Reference no: EM132689986

D ltd and H corporation are both engaged in the manufacture of computers. On july 1 , year 5 they agree to a merger whereby D will issue 300,000 shares with a current market value of $9 each for the net assets of Summarized balance sheet of the two companies prior to the merger are presented below:

                                                         D ltd                    H corporations

                                            Carrying amount        Carrying amount                Fair value

Current assets                   450,000                      500,000                        510,000

Non-current assets(net)    4,950,000                         3,200,000                       3,500,000

Current liabilities                 5,400,000                              3,700,000

Long-term debt 600,000 800,000

Common shares 1,100,000 900,000

Retained earnings 2500,000 500,000

In determine the purchase price the management of d ltd noted that h corporation leaves a manufacture facility under an operating lease that has terms the are favourable relative to market terms. However, the lease agreement explicitly prohibits transfer of the lease through either sale or sublease. An independent appraiser placed a value of $60,000 on this favourable lease agreement.

Problem 1: Prepare the Balance sheet of D after the merger.