10. Red Corporation will issue ordinary shares with a par value P10 for the net assets of Blue Company. Red's ordinary share has a current market value of P40 per share. Blue's statement of financial position on the date of acquisition follow: P320,000 Current assets Property and equipment Liabilities Common stock, P5 par P80,000 880,000 Additional paid in capital 320,000 400,000 400,000 Retained eamings Blue's current assets are appraised at P400,000 and the property and equipment were appraised at P1,600,000. Its liabilities are fairly valued. Accordingly, Red Corporation issued shares of its common stock with a total market value cqual to that of Blue's net assets including goodwill. CHAPTER 1: BUSINESS COMBINATION Page| To recognize goodwill of P200,000, how many shares were to be issued by Red? a 55,000 shares b. 45,000 shares c. 40,000 shares d. 50,000 shares

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10. Red Corporation will issue ordinary shares with a par value P10 for the net assets of Blue
Company. Red's ordinary share has a current market value of P40 per share. Blue's
statement of financial position on the date of acquisition follow:
Current assets
Property and equipment lu
Liabilities
P320,000
Common stock, PS par
P80,000
880,000 Additional paid in capital 320,000
400,000
400,000 Retained earnings
Blue's current assets are appraised at P400,000 and the property and equipment were appraised at
P1,600,000, Its liabilities are fairly valued. Accordingly, Red Corporation issued shares of its
common stock with a total market value equal to that of Blue's net assets including goodwill.
CHAPTER 1: BUSINESS COMBINATION
Page | 46
To recognize goodwill of P200,000, how many shares were to be issued by Red?
a. 55,000 shares
b. 45,000 shares
c. 40,000 shares
d. 50,000 shares
11. On May 31,2020, Genesis Company has assets and liabilities with the following fair values:
Current Assets - P180,000; Non-Current Assets - P220,000; Liabilities – P40,000.
On June 1, 2020, Judges Corporation purchased the net assets of Genesis for P310,000
cash. In the books of Judges, the acquisition resulted to:
a. Gain recognized in the P/L amounting to P50,000
b. Goodwill recognized in the balance sheet amounting to 50,000
c. Gain recognized in the OCI amounting to P50,000
d. Decrease in current assets of P50,000
Transcribed Image Text:10. Red Corporation will issue ordinary shares with a par value P10 for the net assets of Blue Company. Red's ordinary share has a current market value of P40 per share. Blue's statement of financial position on the date of acquisition follow: Current assets Property and equipment lu Liabilities P320,000 Common stock, PS par P80,000 880,000 Additional paid in capital 320,000 400,000 400,000 Retained earnings Blue's current assets are appraised at P400,000 and the property and equipment were appraised at P1,600,000, Its liabilities are fairly valued. Accordingly, Red Corporation issued shares of its common stock with a total market value equal to that of Blue's net assets including goodwill. CHAPTER 1: BUSINESS COMBINATION Page | 46 To recognize goodwill of P200,000, how many shares were to be issued by Red? a. 55,000 shares b. 45,000 shares c. 40,000 shares d. 50,000 shares 11. On May 31,2020, Genesis Company has assets and liabilities with the following fair values: Current Assets - P180,000; Non-Current Assets - P220,000; Liabilities – P40,000. On June 1, 2020, Judges Corporation purchased the net assets of Genesis for P310,000 cash. In the books of Judges, the acquisition resulted to: a. Gain recognized in the P/L amounting to P50,000 b. Goodwill recognized in the balance sheet amounting to 50,000 c. Gain recognized in the OCI amounting to P50,000 d. Decrease in current assets of P50,000
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