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kaplan mt482 ful course [ all units discusn and unit 4,5,6,7,8,and 10 assgmt and unit 9 final and quizes 1 4 5 7 8 9

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Question;unit 1 discussionDiscussion 1Write a summary of your findings from your job research. In addition, comment on the skills and knowledge that you have acquired during the last couple of years that have prepared you for a job in the financial industry.Discussion 2Each week the Topic 2 Discussion thread will be dedicated to the Term Project. You will be able to freely discuss the Assignment as a group in the thread. Your instructor will provide material each week to help focus the discussion and aid you in completing the term paper. This week the Discussion thread will focus on a discussion of our company choices and, as a group, choose one.unit 2Topic 1One step in assessing the quality of earnings is to look for red flags. An example of a red flag is a significant increase in accounts receivable without commensurate growth in sales (that is, accounts receivable turnover decreases). List and discuss at least five other red flags the astute analyst might look for, explain why each is a red flag, and identify where the analyst might find this information.Before you answer this question, conduct research in order to find an example to share related to this topic. Using your example, discuss how monitoring the financial results of a company?s competitors over time might help raise or explain red flags.Topic 2Term Project DiscussionThis week, led by your instructor, sources of financial information for the company selected will be discussed. Each student should post at least twice in this thread.Topic 1You are considering purchasing a company - assets, liabilities, warts, and all. You are aware that sometimes liabilities do not always show up on the balance sheet. Discuss five examples of liabilities that may not be explicitly recognized on the balance sheet, making sure to explain why they are liabilities.Topic 2Term Project DiscussionResearch the topic of ?liquidity,? and discuss how liquid the project company is at this time. Your instructor will add related material to the conversation. Each student should post at least twice in this thread.unit 4Topic 1Analysts maintain that two of the most important ratios are inventory turnover and accounts receivable turnover.You are analyzing ABC Company, a computer manufacturer. You notice that inventory turnoverthis year is significantly lower than prior years. You also notice that accounts receivable turnover is significantly lower this year when compared to previous years. Provide three explanations that would be consistent with your observation for inventory turnover and include an explanation of whether these would be of concern to you, as well as what the effect might be on next period's financial results. In addition, provide three explanations that would be consistent with your observation of the accounts receivable turnover, and also explain whether these would be of concern to you.Topic 2Term Project DiscussionResearch and discuss the topic ?capital structure.? Then analyze and discuss the capital structure of our term project company. You must post at least two substantial posts in this thread.Topic 1Wilde Corporation owns 30% of the outstanding stock of Bernie, Inc. Bernie recorded net income of $10M and paid dividends of $3M in 2005. For each of the following ratios, state the effect (higher, lower or no effect) that the use of the equity method would have on Wilde's financial ratios compared to the use of the cost method in 2005. Explain and discuss your answers.Gross marginTotal asset turnoverCash flow from operations to current liabilitiesDebt to equityTopic 2Term Project DiscussionResearch and discuss the topic ?return on investment? (ROI). Then analyze and discuss the ROI of our term-project company. You must post at least two substantial posts in this thread.unit 6Topic 1The table below shows the differences in accounting treatments for goodwill in three selected countries.Accounting for goodwill in selected countries:CountryOption to expenseimmediatelyOption to charge toequityTax deductibleUnited StatesNoNoNo*CanadaNoNoYesGreat BritainNoYesNo*Goodwill is tax deductible in the United States under limited circumstances, for the purposes of this question, assume it is not.Given a company that has recognized significant acquisition goodwill, identify the country whose accounting and tax rules for goodwill would likely result in the highest valuation of the company. Justify, explain, and discuss your answer.Topic 2Term Project DiscussionResearch and discuss