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c. How much Resulting APIC is to be charged or debited for the stock issuance cost d. How much Retained earnings is to be charged or debited for the stock issuance cost

c. How much Resulting APIC is to be charged or debited for the stock issuance cost d. How much Retained earnings is to be charged or debited for the stock issuance cost

Financial Accounting
Financial Accounting
14th Edition
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Carl Warren, Jim Reeve, Jonathan Duchac
Chapter15: Investments And Fair Value Accounting
Section: Chapter Questions
Problem 2E
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Entity A acquired the net assets of Entity B by issuing 10,000 ordinary shares with par value of P10 and bonds payable with face amount of P500,000. The bonds are classified as financial liability at amortized cost. At the time of acquisition, the ordinary shares are publicly quoted at P20 per share. On the other hand, the bonds payable are trading at 110. Entity A paid P160,000 share issuance costs and P20,000 bond issue costs. Entity A also paid P40,000 acquisition related costs and P30,000 indirect costs of business combination. Before the date of acquisition, Entity A and Entity B reported the following data: Entity A Entity B 1,000,000 2,000,000 500,000 Noncurrent liabilities 1,150,000 500,000 40,000 810,000 Current assets 500,000 1,000,000 400,000 500,000 200,000 300,000 100,000 Noncurrent assets Current liabilities Ordinary shares Share premium Retained earnings At the time of acquisition, the current assets of Entity B have fair value of P1,200,000 while the noncurrent assets of Entity A have fair value of P1,300,000. On the same date, the current liabilities of Entity B have fair value of P600,000 while the noncurrent liabilities of Entity A have fair value of P500,000. a. What is the goodwill or gain on bargain purchase arising from business combination? b. What total amount should be expensed as incurred at the time of business combination? c. How much Resulting APIC is to be charged or debited for the stock issuance cost d. How much Retained earnings is to be charged or debited for the stock issuance cost
Transcribed Image Text:Entity A acquired the net assets of Entity B by issuing 10,000 ordinary shares with par value of P10 and bonds payable with face amount of P500,000. The bonds are classified as financial liability at amortized cost. At the time of acquisition, the ordinary shares are publicly quoted at P20 per share. On the other hand, the bonds payable are trading at 110. Entity A paid P160,000 share issuance costs and P20,000 bond issue costs. Entity A also paid P40,000 acquisition related costs and P30,000 indirect costs of business combination. Before the date of acquisition, Entity A and Entity B reported the following data: Entity A Entity B 1,000,000 2,000,000 500,000 Noncurrent liabilities 1,150,000 500,000 40,000 810,000 Current assets 500,000 1,000,000 400,000 500,000 200,000 300,000 100,000 Noncurrent assets Current liabilities Ordinary shares Share premium Retained earnings At the time of acquisition, the current assets of Entity B have fair value of P1,200,000 while the noncurrent assets of Entity A have fair value of P1,300,000. On the same date, the current liabilities of Entity B have fair value of P600,000 while the noncurrent liabilities of Entity A have fair value of P500,000. a. What is the goodwill or gain on bargain purchase arising from business combination? b. What total amount should be expensed as incurred at the time of business combination? c. How much Resulting APIC is to be charged or debited for the stock issuance cost d. How much Retained earnings is to be charged or debited for the stock issuance cost
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