(Solution) - Company A has purchased Company T Both companies balance sheets -(2025 Original AI-Free Solution)

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Company A has purchased Company T. Both companies' balance sheets (at book value) and income statements are shown below. Company A has identified the fair value of T's current assets to be $20 and its fixed assets to be $55. Any increase in fixed asset value is depreciated straight line over 5 years, and any increase in the current asset value is assumed to be inventory. Inventory turns over 2 times per year?

a. Create the balance sheet for the merged company, assuming that A acquired T for (i) $30 and (ii) $55 (both amounts in cash).
b. Assume that A has 100 shares outstanding before the merger and that T has 55 shares. Calculate the EPS for both companies.
c. Construct the income statement and calculate the EPS for the merged company based on a 1:1 share exchange?