The managers of Savage Company own 10,000 of its 100,000 outstanding common shares.Swann Company is formed by the managers of Savage Company to take over Savage Company in a leveraged buyout.The managers contribute their shares in Savage Company and Swann Company then borrows $675,000 to purchase the remaining 90,000 shares of Savage Company for $600,000; the remaining $75,000 is used for working capital.Savage Company is then merged into Swann Company effective January 1,2016.Data relevant to Savage Company immediately prior to the leveraged buyout follow:
Required:
A.Prepare journal entries on Swann Company's books to reflect the effects of the leveraged buyout.
B.Determine the balance of each of the following immediately after the merger:
1.Current Assets
2.Plant Assets
3.Note Payable
4.Common Stock
Definitions:
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