the topic ?Asset Turnover (Utilization)? then analyze and discuss these topics with regard to our term project company. You must post at least two substantial posts in this thread.Topic 1Consider these two scenarios and provide your answer to both scenarios in your response:1. Is it possible to have a positive net income and negative cash flow from operations? If your answer is no, explain fully. If your answer is yes, provide two examples when one might find this.2. Is it possible to have a negative net income and positive cash flow from operations?If your answer is no, explain fully. If your answer is yes, provide two examples when one might find this.Topic 2Term Project DiscussionResearch and discuss the topics ?Profitability and Equity Analysis.? Then analyze and discuss these topics with regard to our term project company. You must post at least two substantial posts in this thread.unit 8Topic 1Throughout this course, many discussion opportunities come up where you need to respond to other people's opinions and comments. Respond to your Discussion after you have completed the reading.Describe the primary difference between ?funds flows? analysis and ratio analysis. Which analysis technique is preferred and why?Topic 2Term Project DiscussionResearch and discuss the topics ?financial statement forecasting.? Then analyze and discuss these topics with regard to our term project company. You must post at least two substantial posts in this thread.unit 9Topic 1Consider each of the following situations independently of each other.1. Current ratio increases from one period to the next2. Accounts receivable turnover increases from one period to the next3. Accounts payable turnover increases from one period to the nextQuestion 1Provide one example of when the underlying circumstances may be such that the observed trend is unfavorable.Question 2Provide one example of when the underlying circumstances may be such that the observed trend is favorable.Topic 2Term Project DiscussionResearch and discuss the topics ?company value, book, and market.? Then analyze and discuss these topics with regard to our term project company. You must post at least two substantial posts in this thread.unit 10Scroll down and click "Respond" to post your reply to the Discussion questions. Please review the Discussion Board Participation grading rubric on your course syllabus. This is important information that will ensure that you earn maximum points.Complete the Reflection ExerciseNow that you have completed this course, take a few moments to reflect on what you have accomplished. Take time to review the responses of your classmates and provide your feedback.What were your goals when you first began this course? Did you accomplish them?Did you start this course with any preconceived ideas? If so, were these ideas valid?How have you personally and / or professionally benefited from what you learned?What was the most important thing you learned?="0">MT482 Financial Statement Analysis Unit 4 Assignment RubricsComplete the Case Study: Inventory Valuation in the Film IndustryFor this Assignment, turn to page 259 in your textbook (Chapter 4 of FinancialStatements Analysis) and complete Case 4-1, Inventory Valuation in the Film Industry? Columbia PicturesThis is a challenging activity. You should prepare to spend substantial timeworking on your response.Directions for Submitting Your ProjectBefore you submit your project, you should save your work on your computer in alocation, and with a name, that you will remember. Make sure your project is in theappropriate format (Word, Excel, PowerPoint, or other), then, when you are ready, youmay submit on the Dropbox page.MT482 ? Unit 4 Assignment: Columbia Case 4-1Content, Analysis,PointsPossiblePointsEarned? Response includes accurate information regardingthe main determinants of the valuation of featurefilms, television programs, and general releasefeature productions by Columbia Pictures.? Response includes accurate information on thereasonableness of the bases of valuation.? Response includes the additional information oninventory valuation that an unsecured lender toColumbia Pictures would wish to obtain and anyanalyses the lender would wish to conduct15? Response includes appropriate analysis of the basesof valuation and other areas of analysis that a lenderwould wish to conduct9Correct spelling and grammar 6Total Points Earned 30MT482 Financial Statement Analysis Unit 5 Assignment Rubric="3">Complete the Case Study: Accounting Entries for Consolidation ofIntercorporate Investments.For this Assignment, turn to page 321 in your textbook (Chapter 5 of FinancialStatements Analysis), and complete Case 5-1, Accounting