Consider the Following Premerger Information About Firm X and Firm

question 74

Multiple Choice

Consider the following premerger information about Firm X and Firm Y:
Assume that Firm X acquires Firm Y by paying cash for all the shares outstanding at a merger premium of $3 per share.Also assume that neither firm has any debt before or after the merger.What is the value of the total equity of the combined firm,XY,if the purchase method of accounting is used?

• A) $1,274,000
• B) $1,316,000
• C) $1,352,000
• D) $1,422,000
• E) $1,427,000

---

Definitions:

Underapplied Manufacturing Overhead

A situation where the actual manufacturing overhead costs exceed the applied (or allocated) manufacturing overhead costs.

Allocation

Allocation refers to the process of distributing resources, costs, or revenues among various accounts or departments within an organization based on predetermined criteria.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold in a company, including materials, labor, and manufacturing overhead.

Cost of Goods Available

The total cost of inventory that is available for sale at the beginning of a period, including purchases made during that period.