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.