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Homework answers / question archive / Assume that the following balance sheets are stated at book value
Assume that the following balance sheets are stated at book value. Jurion Co. Current assets $ 8,000 Current liabilities$ 4,500 Net fixed assets 23,000 Long-term debt 8,500 Equity 18,000 Total $31,000 Total $31,000 James's, Inc. Current assets $2,600 Current liabilities $1,900 Net fixed assets 7,100 Long-term debt 1,200 Equity 6,600 Total $9,700 Total $9,700 Suppose the fair market value of James's fixed assets is $12,000 versus the $7,100 book value shown. Jurion pays $17,000 for James's and raises the needed funds through an issue of long- term debt. Construct the post-merger balance sheet now using the acquisition method.
Given That Jurion acquired James Inc
Net asset value of James INC is
| Particulars | Amount |
| Current Assets | 2,600 |
| Fixed Assets | 12000 |
| Current Liabilities | -1900 |
| Long term Debt | -1200 |
| Net assets taken over | 11,500 |
Amount Paid to James is 17,000
Net assets taken over is 11,500
Hence the additional amount paid is Good will
Goodwill = 17,000 - 11500 = 5500
Hence the consolidated balance sheet is as follows
| Particulars | Amount | Particulars | Amount |
| Current Assets | 10,600 | Current Liabilities | 6400 |
| Net Fixed Assets | 35000 | Long term Debt | 26700 |
| Goodwill | 5500 | Equity | 18000 |
| Total | 51100 | Total | 51100 |
