Consider the follwing pre-merger information about firm x and firm y. Problem is attached in excel file.
Balance Sheets for Mergers firm x firm y
total earnings 40000 15000
shares outstanding 20000 20000
per share values:
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 or after the merger, construct the postmerger balance sheet for the firm
X assuming the use of
a)pooling of interests accounting methods
b)purchase accounting methods
The solution explains how to prepare the balance sheet using the pooling of interest method and purchase method.