510 Post Acquisition problem - $ 17 mil $ 17 mil Long-term...

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Accy 510 Ralcorp, a large store-brand cereal producer, purchased the assets and assumed certain liabilities of Post brand cereals from Kraft Foods effective on the 4 th of August, 2008. Ralcorp issued $1,888 million of its own stock (valued at $58.70 per share for purposes of the transaction) in exchange for the Post assets and liabilities. (The actual transaction wasn’t this simple. We’ll assume this as a ‘base case’.) The Post assets and liabilities involved in the deal were: Book value Fair value Cash $ 73 mil $ 73 mil Accounts receivable 3 mil 3 mil Inventories 83 mil 104 mil Property, plant and equipment 425 mil 470 mil Other intangible assets 1,158 mil 947 mil Total assets $1,742 mil $1,597 mil Current liabilities
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Unformatted text preview: $ 17 mil $ 17 mil Long-term debt 965 mil 965 mil Deferred tax liability 77 mil 448 mil Other liabilities 74 mil 74 mil Total recorded liabilities $1,133 mil $1,504 mil Requirements : 1) Model the transaction described above: Who are the transactors? What did each transactor give up and receive in the transaction? How does this transaction differ from the other M&A transactions you read about in the Compass folder? 2) Propose a full treatment of how each party should account for this transaction on the transaction date, including the entries each would make on its own books. Fully explain why your treatment captures the economic effects on each transactor faithfully....
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