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.

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Advanced Financial Accounting Fall 2020

 

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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