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Business Combination-Acquisition of Net Assets

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ADVANCED FINANCIAL ACCOUNTING 2
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  BUSINESS COMBINATION   ACQUISITION OF NET ASSETS   1. On January 1, 2012, Marks Company purchased the net assets of Spencer Company by paying P 850,000 cash and issuing shares of stocks at P 3,110,000 fair market value. Book value and fair value data on the Statement of Financial Position on January 1, 2012 are as follows:   Marks Company   Spencer Company   Book Value   Fair Value   Book Value   Fair Value   Cash   P 4,600,000   P 4,600,000   P 300,000   P 300,000   Accounts Receivable   1,000,000   1,000,000   980,000   980,000   Inventory   1,500,000   1,300,000   710,000   600,000   Building & Equipment, net 1,800,000   1,460,000   1,520,000   1,064,000   Goodwill   - -   90,000 80,000   TOTAL ASSETS   8,900,000   8,360,000   3,600,000   3,024,000   ========== ========== =========== =========   Liabilities   P 1,000,000   P 1,000,000   P 570,000   P 570,000   Capital Stock   1,600,000   600,000   Additional paid in capital   900,000   960,000   Retained Earnings   5,400,000 1,470,000_ TOTAL LIAB & SHE   8,900,000   3,600,000   ==========   ==========   Marks incurred and paid legal and brokerage fees of P 25,000 for business combination; stocks issuance cost of P 23,000 and Pn 12,000 indirect acquisition costs. It is determinable that contingency fee of P 11,800 would be paid within the year.   I. Total assets after the business combination   a. P 11,991,200   c. P 12,531,200   b. P 13,381,200   d. P 12,351,200   II. Stockholders’ equity after the business combination   a. P 7,900,000   c. P 10,937,600   b. P 11,010,000 d. P 10,949,400   2. A condensed Statement of Financial Position at August 31, 2012 and related current fair value data for Apple Company are presented below;   Apple Company   Statement of Financial Position   August 31, 2012   Carrying Amount   Fair Value   Assets:   Current assets   P 368,000   P 404,000   Plant assets   592,000   690,000   Patent, net   58,500__   48,000   Total Assets   1,019,000   Liabilities & SHE:   Current liabilities   P 107,500   P 107,000      Long term debt   280,000   297,500   Capital stock, P 20 par   210,000   Retained earnings   421,500__   Total Liabilities and SHE   1,019,000   On September 1, 2012, Eve Corporation issued 10,700 shares of its P 24 par value common stocks (current fair value P 33 per share) and P 145,000 cash for the net assets of Apple Company. Of the P 47,500 out of pocket costs paid by Eve on September 1, 2012, P 26,500 were indirect costs and the remainder were legal fees and finder’s fees related to the business combination.   I. How much is the net increase in the stockholders equity in the books of the surviving company as a result of the business combination?   a. P 592,000   c. P 518,500   b. P 545,000   d. P 496,200   3. The following are the Statement of Financial Position of Top and Shop Corporation as of December 31, 2011:   Top   Shop   Cash   P 150,000   P 10,000   Receivable   35,000   7,500   Inventories   40,000   12,500   Land   37,500   50,000   Building, net   110,000   50,000   Equipment, net   75,000_ 120,000_   Total Assets   P 447,500   P 250,000   ==========   ==========   Accounts payable   P 92,500   P 30,000   Ordinary shares, P 10 par   250,000   100,000   Share premium   25,000   70,000   Retained Earnings   80,000_   50,000_   Total Liabilities & SHE   P 447,500   P 250,000   ==========   ===========   Top decided to acquire the net assets of Shop on January 1, 2012. Top will issue 9,500 ordinary shares with market value of P 17 per share and cash purchase price of P 14,000, Shop will be dissolved. The book values reflect fair values except for building of Top, which has a net realizable of P 21,000 and P 64,000 respectively. Top also paid for the cost of registering and issuing securities amounting to P 7,500, direct costs of combination amounting to P 11,000 and indirect costs amounting to P 5,000.   I. How much is the total assets after the combination?   a. P 720,000   c. P 722,000   b. P 706,000   d. P 682,500   II. How much is the total shareholders’ equity after the combination?   a. P 516,000   c. P 560,000   b. P 509,000   d. P 493,000  

DEA Notes

Mar 29, 2018

elems01

Mar 29, 2018
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