Post merger balance sheet
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Consider the following premerger information about firm X and Firm Y;
Firm X Firm Y
Total Earnings $40,000 $15,000
Shares outstanding $20,000 $20,000
Per-share values
Market $49 $18
Book $20 $7
Assume that firm X acquires Firm Y by paying cash for all 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 using the purchase accounting method.
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Solution Summary
The solution explains how to prepare a post merger balance sheet using purchase accounting method.
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The post merger balance sheet (with Firm X purchasing Firm Y) would be
Book Value of X + Market Value of Y + Any Goodwill in Purchase
Since there is no debt, in the balance ...
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