Question
In: Accounting
. Balance sheet format, terminology, and accounting methods. Exhibit 4.4 presents the balance sheet of Paul...
. Balance sheet format, terminology, and accounting methods.
Exhibit 4.4 presents the balance sheet of Paul Loren Company for
Years 10 and 9. This balance sheet uses the terminology, format,
and accounting methods of U.S. GAAP, and Paul Loren reports results
in millions of U.S. dollars. (Adapted from the financial statements
of Polo Ralph Lauren.) In addition to the items reported in Paul
Loren’s balance sheet, assume the following hypothetical
information is available to you: ■ In Year 10 Paul Loren revalued a
building with an acquisition cost of $200 million downward, to its
current fair value of $182 million. ■ In Year 10 Paul Loren wrote
up the value of inventory, with a carrying value of $135 million,
to its fair value of $165 million. ■ Included in commitments and
contingencies for Year 10 is a lawsuit filed against Paul Loren for
breach of contract. Paul Loren estimates the following range of
outcomes for this lawsuit: 70% chance of damages of $100 million,
20% chance of damages of $500 million, and 10% chance of damages of
$1 billion. a. Prepare a balance sheet for Paul Loren for Year 10,
following the format, terminology, and accounting methods required
by U.S. GAAP. Ignore any income tax effects of any revisions to
reported amounts. b. How, if at all, would your answer to part a
differ if Paul Loren used IFRS?
Paul Loren Company Balance Sheets For Years 10 and 9 (amounts in
millions of US$) (Problem 32)
Year 10 Year 9
ASSETS
Current Assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 563.1 $ 481.2
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 584.1 338.7
Accounts receivable, net of allowances of $206.1 and $190.9 million . . . 381.9 474.9
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 504.0 525.1
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.0 101.8
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139.7 135.0
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,275.8 2,056.7
Noncurrent investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75.5 29.7
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 697.2 651.6
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.9 102.8
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 986.6 966.4
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363.2 348.9
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148.7 200.4
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,648.9 $4,356.5
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 149.8 $ 165.9
Income tax payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37.8 35.9
Accrued expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 559.7 472.3
Total Current Liabilities. . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . 747.3 674.1
Long-Term Debt. . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . 747.3 674.1
Deferred Tax Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 282.1 406.4
Other Noncurrent Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126.0 154.8
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . 1,902.7 1,909.4
STOCKHOLDERS’ EQUITY:
Class A common stock, par value $0.01 per share;
75.7 million and 72.3 million shares issued;
56.1 million and 55.9 million shares outstanding . . . . . . . . .
. . . . . . . . 0.8 0.7
Class B common stock, par value $0.01 per share;
42.1 million and 43.3 million shares issued and outstanding. . . .
. . . . . . 0.4 0.4
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,243.8 1,108.4
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,544.9 2,177.5
Treasury stock, Class A, at cost (19.6 million and 16.4 million shares) . . . . (1,197.7) (966.7)
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . 154.0 126.8
Total Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,746.2 2,447.1
Total Liabilities and Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . $ 4,648.9 $4,356.5
Solutions
Expert Solution
a. Balance Sheet for Paul Loren for the Year 10 as per US GAAP
| Sr. No. | Assets | Amount(in $mn) | |
| a. | Current Assets | ||
| Cash & Cash Equivalents | $ 563.1 | ||
| Accounts Receivable | $ 381.9 | ||
| Inventories | $ 474.0 | ||
| Short Term Investments | $ 584.1 | ||
| Deferred Tax Assets | $ 103.0 | ||
| Prepaid expenses & Others | $ 139.7 | ||
| Total Current Assets | $ 2,245.8 | ||
| b. | Long Term Assets | ||
| Property & Equipment | $ 715.2 | ||
| Intangible Assets | $ 363.2 | ||
| Good Will | $ 986.6 | ||
| Non Current Investments | $ 75.5 | ||
| Deferred tax Asset | $ 101.9 | ||
| Other Asset | $ 148.7 | ||
| Total Long Term Assets | $ 2,391.1 | ||
| Total Assets(a+b) | $ 4,636.9 | ||
| Liabilities | |||
| a. | Current Liabilities | ||
| Accounts Payable | $ 149.8 | ||
| Income Tax Payable | $ 37.8 | ||
| Accrued Expenses & Others | $ 559.7 | ||
| Total Current Liabilities | $ 747.3 | ||
| b. | Long Term Liabilities | ||
| Long Term Debt | $ 747.3 | ||
| Deferred Tax Liabilities | $ 282.1 | ||
| Other Non Current Liabilities | $ 126.0 | ||
| Total Long Term Liabilities | $ 1,155.4 | ||
| c. | Stock Holders Equity | ||
| Retained Earnings | $ 2,544.9 | ||
| Common Stocks | Class A | $ 0.8 | |
| Class B | $ 0.4 | ||
| Treasury Stock | $ (1,197.7) | ||
| Additional Paid up capital | $ 1,243.8 | ||
| Accumulated Other Comprehensive Income | $ 142.0 | ||
| Total Stock Holders Equity | $ 2,734.2 | ||
| Total Liabilities and Equity(a+b+c) | $ 4,636.9 | ||
| Continget liabilities | |||
| Damages of Lawsuit against paul lauren | $ 1,600.0 |
Note:
1. Assets to be presented at Book Value.
2. Value of Building was revalued & Inventory is over valued from their original costs therefore unrealised gain/losses recognised.
3. Adjustment of unrealised gain /losses in 'Accumulated other comprehennsive income'.
b. Balance Sheet for Paul Loren for the Year 10 as per IFRS
| Sr. No. | Liabilities | Amount(in $mn) | |
| a. | Stock Holders Equity | ||
| Retained Earnings | $ 2,544.9 | ||
| Common Stocks | Class A | $ 0.8 | |
| Class B | $ 0.4 | ||
| Treasury Stock | $ (1,197.7) | ||
| Additional Paid up capital | $ 1,243.8 | ||
| Accumulated Other Comprehensive Income | $ 154.0 | ||
| Total Stock Holders Equity | $ 2,746.2 | ||
| b. | Non-current Liabilities | ||
| Long Term Debt | $ 747.3 | ||
| Deferred Tax Liabilities | $ 282.1 | ||
| Other Non Current Liabilities | $ 126.0 | ||
| Total Non-current Liabilities | $ 1,155.4 | ||
| c. | Current Liabilities | ||
| Accounts Payable | $ 149.8 | ||
| Income Tax Payable | $ 37.8 | ||
| Accrued Expenses & Others | $ 559.7 | ||
| Total Current Liabilities | $ 747.3 | ||
| Total Liabilities and Equity(a+b+c) | $ 4,648.9 | ||
 ekkarill92 answered 1 year agoRelated SolutionsBalance sheet format, terminology, and accounting methods. Exhibit 4.4 presents the balance sheet of Paul Loren...Balance sheet format, terminology, and accounting methods.
Exhibit 4.4 presents the balance
sheet of Paul Loren Company for Years 10 and 9. This balance sheet
uses the terminology
Paul Loren Company
Balance Sheets
For Years 10 and 9
(amounts in millions of US$) (Problem 32)
Year 10 Year 9
ASSETS
Current Assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . .
. . ....
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