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G Company is considering the takeover of K Company whereby it will issue 7,400 common shares for all of the outstanding shares of K Company. K Company will become a wholly owned subsidiary of G Company. Prior to the acquisition, G Company had 13,000 shares outstanding, which were trading at $8.00 per share. The following information has been assembled:

		G Company						K Company
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
Current assets	$	47,000		$	54,500		$	24,000		$	16,200
Plant assets (net)		74,000			84,000			34,000			39,000
	$	121,000					$	58,000
Current liabilities	$	21,400			21,400		$	6,400			6,400
Long-term debt		22,000			26,000			3,900			4,600
Common shares		44,000						24,000
Retained earnings		33,600						23,700
	$	121,000					$	58,000

Required:

(a) Prepare G Companys consolidated balance sheet immediately after the combination using the direct approach and accounting for the combination with

(i) The acquisition method

(ii) The new-entity method

(b) Calculate the current ratio and debt-to-equity ratio for G Company under both methods. (Round your answers to 2 decimal places.)

	New Entity Method		Acquisition Method
Current ratio
Debt-to-equity ratio

(c) Prepare G Companys consolidated balance sheet immediately after the combination using the worksheet approach and the acquisition method. (Leave no cells blank - be certain to enter "0" wherever required. Values in the first two columns and last column (the "parent", "subsidiary" and "consolidated" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Elimination" entries columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Omit $ sign in your response.)

Consolidated Financial Statement Working Paper
G Company
Consolidated Balance Sheet
				Eliminations
	G Company	K Company		Dr.		Cr.	Consolidated
Current assets	$	$		$		$	$
Plant assets (net)
Goodwill
Investment in K Company
Acquisition differential
	$	$					$
Current liabilities	$	$					$
Long-term debt
Common shares
Retained earnings
	$	$					$
			Total	$		$

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