Clemente Co

question 85

Multiple Choice

Clemente Co. owned all of the voting common stock of Snider Co. On January 2, 2010, Clemente sold equipment to Snider for $125,000. The equipment had cost Clemente $140,000. At the time of the sale, the balance in accumulated depreciation was $40,000. The equipment had a remaining useful life of five years and a $0 salvage value. Straight-line depreciation is used by both Clemente and Snider. At what amount should the equipment (net of depreciation) be included in the consolidated balance sheet dated December 31, 2010?

• A) $105,000.
• B) $100,000.
• C) $95,000.
• D) $80,000.
• E) $85,000.

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Definitions:

Beta

A metric that compares the level of risk and volatility of an individual security or portfolio to that of the general market.

SML

The Security Market Line, a graphical representation of the Capital Asset Pricing Model (CAPM) that displays the expected return of an investment as a function of its systemic risk.

Required Rate Of Return

The minimum percentage return an investor expects to receive from an investment, taking into account its risk.

Portfolio

A collection of investments held by an individual or institution, including stocks, bonds, commodities, and more, aimed at diversifying risk.