Acquiring company buys 100% of Target Companies equity for $5 million in cash. As an analyst, you are given the preserver balance sheet for the two companies. Assuming plant and equipment are revalued upward by $500,000, what will be the combined companies' shareholders' equity plus total liabilities? What is the difference between Acquiring Company's shareholders' equity and the shareholders' equity of the combined companies?
Please show your work.
Pre-merger balance sheets for above companies
Acquiring Company Target Company
Current Assets 600,000 800,000
Plant & Equipment 1,200,000 1,500,000
Total Assets 1,800,000 2,300,000
Long-term Debt 500,000 300,000
Shareholders' Equity 1,300,000 2,000,000
Shareholders' equity +
Total Liabilities 1,800,000 2,300,000