Balance Sheets for Mergers Consider the following premerger information about fi rm X and fi rm Y:

Firm X Firm Y Total earnings $40,000 $15,000 Shares outstanding 20,000 20,000 Per-share values:

Market $ 49 $ 18 Book $ 20 $ 7 Assume that fi rm X acquires fi rm Y by paying cash for all the shares outstanding at a merger premium of $5 per share. Assuming that neither fi rm has any debt before or after the merger, construct the postmerger balance sheet for fi rm X assuming the use of

(a) pooling of interests accounting methods and

(b) purchase accounting methods. LO.1