Consider the following premerger information about firm X and firm Y: .............................................Firm X ...............Firm Y Total earnings

Question:

Consider the following premerger information about firm X and firm Y:

.............................................Firm X ...............Firm Y

Total earnings ..........................$105,000 ..............$48,300

Shares outstanding .......................43,900 ...............33,000

Per-share values:

Market ......................................$ 53 ..................$ 19

Book ........................................$ 21 ...................$ 9

Assume that Firm X acquires Firm Y by paying cash for all the shares outstanding at a merger premium of $5 per share. Assuming that neither firm has any debt before or after the merger, construct the post merger balance sheet for Firm X assuming the use of the purchase accounting method.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...