The condensed balance sheets for Rice & Associates and Rachel Company as of December 30, 2016 are shown in Exhibit 1. On December 31, 2016, Rice & Associates purchased 80.0 percent of Rachel Company for $140,000 by issuing 50,000 shares of its previously authorized common stock. As of December 31, 2016, the fair values of Rachel Companyâs assets and liabilities are shown below, including customer lists, an intangible asset identified during the acquisition:
Cash $10,000
Accounts receivable 40,000
Inventory 70,000
Property, plant and equipment 120,000
Customer lists 10,000
Accounts payable 15,000
Long-term liabilities 65,000
Required:
a. Prepare a consolidated balance sheet immediately after the acquisition on December 31, 2016.
b. Will an account called âinvestment in Rachel Companyâ appear as an asset in Rice & Associateâs un-consolidated balance sheet? (circle one) Yes or No? Explain.
c. Will an account called âinvestment in Rachel Companyâ appear as an asset in Rice & Associateâs consolidated balance sheet? (circle one) Yes or No? Explain.
d. Will an account called âgoodwillâ appear as an asset in Rice & Associates un-consolidated balance sheet? (circle one) Yes or No? Explain.
e. Will an account called âgoodwillâ appear as an asset in Rachel Companyâs un-consolidated balance sheet? (circle one) Yes or No? Explain.
EXHIBIT 1 RICE & ASSOCIATES AND RACHEL BALANCE SHEETS Before Acquisition of Rachel Rice Before Issue Stock Assets for Rachel Rachel Cash $56,000 $10,000 Accounts receivable 150,000 40,000 Inventory 300,000 40,000 Property, plant & equipment 400,000 130,000 Total assets $906,000 $220,000 Liabilities & Stockholder's Equity Accounts payable $80,000 $20,000 Long-term liabilities 300,000 50,000 Common stock, par value $1 350,000 90,000 Capital paid in excess of par value 50,000 10,000 Retained earnings 126,000 50,000 Total liabilities & stockholder's equity $906,000 $220,000
The condensed balance sheets for Rice & Associates and Rachel Company as of December 30, 2016 are shown in Exhibit 1. On December 31, 2016, Rice & Associates purchased 80.0 percent of Rachel Company for $140,000 by issuing 50,000 shares of its previously authorized common stock. As of December 31, 2016, the fair values of Rachel Companyâs assets and liabilities are shown below, including customer lists, an intangible asset identified during the acquisition:
Cash $10,000
Accounts receivable 40,000
Inventory 70,000
Property, plant and equipment 120,000
Customer lists 10,000
Accounts payable 15,000
Long-term liabilities 65,000
Required:
a. Prepare a consolidated balance sheet immediately after the acquisition on December 31, 2016.
b. Will an account called âinvestment in Rachel Companyâ appear as an asset in Rice & Associateâs un-consolidated balance sheet? (circle one) Yes or No? Explain.
c. Will an account called âinvestment in Rachel Companyâ appear as an asset in Rice & Associateâs consolidated balance sheet? (circle one) Yes or No? Explain.
d. Will an account called âgoodwillâ appear as an asset in Rice & Associates un-consolidated balance sheet? (circle one) Yes or No? Explain.
e. Will an account called âgoodwillâ appear as an asset in Rachel Companyâs un-consolidated balance sheet? (circle one) Yes or No? Explain.
| EXHIBIT 1 | ||||||
| RICE & ASSOCIATES AND RACHEL | ||||||
| BALANCE SHEETS | ||||||
| Before Acquisition of Rachel | ||||||
| Rice Before | ||||||
| Issue Stock | ||||||
| Assets | for Rachel | Rachel | ||||
| Cash | $56,000 | $10,000 | ||||
| Accounts receivable | 150,000 | 40,000 | ||||
| Inventory | 300,000 | 40,000 | ||||
| Property, plant & equipment | 400,000 | 130,000 | ||||
| Total assets | $906,000 | $220,000 | ||||
| Liabilities & Stockholder's Equity | ||||||
| Accounts payable | $80,000 | $20,000 | ||||
| Long-term liabilities | 300,000 | 50,000 | ||||
| Common stock, par value $1 | 350,000 | 90,000 | ||||
| Capital paid in excess of par value | 50,000 | 10,000 | ||||
| Retained earnings | 126,000 | 50,000 | ||||
| Total liabilities & stockholder's equity | $906,000 | $220,000 | ||||
Related questions
I need Answers to Question from P - V!
I know it's a lot but they are all small questions related to the same case so I didn't know how to split it into multiple questions. I would really appreciate the help, as I need a way to compare my answers.
