In order to address the course learning objective. "...demonstrate your ability to justify if current Corporate Strategies work to achieve competitive advantage'..."

An eBay executive was once asked a question about some of the firm's new acquisitions. The question and his answer follows:

Q - With your other acquisitions, what have you learned about how to make them work, how to integrate them into the culture?

A - We think about acquisitions in three categories: acquisitions to strengthen our core, adjacent acquisitions, and capability acquisitions. The easiest are the first kind, like the acquisition two years ago of (the Korean auction site) Gmarket. We’re letting adjacent acquisitions, such as StubHub and Bill Me Later, run relatively independently. With Bill Me Later we’ve integrated core capabilities into PayPal and eBay. Positronic, a small search company, is in the third category. In many cases we’re buying the people—Christopher Payne, who’s running eBay North America now, was a founder of Positronic—which helps us integrate faster and acquire great talent.

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Now it is your turn. Please address the following questions:

1. What benefits would eBay have from allowing an acquired firm, such as "Bill Me Later" to function relatively independently?
2. Is it a good idea to impose the acquiring firm’s culture onto the acquired firms? Why? Why not?   

Dealing a Rigged Game

The case study concerns Pete Miller, CEO of National Oilwell Varco (NOV) since 2001. Miller acquired over 200 companies, each with a strategic tie to the oil producing industry. The company now has a dominant share of the market for offshore drilling equipment, a segment of the industry that reported the most orders ever in 2013. NOV stands to capitalize on all segments of the future oil industry – the actual building of the drilling rigs, jack-ups, and ships that have to go offshore and do the drilling.

Management Update: In November 2013, Pete Miller announced he was stepping down as NOV’s CEO to serve as executive chairman of DistributionNOW

Case Question: Recall our definition of strategy as “a comprehensive plan for accomplishing an organization’s goals.” Explain why NOV’s approach to acquisitions qualifies as corporate-level strategy. Be specific by discussing the company’s moves, the nature and state of the industry that it’s in (drilling equipment and services), the nature and state of the industry to which it’s closely related (oil and gas drilling), and, most importantly, its goals. What are NOV’s goals?

On 1 March 2020, Black Ltd was registered and offered 500 000 ordinary shares to the public at an issue price of $6, payable as follows:
$3 on application
$2 on allotment
$1 on final call
The share issue was successful, and all the allotment money was received by the due date. The final call was made on 1 November with money due by 30 November. All money was received on the due date except for the holder of 15 000 shares who failed to meet the final call.
On 7 December 2020, as provided for in the constitution, the directors decided to forfeit these shares. They were reissued, on 15 December 2020, as paid to $6 for $5.6 cash. Costs of forfeiture and reissue amounted to $4 000 and was paid on the same day. The balance of the Forfeited Shares account was returned to the former shareholder on 31 December 2020.

Prepare the journal entries to record the transactions of ABC Ltd for the events outlined above.

Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2020. As of that date, Abernethy has the following trial balance:

During 2020, Abernethy reported net income of $122,500 while declaring and paying dividends of $15,000. During 2021, Abernethy reported net income of $159,250 while declaring and paying dividends of $49,000.

Assume that Chapman Company acquired Abernethy’s common stock for $698,050 in cash. As of January 1, 2020, Abernethy’s land had a fair value of $123,900, its buildings were valued at $219,400, and its equipment was appraised at $254,500. Chapman uses the equity method for this investment.

Prepare consolidation worksheet entries for December 31, 2020, and December 31, 2021.

Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2020. As of that date, Abernethy has the following trial balance: Debit Credit Accounts payable $ 55,800 Accounts receivable $ 42,500 Additional paid-in capital 50,000 Buildings (net) (4-year remaining life) 209,000 Cash and short-term investments 67,250 Common stock 250,000 Equipment (net) (5-year remaining life) 357,500 Inventory 136,000 Land 114,000 Long-term liabilities (mature 12/31/23) 168,500 Retained earnings, 1/1/20 414,650 Supplies 12,700 Totals $ 938,950 $ 938,950 During 2020, Abernethy reported net income of $104,500 while declaring and paying dividends of $13,000. During 2021, Abernethy reported net income of $137,750 while declaring and paying dividends of $34,000. Assume that Chapman Company acquired Abernethy’s common stock for $849,550 in cash. As of January 1, 2020, Abernethy’s land had a fair value of $128,300, its buildings were valued at $274,600, and its equipment was appraised at $334,750. Chapman uses the equity method for this investment. Prepare consolidation worksheet entries for December 31, 2020, and December 31, 2021.

Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2020. As of that date, Abernethy has the following trial balance:

During 2020, Abernethy reported net income of $87,000 while declaring and paying dividends of $11,000. During 2021, Abernethy reported net income of $122,500 while declaring and paying dividends of $55,000.

Assume that Chapman Company acquired Abernethy’s common stock for $873,250 in cash. As of January 1, 2020, Abernethy’s land had a fair value of $129,800, its buildings were valued at $243,800, and its equipment was appraised at $403,750. Chapman uses the equity method for this investment.

Prepare consolidation worksheet entries for December 31, 2020, and December 31, 2021.

QUESTION 1

(the interest rates)

You are a senior financial analyst and have been asked to analyse recent developments in the Euro era and the U.S markets and advise the top management on the economic conditions in both markets. You have collected data on the euro area yields of the central government bonds and the U.S. treasury bond yields. For this purpose, you have downloaded the following data from the European Central Bank and the U.S Federal Reserve Bank on 24^th September 2020 (Mo = month, Yr = Year):

REQUIRED:

1. Considering both yield rates on 24^th September 2020, depict the yield curves charts and describe the implied market outlook in the Euro area and the U.S. market to the top management.

[4 marks].

QUESTION 1 (continued)

2. Calculate the market price of each bond on 24^th September 2020 that issued by North Polar Ltd., a European company specialises in manufacturing semiconductors, using the yield curve data provided in the table above. What is the current total value of minimum application?

[4 marks]

3. Suppose the Australian government has announced tax cuts for the business sector. Using the loanable funds model, explain how this will impact the supply of and demand for loanable funds and the interest rate in Australia. (Explain your answer using diagrams).

Matthews Co. acquired all of the common stock of Jackson Co. on January 1, 2020. As of that date, Jackson had the following trial balance:

During 2020, Jackson reported net income of $96,000 while paying dividends of $12,000. During 2021, Jackson reported net income of $132,000 while paying dividends of $36,000. Assume that Matthews Co. acquired the common stock of Jackson Co. for $588,000 in cash. As of January 1, 2020, Jackson's land had a fair value of $102,000, its buildings were valued at $188,000, and its equipment was appraised at $216,000. Any excess of consideration transferred over fair value of assets and liabilities acquired is due to an unamortized patent to be amortized over 10 years.

Matthews decided to use the equity method for this investment.

Required:

Using Excel

(A.) Prepare consolidation worksheet entries for December 31, 2020.

(B.) Prepare consolidation worksheet entries for December 31, 2021.

finchco case for corporate finance,

It was late February 2010, and Harry Finch who was president and chief executive officer (CEO) of Finch Distributing Company (Finchco), was thinking about selling his business. At 65 years of age but in excellent health, he wanted to pursue his dream of buying a yacht and sailing around the world. His interest in selling the company had begun in earnest when in late 2007 Finchco had received a $35.4 million offer1 to purchase the company from one of its U.S. suppliers. Unfortunately, at the onset of the financial crisis, the offer was revoked. Since that time, Finchco had experienced a financial reversal related to the downturn of the economy but Finch felt that the company was turning around and had a potential large contract on the horizon. He wondered whether the time was right to offer his firm for sale.

On January 1, 2016, SugarBear Company acquired equipment costing $150,000, which will be depreciated on the assumption that the equipment will be useful for five years and have a residual value of $12,000. The estimated output from this equipment is as follows: 2016 - 15,000 units; 2017 - 24,000 units; 2018 - 30,000 units; 2019 - 28,000 units; 2020 - 18,000 units. The company is now considering possible methods of depreciation for this asset.

Required:

a.) Calculate what the depreciation expense would be for each year of the asset's life, if the company chooses:

i.) The straight-line method

ii.) The units-of-production method

iii.) The double-diminishing-balance method

b.) Briefly discuss the criteria that a company should consider when selecting a depreciation method.