prepare a pro forma balance sheet showing the effects of these planned transactions 594140
Asset Acquisition, Pro forma
Balance sheets for Salt Company and Pepper Company on December 31, 2010, follow:
|
Salt |
Pepper |
|
|
ASSETS |
||
|
Cash |
$95,000 |
$180,000 |
|
Receivables |
117,000 |
230,000 |
|
Inventories |
134,000 |
231,400 |
|
Plant assets |
690,000 |
1,236,500 |
|
Total assets |
$1,036,000 |
$1,877,900 |
|
EQUITIES |
||
|
Accounts payable |
$180,000 |
$ 255,900 |
|
Mortgage payable |
152,500 |
180,000 |
|
Common stock, $20 par value |
340,000 |
900,000 |
|
Other contributed capital |
179,500 |
270,000 |
|
Retained earnings |
184,000 |
272,000 |
|
Total equities |
$1,036,000 |
$1,877,900 |
Pepper Company tentatively plans to issue 30,000 shares of its $20 par value stock, which has a current market value of $37 per share net of commissions and other issue costs. Pepper Company then plans to acquire the assets and assume the liabilities of Salt Company for a cash payment of $800,000 and $300,000 in long-term 8% notes payable. Pepper Company”s receivables include $60,000 owed by Salt Company. Pepper Company is willing to pay more than the book value of Salt Company assets because plant assets are undervalued by $215,000 and Salt Company has historically earned above-normal profits.
Required:
Prepare a pro forma balance sheet showing the effects of these planned transactions.