On January 1, 2012, Smeder Company, an 80% Owned Subsidiary

question 87

Multiple Choice

On January 1, 2012, Smeder Company, an 80% owned subsidiary of Collins, Inc. transferred equipment with a 10-year life (six of which remain with no salvage value) to Collins in exchange for $84,000 cash. At the date of transfer, Smeder's records carried the equipment at a cost of $120,000 less accumulated depreciation of $48,000. Straight-line depreciation is used. Smeder reported net income of $28,000 and $32,000 for 2012 and 2013, respectively. All net income effects of the intra-entity transfer are attributed to the seller for consolidation purposes.
Compute Collins' share of Smeder's net income for 2013.

• A) $27,600.
• B) $23,600.
• C) $27,200.
• D) $24,000.
• E) $34,000.

Understand the ethical duties and responsibilities in the legal profession.

Identify situations that may lead to a breach of competence.

Understand the significance and applications of attorney-client confidentiality.

Recognize the ethical implications of supervising nonlawyer assistants.

---

Definitions:

Debt to Assets Ratio

A financial metric measuring the proportion of a company's total assets financed through debt, indicating financial leverage and risk.

Times Interest Earned

A financial ratio that measures a company's ability to meet its debt obligations based on its current income, indicating financial stability against interest charges.

Coupon Interest Rate

The fixed rate of interest paid by a bond to its holder at specified intervals until maturity.

Market Interest Rate

The prevailing rate of interest determined by supply and demand in the money market that borrowers must pay and lenders receive.