Purchase accounting methods

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Reference no: EM1355763

Balance Sheet for Mergers:

Consider the following pre-merger information about firm X and firm Y.

Firm X Firm Y

Total earnings $40,000 $15,000

Shares outstanding (per mkt Shares)

Market $49 $18
Book $20 $7

Assume that firm X acquires firm Y by paying cash for all the shares outstanding at a merger premium of $5 per share. Assuming that neither firm has any debt before of after the merger, construct the post merger balance sheet for firm X assuming the use of (a) pooling of interests accounting methods and (b) purchase accounting methods.

Reference no: EM1355763

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