Assume the Following Balance Sheets Are Stated at Book Value

question 48

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:

Perfectly Inelastic

A demand situation where the quantity demanded does not change regardless of the price level.

Excise Tax

is a tax directly levied on certain goods, services, or activities, often with the intent to reduce their consumption or generate revenue.

Market Price

The current price at which a good or service can be bought or sold in a given market, reflecting supply and demand dynamics.

Tax Revenue

The wealth gathered by governments by imposing taxes.