Prepare balance sheet after an acquisition
On January 2, 2011, Pet Corporation enters into a...

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Prepare balance sheet after an acquisition
On January 2, 2011, Pet Corporation enters into a business combination with Sea Corporation in which Sea is dissolved. Pet pays $1,650,000 for Sea, the consideration consisting of 66,000 shares of Pet $10 par common stock with a market value of $25 per share. In addition, Pet pays the following expenses in cash at the time of the merger:

Finders’ fee

$ 70,000

Accounting and legal fees

130,000

Registration and issuance costs of securities

80,000

$280,000

Balance sheet and fair value information for the two companies on December 31, 2010, immediately before the merger, is as follows (in thousands):

Pet Book Value

Sea Book Value

Sea Fair Value

Cash

$ 300

$ 60

Accounts receivable—net

460

100

80

Inventories

1,040

160

240

Land

800

200

300

Buildings—net

2,000

400

600

Equipment—net

1,000

600

500

Total assets

$5,600

$1,520

$1,780

Accounts payable

$ 600

$ 80

Note payable

1,200

400

360

Capital stock, $10 par

1,600

600

Other paid-in capital

1,200

100

Retained earnings

1,000

340

Total liabilities and owners’ equity

$5,600

$1,520

REQUIRED : Prepare a balance sheet for Pet Corporation as of January 2, 2011, immediately after the merger, assuming the merger is treated as an acquisition.

David · Accepted Answer

Pet Corporation 
Balance Sheet at January 2, 2011 
Assets 
Cash (300,000 + 60,000 – 280,000)                                                                      80,000 
Accounts receivable – net (460,000 + 80,000 = 540,000)                         540,000 
Inventories 1,040,000 + 240,000 = 1,280,000)                                                          1,280,000 
Land (8000,000 + 300,000 = 1,100,000)                                                         1,100,000 
Buildings – net (2,000,000 + 600,000 = 2,600,000)                        2,600,000 
Equipment – net (1,000,000 + 500,000 = 1,500,000)                                            1,500,000 
Goodwill (1,650,000 – 1,340,000 = 310,000)                                            310,

Prepare balance sheet after an acquisition On January 2, 2011, Pet Corporation enters into a business combination with Sea Corporation in which Sea is dissolved. Pet pays $1,650,000 for Sea, the...

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