Item 5 Item 5 10 points Item Skipped Problem 21-3 Balance Sheets for Mergers Ass

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Item 5

Item 5 10 points Item Skipped

Problem 21-3 Balance Sheets for Mergers

Assume that the following balance sheets are stated at book value. The fair market value of James's fixed assets is equal to $9,900. Jurion pays $16,720 for James and raises the needed funds through an issue of long-term debt.

Construct a postmerger balance sheet assuming that Jurion Co. purchases James, Inc., and the purchase method of accounting is used. Assume book value of current assets is equal to market value and book value of debt for James, Inc. is equal to market value. (Do not round intermediate calculations.)

Jurion Co. Current assets $ 12,450 Current liabilities $ 5,540 Net fixed assets 36,900 Long-term debt 10,100 Equity 33,710 Total $ 49,350 Total $ 49,350

Explanation / Answer

**Value of asset acquired = 3580+9900-1540-2080 = 9860

Goodwill =value paid -value of asset acquired

         = 16720 -9860

          = 6860

Jurion co.post merger current asset [12450+3580] 16030 current liabilities [5540+1540] 7080 Fixed asset [36900+9900] 46800 long term debt [(10100+16720)+2080] 28900 Goodwill 6860 Equity 33710 Total 69690 Total 69690

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