P 1-2 Prepare balance sheet after an acquisition On January 2, 2011, Pet Corporation enters into a business combination with Sea Corporation in which Sea is dissolved. Pet pays $1,650,000 for Sea, the consideration consisting of 66,000 shares of Pet $10 par common stock with a market value of $25 per share. In addition, Pet pays the following expenses in cash at the time of the merger: 22 CHAPTER 1 Finders' fee Accounting and legal fees Registration and issuance costs of securities Balance sheet and fair value information for the two companies on December 31, 2010, immedi ately before the merger, is as follows (in thousands): Cash Accounts receivable-net Inventories Land Buildings net Equipment-net Total assets $70,000 130,000 80,000 $280,000 Accounts payable Note payable Capital stock, $10 par Other paid-in capital Retained earnings Total liabilities and owners' equity Pet Book Value $ 300 460 1,040 800 2,000 1,000 $5,600 $ 600 1,200 1,600 1,200 1,000 $5,600 Sea Book Value $ 60 100 160 200 400 600 $1,520 $ 80 400 600 100 340 $1,520 Sea Fair Value $ 60 80 240 300 600 500 $1,780 $ 80 360 REQUIRED: Prepare a balance sheet for Pet Corporation as of January 2, 2011, immediately after the merger assuming the merger is treated as an acquisition
P 1-2 Prepare balance sheet after an acquisition On January 2, 2011, Pet Corporation enters into a business combination with Sea Corporation in which Sea is dissolved. Pet pays $1,650,000 for Sea, the consideration consisting of 66,000 shares of Pet $10 par common stock with a market value of $25 per share. In addition, Pet pays the following expenses in cash at the time of the merger: 22 CHAPTER 1 Finders' fee Accounting and legal fees Registration and issuance costs of securities Balance sheet and fair value information for the two companies on December 31, 2010, immedi ately before the merger, is as follows (in thousands): Cash Accounts receivable-net Inventories Land Buildings net Equipment-net Total assets $70,000 130,000 80,000 $280,000 Accounts payable Note payable Capital stock, $10 par Other paid-in capital Retained earnings Total liabilities and owners' equity Pet Book Value $ 300 460 1,040 800 2,000 1,000 $5,600 $ 600 1,200 1,600 1,200 1,000 $5,600 Sea Book Value $ 60 100 160 200 400 600 $1,520 $ 80 400 600 100 340 $1,520 Sea Fair Value $ 60 80 240 300 600 500 $1,780 $ 80 360 REQUIRED: Prepare a balance sheet for Pet Corporation as of January 2, 2011, immediately after the merger assuming the merger is treated as an acquisition
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:P 1-2
Prepare balance sheet after an acquisition
On January 2, 2011, Pet Corporation enters into a business combination with Sea Corporation in which
Sea is dissolved. Pet pays $1,650,000 for Sea, the consideration consisting of 66,000 shares of Pet $10
par common stock with a market value of $25 per share. In addition, Pet pays the following expenses in
cash at the time of the merger:
22
CHAPTER 1
Finders' fee
Accounting and legal fees
Registration and issuance costs of securities
Balance sheet and fair value information for the two companies on December 31, 2010, immedi-
ately before the merger, is as follows (in thousands):
Cash
Accounts receivable-net
Inventories
Land
Buildings-net
Equipment-net
Total assets
$ 70,000
130,000
80,000
$280,000
Accounts payable
Note payable
Capital stock, $10 par
Other paid-in capital
Retained earnings
Total liabilities and owners' equity
Pet Book Value
$ 300
460
1,040
800
2,000
1,000
$5,600
$ 600
1,200
1,600
1,200
1,000
$5,600
Sea Book Value
$ 60
100
160
200
400
600
$1,520
$ 80
400
600
100
340
$1,520
Sea Fair Value
$ 60
80
240
300
600
500
$1,780
$ 80
360
REQUIRED: Prepare a balance sheet for Pet Corporation as of January 2, 2011, immediately after the
merger, assuming the merger is treated as an acquisition.
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