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Excel File Edit View Insert Format Tools 43 64% (4) Thu 2:06 PM Q AutoSave OFF HESU- Data Window Help Advanced Accounting - Consolidation Case Study - Excel Template (1) - Saved to my Mac Review View Tell me Q Home Insert Draw Page Layout Formulas Data Share Q Comments X Arial Insert v V 10 V AA ab Wrap Text General V hiv WE Ayu Oy V 5 DX Delete v Paste B I U .00 Merge & Center $ % ) Cell Ideas Conditional Format Formatting as Table Styles Sort & Filter Sensitivity Format Find & Select C133 fx Equity Entry D E F G H 1 J K 1 M N o R s T U V 5 The following information was obtained by the accounting department in order to prepare the pro-forma financial statements for the Board of Directors. Amounts below are actuals or based on management's best estimate of the transaction details. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 (all amounts in thousands, unless stated otherwise) Balance Sheet December 31, 2019 Assets Paddle-up Stream Cash and receivables $ 2,860 $ 720 Inventory 1,700 900 Equity method investments 300 Investment in Sub Land 650 175 Buildings and equipment, net 2,400 600 Total assets TS 7.610$ 2,695 Liabilities & Equity Current liabilities 1,500 1,000 Long-term debt 2.000 400 Common stock, par value 500 100 Additional paid-in capital 1,200 350 Retained earnings 2,410 845 Total liabilities & equity S 7.610$ 2,695 22 23 24 25 26 Additional Information a) Paddle-up Co expects to pay $1.7 million in cash for the acquistion of Stream Co. Legal and accounting fees are estimated to be $150K b) The fair values of Stream Co's reported net assets are assumed to equal their book values with the exception of the following assets: 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 Inventory Equity Method investments Land Buildings & equipment, net Stream Co Estimated Fair Value $800 250 420 900 c) Inventory and Equity method investments are expected to be sold in 2020. d) Buildings and equipment: 20 year useful life; straight-line depreciation e) During due dilligence, management identified the following unrecorded intangible assets (estimated fair values shown below): -Assembled workforce $300 -Business reputation of Stream Co. 500 -Potential contracts with Oar Inc. 150 Solution Condensed + + 100% JUN 3 18 n 4 43 64% (4) Thu 2:06 PM Q Excel File Edit View Insert Format Tools AutoSave HESU- Data Window Help Advanced Accounting - Consolidation Case Study - Excel Template (1) - Saved to my Mac O OFF Q Home Insert Draw Page Layout Formulas Data Review View Tell me Share Q Comments X Arial Insert v V 10 . AP ab Wrap Text General V hiv WE Ayu Oy V 5 DX Delete v Paste B I U G.A~ .00 E = 3 Merge & Center V Cell $ % Ideas Conditional Format Formatting as Table Sensitivity Styles Sort & Filter Format Find & Select C133 fx Equity Entry E F G H 1 J K L M N 0 R s T U V 45 46 47 AB D -Prime retail location of Stream Co. shops -Stream Co. Customer list 100 See below f) Paddle-up management regeusted assistance from the accounting department in order to value the customer list intangible given the amount of assumptions that needed to be considered and their unfamiliarity with the income approach'. The following information was obtained from Stream Company's management: -Projected revenue related to this intangible for 2020; 1,000 -Projected annual revenue growth 5% -Cost of sales and operating expenses are estimated as % of revenue 80% -The effective income tax rate for the company 25% -Average remaining useful life of the asset; straight line depreciation 5 years -The appropriate risk adjusted discount rate 24% -Depreciation expense included in operating expenses for 2020 9 -Depreciation expense is projected to increase in line with revenue growth 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 ******** g) Additional management estimates related to the customer list intangible: 2020 Projected additional capital expenditures 50 Capital charge on use of contributory assets 60 2021 50 60 2022 51 60 The accounting department should complete the following steps in order to prepare the pro-forma consolidated balance sheet. Again, management will be using the stock acquisition method of accounting. 