Jessica McManigal

Acc 431 Advanced Accounting

August 19, 2009

Case Study 1

Research and Analysis Case 1-PepsiCo-Quaker Oats Merger

1. How was the merger between PepsiCo and Quaker Oats structured?

The merger between PepsiCo and Quaker Oats was structured as a stock for stock

exchange.

Which firm is the survivor?

After the merger Quaker Oats was a subsidiary of PepsiCo. So I would have to say

PepsiCo.

Who holds what stock after the merger?

After the merger PepsiCo shareholders owns 82% of the combined firm and Quaker Oats

shareholders own 18% of the combined firm. So PepsiCo owns the majority of the stock.

2. What accounting method was used to account for the merger of PepsiCo and

Quaker Oats?

The pooling-of-interests method was the accounting method that was used to account for

the PepsiCo and Quaker Oats merger.

What are the reporting implications of the chosen accounting method?

The reporting implications for the pooling-of-interests method are as follows;

 1. Revenues and expenses were combined retroactively for the two companies.

2. The cost that was incurred as a combination was expenses as they were

incurred.

3. Both companies were combined at book value.

4. Both companies continue to exist.

5. No goodwill I s recorded.

3. What was the approximate amount for the recorded value of the acquisition of

the surviving firm’s books?

$613 Million

What was the approximate amount for the market value of the acquisition?

$306 X $42 Million = $13 Billion

4. What items of value did Quaker Oat bring to the merger that will not be recorded

in the acquisition?

Trademark

IPR&D

Goodwill

How will these items affect future reported income for the combined firm?

They will affect the reported income for the combined firm.

Case Study 2

Analysis and Research case: Accounting Information and Salaries Negotiations

1. What advice would you provide the negotiating parties regarding the issue of

considering the Eagles Stadium income statement in their discussions? What

authoritative literature could you cite in supporting your advice?

First I would tell them that they have to include the stadium income as part of the

negotiation because that is where the Eagles play all of their games, so the stadium would

not generate all the revenue that they are generating unless the team played their games

there. So it seems as if the income that the stadium is making is greatly increased by the

team. I think they should have a consolidated income statement so they can better

understand the true income of the stadium as well as the team since they are supported by

each other. All this information is supported by SFAS 160.

2. What other pertinent information would you need to provide a specific

recommendation regarding players’ salaries?

∙ What other things they could use the stadium for besides the Eagles games

∙ The amount the owners have invested in the team and the stadium

∙ Comparable statistics for the stadium and other players