Problem 1
a) On June 11, 2008, Anheuser-Busch received a $46.4 billion ($65 a share) takeover offer from Belgium’s InBev. Anheuser-Busch lacks some common defenses against takeover offers. Its board is no longer staggered, meaning all its directors are up for re-election in any given year. And the Busch family does not control the company through supervoting shares, as is the case with some other family businesses that are publicly held. A deal would probably remove Anheuser-Busch from the hands of the Anheuser and Busch families. Still, the family doesn't own enough shares to sway a shareholder vote on the board. Directors and executives hold only 4.5 percent of the company's shares, according to a regulatory filing earlier this year.
After the rejection of InBev’s offer by Anheuser-Busch’s board on June 26, 2008,   InBev, said it would launch a hostile bid . InBev, meanwhile, asked the court earlier in the day, for a declaratory ruling that would confirm the shareholders’ right to remove all 13 of Anheuser’s board members, without giving cause. The brewer is asking for clarification of the legal status of five of the directors appointed in 2006, before changes were made that allow the removal of board directors by written consent.
Anheuser-Busch may announce plans to lower costs and sell off divisions to increase its stock price so it doesn't need to be acquired. One of Anheuser-Busch’s potential countermoves would involve buying the 50 percent of Mexico’s Grupo Modelo that it does not already own. That would raise Anheuser-Busch’s price tag, potentially deterring a suitor.
i. Identify the takeover tactics employed by InBev and explain why each was used.

ii. Identify the takeover defenses employed by Anheuser and explain why each was used.

Chapter 12 Case– Inventory Management

Background

Zhou Bicycle Company (ZBC), located in Seattle, is a wholesale distributor of bicycles and bicycle parts. Formed in 1981 by University of Washington Professor Yong-Pin Zhou, the firm’s primary retail outlets are located within a 400-mile radius of the distribution center. These retail outlets receive the order from ZBC within 2 days after notifying the distribution center, provided that the stock is available. However, if an order is not fulfilled by the company, no backorder is placed; the retailers arrange to get their shipment from other distributors, and ZBC loses that amount of business.

The company distributes a wide variety of bicycles. The most popular model, and the major source of revenue to the company, is the AirWing. ZBC receives all the models from a single manufacturer in China, and shipment takes as long as 4 weeks from the time an order is placed. With the cost of communication, paperwork, and customs clearance included, ZBC estimates that each time an order is placed, it incurs a cost of $65. The purchase price paid by ZBC, per bicycle, is roughly 60% of the suggested retail price for all the styles available, and the inventory carrying cost is 1% per month (12% per year) of the purchase price paid by ZBC. The retail price (paid by the customers) for the AirWing is $170 per bicycle.

ZBC is interested in making an inventory plan for 2016. The firm wants to maintain a 95% service level with its customers to minimize the losses on the lost orders. The data collected for the past 2 years are summarized in the following table. A forecast for AirWing model sales in 2016 has been developed and will be used to make an inventory plan for ZBC.

Solution Requirements

Utilize Microsoft Excel to complete the following steps. Submit the assignment in Excel for credit. No credit will be given for work submitted in another file format. Pay attention to formatting and clearly label all steps:

Develop an annual inventory plan for to help ZBC by completing the following steps.

1. Calculate the economic order quantity for ZBC’s estimated demand.

Hint: Have to convert the inventory carrying cost % to annual $ amount.

2. Determine how many times orders should be placed throughout the year. How often should orders be placed?

Hint: assume 300 working days per year.

3. Calculate the reorder point, include safety stock.

4. Determine the total costs of inventory, including product costs.

5. Write a short paragraph or memo outlining the process that ZBC should follow with their inventory plan.

6. Bonus Question: Trace the inventory balance over the course of the year. Assume a starting inventory balance of 35 bicycles. Also assume that retail orders are called into ZBC the first business day of every month and the first order to ZBC suppliers is on Jan 4, 2016.
What conclusions or recommendations do you draw from tracing the inventory?

Hint: Take into consideration orders to suppliers and supplier lead time, orders from retailers and lead time in shipments to retailers, as well as the estimated time between orders to suppliers. Consider creating a table similar to the one below. Make sure to fill in dates, order quantities, and calculate the inventory balance.

