Question

Assume that the following balance sheets are stated at book value. Meat Co.   Current assets $...

Assume that the following balance sheets are stated at book value.

Meat Co.
  Current assets $ 12,600   Current liabilities $ 5,600
  Net fixed assets 36,900   Long-term debt 10,100
  Equity 33,800
     Total $ 49,500     Total $ 49,500
Loaf, Inc.
  Current assets $ 3,700   Current liabilities $ 1,600
  Net fixed assets 7,600   Long-term debt 2,200
  Equity 7,500
     Total $ 11,300     Total $ 11,300

Suppose the fair market value of Loaf’s fixed assets is $11,100 versus the $7,600 book value shown. Meat pays $17,800 for Loaf and raises the needed funds through an issue of long-term debt. Construct the postmerger balance sheet, assuming that the purchase method of accounting is used.

Meat Co., post-merger
  Current assets $   Current liabilities $
  Fixed assets   Long-term debt
  Goodwill   Equity
     Total $      Total $

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