On January 1, 20X5, Pirate Company acquired all of the outstanding stock of Ship Inc., a Norwegian company, at a cost of $153,000. Ship's net assets on the date of acquisition were 700,000 kroner (NKr). On January 1, 20X5, the book and fair values of the Norwegian subsidiary's identifiable assets and liabilities approximated their fair values except for property, plant, and equipment and patents acquired. The fair value of Ship's property, plant, and equipment exceeded its book value by $18,000. The remaining useful life of Ship's equipment at January 1, 20X5, was 10 years. The remainder of the differential was attributable to a patent having an estimated useful life of 5 years. Ship's trial balance on December 31, 20X5, in kroner, follows:

Additional Information:

Ship uses the FIFO method for its inventory. The beginning inventory was acquired on December 31, 20X4, and ending inventory was acquired on December 15, 20X5. Purchases of NKr430,000 were made evenly throughout 20X5.

Ship acquired all of its property, plant, and equipment on July 1, 20X3, and uses straight-line depreciation.

Ship’s sales were made evenly throughout 20X5, and its operating expenses were incurred evenly throughout 20X5.

The dividends were declared and paid on July 1, 20X5.

Pirate's income from its own operations was $247,000 for 20X5, and its total stockholders' equity on January 1, 20X5, was $3,500,000. Pirate declared $180,000 of dividends during 20X5.

Exchange rates were as follows:

Assume the U.S. dollar is the functional currency, not the krone.

Required:
a. Prepare a schedule remeasuring the trial balance from Norwegian kroner into U.S. dollars. (If no adjustment is needed, select 'no entry necessary'.)

b. Assume that Pirate uses the fully adjusted equity method. Record all journal entries that relate to its investment in the Norwegian subsidiary during 20X5. Provide the necessary documentation and support for the amounts in the journal entries. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

1. Record the purchase of ship inc.

2. record the dividend received from the foreign subsidiary

3. record the equity in the net income of the foreign subsidiary

4. record the amortization of the differential

c. Prepare a schedule that determines Pirate's consolidated net income for 20X5..(Amounts to be deducted should be indicated with a minus sign.)

d. Compute Pirate's total consolidated stockholders' equity at December 31, 20X5.

Founded in 1964 as Clipper Trucking Co., within two
decades Spirit Airlines was chugging through the skies as
a tiny commercial airline connecting passengers between
Florida and the Midwest. Yet by the 2000s, Spirit was
near failure—a common story in the commercial airline
business—until seasoned aviation executive and merciless
cost-cutter Bill Franke stepped in in 2006 to buy the airline
and then did something remarkable. Franke had honed his
chops cutting costs as CEO of America West Airlines in the
1990s and was an early investor in ultra-low cost Ryan Air.
Despite his detractors, Franke, along with his CEO, Ben
Baldanza, put Spirit on a steadier (if frill-free) fl ight path,
making it not only one of the few post-9/11 success stories,
but also a trend-setter and model in a deeply challenged
industry.
While larger carriers have suff ered billions of dollars in
losses and bankruptcies, Spirit was fl ying high last year with
$289 million in earnings, 40 percent more per plane than any
other domestic airline. Th e company is currently valued at
about $1.63 billion, the same as U.S. Airways Group Inc., which
is about nine times larger in terms of traffi c. Despite its tiny
size—Spirit carries just 1 percent of the nation’s fl iers on its
40-jet fl eet—only two U.S. airlines have fared better: Southwest
(with 692 Boeing jets) and Alaska Air Group Inc. (with
122 aircraft). While many airlines continue to cancel services,
lay off employees, and cut corners to maintain minimal
profi tability, in 2011 Spirit’s revenue soared 37.1 percent over
the previous year. Th e airline also fl ew 15.2 percent more seats
and added multiple routes.
So how did Franke and Baldanza transform a company
once facing bankruptcy into the most profitable airline
in the United States? By doing everything that was once
deemed impossible, yet has since—thanks to Spirit’s
innovative example—become the industry standard. That
means offering the cheapest tickets in the business and
making everything—from water to boarding passes—a
la carte. Spirit was the first U.S. airline to reintroduce
a charge for checked luggage, which has since become
commonplace.
Spirit has found its niche—the traveler who is ultra-budget
conscious and is interested in little more than getting from
A to Z at the cheapest possible price. It’s that simple, and
Spirit doesn’t pretend to embody anything else—not comfort,
not convenience, not service. Spirit’s on-time performance
is among the worst in the industry; its legroom is negligible
at best, and (not surprisingly, considering its bare bones
approach to travel), it has suff ered more than a few PR
disasters in recent years. Th ese include irate, vocal customers
like Jerry Meekins, a 76-year-old Vietnam vet with terminal
cancer, who was denied a refund by Spirit after he was told by
doctors that he had only months to live and couldn’t fl y (and
so couldn’t use his ticket); and a 2010 pilot strike that saw the
airline grounded for 10 days.

