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Question 2 Your firm would like to take over a manufacturing entity located in Accra, Stacy Ltd. The target company's financial position as of now is presented in the statement of financial position exhibited below. Statement of Financial Position on December 31, 2022 GH¢ ASSETS Current assets Cash Trade and other receivables Inventories Total current assets Noncurrent assets Long-term investments Property, plant, and equipment Total noncurrent assets Total assets LIABILITIES AND EQUITY Current liabilities Bank overdraft Trade payables Interest payable Current tax liability Total current liabilities Noncurrent liabilities Bank loan Obligations under finance lease Total noncurrent liabilities Total liabilities Equity Income surplus Share deals Capital surplus Stated capital Shareholders' fund Total liabilities and equity 35,650.00 380,020.00 89,762.00 505,432.00 20,500.00 1,889,510.00 1,910,010.00 2,415.442.00 14,350.00 480,912.00 11,400.00 28,569.00 535,231.00 90,000.00 75,865.00 165,865.00 701,096.00 123,450.00 30,116.00 60,780.00 1,500,000.00 1,714,346.00 2,415,442.00 Stacy Ltd is registered with 5,000,000 shares but only 500,000 shares have been issued and paid up. Your firm is considering how much to quote in its bid for Stacy Ltd. Required: (a) Based on net assets, how much should your firm offer for each share of Stacy Ltd.'s equity stock? (b) Supposing under the acquisition deal, the bank loan and long-term investments will not be transferred to your firm, how much should your firm quote for a share of the target entity's equity stock considering its assets and liabilities?

Question 2 Your firm would like to take over a manufacturing entity located in Accra, Stacy Ltd. The target company's financial position as of now is presented in the statement of financial position exhibited below. Statement of Financial Position on December 31, 2022 GH¢ ASSETS Current assets Cash Trade and other receivables Inventories Total current assets Noncurrent assets Long-term investments Property, plant, and equipment Total noncurrent assets Total assets LIABILITIES AND EQUITY Current liabilities Bank overdraft Trade payables Interest payable Current tax liability Total current liabilities Noncurrent liabilities Bank loan Obligations under finance lease Total noncurrent liabilities Total liabilities Equity Income surplus Share deals Capital surplus Stated capital Shareholders' fund Total liabilities and equity 35,650.00 380,020.00 89,762.00 505,432.00 20,500.00 1,889,510.00 1,910,010.00 2,415.442.00 14,350.00 480,912.00 11,400.00 28,569.00 535,231.00 90,000.00 75,865.00 165,865.00 701,096.00 123,450.00 30,116.00 60,780.00 1,500,000.00 1,714,346.00 2,415,442.00 Stacy Ltd is registered with 5,000,000 shares but only 500,000 shares have been issued and paid up. Your firm is considering how much to quote in its bid for Stacy Ltd. Required: (a) Based on net assets, how much should your firm offer for each share of Stacy Ltd.'s equity stock? (b) Supposing under the acquisition deal, the bank loan and long-term investments will not be transferred to your firm, how much should your firm quote for a share of the target entity's equity stock considering its assets and liabilities?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question 2 Your firm would like to take over a manufacturing entity located in Accra, Stacy Ltd. The target company's financial position as of now is presented in the statement of financial position exhibited below. Statement of Financial Position on December 31, 2022 GH₂ ASSETS Current assets Cash Trade and other receivables Inventories Total current assets Noncurrent assets Long-term investments Property, plant, and equipment Total noncurrent assets Total assets LIABILITIES AND EQUITY Current liabilities Bank overdraft Trade payables Interest payable Current tax liability Total current liabilities Noncurrent liabilities Bank loan Obligations under finance lease Total noncurrent liabilities Total liabilities Equity Income surplus Share deals Capital surplus Stated capital Shareholders' fund Total liabilities and equity 35,650.00 380,020.00 89,762.00 505,432.00 20,500.00 1,889,510.00 1,910,010.00 2,415,442.00 14,350.00 480,912.00 11,400.00 28,569.00 535,231.00 90,000.00 75,865.00 165,865.00 701,096.00 123,450.00 30,116.00 60,780.00 1,500,000.00 1,714,346.00 2,415,442.00 Stacy Ltd is registered with 5,000,000 shares but only 500,000 shares have been issued and paid up. Your firm is considering how much to quote in its bid for Stacy Ltd. Required: (a) Based on net assets, how much should your firm offer for each share of Stacy Ltd.'s equity stock? (b) Supposing under the acquisition deal, the bank loan and long-term investments will not be transferred to your firm, how much should your firm quote for a share of the target entity's equity stock considering its assets and liabilities?
Transcribed Image Text:Question 2 Your firm would like to take over a manufacturing entity located in Accra, Stacy Ltd. The target company's financial position as of now is presented in the statement of financial position exhibited below. Statement of Financial Position on December 31, 2022 GH₂ ASSETS Current assets Cash Trade and other receivables Inventories Total current assets Noncurrent assets Long-term investments Property, plant, and equipment Total noncurrent assets Total assets LIABILITIES AND EQUITY Current liabilities Bank overdraft Trade payables Interest payable Current tax liability Total current liabilities Noncurrent liabilities Bank loan Obligations under finance lease Total noncurrent liabilities Total liabilities Equity Income surplus Share deals Capital surplus Stated capital Shareholders' fund Total liabilities and equity 35,650.00 380,020.00 89,762.00 505,432.00 20,500.00 1,889,510.00 1,910,010.00 2,415,442.00 14,350.00 480,912.00 11,400.00 28,569.00 535,231.00 90,000.00 75,865.00 165,865.00 701,096.00 123,450.00 30,116.00 60,780.00 1,500,000.00 1,714,346.00 2,415,442.00 Stacy Ltd is registered with 5,000,000 shares but only 500,000 shares have been issued and paid up. Your firm is considering how much to quote in its bid for Stacy Ltd. Required: (a) Based on net assets, how much should your firm offer for each share of Stacy Ltd.'s equity stock? (b) Supposing under the acquisition deal, the bank loan and long-term investments will not be transferred to your firm, how much should your firm quote for a share of the target entity's equity stock considering its assets and liabilities?
(c) Assume that your firm will not take over the long-term investments and bank loan and the following fair value assessments are done: ▪ Inventories worth GH¢9,500 are obsolete. It is expected that GH 80,000 will be realised from sale of the other inventories. ▪ Uncollectible trade receivables are estimated to be GH¢15,000. • Current value of property, plant and equipment is GH¢2,155,800. Determine the value your firm should quote for a share in Stacy Ltd.
Transcribed Image Text:(c) Assume that your firm will not take over the long-term investments and bank loan and the following fair value assessments are done: ▪ Inventories worth GH¢9,500 are obsolete. It is expected that GH 80,000 will be realised from sale of the other inventories. ▪ Uncollectible trade receivables are estimated to be GH¢15,000. • Current value of property, plant and equipment is GH¢2,155,800. Determine the value your firm should quote for a share in Stacy Ltd.
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