Balance sheet immediately following the merger. Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

Question

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Answer 1

Question

Chapter 1, Problem 1.37P

a.

To determine

To prepare: Balance sheet immediately following the merger.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

a.

Expert Solution

Explanation of Solution

The balance sheet immediately following the acquisition:

Company BSCombined Balance SheetJanuary 1, 20X3
Assets	Amount ($)	Amount ($)	Liabilities	Amount ($)	Amount ($)
Current Assets			Current Liabilities
Cash and Receivables		110,000	Current Liabilities		100,000
Inventory		142,000
			Common Stock
Fixed Assets			Capital Stock		214,000
Land		115,000	Capital in excess of Par value		216,000
Plant and equipment	540,000		Retained Earnings		240,000
Less: Accumulated depreciation	(150,000)	390,000
Goodwill		13,000

		770,000			770,000

Table (1)

Working Note:

1. Calculation of goodwill:

Particulars	Amount ($)
Fair value of compensation given (700×$300)	210,000
Less: Fair value of net assets acquired ($217,000−$20,000)	(197,000)
Goodwill	13,000

Table (2)

b.

1

To determine

To prepare: The stockholders’ equity section of the combined company by issuing 1,100 shares of common.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

b.

1

Expert Solution

Explanation of Solution

Calculation of stockholders’ equity:

Particulars	Amount ($)
Capital Stock ($200,000+($20×1,100))	222,000
Capital in excess of par value [$20,000+($300−$20)×1,100]	328,000
Retained earnings	240,000
Total	790,000

Table (3)

2

To determine

To prepare: The stockholders’ equity section of the combined company by issuing 1,800 shares of common.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

2

Expert Solution

Explanation of Solution

Calculation of stockholders’ equity:

Particulars	Amount ($)
Capital Stock ($200,000+($20×1,800))	236,000
Capital in excess of par value [$20,000+($300−$20)×1,800]	524,000
Retained earnings	240,000
Total	1,000,000

Table (4)

3

To determine

To prepare: The stockholders’ equity section of the combined company by issuing 3,000 shares of common.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

3

Expert Solution

Explanation of Solution

Calculation of stockholders’ equity:

Particulars	Amount ($)
Capital Stock ($200,000+($20×3,000))	260,000
Capital in excess of par value [$20,000+($300−$20)×3,000]	860,000
Retained earnings	240,000
Total	1,360,000

Table (5)

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MG Corporation exchange 150,000 shares of newly issued P1 par value common stock with a fair market value of P25 per share for all of the outstanding PS par value common stock of GC Company and such is then dissolved. MG Corp. paid the following costs and expenses related to the business combination: Costs of special shareholders’ meeting to vote on the merger P13,000 Registering and issuing securities 14,000 Accounting and legal fees 9,000 Salaries of MG Corp.’s employees assigned to the implementation of the merger 15,000 Cost of closing duplicate facilities 11,000 In the business combination of MG Corp and GC Company Group of answer…

P Company issues Php500,000 shares of its own Php10 par common stock for the net assets of S Company in a merger consummated on July 1, 2020. On this date, P stock is quoted at P20 per share. Summary of Balance sheet data for the two companies at July 1, 2020, just before combination, are as follows: Calculate the retained earnings of P Company immediately after the combination:

Answer 2

Question

Chapter 1, Problem 1.37P

a.

To determine

To prepare: Balance sheet immediately following the merger.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

a.

Expert Solution

Explanation of Solution

The balance sheet immediately following the acquisition:

Company BSCombined Balance SheetJanuary 1, 20X3
Assets	Amount ($)	Amount ($)	Liabilities	Amount ($)	Amount ($)
Current Assets			Current Liabilities
Cash and Receivables		110,000	Current Liabilities		100,000
Inventory		142,000
			Common Stock
Fixed Assets			Capital Stock		214,000
Land		115,000	Capital in excess of Par value		216,000
Plant and equipment	540,000		Retained Earnings		240,000
Less: Accumulated depreciation	(150,000)	390,000
Goodwill		13,000

		770,000			770,000

Table (1)

Working Note:

1. Calculation of goodwill:

Particulars	Amount ($)
Fair value of compensation given (700×$300)	210,000
Less: Fair value of net assets acquired ($217,000−$20,000)	(197,000)
Goodwill	13,000

Table (2)

b.

1

To determine

To prepare: The stockholders’ equity section of the combined company by issuing 1,100 shares of common.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

b.

