Refer to Problem 9. All of the facts and data are the same except that in the proposed takeover, Myers Company will purchase all of the outstanding common shares of Norris Inc.
Myers would offer to pay $400,000 cash for the Norris net assets, to be financed by a $400,000 bank loan due in five years. In addition, Myers would incur legal, appraisal, and finders’ fees for a total cost of $5,000.
Myers would issue 50,000 shares currently trading at $8 each for the Norris net assets. Other costs associated with the takeover would be as follows:
Legal, appraisal, and finders’ fees ... $ 5,000
Costs of issuing shares ........ 7,000
(a) Prepare the journal entries of Myers for each of the two proposals being considered.
(b) Prepare the consolidated balance sheet of Myers after the takeover for each of the proposals being considered.