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Merck & Co., Inc. is a global, research-driven pharmaceutical company that discovers, develops, manufactures, and markets a broad range of human and animal health products. The following are excerpts from the financial review section of the companys annual report. MERCK & CO., INC. Financial Review Section (partial).In the United States, the Company has been working with private and governmental employers to slow the increase of health care costs. Outside of the United States, in difficult environments encumbered by government cost containment actions, the Company has worked with payers to help them allocate scarce resources to optimize health care outcomes, limiting potentially detrimental effects of government actions on sales growth. Several products face expiration of product patents in the near term. The Company, along with other pharmaceutical manufacturers, received a notice from the Federal Trade Commission (FTC) that it was conducting an investigation into pricing practices. Required:1. In light of the above excerpts from Merck's annual report, discuss some unique pricing issues faced by companies that operate in the pharmaceutical industry. 2. What are some reasons why the same company often sells identical drugs for dramatically different prices in different countries? How can the same drug used for both humans and animals cost significantly different prices? 3. Suppose that Merck has just developed a revolutionary new drug. Discuss the steps it would go through in setting a price. Include a discussion of the information it would need to gather, and the issues it would need to consider.
A company that uses the perpetual inventory system purchased 500 pallets of industrial soap for 10,000 and paid 750 for the freight in. The company sold the whole lot to a supermarket chain for 14,000 on account. The company uses the specific identification method of inventory costing. Which of the following entries correctly records the cost of goods sold? A. cost of goods sold 10,750 merchandise inventory 10,750 B. merchandise inventory 10,750 cost of goods sold 10,750 C. cost of goods sold 10,000 sales revenue 10,000 D. cost of goods sold 10,000 merchandise inventory 10,000
Mills Corporation acquired as a long-term investment $225 million of 8% bonds, dated July 1, on July 1, 2021. Company management has the positive intent and ability to hold the bonds until maturity. The market interest rate (yield) was 6% for bonds of similar risk and maturity. Mills paid $250.0 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2021, was $240.0 million.Required:1. Prepare the journal entry to record Mills'investment in the bonds on July 1, 2021 and interest on December 31, 2021, at the effective market) rate. 2. At what amount will Mills report its investment in the December 31, 2021, balance sheet?
Mobility Partners makes wheelchairs and other assistive devices. For years it has made the rear wheel assembly for its wheelchairs. A local bicycle manufacturing firm, Trailblazers, Inc., offered to sell these rear wheel assemblies to Mobility. If Mobility makes the assembly, its cost per rear wheel assembly is as follows (based on annual production of 2,000 units):Direct materials $ 25 Direct labor 53 Variable overhead 16 Fixed overhead 47 Total $ 141 Trailblazers offered to sell the assembly to Mobility for $110 each. The total order would amount to 2,000 rear wheel assemblies per year, which Mobility's management will buy instead of make if Mobility can save at least $10,000 per year. Accepting Trailblazers's offer would eliminate annual fixed overhead of $40,000.Required:(a) Prepare a schedule that shows the differential costs on the 2,000 rear wheel assemblies order. (Leave no cells blank - be certain to enter "0" wherever required. Input all amounts as positive values. Omit the "$" sign in your response.)(b) Should Mobility make rear wheel assemblies or buy them from Trailblazers?
MVS, Inc. produces cleaning equipment, and operates several divisions. Division A produces a product that it sells to other companies for $25 per unit. It is currently operating at full capacity of 60,000 units per year. Variable manufacturing cost is $13 per unit, and variable marketing cost is $3 per unit. The company wishes to create a new division, Division B, to produce an innovative new tool that requires the use of Division A's product (or one very similar). Division B will produce 20,000 units. Division B can purchase a product equivalent to Division A's from Company X for $18 per unit. However, MVS, Inc. is considering having Division A supply Division B with the product. If Division A supplies Division B, the transfer price would be $16 and there would be no marketing costs associated with the units.Required:a) From Division A's perspective the net benefit (cost) is ___________.
