The Managers of Savage Company Own 10,000 of Its 100,000

question 4

Essay

The managers of Savage Company own 10,000 of its 100,000 outstanding common shares. Swann Company is formed by the managers of Savage Company to take over Savage Company in a leveraged buyout. The managers contribute their shares in Savage Company and Swann Company then borrows $675,000 to purchase the remaining 90,000 shares of Savage Company for $600,000; the remaining $75,000 is used for working capital. Savage Company is then merged into Swann Company effective January 1, 2016. Data relevant to Savage Company immediately prior to the leveraged buyout follow: Required:
A. Prepare journal entries on Swann Company's books to reflect the effects of the leveraged buyout.
B. Determine the balance of each of the following immediately after the merger:
1. Current Assets
2. Plant Assets
3. Note Payable
4. Common Stock

---

Definitions:

Values Clarification

A process of becoming more conscious of and naming what we value or consider important in life, often used in moral and career decision-making.

Risk Factor

An aspect of personal behavior or lifestyle, an environmental exposure, or a genetic characteristic that is associated with an increased occurrence of disease or injury.

Veracity

A moral principle that holds that people should tell the truth and not lie.

Painful Procedure

A medical or therapeutic intervention that causes discomfort or pain to the patient, often requiring specific pain management techniques.