Bogart is a listed company that reports using IFRS and has a reporting date of 30 September 2020. Bogart purchased 18% of Lupin’s 100 million $1 ordinary shares for $43 million cash on 1 October 2018, gaining significant influence. Lupin had retained earnings of $85 million and no other components of equity, on the date of purchase.
The investment in Lupin was accounted for correctly in Bogart’s individual financial statements for the year ended 30 September 2019, when Lupin had retained earnings of $150 million and no other components of equity.
Bogart acquired control over Lupin on 1 October 2019, purchasing a further 67% of its ordinary shares. Cash consideration of $160 million was correctly included in calculating goodwill. Purchase consideration included 3 million of Bogart’s own $1 ordinary shares, with a fair value of $1.40 each. No accounting entries were posted for this share consideration.
Bogart derecognised the carrying amount of the existing 18% holding in Lupin and included it in calculating the goodwill of the business combination. The carrying amount of the net assets of Lupin was also used in calculating goodwill. The fair value of the existing 18% holding was $73 million at 1 October 2019 and the fair value of the identifiable net assets of Lupin was $285 million. The excess of the fair value of net assets over the carrying amount was due to equipment with a remaining useful life of ten years. The fair value of the non-controlling interest in Lupin on 1 October 2019 was $63.8 million and was included in calculating goodwill.
On 30 September 2020, Bogart purchased an additional 5% of the ordinary shares of Lupin. Consideration transferred for these additional shares was $19 million cash, which was expensed to the consolidated statement of profit or loss. On 30 September 2020, Lupin had retained earnings of $185 million and no other components of equity.
Required:
Discuss, with calculations, how the purchase of the additional share capital in Lupin should be accounted for in the consolidated financial statements. Show the accounting entry required to correct any error.
In: Accounting
Janice Underwood, an MBA student in Southeastern University , has been hired as a night manager of Campus Deli and Sub Shop (CDSS), which is located adjacent to the campus. Sales were $ 875,000 last year; variable costs were 60 % of sales; and fixed costs were $ 50,000. Therefore, EBIT totalled $ 300,000. Since the university ‘s enrollment is capped, the store’s EBIT is expected to be constant over time. Since no expansion capital is required, CDSS pays out all earnings as dividends.
CDSS is currently all equity financed, and its 100,000 shares outstanding sell at a price of $ 10 per share. The firm’s tax rate is 34 %. Underwood believes that the firm will be better off if some debt financing is used.She needs some justification for her suggestion. She developed the following estimates of the costs of debt and equity at different debt levels ( in thousands of dollars ):
Amount borrowed cost of debt cost of equity
$ 0 _ 15.0%
200 10.0% 15.5
400 11.0 16.5
500 13.0 18.0
600 16.0 20.0
If the firm were recapitalized, the borrowed funds would be used to repurchase stock. Stockholders ,in return, would use the funds provided by the repurchase to buy equities in other fast food companies similar to CDSS. Underwood needs help in answering the following questions:
1.Calculate CDSS’s expected EPS at debt levels of $0, $ 200,000, $400,000,$ and 600,000. How many shares would remain after recapitalization under each scenario? Assume that shares are repurchased at the current market price of $ 10per share?
2. What would be the stock price under each case defined above?
3.If CDSS’s fixed costs total $ 50,000, what is its degree of operating leverage?
4. What will be CDSS’s degree of financial leverage at a debt level of $ 500,000?
In: Accounting
Business Weekly conducted a survey of graduates from 30 top MBA programs. On the basis of the survey, assume the mean annual salary for graduates 10 years after graduation is 169000 dollars. Assume the standard deviation is 43000 dollars. Suppose you take a simple random sample of 77 graduates. Find the probability that a single randomly selected policy has a mean value between 168019.9 and 175860.4 dollars. P(168019.9 < X < 175860.4) = (Enter your answers as numbers accurate to 4 decimal places.) Find the probability that a random sample of size n = 77 n=77 has a mean value between 168019.9 and 175860.4 dollars. P(168019.9 < M < 175860.4) = (Enter your answers as numbers accurate to 4 decimal places.)
In: Statistics and Probability
Business Weekly conducted a survey of graduates from 30 top MBA
programs. On the basis of the survey, assume the mean annual salary
for graduates 10 years after graduation is 121000 dollars. Assume
the standard deviation is 41000 dollars. Suppose you take a simple
random sample of 79 graduates.
Find the probability that a single randomly selected salary exceeds
117000 dollars.
P(X > 117000) =
Find the probability that a sample of size n=79 is randomly
selected with a mean that exceeds 117000 dollars.
P(M > 117000) =
Enter your answers as numbers accurate to 4 decimal places.
In: Statistics and Probability
Audubon Advisors is a volunteer student organization that uses business skills they’ve learned in their MBA program to advise local charity groups about business decisions. One charity group is planning to make and sell cutting boards at a major cooking show. The boards cost $6 each to make and will sell for $20 each. The boards will be made by volunteers at the show and all materials not used can be returned. That is, the group will make only the number of boards it can actually sell. The cooking show allows three options for groups selling at the show:
A. Pay a fixed booth fee of $5,600
B. Pay a fee of $3,800 plus 10% of all revenue from the boards sold at the show
C. Pay 25% of all revenues from boards sold at the show.
1. Compute the CM per board under each of the three options.
2. Compute the breakeven point in number of boards for each of the three options.
3. Which payment plan has the lowest risk of loss for the charity group? Why?
4. Which payment plan has the highest profit potential assuming that there is very high demand for the boards? Why?
In: Accounting
Use Excel to answer. A college admission officer for an MBA program determines that historically candidates have undergraduate grade averages that are normally distributed with standard deviation of .45. A random sample of 25 applications from the current year yields a sample mean grade point average of 2.90.