10 points 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 a. Calculate the valuation of the intangible using the income approach method. (Round to nearest thousand) 2020 2021 2022 Revenue 1,000 1,050 1.103 Operating Expenses 800 340 882 Projected Operating income 200 210 221 Income tax expense 50 53 55 After-tax operating income 150 158 165 Depreciation expense 9 9 10 Capital expenditures 50 50 51 Contributory assets capital charge 60 60 60 Net cash flow 49 57 64 Present value of net cash flows 40 37 34 Total 110 b. Prepare a schedule computing the goodwill / gain on acquisition. 10 points S Acquisition cost Book value Excess of acquisition cost over book value Excess of fair value over book value: Solution Condensed + + 100% JUN 3 18 n 4 43 65% (4) Thu 2:06 PM Q Excel File Edit View Insert Format Tools AutoSave HESU- Data Window Help Advanced Accounting - Consolidation Case Study - Excel Template (1) - Saved to my Mac O OFF Q Home Insert Draw Page Layout Formulas Data Review View Tell me Share Q Comments X Arial Insert v V 10 V AA ab Wrap Text General V hiv WE AY O v V 5 DX Delete Paste B I U GA~ .00 v 3 Merge & Center Cell $ % ) Ideas Conditional Format Formatting as Table Styles Sort & Filter Sensitivity Format Find & Select C133 4 x fx Equity Entry D E F H 1 J L M N 0 R s T U V G FTVG IY c. Next, record Paddle-up's entry to record the acquisition. 10 points Description Debit Credit 95 96 97 98 99 100 101 102 103 104 105 106 107 108 6 d. Use the drop-down list to select either "E" or "R' for the 10 points Elminations Accounts Taken From Books Paddle-up Stream Dr (Cr) Dr (Cr) $ $ Consolidated Balances Dr (Cr) Balance sheet accounts Dr Cr Use the drop-down list to select either "E" or "R" for the elimination entry .... - - - . - 1 - . 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 - . ..... - 7 - Total IS $ . Good Job Good Job! Good Job! Good Job Good Job! e. Please enter the working paper eliminating entries below: 10 points Equity Entry Debit Credit E Solution Condensed + + 100% JUN 3 18 n 4 Excel file Edit View Insert Format Tools 43 65% (4) Thu 2:06 PM Q O AutoSave OFF HESU- Data Window Help Advanced Accounting - Consolidation Case Study - Excel Template (1) - Saved to my Mac Review View Tell me Q Home Insert Draw Page Layout Formulas Data Share Q Comments X Arial Insert v V 10 V AA ab Wrap Text General V hiv WE 49- O- 5 V DX Delete Paste B I U .00 E = 3 Merge & Center V $ % Cell Ideas Conditional Format Formatting as Table Sensitivity Styles Sort & Filter Format Find & Select C133 4 x fx Equity Entry J L M N 0 R s T U V 10 points 10 points | AB D E F G H 1 T30 131 e. Please enter the working paper eliminating entries below: 132 133 Equity Entry Debit Credit 134 E 135 136 137 - 138 Good Job! 139 140 Revalue Entry Debit Credit 141 R 142 143 - 144 145 146 147 Good Job! 148 149 f. Finally, present the pro-forma consolidated balance sheet at the date of acquisition. 150 151 Paddle-up Corporation and Subsidiary 152 Pro-Forma Consolidated Balance Sheet 153 Date of acquisition 154 155 Assets 156 S 157 158 159 160 161 162 Total assets $ 183 164 Liabilities 165 $ 166 167 Total liabilities 168 169 Stockholders' equity 170 171 172 173 Total equity WWWWWWWWWWWW Solution Condensed + + 100% JUN 3 18 n 4 Arial 10 A a. Av B Wrap Text Margo & Contar Accounting $ % &8 ili 4 X fx 10 Conditional Formatting AB D E F H - K L M Student Name(s) Class: Advanced Accounting The following information was obtained by the accounting department in order to prepare the pro-forma financial statements for the Board of Directors. Amounts below are actuals or based on management's best estimate of the transaction details. (all amounts in thousands, unless stated otherwise) Balance Sheet December 31, 2019 Assets Paddle-up Stream Cash and receivables 2,860 $ 720 Inventory 1,700 900 Equity method investments 300 Investment in Sub Land 650 175 Buildings and equipment, net 2,400 600 Total assets 7,6105 2,696 Liabilities & Equity Current