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2 years ago

Consider the following premerger information about Firm X and Firm Y:

Business

1 answer:

umka21 [38]2 years ago

5 0

Answer:

Firm X and Firm Y

Post-merger Balance Sheet for Firm X

Net assets $886,000

Goodwill 90,000

Total assets $976,000

Common stock $742,000

Long-term debt 234,000

Total liabilities and

equity $976,000

Explanation:

a) Data and Calculations:

Firm X Firm Y

Total earnings $96,000 $22,500

Shares outstanding 53,000 18,000

Per-share values:

Market $53 $18

Book $14 $8

Net assets $742,000 $144,000

= (53,000*$14) (18,000*$8)

Net assets = Common Stock for each company

Merger premium on Firm Y $5

Goodwill on acquisition = $90,000 (18,000 * $5)

Investment in Firm Y = $234,000 (18,000 * ($8 + $5)

Long-term debt issued = $234,000

Net assets

Firm X net assets before acquisition = $742,000

Firm Y net assets before acquisition = 144,000

Net value of combined assets = $886,000

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