The balance sheets of Petrello Company and Sanchez Company as of January 1, 2014, are presented below. On that date, after an extended period of negotiation, the two companies agreed to merge. To effect the merger, Petrello Company is to exchange its unissued common stock for all the outstanding shares of Sanchez Company in the ratio of 1/2 share of Petrello for each share of Sanchez. Market values of the shares were agreed on as Petrello, $52; Sanchez, $26. The fair values of Sanchez Company’s assets and liabilities are equal to their book values with the exception of plant and equipment, which has an estimated fair value of $707,190. Petrello SanchezCash $498,860 $220,000Receivables 495,790 237,690Inventories 2,104,300 252,560Plant and equipment (net) 3,818,630 853,200 Total assets $6,917,580 $1,563,450 Current Liabilities $1,209,800 $318,670Common stock ($16 par value) 3,563,480 800,000Other contributed capital 369,700 —0—Retained earnings 1,774,600 444,780 Total equities $6,917,580 $1,563,450Prepare a balance sheet for Petrello Company immediately after the merger. (List assets in order of liquidity.)PETRELLO COMPANYBalance SheetJanuary 1, 2014Assets CashCommon StockGoodwillInventoriesLiabilitiesOther Contributed CapitalPlant and Equipment (net)ReceivablesRetained Earnings $ CashCommon StockGoodwillInventoriesLiabilitiesOther Contributed CapitalPlant and Equipment (net)ReceivablesRetained Earnings CashCommon StockGoodwillInventoriesLiabilitiesOther Contributed CapitalPlant and Equipment (net)ReceivablesRetained Earnings CashCommon StockGoodwillInventoriesLiabilitiesOther Contributed CapitalPlant and Equipment (net)ReceivablesRetained Earnings CashCommon StockGoodwillInventoriesLiabilitiesOther Contributed CapitalPlant and Equipment (net)ReceivablesRetained Earnings Current Assets Current Liabilities Intangible Assets Long-term Investments Long-term Liabilities Net Income / (Loss) Property, Plant and Equipment Stockholders' Equity Total Assets Total Current Assets Total Current Liabilities Total Intangible Assets Total Liabilities Total Liabilities and Stockholders' Equity Total Long-term Investments Total Long-term Liabilities Total Property, Plant and Equipment Total Stockholders' Equity $ Liabilities and Stockholders' Equity CashCommon StockGoodwillInventoriesLiabilitiesOther Contributed CapitalPlant and Equipment (net)ReceivablesRetained Earnings $ CashCommon StockGoodwillInventoriesLiabilitiesOther Contributed CapitalPlant and Equipment (net)ReceivablesRetained Earnings CashCommon StockGoodwillInventoriesLiabilitiesOther Contributed CapitalPlant and Equipment (net)ReceivablesRetained Earnings CashCommon StockGoodwillInventoriesLiabilitiesOther Contributed CapitalPlant and Equipment (net)ReceivablesRetained Earnings Current Assets Current Liabilities Intangible Assets Long-term Investments Long-term Liabilities Net Income / (Loss) Property, Plant and Equipment Stockholders' Equity Total Assets Total Current Assets Total Current Liabilities Total Intangible Assets Total Liabilities Total Liabilities and Stockholders' Equity Total Long-term Investments Total Long-term Liabilities Total Property, Plant and Equipment Total Stockholders' Equity $

