EBK CORPORATE FINANCE
11th Edition
ISBN: 8220102798878
Author: Ross
Publisher: YUZU
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Chapter 29, Problem 2QP
Summary Introduction
To construct: The post merger balance sheet for Firm X by using purchase accounting method.
Merger:
Merger is the combination of two entities into one in which the shareholders of both companies merge their resources into a new company.
Purchase Accounting Method for Mergers:
In the purchase accounting method, the assets of the targeted company has to be recorded into the current market value in the books of the acquiring company and
Balance Sheet:
Balance sheet is the summarized statement of total assets and total liabilities of a company in an accounting period. It is one of the financial statements of accounting.
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Consider the following pre-merger information about firm X and firm Y:
Firm X
Firm Y
$90,000
$52,200
46,800
36,000
Total earnings
Shares outstanding
Per-share values:
Market
Book
$
53
$ 21
$ 19
SASA
$ 9
Assume that firm X acquires firm Y by paying cash for all the shares outstanding at a
merger premium of $5 per share. Assuming that neither firm has any debt before or after
the merger, construct the post-merger balance sheet for firm X assuming the use of
purchase accounting methods.
Consider the following premerger information about Firm X and Firm Y:
Firm X
$ 40,000
20,000
Total earnings
Shares outstanding
Per-share values:
Market
Book
$49
$ 20
Firm Y
$15,000
20,000
Total asset of the combined company
$18
$7
Assume that Firm X acquires Firm Y by paying cash for all the shares outstanding at a
merger premium of $6 per share. Assuming that neither firm has any debt before or after
the merger, what are the total assets of Firm X after the merger?
Total assets XY
Total equity XY = $880,000
Total assets XY = Total equity XY = $760,000
Total assets XY = Total equity XY = $1,240,000
Total assets XY = Total equity XY = $853,600
Total assets XY = Total equity XY = $924,000
=
Consider the following premerger information about Firm X and Firm Y:
Firm X
Firm Y
Total earnings
$
95,000
$
22,000
Shares outstanding
52,000
17,000
Pre-share values:
Market
$
52
$
21
Book
$
15
$
10
Assume that Firm X acquires Firm Y by paying cash for all the shares outstanding at a merger premium of $6 per share, and that neither firm has any debt before or after the merger.
a.
Assuming the pooling of interests method is used, what is the equity of the combined firm?
Equity value
$
b.
List the assets of the combined firm assuming the purchase accounting method is used.
Assets from X
$
Assets from Y
Goodwill
Total Assets XY
$
Please dont provide solution image based thnx
Chapter 29 Solutions
EBK CORPORATE FINANCE
Ch. 29 - Prob. 1CQCh. 29 - Prob. 2CQCh. 29 - Prob. 3CQCh. 29 - Prob. 4CQCh. 29 - Prob. 5CQCh. 29 - Prob. 6CQCh. 29 - Economies of Scale What does it mean to say that a...Ch. 29 - Prob. 8CQCh. 29 - Prob. 9CQCh. 29 - Prob. 10CQ
Ch. 29 - Prob. 1QPCh. 29 - Prob. 2QPCh. 29 - Prob. 3QPCh. 29 - Prob. 4QPCh. 29 - Cash versus Stock Payment Penn Corp. is analyzing...Ch. 29 - EPS, PE, and Mergers The shareholders of Flannery...Ch. 29 - Prob. 7QPCh. 29 - Cash versus Stock as Payment Consider the...Ch. 29 - Prob. 9QPCh. 29 - Prob. 10QPCh. 29 - Prob. 11QPCh. 29 - Prob. 12QPCh. 29 - Prob. 13QPCh. 29 - Prob. 14QPCh. 29 - Prob. 15QPCh. 29 - Prob. 16QPCh. 29 - Prob. 1MCCh. 29 - Prob. 2MCCh. 29 - Prob. 3MCCh. 29 - Prob. 4MC
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