C12-Chp-07-8-Prb-Sol-Buds-Luxury-Vehicles-2012

C12-Chp-07-8-Prb-Sol-Buds-Luxury-Vehicles-2012 - File Page...

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File: 807fb9b6d8b50fbbf8e2d42ba67155ca0f115ae7.xls Page 1 of 3 Bud's Luxury Vehicles, Inc. Balance Sheet. December 31, 2011 Divisions Total Total Fair Autos Motorhomes Book Value Market Value Cash $1,000,000 $1,000,000 $2,000,000 $2,000,000 Inventory 2,500,000 2,500,000 5,000,000 5,000,000 Building and Land 1,500,000 1,500,000 3,000,000 8,000,000 Total Book value $5,000,000 $5,000,000 $10,000,000 Total market value of all assets $15,000,000 Debt - Common Stock (Owner’s Investment) 2,000,000 Retained Earnings 8,000,000 Total Debt and Equity (Book Value) $10,000,000 Total market value of stockholder's equity $15,000,000 (FMV of corporate stock may not be equal to FMV of net assets, but it is in this case.) 1 Bud began the auto sales business in 1970 with a $2,000,000 investment, and has owned and operated it as a C Corporation since that time. 2 In 1982, the corporation bought additional land, built the motorhome sales building and began selling motorhomes. The real estate has appreciated substantially. Each dealership is located in a building valued at $4,000,000 (including land). The inventory has a value equal to its cost (B.V.) shown in the financial statements. 3 The corporation typically has taxable income of about $400,000 per year, after deducting reasonable salaries for employees and officers. 4 The two dealerships have equal sales and each contributes about $200,000 per year to taxable income. 5 The Possible Corporate Acquisition Big Corporation operates auto dealerships throughout the United States. Big Corp. has offered $15,000,000 for all stock in Bud's Luxury Vehicles, Inc.
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C12-Chp-07-8-Prb-Sol-Buds-Luxury-Vehicles-2012 - File Page...

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