Assume the following balance sheets are stated at book value. Suppose the fair market value of Loaf's fixed assets is $7,200 versus the $3,300 book value shown.Meat pays $10,200 for Loaf and raises the needed funds through an issue of long-term debt.Assume the purchase method of accounting is used.The post-merger balance sheet of Meat Co.will have total debt of ______ and total equity of ______.
A)$1,600; $11,500
B)$1,600; $15,400
C)$10,200; $15,400
D)$14,500; $11,500
E)$14,500; $15,400

Question

Assume the following balance sheets are stated at book value.  Suppose the fair market value of Loaf's fixed assets is $7,200 versus the $3,300 book value shown.Meat pays $10,200 for Loaf and raises the needed funds through an issue of long-term debt.Assume the purchase method of accounting is used.The post-merger balance sheet of Meat Co.will have total debt of ______ and total equity of ______.
A)$1,600; $11,500 
B)$1,600; $15,400 
C)$10,200; $15,400 
D)$14,500; $11,500 
E)$14,500; $15,400

Quizplus · Accepted Answer

Total post-merger debt = $1,800 + $1,100 + $900 + $500 + $10,200 = $14,500Total post-merger equity = Pre-merger equity of acquiring firm = $11,500

Assume the Following Balance Sheets Are Stated at Book Value