MOS 4465 Assignment 3 Chapter 4

Points awarded for assignment 3 chapter 4 - 100 out of 100

Question 1

This case introduces you to data analysis by allowing you to extract, visualize, and compare financial data over a span of 11 years, from 2010-2020, for six publicly traded companies whose identities have been disguised. The data is provided as an Excel file called “Ch03_CompanyData”.

Download the Excel File Here

For the case, assume you are an analyst conducting research into the relative performance and state of financial health of the companies.

For this question you will use PowerBI—instructions on how to create your visualization are included below. Once you have created your visualization you will refer to it to answer the included questions.

Instructions

If you do not already have Power BI, you can download a free version of Power BI desktop from Microsoft.com. After installing the application, you should be ready to import your data.

To import your data, open the application and click get data, Import data from Excel and select the file you downloaded and click the transform button. This opens up a query window where you see a preview of your data. Ensure that the data is properly formatted paying close attention that the variable “Year” is formatted as text. Click the “Close & Apply” button on the top left corner of the screen. Once your data is imported, you should see the worksheet name under the Fields pane in the right most part of your screen. This blank canvas labelled page 1, will be the starting point of your task. You can change this label to whatever you wish. Now you are ready to perform your visualizations.
To begin creating your visualization, create the report you want to visualize, by selecting the variables of interest – Company name, Goodwill and Year. This will create a Table showing the data. Next, click on the visualization of your choice on the right side of the screen. A clustered column chart yields an acceptable format. Ensure that “Company name” is in the Axis and the values are of the variable that you are interested in.

Present a visualization that shows the goodwill for each company for the years from 2010 – 2020. Using this visualization, answer the following questions.

What was the amount of recorded goodwill for Johnson Limited in 2020? Multiple Choice

$4,875
$4,500
$1,100
$850

If there was no additional acquisition by Airride Inc. in 2014, how much goodwill impairment was recognized by Airride Inc. in 2014? Multiple Choice

$1,237
$1,654
$417
$0

If an amount was paid for goodwill in every acquisition and if the amount was always greater than any goodwill impairment for that year, which company(ies) acquired a subsidiary in every year between 2010 and 2021? Multiple Choice

DD-W Corp.and Skylight Inc.
DD-W Corp. only
Johnson Limited only
DD-W Corp and Johnson Limited.

If an amount was paid for goodwill in every acquisition and if the amount was always greater than any goodwill impairment for that year, which company(ies) did not acquire any new subsidiary between 2010 and 2020?Multiple Choice

DD-W Corp.
Coolridge Inc.
Johnson Limited
Wonder Corporation

Question 5

The balance sheets of Percy Corp. and Saltz Ltd. on December 31, Year 10, are shown below:

	Percy			Saltz
Cash	$	200,000		$	4,000
Accounts receivable		50,000			14,000
Inventory		60,000			42,000
Plant		475,000			192,000
Accumulated amortization		(125,000	)		(90,000	)
Trademarks(net)		–			14,000
	$	660,000		$	176,000
Current liabilities	$	100,000		$	20,000
Long-term debt		160,000			40,000
Common shares		220,000			60,000
Retained earnings		180,000			56,000
	$	660,000		$	176,000

The fair values of the identifiable net assets of Saltz Ltd. on December 31, Year 10, were as follows:


Cash			$	4,000
Accounts receivable				14,000
Inventory				52,000
Plant				120,000
Trademarks				28,000
				218,000
Current liabilities	$	20,000
Long-term debt		38,000		58,000
Net assets			$	160,000

In addition to the assets identified above, Saltz owned a taxi licence in the City of Moose Jaw. This licence expires in nine years. These licences are selling in the open market at approximately $40,000. On January 1, Year 11, Percy Corp paid $175,000 in cash to acquire 7,000 (70%) of the common shares of Saltz Ltd. Saltz’s shares were trading for $20 per share just after the acquisition by Percy.

Required:

Prepare the consolidated balance sheet on January 1, Year 11.

Question 6

The July 31, Year 3, balance sheets of two companies that are parties to a business combination are as follows:

	Ravinder Corp.		Robin Inc.
	Carrying Amount		Carrying Amount		Fair Value
Current assets	$	1,600,000	$	420,000	$	468,000
Plant and equipment		1,330,000		1,340,000		972,000
Accumulated depreciation		(250,000)		(500,000)
Patents(net)		–		–		72,000
	$	2,680,000	$	1,260,000

Current liabilities	$	1,360,000	$	252,000		252,000
Long-term debt		480,000		360,000		384,000
Common shares		720,000		168,000
Retained earnings		120,000		480,000
	$	2,680,000	$	1,260,000

In addition to the assets identified above, Ravinder Corp. attributed a value of $100,000 to a major research project that Robin Inc. was working on. Robin Inc. feels that it is within a year of developing a prototype for a state-of-the-art bio-medical device. If this device can ever be patented, it could be worth hundreds of thousands of dollars.

Effective on August 1, Year 3, the shareholders of Robin Inc. accepted an offer from Ravinder Corp. to purchase 80% of their common shares for $1,040,000 in cash. Ravinder Corp.’s legal fees for investigating and drawing up the share purchase agreement amounted to $25,000.

Required:

(a) Prepare the journal entries in the records of Ravinder Corp. to record the share acquisition and cost of legal fees. (If no entry is required for a transaction/event, select “No journal entry required” in the first account field.)

(b) Prepare a schedule to calculate and allocate the acquisition differential. (Negative amounts and amounts to be deducted should be indicated by a minus sign.)

(c) Prepare Ravinder Corp.’s consolidated balance sheet as at August 1, Year 3. Assume there were no transactions on this date other than the transactions described above. (Negative amounts should be indicated by a minus sign.)

Question 7

The condensed financial statements for OIL Inc. and ERS Company for the year ended December 31, Year 5, follow:

	OIL		ERS
Revenues	$	924,000	$	316,000
Expenses		668,000		208,000
Net income	$	256,000	$	108,000
Retained earnings, 1/1/Year 5	$	808,000	$	208,000
Net income		256,000		108,000
Dividends paid		98,000		0
Retained earnings, 12/31/Year 5	$	966,000	$	316,000
Cash	$	88,000	$	118,000
Receivables and inventory		408,000		178,000
Patented technology (net)		908,000		312,000
Equipment (net)		708,000		608,000
Total assets	$	2,112,000	$	1,216,000
Liabilities	$	608,000	$	422,000
Common shares		538,000		478,000
Retained earnings		966,000		316,000
Total liabilities and equities	$	2,112,000	$	1,216,000

On December 31, Year 5, after the above figures were prepared, OIL issued $252,000 in debt and 12,000 new shares to the owners of ERS for 90% of the outstanding shares of that company. OIL shares had a fair value of $48 per share.
OIL also paid $38,000 to a broker for arranging the transaction. In addition, OIL paid $40,000 in stock issuance costs. ERS’s equipment was actually worth $706,000, but its patented technology was appraised at only $288,000.

Required:

What are the consolidated balances for the year ended/at December 31, Year 5, for the following accounts? (Omit $ sign in your response.)

(a) Net income

(b) Retained earnings, 1/1/Year 5

(c) Equipment

(d) Patented technology

(e) Goodwill

(f) Liabilities

(g) Common shares

(h) Non-controlling interests

Related Assignment: (Solution) MOS4465 Assignment 4 (Chapter 5)