Yet Baldanza seems unphased: “We just want to have the
lowest price. Th at drives almost every other decision in the
company: how many seats to have in the airplane, what times
of day to fl y, the kinds of cities we fl y to, and so on.”
With Spirit’s enviable balance sheet, it’s likely that more
airlines will get on board with the nickel-and-diming scheme.
It may be bad news for consumers, but it’s good news to
airlines that are struggling to make a profi t in uncertain
times.

1. Spirit’s number one goals seems to be “the lowest-price airline ticket.” Is this a S.M.A.R.T Goal? Explain.

2. Will this strategic goal continue to be successful for Spirit? Why or Why Not?

3. If you were the CEO of Spirit, what goals would you add to ensure that the company prospers in the long run?

Look at the following Balance Sheet and financial information for Flexics Inc. Flexics, Inc. is a leading producer of plasma technology display devices in the USA. One of the company's latest innovations is a patented process that permits the rapid production of customized semiconductor wafers using plasma-based etching technology instead of quartz plates. Flexics, based in Seattle, started business in 1987 and now has production facilities in Vancouver and a research affiliate in Princeton, New Jersey.
In late-1998 Alex Pereira, the founder and CEO of Flexics, was considering options for realization of the value of his shareholding in Flexics. Pereira was seeking a method that would offer greater
FIN 7900, Mergers and Acquisitions – Problem Set Page 2
liquidity and diversification of his and his family's investment in the company. One option was to
talk to investment bankers about an initial public offering (IPO). This would allow him to sell
some or all of his shares in the market. But he was unhappy about the IPO market in the industry,
which was weaker than in 1997 when bankers had talked about an IPO price in the $40-45 range.
In the past year, public offerings of similar technology companies had brought price/earnings ratios
of about 15. A recent private placement of Flexics shares with a venture capital investor had been
done at an effective price of $24 per share. Another possibility was to sell his shares to Photronics,
which was rumored to be interested in buying a stake in Flexics. Among the other options he was
considering was a leveraged buy-out by management. Pereira liked the idea of giving key officers
a greater stake and control, but he wanted to get a good price for his shares. He was willing to
receive payment partly in cash, and partly in the form of a $30 million, 15% pre-payable
subordinated note.
Management had discussed the LBO possibility with Seattle Partners, a venture capital firm that
was familiar with Flexics. The firm's advisors had calculated that of the minimum amount of $216
million needed for the LBO, $20 million would have to come from management, as much as $120
million could be raised through a senior debt issuance led by Bank of America (BofA), and the
remainder from a private equity group led by Seattle Partners. B of A indicated the rate would be
12% and that lenders would need a Net Operating Income/Interest Expense ratio of at least 2x. At
this time 35% of the 9 million shares outstanding were held by the founder and his family, and the
remainder was held by venture capital and private equity groups. Net operating income was $30
million. Other key indicators are listed above.
Balance sheet
Cash
Other current assets
Long term assets, net
Total assets
Noninterest bearing short term debt
Short term debt (10%)
Senior long-term debt
Subordinated debt
Equity
Total Liabilities & Equity
($ millions)
50
100
120
270
60
10
0
0
200
270
Interest Coverage
Net Operating Income
Interest Expense
- Short term debt
- Senior long term debt
- Subordinated debt
Total
NOI/Interest expense
Effective tax rate
Depreciation
30
1
0
0
1
30
30%
$20 million
FIN 7900, Mergers and Acquisitions – Problem Set Page 3
Flexics shares were expected to be (based on information of similar companies) trading at a P/E
of 10.6 on earnings of $2.26 per share. Based on past performance the company was expected to
generate free cash flows of $2.57 per share next year, an increase of 3.6% from the current level
of $2.48. The Treasury bond yield was 4.5%, the company’s beta, based on comparable companies,
was about 1.3 and the long run market return was 11.5%.
A. What is the total number of shares in Flexics currently? How many shares does the CEO
own? [5 points]
B. Based on the Balance Sheet values (shareholder’s equity), what is the book-value of each
share? [5 points]
C. What was the value of the entire company Flexics based on the recent private placement?
[5 points]
D. What is the Enterprise Value (EV) of Flexics at current market prices?[5 points]
E. Create a basic income statement (starting from operating income to net income). [5 points]
F. At the current price levels, how much cash can the CEO generate by selling all his shares?
[10 points]
G. Consider a scenario that Flexics raises debt to the tune of $20 million as senior debt from
Bank of America, at 12% interest, create a basic income statement (showing increased
interest payments, changes to net income, etc.). Will the net income be positive of negative
for this hypothetical scenario? [15 points]
H. Consider another scenario where in addition to the senior debt from BofA, Flexics also
raises debt of $10 million at 15% from Seattle partners. Create a basic income statement
(showing increased interest payments, changes to net income, etc.). Will the net income be
positive or negative for this hypothetical scenario? [20 points]
I. What is the most amount of debt (given the information given above regarding conditions
of generating debt), can the CEO of Flexics raise for an LBO? [20 points]

On July 1, 2020, Concord Company purchased for $7,200,000 snow-making equipment having an estimated useful life of 5 years with an estimated salvage value of $300,000. Depreciation is taken for the portion of the year the asset is used.

