Assume that the following balance sheets are stated at book value. Suppose that Meat Co. purchases Loaf, Inc.

The fair market value of Loaf’s fixed assets is $11,500 versus the $8,300 book value shown. Meat pays $18,400 for Loaf and raises the needed funds through an issue of long-term debt. Construct the postmerger balance sheet under the purchase accounting method.

Transcribed Image Text:

Meat Co. Current assets $21,600 Current liabilities $ 7,320 Net fixed assets 51,600 Long-term debt 16,420 Equity 49,460 $73,200 Total $73,200 Total Loaf, Inc. Current assets $ 4,700 Current liabilities $ 1,800 Net fixed assets 8,300 Long-term debt 3,120 Equity 8,080 Total $13,000 Total $13,000