Silver Enterprises Has Acquired All Gold Mining in a Merger

question 84

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:

Money Supply Growth Rate

The rate at which the amount of money available in an economy is growing, influencing inflation and economic stability.

Phillips Curve

A concept suggesting an inverse relationship between the rate of inflation and the rate of unemployment within an economy.

Desired Expenditures

The amount of spending households, firms, and the government wish to make, usually influenced by economic conditions and policies.

Inflation

A persistent upsurge in the average cost of goods and services across an economy over time.