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ACCT 607 Name_____________________

Applied Case Assignment #7 (Chapters 10 and 11)

Answer the following questions based on the provided excerpts from a selection of greater Washington

area public companies’ recent 10-Ks.

Part I: Booz Allen Hamilton Holding Corporation (NYSE: BAH; McLean, VA)

Founded in 1914, Booz Allen Hamilton describes itself as “a leading provider of management consulting,

technology, and engineering services to the U.S. government in the defense, intelligence, and civil

markets.” Booz Allen Hamilton Holding serves as the top-level holding company for the consolidated

Booz Allen Hamilton U.S. government consulting business. Answer the following questions based on the

Company’s Consolidated Balance Sheets for March 31, 2015 and 2014 (hereafter, FY15 and FY14),

which are excerpted and presented on the next page:

1. During FY15, the decreases in Class B, Class C, and Class E shares are because those shares were

converted to Class A shares. Assume that the remaining increase in Class A share is due to new share

issuances for cash. What journal entry would the Company have recorded for the issuance of those

new shares?

2. There were no sales of Treasury Stock during FY15. What was the average share price at which the

Company repurchased additional Treasury Stock shares during FY15?

3. There were no usual transactions affecting the Company’s Retained Earnings during FY15. If Net

Income for FY2015 was $232,569 thousand, what was the value of dividends declared during the year?

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EXCERPT FROM BOOZ ALLEN HAMILTON HOLDING CORPORATION’S 2015 10K

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ACCT 607 Applied Case Assignment #7 (Chapter 10, 11)  Continued

Part II: Under Armour, Inc. (NYSE: UA; Baltimore, MD)

4. Incorporated in Maryland in 1996, Under Armour, Inc. describes itself as “developing, marketing and distributing branded performance apparel, footwear and accessories for men, women and youth.”

On June 15, 2015, Under Armour announced the creation of a new class of non-voting common

stock, the Class C common stock. The press release stated that: Under Armour expects to issue Class C stock through a stock dividend to all existing holders of Under

Armour's Class A and Class B common stock, which will have the same effect as a two-for-one stock

split. Each holder of a share of Class A or Class B stock will receive one share of the new Class C stock.

Do you agree or disagree that the effect of the Class C stock dividend will be the same as a two-for-

one stock split? As an example, assume the transaction would have occurred on January 1, 2015. On

the basis of the information on Under Armour’s Consolidated Balance Sheet for December 31, 2014

(excerpted and presented on the next page of this assignment), what journal entry would be required

to record (a) a two-for-one stock split, and (b) the Class C stock dividend?

(a) Two-for-one stock split:

(b) Class C stock dividend:

Do you agree or disagree that the effect of the Class C stock dividend will be the same as a two-for-

one stock split?

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EXCERPT FROM UNDER ARMOUR, INC.’S 2015 10K

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ACCT 607 Applied Case Assignment #7 (Chapter 10, 11)  Continued

Part III: Lockheed Martin Corporation (NYSE: LMT; Bethesda, MD)

Lockheed Martin Corporation describes itself as “a global security and aerospace company principally

engaged in the research, design, development, manufacture, integration and sustainment of advanced

technology systems, products and services,” with its principal customers being agencies of the U.S.

Government. On the next two pages are Lockheed Martin’s Consolidated Statements of Earnings,

Comprehensive Income, and Balance Sheets, along with the Long-Term Debt footnote, excerpted from

the its 2014 10-K.

5. What is the principal or face value of Lockheed Martin’s long-term debt?

6. (a) To what covenant(s) is Lockheed Martin subject under the terms of their revolving credit facility?

(b) How is the covenant ratio described differently from what we might compute as part of the ROE

decomposition?

7. The footnote states that “In April 2013, [Lockheed Martin] repaid $150 million of long-term notes

with a fixed interest rate of 7.38% due to their scheduled maturities.” At the time of repayment, did

the net carrying value of these long-term notes reflect at a premium, a discount, or par value? Explain.

8. Has Lockheed Martin’s solvency improved or deteriorated in 2014 relative to 2013?

Explain your response, and identify the primary cause for that change.

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EXCERPTS FROM LOCKHEED MARTIN CORPORATION’S 2014 10K

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