solved Course Project: Corporate Consolidation ProjectOverviewThis Group Course Project is the

Course Project: Corporate Consolidation ProjectOverviewThis Group Course Project is the Signature Assignment of the ACCT559 Course and is compatible with the DeVryTech path by requiring that:Students use different technologies to present key deliverables related to the Group Course Project on consolidations and it related financial statements,Students use collaboration tools to coordinate their work as a team in solving the course project, andStudents use online research methods to capture data relevant to the course project.ObjectiveThe objective of the Corporate Consolidation Project is to provide students with an in-depth, hands-on experience examining a real-world scenario. Students will address the following primary areas.Using actual financial results for the recently completed year and a set of assumptions, forecast proposed parent company financial results for the upcoming year assuming the acquisition is not attempted.Develop a set of revised, forecasted, separate financial statements for the parent company that reflect the proposed acquisition.Prepare a pro forma consolidation worksheet for the parent company and its proposed subsidiary.Perform ratio analysis based on (a) the separate financial statements and (b) the consolidated financial statements.Articulate findings, conclusions, and a recommendation in a memorandum to the chairperson of the parent company’s acquisition committee.GuidelinesThe Course Project is to be done by each student. The project is to solve a Case Study, which is listed below.There are three topics in each letter group that correspond to the three required milestones.Milestone 1: Requirement 1 – Due Week 3 (50 points)Milestone 2: Requirements 2 and 3 – Due Week 5 (100 points)Milestone 3: Requirements 4 and 5 – Due Week 6 (50 points)Each group will choose a leader to be responsible for submitting the Groups’ document(s). Members of each group use collaboration software (BBB as well as other collaboration tools like discussion boards/Google docs) to coordinate the group’s activities to complete each milestone due in Weeks 3, 5 and 6.Each member of a group should participate in the collaboration tool as selected by the group and contribute to the discussion at least six times for each milestone. Please see the grading rubric.Please submit the solution to each milestone of the course project in the assignment section of the respective week. You should create a multimedia piece (such as a narrated power point slides with at least a 2-3 minute narration summarizing your work) for your group’s solution to each milestone of the Course project Do not make it available to the class.Only one team submission is to be made; each person does not submit his or her own solution to milestones.undefinedAny communication that occurs outside collaboration tool or private discussion area on the group’s home page will not be visible to me; thus, it will not earn you points towards the individual participation component of each milestone’s grade.Although this is a group project, it is required that each team member play a meaningful role in completing each milestone. You should review the grading rubric found at the bottom of the page because it will be used to grade each submission and individual participation component of each milestone. Each team member will receive a separate grade dependent on both the submission and his or her participation. Note also that participation in the team topic does not count toward your required weekly discussion log-ins and posts, but it will count toward your individual team grade.Once you have been assigned to a group, go to the e-mail tool, and note the group number or name in the address box. If you click on the group, then Add, you will see the names of your group members in the box. Go ahead and send an e-mail to say hello to your teammates, and tell them a bit about yourself.Teams are to begin working on Milestone 1 using your team topic. Also, please let me know if you have not heard from a member of your group early in the course.Good luck and enjoy!ScenarioParent Inc. is contemplating a tender offer to acquire 80% of Subsidiary Corporation’s common stock. Subsidiary’s shares are currently quoted on the New York Stock Exchange at $85 per share. In order to have a reasonable chance of the tender offer attracting 80% of Subsidiary’s stock, Parent believes it will have to offer at least $105 per share. If the tender offer is made and is successful, the purchase will be consummated on January 1, 20X1.A typical part of the planning of a proposed business combination is the preparation of projected or pro forma consolidated financial statements. As a member of Parent’s accounting group, you have been asked to prepare the pro forma 20X1 consolidated financial statements for Parent and Subsidiary assuming that 80% of Subsidiary’s stock is acquired at a price of $105 per share. To support your computations, Martha Franklin, the chairperson of Parent’s