FSAby pwsMay 23, 2019April 21, 2020 Welcome to your FSA and M&A Accounting exam. The assessment consists of 30 questions testing the content covered in your classes with Pillars of Wall Street. You may use your notes and a calculator to assist you in the exam. Once you begin your assessment, you will not be able to pause your exam for any reason, therefore, please take care of any outside activities that require your time prior to beginning the assessment. If you close the webpage while taking the exam, your results will not save. If you have poor internet connection, we encourage you to write your answers on paper as you go. Please input your name, your firm code (Rabo2020), and your email address. If you have any questions, please contact your instructor. Good luck! Name Firm Code Email 1. Indicate which of the following statements below are true: In the event of bankruptcy, preferred shareholders are paid before common shareholders but after debt holders Purchases of PP&E should be expensed immediately upon acquisition to ensure that revenue and expenses are properly matched for the period Accrual accounting requires a company to recognize revenue only when cash is received Outstanding shares is equal to the number of shares issued less shares repurchased 2. Jackson issued 5,000 of new equity and used the proceeds to pay down 5,000 of long term debt. Based on this information, which one of the following statements would be correct? Total liabilities increased 5,000 There is no net change in total liabilities and equity The net change in total liabilities and equity is 10,000 Total equity decreased by 5,000 3. Where would an impairment of inventory be reported on the cash flow statement? Operating activities Investing activities Financing activities None of the above. An impairment of inventory will only be found within COGS on the income statement 4. Finlandia Company made the following transactions during its first year in business. Using the information below, calculate Finlandia’s total equity at year end.• Investors gave Finlandia 100,000 in exchange for common shares in the company • Finlandia borrowed 50,000 from creditors during the year and paid interest expense of 5,000 • Finlandia spent 15,000 on PP&E• Finlandia purchased inventory for 20,000, 75.0% in cash and the remainder on credit • Finlandia made cash sales totaling 50,000 during the year costing 20,000• SG&A expenses totalled 5,000 during the year• Assume no depreciation and interest income• The tax rate is 30% of profits before tax • Finlandia paid dividends of 4,000 during the year 99,500 110,000 113,500 116,000 5. Using the operating working capital statistics for Phoenix Ltd below, calculate the days funding required or provided by writing the number of days and required "Tied Up" or provided "Freed". Accounts payable days: 62Inventory days: 20Accounts receivable days: 35 7 Freed 7 Tied Up 47 Freed 47 Tied Up 6. Using Elixir’s balance sheet below, calculate the operating working capital for the most recent financial year. (299) 98 152 245 7. Using Elixir’s balance sheet, calculate net debt for the most recent financial year. 2,455 2,548 3,119 3,808 8. Using the following information, calculate EBITDA to be used for valuation purposes. 2,300 3,300 4,100 5,100 9. Use the following information to calculate an adjusted net income to be used for valuation purposes. 1,900 1,960 2,240 2,300 10. Sutton Place Beverages purchased machinery valued at 2,000 at the beginning of year 1 that had an estimated useful life of 10 years and a salvage or residual value of 500. Assuming straight-line depreciation, what is the net book value at the end of year 7? 150 950 1,050 1,400 11. Minotaur purchased inventory for 100,000, paying 40,000 in cash and 60,000 on credit. The balance sheet impact would be as follows: Decrease in total equity and increase in total assets and total liabilities No change in total assets and total equity Increase in total assets and increase in total liabilities Decrease in total assets and increase in total liabilities 12. All of the following would be included in the calculation of net debt except: Bank loans Short term investments Bonds Accrued liabilities Commercial paper Cash Notes payable 13. Which one of the following is least likely to appear in cash flow from financing? Decrease in long term debt Share issuance Payment of dividends Capital expenditures Share buybacks Debt raise 14. Using the financial information, calculate the cash flow from operating activities. 235 350 370 580 15. Using the financial information, calculate the cash flow from investing activities. (285) (50) (15) 150 16. Using the financial information, calculate the cash flow from financing activities. (195) (110) (60) 265 17. Using the financial information, calculate EBITDA / interest expense. 10.2x 10.7x 11.2x 11.7x 18. Using the information below, calculate the total combo shareholders’ equity for Rossini after acquisition of Verdi. Rossini acquired 100% of Verdi for 2,000 and financed the acquisition with 500 balance sheet cash, 700 new long term debt and the remainder of the purchase price with a new equity issuance.Verdi has no goodwill as of the acquisition date 1,200 3,800 4,200 5,000 19. Murray Hill Sweets acquires 100% of Paulus Hook Bitters for $5,000. Assuming the book value of Paulus Hook Bitters’ net assets is $3,800, there are no fair value step-ups and the target company has $300 of existing goodwill (which is part of the $3,800 in net assets), please calculate DEAL GOODWILL. 900 1,200 1,500 1,800 20. Urbino purchased York for 50,000 and financed the acquisition with 100.0% debt. The new debt has an annual interest rate of 5.0%. Below are Urbino’s and York’s standalone income statements one year forward from the close of the acquisition. With this information, calculate the net income for the consolidated company. Both Urbino and York have a marginal tax rate of 35.0%. 31,000 31,200 31,875 32,625 21. Monet acquired 70.0% of Diego one year ago. At the acquisition date, Monet recorded noncontrolling interest of 200 related to its acquisition of Diego. Diego’s net income was 300 during the year and Diego paid its investors 200 in dividends during the year. Determine the ending balance of the noncontrolling interest on Monet’s balance sheet at the end of the year. 200 230 270 300 22. Indicate which statement(s) below are false? Deferred taxes relate to temporary differences between “book” accounting and tax accounting The difference between a company’s effective tax rate and marginal tax rate relates to temporary differences between “book” accounting and tax accounting treatment When tax depreciation is accelerated compared to “book” accounting depreciation, a deferred tax asset is likely to result When tax depreciation is accelerated compared to “book” accounting depreciation, a deferred tax liability is likely to result 23. Orange acquired 75% of Banana for 3,000. Using the data below calculate the deal goodwill using the full goodwill method (required under US GAAP and an option under IFRS). Book value of Orange equity: $2,600Book value of Banana equity: $1,800Book value of Banana goodwill: $200 1,400 1,650 2,000 2,400 24. Using the attached appendix, what is the company’s most recent share count in millions (basic common shares outstanding)? FSA & M&A Accounting Exam Appendix 1445.4 1448.3 1469.0 1485.3 25. Using the attached appendix, what is the company’s depreciation expense in the most recent financial year? FSA & M&A Accounting Exam Appendix 927 2,341 2,416 2,491 26. Using the attached appendix, what are total cash dividends paid in the most recent financial year? FSA & M&A Accounting Exam Appendix 5 4,040 5,000 9,045 27. Using the attached appendix, calculate operating working capital for the most recent financial year. Assume “short-term obligations” are interest-bearing. FSA & M&A Accounting Exam Appendix (3,643) (2,485) 428 5,453 28. Using the attached appendix, calculate the cleaned EBITDA for the most recent financial year. FSA & M&A Accounting Exam Appendix 12,201 12,223 12,431 12,506 29. Using the attached appendix, calculate the company’s marginal tax rate for the most recent financial year.FSA & M&A Accounting Exam Appendix 35.6% 36.1% 36.6% 37.1% 30. Using the attached appendix, calculate the company’s net debt as of the most recent balance sheet date. Assume “short-term obligations” are interest-bearing. FSA & M&A Accounting Exam Appendix 17,204 20,117 21,275 24,188 Time is Up!