Entries for Consolidation ofIntercorporate Investments ? Axel CorporationThis is a challenging activity. You should prepare to spend substantial timeworking on your response.Directions for Submitting Your ProjectBefore you submit your project, you should save your work on your computer in alocation, and with a name, that you will remember. Make sure your project is in theappropriate format (Word, Excel, PowerPoint, or other), then, when you are ready, youmay submit on the Dropbox page.MT482 ? Unit 5 Assignment: Axel Case 5-1Content, Analysis, and Effective writing skills PointsPossiblePossibleEarnedResponse includes the journal entries for Axel Corp. torecord the acquisition of Wheal Company stock assuming:? pooling accounting? purchase accounting.Response includes the worksheet entries for Axel Corp. toeliminate the investment in Wheal Company stock inpreparation for a consolidated balance sheet at December31, Year 4 assuming:? pooling accounting? purchase accounting.Response includes the calculation of consolidated retainedearnings for December 31:? Axel Corp. uses the pooling method for this businesscombination.? Axel Corp. uses the purchase method for acquisition ofWheal Company24Correct spelling and grammar 6Total Points Earned 30unit 7MT482 Financial Statement Analysis Unit 7 Assignment RubricComplete the Case Study: Analysis of Cash FlowsFor this Assignment, turn to page 439 in your textbook (Chapter 7 of FinancialStatements Analysis), and complete Case 7-1, Cash Flow and Free Cash Flow Analysis? Lands? End.This is a challenging activity. You should prepare to spend substantial timeworking on your response.Directions for Submitting Your ProjectBefore you submit your project, you should save your work on your computer in alocation, and with a name, that you will remember. Make sure your project is in theappropriate format (Word, Excel, PowerPoint, or other), then, when you are ready, youmay submit on the Dropbox page.MT482 ? Unit 7 Assignment: Lands? End Case 7-1Content, Analysis, and Effective writing skillsPointsPossiblePossibleEarnedYear that Lands? End strategy was implemented and summaryfor how the strategy is reflected in the information that iscontained in the statement of cash flows.4Explanation for how the four items listed below reconcile netincome to net cash flows from operating activities:(1) Depreciation(2) Receivables(3) Inventory(4) Reserve for returns, and calculates free cash flows for eachyear shown.10Calculation of free cash flows for each year. 6Analysis of how Lands? End uses its free cash flow statementand whether this reflects good financial strategy. 4Correct spelling and grammar 6Total Points Earned 30unit 6Understanding Revenue RecognitionFor this assignment, turn to page 362 in your textbook (Chapter 6 of Financial Statements Analysis), and complete Case 6-1, Understanding Revenue Recognition.BIKE Company starts with $3,000 cash to finance its business plan to produce bike helmets with a simple assembly process. During the first month of business the company signs sales contracts for 1,300 units (sales price of $9 per unit), produces 1,200 units (production cost of $7 per unit), ships 1,100 units, and collects in full for 900 units. Production costs are paid at the time of production. The company has only two other costs:This is the entire problem. Do you think it will be completed by tonight? Sorry but i need it by then.1. Commission of 10% of the selling price when the company collects from the customer,2. Shipping costs of $0.20 per unit paid at time of shipment. Selling price and all costs per unit have been constant and are likely to remain the same.A. Prepare comprehensive (side by side) balance sheets and income statements for the first month of BIKE Company for each of the following three alternatives:1. Revenue is recognized at the time of shipment2. Revenue is recognized at the time of collection3. Revenue is recognized at the time of productionNote: net income for each of the three alternatives is (1) $990, (2) $810, and (3) $1080 respectively.B. The method where revenue is recognized at the time of collection, known as the installment method, is except the bull for financial reporting in unusual and special cases. Why is BIKE Company likely to prefer this method for tax purposes? (one line simple answer)C. Comment on the usefulness of the installment method for a credit analyst is using both the balance sheet and income statement.unit 8CASE 9?1: Forecasting Pro Forma Financial StatementsRefer to the following financial statements forKodak:AnalysisINCOME STATEMENTFor Year Ended December 31 (in millions) 20x6 20x5 20x4Net sales.......................................................................................... $13,234 $13,994 $14,089Cost of goods sold............................................................................ 8,670 8,375 8,086Gross profit.................................................................................. 