Research two (2) publically traded U.S. companies, and download their financial statements. Assume that you are the CEO of one of the selected companies. You are responsible for gaining control over the other company. You have three (3) choices, either of which you believe that the Board of Directors will support. Choice 1: Your company acquires 35% of the voting stock of the target company. Choice 2: Your company acquires 51% of the voting stock of the target company. Choice 3: Your company acquires 100% of the voting stock of the target company.
1) Provide a brief background introduction on both the company that you are working for and the company that you are responsible for gaining control over.
2) Specify the overall manner in which the acquisition fits into your company’ strategic direction. Next, identify at least three (3) possible synergies that could occur as a result of the proposed acquisition.
3) Select two (2) out of the three (3) choices provided in the above scenario, and analyze the key accounting requirements for each of the two (2) choices that you selected. Next, suggest one (1) strategy in which you would prepare the financial statements for your company after the acquisition under each of the two (2) choices.
4) Select the choice that you consider to be the most advantageous to your company. Explain to the Board of Directors at least three (3) reasons why your selected choice is the most advantageous to the company.
5) Assume two (2) years after the acquisition, your Board of Directors wants to offer the shares back to the public in hopes of making a large profit. Assume that in each of the two (2) years your company and the target company have had exactly the same reported net income as they did in the year of acquisition. Determine the type of value, (e.g., cost of fair value) that you would use to report the subsidiary’s net asset in the subsidiary’s financial statements, which the company will distribute to the public with the public offering. Provide support for your rationale.
6) Use at least three (3) quality academic resources in this assignment. Note: Wikipedia and other Websites do not qualify as academic resources.
*no copying please
In: Accounting
Tan Company acquires a new machine (10-year property) on January 15, 2020, at a cost of $200,000. Tan also acquires another new machine (7-year property) on November 5, 2020, at a cost of $40,000. No election is made to use the straight-line method. The company does not make the § 179 election and elects to not take additional first-year depreciation. Determine the total deductions in calculating taxable income related to the machines for 2020.
a.$102,000
b.$24,000
c.$25,716
d.$132,858
Barry purchased a used business asset (seven-year property) on September 30, 2020, at a cost of $200,000. This is the only asset he purchased during the year. Barry did not elect to expense any of the asset under § 179, did not claim additional first-year depreciation, and did not elect straight-line cost recovery. Barry sold the asset on July 17, 2021. Determine the cost recovery deduction for 2021.
a.$19,133
b.$34,438
c.$55,100
d.$24,490
White Company acquires a new machine (seven-year property) on January 10, 2020, at a cost of $620,000. White makes the election to expense the maximum amount under § 179, and wants to take any additional first-year depreciation allowed. No election is made to use the straight-line method. Determine the total deductions in calculating taxable income related to the machine for 2020, assuming that White reports taxable income of $800,000.
a.$568,574
b.$88,598
c.$620,000
d.$301,159
In: Accounting
EXERCISE 5-4
Allocation of Cost and Workpaper Entries at Date of Acquisition LO 2
On January 1, 2020, Porter Company purchased an 80% interest in Salem Company for $260,000. On this date, Salem Company had common stock of $207,000 and retained earnings of $130,500.
An examination of Salem Company’s balance sheet revealed the following comparisons between book and fair values:
| Book Value | Fair Value | |
| Inventory | $ 30,000 | $ 35,000 |
| Other current assets | 50,000 | 55,000 |
| Equipment | 300,000 | 350,000 |
| Land | 200,000 | 200,000 |
Required:
In: Accounting
ABC Pty Ltd is an Australian resident private company and on 1 July 2019 its franking account balance was $35,000. ABC paid PAYG instalments of income tax during the year ended 30 June 2020 as follows: 21 July 2019 -- $35,000 21 October 2019 -- $35,000 21 January 2020 -- $35,000 21 April 2020 -- $26,000 A refund of income tax of $22,500 was received by ABC from the ATO on 1 April 2020. ABC paid GST of $65,000 on 28 October 2019 and FBT of $57,000 on 30 April 2020. ABC received a fully franked dividend of $21,000 on 1 November 2019 and an unfranked dividend of $33,000 on 12 December 2019. ABC paid a 75% franked dividend of $120,000 on 1 February 2020and a 50% franked dividend of $70,000 on 1 June 2020. Prepare a franking account for ABC for the year ended 30 June 2020.
