# Assignment on accounting project

accounting project
I have uploaded the required documents, and I have almost finished the second question. Only question one is left. I hope the teacher can help me check question two after finishing the question one.

Individual Project

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Instructions:

• There are two problems with multiple parts included in this project. The final submission for this project should be in an Excel Workbook that you have created
• Use the information provided for each problem below to provide the required entries, calculations, and/or the necessary explanations
• Your answers to the mathematical problems should be easy to follow with supporting schedules prepared as necessary and calculations done either in the cell or somewhere separate in the answer space
• The answer for each question should be treated similar to a work paper that you would prepare in a professional setting, meaning a manager/reviewer should be able to clearly follow the steps you took to arrive at the solution, and the final answer (journal entry, balance, etc.) should be clearly indicated
• You may use as many rows, columns, tabs, or extra space as needed to fully answer the problem; be aware of how this may impact the formatting of your prior work
• Ensure that you have completed all parts of both problems before submitting
• Submit one completed workbook (.XLSX format) via the Canvas assignment
• Each individual should work independently of other students. Workbooks will be checked for indications of copying and other forms of academic dishonesty.

Instructions:

Mathematical problems will be graded based on mathematical accuracy and appropriate accounting treatment (correct journal entries, account balances, etc.). Responses to the real-world case will be graded holistically based on how sufficiently your responses identify correct information from SEC filings.

 Area Possible Points Problem 1 120 Problem 2 34 Clear presentation and formatting 10 Total 164

As a reminder, the individual project will be weighted as 15% of the total grade for ACCN 7120.

Problem 1 (120 points)

Alpha Ltd. effectively gained control over Beta Inc. by acquiring 70% of Beta’s common shares paying \$200,000 in cash and issuing shares with value of \$500,000 to Beta’s shareholders on December 31, 2010. The balance sheets of Alpha (including the effects of the acquisition) and Beta on December 31, 2010 are shown below:

 BALANCE SHEET Post-Acquisition ALPHA BETA Dec 31 2010 Dec 31 2010 Cash 500,000 320,000 A/R 670,000 500,000 Inventory 930,000 220,000 Other current assets 240,000 50,000 Equipment 800,000 400,000 Equipment acc depr (200,000) (200,000) Building 450,000 Building acc depr (45,000) Goodwill 50,000 Investment in B 700,000 3,640,000 1,745,000 Accounts payable 1,250,000 1,050,000 LT liabilities 1,730,000 268,781 Common Stock 1,000,000 400,000 R/E (340,000) 26,219 3,640,000 1,745,000

At the date of acquisition, the due diligence team determined the following fair values:

 BETA FV A/R 480,000 Inventory 210,000 Equipment 250,000 LT Liab. 293,097

The turnover of receivables and inventory is one year and Beta’s equipment had a useful life of five years at the acquisition date. The long-term liabilities balance on this date is comprised of just one specific bank loan with a remaining term of four years.

In addition, Alpha identified an additional intangible asset, a patent with estimated value of 50,000 and a useful life of ten years at the acquisition date.

All fair value differences are amortized using straight line.

During 2011 the following transactions took place:

• Beta’s sales were entirely made to Alpha. Beta’s sales had a markup of 1.6 times COGS. At the end of 2011, 20 percent of the items sold to Alpha were still in Alpha’s inventory.

• Alpha sold some product components to Beta for \$96,000. Alpha’s sales to Beta had a markup of 1.2 times COGS. At the end of 2011, 50 percent of the items sold to Beta were still in Beta’s inventory.

• Alpha sold equipment to Beta on January 1, 2011 for \$40,000. This equipment had a net book value of \$60,000 and a useful life of four years at the time of the sale.

• Beta sold a building to Alpha for on July 1, 2011 for \$525,000. This building had a net book value of \$393,750 and a useful life of 17.5 years at the time of the sale.

• There was a balance of \$85,000 in intercompany accounts payable and receivable on December 31, 2011.

