Assume the Following Balance Sheets Are Stated at Book Value

question 9

Multiple Choice

Assume the following balance sheets are stated at book value. Suppose the fair market value of Loaf's fixed assets is $7,200 versus the $3,300 book value shown.Meat pays $10,200 for Loaf and raises the needed funds through an issue of long-term debt.Assume the purchase method of accounting is used.The post-merger balance sheet of Meat Co.will have total debt of ______ and total equity of ______.

• A)$1,600; $11,500
• B)$1,600; $15,400
• C)$10,200; $15,400
• D)$14,500; $11,500
• E)$14,500; $15,400

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Definitions:

Loan Payment

A payment made to reduce the outstanding balance of a loan, often made on a monthly basis.

Compounded Monthly

Pertains to the frequency in which interest earnings are added to the principal investment amount, occurring every month.

Monthly Payment

Monthly payment is the amount of money paid each month towards the repayment of a loan, mortgage, or other financial obligation.

Loan

Money borrowed that is expected to be paid back with interest.