Case ID: 4203     Solution ID: 22229     Words: 1071 Price $ 75

Jimmy Fu and Moog Inc Understanding Shareholders Equity Brief Case Case Solution

Case Solution

An English-language PDF of this Brief Case in an academic course pack will allow the students with the opportunity to buy an audio form as well. Jimmy Flu is appearing for an interview at Moog Inc for a job position. Moog Inc. is a global designer, producer and incorporatesprecision motion and fluid controls and systems. Jimmy has come to know that a job proposal from Moog generally entails stock choice and restricted stock as remuneration. The entrusting and final policy for the stock plan compelled Jimmy to look into the Shareholder’s equity segment of the Moog Balance sheet, where he identified more figures than hoped for. The case allows the students to learn about concepts of employee stock options, stock-splits and buybacks, multiple share classes, and the fundamentals of equity investment and diversification. Students will be required to finish a quantitative evaluation and assessment of the financial trading related to the Shareholders' Equity. Key concepts Include: Accounting, Shareholder's Equity, Stock Options, Stock Splits, Share Classes, Equities, and Investments.

Excel Calculations

 Balance Sheet Extracts

Common Stock

Class A

Class B

Additional Paid-in Capital

Retained Earnings

Treasury Shares (Class A)

Treasury Shares (Class B

Accumulated Other Income

Total Share holder's Equity

Outstanding Class A Shares

Outstanding Class B Shares

Questions Covered

Put yourself in Jimmy’s shoes and using information contained in exhibit 1. Explain the changes in the equity section of the balance sheet that occurred as a result of the five transactions which jimmy found referenced in Moog’s 2007 10-K filing. Discuss how they might affect the value of Jimmy’s restricted stock and options (in terms of the direction as opposed to magnitude of value changes) had he been working for the firm at the time. Where appropriate, provide details on any changes to the number of shares authorized, issues and outstanding as well as the appropriate valuation for balance sheet purposes.

Prepare the Shareholders Equity section of the Balance Sheet for Moog Inc. as at September 29, 2007.

Given your answer to the previous question and the additional information regarding transactions in 2008 detailed above, prepare and describe in detail the set of equity related transactions which would generate the Shareholder’s Equity section of the Balance Sheet for Moog Inc. as at September 28, 2008. Be specific in your responses and show all the effects of each transactions which result in a perfect replication of the 2008 Balance Sheet, you should document the effects of those transactions which you think occurred and provide the equity section of a pro-forma Balance Sheet for September)

For fiscal years beginning after December 15, 2005, the FASB requires that an expense (equal to the fair value of the option being granted) must be charged upon issuance of employee stock options. Assuming that Jimmy was issued a grant of 12,000 options which he will exercise once they are all vested when the stock price has risen to $10 per share, describe in detail how to account for the options in each fiscal year from the grant date until the exercise date. You should assume that the fair value of each option was $3 on the grant date when the stock price was $5.00 and that the first options would vest on the grant date. You should assume that the company issues new shares to satisfy its obligation.