Negotiations have been made and on January 3, 2020, an agreement was reached and the net assets with a fair value of P6,000,000 were exchanged on this date for the following: • 100,000 shares in Alpha Company, par P10, market value, P25 P4,000,000 cash, half to be paid on date of exchange and the other payable in semi- annual installments of P500,000 beginning June 30, 2020. (assume a market rate of interest of 12%) • Non-cash assets, book value of P200,000, fair market value of P240,000 In issuing the equity instruments, Alpha Company incurred the following: 5 ככרי o underwriting cots and brokerage fees, P20,000 o transaction costs such as stamp duties and professional advisers fee, P5,000. • Legal and accounting fees related with the business combination, P30,000. How much is the goodwill on business combination? a. P472,500 b. P258,700 c. P598,500 d. P527,500 The total amount that will affect the P/L as of the date of acquisition is: a. P30,000 b. P55,000 с. Р25,000 d. P297,500 e. P-0- (36) -

Negotiations have been made and on January 3, 2020, an agreement was reached and the net assets with a fair value of P6,000,000 were exchanged on this date for the following: • 100,000 shares in Alpha Company, par P10, market value, P25 P4,000,000 cash, half to be paid on date of exchange and the other payable in semi- annual installments of P500,000 beginning June 30, 2020. (assume a market rate of interest of 12%) • Non-cash assets, book value of P200,000, fair market value of P240,000 In issuing the equity instruments, Alpha Company incurred the following: 5 ככרי o underwriting cots and brokerage fees, P20,000 o transaction costs such as stamp duties and professional advisers fee, P5,000. • Legal and accounting fees related with the business combination, P30,000. How much is the goodwill on business combination? a. P472,500 b. P258,700 c. P598,500 d. P527,500 The total amount that will affect the P/L as of the date of acquisition is: a. P30,000 b. P55,000 с. Р25,000 d. P297,500 e. P-0- (36) -

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section: Chapter Questions

Problem 7P

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On October 1, 2017, Alpha Company is interested in the business of Beta Company. Negotiations have been done and on January 3, 2018, an agreement was reached and the net assets with a fair value of P6,000,000 were exchanged on this date for the following:100,000 shares in Alpha Company, par P10, market value, P25P4,000,000 cash, half to be paid on date of exchange and the other payable in semi-annual installments of P500,000 beginning June 30, 2018. (assume a market rate of interest of 12% and round off present value factor to three decimal places)Non-cash assets, book value of P200,000, fair market value of P240,000 In issuing the equity instruments, Alpha Company incurred the following: -underwriting cots and brokerage fees, P20,000 -transaction costs such as stamp duties and professional advisers fee, P5,000.Legal and accounting fees related with the business combination, P30,000.Determine the amount of Goodwill.
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