Yount, Inc. Pro Forma Balance Sheet January 1, 2015 Assets Liabilities and Equity $ 30,000 165,000 80,000 115,000 Cash equivalents . $100,000 120,000 50,000 Current liabilities . Long-term liabilities Common stock ($10 par). Retained earning s. Accounts receivable Inventory Depreciable fixed assets Accumulated depreciation 200,000 (80,000) $390,000 Total assets. Total liabilities and equity $390,000
Moon Company is contemplating the acquisition of Yount, Inc., on January 1, 2015. If Moon acquires Yount, it will pay $730,000 in cash to Yount and acquisition costs of $20,000.
The January 1, 2015, balance sheet of Yount, Inc., is anticipated to be as attached:
Fair values agree with book values except for the inventory and the
which have fair values of $70,000 and $400,000, respectively.
Your projections of the combined operations for 2015 are as follows:
Combined sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $200,000
Combined cost of goods sold, including Yount’s beginning inventory, at book value,
which will be sold in 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,000
Other expenses not including depreciation of Yount assets . . . . . . . . . . . . . . . . . . . . . . . . 25,000
Depreciation on Yount fixed assets is straight-line using a 20-year life with no salvage value.
1. Prepare a value analysis for the acquisition and record the acquisition.
2. Prepare a pro forma income statement for the combined firm for 2015. Show supporting calculations for consolidated income. Ignore tax issues.
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