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Persaud Corp. convinced Bracebridge Inc. that the two companies should establish Renfrew Ltd. to build a new gambling casino in Renfrew. Although chances for the casino's success were relatively low, a local bank loaned $90 million to the new corporation, which built the casino at a cost of $83 million. Bracebridge purchased 100 percent of the initial common shares offering for $6 million, and Persaud agreed to supply 100 percent of the management which would include directing Renfrew's day-to-day activities. Persaud also agreed to guarantee the bank loan. Additionally, Persaud guaranteed a 18 percent return to Bracebridge on its investment for the first 10 years. Persaud will receive all profits in excess of the 18 percent return to Bracebridge. Immediately after the casino's construction, Persaud reported the following amounts (in millions): Cash Buildings & Equipment Accumulated Depreciation Accounts Payable Bonds Payable Common Shares Retained Earnings Assets Cash The only disclosure that Persaud currently provides in its financial reports about its relationships to Bracebridge and Renfrew is a brief footnote indicating that a contingent liability exists on its guarantee of Renfrew Corporation's debt. Persaud Corp. Consolidated Balance Sheet Required: Prepare a consolidated balance sheet for Persaud immediately following the casino's construction. (Enter your answers in millions of dollars. Negative amounts should be indicated by a minus sign.) Buildings & equipment Accumulated depreciation Bank loan payable $ Total assets Liabilities and Shareholder's equity Accounts payable Bank loan payable Common shares Retained earnings 6 112 (18) 4 56 Total liabilities plus shareholder's equity 20 20 $ $ 0 0

Persaud Corp. convinced Bracebridge Inc. that the two companies should establish Renfrew Ltd. to build a new gambling casino in Renfrew. Although chances for the casino's success were relatively low, a local bank loaned $90 million to the new corporation, which built the casino at a cost of $83 million. Bracebridge purchased 100 percent of the initial common shares offering for $6 million, and Persaud agreed to supply 100 percent of the management which would include directing Renfrew's day-to-day activities. Persaud also agreed to guarantee the bank loan. Additionally, Persaud guaranteed a 18 percent return to Bracebridge on its investment for the first 10 years. Persaud will receive all profits in excess of the 18 percent return to Bracebridge. Immediately after the casino's construction, Persaud reported the following amounts (in millions): Cash Buildings & Equipment Accumulated Depreciation Accounts Payable Bonds Payable Common Shares Retained Earnings Assets Cash The only disclosure that Persaud currently provides in its financial reports about its relationships to Bracebridge and Renfrew is a brief footnote indicating that a contingent liability exists on its guarantee of Renfrew Corporation's debt. Persaud Corp. Consolidated Balance Sheet Required: Prepare a consolidated balance sheet for Persaud immediately following the casino's construction. (Enter your answers in millions of dollars. Negative amounts should be indicated by a minus sign.) Buildings & equipment Accumulated depreciation Bank loan payable $ Total assets Liabilities and Shareholder's equity Accounts payable Bank loan payable Common shares Retained earnings 6 112 (18) 4 56 Total liabilities plus shareholder's equity 20 20 $ $ 0 0

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing
Section: Chapter Questions
Problem 19E
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Persaud Corp. convinced Bracebridge Inc. that the two companies should establish Renfrew Ltd. to build a new gambling casino in Renfrew. Although chances for the casino's success were relatively low, a local bank loaned $90 million to the new corporation, which built the casino at a cost of $83 million. Bracebridge purchased 100 percent of the initial common shares offering for $6 million, and Persaud agreed to supply 100 percent of the management which would include directing Renfrew's day-to-day activities. Persaud also agreed to guarantee the bank loan. Additionally, Persaud guaranteed a 18 percent return to Bracebridge on its investment for the first 10 years. Persaud will receive all profits in excess of the 18 percent return to Bracebridge. Immediately after the casino's construction, Persaud reported the following amounts (in millions): Cash Buildings & Equipment Accumulated Depreciation Accounts Payable Bonds Payable Common Shares Retained Earnings The only disclosure that Persaud currently provides in its financial reports about its relationships to Bracebridge and Renfrew is a brief footnote indicating that a contingent liability exists on its guarantee of Renfrew Corporation's debt. Persaud Corp. Consolidated Balance Sheet Required: Prepare a consolidated balance sheet for Persaud immediately following the casino's construction. (Enter your answers in millions of dollars. Negative amounts should be indicated by a minus sign.) Assets Cash Buildings & equipment Accumulated depreciation Bank loan payable $ Total assets Liabilities and Shareholder's equity Accounts payable Bank loan payable Common shares Retained earnings 6 112 (18) 4 56 20 20 Total liabilities plus shareholder's equity $ $ 0
Transcribed Image Text:Persaud Corp. convinced Bracebridge Inc. that the two companies should establish Renfrew Ltd. to build a new gambling casino in Renfrew. Although chances for the casino's success were relatively low, a local bank loaned $90 million to the new corporation, which built the casino at a cost of $83 million. Bracebridge purchased 100 percent of the initial common shares offering for $6 million, and Persaud agreed to supply 100 percent of the management which would include directing Renfrew's day-to-day activities. Persaud also agreed to guarantee the bank loan. Additionally, Persaud guaranteed a 18 percent return to Bracebridge on its investment for the first 10 years. Persaud will receive all profits in excess of the 18 percent return to Bracebridge. Immediately after the casino's construction, Persaud reported the following amounts (in millions): Cash Buildings & Equipment Accumulated Depreciation Accounts Payable Bonds Payable Common Shares Retained Earnings The only disclosure that Persaud currently provides in its financial reports about its relationships to Bracebridge and Renfrew is a brief footnote indicating that a contingent liability exists on its guarantee of Renfrew Corporation's debt. Persaud Corp. Consolidated Balance Sheet Required: Prepare a consolidated balance sheet for Persaud immediately following the casino's construction. (Enter your answers in millions of dollars. Negative amounts should be indicated by a minus sign.) Assets Cash Buildings & equipment Accumulated depreciation Bank loan payable $ Total assets Liabilities and Shareholder's equity Accounts payable Bank loan payable Common shares Retained earnings 6 112 (18) 4 56 20 20 Total liabilities plus shareholder's equity $ $ 0
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