Exhibit 11 5 Sports Products Inc Sells Skis And Snowboards Below Is Some Financial Information For Each Division At Sp 1 (49.67 KiB) Viewed 46 times
Exhibit 11 5 Sports Products Inc Sells Skis And Snowboards Below Is Some Financial Information For Each Division At Sp 2 (49.26 KiB) Viewed 46 times
Exhibit 11-5 Sports Products Inc. sells skis and snowboards. Below is some financial information for each division at Sports Products for the most recent fiscal year. Skis Snowboards Division Division Income Statement Information Marketing expenses $ 200,000 $ 150,000 Operating income 750,000 600,000 Income tax expense (30% tax rate) 225,000 180,000 Balance Sheet Information Average operating assets $1,100,000 $525.000 Non-interest bearing current liabilities 100,000 75,000 18% Percent cost of capital 18% To calculate economic value added (EVA), management requires adjustments for marketing and non-interest bearing current liabilities as outlined below. Parasecten
Percent cost of capital 18% 18% To calculate economic value added (EVA), management requires adjustments for marketing and non-interest bearing current liabilities as outlined below. Marketing will be capitalized and amortized over several years resulting in an increase to average operating assets of $125,000 for the Skis division and $82,500 for the Snowboards division. On the income statement, marketing expenses for the year will be added back to operating income, then marketing amortization expense for one year will be deducted. The current year amortization expense will total $60,000 for the Ski division and $45,000 for the Snowboards division. Non-interest bearing liabilities will be deducted from average operating assets. Refer to Exhibit 11-5. What is the EVA for the Snowboards division? O $397,650 O S443,400 O $420.500 O $474.000 O None of the answer choices is correct,
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