Question

Your supervisor asks you to analyze the potential purchase of Drew Company by your firm, Pierson, Inc. You are provided the following information (in millions):


Required:
a. Prepare a pro forma combined balance sheet using purchase accounting. Note that Pierson pays $180 million in cash for Drew where the cash is obtained by issuing long-term debt.
b. Discuss how differences between pooling and purchase accounting for acquisitions affect future reported earnings of the Pierson/Drew business combination.
(CFAAdapted)


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  • CreatedJanuary 22, 2015
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