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Problem 2-5 Balance sheets for Salt Company and Pepper Company on December 31, 2013, follow: Salt Pepper ASSETS Cash Receivables Inventories $97,130 118,880 138,730 711.180 $1,065,920 $183,620 248,880 241,372 1.121.360 $1,795,232 Plant assets $177,840 154,910 Total assets EQUITIES Accounts payable Mortgage payable Common stock, $20 par value Other contributed capital Retained earnings Total equities $245,513 190,000 870,400 253,410 235,909 $1,795,232 185,880 230,260 $1,065,920 Pepper Company tentatively plans to issue 27.540 shares of its $20 par value stock, which has a current market value of $39 per share nct of commissions and other issue costs. Pepper Company then plans to acquire the assets and assume the liabilities of Salt Company for a cash payment of $865,900 and $288,400 in long-term 8% notes payable. Pepper Company's receivables include $55,450 Owed by Salt Company. Pepper Company is willing to pay more than the book value of Salt Company assets because plant assets are undervalued by $234,090 and Salt Company has historically earned above-normal profits. Prepare a pro forma balance sheet showing the effects of these planned transactions. (If an amount reduces the account balance then enter with negative sign preceding the number e.g. -5,125 or parentheses e.g. (5,125).) DeleuUCIJ ZULJ Audited Pro Forma Balance Sheet Adjustments Balance Sheet Cash $183,620 $ Receivables 248,880 Inventories 241,372 Plant Assets 1,121,360 Goodwill Total Assets 1,795,232 Accounts Payable 245,513 Notes Payable, 8% 0 Mortgage Payable 190,000 Common Stock, $20 par 870,400 Additional Paid-in Capital 253,410 Retained Earnings 235,909 Total Liabilities and Equity 1,795,232 Problem 2-5 Balance sheets for Salt Company and Pepper Company on December 31, 2013, follow: Salt Pepper $97,130 118,880 138,730 711,180 $1,065,920 $183,620 248,880 241,372 1,121,360 $1,795,232 ASSETS Cash Receivables Inventories Plant assets Total assets EQUITIES Accounts payable Mortgage payable Common stock, $20 par value Other contributed capital Retained earnings Total equities $177,840 154,910 317,030 185,880 230,260 $1,065,920 $245,513 190,000 870,400 253,410 235,909 $1,795,232 Pepper Company tentatively plans to issue 27.540 shares of its $20 par value stock, which has a current market value of $39 per share net of commissions and other issue costs. Pepper Company then plans to acquire the assets and assume the liabilities of Salt Company for a cash payment of $865,900 and $288,400 in long-term 8% notes payable. Pepper Company's receivables include $55,450 owed by Salt Company. Pepper Company is willing to pay more than the book value of Salt Company assets because plant assets are undervalued by $234,090 and Salt Company has historically earned above normal profits. Prepare a pro forma balance sheet showing the effects of these planned transactions. (If an amount reduces the account balance then enter with negative sign preceding the number e.g. -5,125 or parentheses e.g. (5,125).) 1,005,20 51,795,232 Pepper Company tentatively plans to issue 27,540 shares of its $20 par value stock, which has a current market value of $39 per share net of commissions and oth issue costs, Pepper Company then plans to acquire the assets and assume the liabilities of Salt Company for a cash payment of $865,900 and $288,400 in long-tern 8% notes payable. Pepper Company's receivables include $55,450 owed by Salt Company. Pepper Company is willing to pay more than the book value of Salt Comp assets because plant assets are undervalued by $234,090 and Salt Company has historically earned above-normal profits. Prepare a pro forma balance sheet showing the effects of these planned transactions. (If an amount reduces the account balance then enter with negative si preceding the number e.g. -5,125 or parentheses e.g. (5,125).) PEPPER COMPANY Pro Forma Balance Sheet Giving Effect to Proposed Issue of Common Stock and Note Payable for All of the Common Stock of Salt Company under Purchase Accounting December 31, 2013 Audited Pro Forma Balance Sheet Adjustments Balance Sheet Cash $183,620 Receivables 248,880 Inventories 241,372 Plant Assets 1,121,360 Goodwill Total Assets 1,795,232 Audited Pro Forma Balance Sheet Adjustments Balance Sheet Cash $183,620 Receivables 248,880 Inventories 241,372 Plant Assets 1,121,360 Goodwill Total Assets 1,795,232 Accounts Payable 245,513 Notes Payable, 8% Mortgage Payable 190,000 Common Stock, $20 par 870,400 Additional Paid-in Capital 253,410 Retained Earnings 235,909 Total Liabilities and Equity 1,795,232

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