liabilities 1,500 1,000 Long-term debt 2,000 400 Common stock, par value 500 100 Additional paid in capital 1,200 350 Retained earnings 2,410 845 Total liabilities & equity 7,6105 2,095 Additional Information a) Paddle-up Co expects to pay $1.7 million in cash for the acquistion of Stream Co. Legal and accounting fees are estimated to be $150K b) The fair values of Stream Co's reported net assets are assumed to equal their book values with the exception of the following assets: Stream Co Estimated Fair Value Inventory $800 Equity Method investments Buildings & equipment, net Land 250 420 900 Solution Condensed + Condition Formattis B M 500 BIU a. Av Merge & Center $ % x fx 10 C E F H L c) Inventory and Equity method investments are expected to be sold in 2020. d) Buildings and equipment: 20 year useful life; straight-line depreciation e) During due dilligence, management identified the following unrecorded intangible assets (estimated fair values shown below): -Assembled workforce $300 -Business reputation of Stream Co. -Potential contracts with Oar Inc. 150 -Prime retail location of Stream Co. shops 100 Stream Co. Customer list See below 1) Paddle-up management reqeusted assistance from the accounting department in order to value the customer list intangible given the amount of assumptions that needed to be considered and their unfamiliarity with the income approach'. The following information was obtained from Stream Company's management: -Projected revenue related to this intangible for 2020; 1,000 - Projected annual revenue growth 5% -Cost of sales and operating expenses are estimated as % of revenue 80% -The effective income tax rate for the company 25% -Average remaining useful life of the asset; straight line depreciation 5 years -The appropriate risk adjusted discount rate 24% -Depreciation expense included in operating expenses for 2020 -Depreciation expense is projected to increase in line with revenue growth g) Additional management estimates related to the customer list intangible: 2020 2021 2022 Projected additional capital expenditures 50 51 Capital charge on use of contributory assets 60 60 60 9 50 The accounting department should complete the following steps in order to prepare the pro-forma consolidated balance sheet. Again, management will be using the stock acquisition method of accounting. a. Calculate the valuation of the intangible using the income approach method. (Round to nearest thousand) 10 points 2020 2021 2022 Revenue 1,000 1,050 1,103 Operating Expenses 800 840 882 Projected Operating income 200 221 Income tax expense 50 55 After-tax operating income 150 157 166 Depreciation expense Solution Condensed 210 53 9 10 En + U E F H K L Depreciation expense Capital expenditures Contributory assets capital charge Net cash flow Present value of net cash flows b. Prepare a schedule computing the goodwill / gain on acquisition Acquisition cost Book value Excess of acquisition cost over book value Excess of fair value over book value: 9 50 60 49 40 9 50 60 57 37 10 51 60 64 34 Total 110 10 poin Goodwill / Gain on Acquisition $ Please Retry! c. Next, record Paddle-up's entry to record the acquisition Description 10 points Debit Credit 6 d. Solution Condensed Accounts Taken From Use the drop-down to select ether or "R" for the 10 points 10 B D E H K M N Use the drop-down list to select either or "R" for the 10 points LLIURE Accounts Taken From Books Paddle-up Stream Dr (C1) Dr (Cr) $ Balance sheet accounts Consolidated Balances Dr (Cr) Dr Cr Use the drop-down list to select ether or "R" for the elimination enty Total $ Good Job! $ Good Job Good Job! $ Good Jobl Good Job e. Please enter the working paper eliminating entries below. 