Microsoft Word - Document1Assignment: 1. Calculate the amount of goodwill that Amazon will record...

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Microsoft Word - Document1Assignment: 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 egarding 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 esulting allocations on Amazon’s future earnings? 5. Instead of boowing 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 $ XXXXXXXXXXHow 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).

Riddhi · Accepted Answer

Amazon Inc is an Ecommerce company registered in America, with its head office in Seattle, Washington and is largest ecommerce website with largest customer base in the world. The company has net sales of $136 billion in the fiscal year 2016 and has a market cap of $465 billion. Company manufactures electronic retail products like Tablets, fire stick, echo etc under its own brand name. Amazon Inc also provides warehousing facility to many vendors for regular sale of products.
	Whole foods were in the business of supermarket selling organic and natural foods, vegetables, fruits and other ready to eat packaged products. The market cap of the whole foods was $13.46 billion in the fiscal year 2016 with 460 stores in united states, Canada, and United Kingdom. It is the sixth largest grocery store and has a customer base of more than 8 million customers visiting stores every week.    
	Amazon Inc acquired whole foods on 16th July 2017 for $13,176 million at the cost of $42 per share of the whole foods. The company acquired shares of Whole foods at the fair market value of the assets and liabilities. The cost of goodwill in the entire deal on acquisition is calculated below comes to $8,985 million. The objective of purchasing whole foods was to transform the scale of operations by increasing the presence not just to stores by visit but to make an online presence as well. This also brings in physical presence of amazon. Amazon has its presence in the online market but has no in store or physical presence. 
	The benefits of this deal to amazon are the business of amazon in the grocery segment will increase by more than $700 billion only in United States. After the announcement of deal the share prices of the company was up by 3% which in value was approximately $14 billion, which was the cost of the deal. Amazon will have advantage of logistics in the parts of north America where the presence is limited.
1. Amount of goodwill that amazon will record related to the acquisition of Whole Foods – 
	Particulars
	Amount
	Cash paid, Purchase price 
	$13,176
	
	
	Allocation
	
	Current assets
	$1,625
	Plant, Property and equipment
	$3,826
	Intangible Assets
	$2,336
	Long term assets
	$181
	Total assets 
	$7,968
	(-) Liabilities
	($3,777)
	Fair value of Total Assets
	$4,191
	
	
	GOODWILL
	$8,985
	
	
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,

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...

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