income after 1 year if its net income exceed P3,000,000, there is a 90% chance of meeting the t ome. Determine the total EQUITY of BIGGEST CO. immediately after the business combination.
income after 1 year if its net income exceed P3,000,000, there is a 90% chance of meeting the t ome. Determine the total EQUITY of BIGGEST CO. immediately after the business combination.
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter15: Financial Statement Analysis
Section: Chapter Questions
Problem 30BEB: Klynveld Companys balance sheet shows total liabilities of 94,000,000, total stockholders equity of...
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Question
![On January 1, 2021, ABC acquired all the assets and assumed all the liabilities of DEF Co. for P4,500,000. Relevant information
follows:
ASSETS
Fair Values
Carrying Value
55,000
Cash
55,000
800,000
Receivable
800,000
Allowance for Doubtful Accounts
150,000
700,000
3,500,000
150,000
180,000
750,000
4,000,000
200,000
1,555,0000
Inventory
Land
Goodwill
Liabilities
1,555,000
DEC Co. has research and development projects with fair value of P100,000. ABC does not intend to use those R&Ds.
However, there have been exchange transactions involving the information generated from DEF, but those transactions are
infrequent.
> All fair value adjustments result to temporary differences but do not affect the tax bases of the assets and liabilities. The
tax rate is 30%.
ABC incurred P200,000 on general administrative costs of maintaining an internal acquisition department.
Compute the goodwill (gain on bargain purchase)?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7598bc75-715d-4f42-8095-6126b48202ad%2F4f7300b0-94ac-48d3-9d72-254d63dbc039%2F652hbta_processed.jpeg&w=3840&q=75)
Transcribed Image Text:On January 1, 2021, ABC acquired all the assets and assumed all the liabilities of DEF Co. for P4,500,000. Relevant information
follows:
ASSETS
Fair Values
Carrying Value
55,000
Cash
55,000
800,000
Receivable
800,000
Allowance for Doubtful Accounts
150,000
700,000
3,500,000
150,000
180,000
750,000
4,000,000
200,000
1,555,0000
Inventory
Land
Goodwill
Liabilities
1,555,000
DEC Co. has research and development projects with fair value of P100,000. ABC does not intend to use those R&Ds.
However, there have been exchange transactions involving the information generated from DEF, but those transactions are
infrequent.
> All fair value adjustments result to temporary differences but do not affect the tax bases of the assets and liabilities. The
tax rate is 30%.
ABC incurred P200,000 on general administrative costs of maintaining an internal acquisition department.
Compute the goodwill (gain on bargain purchase)?
![The following are the balances of BIG Company and GIRL Company as of January 1, 20x1.
Fair
Fair
Вook
Вook
BIG COMPANY
Market
Market
Value
Value
Value
Value
ASSE TS
LIABILITY AND EQUITY
105,000 Accounts Payable
470,000 Mortgage Payable
300,000 Ordinary Share, 20 par 2,000,000
Cash
105,000
300,000
330,000
Accounts Receivable
550,000
1,300,000 1,320,000
Inventory
Property, Plant and Equipment, net
220,000
4,790,000 4,500,000 Share Premium
?
775,000
?
Goodwill
100,000
100,000 Retained Earnings
1,390,000
?
Fair
Вook
Fair Market
Вook
GIRL COMPANY
Market
Value
Value
Value
Value
Cash
300,000
300,000 Accounts Payable
550,000
500,000
Accounts Receivable
600,000
470,000 Mortgage Payable
300,000 Ordinary Share, 20 par
2,500,000 2,480,000
350,000
8,910,000 10,000,000 Share Premium
Inventory
3,000,000
?
Property, Plant and Equipment, net
2,760,000
?
Goodwill
150,000
100,000 Retained Earnings
1,500,000
The companies combined their resources and formed BIGGEST Co. Research and development with a fair
market value of P120,000 was not included in the books of Big Company. An unrecorded interest payable
worth P20,000 was also not included in the books of Girl Company. The new company issues 16,000 shares
of 500 par value common stocks with fair value of P550 and pays additional 1,500,000 and incurs a mortgage
loan of P1,000,000. The company also paid a direct costs of 50,000 and indirect cost of 20,000. P15,000
direct cost and P5,000 stock issue cost remain unpaid. Chan Co. also pay BIG and GIRL additional P100,000
net income after 1 year if its net income exceed P3,000,000, there is a 90% chance of meeting the target
income. Determine the total EQUITY of BIGGEST CO. immediately after the business combination.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7598bc75-715d-4f42-8095-6126b48202ad%2F4f7300b0-94ac-48d3-9d72-254d63dbc039%2Fz0nnvid_processed.jpeg&w=3840&q=75)
Transcribed Image Text:The following are the balances of BIG Company and GIRL Company as of January 1, 20x1.
Fair
Fair
Вook
Вook
BIG COMPANY
Market
Market
Value
Value
Value
Value
ASSE TS
LIABILITY AND EQUITY
105,000 Accounts Payable
470,000 Mortgage Payable
300,000 Ordinary Share, 20 par 2,000,000
Cash
105,000
300,000
330,000
Accounts Receivable
550,000
1,300,000 1,320,000
Inventory
Property, Plant and Equipment, net
220,000
4,790,000 4,500,000 Share Premium
?
775,000
?
Goodwill
100,000
100,000 Retained Earnings
1,390,000
?
Fair
Вook
Fair Market
Вook
GIRL COMPANY
Market
Value
Value
Value
Value
Cash
300,000
300,000 Accounts Payable
550,000
500,000
Accounts Receivable
600,000
470,000 Mortgage Payable
300,000 Ordinary Share, 20 par
2,500,000 2,480,000
350,000
8,910,000 10,000,000 Share Premium
Inventory
3,000,000
?
Property, Plant and Equipment, net
2,760,000
?
Goodwill
150,000
100,000 Retained Earnings
1,500,000
The companies combined their resources and formed BIGGEST Co. Research and development with a fair
market value of P120,000 was not included in the books of Big Company. An unrecorded interest payable
worth P20,000 was also not included in the books of Girl Company. The new company issues 16,000 shares
of 500 par value common stocks with fair value of P550 and pays additional 1,500,000 and incurs a mortgage
loan of P1,000,000. The company also paid a direct costs of 50,000 and indirect cost of 20,000. P15,000
direct cost and P5,000 stock issue cost remain unpaid. Chan Co. also pay BIG and GIRL additional P100,000
net income after 1 year if its net income exceed P3,000,000, there is a 90% chance of meeting the target
income. Determine the total EQUITY of BIGGEST CO. immediately after the business combination.
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