Pumpworks Inc. and Seaworthy Rope Company agreed to merge on January 1, 20X3. On the date of

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Pumpworks Inc. and Seaworthy Rope Company agreed to merge on January 1, 20X3. On the date of the merger agreement, the companies reported the following data:

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Pumpworks has 10,000 shares of its $20 par value shares outstanding on January 1, 20X3, and Seaworthy has 4,000 shares of $5 par value stock outstanding. The market values of the shares are $300 and $50, respectively.
Required

a. Pumpworks issues 700 shares of stock in exchange for all of Seaworthy’s net assets. Prepare a balance sheet for the combined entity immediately following the merger.

b. Prepare the stockholders’ equity section of the combined company’s balance sheet, assuming Pumpworks acquires all of Seaworthy’s net assets by issuing

 1. 1,100 shares of common.

 2. 1,800 shares of common.

 3. 3,000 shares of common.

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Advanced Financial Accounting

ISBN: 9781260165111

12th Edition

Authors: Theodore Christensen, David Cottrell, Cassy Budd

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