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    Balance Sheet for Mergers

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    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

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    Solution Summary

    The solution explains how to prepare the balance sheet using the pooling of interest method and purchase method.