Question
Assume that the following balance sheets are stated at book value. Meat Co. Current assets $ 15,000 Current liabilities $ 6,800 Net fixed assets 40,500
Assume that the following balance sheets are stated at book value. Meat Co. Current assets $ 15,000 Current liabilities $ 6,800 Net fixed assets 40,500 Long-term debt 11,300 Equity 37,400 Total $ 55,500 Total $ 55,500 Loaf, Inc. Current assets $ 4,900 Current liabilities $ 2,800 Net fixed assets 12,400 Long-term debt 3,400 Equity 11,100 Total $ 17,300 Total $ 17,300 Suppose the fair market value of Loafs fixed assets is $18,300 versus the $12,400 book value shown. Meat pays $25,000 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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