hhmmm, with that logic, do you really think they were asking to identofy contagno, or say that V is less than book value if ROE is negative etc…
MrGrey Wrote: ------------------------------------------------------- > supersharpshooter Wrote: > -------------------------------------------------- > ----- > > so they sold their entire inventory? AKA > original > > COGS for subsidiary was the book value of their > > entire inventory, and so you adjusted it by the > > mark-up? > > i realldy dont remember the exact wording of the > vignetta. all I know is there was no way they > were simply asking what the current ratio would be > after the aqcuisition, especially since there was > a mark up in inventory. That was my thinking on > exam day but I have no clue anymore about > anything. > > I do remember the answer was C, if you did not > adjust COGS and after you adjusted for the full > wrtie up of inventory the answer was B and came up > exactly. > > take it for what its worth, we will never know. The trick for current ratio was to remove cash from the acquirer post acquistion and use the combined balance sheet of the acquirer and the fair market value of the acquiree… I think.
financial_novice Wrote: ------------------------------------------------------- > hhmmm, with that logic, do you really think they > were asking to identofy contagno, or say that V is > less than book value if ROE is negative etc… i hear you on those and I have no idea. current ratio is level I stuff though, level II is all about adjustments to financial statements.
That doesnt make sense. The FMV mark-up is performed on ENDING inventory. Obviously, if you sold the material during the year, its not sitting in ending inventory and therefore wasnt marked up. It would also not have been purchased as a tangible asset in the merger (since it was out the door). Not only that but COGS is much more comprehensive then just inventory cost, it also includes shipping etc, you cant possible separate the components. My point is, your not trying to recreate the past fiscal year, assuming a merged entity from day 1, therefore the answer is a simple Revs-COGS calc.
i have the feeling this could be one of those questions that was vague enough that CFAI just gives everyone a point
I hope so. This was the only FSA question I was confused about.
floater Wrote: ------------------------------------------------------- > i have the feeling this could be one of those > questions that was vague enough that CFAI just > gives everyone a point You sure they give extra point for wrong questions. I thought they would grade us on the Correct Questions only. Any thoughts???
c’mon 2 pages on this. it said no intercompany sales in the questions so no adjustment are necessary. Just add sales and COGS and find the profit margin. Was the difference in fair value due to difference of book and market value of inventory? And it would not matter anyways as sales and cogs were the projections so doesn’t matter what happened on acquisition. The only point is that there were no intercompany sales.
I didn’t even see that mark up crap and I didn’t even look for anything once they said no inter-company transactions. No adjustment needed, end of story
CFA=NOLIFE Wrote: ------------------------------------------------------- > c’mon 2 pages on this. > > it said no intercompany sales in the questions so > no adjustment are necessary. Just add sales and > COGS and find the profit margin. > > Was the difference in fair value due to difference > of book and market value of inventory? And it > would not matter anyways as sales and cogs were > the projections so doesn’t matter what happened on > acquisition. The only point is that there were no > intercompany sales. case closed.