Silver Enterprises Has Acquired All Gold Mining in a Merger

question 54

Multiple Choice

Silver Enterprises has acquired All Gold Mining in a merger transaction.The following balance sheets represent the premerger book values for both firms. Assume the merger is treated as a purchase for accounting purposes.The market value of All Gold Mining's fixed assets is $3,800; the market values for current and other assets are the same as the book values.Assume that Silver Enterprises issues $5,000 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)$640; $4,610
• C)$890; $2,700
• D)$890; $4,610
• E)$890; $5,500

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Definitions:

Total Asset Holdings

The complete array of assets owned by an individual or entity, including cash, stocks, bonds, property, and more.

Financial Intermediary

An institution that acts as a middleman between savers and borrowers, facilitating the flow of funds in the financial system.

Goldman Sachs

A leading global investment banking, securities, and investment management firm that provides a wide range of financial services to a sizable and diversified client base.

Venture Capital

Financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential.