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Thomson Inc is considering acquiring Stevenson Corp under the following conditions: the FMV (Fair market value) of Stevensons fixed assets is estimated to be 1.5

Thomson Inc is considering acquiring Stevenson Corp under the following conditions:

  • the FMV (Fair market value) of Stevensons fixed assets is estimated to be 1.5 times that of its book value
  • the total offered price for all of Stevensons equity is to be $10,530
  • Thomson is to assume all of Stevensons liabilities
  • the total financing of the acquisition is to be leveraged (borrowing)

The following are the balance sheets of each company before the acquisition:

Thomson Inc (Shortly before acquisition)

Current assets $1,000 Current liabilities $750
Gross fixed assets $50,000 Long term debt $12,250
Cum. depreciation $(20,000) Common equity $18,000
Net fixed assets $30,000 Total equity and
Total assets $31,000 total liabilities $31,000

Stevenson Corp (Shortly before acquisition)

Current assets $500 Current liabilities $400
Gross fixed assets $25,000 Long term debt $7,000
Cum. depreciation $(10,000) Common equity $8,100
Net fixed assets $15,000 Total equity and
Total assets $15,500 total liabilities $15,500

Total cost of acquisition to Thomson is:

The value of the goodwill is:

Thomsons long term debt after the transaction is:

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