Use the data presented in Problem 1-28 to do the following:

a. Prepare a balance sheet for the combined entity immediately following the merger assuming Bilge Pumpworks issues 700 shares of its stock in exchange for the net assets of Seaworthy in a business combination recorded as a pooling of interests.

b. Prepare the stockholders' equity section of the combined balance sheet under pooling of interests treatment assuming Bilge acquires all of the net assets of Seaworthy by issuing the following shares:
(1) 1,100 shares of common.
(2) 1,800 shares of common.
(3) 3,000 shares of common.

Data From Problem 1-28 Bilge Pumpworks and Seaworthy Rope Company agreed to merge on January 1, 20X3. On the date of the merger agreement, the companies report the following data:

Bilge 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.
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a. Bilge issues 700 shares of stock in exchange for all the net assets of Seaworthy. Prepare a balance sheet for the combined entity immediately following the merger assuming the acquisition is recorded as a purchase.

b. Prepare the stockholders' equity section of the combined company's balance sheet under purchase treatment assuming Bilge acquires all the net assets of Seaworthy by issuing:
(1) 1,100 shares of common.
(2) 1,800 shares of common.
(3) 3,000 shares of common.

Transcribed Image Text:

Bilge Pumpworks Seaworthy Rope Company Balance Sheet Items Book Value Fair Value Book Value Fair Value Cash and Receivables $ 90.000 Inventory 100,000 $ 90.000 150.000 $ 20.000 $ 20.000 30,000 42.000 Land 100,000 140.000 10.000 15.000 Plant and Equipment 400.000 200.000 Less: Accumulated Depreciation (150,000) 300.000 (80.000) 140.000 Total Assets $540.000 $680.000 $180.000 $217,000 Current Liabilities $ 80.000 $ 80.000 $ 20.000 $ 20.000 Capital Stock 200.000 Capital in Excess of Par Value 20.000 20.000 5.000 Retained Earnings 240,000 135,000 Total Liabilities and Equities $540,000 $180,000