Given the following information for Watson Power Co., find the WACC. Assume the companys tax rate is 21 percent.Debt: 15,000 bonds with a 5.8 percent coupon outstanding, $1,000 par value, 25 years to maturity, selling for 108 percent of par; the bonds make semiannual payments.Common stock: 575,000 shares outstanding, selling for $64 per share; the beta is 1.09.Preferred stock: 35,000 shares of 2.8 percent preferred stock outstanding, currently selling for $65 per share.Market: 7 percent market risk premium and 3.2 percent risk-free rate.Required:What is the company's WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16)
Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 30,000 Rets per year. Costs associated with this level of production and sales are given: Unit Total Direct materials $15 $450,000 Direct labor 8 240,000 Variable manufacturing overhead 3 90,000 Fixed manufacturing overhead 9 270,000 Variable selling expense 4 120,000 Fixed selling expense 6 180,000 Total cost $45 $1,350,000The Rets normally sell for $50 each. Fixed manufacturing overhead is constant at $270,000 per year within the range of 25,000 through 30,000 Rets per year.Required:Assume that due to a recession, Polaski Company expects to sell only 25,000 Rets through regular channels next year.A large retail chain has offered to purchase 5,000 Rets if Polaski is willing to accept a 16% discount off the regular price.There would be no sales commissions on this order; thus, variable selling expenses would be slashed by 75%.However, Polaski Company would have to purchase a special machine to engrave the retail chain's name on the 5,000 units. This machine would cost $10,000. Polaski Company has no assurance that the retail chain will purchase additional units any time in the future.Determine the impact on profits next year if this special order is accepted.Refer to the original data, assume again that Polaski Company expects to sell only 25,000 Rets through regular channels next year.The U.S. Army would like to make a one-time-only purchase of 5,000 Rets.The Army would pay a fixed fee of $1.80 per Ret, and in addition it would reimburse Polaski Company for all costs of production (variable and fixed) associated with the units.Since the army would pick up the Rets with its own trucks, there would be no variable selling expenses of any type associated with this order.If Polaski Company accepts the order, by how much will profits be increased or decreased for the year. Assume the same situation as that described above, except that the company expects to sell 30,000 Rets through regular channels next year. Thus, accepting the U.S. Army's order would require giving up regular sales of 5,000 Rets.If the Army's order is accepted, by how much will profits be increased or decreased from what they would be if the 5,000 Rets were sold through regular channels?
New Orleans Chemicals Company follows the indirect method to prepare its statement of cash flows. Refer to the following portion of the comparative balance sheet: New Orleans Chemicals Company Comparative Balance Sheet December 31, 2018 and 2017 2018 2017 Increase/ (Decrease) Common Stock $ $35,000 $2,200 $32,800 Retained Earnings 157,000 92,000 65,000 Treasury Stock (8,100) (5,200) (2,900) Total Equity $183,900 $89,000 $94,900 Net Income for 2018 was $94,000. Based on the above information, determine the amount of dividends declared during 2018.
On January 1, 2019, Shay Company issues $290,000 of 11%, 20-year bonds. The bonds sell for $282,750. Six years later, on January 1, 2025, Shay retires these bonds by buying them on the open market for $303,050. All interest is accounted for and paid through December 31, 2024, the day before the purchase. The straight-line method is used to amortize any bond discount.Required:1. What is the amount of the discount on the bonds at issuance?2. What is the carrying (book) value of the bonds as of the close of business on December 31, 2024?3. Prepare the journal entry to record the bond retirement.
On January 1, 2012, Piper Co., purchased a machine (its only depreciable asset) for $600,000. The machine has a five-year life, and no salvage value. Sum-of-the-years'-digits depreciation has been used for financial statement reporting and the elective straight-line method for income tax reporting. Effective January 1, 2015, for financial statement reporting, Piper decided to change to the straight-line method for depreciation of the machine. Assume that Piper can justify the change.Piper's income before depreciation, before income taxes, and before the cumulative effect of the accounting change (if any), for the year ended December 31, 2015, is $500,000. The income tax rate for 2015, as well as for the years 2012-2014, is 30%. Required:A) What amount should Piper report as net income for the year ended December 31, 2015?O $120,000O $182,000O $308,000O $350,000
On January 1, 20X8, Polo Corporation acquired 75 percent of Stallion Company's voting common stock for $300,000. At the time of the combination, Stallion reported common stock outstanding of $200,000 and retained earnings of $150,000, and the fair value of the noncontrolling interest was $100,000. The book value of Stallion's net assets approximated market value except for patents that had a market value of $50,000 more than their book value. The patents had a remaining economic life of ten years at the date of the business combination. Stallion reported net income of $40,000 and paid dividends of $10,000 during 20X8.Required:a) Based on the preceding information, what balance will Polo report as its investment in Stallion at December 31, 20X8, assuming Polo uses the equity method in accounting for its investment?
On September 1 of the current year, Joy Tucker established a business to manage rental property, She completed the following transactions during September.a. Opened a business bank account with a deposit of $49,000 in exchange for common stock.b. Purchased office supplies on account, $3,010.c. Received cash from fees earned for managing rental property, $8,240.d. Paid rent on office and equipment for the month, $3,690.e. Paid creditors on account, $1,370. Billed customers for fees earned for managing rental property, $6,840.g. Paid automobile expenses for month, $820, and miscellaneous expenses, $410.h. Paid office salaries, $2,600l. Determined that the cost of supplies on hand was $1,780; therefore, the cost of supplies used was $1,230. Paid dividends $2,460.Required:1. Indicate the effect of each transaction and the balances after each transaction.