Microsoft Word - Document1 Assignment: 1. Calculate the amount of goodwill that Amazon will record related to the acquisition of Whole Foods. 2. Using Amazon’s preacquisition consolidated balance...

Questions are on page 4-5 in attached file


Microsoft Word - Document1 Assignment: 1. Calculate the amount of goodwill that Amazon will record related to the acquisition of Whole Foods. 2. Using Amazon’s preacquisition consolidated balance sheet for the second quarter of 2017 (June30, 2017) presented in case Exhibit 8, information pertaining to Whole Foods’ preacquisition consolidated balance sheet presented in case Exhibit 9, and information regarding the allocation of the purchase price also presented in the case, prepare a pro forma postacquisition consolidated balance sheet. Assume that Amazon finances the entire deal by issuing debt. 3. Assume that Amazon decided to use its available cash for the purchase ,rather than obtaining debt financing. How would Amazon’s pro forma postacquisition consolidated balance sheet differ from that prepared in response to assignment 2 above? 4. The allocation of the purchase price across different accounts requires that management make estimates and exercise considerable judgement. What are the implications of those resulting allocations on Amazon’s future earnings? 5. Instead of borrowing or using available cash for the acquisition of Whole Foods, assume that Amazon opted to use shares of its common stock to make the purchase. (Closing price of Amazon’s stock on August 28, 2017, the acquisition completion date, was $946.02.) How would Amazon’s pro forma postacquisition consolidated balance sheet differ from that prepared in response to assignment 2? 6. Assume that in the first full fiscal year following the acquisition(fiscal year ending December 31, 2018), Whole Foods reports preconsolidated revenues of $18 billion and net income of $275 million. What would be the effect of Whole Foods on Amazon’s consolidated net income and EPS? 1. Assuming Amazon used its available cash to acquire Whole Foods (as in question 3 above)? 2. Assuming Amazon used stock to acquire Whole Foods (as in question 5 above)? In addressing question 6, you may make the following assumptions: o   That the remainder of Amazon’s business remains constant (in other words, assume there is no change in Amazon’s financial statements from 2016). o   That Amazon records an additional $60 million (after tax) in amortization on the acquired intangibles. o   That Amazon records an additional $11 million (after tax) in depreciation on the acquired property, plant, and equipment (PP&E).