4,564 5,619 6,003Selling, general, and administrative expenses................................. 2,781 2,665 2,846Research and development costs..................................................... 779 784 817Restructuring costs (credits) and other............................................ 659 (44) 350Earnings from operations............................................................ 345 2,214 1,990Interest expense............................................................................... 219 178 142Other income (charges)..................................................................... (18) 96 261Earnings before income taxes.......................................................... 108 2,132 2,109Provision for income taxes................................................................ 32 725 717Net earnings................................................................................ $ 76 $ 1,407 $ 1,392Prepare forecasts of its income statement, balance sheet, and statement of cash flows for 20x7 under the following assumptions:? a. All financial ratios remain at 20x6 levels.? b. Kodak will not record restructuring costs for 20x7.? c. Taxes payable are at the 20x6 level of $544 million.? d. Depreciation expense charged to SG&A is $765 million and $738 million for 20x6 and 20x5, respectively.? e. Gross PPE is $12,982 million and $12,963 million for 20x6 and 20x5, respectively.? f. Projected current maturities of long-term debt are $13 million for 20x7.Top of Formunit 9 final paperComplete Your Final ProjectThemeComprehensive Case Analysis based on the course materialDescriptionYour instructor posted an announcement during Unit 1 assigning a major publicly traded corporation from a non-regulated industry to use for this Assignment. You are required to obtain complete financial statements of this company for the last 5 years.You will prepare a Financial Statement Analysis Report based on these financial statements and other information.You should have been working on this project throughout the term.DirectionsFor your Final Project, turn to page 676 in our textbook, and complete the Assignment under Case CC-1, Comprehensive Financial Analysis.The final analysis should be set up as a research paper with the following sequence:Cover page with your name, course number, your instructor, date, subject, a brief statement that you (and you alone) produced the paper, and a citation for each reference mentioned in your statement.Executive Summary (max. ? page in Bold)Table of ContentsIntroductionBody (8 ? 12 pages)Conclusion and Recommendation(s)ReferencesSubmit your Final Project by the end of Unit 9.ID: MT482-09-11-FPunit 10MT482 Financial Statement Analysis Unit 10 Reflection PaperUnit 10 Reflection PaperCommunication skills, which include writing, are critical in academics and in theworkplace. Therefore, in Unit 10, you will be completing a self-reflection. This is youropportunity to reflect of what you have learned in this course. This is a chance for youand your instructor to see how the value of the subject matter in this course will connectto your academic and professional future.Here is a preview of this Unit 10 Assignment:After reflecting on what you have learned and how you have benefited by taking MT482,write a minimum one-page response to the questions below. Make sure to address thecritical elements so you will be successful in completing this Assignment.Please answer the following questions in your paper:1. Reflect and describe which key concepts and topics in this course havemade you a stronger candidate to enter the business world.2. Discuss how this course has affected you in your professionaldevelopment as a student and as a person as well as encouraging you on youracademic path.Respond using the critical elements below, submit your minimum one pageresponse to the Dropbox by Tuesday at 12 midnight EST in Unit 10.Critical Elements:? Write your original response in Standard American English, paying specialattention to grammar, style, and mechanics.? Respond to the questions in a thorough manner, providing specificexamples of concepts and topics, from question 1, and specific examples oftheir impact on you from question 2.? Ensure that your viewpoint and purpose are clearly stated.? Demonstrate logical and appropriate transitions from one idea to another.quizesuestion 1. Question:Which of the following statements regarding the intrinsic value of a company is correct?It