1

Expert Solution

Explanation of Solution

Calculation of stockholders’ equity:

Particulars	Amount ($)
Capital Stock ($200,000+($20×1,100))	222,000
Capital in excess of par value [$20,000+($300−$20)×1,100]	328,000
Retained earnings	240,000
Total	790,000

Table (3)

2

To determine

To prepare: The stockholders’ equity section of the combined company by issuing 1,800 shares of common.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

2

Expert Solution

Explanation of Solution

Calculation of stockholders’ equity:

Particulars	Amount ($)
Capital Stock ($200,000+($20×1,800))	236,000
Capital in excess of par value [$20,000+($300−$20)×1,800]	524,000
Retained earnings	240,000
Total	1,000,000

Table (4)

3

To determine

To prepare: The stockholders’ equity section of the combined company by issuing 3,000 shares of common.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

3

Expert Solution

Explanation of Solution

Calculation of stockholders’ equity:

Particulars	Amount ($)
Capital Stock ($200,000+($20×3,000))	260,000
Capital in excess of par value [$20,000+($300−$20)×3,000]	860,000
Retained earnings	240,000
Total	1,360,000

Table (5)

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Answer 3

Question

Chapter 1, Problem 1.37P

a.

To determine

To prepare: Balance sheet immediately following the merger.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

a.

Expert Solution

Explanation of Solution

The balance sheet immediately following the acquisition:

Company BSCombined Balance SheetJanuary 1, 20X3
Assets	Amount ($)	Amount ($)	Liabilities	Amount ($)	Amount ($)
Current Assets			Current Liabilities
Cash and Receivables		110,000	Current Liabilities		100,000
Inventory		142,000
			Common Stock
Fixed Assets			Capital Stock		214,000
Land		115,000	Capital in excess of Par value		216,000
Plant and equipment	540,000		Retained Earnings		240,000
Less: Accumulated depreciation	(150,000)	390,000
Goodwill		13,000

		770,000			770,000

Table (1)

Working Note:

1. Calculation of goodwill:

Particulars	Amount ($)
Fair value of compensation given (700×$300)	210,000
Less: Fair value of net assets acquired ($217,000−$20,000)	(197,000)
Goodwill	13,000

Table (2)

b.

1

To determine

To prepare: The stockholders’ equity section of the combined company by issuing 1,100 shares of common.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

b.

1

Expert Solution

Explanation of Solution

Calculation of stockholders’ equity:

Particulars	Amount ($)
Capital Stock ($200,000+($20×1,100))	222,000
Capital in excess of par value [$20,000+($300−$20)×1,100]	328,000
Retained earnings	240,000
Total	790,000

Table (3)

2

To determine

To prepare: The stockholders’ equity section of the combined company by issuing 1,800 shares of common.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

2

Expert Solution

Explanation of Solution

Calculation of stockholders’ equity:

Particulars	Amount ($)
Capital Stock ($200,000+($20×1,800))	236,000
Capital in excess of par value [$20,000+($300−$20)×1,800]	524,000
Retained earnings	240,000
Total	1,000,000

Table (4)

3

To determine

To prepare: The stockholders’ equity section of the combined company by issuing 3,000 shares of common.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

3

Expert Solution

Explanation of Solution

Calculation of stockholders’ equity:

Particulars	Amount ($)
Capital Stock ($200,000+($20×3,000))	260,000
Capital in excess of par value [$20,000+($300−$20)×3,000]	860,000
Retained earnings	240,000
Total	1,360,000

Table (5)

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Answer 4

Question

Chapter 1, Problem 1.37P

a.

To determine

To prepare: Balance sheet immediately following the merger.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

a.

Expert Solution

Explanation of Solution

The balance sheet immediately following the acquisition:

Company BSCombined Balance SheetJanuary 1, 20X3
Assets	Amount ($)	Amount ($)	Liabilities	Amount ($)	Amount ($)
Current Assets			Current Liabilities
Cash and Receivables		110,000	Current Liabilities		100,000
Inventory		142,000
			Common Stock
Fixed Assets			Capital Stock		214,000
Land		115,000	Capital in excess of Par value		216,000
Plant and equipment	540,000		Retained Earnings		240,000
Less: Accumulated depreciation	(150,000)	390,000
Goodwill		13,000

		770,000			770,000

Table (1)

Working Note:

1. Calculation of goodwill:

Particulars	Amount ($)
Fair value of compensation given (700×$300)	210,000
Less: Fair value of net assets acquired ($217,000−$20,000)	(197,000)
Goodwill	13,000

Table (2)

b.

