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Coca-Cola Corporation has acquired Pepsi-Cola in a merger transaction. The fixed Assets of Coca-Cola have a market value of 10 Billions, the market values for

Coca-Cola Corporation has acquired Pepsi-Cola in a merger transaction.

The fixed Assets of Coca-Cola have a market value of 10 Billions, the market values for the other assets are the same as book values.

The market value for Pepsi-Cola fixed assets is 400 Billions, the market values for the other assets are the same as book values.

Assume that Coca-Cola issues 800 Billions in new long-term debt to finance the acquisition.

The following balance sheets represent the premerger book values.

Coca-Cola

Current assets

100

Current liabilities

95

Other assets

50

Long-term debt

15

Net fixed assets

200

Equity

240

Total

350

350

Pepsi-Cola

Current assets

95

Current liabilities

80

Other assets

60

Long-term debt

300

Net fixed assets

250

Equity

25

Total

405

405

Prepare the balance sheet for the new corporation if the merger is treated as a purchase for accounting purposes.

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