Assume that Wal-Mart decided to acquire major retailing rival Target Corporation on January 31, 2010. Target’s fiscal year ended on January 30, 2010, but you may assume that the year ends are identical to keep the calculations simpler. Visit the two firms’ Web sites to acquire their annual reports on this date (Wal-Mart lists this as the 2010 annual report, while Target lists this as a 2009 annual report).
Assumptions:
Wal-Mart issued 1 billion shares of $.10 par value common stock to acquire 100% of Target’s outstanding common shares.
Wal-Mart stock had a fair market value of $50 per share on this date.
Fair values of all assets and liabilities are equal to book values, except as noted.
■ Inventories were undervalued by 10 percent.
■ Property and equipment were undervalued by 20 percent, except construction in progress, where book value equaled fair value.
REQUIRED
1. Prepare all the journal entries on Wal-Mart’s books to account for the acquisition of Target. Assume Target’s Accumulated Other Comprehensive Loss of $581 million is also acquired. Assume Target is dissolved.
2. Prepare the balance sheet of Wal-Mart Corporation immediately after the acquisition of Target.