Pluto Technology Venture (PTV) is an unincorporated joint venture with three current owners. A few other prospective
Question:
The assets and liabilities were assigned a value of $8.8 million. In exchange, FL was given a 30% interest in PTV and $2.2 million in cash.
6. BCC invested $8.8 million in cash, in exchange for a 40% interest in PTV. In addition, BCC loaned $2 million to PTV at 5% interest. The market rate of interest is currently 8%.
7. EPL received a 30% interest in PTV in exchange for a building that was recorded on its books at $4.9 million (cost $6 million and accumulated depre ciation of $1.1 million). EPL also rents space in another building to PTV at an amount below fair market value.
8. EPL has signed a "management agreement" with PTV to perform manage ment services until PTV grows to the point where it needs its own manage ment team. EPL is allowed under the agreement to charge for its services at cost plus 25%. The agreement also covers the use of equipment by PTV. PTV can either rent the equipment or rent with an option to purchase, at specified rates and amounts.
9. One prospective joint venturer has loaned PTV $1 million at the market rate of interest for a period of one year. After one year, the prospective venturer is permitted to acquire a 10% interest in PTV at its fair market value. At that time, the prospective venturer must pay the balance of the purchase price or forgo the $1 million.
10. PTV is in the process of renovating the building. The value of the building is expected to rise because of the renovations and because of general economic conditions.
11. PTV leases computers and equipment under a three-year contract. Since PTV signed the lease, prices have dropped by 30%, and a further drop is possible.
12. Competition in the industry has been very aggressive in recent months and is expected to persist. Costs of inputs can fluctuate significantly. The selling prices of finished goods can also fluctuate significantly.
13. PTV has invested some of the cash that was received from the current and prospective joint venturers in short-term, high-yielding bonds.
14. PTV has begun to conduct joint projects with other organizations and has contributed about $320,000 to date to developing specialized computer graphics packages.
15. Last week PTV signed a two-year contract with a film company to develop animation materials. The contract should generate revenue of $10 million to $14 million.
Required:
Prepare the draft report.
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Step by Step Answer:
Modern Advanced Accounting In Canada
ISBN: 9781259066481
7th Edition
Authors: Hilton Murray, Herauf Darrell