• Beta issued a five year bond on December 30, 2011 at par with the following characteristics:

 BONDS ISSUED ON DEC 30 2011 WHEN MARKET RATE = COUPON RATE = 12% FACE VALUE = 500,000 MATURE DEC 31 2016 BETA Calculations 12/31 Face Value Unamortized Prem/Discount Carrying Amount Effective Interest Cash Interest Discount Amortized 2011 500,000 -0- 500,000 2012 500,000 -0- 500,000 60,000 60,000 -0- 2013 500,000 -0- 500,000 60,000 60,000 -0- 2014 500,000 -0- 500,000 60,000 60,000 -0- 2015 500,000 -0- 500,000 60,000 60,000 -0- 2016 500,000 -0- 500,000 60,000 60,000 -0-

During 2012, the following transactions took place:

• Beta’s sales were entirely made to Alpha. Beta’s sales had a markup of 1.6 times COGS. At the end of 2012, 15 percent of the items sold to Alpha were still in Alpha’s inventory.

• Alpha charged a management consulting fee of \$50,000 to Beta, included in Beta’s operating expenses.

• In 2012, there was a \$50,000 goodwill impairment.

• Alpha purchased all of Beta’s bonds in the bond market for \$485,128 on December 31, 2012 after the 2012 coupon payment. At that time the market rate was 13%.

During 2013 the following transactions took place:

• There were no inter-company sales. Alpha’s sales were \$1,000,000. Beta’s sales were \$400,000.

• At the end of 2013, there were no items purchased from Beta in Alpha’s inventory. Alpha’s COGS was \$500,000. Beta’s COGS was \$225,000.

• At the end of 2013, the balance of bond liability on Beta’s balance sheet was \$500,000 and the balance of bond asset on Alpha’s balance sheet was \$488,846.

• In 2013, Beta reported bond interest expense of \$60,000. Alpha reported interest revenue from its bond investment of \$63,718.

The financial statements of Alpha and Beta for 2011 and 2012 were as follows:

 BALANCE SHEET ALPHA BETA Dec 31 2011 Dec 31 2011 Cash 27,500 407,746 A/R 268,500 430,000 Inventory 920,000 345,000 Other current assets 235,000 55,000 Equipment 720,000 440,000 Equipment acc depr (380,000) (290,000) Building 525,000 Building acc depr (15,000) Goodwill 50,000 Investment in B 686,927 2,987,927 1,437,746 Accounts payable 340,000 120,000 LT liabilities 1,730,000 768,781 NCI Common Stock 1,000,000 400,000 R/E (82,073) 148,965 2,987,927 1,437,746

 INCOME STATEMENT ALPHA 2011 BETA 2011 Sales 1,200,000 600,000 Loss on sale of equipment (20,000) Gain on sale of building 131,250 Equity in Investee Income 21,927 1,201,927 731,250 COGS 610,000 375,000 Operating expenses 52,500 50,000 Eq depreciation 180,000 90,000 Building depreciation 15,000 11,250 Interest expense 86,500 32,254 944,000 558,504 Net Income 257,927 172,746

 BALANCE SHEET ALPHA BETA Dec 31 2012 Dec 31 2012 Cash 302,872 269,003 Bond investment 485,128 A/R 230,000 450,000 Inventory 920,000 345,000 Other current assets 30,000 45,000 Equipment 720,000 440,000 Equipment acc depr (560,000) (380,000) Building 525,000 Building acc depr (45,000) Goodwill 50,000 Investment in B 603,649 3,211,649 1,219,003 Accounts payable 320,000 55,000 LT liabilities 1,730,000 712,543 NCI Common Stock 1,000,000 400,000 R/E 161,649 51,460 3,211,649 1,219,003

 INCOME STATEMENT ALPHA 2012 BETA 2012 Sales 1,200,000 608,000 Consulting revenue 50,000 Gain on bond retirement Equity in Investee Income (48,278) 1,201,722 608,000 COGS 608,000 380,000 Operating expenses 53,500 100,000 Eq depreciation 180,000 90,000 Building depreciation 30,000 Interest expense 86,500 85,505 Goodwill impairment 958,000 655,505 Net Income 243,722 (47,505)

Provide the following:

• Consolidated balance sheet at acquisition on 2010;

• Equity method entries for 2011 and summary of debits and credits to investment income and investment account;

• Consolidated balance sheet and income statement for 2011;

