Silver Enterprises has acquired All Gold Mining in a merger transaction. The fol
ID: 2761726 • Letter: S
Question
Silver Enterprises has acquired All Gold Mining in a merger transaction. The following balance sheets represent the premerger book values for both firms:
Construct the balance sheet for the new corporation assuming that the transaction is treated as a purchase for accounting purposes. The market value of All Gold Mining's fixed assets is $16,050; the market values for current and other assets are the same as the book values. Assume that Silver Enterprises issues $23,000 in new long-term dept to finance the acquisition.
Silver Enterprises has acquired All Gold Mining in a merger transaction. The following balance sheets represent the premerger book values for both firms:
Explanation / Answer
Since, Acquisition transaction is treated as a purchase for accounting purpose. So all the items in the balance sheet of both companies should be added at market value to get a consolidate balance sheet.
Current assets and other assets will be same as pre-merger balance sheet and market value of fixed asset will be $16,050. Current issued $23,000 worth of long term debt to finance the acquisition. So in consolidated balance sheet $23,000 is reflected as long term debt.
So consolidated balance sheet of both companies is mention in the table below:
Assets
Amount
Liabilities
Amount
Current Assets
$10,100
Current liabilities
$6,550
Other Assets
$4,110
Long term debt
$32,500
Fixed assets
$51,350
Equity
$48,260
Goodwill
$21,750
Total
$87,310
Total
$87,310
Assets
Amount
Liabilities
Amount
Current Assets
$10,100
Current liabilities
$6,550
Other Assets
$4,110
Long term debt
$32,500
Fixed assets
$51,350
Equity
$48,260
Goodwill
$21,750
Total
$87,310
Total
$87,310
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.