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?
Arab Open University
B326: TMA –2nd Semester 2017-2018
About TMA:
The TMA covers the advanced accounting concepts and practices in the businesses. It is marked out of 100 and is worth 20% of the overall assessment component. It is intended to assess students’ understanding of some of the learning points within chapter 1, 3,4 and 5 beside the supplementary material. This TMA requires you to apply the course concepts. The TMA is intended to:
· Assess students’ understanding of key learning points within chapter 1, 3,4 and 5.
· Increase the students’ knowledge about the reality of the advanced Accounting.
· Develop students’ communication skills, such as memo writing, essay writing, analysis and presentation of material.
· Develop the ability to understand and interact with the nature of the advanced accounting tools in reality .
· Develop basic ICT skills such as using the internet.
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%
4- You should use a Microsoft Office Word and Times New Roman Font of 12 points.
5- You should read and follow the instructions below carefully. Each part of the process will carry marks for the assignment.
Criteria for Grade Distribution:
| Criteria | Content | Referencing& e-library | Structure and Presentation of ideas | Total marks | |
| Part A | Part B | ||||
| Marks | 65 | 35 | (5) | (5) | 100 |
The TMA Questions
PART A: case study (Apple)
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.
The Company designs, manufactures and markets mobile communication and media devices and personal computers, and sells a variety of related software, services, accessories, networking solutions and third-party digital content and applications. The Company’s products and services include iPhone®, iPad®, Mac®, Apple Watch®, Apple TV®, a portfolio of consumer and professional software applications, iOS, macOS®, watchOS® and tvOS™ operating systems, iCloud®, Apple Pay® and a variety of accessory, service and support offerings. The Company sells and delivers digital content and applications through the iTunes Store®, App Store®, Mac App Store, TV App Store, iBooks Store® and Apple Music® (collectively “Digital Content and Services”). The Company sells its products worldwide through its retail stores, online stores and direct sales force, as well as through third-party cellular network carriers, wholesalers, retailers and value-added resellers. In addition, the Company sells a variety of third-party Apple-compatible products, including application software and various accessories through its retail and online stores.
Note: the financial statements of Apple are available at:
http://investor.apple.com/financials.cfm
Instructions Use the annual report and accounts of 2017 to answer the following questions:
1. What are Apple business strategies? And how do they achieve these strategies?
[Marks 8]
2. Explain four risk factors that may affect Apple Inc? [Marks 8]
3. In the annual report apple mentioned that they measure certain asset and liabilities using fair value measurement, according to FASB there are three level hierarchy for the fair value measurement technique explain them? Mention example from the balance sheet for asset and liabilities that were measured at fair value for each level.[Marks 9]
4. What is the responsibility of management toward the financial reporting?[Marks 2]
5. 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? [Marks 18]
6. What are the Exceptions to not to consolidate the financial statement and what are the benefits of consolidating the financial statements? [Marks 8]
PART B: case study
A. Below are the income statement information for 2015 of Orange and its 75% owned subsidiary “Gold”.
| Parent | Subsidiary | |
| Sales | 6,000,000 | 3,600,000 |
| Cost of goods sold | 3,000,000 | 2,400,000 |
| Gross profit | 3,000,000 | 1,200,000 |
| Operating expense | 1,500,000 | 480,000 |
| Net income | 1,500,000 | 720,000 |
During 2015, Parent sold to its subsidiary inventory for $ 1,200,000 with a gross profit $300,000. The remaining inventory on the hand of subsidiary is 45%.
Required
· Compute the unrealized profit – ending (4 marks)
· Compute profit for 2015 for the
· Non-controlling interest
· Parent profit
(5 marks 2.5 each)
· Prepare the consolidated income statement for 2015, show the elimination entries. (18 marks : each entry 3 marks and income statement 6 marks)
Part C: Case study 3
In January 1, 2015 flower Company has acquired 60% of Dallas Company for $1,020,000 on the date of the acquisition the subsidiary had retained earnings $150,000 and a capital of $1,450,000.
· Separate balance sheet as of 1 January 2015 for Parent and its Subsidiary.
| Description | Parents | Subsidiary | |
| at Book value | at fair value | ||
| Cash | 45,000 | 335,000 | 335,000 |
| Receivable | 60,000 | 240,000 | 240,000 |
| Land | 780,000 | 700,000 | 680,000 |
| Property | 1,405,000 | 400,000 | 430,000 |
| Investment in Subsidiary | 1,020,000 | – | |
| Total asset | 3,310,000 | 1,675,000 | |
| Account payable | 25,000 | 60,000 | 55,000 |
| Other liabilities | 205,000 | 15,000 | 16,000 |
| Capital stock | 2,400,000 | 1,450,000 | |
| Retained earnings | 680,000 | 150,000 | |
| Total equity and liabilities | 3,310,000 | 1,675,000 |
a. Record the parent entry in time of acquisition of asset . [Marks: 2]
b. Is there any Goodwill raised from the business combination. If yes what is the amount of Goodwill. [Marks: 8 , each step 2 marks]
c. Record the elimination entries required for consolidation as of January 1, 2015 (using cost method) [Marks: 5, each entry 2.5 marks]
d. Prepare the consolidated balance sheet as of January 1, 2015[Marks: 5] [Marks:2+8+5+5= 20]
Use the following headings (below) to make up the different sections of your work:
| The PT3 form | |
| Title and contents page | |
| References ( Recorded according to the Harvard style – Available on LMS ) |
2 | Page
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