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Assume that the following balance sheets are stated at book value. Meat Co. Current assets $ 14,200 Current liabilities $ 6,400 Net fixed assets 39,300
Assume that the following balance sheets are stated at book value. |
Meat Co. | |||||||
Current assets | $ | 14,200 | Current liabilities | $ | 6,400 | ||
Net fixed assets | 39,300 | Long-term debt | 10,900 | ||||
Equity | 36,200 | ||||||
Total | $ | 53,500 | Total | $ | 53,500 | ||
Loaf, Inc. | |||||||
Current assets | $ | 4,500 | Current liabilities | $ | 2,400 | ||
Net fixed assets | 10,800 | Long-term debt | 3,000 | ||||
Equity | 9,900 | ||||||
Total | $ | 15,300 | Total | $ | 15,300 | ||
Suppose the fair market value of Loafs fixed assets is $15,900 versus the $10,800 book value shown. Meat pays $22,600 for Loaf and raises the needed funds through an issue of long-term debt. Construct the postmerger balance sheet, assuming that the purchase method of accounting is used. |
Meat Co., post-merger | |||||
Current assets | $ | Current liabilities | $ | ||
Fixed assets | Long-term debt | ||||
Goodwill | Equity | ||||
Total | $ | Total | $ | ||
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