Dallas & Associates Financial Statement Preparation & Analysis
You have been hired as a senior financial analyst for Dallas and Associates and you are in charge of preparing the financial statements and presenting an annual analysis at the board meeting.
Overview of Dallas & Associateâs Balance Sheet
The assets of Dallas & Associates in 2017 have both current assets and net plant and equipment. It has total assets of $ 7.5 million and net plan and equipment equals $5 million. Dallas & Associateâs only finances with $2.5 million long-term debt, $500,000 notes payable and total common equity of $3.5 million. The firm does have $400,000 accounts payable and $600,000 accruals on its balance sheet. Now assume the firmâs current assets consist entirely of cash and cash equivalence, account receivables and inventories. If it has 1.5 million cash and cash equivalents and $400,000 account receivables.
Dallas & Associates Income Statement in 2017 (dollars are in millions)
| Sales | 15 |
| Operating costs excluding depreciation and amortization | 5 |
| EBITDA | 10 |
| Depreciation & Amortization | 0.6 |
| EBIT | 9.4 |
| Interest | 0.4 |
| EBT | 9 |
| Taxes (40%) | 3.6 |
| Net Income Cash Dividends | 5.4 2.0 |
Use the above information to answer the following questions. Make sure to include the calculation steps/ formula.
Questions:
a. Prepare the balance sheet.
| Total Assets | Liabilities & Shareholderâs Equity |
b. What is the amount of total liabilities and equity that appears on the firmâs balance?
c. What is the amount of current assets?
d. What is the balance of current liabilities?
e. What is the amount of companyâs inventory?
f. What is the amount of total liabilities?
g. What is the amount of total debt?
h. What is the amount of total capital?
i. What is the amount of net working capital?
j. What is the amount of net operating working capital?
k. If by the end of 2017, the retained earnings of John and Jon is $2.5 million, what is the amount of paid-in capital?
l. If John & Jon decides to purchase $500,000 market securities by using its cash, how does this action would affect its current asset position?
m. As the Income of Statement shows in 2017 Dallas associates actually gave out $2 million cash dividends, what is the amount of retained earnings?
n. What is the amount of operating income?
o. What are the operating margin and the profit margin?
p. What is the average length of time that Dallas associates must wait after making a sale before it receives cash?
q. What is the ratio we generally use to estimate a firmâs ability to meet its annual interest payments? And calculate that ratio for Dallas associates.
r. What are the fixed assets turnover ratio and the total asset turnover ratio?
s. What is the ratio of total debt to total capital?
t. What is the ratio of return on common equity?
u. Assume between 2016 and 2017, net operating working capital has increased by $500,000, calculate Dallas & Associates free cash flow. (Hint: use this formula. FCF = [EBIT (1-T) +Depreciation & Amortization] â [Capital Expenditures + Change on Net Operating Working Capital])
v. Now after you present your analysis on the meeting, the CEO would like to see higher sales and a forecasted net income of $10.8 million. Assume that operating costs (excluding depreciation and amortization) are still one third of sales and that depreciation and amortization and interest expenses will increase by 10%. The tax rate which is 40%, will remain the same. What level of sales would generate $10.8 million in net income?
THANK YOU!
Paulee Corporation paid $24,800 for an 80% interest in SergioCorporation on January 1, 2015, at which time Sergio'sstockholders' equity consisted of $15,000 of Common Stock and$6,000 of Retained Earnings. The fair values of SergioCorporation's assets and liabilities were identical to reorded bookvalues when Paulee acquired its 80% interest.
Sergio Corporation reported net income of $4,000 and paiddividends of $2,000 during 2015. Paulee Corporation sold inventoryitems to Sergio during 2015 and 2016 as follows:
| 2015 | 2016 | |
| Paulee's sales to Sergio | $5,000 | $6,000 |
| Paulee's cost of sales to Serigo | 3,000 | 3,500 |
| Unrealized profit at year-end | 1,000 | 1,500 |
At December 31, 2016, the accounts payable of Sergio include$1,500 owed to Paulee for inventory purchases.
Financial statements of Paulee and Sergio appear in the firsttwo columns of the partially completed working papers.