can be calculated as book value plus the present value of future expected dividends, discounted at the cost of equity capital.It can be calculated as present value of future expected dividends, discounted at the cost of debt.It can be calculated as present value of future expected residual income, discounted at the cost of equity capital.It can be calculated as book value plus the present value of future expected residual income, discounted at the cost of equity capitalQuestion 2. Question:Which of the following statistics would be the most useful in determining the efficiency of a car rental company?Inventory turnoverNumber of employees per car rentalAverage length of car rentalNumber of days cars are rented as a percentage of number of days available for rentQuestion 3. Question:Following is some financial information for Dell Inc.What is Dell's P/E ratio for 2006?\ 27.6312.8123.659.70Question 4. Question:A common size income statement would typically be prepared by dividing:all items on income statement in Year t by their corresponding value in Year t-1.all items on income statement in Year t by their corresponding balance sheet accounts in Year t.all items on income statement in Year t by net income in Year t-1.all items on income statement in Year t by sales in Year t.Question 5. Question:Given the following information, calculate the inventory turnover for ABC Co. for 2006 (pick closest number).8.967.226.936.18Question 6. Question:You have been provided the following information about High Inc.Working Capital for 2005 is:$56,000$20,000$151,000$207,000Question 7. Question:You are analyzing a large stable company. For the year ending 12/31/05 the company reported earnings of $58,900K and book value at the end of 2005 was $371,700K. You expect earnings to grow at 5% a year in perpetuity, and the dividend payout ratio of 70% to continue. The company borrows at 8%, and has a cost of equity of 12%. The company has 25,000K shares outstanding.What is your estimate of price using the residual income valuation model at 12/31/05?$20.62$21.65$23.56$24.72 ()s:Question 8. Question:If a company receives an unqualified audit opinion it means the auditors:did not complete a full audit and therefore do not feel qualified to give an opinion on financial statements.are providing assurance that the company will remain financially viable for at least the next year.are providing assurance that the company's financial statements fairly present company's financial performance and position.are providing assurance that the company's financial statements are free from misstatement, fraudulent accounting and fairly indicate future performance.Question 9. Question:Which of the following ratios is not generally considered to be helpful in assessing short-term liquidity?Acid test ratioCurrent ratioDays to collect receivablesDays goodwill held:Question 10. Question:Two otherwise equal companies have significantly different dividend payout ratios. Which of the following statements is most likely to be correct? The company with higher the dividend payout ratio:will have a higher inventory turnover ratio.will have a lower inventory turnover ratio.will have higher earnings growth.will have lower earnings growth.Which of the following steps are required to adjust LIFO to FIFO?Inventory needs to be calculated as reported LIFO inventory plus LIFO reserve.Increase deferred tax payable by LIFO reserve times Tax rate.Retained earnings need to be calculated as reported retained earnings plus LIFO reserve times (1 - Tax rate).All of the above.Question 2. Question:The following information can be found in Manufacturer Company's financial statements.If Manufacturer used FIFO its retained earnings as of the end of fiscal 2006 would be:$ 540,000$ 440,000$ 524,000$ 506,000Question 3. Question:Below is selected information taken from the balance sheet of Huy Corporation as of 12/31/06.The average age of Huy's depreciable assets as of 2006 is:2 years7 years14 years34 yearsQuestion 4. Question:The following information can be found in Manufacturer Company's financial statements.If Manufacturer used FIFO its Net Income for fiscal 2006 would be:$ 165,000$ 149,000$ 135,000CORRECT $ 131,000Question 5. Question:Under current US GAAP, goodwill is:I. amortized over a period not to exceed 40 years.II. tested annually for impairment.III. exclusive of separately identifiable intangible assets.IV. recorded only upon purchase of another entity.I, II, III and IVII, III and IVI, II and IIIII and IVQuestion 6. Question:Look Good Corporation has current assets of $1.1M and current liabilities of $1M. It is close to year-end and it would like to increase its current ratio. Which of the