Moon Company is contemplating the acquisition of Yount, Inc., on January 1, 2015. If Moon acquires Yount,

Question:

Moon Company is contemplating the acquisition of Yount, Inc., on January 1, 2015. If Moon acquires Yount, it will pay $730,000 in cash to Yount and acquisition costs of $20,000.

The January 1, 2015, balance sheet of Yount, Inc., is anticipated to be as follows:

Assets Cash equivalents Accounts receivable Inventory Depreciable fixed assets Accumulated depreciation Total

Fair values agree with book values except for the inventory and the depreciable fixed assets, which have fair values of $70,000 and $400,000, respectively.

Your projections of the combined operations for 2015 are as follows:

Combined sales. Combined cost of goods sold, including Yount's beginning inventory, at book value, which will

Depreciation on Yount fixed assets is straight-line using a 20-year life with no salvage value.

Required

1. Prepare a value analysis for the acquisition and record the acquisition.
2. Prepare a pro forma income statement for the combined firm for 2015. Show supporting calculations for consolidated income. Ignore tax issues.

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