Financial statement effects of revaluations required by the purchase method. Bristol-Myers Corporation and Squibb, both pharmaceutical companies, agreed to merge as of January 2. Year 10. Bristol-Myers exchanged 234 million shares of its common stock for the outstanding shares of Squibb. The shares of Bristol-Myers sold for $55 per share on the merger date, resulting in a transaction with a market value of $12.87 billion. Assume that the market value of buildings and equipment of Squibb exceeds their book value by $2,500 million, the market value of patents exceeds their book value by $6,400 million, and that the market values of all other recorded assets and liabilities equal their book values. The buildings and equipment have a ten-year remaining useful life and the patents have a five-year remaining useful life as of January 2, Year 10. Condensed balance sheet data on January 2, Year 10. appear below (amounts in millions).

Bristol-Myers Squibb Assets $5,190 $3,083 Liabilities 1,643 1,682 Shareholders' Equity 3,547 1,401 $5,190 $3,083

a. Prepare a condensed consolidated balance sheet on the date of the merger assuming that the firms accounted for the merger using the purchase method. Show any amount for goodwill separately.

b. Projected net income for Year 10 before considering the effects of the merger are $1,225 for Bristol-Myers and $523 for Squibb. Compute the amount of consolidated net income projected for Year 10 for Bristol-Myers and Squibb using the purchase method.