REQUIRED:
1. Show all preliminary computations (5 pts)
2. Complete the consolidation working papers for PauleeCorporation and Subsidiary for the year ended December 31, 2016 (13pts)
3. Give all eliminating journal entires (6 pts)
| Paulee | Sergio | Eliminations- Debit | Eliminations- Credit | Non-Cont. Interest | Consolidated | |
| INCOME STATEMENT Sales | $43,000 | $20,000 | ||||
| Income from Sergio | 6,700 | |||||
| Cost of Sales | (22,000) | (8,000) | ||||
| Other expenses Non-controlling interest Expense | (12,200) | (3,000) | ||||
| Net Income | 15,500 | 9,000 | ||||
| RETAINED EARNINGS Retained Earnings 1/1 | 9,000 | 8,000 | ||||
| Add: Net Income | 15,500 | 9,000 | ||||
| Less: Dividends | (10,000) | (5,000) | ||||
| Retained Earnings 12/31 | $14,500 | $12,000 | ||||
| BALANCE SHEET Cash | 5,400 | 3,000 | ||||
| Accounts Receivable- Net | 14,000 | 10,000 | ||||
| Dividend Receivable | 2,000 | |||||
| Inventories | 18,000 | 8,000 | ||||
| Goodwill | ||||||
| Equipment and Buildings- Net | 24,000 | 31,000 | ||||
| Investment in Sergio | 28,100 | |||||
| TOTAL ASSETS | $91,500 | $52,000 | ||||
| LIAB. & EQUITY Accounts payable | 17,500 | 12,500 | ||||
| Dividend payable | 7,000 | 2,500 | ||||
| Other Debt | 12,500 | 10,000 | ||||
| Capital Stock | 40,000 | 15,000 | ||||
| Retained Earnings | 14,500 | 12,000 | ||||
| 1/1 Noncontrl Interest | ||||||
| 12/31 Noncontrl Interest | ||||||
| LIAB. & EQUITY | $91,500 | $52,000 |
Paulee Corporation paid $24,800 for an 80% interest in SergioCorporation on January 1, 2015, at which time Sergio'sstockholders' equity consisted of $15,000 of Common Stock and$6,000 of Retained Earnings. The fair values of SergioCorporation's assets and liabilities were identical to reorded bookvalues when Paulee acquired its 80% interest.
Sergio Corporation reported net income of $4,000 and paiddividends of $2,000 during 2015. Paulee Corporation sold inventoryitems to Sergio during 2015 and 2016 as follows:
| 2015 | 2016 | |
| Paulee's sales to Sergio | $5,000 | $6,000 |
| Paulee's cost of sales toSerigo | 3,000 | 3,500 |
| Unrealized profit atyear-end | 1,000 | 1,500 |
At December 31, 2016, the accounts payable of Sergio include$1,500 owed to Paulee for inventory purchases.
Financial statements of Paulee and Sergio appear in the firsttwo columns of the partially completed working papers.
REQUIRED:
1. Show all preliminary computations (5 pts)
2. Complete the consolidation working papers for PauleeCorporation and Subsidiary for the year ended December 31, 2016 (13pts)
3. Give all eliminating journal entires (6 pts)
| Paulee | Sergio | Eliminations- Debit | Eliminations- Credit | Non-Cont. Interest | Consolidated | |
| INCOME STATEMENT Sales | $43,000 | $20,000 | ||||
| Income from Sergio | 6,700 | |||||
| Cost of Sales | (22,000) | (8,000) | ||||
| Other expenses Non-controlling interest Expense | (12,200) | (3,000) | ||||
| Net Income | 15,500 | 9,000 | ||||
| RETAINED EARNINGS Retained Earnings 1/1 | 9,000 | 8,000 | ||||
| Add: Net Income | 15,500 | 9,000 | ||||
| Less: Dividends | (10,000) | (5,000) | ||||
| Retained Earnings 12/31 | $14,500 | $12,000 | ||||
| BALANCE SHEET Cash | 5,400 | 3,000 | ||||
| Accounts Receivable- Net | 14,000 | 10,000 | ||||
| Dividend Receivable | 2,000 | |||||
| Inventories | 18,000 | 8,000 | ||||
| Goodwill | ||||||
| Equipment and Buildings-Net | 24,000 | 31,000 | ||||
| Investment in Sergio | 28,100 | |||||
| TOTALASSETS | $91,500 | $52,000 | ||||
| LIAB. & EQUITY Accounts payable | 17,500 | 12,500 | ||||
| Dividend payable | 7,000 | 2,500 | ||||
| Other Debt | 12,500 | 10,000 | ||||
| Capital Stock | 40,000 | 15,000 | ||||
| Retained Earnings | 14,500 | 12,000 | ||||
| 1/1 Noncontrl Interest | ||||||
| 12/31 Noncontrl Interest | ||||||
| LIAB. &EQUITY | $91,500 | $52,000 |
