PROBLEM VI A condensed Statement of Financial Position at December 31, 2017 for Acquiree Company follows: Carrying Value P1,368,000 1,592,500 585,000 P3,545,500 Fair Value Current Assets, including cash of P250,000 Plant Assets P1,300,000 1,500,000 Goodwill Total Assets Current Liabilities Long-term debt Ordinary shares, par P20 Share premium Retained earnings Total Liabilities and Equity 607,500 780,000 1,000,000 500,000 657,500 P3,545,500 607,600 797,500 On January 2, 2018, Acquirer Company paid P1,500,000 cash for the net assets of the Acquiree Company (excluding cash), after which the acquiree was dissolved. This amount includes a reimbursement of the acquisition related cost paid by the Acquiree Company. A total of P147,500 out of the pocket cost was paid on this date, P57,500 of which were paid by the Acquirer Company and the reminder pertains to legal fees directly related to the business combination which was paid by the Acquiree Company. 1. What amount of goodwill is recognized by the acquirer in its financial statements? 2. How much is the increase in the assets of the surviving company as a result of the business combination?

PROBLEM VI A condensed Statement of Financial Position at December 31, 2017 for Acquiree Company follows: Carrying Value P1,368,000 1,592,500 585,000 P3,545,500 Fair Value Current Assets, including cash of P250,000 Plant Assets P1,300,000 1,500,000 Goodwill Total Assets Current Liabilities Long-term debt Ordinary shares, par P20 Share premium Retained earnings Total Liabilities and Equity 607,500 780,000 1,000,000 500,000 657,500 P3,545,500 607,600 797,500 On January 2, 2018, Acquirer Company paid P1,500,000 cash for the net assets of the Acquiree Company (excluding cash), after which the acquiree was dissolved. This amount includes a reimbursement of the acquisition related cost paid by the Acquiree Company. A total of P147,500 out of the pocket cost was paid on this date, P57,500 of which were paid by the Acquirer Company and the reminder pertains to legal fees directly related to the business combination which was paid by the Acquiree Company. 1. What amount of goodwill is recognized by the acquirer in its financial statements? 2. How much is the increase in the assets of the surviving company as a result of the business combination?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 19E

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Distressed Corporation is undergoing liquidation. Relevant information as of January 1, 20x1 is shown below:ASSETSCarrying AmountNet Realizable ValueCash P250,000 P300,000Accounts Receivable 150,000 355,649Equipment-net 600,000 200,000Land 1,700,000 1,500,000TOTAL ASSETS P2,700,000 P2,355,649LIABILITIESCarrying AmountSettlement AmountAccounts Payable P1,000,000 P1,000,000Salaries Payable 500,000 500,000Notes Payable 800,000 805,234Loan Payable 800,000 800,000TOTAL LIABILITIES P3,100,000 P3,105,234EQUITYShare Capital P1,600,000Retained Earnings (2,000,000)Capital Deficiency (400,000)TOTAL LIABILITIES & EQUITY P2,700,000Additional Information:• Administrative expenses amounting to P180,744 are expected to be incurred during the liquidation process.• The equipment is pledged to the loan payable.• The land is pledged to the notes payable.QUESTIONS:1. How much are the total free assets? _____________2. How much are the unsecured liabilities with priority? _____________3. How much are…
Distressed Corporation is undergoing liquidation. Relevant information as of January 1, 20x1 is shown below:ASSETSCarrying AmountNet Realizable ValueCash P250,000 P300,000Accounts Receivable 150,000 355,649Equipment-net 600,000 200,000Land 1,700,000 1,500,000TOTAL ASSETS P2,700,000 P2,355,649LIABILITIESCarrying AmountSettlement AmountAccounts Payable P1,000,000 P1,000,000Salaries Payable 500,000 500,000Notes Payable 800,000 805,234Loan Payable 800,000 800,000TOTAL LIABILITIES P3,100,000 P3,105,234EQUITYShare Capital P1,600,000Retained Earnings (2,000,000)Capital Deficiency (400,000)TOTAL LIABILITIES & EQUITY P2,700,000Additional Information:• Administrative expenses amounting to P180,744 are expected to be incurred during the liquidation process.• The equipment is pledged to the loan payable.• The land is pledged to the notes payable. QUESTIONS: 7. What is the amount paid to unsecured creditors without priority? _____________8. What is the amount paid to partially secured…
