Question

Assume that the following statements of financial position are stated and a book value. Construct a post-merger statement of financial position assuming that Amherst Co. purchases Essex Inc. and the pooling of interests method of accounting is used.

Amherst co. Essex INC.

Current Assets $12,000 Current Assests 3400

Net fixed Asstes 36,000 Net fixed assests 6,400

Total = 48,000 Total 9,800

Current liabilitoes $5,300 Current liab 1,300

long term debt 9,800 long term debt 1,900

equity 32,900 equity 6,600

total = 48,000   total = 9,800

Answer 1

Under pooling method, all the accounts of both companies are combined together and accounts are total in the new company after post merger

   Current assets = (12000+ 3400) = 15400

Net Fixed assets = (36000+6400) = 42400

Current Liabilities = (5300+1300) = 6600

Long Term Debt = (9800+1900) = 11700

Equity = (32900+6600) = 39500

                                                           Amherst Co, post merger

Liabilities                                                        Assets

Equity                  $ 39500                       Current assets         $ 15400

Long term Liability    $ 11700                        Net Fixed assets      $ 42400

Current Liability        $ 6600

Total Liabilities         $ 57800                          Total assets          $ 57800