21. The balance sheets of Stanford Corporation and Boulder Corporation appear below. Stanford Corporation has 100,000 shares of stock outstanding and Boulder Corporation has 50,000 shares of stock outstanding. Stanford Corporation acquires Boulder Corporation by issuing one new share of Stanford for each four shares of Boulder. Show the balance sheet of the combined companies as it would appear after the merger.

	Stanford	Boulder
Current Assets	$1,000,000	$200,000
Fixed Assets	2,000,000	500,000
Total Assets	$3,000,000	$700,000
Current Liabilities	$500,000	$100,000
Long-Term Debt	1,000,000	300,000
Equity	1,500,000	300,000
Total liab. & equity	$3,000,000	$700,000

The balance sheet of the combined companies as it would appear after the merger is below. The professor provided us with the answers.

. Stanford Boulder Combined Current assets $1,000,000 $200,000 $1,200,000 Fixed assets 2,000,000 500,000 2,500,000 Total assets $3,000,000 $700,000 $3,700,000 Current liab. $ 500,000 $100,000 $ 600,000 Long-term debt 1,000,000 300,000 1,300,000 Equity 1,500,000 300,000 1,800,000 Tot. liab. & equity $3,000,000 $700,000 $3,700,000

Shares outstanding 100,000 50,000 112,500 I understand that Stanford Corporation has 100,000 shares of stock outstanding and Boulder Corporation has 50,000 shares of stock outstanding. How did they get combined 112,500 shares outstanding after the merger. Can you explain what was done to get that answe. Please show your work so I can understand it.

2. The income statements for Stanford Corporation and Boulder Corporation (problem 1) follow. Show the post-merger income statement assuming no synergestic benefits.

	Stanford	Boulder
Sales	$5,000,000	$2,000,000
Cost of Goods Sold	4,000,000	1,700,000
Administrative Expense	200,000	150,000
Depreciation	200,000	50,000
Net Operating Income	600,000	100,000
Interest	100,000	30,000
Earnings Before Tax	500,000	70,000
Income Tax	170,000	23,800
Net Income	$330,000	$46,200
Earnings Per Share	$3.30	$0.92

The post-merger income statement assuming no synergestic benefit is shown below. The professor provided the answers.

Stanford Boulder Combined Sales $5,000,000 $2,000,000 $7,000,000 Cost of goods sold 4,000,000 1,700,000 5,700,000 Administrative exp. 200,000 150,000 350,000 Depreciation 200,000 50,000 250,000 Net operating inc. 600,000 100,000 700,000 Interest expense 100,000 30,000 130,000 Earnings before tax 500,000 70,000 570,000 Tax 170,000 23,800 193,800 Net income $ 330,000 $ 46,200 $ 376,200 Earnings per share $3.30 $0.92 $3.34 It seems like everything was added up. But if earnings per share is $3.30 for Stanford and $0.92 for Boulder, how did $3.34 become a combined earnings per share for combined companies. Can you please explain that to me. How did that answer come about. Please show me your work so I can understand it.