In the previous problem, suppose the fair market value of Sorenson’s fixed assets is $10,000 versus the $5,000 book value shown. Sipowicz pays $14,000 for Sorenson and raises the needed funds through an issue of long-term debt. Construct the postmerger balance sheet now, assuming that the purchase method of accounting is used.

Data from Previous Problem

Assume that the following balance sheets are stated at book value. Construct a postmerger balance sheet assuming that Sipowicz purchases Sorenson and the pooling of interests method of accounting is used.

Transcribed Image Text:

Current assets Net fixed assets Total Sipowicz Co. $ 8,000 Current liabilities 12,000 Long-term debt Equity Total $20,000 $ 2,400 1,600 16,000 $20,000