In December 2017, Parent Company started negotiating for the acquisition of Sub Company. The offer was for shareholders of Sub Company to receive one Parent Company share with a market value of P125 for every four shares held in exchange for all assets of Sub Company (except cash and shares in listed companies). In addition to the shares, Parent Company will transfer its shares in listed companies which has a fair market value of P750,000. Parent Company will also pay Sub Company sufficient cash to enable Sub Company to pay all its creditors then Sub will liquidate. The shareholders of Sub Company accepted the offer. Balance Sheet on December 31, 2017 is given below: Parent 7,250,000 Sub 260,000 1,065,000 1,500,000 Cash Accounts receivable 1,700,000 2,800,000 Inventory Shares in listed company Land and building - net Property, plant & equipment Accounts payable Mortgage loan Equity, Common stock, P50 par 800,000 3,500,000 6,500,000 1,100,000 2,000,000 5,250,000 3,250,000 7,500,000 10,000,000 1,800,000 2,000,000 1,500,000 7,500,000 175,000 Retained earnings The net assets of Sub Company are reflected at their fair values except for the following: Inventory, P1,300,000 fair market value Land and building, P4,000,000 fair market value Shares in listed companies, P900,000 fair market value
In December 2017, Parent Company started negotiating for the acquisition of Sub Company. The offer was for shareholders of Sub Company to receive one Parent Company share with a market value of P125 for every four shares held in exchange for all assets of Sub Company (except cash and shares in listed companies). In addition to the shares, Parent Company will transfer its shares in listed companies which has a fair market value of P750,000. Parent Company will also pay Sub Company sufficient cash to enable Sub Company to pay all its creditors then Sub will liquidate. The shareholders of Sub Company accepted the offer. Balance Sheet on December 31, 2017 is given below: Parent 7,250,000 Sub 260,000 1,065,000 1,500,000 Cash Accounts receivable 1,700,000 2,800,000 Inventory Shares in listed company Land and building - net Property, plant & equipment Accounts payable Mortgage loan Equity, Common stock, P50 par 800,000 3,500,000 6,500,000 1,100,000 2,000,000 5,250,000 3,250,000 7,500,000 10,000,000 1,800,000 2,000,000 1,500,000 7,500,000 175,000 Retained earnings The net assets of Sub Company are reflected at their fair values except for the following: Inventory, P1,300,000 fair market value Land and building, P4,000,000 fair market value Shares in listed companies, P900,000 fair market value
Chapter20: Corporations: Distributions In Complete Liquidation And An Overview Of Reorganizations
Section: Chapter Questions
Problem 34P
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Question
Determine the total assets of Parent Company immediately after the merger.
Transcribed Image Text:In December 2017, Parent Company started negotiating for the acquisition of Sub Company. The offer was for shareholders of Sub
Company to receive one Parent Company share with a market value of P125 for every four shares held in exchange for all assets of Sub
Company (except cash and shares in listed companies). In addition to the shares, Parent Company will transfer its shares in listed
companies which has a fair market value of P750,000. Parent Company will also pay Sub Company sufficient cash to enable Sub
Company to pay all its creditors then Sub will liquidate. The shareholders of Sub Company accepted the offer.
Balance Sheet on December 31, 2017 is given below:
Sub
260,000
1,065,000
1,500,000
1,100,000
2,000,000
5,250,000
Parent
7,250,000
Cash
Accounts receivable
1,700,000
2,800,000
Inventory
Shares in listed company
Land and building – net
Property, plant & equipment
Accounts payable
Mortgage loan
Equity, Common stock, P50 par
800,000
3,500,000
6,500,000
3,250,000
2,000,000
1,500,000
7,500,000
175,000
7,500,000
10,000,000
1,800,000
Retained earnings
The net assets of Sub Company are reflected at their fair values except for the following:
Inventory, P1,300,000 fair market value
Land and building, P4,000,000 fair market value
Shares in listed companies, P900,000 fair market value
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