D Ltd. and H Corporation are both engaged in the manufacture of computers. On July 1, Year 5, they agree to a merger, whereby D will issue 300,000 shares with current market value of $9 each for the net assets of H. Summarized balance sheets of the two companies prior to the merger are presented below:
BALANCE SHEET
June 30, Year 5

In determining the purchase price, the management of D Ltd. noted that H Corporation leases a manufacturing facility under an operating lease that has terms that are favourable relative to market terms. However, the lease agreement explicitly prohibits transfer of the lease (through either sale or sublease). An independent appraiser placed a value of $60,000 on this favourable lease agreement.
Required:
Prepare the July 1, Year 5, balance sheet of D, after the merger.

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D Ltd H Corporation Carrying amountCarrying amount Current assets Non-current assets (net) Fair value S 510,000 3,500,000 $ 450,000 4,950,000 $5,400,000 $ 600,000 1,100,000 2,500,000 1,200,000 $5,400,000 500,000 3,200,000 $3,700,000 S 800,000 900,000 500,000 1,500,000 $3,700,000 Current liabilities Long-term debt Common shares Retained earnings 800,000 920,000