Details of this Paper

ACC - Myers Company Ltd. Problem




Question;Problem 9 Myers Company Ltd. was formed 10 years ago by the issuance of 22,000 common;shares to three shareholders. Four years later the company went public and issued;an additional 30,000 common shares.;The management of Myers is considering a takeover in which Myers would;purchase all of the assets and assume all of the liabilities of Norris Inc. Other costs;associated with the takeover would be as follows;Legal, appraisal, and? nders? fees $ 5,000;Costs of issuing shares 7,000;$12,000;Two alternative proposals are being considered;PROPOSAL 1;Myers would offer to pay $300,000 cash for the Norris net assets, to be financed by;a $300,000 bank loan due in five years.;PROPOSAL 2;Myers would issue 50,000 shares currently trading at $8 each for the Norris net;assets. Norris shareholders would be offered five seats on the 10-member board;of directors of Myers, and the management of Norris would be absorbed into the;surviving company.;Balance sheet data for the two companies prior to the combination are as;follows;Myers Norris;Book value Book value Fair value;Cash $ 140,000 $ 52,500 $ 52,500;Accounts receivable 167,200 61,450 56,200;Inventory 374,120 110,110 134,220;Land 425,000 75,000 210,000;Buildings (net) 250,505 21,020 24,020;Equipment (net) 78,945 17,705 15,945;$1,435,770 $337,785;Current liabilities $ 133,335 $ 41,115 41,115;Non-current liabilities ? 150,000 155,000;Common shares 500,000 100,000;Retained earnings 802,435 46,670;$1,435,770 $337,785;Required;(a) Prepare the journal entries of Myers for each of the two proposals being;considered.;(b) Prepare the balance sheet of Myers after the takeover for each of the proposals;being considered.


Paper#43887 | Written in 18-Jul-2015

Price : $22