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- On September 1, Parent Company acquired Subsidiary Company. The consideration is payable as follows: · an immediate payment of P2,000,000;· a further payment of P750,000 after one year if profit before interest and tax for the first year following acquisition exceeds P350,000; and· a further payment of P750,000 after two years if profit before interest and tax for the second year following acquisition exceeds P400,000.At the date of acquisition, the fair value of these two payments is assessed as P500,000. How much is the total consideration transferred recognized as a result of the business combination?On September 17, 2018, Ziltech, Inc., entered into an agreement to sell one of its divisions that qualifies as a component of the entity according to generally accepted accounting principles. By December 31, 2018, the company’sfiscal year-end, the division had not yet been sold, but was considered held for sale. The net fair value (fair valueminus costs to sell) of the division’s assets at the end of the year was $11 million. The pretax income from operations of the division during 2018 was $4 million. Pretax income from continuing operations for the year totaled$14 million. The income tax rate is 40%. Ziltech reported net income for the year of $7.2 million.Required:Determine the book value of the division’s assets on December 31, 2018.On January 1, 2020, Shell Corporation acquired the net assets of Petron Inc. The acquirertransferred cash amounting to P3,000,000 and obligates itself to pay additional P1,500,000 afterone year if the market price of Shell Corporation increased by 50%. The businesscombination resulted to a goodwill of P300,000.At the date of acquisition, it is estimated that there is a 70% probability that the condition will bemet.On March 1, 2020, The operations of Shell Corporation was halted due to COVID 19 –pandemic lockdown and restrictions, this resulted to a 30% decrease in probability estimation ofthe contingent consideration. 1. What is the value of contingent consideration on March 1, 2020?a. 1,500,000b. 1,050,000c. 450,000d. 600,000 2. What is the effect of the March 1, 2020 information to the recognized goodwill?a. Goodwill decreased by P450,000.b. Gain on bargain purchase will be recognized in the amount of P150,000.c. Gain on bargain purchase will be recognized in the amount of…
- An entity acquired an investment in equity instrument for P800,000 on 31 March 2020. The direct acquisition costs incurred were P140,000. On 31 December 2020 the fair value of the instrument was P1,100,000 and the transaction costs that would be incurred on sale were estimated at P120,000. If the investment is designated as FA@FVTOCI, what gain would be recognized in the financial statements for the year ended 31 December 2020?On December 29, 20x1, an entity commits itself to purchase a financial asset for ₱10,000, whichis its fair value on commitment date (trade date). Transaction costs are immaterial. OnDecember 31, 20x1 and on January 4, 20x2 (settlement date) the fair values of the asset are₱12,000 and ₱15,000, respectively. If the entity uses the settlement date accounting and that theinvestment is classified as held for trading, how much is the carrying amount of the investment inthe December 31, 20x1 statement of financial position?On July 1, 2020, Philip Company acquired the net assets of Shayne Company for a consideration transferred of P32,000,000. At the acquisition date, the carrying amount of Shayne’s net assets was P20,000 and a temporary appraisal of P28,000,000 was attributed to the net assets. At December 31, 2020, a provisional fair value of P27,000,000 was attributed to the net assets. An additional valuation received on March 31, 2021 increased this provisional fair value by P2,000,000 and on May 31, 2021 this fair value was finalized at P30,000,000. Goodwill is tested for impairment on December 31, 2021 and deemed impaired by P200,000. What amount should the surviving company present for goodwill in its separate statement of financial position as of December 31, 2020?
- Use the following to answer questions 8 through 10: On May 1, 2021, Jazzie Co. agreed to sell the assets of its Mister Division to Shawna Inc. for $80 million. The sale was completed on December 31, 2021. Jazzie’s year ends on December 31st. The following additional facts pertain to the transaction: The Mister Division qualifies as a component of an entity as defined by GAAP. Mister's net assets totaled $48 million on Jazzie's books at the time of the sale. Mister incurred a pre-tax operating loss of $10 million in 2021. Jazzie’s income tax rate is 40%. In the 2021 income statement for Jazzie Co., they would report after tax income from discontinued operations of: Group of answer choices $9.2 million. $13.2 million. $22 million. $26 million.A business combination involves a contingent consideration. It is considered 80% probable that a payment of $700,000 will become payable three years after the acquisition date. Using a 5% discount rate, what liability should be recorded for the contingent consideration on the acquisition date? Multiple Choice $700,000 $560,000 $483,749 $604,686A business combination involves a contingent consideration. It is considered 80% probable that a payment of $700,000 will become payable three years after the acquisition date. Using a 5% discount rate, what liability should be recorded for the contingent consideration on the acquisition date? Select one: a. $604,686 b. $700,000 c. $483,749 d. $560,000
- An entity acquired an investment in equity instrument for P800,000 on 31 March 2020. The direct acquisition costs incurred were P140,000. On 31 December 2020 the fair value of the instrument was P1,100,000 and the transaction costs that would be incurred on sale were estimated at P120,000. If the investment is designated as FA@FVTOCI, what gain would be recognized in the financial statements for the year ended 31 December 2020? Group of answer choices A) P420,000 B) P160,000 C) Nil D) P40,000On September 30, 2021, when the carrying amount of the assets of a major subsidiary was P70,000,000, Young Company signed a legally binding contract to sell the subsidiary. The sale is expected to be completed by January 31, 2022 at a selling price of P60,000,000. In addition, prior to January 31, 2022, the sale contract obliged the entity to terminate the employment of certain employees of the business segment incurring an expected termination cost of P5,000,000 to be paid on June 30, 2022. The segment's revenue and expenses for 2021 were P40,000,000 and P45,000,000 respectively. The income tax rate is 30%. What amount should be reported as loss from discontinued operation for 2021? a. 10,500,000 b. 20,000.000 c. 15.000.000 d. 14,000,000On January 1, 20x1, Ai Inc. acquired all the assets and liabilities of Pon Corp. forP1,200,000. Pon Corpassets and liabilities have a fair value of P2,500,000 andP1,300,000, respectively.Additional Information:● Ai is the exclusive distributor of Pon's products. The agreement has aremaining term of five years. The contract does not have any cancellationclause.● The agreement has a fair value of P400,000, of which 30% is "at the market.”The off-market component is unfavorable to the Ai Inc.● No assets and liabilities related to the contract were recognized.How much is the "gain of bargain purchase" to be recognized by Ai Inc. as a result ofthe business combination?