In: Accounting
Hyundai Heavy Industries Co. is one of Korea’s largest industrial producers. According to an article in BusinessWeek Online, the company is not only the world’s largest shipbuilder but also manufactures other industrial goods ranging from construction equipment and marine engines to building power plants and oil refineries worldwide. Despite being a major industrial force in Korea, several of the company’s divisions are unprofitable, or “bleeding red ink” in the words of the article. Indeed, last year the power plant and oil refineries building division recorded a $105 million loss, or 19 percent of its sales. Hyundai Heavy Industries recently hired a new CEO who is charged with the mission of bringing the unprofitable divisions back to profitability. According to BusinessWeek, Hyundai’s profit-driven CEO has provided division heads with the following ultimatum: “…hive off money-losing businesses and deliver profits within a year—or else resign.” Suppose you are the head of the marine engine division and that it has been unprofitable for 7 of the last 10 years. While you build and sell in the competitive marine engines industry, your primary customer is Hyundai’s profitable ship-building division. This tight relationship is due, in large part, to the technical specifications of building ships around engines. Suppose that in our end-of-year report to the CEO you must disclose that while your division reduced costs by 10 percent, it still remains unprofitable. Make an argument to the CEO explaining why your division should not be shut down.
In: Economics
SHARE-BASED PAYMENTS
Kiwi Car Direct Limited is a New Zealand company which purchases car parts from the United States. It has a balance date of 31 March.
In March 2017 Kiwi Car Direct Limited negotiated the purchase of car parts from its longstanding supplier in the US, Eagle Auto Parts Limited. In this case, Kiwi Car Direct Limited negotiated to settle the purchase of the transaction with 35,000 shares in Kiwi Car Direct Limited. The car parts were received on the 31 March 2017 and are considered to have a total fair value of $260,000. The fair value of Kiwi Car Direct Limited’s shares on the 31 March 2017 was $7.50 per share.
Furthermore, on the 1 April 2017, Kiwi Car Direct Limited granted 10,000 share options to its CEO. All services had been performed by the CEO at that date. The entity reliably estimated the fair value of each option at $6.50.
Required:
(a) Provide the journal entry to record the purchase of the car parts by Kiwi Car Direct Limited on the 31 March 2017.
(b) Calculate the remuneration expense which will be reported in the financial statements of Kiwi Car Direct Limited for the year to 31 March 2018 for services received from the CEO
as consideration for the share options granted.
(c) Discuss the extent to which you consider that the share options granted to the CEO of Kiwi Car Direct Limited are likely to align his/her interests with those of shareholders.