following will achieve this?Encourage customers to pay their bills more quickly.Increase short-term borrowings by $0.1M.Sold building for $0.2M in cash.Liquidate some of its trading marketable securities.Question 7. Question:LIFO liquidation occurs when:a firm changes from LIFO to another inventory method.a firm experiences an increase in cost of raw materials.the LIFO reserves decline in value.the quantity of goods sold is greater than the quantity produced.Question 8. Question:The following information can be found in ABC Co.'s financial statements.Assume a tax rate of 35%. Inventories valued using the LIFO method represented approximately 80% of consolidated inventories.What will be the retained earnings for 2005 if ABC used FIFO valuation?CORRECT 3,205,2713,566,9183,893,0004,096,430Question 9. Question:A firm has a current ratio greater than 1.0. If the firm's ending inventory is understated by $3,000 and beginning inventory is overstated by $5,000, the firm's net income (before taxes) and current ratio will be:Option AOption BOption COption DQuestion 10. Question:For Control Furniture Co.,LIFO Reserve in Year 2006 $91 millionLIFO Reserve in Year 2005 $82 millionTax Rate is 35%.To restate Year 2006 LIFO inventories to a FIFO basis, we use the following analytical entry:Option AOption BCORRECT Option COption DWhich of the following is incorrect?An analyst should be aware of the following when analyzing a company that has significant investments recorded using the equity method:Cash flow received from investee may be substantially different from investment income recorded.As investee's liabilities are not recorded on the company's balance sheet, there may be significant off-balance-sheet financing.They must mark investment in investee to market even though there may be no ready market in which they can sell their investment.Company must record pro rata share of investee's earnings, which may not be well correlated with changes in market value of investee.Question 2. Question:Guido Inc. buys 2,000 shares of Weiner Company for $30 per share on January 1, 2006. At the end of 2006, Weiner shares are trading at $33 per share. Weiner has a total of 200,000 shares outstanding and reported net income of $3,000,000 and paid dividends of $1,000,000 for fiscal 2006.Determine the amount Guido Inc. will record as an investment on its balance sheet under the three scenarios: Weiner is considered trading marketable equity security (MES), available for sale (AFS) MES or using cost method.Choice AChoice BChoice CChoice DQuestion 3. Question:Constant Corp. bought Steady Company on June 30, 2005 in a pooling-of-interests transaction. Both companies are in stagnant markets. Steady had total assets of $50,000 and total liabilities of $30,000 with fair market values of $60,000 and $30,000, respectively. Constant issued 1,000 shares, valued at $45 per share. Both companies operate in tax-free havens and take a half-year's depreciation in the year acquired using ten-year lives. Monthly operating results are as follows:Assume revenue and earnings remain same for the next year. Company is following SFAS 142.Feedback:It can be either $42,000 or $48,000. Under GAAP for purchase accounting, there are two alternatives. Although income is always reported from the acquisition date forward, it is permitted to report 12 months sales of the acquired company, as long as 12 months expenses are included and pre-acquisition earnings are backed out. The simpler (and easier for the reader) approach is to only report post-acquisition (i.e., six months in this example) sales and expenses.If accounted for as a purchase, 2005 consolidated earnings are reported as$10,700$11,900$12,700$13,200 ()Question 4. Question:Parent Company Inc. successfully bids for Child Company Inc. in year X1. Parent Company Inc. has purchased all of Child's shares outstanding for $8,500. Following are excerpts from both companies' financial statements for year X1, prior to the acquisition.Also assume the following information: the acquisition was accounted for using the purchase method. $1,500 of the excess price relates to depreciable assets, and those assets have an additional useful life of 10 years at the time of the acquisition. Parent Company Inc. uses the straight line depreciation method and has a 34% tax rate. The combined net income for both companies for year X2 (excluding any expenses that need to be recorded as a result of the purchase method accounting for the merger) was $1,560.What would be total assets in the consolidated financial statements for the date on which the merger became effective, assuming any excess purchase price relates to goodwill?