Complete the form below by determining the depreciation expense and year-end book values for 2020 and 2021 using the

Assume the company had used straight-line depreciation during 2020 and 2021. During 2022, the company determined that the equipment would be useful to the company for only one more year beyond 2022. Salvage value is estimated at $400,000.

Compute the amount of depreciation expense for the 2022 income statement.

Assume the company had used straight-line depreciation during 2020 and 2021. During 2022, the company determined that the equipment would be useful to the company for only one more year beyond 2022. Salvage value is estimated at $400,000.

What is the depreciation base of this asset?

Organizational structure and culture which affect employee behavior and success - Chapters 15 & 16 Organizational behavior 18th edition

Scenario (fictional)

An industry consulting firm has the following structure and culture:

All the employees at this consulting firm work full-time. All the full-time consultants report to various industry directors depending on the industry contract. The company employees work mostly from home with directors or consultants renting temporary office space with or without videoconferencing when needed for either client meetings or vendor meetings. The company is very successful and has an expanding client base.

The company CEO is extremely relaxed and extremely smart and expects everyone at the company to display a relaxed yet expert demeanor as well. There really are very few rules or expectations at the company as the CEO also believes in keeping processes very simple.

The previous president retired about six months ago, and the CEO, together with a human resources firm hired a new president. About two months ago, the company's employees(i.e. consultants) started receiving emails from the new president putting pressure on all of them to produce results in less time but pressuring them to charge clients higher sums without making any more money for themselves. In addition, the new president wants the staff to come into the office now three times a week for meetings. Three months ago the new president hired thirty new full-time consultants that seem more like salespersons than consultants to existing employees. A few of the long-time consultants have been emailing the CEO about these changes and suggesting they may go elsewhere. In the meantime, the Finance Director has detected several anomalies in the contract terms and financial results from some of the new consultants and one or two of the existing consultants.

Describe the organizational structure at this consulting firm and how it affects employee behavior.

Describe how the changes to the organization's culture might affect employee behavior.

Provide a recommendation for any adjustments you think need to be made as this organization based on the reading and explain why.

Please show me how to do this by using excel and its functions

Mrs. Dawn Chorus, founder and president of United Bird Seed, is wondering whether the company should make its first public sale of common stock and, if so, at what price.

The company’s financial plan suggests rapid growth over the next three years but only moderate growth afterwards. Forecasted dividends per share are as follows:

Year                1                      2                      3                      4                      5

                       $1.00            $1.20             $1.44           5% growth thereafter

Investors demand a return of 10%.

Calculate the price of United Bird Seed’s stock (today).

The new CEO of Sena Manufacturing company ltd, with a labour force of 250 workers and six
functional departments, had undertaken scoping operational assessment of the company in the
third week of his resumption and in his initial assessment and view, he argues that maintaining
both Cost Accountant and Financial Accountant amount to duplication of functions and waste
of scare resources of the company. You are required as the current Cost Accountant with
the company for over seven (7) years, submit in a memo, strategic role you are discharging
in the company.
A

The new CEO of Sena Manufacturing company ltd, with a labour force of 250 workers and six
functional departments, had undertaken scoping operational assessment of the company in the
third week of his resumption and in his initial assessment and view, he argues that maintaining
both Cost Accountant and Financial Accountant amount to duplication of functions and waste
of scare resources of the company. You are required as the current Cost Accountant with
the company for over seven (7) years, submit in a memo, strategic role you are discharging
in the company.
A

International Accounting

O.J. Sanders works in the financial reporting section of a large U.S. pharmaceutical company. The company has recently committed to “go green” and O.J.’s boss wants to add some environmental disclosures in the company’s annual report. O.J. is charged with recommending the contents of the environmental disclosure. In his research, O.J. learns that U.S. companies have generally lagged European companies in environmental reporting, but that more and more U.S. companies are now disclosing environmental matters. He believes that his company should at least “match the competition” in the disclosures it makes. Toward that end, he obtains the annual report of Roche, a Swiss competitor. O.J. also learns about the G3 sustainability reporting

4. Describe the environmental disclosures that O.J. should recommend his company make.