Course_Project_Requirement_3_Solution.xlsx - Project...

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Project Description Page 1 ACCT559 – Course Project Corporate Takeover Situation Parent, Inc. is contemplating a tender offer to acquire 80 percent of Subsidiary Corporation's comm are currently quoted on the New York Stock Exchange at $100 per share. Parent is going to offer $1 tender offer. If the tender offer is made and is successful, the purchase will be consummated on Jan A typical part of the planning of a proposed business combination is the preparation of projected o financial statements. As a member of Parent's accounting group, you have been asked to prepare th financial statements for Parent and Subsidiary assuming that 80 percent of Subsidiary's stock is acq share. To support your computations, Martha Franklin, the chairperson of Parent's acquisitions com the projected 2009 financial statements for Subsidiary. (The projected financial statements for Subs companies were prepared earlier for the acquisition committee's use in targeting a company for ac financial statements for Subsidiary for 2009 and Parent's actual 2008 financial statements are prese Assumptions Ms. Franklin has asked you to use the following assumptions to project Parent's 2008 financial state - Sales will increase by 10 percent in 2009 and all sales will be on account. - Accounts receivable will be 5 percent lower on December 31, 2009, than on December 31, 2008. - Cost of goods sold will increase by 9 percent in 2009. - All purchases of merchandise will be on account. - Accounts payable are expected to be $50,500 on December 31, 2009. - Inventory will be 3 percent higher on December 31, 2009, than on December 31, 2008. - Straight-line depreciation is used for all fixed assets. - No fixed assets will be disposed of during 2009. The annual depreciation expense on existing asse - Equipment will be purchased on January 1, 2009, for $48,000 cash. The equipment will have an es salvage value. - Other operating expenses (depreciation is discussed above) will increase by 14 percent in 2009 an - Parent's income tax rate is 40 percent, and taxes are paid in cash in four equal payments. Payment April, June, September, and December. For simplicity, assume taxable income equals financial repor - Parent will continue the $2.50 per share annual cash dividend on its common stock. - If the tender offer is successful, Parent will finance the acquisition by issuing $170,000 of 6 percen on January 1, 2009. The bonds would first pay interest on July 1, 2009, and would pay interest semi January 1 and July 1 until maturity on January 1, 2019. - The acquisition will be properly accounted for as an acquisition (SFAS 141R) and Parent will accou equity method. Although most of the legal work related to the acquisition will be handled by Paren prepare and process the tender offer will total $2,000 and will be paid in cash by Parent in 2009. Additional Information As of January 1, 2009, all of Subsidiary's assets and liabilities are fairly valued except for machinery estimated fair value of $9,500, and a 5-year remaining useful life. Assume that straight-line depreci revaluation increment.
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