Question: In its latest Annual Report Monterey Holdings reported revenues of

In its latest Annual Report, Monterey Holdings reported revenues of $849,414,000 and net income of $22,682,000 for the year. Part of the revenues and income for the year was generated by Montego Motors, which Monterey Holdings acquired on February 26 for $83.4 million. Since this acquisition was made after the start of the year, the reported amounts do not reflect an entire year's worth of revenue and income from this segment of the company.
In a footnote to the financial statements, Monterey Holdings disclosed total revenues of
$868,237,000 and net income of $21,921,000, which are the amounts the company would have reported if the acquisition had occurred before the beginning of the year.

a. Are the revenue and income amounts disclosed in the footnote pro-forma amounts? Why?
b. Why would Monterey Holdings disclose the additional revenue and incomeamounts?

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  • CreatedFebruary 21, 2014
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