Distressed Corporation is undergoing liquidation. Relevant information as of January 1, 20x1 is shown below:ASSETSCarrying AmountNet Realizable ValueCash P250,000 P300,000Accounts Receivable 150,000 355,649Equipment-net 600,000 200,000Land 1,700,000 1,500,000TOTAL ASSETS P2,700,000 P2,355,649LIABILITIESCarrying AmountSettlement AmountAccounts Payable P1,000,000 P1,000,000Salaries Payable 500,000 500,000Notes Payable 800,000 805,234Loan Payable 800,000 800,000TOTAL LIABILITIES P3,100,000 P3,105,234EQUITYShare Capital P1,600,000Retained Earnings (2,000,000)Capital Deficiency (400,000)TOTAL LIABILITIES & EQUITY P2,700,000Additional Information:• Administrative expenses amounting to P180,744 are expected to be incurred during the liquidation process.• The equipment is pledged to the loan payable.• The land is pledged to the notes payable. QUESTIONS: 4. How much are the net free assets? _____________5. What is the estimated deficiency? _____________6. What is the estimated recovery…
Distressed Corporation is undergoing liquidation. Relevant information as of January 1, 20x1 is shown below:ASSETSCarryingAmountNet RealizableValueCash P250,000 P300,000Accounts Receivable 150,000 355,649Equipment-net 600,000 200,000Land 1,700,000 1,500,000TOTAL ASSETS P2,700,000 P2,355,649LIABILITIESCarryingAmountSettlementAmountAccounts Payable P1,000,000 P1,000,000Salaries Payable 500,000 500,000Notes Payable 800,000 805,234Loan Payable 800,000 800,000TOTAL LIABILITIES P3,100,000 P3,105,234EQUITYShare Capital P1,600,000Retained Earnings (2,000,000)Capital Deficiency (400,000)TOTAL LIABILITIES & EQUITY P2,700,000Additional Information:• Administrative expenses amounting to P180,744 are expected to be incurred during the liquidationprocess.• The equipment is pledged to the loan payable.• The land is pledged to the notes payable.QUESTIONS:1. What is the amount paid to unsecured creditors without priority? 2. What is the amount paid to partially secured creditors?
Distressed Corporation is undergoing liquidation. Relevant information as of January 1, 20x1 is shown below:ASSETSCarryingAmountNet RealizableValueCash P250,000 P300,000Accounts Receivable 150,000 355,649Equipment-net 600,000 200,000Land 1,700,000 1,500,000TOTAL ASSETS P2,700,000 P2,355,649LIABILITIESCarryingAmountSettlementAmountAccounts Payable P1,000,000 P1,000,000Salaries Payable 500,000 500,000Notes Payable 800,000 805,234Loan Payable 800,000 800,000TOTAL LIABILITIES P3,100,000 P3,105,234EQUITYShare Capital P1,600,000Retained Earnings (2,000,000)Capital Deficiency (400,000)TOTAL LIABILITIES & EQUITY P2,700,000Additional Information:• Administrative expenses amounting to P180,744 are expected to be incurred during the liquidationprocess.• The equipment is pledged to the loan payable.• The land is pledged to the notes payable.QUESTIONS:1. How much are the total free assets? _____________2. How much are the unsecured liabilities with priority? _____________3. How much are the…
Grant Company purchased the net assets of Harding Company on January 1, 2015, and made the following entry to record the purchase:Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160,000Land. . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . 50,000Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000Note Payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000Account to be determined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000Common Stock ($1 par). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000Paid-in Capital in Excess of Par . . . . . . . . . . . . . . .…
The balance sheet of the proprietorship of Jacob as of June 30, 2018 showed the following assets andliabilities:Cash P 40,000Accounts Receivable 53,600Inventory 88,000Equipment 65,600Accounts Payable 63,520The cash balance included a 200- share certificate of BW Resources common at acquisition cost of P 1,600; the current market quotation is 70 per share. Of the accounts receivable, an estimated 5% is considered to be doubtful of collection. Certain inventory items, booked at a cost of P22,960, are currently worth P16,000. Depreciation has not been recorded; the equipment, acquired two years ago, has a remaining useful life of about eight more years. Prepaid expense of P 12,800 and accrued expense of P 6,120 have not been properly recognized. Emily and Bert will join Jacob in a partnership. Jacob will invest the net assets of his business, after effecting the appropriate adjustments, and he will be allowed credit for goodwill equal to 10% of his initial capital credit. Emily and Bert…
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