Question: Your supervisor asks you to analyze the potential purchase of

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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