Traveller Bus Lines Inc TBL is a wholly owned subsidiary
Traveller Bus Lines Inc. (TBL) is a wholly owned subsidiary of Canada Transport Enterprises Inc. (CTE), a publicly traded transportation and communications con glomerate. TBL is primarily in the business of operating buses over short- and long-distance routes in central and western Canada and the United States. TBL also has a school bus division operating in eastern Canada. CTE and its subsidiaries are audited by DeBoy Shoot, which issued an unqualified audit opinion on CTE's June 30, year-end consolidated financial statements. This was the only audit opinion issued on the CTE group of companies. TBL has a July 31 year-end. It is now September 8, Year 7. CTE has been reporting operating losses for several years and has put TBL up for sale as part of a strategy to change its focus. This is the first of several planned divestitures, designed to restore CTE's lacklustre share price.
Currently, the only interested party is an employee group led by TBL's president, Dan Williams. Williams's management buyout team consists of the vice president of operations and the CFO. Handling the negotiations at CTE's corporate office is Eva Joel, vice-president of strategic divestitures.
The buyout team has submitted the first draft agreement of purchase and sale for review., below, contains extracts from the draft agreement; notes made by CTE's lawyer are shown in italics. You, a CA at Heatley Dan LLP, have gathered some additional background information.
Andrew wants to maximize the total selling price. He asked the partner in charge of the advisory services at Heatley Dan LLP to review the information given and provide recommendations on how CTE can maximize the total selling price and how the agreement should be changed to minimize possible disputes in the future. In addition, he would like a summary of the accounting issues of significance to CTE that will arise on the sale of TBL. The partner has asked you to prepare the draft report to Joel.
Prepare the draft report.
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