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    Argosy University/ Phoniex University/
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    Phoniex University
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Category > Accounting Posted 25 Sep 2017 My Price 7.00

Petrello Company

Acquisition Method

The balance sheets of Petrello Company and Sanchez Company as of January 1, 2011, are presented below. On that date, after an extended period of negotiation, the two companies agreed to merge. To effect the merger, Petrello Company is to exchange its unissued common stock for all the outstanding shares of Sanchez Company in the ratio of ½ share of Petrello for each share of Sanchez. Market values of the shares were agreed on as Petrello, $48; Sanchez, $24. The fair values of Sanchez Company"s assets and liabilities are equal to their book values with the exception of plant and equipment, which has an estimated fair value of $720,000.

 

Petrelto

Sanchez

Cash

$ 480,000

$ 200,000

Receivables

480,000

240,000

Inventories

2,000,000

240,000

Plant and equipment (net)

3,840,000

800,000

Total assets

$6,800,000

$1,480,000

Liabilities

$1,200,000

$ 320,000

Common stock, $16 par value

3,440,000

800,000

Other contributed capital

400,000

—0—

Retained earnings

1,760,000

360,000

Total equities

$6,800,000

$1,480,000

Required:

Prepare a balance sheet for Petrello Company immediately after the merger.

Answers

Maurice Tutor
(5)
Status NEW Posted 25 Sep 2017 08:09 PM My Price 7.00

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