Please note: make sure the you answer each secton correctly last time you left out a whole section. I need the completed statements of the balance sheet, cash flow,retained, earnings, Journal entry, and statement of operations.

Parent Inc. is contemplating a tender offer to acquire 80% of Subsidiary Corporations common stock. Subsidiarys shares are currently quoted on the New York Stock Exchange at $85 per share. In order to have a reasonable chance of the tender offer attracting 80% of Subsidiarys stock, Parent believes it will have to offer at least $105 per share. If the tender offer is made and is successful, the purchase will be consummated on January 1, 2013.

A typical part of the planning of a proposed business combination is the preparation of projected or pro forma consolidated financial statements. As a member of Parents accounting group, you have been asked to prepare the pro forma 2013 consolidated financial statements for Parent and Subsidiary assuming that 80% of Subsidiarys stock is acquired at a price of $105 per share. To support your computations, Martha Franklin, the chairperson of Parents acquisitions committee, has provided you with the projected 2013 financial statements for Subsidiary. (The projected financial statements for Subsidiary and several other companies were prepared earlier for the acquisition committees use in targeting a company for acquisition.) The projected financial statements for Subsidiary for 2013 and Parents actual 2012 financial statements are presented in Table 1.

Assumptions

1

Sales will increase by 10% in 2017

2

All sales will be on account

3

Accounts receivable will be 5 percent lower on 12/31/17 than on 12/31/16

4

Cost of goods sold will increase by 9% in 2017

5

All purchases of merchandise will be on account

6

Accounts payable are expected to be 50,500 in 12/31/2017

7

Inventory will be 3% higher in 2017 than in 2016

8

Straight line depreciation is used for all fixed assets

9

No fixed assets will be disposed of during 2017. Annual depreciation on existing assets is 40,000 per year

10

Equipment was purchased on 1/1/17 for $48,000 cash; 10 year life and no salvage

11

Operating expenses other than depreciation will increase by 14% in 2017

12

All operating expenses other than depreciation will be paid in cash

13

Parent's income tax rate is 40%; taxes are paid in 4 payments, 15th of April, June, September & December

14

Parent will continue the $2.50 per share annual cash dividend on its common stock

ACQUISTION ASSUMPTIIONS

15

If tender offer is successful;, Parent will finance the acquisition by issuing 170,000 of 6% non-convertible bonds at par on Jan 1 ,2017. Bonds pay interest on July 1 2017 and semiannually thereafter each January 1 and July 1 until maturity on January 1, 2027.

16

The acquisition will be accounted for as a purchase and Parent will account for the investment using the equity method. Direct costs for the tender offer of $2,000 paid in cash by parent in 2017.

17

As of January 1 2017 all of subsidiary's assets and liabilities are fairly valued except for machinery with a book value of $8,000, estimated fair value of $9,500 and a 5 year remaining useful life. Straight line depreciation is used to amortize any revaluation increment.

18

No transactions between these companies occurred prior to 2017. Parent plans to buy 50,000 of merchandise from subsidiary in 2017 and will have 3,600 in remaining inventory on Dec 31 2017. Subsidiary is expected to buy 2,400 of merchandise from parent in 2017 and to have 495 in inventory on Dec 31, 2017. Parent and subsidiary price their products to yield a 65 percent and 80 percent markup on cost, respectively.

19

Parent intends to use three financial yardsticks to determine the financial attractiveness of the combination. 1) Parent wishes to acquire only if 2017 consolidated earnings per share will be at least as high as the earnings per share Parent would report without combination. 2) Parent will consider combination unattractive if it will cause the consolidated current ratio to fall below 2 to 1. 3) ROE must remain above 20 percent for the combined equity.

20

If financial yardsticks above and the non financial aspects are appealing, then the tender offer will be made. If the objectives are not met, the acquistion will either be restructured or abandoned.

Assumptions Financial Statements
	Parent 2016 Actual	Subsidiary 2017 Projected
Sales	$800,000	$100,000
COGS	$(485,000)	$(55,000)
Operating expense	$(219,000)	$(10,000)
Income before taxes	$96,000	$35,000
Income tax expense	$(38,400)	$(14,000)
Net income	$57,600	$21,000
Retained earnings	$23,000	$21,000
Add Net Income	$57,600	$21,000
Deduct Dividends	$(38,000)	$(7,000)
Retained Earnings December 31	$42,600	$28,500
Cash	$36,200	$19,500
Accounts receivable	$39,000	$13,000
Inventory	$26,000	$12,000
PPE	$673,000	$213,000
Accumulated Depreciation	$(490,000)	$(28,000)
Total Assets	$284,200	$229,500
Accounts Payable	$44,600	$21,000
Common Stock*	$190,000	$150,000
Paid-in Capital in Excess of Par	$7,000	$30,000
Retained Earnings	$42,600	$28,500
Total Liabilities and Equities	$284,200	$229,500
*Parent $12.50 Par value
*Subsidiary $75 Par value
Forecast the separate financial statements of Parent Inc. Using Ms. Franklin's assumptions and Parent's 2016 financial statements, prepare pro forma 2017 financial statements for Parent Inc., assuming that the acquisition is not attempted. Support your statements with appropriate work papers and journal entries. Pro forma financial statements include a statement of operation, a statement of retained earnings, a balance sheet, and a cash flow statement