As discussed in today's meeting, Paddle-up Inc.'s Board of Directors has requested pro-forma financial statements for several acquisition scenarios of Stream Company.

For the past several years Paddle-Up Inc.'s Executive Management Team had experienced continued pressure from their investors for their lack of growth (markets share, revenue, and profits). On September 1, 2018 the Chief Executive Officer, Chief Operating Officer, and the Chief financial Officer all resigned.

Previous to the Executive Management Team's resignation, Paddle-Up Inc.'s Board of Directors were in discussions with Stream Company's Board of Directors about a possible acquisition. The combination of constant pressure from investors and learning that the Board had been in negotiations with Stream Company, without their knowledge, sparked the abrupt resignations.

Stream Company shareholders want cash for the sale of 100% of their company (via an Asset Acquisition). Paddle-Up Inc.'s Board of Directors prefers to buy 90% of Stream Company using a combination of cash and Paddle-Up shares (via a Stock Acquisition).

The Board has requested that the accounting department provide a pro-forma balance sheet at date of acquisition (use January 1, 2018 balance sheet information for both companies) for the following two scenarios:

1.Purchase 100% of Stream Company; accounting for as an asset acquisition assuming a cash only payment of $550 million.

2.Purchase 90% of Stream Company; accounting for as a stock acquisition (consolidation) assuming consideration (payment) given is a combination of cash ($50 million) and Paddle-Up stock issuance (20,000,000 shares).

The Board has also requested that the accounting department provide pro-forma consolidated financial statements (income statement, statement of retained earnings, and balance sheet) for the 90% stock acquisition scenario as of December 31, 2018 (using the complete equity method).

Finally, in addition to providing the pro-forma financial statements, the board would like one page memorandum that addresses the following:

1.Analysis of the two acquisition date scenarios (asset acquisition and stock acquisition). Include in the analysis a brief explanation of the accounting differences between asset and stock acquisitions.

2.Analysis of the consolidated financial statements as of 12/31/18.

3.Recommendation in regards to several ethical questions included in a note received from the Paddle-Up Inc. acquisition team (Exhibit A). Consider whether the type of acquisition (asset or stock) impacts your evaluation.

4.Analysis whether the stock acquisition of Stream Company is a good financial and strategic decision.

Memorandum to the Board of Directors.

Asset acquisition balance sheet (date of acquisition).

Goodwill calculation

Journal entry

.Schedule showing the impact of the journal entry on Paddle-Up Inc.'s balance sheet to arrive at the post-asset acquisition balance sheet.

Stock acquisition balance sheet (date of acquisition).

a.Acquisition Journal entry

b.Workpaper entries in journal entry form

c.Workpaper

D.Stock acquisition 3-section workpaper as of 12/31/18 (complete equity method).

a.Acquisition Journal entry

b.Workpaper entries in journal entry form

c.Workpaper

Notes:

1.Items B, C, D and E each must be presented independently on ONE PAGE (i.e. Do not combine requirement C answers with requirement D answers on the same page).

2.The entire report must be as written a word document..

3.All financial work must be prepared in EXCEL

4.The completed project evaluation will include how well the material is presented

Supporting Data: The request memorandum

Exhibit A - The Paddle-Up acquisition team discovered during their due diligence that Stream Company did not realize the following key facts:

Stream Company management and board did not realize their patents and brands had significant value. Thus, they did not include these asset values in their own internal evaluation of the potential sale to Paddle-Up Inc.

Stream Company management and board does not fully understand that more than 25% of their employees will be let go (fired) within 6 months of the acquisition.

Stream Company management and board do not realize that their long-term customers will be faced with dramatic price increases to be implemented by Paddle-Up Inc.

Financial data