Assume that the following statements of financial position are stated and a book value. Alpha Corporation Current Assets $15,000 Current Liabilities $5,400 Net Fixed Assets 39,000 Long-Term Debt 10,100 Equity 38,500 $54,000 $54,000 Beta Corporation Current Assets $3,600 Current Liabilities $1,400 Net Fixed Assets 6,700 Long-Term Debt 2,100 Equity 6,800 $10,300 $10,300 Suppose the fair market value of Beta’s fixed assets is $9,500 rather than the $6,700 book value shown. Alpha pays $17,300 for Beta and raises the needed funds through an issue of long-term debt. Construct the post-merger statement of financial position now, assuming that the purchase method of accounting is used.

Step 1: The acquisition is funded by long-term debt; the post-merger balance sheet will have…

Answered: Assume that the following statements of…

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter3: Analysis Of Financial Statements

Section: Chapter Questions

Problem 8P

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Assume that the following statements of financial position are stated and a book value.

Alpha Corporation
Current Assets	$15,000	Current Liabilities	$5,400
Net Fixed Assets	39,000	Long-Term Debt	10,100
	Equity	38,500
	$54,000		$54,000

Beta Corporation
Current Assets	$3,600	Current Liabilities	$1,400
Net Fixed Assets	6,700	Long-Term Debt	2,100
		Equity	6,800
	$10,300		$10,300

Suppose the fair market value of Beta’s fixed assets is $9,500 rather than the $6,700 book value shown. Alpha pays $17,300 for Beta and raises the needed funds through an issue of long-term debt. Construct the post-merger statement of financial position now, assuming that the purchase method of accounting is used.

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