Combined cash=$498,860+$220,000=$718,860

The balance sheets of Petrello Company and Sanchez Company as of January 1, 2014, are presented below. On that date, after an extended period of negotiation, the two companies agreed to merge. To effect the merger, Petrello Company is to exchange its unissued common stock for all the outstanding shares of Sanchez Company in the ratio of 1/2 share of Petrello for each share of Sanchez. Market values of the shares were agreed on as Petrello, $52; Sanchez, $26. The fair values of Sanchez Company’s assets and liabilities are equal to their book values with the exception of plant and equipment, which has an estimated fair value of $707,190. Petrello Sanchez Cash $498,860 $220,000 Receivables 495,790 237,690 Inventories 2,104,300 252,560 Plant and equipment (net) 3,818,630 853,200 Total assets $6,917,580 $1,563,450 Current Liabilities $1,209,800 $318,670 Common stock ($16 par value) 3,563,480 800,000 Other contributed capital 369,700 —0— Retained earnings 1,774,600 444,780 Total equities $6,917,580 $1,563,450 Prepare a balance sheet for Petrello Company immediately after the merger. (List assets in order of liquidity.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The balance sheets of Petrello Company and Sanchez Company as of January 1, 2014, are presented below. On that date, after an extended period of negotiation, the two companies agreed to merge. To effect the merger, Petrello Company is to exchange its unissued common stock for all the outstanding shares of Sanchez Company in the ratio of 1/2 share of Petrello for each share of Sanchez. Market values of the shares were agreed on as Petrello, $52; Sanchez, $26. The fair values of Sanchez Company’s assets and liabilities are equal to their book values with the exception of plant and equipment, which has an estimated fair value of $707,190.

	*Petrello*	*Sanchez*
Cash	$498,860	$220,000
Receivables	495,790	237,690
Inventories	2,104,300	252,560
Plant and equipment (net)	3,818,630	853,200
Total assets	$6,917,580	$1,563,450

Current Liabilities	$1,209,800	$318,670
Common stock ($16 par value)	3,563,480	800,000
Other contributed capital	369,700	—0—
Retained earnings	1,774,600	444,780
Total equities	$6,917,580	$1,563,450

Prepare a balance sheet for Petrello Company immediately after the merger. (List assets in order of liquidity.)

PETRELLO COMPANY Balance Sheet January 1, 2014
Assets
CashCommon StockGoodwillInventoriesLiabilitiesOther Contributed CapitalPlant and Equipment (net)ReceivablesRetained Earnings			$
CashCommon StockGoodwillInventoriesLiabilitiesOther Contributed CapitalPlant and Equipment (net)ReceivablesRetained Earnings
CashCommon StockGoodwillInventoriesLiabilitiesOther Contributed CapitalPlant and Equipment (net)ReceivablesRetained Earnings
CashCommon StockGoodwillInventoriesLiabilitiesOther Contributed CapitalPlant and Equipment (net)ReceivablesRetained Earnings
CashCommon StockGoodwillInventoriesLiabilitiesOther Contributed CapitalPlant and Equipment (net)ReceivablesRetained Earnings
Current Assets Current Liabilities Intangible Assets Long-term Investments Long-term Liabilities Net Income / (Loss) Property, Plant and Equipment Stockholders' Equity Total Assets Total Current Assets Total Current Liabilities Total Intangible Assets Total Liabilities Total Liabilities and Stockholders' Equity Total Long-term Investments Total Long-term Liabilities Total Property, Plant and Equipment Total Stockholders' Equity			$
Liabilities and Stockholders' Equity
CashCommon StockGoodwillInventoriesLiabilitiesOther Contributed CapitalPlant and Equipment (net)ReceivablesRetained Earnings			$
CashCommon StockGoodwillInventoriesLiabilitiesOther Contributed CapitalPlant and Equipment (net)ReceivablesRetained Earnings
CashCommon StockGoodwillInventoriesLiabilitiesOther Contributed CapitalPlant and Equipment (net)ReceivablesRetained Earnings
CashCommon StockGoodwillInventoriesLiabilitiesOther Contributed CapitalPlant and Equipment (net)ReceivablesRetained Earnings
Current Assets Current Liabilities Intangible Assets Long-term Investments Long-term Liabilities Net Income / (Loss) Property, Plant and Equipment Stockholders' Equity Total Assets Total Current Assets Total Current Liabilities Total Intangible Assets Total Liabilities Total Liabilities and Stockholders' Equity Total Long-term Investments Total Long-term Liabilities Total Property, Plant and Equipment Total Stockholders' Equity			$

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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