In: Accounting
Read out the case study given below and answer the questions that follow. New York-based Kozmo, the 3-year-old company announced that it would stop delivery service in all nine cities it operates. New York-based Kozmo, which dispatched legions of orange-clad deliverymen to cart goods to customers' doors, is the latest dot.com dream to evaporate in the market downturn. Amazon com, venture capital firm Flatiron Partners and coffee giant Starbucks were among the investors in Kozmo. Kozmo said in December that investors promised a total of $30 million in private funding. But last month the company learned that an investor had backed out of a $6 million commitment. Kozmo executives had been working on a merger deal with Los Angeles-based PDQuick, another online grocer, sources said. The deal collapsed when funding that was promised to PDQuick did not materialize. Sources said Kozmo still has money but decided to close now and liquidate to ensure that employees could receive a severance package. Just last month, Kozmo Chief Executive Gerry Burdo was upbeat about Kozmo's future, saying he was looking to steer Kozmo away from its Internet-only business model and toward a "clicks and bricks" approach. But some analysts say Kozmo's business model only made sense in the context of a densely packed city such as New York. Vern Keenan, a financial analyst with Keenan Vision, said the service had a chance to work in only a few other cities around the world, such as London, Stockholm or Paris. "This seemed like a dumb idea from the beginning," Keenan said. "This grew out of a New York City frame of mind and it simply didn't translate." Kozmo was started by a pair of twenty-something former college roommates. They got the idea for the company on a night when they craved videos and snacks and wished a business existed that would deliver it to them. Kozmo offered free delivery and charged competitive prices when it launched in New York. Though customers loved the service, the costs of delivery were high. After co-founder and former Chief Executive Joseph Park stepped down, Burdo slashed Kozmo's overhead, instituted a delivery fee and oversaw several rounds of layoffs. The company also closed operations in San Diego and Houston. Burdo said last month that profitability was not far away. The company had reached a milestone last December when it reported profits at one of its operations for the first time. Kozmo later saw two more operations reach profitability as a result of brisk holiday business. Online delivery companies have been among the most ravaged by the Internet shakeout. Kozmo's rival in New York, Urban fetch, shuttered its consumer operations last fall. Online grocers such as Webvan and Peapod have also struggled, and smaller operations such as Streamline.com and ShopLink.com have dosed down. Peapod was days away from closing last year when Dutch grocer Royal Ahold agreed to take a majority stake. From the very beginning, supply chain management was to be a core competency of Kozmo. The promising dot.com would deliver your order everything from the latest video to electronics equipment in less than an hour. The technology was superior, the employees were enthusiastic, the customers were satisfied. But eventually, Kozmo ran out of time and money. Questions: 1. What is your understanding of the case? 2. Based on your reasoning, List the factors and reasons for Kozmo’s failure 3. Why KOZMO’s supply chain management could not deliver what it had promised? 4. What could have prevented the shutting down of KOZMO? 5. As a Supply Chain consultant for Kozmo, what would be your suggestions for its revival? 6. What are the pros and cons of online shopping grocery chain?
In: Operations Management
On completing his MBA, James sees a possibility to make a profit selling computers. he has the opportunity to buy a job-lot of computers for 50,000 Euros, and he can buy a shop lease with two years to run for 5,000 Euros and pay an annual rent of 6,000 Euros. He happens just to have inherited 60,000 Euros, so he starts a company and puts the money in as a share capital
During the first year he sells 30,000 Euros of computers for 45,000 Euros. During the second year he sells no computers at all, and at the end of the year he sells the remaining inventory for 1000 Euros and liquidates the company.
Tasks
a. Calculate his accounting profit for each of the two years of operations (IFRS)
b. Explain why the assumptions made at the end of the first year led to the wrong profit estimate
c. What are the consequenses of the assumptions that proved to be incorrect.
In: Accounting
1. Describe the differences between bottleneck effect and founder effect. What are their impacts on genetic diversity in a population? How is their impact on a population reversed over time?
2. Define sympatric and allopatric speciation and give an example of each type
3. Describe three key differences between phyletic gradualism and punctuated equilibrium.
In: Biology
Protek Ltd, a masks distributor company, provides the following trial balance for the year ended 30 June 2020:
Protek Ltd
Trial balance as at 30 June 2020
Debit ($)
Credit ($)
Sales of N97 surgical masks
2,151,670
Sales of 4-ply masks
3,120,850
Sales of masks filters
3,288,426
Cost of goods sold
4,688,000
Rental expenses
375,950
Salaries and wages
1,980,000
Administration expenses
128,450
Annual leave expense
98,510
Doubtful debts expense
158,000
Depreciation expense
376,000
Amortisation expense - patent
56,900
Interest expense
22,500
Interest income
8,200
Selling expenses
66,800
Income tax expense
228,600
Cash on hand
53,000
Cash management account
230,000
Trade debtors
478,600
Allowance for doubtful debts
19,144
Inventories
455,040
Land
760,000
Motor vehicles
630,000
Accumulated depreciation - motor vehicles
252,000
Office equipment
620,000
Accumulated depreciation - office equipment
124,000
Patent (5 years)
569,000
Accumulated amortisation - patent
56,900
Deferred tax asset
28,500
Deferred tax liability
125,000
Bank loan
450,000
Trade creditors
182,560
Provision for annual leave
43,000
Current tax liability
132,100
Retained earnings, 1 July 2019
70,000
Dividends paid
20,000
Share capital
2,000,000
12,023,850
12,023,850
Additional information:
Protek Ltd is a reporting entity in accordance with the requirements of Australian’s Conceptual Framework.
