Consider the actual purchase several years ago of boat maker Bayliner by Brunswick Corporation, modified slightly to simplify the numbers. The purchase price was $400 million for a 100% interest. 

Assume that the book value and the fair-market value of Bayliner’s net assets were $400 million. The balance sheet accounts immediately after the transaction were approximately (in millions):

1. Using the balance-sheet-equation format, prepare a tabulation of the consolidated balance sheet accounts immediately after the acquisition.

2. Suppose Bayliner had sales of $500 million and expenses of $350 million for the year, and Brunswick had sales of $1,800 million and expenses of $1,400 million. Prepare income statements for Brunswick, for Bayliner, and for the consolidated company. Assume that neither Brunswick nor Bayliner sold items to the other.

3. Using the balance sheet equation, present the effects of the operations for the year on the accounts of Bayliner and Brunswick. Also tabulate the consolidated balance sheet accounts at the end of the year. Assume that liabilities are unchanged.

4. Suppose Bayliner paid a cash dividend of $12 million. What accounts in number 3 would be affected and by how much?

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Brunswick Bayliner Investment in Bayliner Cash and other assets Total assets Liabilities Stockholders equity Total equities 400 1,000 $1,400 800 600 $1,400 600 $600 $200 400 $600