A Michigan Company Consists of Three Subsidiaries

question 105

Essay

A Michigan company consists of three subsidiaries.Each has the respective average payroll,unemployment reserve fund,and estimated payroll shown in the table below (all figures are in millions of dollars).Any employer in the state of Michigan whose reserve to average payroll ratio is less than 1 must pay 25% of its estimated payroll in unemployment insurance premiums.Otherwise,if the ratio is at least one,the employer pays 13%.The company can aggregate its subsidiaries and label them as separate employers.For example,if subsidiaries 1 and 2 are aggregated,they must pay 25% of their combined payroll in unemployment insurance premiums.Determine which subsidiaries should be aggregated.

---

Definitions:

Risk of Ownership

This refers to the potential for loss or damages an owner can face while holding onto an asset or property.

Finance Company

A business that makes loans to individuals and commercial customers, distinct from banks and other traditional financial institutions.

Borrowing Company

A company that takes out a loan or issues debt securities to finance its operations or projects.

Aging of Accounts Receivable

The process of categorizing accounts receivable by their due dates to estimate the amount of bad debts.