10 points + Equity Entry Debit E Credit Good Job! Revalue Entry Debit Credit R Good Job! Solution Condensed Good Job! f. Finally, present the pro-forma consolidated balance sheet at the date of acquisition Paddle-up Corporation and Subsidiary Pro-Forma Consolidated Balance Sheet Date of acquisition Assets Total assets $ Liabilities $ Total liabilities Stockholders' equity Total equity Total liabilities and equity Good Job! Excel File Edit View Insert Format Tools 43 64% (4) Thu 2:06 PM Q AutoSave OFF HESU- Data Window Help Advanced Accounting - Consolidation Case Study - Excel Template (1) - Saved to my Mac Review View Tell me Q Home Insert Draw Page Layout Formulas Data Share Q Comments X Arial Insert v V 10 V AA ab Wrap Text General V hiv WE Ayu Oy V 5 DX Delete v Paste B I U .00 Merge & Center $ % ) Cell Ideas Conditional Format Formatting as Table Styles Sort & Filter Sensitivity Format Find & Select C133 fx Equity Entry D E F G H 1 J K 1 M N o R s T U V 5 The following information was obtained by the accounting department in order to prepare the pro-forma financial statements for the Board of Directors. Amounts below are actuals or based on management's best estimate of the transaction details. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 (all amounts in thousands, unless stated otherwise) Balance Sheet December 31, 2019 Assets Paddle-up Stream Cash and receivables $ 2,860 $ 720 Inventory 1,700 900 Equity method investments 300 Investment in Sub Land 650 175 Buildings and equipment, net 2,400 600 Total assets TS 7.610$ 2,695 Liabilities & Equity Current liabilities 1,500 1,000 Long-term debt 2.000 400 Common stock, par value 500 100 Additional paid-in capital 1,200 350 Retained earnings 2,410 845 Total liabilities & equity S 7.610$ 2,695 22 23 24 25 26 Additional Information a) Paddle-up Co expects to pay $1.7 million in cash for the acquistion of Stream Co. Legal and accounting fees are estimated to be $150K b) The fair values of Stream Co's reported net assets are assumed to equal their book values with the exception of the following assets: 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 Inventory Equity Method investments Land Buildings & equipment, net Stream Co Estimated Fair Value $800 250 420 900 c) Inventory and Equity method investments are expected to be sold in 2020. d) Buildings and equipment: 20 year useful life; straight-line depreciation e) During due dilligence, management identified the following unrecorded intangible assets (estimated fair values shown below): -Assembled workforce $300 -Business reputation of Stream Co. 500 -Potential contracts with Oar Inc. 150 Solution Condensed + + 100% JUN 3 18 n 4 43 64% (4) Thu 2:06 PM Q Excel File Edit View Insert Format Tools AutoSave HESU- Data Window Help Advanced Accounting - Consolidation Case Study - Excel Template (1) - Saved to my Mac O OFF Q Home Insert Draw Page Layout Formulas Data Review View Tell me Share Q Comments X Arial Insert v V 10 . AP ab Wrap Text General V hiv WE Ayu Oy V 5 DX Delete v Paste B I U G.A~ .00 E = 3 Merge & Center V Cell $ % Ideas Conditional Format Formatting as Table Sensitivity Styles Sort & Filter Format Find & Select C133 fx Equity Entry E F G H 1 J K L M N 0 R s T U V 45 46 47 AB D -Prime retail location of Stream Co. shops -Stream Co. Customer list 100 See below f) Paddle-up management regeusted assistance from the accounting department in order to value the customer list intangible given the amount of assumptions that needed to be considered and their unfamiliarity with the income approach'. The following information was obtained from Stream Company's management: -Projected revenue related to this intangible for 2020; 1,000 -Projected annual revenue growth 5% -Cost of sales and operating expenses are estimated as % of revenue 80% -The effective income tax rate for the company 25% -Average remaining useful life of the asset; straight line depreciation 5 years -The appropriate risk adjusted discount rate 24% -Depreciation expense included in operating expenses for 2020 9 -Depreciation expense is projected to increase in line with revenue growth 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 ******** g) Additional management estimates related to the customer list intangible: 2020 Projected additional capital expenditures 50 Capital charge on use of contributory assets 60 2021 50 60 2022 51 60 The accounting department should complete the following steps in order to prepare the pro-forma consolidated balance sheet. Again, management will be using the stock acquisition method of accounting. 