Rawhide Brewery Case Solution

Rawhide Brewery Case Solution

Rawhide Brewery Case Solution

 

Tabby Cat beer has presented an opportunity for Rawhide Brewery, situated in Canada. The opportunity means that Rawhide has to share its excess capacity of production with Tabby. Rawhide has three proposals. Under each proposal, Rawhide has to manage accounts differently. The first opportunity is that Tabby outsource the production to Rawhide. The second opportunity requires an investment from both parties to form a new entity. The second opportunity would allow Rawhide to transfer the operations of the brewery and its debt. Rawhide would be the guarantor of the newly formed entity making all the decisions in the way. The third option is Rawhide owning 60 percent of the shares, Tabby being the remainder shareholder. The decisions would be made by both the parties. The chief financial officer of Rawhide has the duty to assess the alternatives and the accounting procedures for the same. The advantages and disadvantages should also be assessed in consideration of the debt-to-equity ratio of Rawhide. 

Excel Calculations

RAWHIDE BREWERY BALANCE SHEET AS AT DECEMBER 31, 2011

RAWHIDE BREWERY INCOME STATEMENT  FOR THE YEAR ENDED DECEMBER 31, 2011

Proposed Balance sheets

 For Proposal 2

 For Proposal 3

Questions Covered

Accounting Implications of Proposal 1-2-3
 
Effects on Balance Sheet
Effects on Income Statement
Effects on Cash flow Statement

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