Question

Bilge Pumpworks and Seaworthy Rope Company agreed to merge on January 1, 20X3. On the date of the merger agreement, the companies reported the following data: Bilge Pumpworks Seaworthy Rope Company Fair Value Fair Value Balance Sheet Items Assets Cash & Receivables Inventory Land lant & Equipment Less: Accumulated Depreciation Book Value Book Value $ 98,000 108,000 108,000 416,000 (140,000) $98,000 160,000 152,000 318,000 $ 17000 27,000 7,000 213,000 (79,000) $ 17000 39,000 12,000 130,000 Total Assets S590,000 $728,000 185,000 $198,000 Liabilities & Equities Current Liabilities Capital Stock Capital in Excess of Par Value Retained Earnings $73,000 $29,000 $ 73.000 321,000 28,000 168,000 $ 29,000 70,500 3,000 72,500 Total Liabilities & Equities S590,000 $185,000 Bilge Pumpworks has 10,700 shares of its $30 par value shares outstanding on January 1, 20X3, and Seaworthy has 4,700 shares of $15 par value stock outstanding. The market values of the shares are $300 and $70, respectively.

Answer 1

Answer a.
BILGE PUMPWORKS AND SUBSIDIARY
Combined Balance Sheet
January 1, 20X3
Assets	Amt.	Liabilities & Equities	Amount
Cash & Receivables	115,000	Current Liabilities	102,000
Inventory	147,000	Capital Stock	342,000
Land	120,000	Capital in excees of Par	217,000
Plant & Equipment	546,000	Retained Earnings	168,000
Less: Accumulated Dep.	(140,000)
Goodwill	41,000
	829,000		829,000
Calculation of Goodwill:
Fair Value of Consideration given - 700 Shares X $300	210,000
Less: Fair Value of Net Assets acquired - ($198,000 - $29,000)	169,000
Goodwill	41,000
Answer b -1.
Issue 1,200 shares of Common
Stock Equity :
Capital Stock	357,000
Capital in excees of Par	352,000
Retained Earnings	168,000
Total Stock Equity	877,000
Answer b -2.
Issue 1,900 shares of Common
Stock Equity :
Capital Stock	378,000
Capital in excees of Par	541,000
Retained Earnings	168,000
Total Stock Equity	1,087,000
Answer b -3.
Issue 3,100 shares of Common
Stock Equity :
Capital Stock	414,000
Capital in excees of Par	865,000
Retained Earnings	168,000
Total Stock Equity	1,447,000