$50,008$49,498$41,508$44,113Question 5. Question:The following information is from L&H's 2004 income statement:Feedback: Pre-tax income in 2005 is $3,900 ($2,600 x 1.5), an increase of $1,300. Starting with 2004, add back amortization expense no longer permitted by SFAS 142 (income increases by $2,000) less the impact of the sales decline of $1,400 (at 50% gross margin = $700 real economic income decrease).Based upon your analysis, you reflect that L&H managementis more than holding its own in a tough economic environment.needs to strengthen its marketing.is achieving growth in its new product line.has adroitly managed its asset portfolio.Question 6. Question:Constant Corp. bought Steady Company on June 30, 2005 in a pooling-of-interests transaction. Both companies are in stagnant markets. Steady had total assets of $50,000 and total liabilities of $30,000 with fair market values of $60,000 and $30,000, respectively. Constant issued 1,000 shares, valued at $45 per share. Both companies operate in tax-free havens and take a half-year's depreciation in the year acquired using ten-year lives. Monthly operating results are as follows:Assume revenue and earnings remain same for the next year. Company is following SFAS 142.Feedback:It can be either $42,000 or $48,000. Under GAAP for purchase accounting, there are two alternatives. Although income is always reported from the acquisition date forward, it is permitted to report 12 months sales of the acquired company, as long as 12 months expenses are included and pre-acquisition earnings are backed out. The simpler (and easier for the reader) approach is to only report post-acquisition (i.e., six months in this example) sales and expenses.If accounted for as a pooling-of-interests, 2005 consolidated earnings are reported as:$12,000$13,200$14,400It cannot be determined without further information ()Question 7. Question:A U.S. company has a subsidiary located in Great Britain. If the British pound is the functional currency and is appreciating relative to the dollar, what will happen to the following ratios after translation?Choice AChoice BChoice CChoice DQuestion 8. Question:Constant Corp. bought Steady Company on June 30, 2005 in a pooling-of-interests transaction. Both companies are in stagnant markets. Steady had total assets of $50,000 and total liabilities of $30,000 with fair market values of $60,000 and $30,000, respectively. Constant issued 1,000 shares, valued at $45 per share. Both companies operate in tax-free havens and take a half-year's depreciation in the year acquired using ten-year lives. Monthly operating results are as follows:Assume revenue and earnings remain same for the next year. Company is following SFAS 142.It can be either $42,000 or $48,000. Under GAAP for purchase accounting, there are two alternatives. Although income is always reported from the acquisition date forward, it is permitted to report 12 months sales of the acquired company, as long as 12 months expenses are included and pre-acquisition earnings are backed out. The simpler (and easier for the reader) approach is to only report post-acquisition (i.e., six months in this example) sales and expenses.If accounted for as a purchase, 2006 consolidated earnings are reported as$10,700$13,400$11,950$14,400Question 9. Question:Parent Company Inc. successfully bids for Child Company Inc. in year X1. Parent Company Inc. has purchased all of Child's shares outstanding for $8,500. Following are excerpts from both companies' financial statements for year X1, prior to the acquisition.Also assume the following information: the acquisition was accounted for using the purchase method. $1,500 of the excess price relates to depreciable assets, and those assets have an additional useful life of 10 years at the time of the acquisition. Parent Company Inc. uses the straight line depreciation method and has a 34% tax rate. The combined net income for both companies for year X2 (excluding any expenses that need to be recorded as a result of the purchase method accounting for the merger) was $1,560.What would be total liabilities in the consolidated financial statements for the date on which the merger became effective, assuming any excess purchase price relates to goodwill?$28,221$27,231$27,741$25,462Question 10. Question:Parent Company Inc. successfully bids for Child Company Inc. in year X1. Parent Company Inc. has purchased all of Child's shares outstanding for $8,500. Following are excerpts from both companies' financial statements for year X1, prior to the acquisition.Also assume the following information: the acquisition was accounted for using the purchase method. $1,500 of the excess price relates to

 

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