Assignment
About TMA:
The TMA covers the advanced accounting concepts and practices in the businesses.
The TMA:
This TMA is based around two cases of "business combination" and "intercompany transaction and relevant information". Marks will be awarded for blending the context of each case and with relevant theory by means of your own interpretation. In addition to this, some research is required.
The TMA requires you to:
1- Review various study sessions beside the supplementary materials.
2- Conduct a simple information search using the internet.
3- Present your findings in not more than 2,000 words ± 10%
PART A: case study (Nike)
The internet is a good place to get information that is useful to you in your study of accounting. For example, you can find information about current events, professional accounting organizations, and specific companies that may support your study.
Access the Nikehome web page From home page and then "The Company", click on "FINANCIAL INFORMATION", followed by "Reports and results", then select the year 2017 to display and download the "Annual report " 2017 on Form PDF.
Instructions Use the annual report and accounts of 2017 to answer the following questions:
1. What is Nike mission statement and what can you analysis from it ( further search required)
2. Financial accounting has allowed the accountant to use estimates when preparing the financial statements.
a. Please provide examples from Nike financials on items which were estimated by management.
b. Explain window dressing in accounting and is it ethical to use it ( give examples on famous companies who has used window dressing).
3. Define business combination and mention reasons why do companies merge?
4. What are the steps that the company has to do in time of merger transaction? And What are the obstacle that may lead to merger failure?
5. What are the Exceptions to not to consolidate the financial statement and what are the benefits of consolidating the financial statements?
PART B: Case Study
In January 1, 2014 James Company has acquired 85% of LuLu Company for $2,125,000 on the date of the acquisition the subsidiary had retained earnings $650,000 and a capital of $1,100,000.
Separate balance sheet as of 1 January 2014 for James and its Subsidiary.
|
Description
|
Parents
|
Subsidiary
|
|
Cash
|
60,000
|
35,000
|
|
Receivable
|
35,000
|
40,000
|
|
Land
|
1,550,000
|
550,000
|
|
Property
|
1,500,000
|
1,200,000
|
|
Investment in Subsidiary
|
2,125,000
|
-
|
|
Total asset
|
5,270,000
|
1,825,000
|
|
|
|
|
|
Account payable
|
50,000
|
60,000
|
|
Other liabilities
|
67,000
|
15,000
|
|
Capital stock
|
3,900,000
|
1,100,000
|
|
Retained earnings
|
1,253,000
|
650,000
|
|
Total equity and liabilities
|
5,270,000
|
1,825,000
|
a. Record the parent entry in time of acquisition of assets.
b. Is there any Goodwill raised from the business combination? If yes compute the amount of Goodwill.
c. Using the cost method, record the elimination entry required for consolidation as of January 1, 2014.
d. Prepare the consolidated balance sheetas of January 1, 2014.
e. Calculate the Investment amount of the parent and Non-controlling interest in the subsidiary as of January 1, 2015, assuming that on the 31st of December 2014, the subsidiary has distributed $10,000 of cash dividends and has a net income of $90,000.
Part C: Case Study
A. Below are the income statement information for 2015 of COS and its 80% owned subsidiary "H&M".
|
|
Parent
|
Subsidiary
|
|
Sale
|
9,000,000
|
5,400,000
|
|
Cost of goods sold
|
4,500,000
|
1,800,000
|
|
Gross profit
|
4,500,000
|
3,600,000
|
|
Operating expense
|
2,250,000
|
720,000
|
|
Net income
|
2,250,000
|
2,880,000
|
During 2015, Subsidiary sold goods to its parent for $ 1,700,000 with a cost of 1,250,000 . The remaining inventory on the hand with the parent is 35%.
Required
• Compute the unrealized profit - ending.
• Compute profit for 2015 for the:
o Non-controlling interest
o Parent profit
• Prepare the consolidated income statement for 2015, show the elimination entries.
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also include a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also Include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.