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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 Liabilities and Equity Current liabilities Bonds payable Common shares (109,000 shares) Retained earnings $ 110,800 152,000 200,400 1,782,000 (909,000) $1,336,200 $ 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: Costs of issuing shares Professional fees. $159,000 on this unrecorded intangible asset. Direct costs associated with the acquisition were as follows: Cash Accounts receivable Inventory Property, plant, and equipment Accumulated depreciation The balance sheet of Hanson Industries as at December 31, Year 5, is as follows: Carrying Fair Amount Value 64,000 $ 64,000 284,000 294,000 182,700 196,000 1,259,000 1,116,500 (309,000) T $1,494,000 $ 146,500 146,500 108,000 139,700 669,000 570,500 $1,494,000 Current liabilities. Liability for warranties Common shares Retained earnings $ 53,000 47,500 $100,500 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 Liabilities and Equity Current liabilities Bonds payable 159,000 S 159,000 Liabilities and Equity Current liabilities Bonds payable Liability for warranties Common shares Retained earnings $ Drake Enterprises Balance Sheet January 1, Year 6 $ 159,000 0 (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.) Assets Balance Sheet January 1, Year 6 Liabilities and Equity 0 (c) Calculate the debt-to-equity ratio under Consolidated and Equity Method. (Round your answers to 2 decimal places.) Equity Method Debt-to-equity ratio Consolidated (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 $ sign in your response.) 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 Drake $ Hanson $ Dr. Eliminations Cr $ Consolidated 5 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 Consolidated Financial Statement Working Paper Drake Company Consolidated Balance Sheet January 1, Year 6 Drake $ $ Hanson $ $ S Dr $ Eliminations Cr $ Consolidated $ 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 Liabilities and Equity Current liabilities Bonds payable Common shares (109,000 shares) Retained earnings $ 110,800 152,000 200,400 1,782,000 (909,000) $1,336,200 $ 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: Costs of issuing shares Professional fees. $159,000 on this unrecorded intangible asset. Direct costs associated with the acquisition were as follows: Cash Accounts receivable Inventory Property, plant, and equipment Accumulated depreciation The balance sheet of Hanson Industries as at December 31, Year 5, is as follows: Carrying Fair Amount Value 64,000 $ 64,000 284,000 294,000 182,700 196,000 1,259,000 1,116,500 (309,000) T $1,494,000 $ 146,500 146,500 108,000 139,700 669,000 570,500 $1,494,000 Current liabilities. Liability for warranties Common shares Retained earnings $ 53,000 47,500 $100,500 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 Liabilities and Equity Current liabilities Bonds payable 159,000 S 159,000 Liabilities and Equity Current liabilities Bonds payable Liability for warranties Common shares Retained earnings $ Drake Enterprises Balance Sheet January 1, Year 6 $ 159,000 0 (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.) Assets Balance Sheet January 1, Year 6 Liabilities and Equity 0 (c) Calculate the debt-to-equity ratio under Consolidated and Equity Method. (Round your answers to 2 decimal places.) Equity Method Debt-to-equity ratio Consolidated (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 $ sign in your response.) 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 Drake $ Hanson $ Dr. Eliminations Cr $ Consolidated 5 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 Consolidated Financial Statement Working Paper Drake Company Consolidated Balance Sheet January 1, Year 6 Drake $ $ Hanson $ $ S Dr $ Eliminations Cr $ Consolidated $

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Part A Drake Enterprises Consolidated Balance Sheet As at January 1 Year 6 Cash 11080010050064000 74300 Accounts receivable 15200028400010000 446000 I... View the full answer