Question

Silver Enterprises has acquired All Gold Mining in a merger transaction. The following balance sheets represent the premerger book values for both firms:

Silver Enterprises
Current assets	$	6,200		Current liabilities	$	4,200
Other assets		2,600		Long-term debt		8,900
Net fixed assets		29,300		Equity		25,000
Total	$	38,100		Total	$	38,100

All Gold Mining
Current assets	$	2,700		Current liabilities	$	1,630
Other assets		790		Long-term debt		0
Net fixed assets		12,400		Equity		14,260
Total	$	15,890		Total	$	15,890

Construct the balance sheet for the new corporation assuming that the transaction is treated as a purchase for accounting purposes. The market value of All Gold Mining's fixed assets is $13,650; the market values for current and other assets are the same as the book values. Assume that Silver Enterprises issues $20,000 in new long-term dept to finance the acquisition.

Silver Enterprises, post-merger
Current assets	$		Current liabilities	$
Other assets			Long-term debt
Net fixed assets			Equity
Goodwill
Total	$		Total	$

Answer 1

Hello

Silver Enterprises, post-merger
Current assets	8900		Current liabilities	5830
Other assets	3390		Long-term debt	28900
Net fixed assets	42950		Equity	25000
Goodwill	4490
Total	59730		Total	59730
Long term debt=8900+20000=28900$
Calculation of Goodwill/Capital reserve
Net Fixed assets	13650
Other assets	790
Current assets	2700
Goodwill(B/F)	4490
Current liabilities	1630
Purchase consideration	20000

I hope this clears your doubt.

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