Question
Assume that the following balance sheets are stated at book value. Meat Co. Current assets $ 12,200 Current liabilities $ 5,400 Net fixed assets 36,300
Assume that the following balance sheets are stated at book value. Meat Co. Current assets $ 12,200 Current liabilities $ 5,400 Net fixed assets 36,300 Long-term debt 9,900 Equity 33,200 Total $ 48,500 Total $ 48,500 Loaf, Inc. Current assets $ 3,500 Current liabilities $ 1,400 Net fixed assets 6,800 Long-term debt 2,000 Equity 6,900 Total $ 10,300 Total $ 10,300 Suppose the fair market value of Loafs fixed assets is $9,900 versus the $6,800 book value shown. Meat pays $16,600 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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