1

To determine

To prepare: The stockholders’ equity section of the combined company by issuing 1,100 shares of common.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

b.

1

Expert Solution

Explanation of Solution

Calculation of stockholders’ equity:

Particulars	Amount ($)
Capital Stock ($200,000+($20×1,100))	222,000
Capital in excess of par value [$20,000+($300−$20)×1,100]	328,000
Retained earnings	240,000
Total	790,000

Table (3)

2

To determine

To prepare: The stockholders’ equity section of the combined company by issuing 1,800 shares of common.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

2

Expert Solution

Explanation of Solution

Calculation of stockholders’ equity:

Particulars	Amount ($)
Capital Stock ($200,000+($20×1,800))	236,000
Capital in excess of par value [$20,000+($300−$20)×1,800]	524,000
Retained earnings	240,000
Total	1,000,000

Table (4)

3

To determine

To prepare: The stockholders’ equity section of the combined company by issuing 3,000 shares of common.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

3

Expert Solution

Explanation of Solution

Calculation of stockholders’ equity:

Particulars	Amount ($)
Capital Stock ($200,000+($20×3,000))	260,000
Capital in excess of par value [$20,000+($300−$20)×3,000]	860,000
Retained earnings	240,000
Total	1,360,000

Table (5)

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Answer 5

Chapter 1, Problem 1.37P

a.

To determine

To prepare: Balance sheet immediately following the merger.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

a.

Expert Solution

Explanation of Solution

The balance sheet immediately following the acquisition:

Company BSCombined Balance SheetJanuary 1, 20X3
Assets	Amount ($)	Amount ($)	Liabilities	Amount ($)	Amount ($)
Current Assets			Current Liabilities
Cash and Receivables		110,000	Current Liabilities		100,000
Inventory		142,000
			Common Stock
Fixed Assets			Capital Stock		214,000
Land		115,000	Capital in excess of Par value		216,000
Plant and equipment	540,000		Retained Earnings		240,000
Less: Accumulated depreciation	(150,000)	390,000
Goodwill		13,000

		770,000			770,000

Table (1)

Working Note:

1. Calculation of goodwill:

Particulars	Amount ($)
Fair value of compensation given (700×$300)	210,000
Less: Fair value of net assets acquired ($217,000−$20,000)	(197,000)
Goodwill	13,000

Table (2)

b.

1

To determine

To prepare: The stockholders’ equity section of the combined company by issuing 1,100 shares of common.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

b.

1

Expert Solution

Explanation of Solution

Calculation of stockholders’ equity:

Particulars	Amount ($)
Capital Stock ($200,000+($20×1,100))	222,000
Capital in excess of par value [$20,000+($300−$20)×1,100]	328,000
Retained earnings	240,000
Total	790,000

Table (3)

2

To determine

To prepare: The stockholders’ equity section of the combined company by issuing 1,800 shares of common.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

2

Expert Solution

Explanation of Solution

Calculation of stockholders’ equity:

Particulars	Amount ($)
Capital Stock ($200,000+($20×1,800))	236,000
Capital in excess of par value [$20,000+($300−$20)×1,800]	524,000
Retained earnings	240,000
Total	1,000,000

Table (4)

3

To determine

To prepare: The stockholders’ equity section of the combined company by issuing 3,000 shares of common.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

3

Expert Solution

Explanation of Solution

Calculation of stockholders’ equity:

Particulars	Amount ($)
Capital Stock ($200,000+($20×3,000))	260,000
Capital in excess of par value [$20,000+($300−$20)×3,000]	860,000
Retained earnings	240,000
Total	1,360,000

Table (5)

Answer 6

Chapter 1, Problem 1.37P

a.

To determine

To prepare: Balance sheet immediately following the merger.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

a.

Expert Solution

Explanation of Solution

The balance sheet immediately following the acquisition:

Company BSCombined Balance SheetJanuary 1, 20X3
Assets	Amount ($)	Amount ($)	Liabilities	Amount ($)	Amount ($)
Current Assets			Current Liabilities
Cash and Receivables		110,000	Current Liabilities		100,000
Inventory		142,000
			Common Stock
Fixed Assets			Capital Stock		214,000
Land		115,000	Capital in excess of Par value		216,000
Plant and equipment	540,000		Retained Earnings		240,000
Less: Accumulated depreciation	(150,000)	390,000
Goodwill		13,000

		770,000			770,000

Table (1)

Working Note:

1. Calculation of goodwill:

Particulars	Amount ($)
Fair value of compensation given (700×$300)	210,000
Less: Fair value of net assets acquired ($217,000−$20,000)	(197,000)
Goodwill	13,000

Table (2)

Answer 7

Chapter 1, Problem 1.37P

a.

