Silver Enterprises Has Acquired All Gold Mining in a Merger

question 48

Multiple Choice

Silver Enterprises has acquired All Gold Mining in a merger transaction. The pre-merger balance sheet for Silver Enterprises has current assets of $1,500, other assets of $400, net fixed assets of $2,300, current liabilities of $1,000, long-term debt of $500 and owners' equity of $,2700. The pre-merger balance sheet for All Gold Mining shows current assets of $600, other assets of $210, net fixed assets of $1,600, current liabilities of $500, and equity of $1,910. Assume the merger is treated as a purchase for accounting purposes. The market value of All Gold Mining's fixed assets is $2,900; the market values for current and other assets are the same as the book values. Assume that Silver Enterprises issues $4,000 in new long-term debt to finance the acquisition. The post-merger balance sheet will reflect goodwill of ________ and total equity of ________.

• A) $640; $2,700
• B) $790; $4,610
• C) $790; $2,700
• D) $890; $4,610
• E) $890; $2,700

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Definitions:

Revenue

The complete sum of earnings derived from selling goods or offering services that are central to a company's core business.

Net Sales

The total revenue from sales less returns, allowances, and discounts.

Cost of Goods Sold

The straightforward costs related to the production of goods a company distributes, encompassing materials and labor expenses.

Gross Profit

The financial measure representing the difference between sales revenue and the cost of goods sold, indicating the efficiency of a company in managing its labor and supplies in production.