Basic Financial Accounting (2)

Basic Financial Accounting (2) - 1. Suppose Atlanta...

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1. Suppose Atlanta Publishing Company acquired all the common shares of Houston Book Company for $60 million cash at the start of the year. Immediately before the business combination, each company had the following condensed balance sheet accounts (in millions): Atlanta Housto n Cash and other Assets $350 $80 Accounts payable, etc $110 $20 Stockholders' equity 240 60 Total equities $350 $80 a. Prepare a tabulation of the consolidated balance sheet accounts immediately after the acquisition. Use the balance sheet equation format b. Suppose Atlanta and Houston have the following results for the year: Atlanta Housto n Sales $330 $110 Expenses 245 90 Prepare income statements for the year for Atlanta, Houston, and the consolidated entity. Assume that neither Atlanta nor Houston sells items t the other. c. Present the effects of the operations for the year on Atlanta’s accounts and on Houston’s accounts using the balances sheet equation. Also tabulate the consolidated balance sheet accounts at the end of the year. Assume that liabilities are unchanged. d. Suppose Houston paid a cash dividend of $5 million. What accounts in requirements 3 would this affect and by how much? 2. Rate of Return a. Auckland Woolens Company reported a 6% operating margin on sales, a 12% pretax operating return on total assets, and $400 million of average total assets. Compute the (a) operating income (b) total sales, and (c) pretax operating return on total assets. b.
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This note was uploaded on 02/25/2012 for the course ACCOUNTING ACCOUNTING taught by Professor Animesh during the Spring '12 term at DeVry Phoenix.

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Basic Financial Accounting (2) - 1. Suppose Atlanta...

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