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1. At the beginning of 1999, CanGo purchased the online gaming company. This purchase was for;cash, paid for through the proceeds of the IPO and results in goodwill.;2. 90% of the online book sales comes from JIT, the other 10% through the inventory which CanGo;possesses. 100% of the CD/DVD/MP3 come through CanGo inventory. The result is that 80% of;ALL sales is JIT and 20% is inventory.;3. There is one warehouse for shipping of books and one plant for manufacturing.;4. There are three divisions: a CD/DVD/MP3 division, an online gaming division and a books;division. All manufacturing takes place in the CD/DVD/MP3 division.;5. The IPO takes place at the beginning of 1999.;6. The CD/DVDs were customized beginning in 1998. The MP3 players were built beginning in the;start of 1999.;7. The online gaming company was purchased for $30,000,000 and both Elizabeth and Andrew;initiated the process.;8. The company begins in 1996, has a VC infusion in 1997 and 1998. It shows a profit in 1998 and;1999. Its only profitable division is the online book sales division.;9. It has some type of international operations, hence the need for a "translation gain or loss" in;owner's equity.;10. It has an extraordinary loss from fire and a sale of a segment of its business in 1999.;Balance Sheet;ASSETS;Cash;December 31, 1999;$20,900,000;Marketable Securities;$117,000,000;Accounts Receivable;$33,000,000;Less: Allowance for Bad Debts;Net Accounts Receivable;$(880,000);$32,120,000;Inventory;Raw Materials;$2,000,000;Work-in-process;$1,000,000;Finished Goods;$5,000,000;Inventory Purchased for Resale;$24,000,000;Total Inventory;$32,000,000;Plant, Property and Equipment;$6,700,000;Less: Accumulated Depreciation;$(320,000);Net Plant, Property and Equipment;$6,380,000;December 31, 1998;Prepaid Expenses;Goodwill and Other Purchased Intangibles;Less: Amortization;Net Goodwill and Other Purchased Intangibles;Total Assets;$200,000;$28,000,000;$(700,000);$27,300,000;$235,900,000;LIABILITIES AND OWNERS' EQUITY;Accounts Payable;$22,000,000;Accrued Advertising;$11,800,000;Other Liabilities and Accrued Expense;$1,400,000;Current Portion of Long-Term Debt;$2,300,000;Long Term Debt;$57,400,000;Preferred Stock, $100 par value per share;100,000 authorized, 0 shares issued and;outstanding;$0;Common Stock, $1 par value per share;250,000,000 shares authorized, 13,000,000 shares;issued, 12,900,000 outstanding;$13,000,000;Additional Paid-in-Capital in excess of par value;Common Stock;$117,000,000;Treasury Stock;$(1,000,000);Retained Earnings (less Cash Dividends Paid);$12,000,000;Total Liabilities and Owner's Equity;$11,000,000;$235,900,000;Income Statement;December 31, 1999;December 31, 1998;Sales Revenues;$51,000,000;$10,300,000;Less: Sales Returns;$(1,000,000);$(300,000);Net Sales Revenues;$50,000,000;$10,000,000;Less: Cost of Goods Sold;$(9,000,000);$(4,000,000);Gross Profit;$41,000,000;$6,000,000;Operating Expenses;Advertising and Sales;Depreciation;$(26,000,000);$(3,000,000);$(160,000);Salaries and Wages;$(1,700,000);$(1,400,000);Product Development;$(4,000,000);$(1,200,000);$(700,000);$0;Merger and Acquisition Related Costs, including;Amortization of Goodwill and Other Intangibles;Total Operating Expenses;Income from Continuing Operations Before Income;Taxes;Less: Income Taxes at 35%;Income from Continuing Operations;$(32,560,000);$8,440,000;$(2,954,000);$5,486,000;Discontinued Operations;Income from Operations of Discontinued Division;(less applicable income taxes);$350,000;Loss on Disposal of Discontinued Division;(less applicable income taxes);Total Gain from Discontinued Operations;$(150,000);$200,000;Extraordinary Items;Loss from fire (less applicable income taxes);$(200,000);Net Income;$5,486,000;DivisionalRevenues;Books;$15,000,000;Online gaming;$25,000,000;Customized MP3/CD/DVD;$10,000,000;Customized MP3/CD/DVD Inventory at end of 1999;$8,000,000;CanGo, Inc. is a fictional Internet company that exists to support the Mastering Series project.;$7,000,000;$3,000,000

 

Paper#34340 | Written in 18-Jul-2015

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