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    Pooling of Interests Accounting and Purchase Accounting

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    Balance Sheet for Mergers:
    Consider the following pre-merger information about firm X and firm Y.
    Firm X Firm Y

    Total earnings $40,000 $15,000

    Shares outstanding (per mkt Shares)

    Market $49 $18
    Book $20 $7

    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 of after the merger, construct the post merger balance sheet for firm X assuming the use of (a) pooling of interests accounting methods and (b) purchase accounting methods.

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    https://brainmass.com/business/finance/textbook-advanced-corporate-finance-chapter-29-problem-2-255495

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    ANSWERS
    Question A
    Firm X
    Book value 27
    In pooling of interest ...

    Solution Summary

    The solution examines pooling of interests accounting methods and purchase accounting methods for a firm paying cash for all the shares.

    $2.19

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