Hint: first calculate α/2 using either the lower bound (2.81) or upper bound (2.99); then calculate α. Finally, calculate the probability content of the interval, which is (1- α). And make sure you use the standard error, not the standard deviation, to calculate α/2.
In: Statistics and Probability
You have just graduated from the MBA program of a large university, and one of your favorite courses was “Today’s Entrepreneurs.” In fact, you enjoyed it so much you have decided you want to “be your own boss.” While you were in the master’s program, your grandfather died and left you $1 million to do with as you please. You are not an inventor and you do not have a trade skill that you can market; however, you have decided that you would like to purchase at least one established franchise in the fast-foods area, maybe two (if profitable). The problem is that you have never been one to stay with any project for too long, so you figure that your time frame is three years. After three years you will sell off your investment and go on to something else.
You have narrowed your selection down to two choices; (1) Franchise L, Lisa’s Soups, Salads, & Stuff and (2) Franchise S, Sam’s Fabulous Fried Chicken. The net cash flows shown below include the price you would receive for selling the franchise in Year 3 and the forecast of how each franchise will do over the three-year period. Franchise L’s cash flows will start off slowly but will increase rather quickly as people become more health conscious, while Franchise S’s cash flows will start off high but will trail off as other chicken competitors enter the marketplace and as people become more health conscious and avoid fried foods. Franchise L serves breakfast and lunch, while Franchise S serves only dinner, so it is possible for you to invest in both franchises. You see these franchises as perfect complements to one another: You could attract both the lunch and dinner crowds and the health conscious and not so health conscious crowds without the franchises directly competing against one another.
Here are the net cash flows (in thousands of dollars):
Expected Net Cash Flows
Year Franchise L Franchise S
0 ($100) ($100)
1 10 70
2 60 50
3 80 20
Depreciation, salvage values, net working capital requirements, and tax effects are all included in these cash flows.
You also have made subjective risk assessments of each franchise, and concluded that both franchises have risk characteristics that require a return of 10%. You must now determine whether one or both of the franchises should be accepted.
What is each franchise’s IRR?
How is the IRR on a project related to the YTM on a bond? For example, suppose the initial cost of a project is $100 and it has cash flows of $40 at Years 1, 2, and 3. What is its IRR?
What is the logic behind the IRR method? According to IRR, which franchises should be accepted if they are independent? Mutually exclusive?
Would the franchises’ IRRs change if the cost of capital changed?
In: Accounting
Business Weekly conducted a survey of graduates from 30 top MBA programs. On the basis of the survey, assume the mean annual salary for graduates 10 years after graduation is $156,000. Assume the standard deviation is $42,000. Suppose you take a simple random sample of 49 graduates. Round all answers to four decimal places if necessary.
In: Statistics and Probability
Business Weekly conducted a survey of graduates from 30 top MBA programs. On the basis of the survey, assume the mean annual salary for graduates 10 years after graduation is 160000 dollars. Assume the standard deviation is 42000 dollars. Suppose you take a simple random sample of 100 graduates.
Find the probability that a single randomly selected policy has a mean value between 155800 and 157900 dollars. P(155800 < X < 157900) = (Enter your answers as numbers accurate to 4 decimal places.)
Find the probability that a random sample of size n = 100 n=100 has a mean value between 155800 and 157900 dollars. P(155800 < M < 157900) =
(Enter your answers as numbers accurate to 4 decimal places.)
In: Statistics and Probability
Scenario: Upon successful completion of the MBA program, imagine you work in the analytics department for a consulting company. Your assignment is to analyze one of the following databases:
Select one of the databases based on the information in the Signature Assignment Options.
Provide a 1,600-word detailed, four part, statistical report with the following sections:
Part 1 - Preliminary Analysis
Generally, as a statistics consultant, you will be given a problem and data. At times, you may have to gather additional data. For this assignment, assume all the data is already gathered for you.
State the objective:
Describe the population in the study clearly and in sufficient detail:
Discuss the types of data and variables:
Part 2 - Descriptive Statistics
Examine the given data.
Present the descriptive statistics (mean, median, mode, range, standard deviation, variance, CV, and five-number summary).
Identify any outliers in the data.
Present any graphs or charts you think are appropriate for the data.
Note: Ideally, we want to assess the conditions of normality too. However, for the purpose of this exercise, assume data is drawn from normal populations.
Part 3 - Inferential Statistics
Use the Part 3: Inferential Statistics document.
Hint: A final conclusion saying "reject the null hypothesis" by itself without explanation is basically worthless to those who hired you. Similarly, stating the conclusion is false or rejected is not sufficient.
Part 4 - Conclusion and Recommendations
Include the following:
In: Statistics and Probability