The balance sheet of Drake Enterprises as at December 31, Year 5, is as follows: Effective January 1, Year 6 , Drake proposes to issue 84,500 common shares (currently trading at $20 per share) for all of the common shares of Hanson Industries. In determining the acquisition price, the management of Drake noted that Hanson Industries has unrecorded customer service contracts and directed its accounting staff to reflect this when recording the acquisition. An independent appraiser placed a value of $154,000 on this unrecorded intangible asset. Direct costs associated with the acquisition were as follows: The balance sheet of Hanson Industries as at December 31 , Year 5 , is as follows: Hanson Industries is to be wound up after the sale. Hanson Industries is to be wound up after the sale. Required: (a) Assume that the shareholders of Hanson accept Drake's offer on the proposed date. Prepare Drake's January 1 , Year 6, consolidated balance sheet after the proposed transaction occurred. (Negative amounts should be indicated by a minus sign.) (b) Assume that Drake is a private entity, uses ASPE, and chooses to use the equity method to account for its investment in Hanson. Prepare Drake's January 1, Year 6, balance sheet after the proposed transaction occurred. (Negative amounts should be indicated by a minus sign.) (c) Calculate the debt-to-equity ratio under Consolidated and Equity Method. (Round your answers to 2 decimal places.) (d) Prepare Drake's consolidated balance sheet after the proposed transaction occurred using the worksheet approach. (Values in the first two columns and last column (the "parent", "subsidiary" and "consolidated" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Entry" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Leave no cells blank - be certain to enter "O" wherever required. Omit $ sign in your response.) The balance sheet of Drake Enterprises as at December 31, Year 5, is as follows: Effective January 1, Year 6 , Drake proposes to issue 84,500 common shares (currently trading at $20 per share) for all of the common shares of Hanson Industries. In determining the acquisition price, the management of Drake noted that Hanson Industries has unrecorded customer service contracts and directed its accounting staff to reflect this when recording the acquisition. An independent appraiser placed a value of $154,000 on this unrecorded intangible asset. Direct costs associated with the acquisition were as follows: The balance sheet of Hanson Industries as at December 31 , Year 5 , is as follows: Hanson Industries is to be wound up after the sale. Hanson Industries is to be wound up after the sale. Required: (a) Assume that the shareholders of Hanson accept Drake's offer on the proposed date. Prepare Drake's January 1 , Year 6, consolidated balance sheet after the proposed transaction occurred. (Negative amounts should be indicated by a minus sign.) (b) Assume that Drake is a private entity, uses ASPE, and chooses to use the equity method to account for its investment in Hanson. Prepare Drake's January 1, Year 6, balance sheet after the proposed transaction occurred. (Negative amounts should be indicated by a minus sign.) (c) Calculate the debt-to-equity ratio under Consolidated and Equity Method. (Round your answers to 2 decimal places.) (d) Prepare Drake's consolidated balance sheet after the proposed transaction occurred using the worksheet approach. (Values in the first two columns and last column (the "parent", "subsidiary" and "consolidated" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Entry" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Leave no cells blank - be certain to enter "O" wherever required. Omit $ sign in your response.)
