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Combination process - Entries for Column H 1 Complete the column "Combined As Is" Balance Sheet by adding the respective balances of the individual entities. Column H reflects the totals of columns B-D-F 2 Complete the column "Combined As Is" Income Statement by adding the respective balances of the individual entities. Column H reflects the totals of columns B-D-F 3 Review the "Combined As Is" Ratios (each entity has formulas to work with) Test check accuracy of ratios in Column H B Incorporation process - revaluation adjustments reflect in Column J - new Balance column K 1 The incorporation process has been structured such that an incorporated entity created by your firm will acquire the operations of each entity. As such all assets are revalued to their fair market values at the time of acquisition. The fair market values are: Cash All cash balances of original operations paid to founders - Combined cash = $0 Opening Balance Sheet cash = $0 Accounts receivable Accounts receivable are revalued at 7% higheras no allowance for doubtfuls Inventory Inventory is revalued at 9% lower due to obsolete raw materials Prepaid expenses Transfer $105,000 to Inventory as goods received day of transaction. Deferred revenue Reduce by 20% to reflect work completed -record change to venture capital short term loan as is considered a purchase adjustment Land Building Equipment Vehicles Accumulated depreciation combined revised market value per appraisal 2,010,000 combined revised market value of 2,450,000 increase combined market value to 975,000 revised market value 380,000 Adjusted all historical balances to a zero balance as assets are revalued and reflect a new starting value Goodwill and intangibles Accounts payable Income taxes payable Deferred tax liability Add $330,000 for goodwill Due diligence discovered an additional $280,000 in payables Nones Add $415,000 for tax effect of transaction as deferred tax liability Term loan Mortgage Current portion of debt Due to relatives No change No change No change Convert 20% of balance to share capital - repay 80% using venture capital short term loan Convert full balances to share capital Convert full balances to share capital Proprietor + Partnership capital + 30% of due from relatives converted None as the start-up of new legal entity Proprietorship capital Partnership capital Share capital Retained Earings Venture capital loan Balancing figure of all other balance sheet balances and adjustments 2022-2023 Operations - Operational Changes - reflect in 2022-2023 adjustments column (Column P) 1 Revenues will increase by $7,200,000 2 Gross profit will be 29% based on 2022-2023 pro forma ending revenues 3 Selling costs will increase by 11% of incremental sales 4 Administrating costs will increase by 8% of incremental cost of sales 5 Amortization will increase by $180,000 per annum (in addition to historical) 6 Interest expense will increase based on venture capital short term loan balance at 9% interest rate 7 Income taxes will be 24% of combined incomes as now an incorporated entity - split as follows - 25% deferred - 75% current - adjust balance sheet accounts for these amounts 8 Adjust final accounts receivable balances to reflect a 45 day collection cycle - difference to cash (use 360 days) 9 Adjust final inventory balances to reflect 57 days on hand - difference to cash (use 360 days) 10 Adjust final accounts payable balances to reflect a turnover ratio of 72 days - difference to cash (use 360 days) 11 Acquired new formulation equipment for $154,000 and financed 100% with a new term loan at end of year. Term loan is repayable over five years and life of equipment will be 10 years. D Balance Sheet Steps - balancing everything 1 Columns B through to L will balance at the Balance Sheet level - ignore income statement effects. 2 Columns N & P must ref the income statement changes and will balance by recording the balance amount in cash If you leave cash blank - the figure reflected in line 57 * - 1 should work. Once cash adjusted - line 57 = 0 3 Column R will balance if 1 and 2 above are balanced Partners: Helen Lamb (75%) + Heather Legg (25%) As Is Combined + Corporate Tax Effect Owner: Mary Oilseed Shareholder: Nicolas Gold GREENGO LTD. Operational Changes Including Corporate Tax Balance Sheet Opening Forecast Results Canola Grow (proprietorship) First Year Fab 1 2022-Jan 31 2023 Start-up Balance Sheets Sugar Sap (partnership) BannerCrop Inc. January 31 202 2022 2021 Combined Adjustments GREENGO LTD Revaluation February 1 Adjustments GREENGO LTD. February 1 Opening 2022 As Is Operations 2022-2023 Jan 31 2023 $ $ $ S $ Assets Current assets Cash Accounts receivable Inventory Prepaid expenses 65,000 1,375,000 1,115.000 75,000 1,200,000 1,350,000 105.000 2.730,000 35,000 1,080,000 900,000 60.000 2,075,000 $ $ $ S $ 175,000 3,655,000 3,365,000 220,000 7,415,000 175,000 3,655,000 3,365,000 220,000

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