Problem 1-3 On January 2, 2020, P Company purchased the net asset of S Company by paying P500,000 cash and issuing 100,000 shares of stocks at P3,000,000 fair market value. The par value of P's shares is P24 per share. Book value and fair value data on the Statement of Financial Positions on January 2, 2020 are as follows: (refer to next page) CHAPTER 1: BUSINESS C OMBINATION Page | 27 P Company S Company Book Value Fair Value 300,000 980,000 600,000 1,064,000 80,000 3,024,000 Book Value Fair Value Cash Accounts Receivable 4,600,000 1,000,000 1,500,000 1,800,000 4,600,000 1,000,000 1,300,000 1,460,000 300,000 980,000 710,000 1,520,000 90,000 3,600,000 Inventory Building & Equipment, net Goodwill Total 8,900,000 8,360,000 Liabilities Share Capital Share Premium Retained Earnings 570,000 1,000,000 1,600,000 900,000 5,400,000 8,900,000 1,000,000 570,000 600,000 960,000 1,470,000 3,600,000 Total P incurred and paid legal and brokerage fees of P50,000 for business combination; share issue costs of P30,000 and P20,000 indirect acquisition costs. It is determinable that contingency fee of P150,000 (estimated fair value) would be paid within the year. Required: 1. Determine the amount of consideration. 2. Compute the goodwill (gain) on combination. 3. Journalize the transactions in the books of the acquirer.
Problem 1-3 On January 2, 2020, P Company purchased the net asset of S Company by paying P500,000 cash and issuing 100,000 shares of stocks at P3,000,000 fair market value. The par value of P's shares is P24 per share. Book value and fair value data on the Statement of Financial Positions on January 2, 2020 are as follows: (refer to next page) CHAPTER 1: BUSINESS C OMBINATION Page | 27 P Company S Company Book Value Fair Value 300,000 980,000 600,000 1,064,000 80,000 3,024,000 Book Value Fair Value Cash Accounts Receivable 4,600,000 1,000,000 1,500,000 1,800,000 4,600,000 1,000,000 1,300,000 1,460,000 300,000 980,000 710,000 1,520,000 90,000 3,600,000 Inventory Building & Equipment, net Goodwill Total 8,900,000 8,360,000 Liabilities Share Capital Share Premium Retained Earnings 570,000 1,000,000 1,600,000 900,000 5,400,000 8,900,000 1,000,000 570,000 600,000 960,000 1,470,000 3,600,000 Total P incurred and paid legal and brokerage fees of P50,000 for business combination; share issue costs of P30,000 and P20,000 indirect acquisition costs. It is determinable that contingency fee of P150,000 (estimated fair value) would be paid within the year. Required: 1. Determine the amount of consideration. 2. Compute the goodwill (gain) on combination. 3. Journalize the transactions in the books of the acquirer.
Cornerstones of Financial Accounting
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ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter10: Stockholder's Equity
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Transcribed Image Text:Problem 1-3
On January 2, 2020, P Company purchased the net asset of S Company by paying P500,000
cash and issuing 100,000 shares of stocks at P3,000,000 fair market value. The par value of P's
shares is P24 per share. Book value and fair value data on the Statement of Financial Positions
on January 2, 2020 are as follows: (refer to next page)
CHAPTER 1: BUSINESS COMBINATION
Page | 27
P Company
S Company
Fair Value
300,000
980,000
600,000
1,064,000
80,000y
3,024,000
Book Value
Book Value
300,000
980,000
710,000
1,520,000
90,000
3,600,000
Fair Value
Cash
4,600,000
1,000,000
1,500,000
1,800,000
4,600,000
1,000,000
1,300,000
1,460,000
Accounts Receivable
Inventory
Building & Equipment, net
Goodwill
Total
8,900,000
8,360,000
Liabilities
Share Capital
1,000,000
1,600,000
900,000
5,400,000
8,900,000
1,000,000
570,000
600,000
960,000
1,470,000
3,600,000
570,000
Share Premium
Retained Earnings
Total
P incurred and paid legal and brokerage fees of P50,000 for business combination; share issue
costs of P30,000 and P20,000 indirect acquisition costs. It is determinable that contingency fee
of P150,000 (estimated fair value) would be paid within the year.
Required:
1. Determine the amount of consideration.
2. Compute the goodwill (gain) on combination.
3. Journalize the transactions in the books of the acquirer.
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