Talmadge company is acquiring the target tyler inc in a, Ask an Expert

Accounting

Using fair value accounting for goodwill under FAS 141R

Case

Talmadge Company is acquiring the target Tyler, Inc in a merger. Tyler's market valuation is $6.0 bln , and its equity value on the balance sheet before any adjustments is 3.0 bln. During the merger process, Tyler's inventories will be written down by $200 mln, and its receivables will be written down by $300mln. On the other hand, under fair value accounting, its plant and equipment will increase in value by $700 mln, and its patents and trademarke will increase in value by $300 mln.

Question: If the prevailing market value of Tyler was $5.0 billion on the Nasdaq during the three months before merger announcement, what is the premium over market value that Talmadge paid for Tyler in dollars and percent?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9407387

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