REFERENCE: Ref.05_10 Stark Company,a 90% Owned Subsidiary of Parker,Inc. ,Sold Land to Land

question 110

Multiple Choice

REFERENCE: Ref.05_10
Stark Company,a 90% owned subsidiary of Parker,Inc. ,sold land to Parker on May 1,2009,for $80,000.the land originally cost Stark $85,000.Stark reported net income of $200,000,$180,000,and $220,000 for 2009,2010,and 2011,respectively.Parker sold the land it purchased from Stark in 2009 for $92,000 in 2011.
-Compute the consolidated gain or loss relating to the land for 2011.

• A)$5,000 loss.
• B)$7,000 gain.
• C)$12,000 gain.
• D)$7,000 loss.
• E)$12,000 loss.

Comprehend the impact of operating costs, including depreciation, on the calculation of value added to shareholders' wealth.

Gain insights into the role of Weighted Average Cost of Capital (WACC) in evaluating company performance and management efficiency.

Understand the effect of federal and provincial income tax rates on company profits and shareholder value.

Apply knowledge of financial metrics to assess a company's financial health and its ability to generate value for shareholders.

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Definitions:

Gross Margin

The difference between sales revenue and the cost of goods sold, showing the profitability of a company's core activities.

Net Operating Income

represents the profit a company makes from its normal business operations, excluding non-operating income and expenses.

Manufacturing Overhead

Indirect factory-related costs that are incurred when a product is manufactured, including costs such as maintenance, supplies, and utilities.

Direct Materials

Raw materials that are directly used in the production of a product and can be directly associated with the finished product.