• Equity method entries for 2012 and summary of debits and credits to investment income and investment account;

• Consolidated balance sheet and income statement for 2012; and,

• Consolidated balances for the following accounts in 2013: Sales, COGS, bond asset, bond liability, bond interest expense, and bond interest revenue. Below are the balances reported by Alpha and Beta in 2013:

 ALPHA 2013 BETA 2013 Sales 1,000,000 400,000 COGS 500,000 225,000 Bond Investment 488,846 Bond Liability 500,000 Bond Interest Revenue 63,718 Bond Interest Expense 60,000

Problem 2 (34 points)

Example of disclosures related to the class material

Open Newmont Mining Corporation investor relations website com/investor-relations/default.aspx”>http://www.newmont.com/investor-relations/default.aspx and find the 2014 Annual Report (Form 10-K Filed 02/20/15 for the Period Ending 12/31/14). Using information from the company’s financial statements and its footnotes (pages 83-130 of the 10-K) answer the following questions:

• Describe briefly what are the main activities of the company (i.e., the company’s business model, sources of income, etc.)

“Newmont Mining Corporation is primarily a gold producer with significant operations and/or assets in the United States, Australia, Peru, Indonesia, Ghana and New Zealand.” “Newmont is also engaged in the production of copper, principally through Batu Hijau in Indonesia, Boddington in Australia and Phoenix in the United States. Newmont Mining Corporation’s original predecessor corporation was incorporated in 1921 under the laws of Delaware.”(10K)

• What is the amount of investment income for 2014?

There are 126 million dollar gain on the investment income (basically selling the investment).

• Using information from the footnotes about “Equity Income of affiliates”, what are the three companies where Newmont has significant influence, and what is the percentage ownership of Newmont in these companies at the end of 2014?

Euronimba Ltd. (43.5%)

Minera La Zanja S.R.L.  (46.94%)

Novo Resources Corp. (28.75%)

• What is the income statement NCI for 2014?

The NCI for 2014 in income statement is 184 million dollars.

• What are the amounts in the “Investments” lines in the 2014 balance sheet?

From the Book basis, the investment is 332 million dollars, From the fair value basis is 334 million dollars.

• Using information from the footnotes about “Investments”, what is the amount in marketable equity securities at the end of 2014 (i.e., accounted for using fair value method), and what were the unrealized gains and losses for these investments in 2014?

Current marketable equity securities fair value is 73 million. Net Book Value 89M- fair value 73M= unrealized loss 16 million dollars.

Long-term marketable equity securities fair value is 172 million dollars, Net book value 170M- fair value 172M= unrealized gain 2 million dollars.

• What is the balance sheet NCI amount at the end of 2014?

NCI on balance sheet 2014 is 2815 million dollars.

• Using information from the footnotes about “Net income attributable to NCI”, what are the three main consolidated entities with NCI in 2014?

Minera Yanacocha

TMAC

Batu Hijau

• Using information from the footnotes about “Other-long term assets”, what is the amount of goodwill in the 2014 balance sheet?

Goodwill in 2014 balance sheet is 883 million dollars.

• Using information from the footnotes about “Significant accounting policies”, what are the variable-interest entities (VIE’s) related to Newmont?

VIEs based on the footnotes are (i) a pledge of their combined 20% share of PTNNT; (ii) an assignment of dividends payable on the shares, net of withholding tax; (iii) a commitment from them to support the application of our standards to the operation of Batu Hijau; and (iv) as of September 16, 2011, in respect of PTPI only, powers of attorney to vote and sell PTNNT shares in support of the pledge, enforceable in an event of default as further security for the funding. (10K)

• Using information from the footnotes about “Segment information”, what are Newmont’s five segments, what is the largest segment in terms of total assets, and what is the most profitable segment in terms of pre-tax income divided by total assets in 2014?

Segments based on geographical regions, North America, South America, Australia/New Zealand, Indonesia, Africa.

The largest segment is North America.

The most profitable segment is Africa. 530/ 3057 Around 17%

• What is the OCI effect of foreign currency translation adjustment in the 2014 Statement of consolidated comprehensive income?

The OCI foreign currency translation adjustment in 2014 Comprehensive income is 23 million dollars.

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