acquisitions committee, has provided you with the projected 20X1 financial statements for Subsidiary. (The projected financial statements for Subsidiary and several other companies were prepared earlier for the acquisition committee’s use in targeting a company for acquisition.) The projected financial statements for Subsidiary for 20X1 and Parent’s actual 20X0 financial statements are presented in Table 1.AssumptionsFranklin has asked you to use the assumptions below to project Parent’s 20X1 financial statements:Sales will increase by 10% in 20X1.All sales will be on account.Accounts receivable will be 5% lower on December 31, 20X1, than on December 31, 20X0.Cost of goods sold will increase by 9% in 20X1.All purchases of merchandise will be on account.Accounts payable is expected to be $50,500 on December 31, 20X1.Inventory will be 3% higher on December 31, 20X1 than on December 31, 20X0.Straight-line depreciation is used for all fixed assets.No fixed assets will be disposed of during 20X1. The annual depreciation on existing assets is $40,000 per year.Equipment will be purchased on January 1, 20X1, for $48,000 cash. The equipment will have an estimated life of 10 years, with no salvage value.Operating expenses, other than depreciation, will increase by 14% in 20X1.All operating expenses, other than depreciation, will be paid in cash.Parent’s income tax rate is 40%, and taxes are paid in cash in four equal payments. Payments will be made on the 15th of April, June, September, and December. For simplicity, assume taxable income equals financial reporting income before taxes.Parent will continue the $2.50 per share annual cash dividend on its common stock.If the tender offer is successful, Parent will finance the acquisition by issuing $170,000 of 6% nonconvertible bonds at par on January 1, 20X1. The bonds would first pay interest on July 1, 20X1 and would pay interest semi annually thereafter each January 1 and July 1 until maturity on January 1, 20Y1.(Note: This is a 10-year bond)This business combination will be recorded using acquisition method and Parent will account for the investment using the equity method. Although most of the legal work related to the acquisition will be handled by Parent’s staff attorney, direct costs to prepare and process the tender offer will total $2,000 and will be paid in cash by Parent in 20X1.As of January 1, 20X1, all of Subsidiary’s assets and liabilities are fairly valued except for machinery with a book value of $8,000, an estimated fair value of $9,500, and a 5-year remaining useful life. Assume that straight line depreciation is used to amortize any revaluation increment.No transactions between these companies occurred prior to 20X1. Regardless of whether they combine, Parent plans to buy $50,000 of merchandise from Subsidiary in 20X1 and will have $3,600 of these purchases remaining in inventory on December 31, 20X1. In addition, Subsidiary is expected to buy $2,400 of merchandise from Parent in 20X1 and to have $495 of these purchases in inventory on December 31, 20X1. Parent and Subsidiary price their products to yield a 65% and 80% markup on cost, respectively.Parent intends to use three financial yardsticks to determine the financial attractiveness of the combination. First, Parent wishes to acquire Subsidiary Corporation only if 20X1 consolidated earnings per share will be at least as high as the earnings per share Parent would report if no combination takes place. Second, Parent will consider the proposed combination unattractive if it will cause the consolidated current ratio to fall below two to one. Third, return on average stockholders’ equity must remain above 20% for the combined entity.If the financial yardsticks described above and the nonfinancial aspects of the combination are appealing, then the tender offer will be made. On the other hand, if these objectives are not met, the acquisition will either be restructured or abandoned.Table 1Parent Inc. Actual Financial Statements for 2020 and Subsidiary Corporation Projected Financial Statements for 2021 Parent 20X0 Actual Subsidiary 20X1 Projected Sales $800,000 $100,000 Cost of goods sold (485,000) (55,000) Operating expenses (219,000) (10,000) Income before taxes 96,000 35,000 Income tax expense (38,400) (14,000) Net income 57,600 21,000 Retained earnings, January 1 23,000 14,500 Add: net income 57,600 21,000 Less: dividends (38,000) (7,000) Retained earnings, December 31 42,600 28,500 Cash 36,200 19,500 Accounts receivable 39,000 13,000 Inventory 26,000 12,000 Property, plant, and equipment 673,000 213,000 Accumulated depreciation (490,000) (28,000) Total assets 284,200 229,500 Parent 20X0 Actual Subsidiary 20X1 Projected Accounts payable 44,600 21,000 Common stock * 190,000 150,000 Paid-in capital in excess of par 7,000 30,000 Retained earnings 42,600 28,500 Total liabilities and stockholders’ equity 284,200 229,500 * Parent: $12.50 par; Subsidiary: $75 par undefinedParent Inc. Actual Financial Statements for 2020 and Subsidiary Corporation Projected Financial Statements for 2021