In: Finance
1.The pre merger balance sheets of firm A and B are given below.Firm A is interested in taking over firm B.Prepare the post- merger balance sheet for firm A according to the pooling of interest method.
Firm A | |||
Current Assets | US $10000 | Current Liabilities | US $6000 |
Net Fixed Assets | US$35000 | Long Term Debt | US $10000 |
Equity | US$29000 | ||
Total | US $45000 | US$45000 |
Firm B | |||
Current Assets | US$4000 | Current Liabilities | US$2000 |
Net Fixed Assets | US$7000 | Long Term Debt | US$2500 |
Equity | US$6500 | ||
Total | US$11000 | US$11000 |
2.Using the Same balance sheets in Question 1,Prepare the post -merger balance sheet for A under the Purchase Method.Take into account the following additional information:
(A) The fair value of the firm B's net fixed assets is US$10000
(B) Firm A pays US$20000 for firm Band Finances the purchase by issuing additional long -term debt