2. OTE's prepaids will not have any value to the purchaser of the business but are needed for operations (not redundant}. 3. The property, plant, and equipment, including the leased assets, have a fair value of $4,500,000. The present value of the forgone tax shield related to the increased fair value of assets is $28,000. There are no issues associated with transferring the lease to a purchaser, and the lease will be a capital lease for the purchaser. If the assets are sold, the latent taxesfselling costs are $24,000. 4. For the existing capital assets, the present value of the current tax shield is $38,000. 5. In the prior year, OTE decided to expand its product mix to include skis. The product did not do well and, by the time OTE discontinued the product and liquidated the inventory in December, it had recorded a negative gross margin of $75,000. One of the customers for the skis still owed DTE money at the end of the prior year. For reasons unrelated to the skis, that customer went bankrupt in March of the current year; at that time, DTE wrote off the customer's remaining balance of $8,500. CITE had not previously set up an allowance for this receivable. 8. In the prior year, OTE had a fire in the manufacturing plant. Although most of the damage was covered by insurance, OTE took the opportunity to undertake $25,000 in additional repairs and maintenance that were not covered by insurance. OTE would not have made those repairs if the fire had not occurred. 7". In the prior year, CITE received a $44,500 volume discount from a new raw materials supplier. It was a great deal, and we were hoping to add this amount to our gross margin every year. However, at the beginning of the current fiscal year, the supplier went bankrupt, so the volume discount ceased. 8. In the prior year, CITE undertook a special marketing campaign that focused on several key business associates and contacts. The campaign cost $20,000 and OTE has no plans to run such a campaign again in the near future. 8. Wutang takes a regular salary from the business and an annual bonus depending on OTE's financial results and the cash available. His salary was $325,000 in the current year and $300,000 in the prior year. Any other cash withdrawals in the year are treated as dividends. 10. Included in interest and bank charges on the income statement is interest on all interest-bearing debt (including the capital lease) of $50,000 and $32,000 in the current year and prior year, respectively. 11. $326,825 and $338,218 of amortization was included in cost of sales in the current year and prior year, respectively