The bank loan is repayable in 3 years.
The depreciation expense of $376,000 relates to motor vehicles and office equipment amounted to $252,000 and $124,000 respectively.
60% of the provision for annual leave are expected to be payable within 1 year and the remaining is payable after 1 year.
The patent was acquired on 1 January 2020. It represents fees paid to Teknova Group, a manufacturer company based in China. Protek Ltd is given the sole distributorship in Australia to sell the new high quality mask, N97, designed for first line workers in the health industry. The patent lasts for 5 years.
There was no new shares issued during the financial year ending 30 June 2020.
Protek Ltd uses the single statement format for the statement of profit or loss and other comprehensive income and presents an analysis of expenses by function on the statement.
The following expenses are allocated to administrative expenses and distribution costs for the purposes of preparation of the statement of profit or loss and other comprehensive income:
Administrative expenses
Distribution costs
Rental expenses
40%
60%
Salaries and wages
50%
50%
Administration expenses
100%
-
Annual leave expense
50%
50%
Doubtful debts expense
-
100%
Depreciation expense – motor vehicles
10%
90%
Depreciation expense – office equipment
80%
20%
Amortisation expense - patent
100%
-
Selling expenses
-
100%
In relation to the statement of financial position, where AASB 101 requires entities to disclose further sub-classifications of the minimum line items on the face of the statement or in the notes, the directors of Protek Ltd want to report only the minimum line items on the face of the statement, and leave the sub-classifications to be disclosed in the notes.
Part A
As the accountant for the entity, prepare the following statements of Protek Ltd the year ended 30 June 2020 in accordance with AASB101:
Statement of profit or loss and other comprehensive income;
Statement of financial position; and
Statement of changes in equity.
In preparing the above statements, you should use the line items that a listed company is likely to use and refer to paragraphs 54, 82, 82A and 106 of AASB 101 in determining the line items to be presented. Show all workings to support your figures presented in the statements. Disclosure notes and comparative figures are not required.
Note: In preparing the statements for Part A, you should consider only information given in this part and ignore information given in Part B below.
Part B
The following events occurred after the preparation of statements was completed in Part A above.
Event 1
The directors have asked you to review the doubtful debts allowance due to the high level of bad debts expense that occurred during the year. The allowance is currently measured based on 4% of trade debtors’ balances following the advice of Jane, who is one of the directors. After reviewing industry averages, you have advised the directors that the allowances should be revised to 8% of the trade debtors’ balances and the directors agreed to your proposal and adopt the new basis from 1 July 2019. This change is considered material in Protek Ltd’s case.
Required:
State if the above situation would constitute a change in accounting policy or a change in accounting estimate. Explain and support your answers by making reference to relevant paragraphs in AASB108.
Prepare necessary adjusting entries and/or notes disclosures required to account for the change in the doubtful debt allowance for the year ended 30 June 2020.
Event 2
Protek Ltd stored its masks in rented warehouses located in several locations. One of the warehouses in Orange was destroyed by bushfires on 29 July 2020. From the accounting records, there were 8,000 boxes of N95 masks stored in that warehouse, with cost of inventories valued at $120,000. Unfortunately, there was no insurance policy acquired to cover this loss and the loss is considered material for Protek Ltd.
The financial statements for the year ended 30 June 2020 were authorised for issue by the directors on 28 August 2020.
Required:
Classify the above event as either an adjusting or non-adjusting event after the end of the reporting period. Justify your answer by making reference to AASB110.
Consistent with your answer to (i) above, prepare any journal entries and/or note disclosures required to comply with the requirements of AASB110.
In: Accounting