Myers Company Ltd. was formed 10 years ago by the issuance of 42,000 common shares to three shareholders. Four years later, the company went public and issued an additional 30,000 common shares. The management of Myers is considering a takeover in which Myers would purchase all of the assets and assume all of the liabilities of Norris Inc. Two alternative proposals are being considered: PROPOSAL 1 Myers would offer to pay $560,000 cash for the Norris net assets. In addition, Myers would incur legal, appraisal, and finders fees for a total cost of $7,000. PROPOSAL 2 Myers would issue 70,000 shares currently trading at $8.00 each for the Norris net assets. Other costs associated with the takeover would be as follows: Legal, appraisal, and finders fees $ 7,000 Costs of issuing shares 9,000 $ 16,000 Norris shareholders would be offered five seats on the 10-member board of directors of Myers, and the management of Norris would be absorbed into the surviving company. Balance sheet data for the two companies prior to the combination are as follows: Myers Norris Carrying Amount Carrying Amount Fair Value Cash $ 550,000 $ 72,500 $ 72,500 Accounts receivable 187,200 81,450 76,200 Inventory 394,120 130,110 154,220 Land 1,055,000 95,000 230,000 Buildings (net) 270,505 41,020 44,020 Equipment (net) 98,945 37,705 35,945 $ 2,555,770 $ 457,785 Current liabilities $ 153,335 $ 61,115 61,115 Non-current liabilities 600,000 170,000 175,000 Common shares 520,000 120,000 Retained earnings 1,282,435 106,670 $ 2,555,770 $ 457,785 Required: (a) Prepare the journal entries in the accounting records of Myers Company Ltd. to record the takeover of Norris Inc. under Proposal 1 and Proposal 2. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) Proposal 1 Proposal 2 (b) Prepare the balance sheet of Myers after the takeover for each of the proposals being considered. Proposal 1 Proposal 2