Bradley-Link’s December 31, 2018, balance sheet included the following items:

Note 8: Bonds (in part)
The 10.0% bonds were issued in 2005 at 97.5 to yield 10%. Interest is paid semiannually on June 30 and December 31. Each $1,000 bond is convertible into 40 shares of the Company’s no par common stock.

The 11.0% bonds were issued in 2009 at 104 to yield 10%. Interest is paid semiannually on June 30 and December 31. Each $1,000 bond was issued with 40 detachable stock warrants, each of which entitles the holder to purchase one share of the Company’s no par common stock for $20, beginning 2019.

On January 3, 2019, when Bradley-Link’s common stock had a market price of $27 per share, Bradley-Link called the convertible bonds to force conversion. 90% were converted; the remainder were acquired at the call price. When the common stock price reached an all-time high of $32 in December of 2019, 40% of the warrants were exercised.

Required:
1. Prepare the journal entries that were recorded when each of the two bond issues was originally sold in 2005 and 2009.
2. Prepare the journal entry to record (book value method) the conversion of 90% of the convertible bonds in January 2019 and the retirement of the remainder.
3. Assume Bradley-Link induced conversion by offering $160 cash for each bond converted. Prepare the journal entry to record (book value method) the conversion of 90% of the convertible bonds in January 2019.
4. Assume Bradley-Link induced conversion by modifying the conversion ratio to exchange 45 shares for each bond rather than the 40 shares provided in the contract. Prepare the journal entry to record (book value method) the conversion of 90% of the convertible bonds in January 2019.
5. Prepare the journal entry to record the exercise of the warrants in December 2019.

10. Exercise 3.10

The Reliable Aircraft Company manufactures small, pleasure-use aircraft. Based on past experience, sales volume appears to be affected by changes in the price of the planes and by the state of the economy as measured by consumers' disposable personal income. The following data pertaining to Reliable's aircraft sales, selling prices, and consumers' personal income were collected:

The arc price elasticity of demand between 2006 and 2007 is:

0.38

0.22

0

–0.22

The arc income elasticity of demand between 2007 and 2008 is:

0

2.33

5.36

–2.33

Assume that these estimates are expected to remain stable during 2009. Forecast 2009 sales for Reliable assuming that its aircraft prices remain constant at 2007 levels and that disposable personal income will increase by 7%. Also assume that the arc income elasticity you just computed is the best available estimate of income elasticity.

Aircraft Sales 2009 Forecast:

Forecast 2009 sales for Reliable given that its aircraft prices will increase by 6% from 2008 levels and that disposable personal income will increase by 7%. Assume that the price and income effects are independent and additive and that the arc income and price elasticities you just computed are the best available estimates of these elasticities to be used in making the forecast.

Aircraft Sales 2009 Forecast:

Wayne’s Workshop shows average revenue per customer of $400. Monthly fixed costs are $40,000. Variable costs in the last month were in total $32,000. During that month the workshop had 1,200 customers.

Required

1.       Calculate the contribution margin ratio.

2.       Calculate the breakeven point.

3.       What was the profit last month?

4.       Prepare an income statement for last month using the contribution format.

5.       What was the operating leverage?

6.       Using the operating leverage formula, calculate the new operating income if sales fall by 5%.

CASE 10‐3 Equity Method and Disclosures

On July 1, 2017, Dynamic Company purchased for cash 40 percent of the outstanding capital stock of Cart Company. Both Dynamic and Cart have a December 31 year‐end. Cart, whose common stock is actively traded in the over‐the‐counter market, reported its total net income for the year to Dynamic and also paid cash dividends on November 15, 2017, to Dynamic and its other stockholders.

Required:

1. How should Dynamic report the foregoing facts in its December 31, 2017, balance sheet and its income statement for the year then ended? Discuss the rationale for your answer.
2. If Dynamic should elect to report its investment at fair value, how would its balance sheet and income statement differ from your answer to part (a)?

Identify the assets and liabilities for the month of May.

Prepare an income statement for May