10 points 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 a. Calculate the valuation of the intangible using the income approach method. (Round to nearest thousand) 2020 2021 2022 Revenue 1,000 1,050 1.103 Operating Expenses 800 340 882 Projected Operating income 200 210 221 Income tax expense 50 53 55 After-tax operating income 150 158 165 Depreciation expense 9 9 10 Capital expenditures 50 50 51 Contributory assets capital charge 60 60 60 Net cash flow 49 57 64 Present value of net cash flows 40 37 34 Total 110 b. Prepare a schedule computing the goodwill / gain on acquisition. 10 points S Acquisition cost Book value Excess of acquisition cost over book value Excess of fair value over book value: Solution Condensed + + 100% JUN 3 18 n 4 43 65% (4) Thu 2:06 PM Q Excel File Edit View Insert Format Tools AutoSave HESU- Data Window Help Advanced Accounting - Consolidation Case Study - Excel Template (1) - Saved to my Mac O OFF Q Home Insert Draw Page Layout Formulas Data Review View Tell me Share Q Comments X Arial Insert v V 10 V AA ab Wrap Text General V hiv WE AY O v V 5 DX Delete Paste B I U GA~ .00 v 3 Merge & Center Cell $ % ) Ideas Conditional Format Formatting as Table Styles Sort & Filter Sensitivity Format Find & Select C133 4 x fx Equity Entry D E F H 1 J L M N 0 R s T U V G FTVG IY c. Next, record Paddle-up's entry to record the acquisition. 10 points Description Debit Credit 95 96 97 98 99 100 101 102 103 104 105 106 107 108 6 d. Use the drop-down list to select either "E" or "R' for the 10 points Elminations Accounts Taken From Books Paddle-up Stream Dr (Cr) Dr (Cr) $ $ Consolidated Balances Dr (Cr) Balance sheet accounts Dr Cr Use the drop-down list to select either "E" or "R" for the elimination entry .... - - - . - 1 - . 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 - . ..... - 7 - Total IS $ . Good Job Good Job! Good Job! Good Job Good Job! e. Please enter the working paper eliminating entries below: 10 points Equity Entry Debit Credit E Solution Condensed + + 100% JUN 3 18 n 4 Excel file Edit View Insert Format Tools 43 65% (4) Thu 2:06 PM Q O AutoSave OFF HESU- Data Window Help Advanced Accounting - Consolidation Case Study - Excel Template (1) - Saved to my Mac Review View Tell me Q Home Insert Draw Page Layout Formulas Data Share Q Comments X Arial Insert v V 10 V AA ab Wrap Text General V hiv WE 49- O- 5 V DX Delete Paste B I U .00 E = 3 Merge & Center V $ % Cell Ideas Conditional Format Formatting as Table Sensitivity Styles Sort & Filter Format Find & Select C133 4 x fx Equity Entry J L M N 0 R s T U V 10 points 10 points | AB D E F G H 1 T30 131 e. Please enter the working paper eliminating entries below: 132 133 Equity Entry Debit Credit 134 E 135 136 137 - 138 Good Job! 139 140 Revalue Entry Debit Credit 141 R 142 143 - 144 145 146 147 Good Job! 148 149 f. Finally, present the pro-forma consolidated balance sheet at the date of acquisition. 150 151 Paddle-up Corporation and Subsidiary 152 Pro-Forma Consolidated Balance Sheet 153 Date of acquisition 154 155 Assets 156 S 157 158 159 160 161 162 Total assets $ 183 164 Liabilities 165 $ 166 167 Total liabilities 168 169 Stockholders' equity 170 171 172 173 Total equity WWWWWWWWWWWW Solution Condensed + + 100% JUN 3 18 n 4 Arial 10 A a. Av B Wrap Text Margo & Contar Accounting $ % &8 ili 4 X fx 10 Conditional Formatting AB D E F H - K L M Student Name(s) Class: Advanced Accounting The following information was obtained by the accounting department in order to prepare the pro-forma financial statements for the Board of Directors. Amounts below are actuals or based on management's best estimate of the transaction details. (all amounts in thousands, unless stated otherwise) Balance Sheet December 31, 2019 Assets Paddle-up Stream Cash and receivables 2,860 $ 720 Inventory 1,700 900 Equity method investments 300 Investment in Sub Land 650 175 Buildings and equipment, net 2,400 600 Total assets 7,6105 2,696 Liabilities & Equity Current liabilities 1,500 1,000 Long-term