To determine

To prepare: Balance sheet immediately following the merger.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

Answer 8

a.

Expert Solution

Explanation of Solution

The balance sheet immediately following the acquisition:

Company BSCombined Balance SheetJanuary 1, 20X3
Assets	Amount ($)	Amount ($)	Liabilities	Amount ($)	Amount ($)
Current Assets			Current Liabilities
Cash and Receivables		110,000	Current Liabilities		100,000
Inventory		142,000
			Common Stock
Fixed Assets			Capital Stock		214,000
Land		115,000	Capital in excess of Par value		216,000
Plant and equipment	540,000		Retained Earnings		240,000
Less: Accumulated depreciation	(150,000)	390,000
Goodwill		13,000

		770,000			770,000

Table (1)

Working Note:

1. Calculation of goodwill:

Particulars	Amount ($)
Fair value of compensation given (700×$300)	210,000
Less: Fair value of net assets acquired ($217,000−$20,000)	(197,000)
Goodwill	13,000

Table (2)

Answer 9

a.

Expert Solution

Answer 10

a.

Expert Solution

Answer 11

Expert Solution

Answer 12

b.

1

To determine

To prepare: The stockholders’ equity section of the combined company by issuing 1,100 shares of common.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

b.

1

Expert Solution

Explanation of Solution

Calculation of stockholders’ equity:

Particulars	Amount ($)
Capital Stock ($200,000+($20×1,100))	222,000
Capital in excess of par value [$20,000+($300−$20)×1,100]	328,000
Retained earnings	240,000
Total	790,000

Table (3)

Answer 13

b.

1

To determine

To prepare: The stockholders’ equity section of the combined company by issuing 1,100 shares of common.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

Answer 14

b.

1

Expert Solution

Explanation of Solution

Calculation of stockholders’ equity:

Particulars	Amount ($)
Capital Stock ($200,000+($20×1,100))	222,000
Capital in excess of par value [$20,000+($300−$20)×1,100]	328,000
Retained earnings	240,000
Total	790,000

Table (3)

Answer 15

b.

1

Expert Solution

Answer 16

b.

1

Expert Solution

Answer 17

Expert Solution

Answer 18

2

To determine

To prepare: The stockholders’ equity section of the combined company by issuing 1,800 shares of common.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

2

Expert Solution

Explanation of Solution

Calculation of stockholders’ equity:

Particulars	Amount ($)
Capital Stock ($200,000+($20×1,800))	236,000
Capital in excess of par value [$20,000+($300−$20)×1,800]	524,000
Retained earnings	240,000
Total	1,000,000

Table (4)

Answer 19

2

To determine

To prepare: The stockholders’ equity section of the combined company by issuing 1,800 shares of common.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

Answer 20

2

Expert Solution

Explanation of Solution

Calculation of stockholders’ equity:

Particulars	Amount ($)
Capital Stock ($200,000+($20×1,800))	236,000
Capital in excess of par value [$20,000+($300−$20)×1,800]	524,000
Retained earnings	240,000
Total	1,000,000

Table (4)

Answer 21

2

Expert Solution

Answer 22

2

Expert Solution

Answer 23

Expert Solution

Answer 24

3

To determine

To prepare: The stockholders’ equity section of the combined company by issuing 3,000 shares of common.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

3

Expert Solution

Explanation of Solution

Calculation of stockholders’ equity:

Particulars	Amount ($)
Capital Stock ($200,000+($20×3,000))	260,000
Capital in excess of par value [$20,000+($300−$20)×3,000]	860,000
Retained earnings	240,000
Total	1,360,000

Table (5)

Answer 25

3

To determine

To prepare: The stockholders’ equity section of the combined company by issuing 3,000 shares of common.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

Answer 26

3

Expert Solution

Explanation of Solution

Calculation of stockholders’ equity:

Particulars	Amount ($)
Capital Stock ($200,000+($20×3,000))	260,000
Capital in excess of par value [$20,000+($300−$20)×3,000]	860,000
Retained earnings	240,000
Total	1,360,000