Sun Inc, is contemplating a tender offer to acquire 80% of Moon Corporation's common stock. moon,s shares currently quoted on the New York stock Exchange at $25 per share in order to have a reasonable chance of the tender offer attracting 80% of Moon stock, Sun believes it will have to offer at least $30 per share. if the tender offer is made and is successful, the purchase will be consummated on January 1,2024. Michael Jackson, the chairperson of Sun acquisition committee, has provided you with the projected 2024 financial statements for Sun Company without the proposed acquisition and the 2024 projected financial statements of the Moon Company in table 1. If the tender offer is successful, Sun will finance the acquisition by issuing $36,000 of 6% nonconvertible bonds at par on January 1, 2024. the bonds would first pay interest on July 1,2024 and would pay interest semiannually thereafter each January 1 and July 1 this business combinations will be recorded using acquisition method and Sun will account for the investment using the equity method. Although most of the legal work related to the acquisition will be handled by sun,s attorney, direct cost to prepare and process the tender offer will total $750 and will be paid in cash by sun in 2024. Additional information:

As of January 1,2024, all of Moon Company Assets and liabilities are fairly valued except for machinery with a book value of $5,000, an estimated fair value of $6,000,and a 5-year remaining useful life. assume that straight-line depreciation is used to amortize any revaluation increment. No Transaction between these companies occurred prior to 2024. Regardless of whether they combine, Sun Company plans to buy $15,000 of merchandise from Moon Company in 2024 and will have $1,200 of these purchases remaining in inventory on December 31,2024. In addition, Moon is expected to buy $900 of merchandise from Sun in 2024 and to have $150 of these purchases in inventory on December 31,2024. sun and Moon price their products to yield a 20 percent and 25 percent markup on cost, respectively. Sun Company intends to use three financial yardsticks to determine the financial attractiveness of the combination. first, Sun wishes to acquire subsidiary corporation Moon only if 2024 consolidated earnings per share will be at least as high as the earnings per share Sun would report if no combination takes place. second, sun will consider the proposed combination unattractive if it will cause the consolidated current ratio to fall below two to one third, return on average Stockholders equity must remain above 20% for the combined entity. if the financial yardsticks described above and the nonfinancial aspects of the combination are appealing, then the tender offer will be made. on the other hand, if these objectives are not met, the acquisition will either be restructured or abandoned. Required 1. Adjust the separate financial statements of sun Company to reflect the proposed acquisition. adjust the given sun pro forma 2024 financial statements to reflect the proposed acquisition that is Adjust parents forecasted financial statements- statements of operation, statements of Retained earnings and balance sheet. for bond insurance, stock purchase,income from subsidiary. support your statements with appropriate work papers and journal entries. 2. Prepare Pro forma consolidated worksheet. prepare a Pro forma consolidated worksheet for sun Company and its proposed subsidiary Moon Company as of December 31,2024.

Sun Company projected financial statements for 2024 With Acquisition and Moon Company projected financial statements for 2024

Sun 2024. Moon 2024 Sales. 275,000 35,000 cost of goods sold (174,000) (18000) operating expenses (82000) (4,500) income before taxes 18,600 12000 income tax expense. (7440) (3600) Net income. 11,160 8400 Retained earnings Jan1 11660, 4800 add:net income 11,160 8400 less: Dividends (5000) (1500) Retained earnings December 31, 17,820 11,700 Cash 20,170 7500 Account receivables 13,775, 4,300 inventory 12,875 4,000 property, Plant and equipment : 228,000, 50,000 Accumulated Depreciation: (176,000) (9,000) Total Assets. 98,220 56,800

Account payable 13,400, 7,000 common stock. 65,000, 30,000 paid in Capital in Excess of Par: 2,000, 8,100 Retained earnings. 17,820 11,700 Total liabilities and Stockholders equity: 98,220, 56,800 sun 13 per share and Moon 20 per share.