Three companies, A, L, and M, whose December 31, Year 5, balance sheets below, have agreed to combine as at January 1, Year 6. Each of the companies has a very small proportion of an intensely competitive market dominated by four much larger companies. In order to survive, they have decided to merge into one company. The merger agreement states that Company A will buy the assets and liabilities of each of the other two companies by issuing 27,000 common shares to Company L and 25,000 common shares to Company M, after which the two companies will be wound up.
Company A's shares are currently trading at $5 per share.
Company A will incur the following costs:
Costs of issuing shares .... $ 8,000
Professional fees ...... 20,000
The following information has been assembled regarding the three companies:
Prepare the balance sheet of Company A on January 2, Year 6, after Company L and Company M have been wound up.