debt 2,000 400 Common stock, par value 500 100 Additional paid in capital 1,200 350 Retained earnings 2,410 845 Total liabilities & equity 7,6105 2,095 Additional Information a) Paddle-up Co expects to pay $1.7 million in cash for the acquistion of Stream Co. Legal and accounting fees are estimated to be $150K b) The fair values of Stream Co's reported net assets are assumed to equal their book values with the exception of the following assets: Stream Co Estimated Fair Value Inventory $800 Equity Method investments Buildings & equipment, net Land 250 420 900 Solution Condensed + Condition Formattis B M 500 BIU a. Av Merge & Center $ % x fx 10 C E F H L c) Inventory and Equity method investments are expected to be sold in 2020. d) Buildings and equipment: 20 year useful life; straight-line depreciation e) During due dilligence, management identified the following unrecorded intangible assets (estimated fair values shown below): -Assembled workforce $300 -Business reputation of Stream Co. -Potential contracts with Oar Inc. 150 -Prime retail location of Stream Co. shops 100 Stream Co. Customer list See below 1) Paddle-up management reqeusted assistance from the accounting department in order to value the customer list intangible given the amount of assumptions that needed to be considered and their unfamiliarity with the income approach'. The following information was obtained from Stream Company's management: -Projected revenue related to this intangible for 2020; 1,000 - Projected annual revenue growth 5% -Cost of sales and operating expenses are estimated as % of revenue 80% -The effective income tax rate for the company 25% -Average remaining useful life of the asset; straight line depreciation 5 years -The appropriate risk adjusted discount rate 24% -Depreciation expense included in operating expenses for 2020 -Depreciation expense is projected to increase in line with revenue growth g) Additional management estimates related to the customer list intangible: 2020 2021 2022 Projected additional capital expenditures 50 51 Capital charge on use of contributory assets 60 60 60 9 50 The accounting department should complete the following steps in order to prepare the pro-forma consolidated balance sheet. Again, management will be using the stock acquisition method of accounting. a. Calculate the valuation of the intangible using the income approach method. (Round to nearest thousand) 10 points 2020 2021 2022 Revenue 1,000 1,050 1,103 Operating Expenses 800 840 882 Projected Operating income 200 221 Income tax expense 50 55 After-tax operating income 150 157 166 Depreciation expense Solution Condensed 210 53 9 10 En + U E F H K L Depreciation expense Capital expenditures Contributory assets capital charge Net cash flow Present value of net cash flows b. Prepare a schedule computing the goodwill / gain on acquisition Acquisition cost Book value Excess of acquisition cost over book value Excess of fair value over book value: 9 50 60 49 40 9 50 60 57 37 10 51 60 64 34 Total 110 10 poin Goodwill / Gain on Acquisition $ Please Retry! c. Next, record Paddle-up's entry to record the acquisition Description 10 points Debit Credit 6 d. Solution Condensed Accounts Taken From Use the drop-down to select ether or "R" for the 10 points 10 B D E H K M N Use the drop-down list to select either or "R" for the 10 points LLIURE Accounts Taken From Books Paddle-up Stream Dr (C1) Dr (Cr) $ Balance sheet accounts Consolidated Balances Dr (Cr) Dr Cr Use the drop-down list to select ether or "R" for the elimination enty Total $ Good Job! $ Good Job Good Job! $ Good Jobl Good Job e. Please enter the working paper eliminating entries below. 10 points + Equity Entry Debit E Credit Good Job! Revalue Entry Debit Credit R Good Job! Solution Condensed Good Job! f. Finally, present the pro-forma consolidated balance sheet at the date of acquisition Paddle-up Corporation and Subsidiary Pro-Forma Consolidated Balance Sheet Date of acquisition Assets Total assets $ Liabilities $ Total liabilities Stockholders' equity Total equity Total liabilities and equity Good Job