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The balance sheet of Drake Enterprises as at December 31, Year 5, is as follows: Cash Accounts receivable Inventory Property, plant, and equipment Accumulated depreciation $ 110,800 152,000 200,400 1,782,000 (999,000 $1,336,200 Liabilities and Equity Current liabilities Bonds payable Common shares (109,000 shares) Retained earnings $ 251,00 361,000 229,00 495, 200 $1,336,200 Effective January 1, Year 6. Drake proposes to issue 87,000 common shares (currently trading at $22 per share) for all of the common shares of Hanson Industries. In determining the acquisition price, the management of Drake noted that Hanson Industries has unrecorded customer service contracts and directed its accounting staff to reflect this when recording the acquisition. An independent appraiser placed a value of $159,000 on this unrecorded intangible asset. Direct costs associated with the acquisition were as follows: u usi paleu a value of $159,00 on this unrecorded intangible asset. Direct costs associated with the acquisition were as follows Costs of issuing shares Professional fees $53,000 47,580 $180,500 The balance sheet of Hanson Industries as at December 31, Year 5, is as follows: Cash Accounts receivable Inventory Property, plant, and equipment Accumulated depreciation Fair Value 64,000 294,000 182,700 1,116,500 Carrying Amount $ 64,000 284,088 196,000 1,259,000 309,000 $1,494,000 $ 146,500 188,000 669,000 570,500 $1,494,000 Current liabilities Liability for warranties Common shares Retained earnings 146,500 139,700 Hanson Industries is to be wound up after the sale. Required: (a) Assume that the shareholders of Hanson accept Drake's offer on the proposed date. Prepare Drake's January 1 Year 6. consolidated balance sheet after the proposed transaction occurred (Negative amounts should be indicated by a minus sign.) Drake Enterprises Consolidated Balance Sheet January 1, Year 6 Cash Accounts receivable inventory Property, plant and equipment Accumulated depreciation Goodw Customer service contracts 159.000 $ 159.000 Liabilities and Equity Current liabilities Bonds payable $ 159,000 Liabilities and Equity Current liabilities Bonds payable Liability for warranties Common shares Retained earnings (b) Assume that Drake is a private entity, uses ASPE, and chooses to use the equity method to account for its investment in Hanson Prepare Drake's January 1, Year 6. balance sheet after the proposed transaction occurred. (Negative amounts should be indicated by a minus sign.) Drake Enterprises Balance Sheet January 1. Year 6 January 1. Your Assets Liabilities and Equity (c) Calculate the debt-to-equity ratio under Consolidated and Equity Method. (Round your answers to 2 decimal places.) Consolidated Debt-to-equity ratio Equity Method (d) Prepare Drake's consolidated balance sheet after the proposed transaction occurred using the worksheet approach (Values in the first two columns and lost column (the "parent", "subsidiary" and "consolidated" balances) that are to be deducted should be Indicated with a minus sign, while all values in the "Elimination" entries columns should be entered os positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Leave no cells blank.be certain to enter "0" wherever required. Omit 5 sign in your response.) Consolidated Financial Statement Working Paper Drake Company Consolidated Balance Sheet January 1 Year 6 Cash Accounts receivable Inventory Property, plant and equipment Accumulated depreciation Investment in Hanson Consolidated Financial Statement Working Paper Drake Company Consolidated Balance Sheet January 1, Year 6 Cash Accounts receivable Inventory Property, plant and equipment Accumulated depreciation Investment in Hanson Acquisition differential Customer service contracts Goodwill Current liabilities Bonds payable Liability for warranties common shares Retained earnings Total The balance sheet of Drake Enterprises as at December 31, Year 5. is as follows: Assets Cash Accounts receivable Inventory Property, plant, and equipment Accumulated depreciation $ 110,800 152,00 200,400 1,782,000 (909.000) $1,336,200 Liabilities and Equity Current liabilities Bonds payable Common shares (109,000 shares) Retained earnings $ 251,000 361,000 229,000 495,200 $1.336,200 Effective January 1, Year 6. Drake proposes to issue 87,000 common shares (currently trading at $22 per share) for all of the common shares of Hanson Industries. In determining the acquisition price, the management of Drake noted that Hanson Industries has unrecorded customer service contracts and directed its accounting staff to reflect this when recording the acquisition. An independent appraiser placed a value of $159,000 on this unrecorded intangible asset. Direct costs associated with the acquisition were as follows: Upise paleu a Value of $159,00 on this unrecorded intangible asset. Direct costs associated with the acquisition were as follows Costs of issuing shares Professional fees $53,000 47,500 $100,500 The balance sheet of Hanson Industries as at December 31, Year 5, is as follows: Cash Accounts receivable Inventory Property, plant, and equipment Accumulated depreciation Fair Value $ 64,000 294,000 182,700 1,116,500 Carrying Amount $ 64,000 284,000 196,000 1,259,000 (309,000 $1,494,000 $ 146,500 108,000 669,000 570.500 $1,494,000 146,500 139,700 Current liabilities Liability for warranties Common shares Retained earnings Hanson Industries is to be wound up after the sale. Required: (a) Assume that the shareholders of Hanson accept Drake's offer on the proposed date Prepare Drake's January 1 Year 6. consolidated balance sheet after the proposed transaction occurred. (Negative amounts should be indicated by a minus sign.) Drake Enterprises Consolidated Balance Sheet January 1, Year 6 Assets Cash Accounts receivable Inventory Property, plant and equipment Accumulated depreciation Goodwill Customer service contracts 159.000 $ 159.000 Liabilities and Equity Current liabilities Bonds payable S 159,000 Liabilities and Equity Current liabilities Bonds payable Liability for warranties Common shares Retained earnings 50 (b) Assume that Drake is a private entity, uses ASPE, and chooses to use the equity method to account for its investment in Hanson Prepare Drake's January 1 Year 6. balance sheet after the proposed transaction occurred. (Negative amounts should be indicated by a minus sign.) Drake Enterprises Balance Sheet January 1 Year 6 Balance Sheen Years Assets Liabilities and Equity (c) Calculate the debt-to-equity ratio under Consolidated and Equity Method. (Round your answers to 2 decimal places.) Consolidated Debt-to-equity ratio (d) Prepare Drake's consolidated balance sheet after the proposed transaction occurred using the worksheet approach. (Values in the first two columns and last column (the "parent", "subsidiary" and "consolidated" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Elimination" entries columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Leave no cells blank - be certain to enter"0" wherever required. Omit S sign in your response.) Consolidated Financial Statement Working Paper Drake Company Consolidated Balance Sheet January 1, Year 6 Cash Accounts receivable Inventory Property, plant and equipment Acculated depreciation Investment in Hanson Consolidated Financial Statement Working Paper Drake Company Consolidated Balance Sheet January 1, Year 6 Accounts receivable Inventory Property, plant and equipment Accumulated depreciation Investment in Hanson Acquisition differential Customer service contracts Goodwill Current liabilities Bonds payable Liability for warranties Common shares Retained earnings Total

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