Question
Rolling River Company Acct 510 Consolidation Case File:Rolling River Company Consolidation Case Situation : You have just been hired by Rolling River Company as their
Rolling River Company
Acct 510
Consolidation Case
File:Rolling River Company Consolidation Case
Situation: You have just been hired by Rolling River Company as their accountant. The CEO is excited to have the companys first 4-year degree accounting major on the team (previously they have only used internal clerical accounting staff supported by an outside consultant). The outside consultant is a CPA and the cost of keeping the CPA was too expensive for month-to-month accounting. In your interview with the CEO you did mention that you had recently completed an advanced accounting class that included accounting for business combinations.
Business Profile: Rolling River Company is a distributor of unique four 4 wheel bicycles that have a 360 degree turning radius. The business currently offers three non-electric bicycles; single rider, two person, and three/four person. Only one rider has the ability to steer but each seated rider has the ability to pedal. The business just completed fiscal year 2016 which was another successful year.
While the company has been growing organically for the past few years the board members (who represent the shareholders) of Rolling River Company do not see enough growth in the existing business and have been pushing the CEO to make a strategic purchase.
Rolling River Company has been in talks to purchase a company in Denmark. The company manufactures one key product, the Denmark Wheel. The Denmark Wheel is an electric wheel that can be placed on almost any bike to give riders the choice of either pedaling or simply engaging the electric wheel. The CEO strongly believes this acquisition could double U.S. sales and be a key factor in taking the business international.
Exhibits:
A Denmark Wheel Company 12/31/16 balance sheet (page 3)
B Rolling River Company 12/31/16 balance sheet (page 4)
C Denmark Wheel Company 12/31/17 income statement, statement of retained earnings, and balance sheet (pages 5-6)
D Rolling River Company 12/31/17 income statement, statement of retained earnings, and balance sheet (pages 7-8)
Note: The 12/31/16 account balances also represent the pre-acquisition 1/1/17 account balances (they are the same).
The CEO has made the following requests:
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