ABC Co. engaged your services to compute the goodwill and purchase price for the acquisition of XYZ Corp. The following data are available for XYZ Corp.: Current Asset Investments 6,000,000 Current Liabilities 2,500,000 Non-current liabilities 3,500,000 2,500,000 P.P.E 13,000,000 Ordinary shares 7,000,000 Share Premium 1,500,000 Accumulated Profits 7,000,000 21,500,000 Total Assets 21,500,000 Total Liabilities and Equity You found out that the investments have a fair value of P2,000,000 and the current assets and property, plant and equipment are understated by P800,000 and P1,850,000. All assets and equities are properly stated. An examination of the company's income for the last 4 years revealed that the total earnings amounted to P9,000,000. The said earnings include gain on sale during the last year of P100,000 and P150,000 annual bonus of the president. The normal rate of return is 10%. Compute for the goodwill (purchase of goodwill for 4 years).
ABC Co. engaged your services to compute the goodwill and purchase price for the acquisition of XYZ Corp. The following data are available for XYZ Corp.: Current Asset Investments 6,000,000 Current Liabilities 2,500,000 Non-current liabilities 3,500,000 2,500,000 P.P.E 13,000,000 Ordinary shares 7,000,000 Share Premium 1,500,000 Accumulated Profits 7,000,000 21,500,000 Total Assets 21,500,000 Total Liabilities and Equity You found out that the investments have a fair value of P2,000,000 and the current assets and property, plant and equipment are understated by P800,000 and P1,850,000. All assets and equities are properly stated. An examination of the company's income for the last 4 years revealed that the total earnings amounted to P9,000,000. The said earnings include gain on sale during the last year of P100,000 and P150,000 annual bonus of the president. The normal rate of return is 10%. Compute for the goodwill (purchase of goodwill for 4 years).
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:ABC Co. engaged your services to compute the goodwill and purchase price for
the acquisition of XYZ Corp. The following data are available for XYZ Corp.:
Current Asset
6,000,000 Current Liabilities
3,500,000
2,500,000
7,000,000
1,500,000
Investments
2,500,000 Non-current liabilities
P.P.E
13,000,000 Ordinary shares
Share Premium
Accumulated Profits
21,500,000 Total Liabilities and Equity
7,000,000
Total Assets
21,500,000
You found out that the investments have a fair value of P2,000,000 and the
current assets and property, plant and equipment are understated by P800,000
and P1,850,000. All assets and equities are properly stated. An examination of
the company's income for the last 4 years revealed that the total earnings
amounted to P9,000,000. The said earnings include gain on sale during the last
year of P100,000 and P150,000 annual bonus of the president. The normal rate
of return is 10%.
Compute for the goodwill (purchase of goodwill for 4 years).
Transcribed Image Text:ARISE Co. has suffered operating losses for some time, but is now operating profitably
and expects to continue to do so. Current and projected income, however will not be
sufficient to eliminate the deficit in the near term. It also appears that plant assets are
overstated considering current prices and economic conditions. After receiving
permission from the government authorities and approval from shareholders, the board
of directors decides to restate the company assets and paid-in capital balances in order
to remove the deficit and make possible the declaration of dividends from profitable
operations. A balance sheet for the company just prior to this action is presented:
250,000
1,500,000
Current Assets
P.P.E
(600,000)
1,150,000
Accumulated Depreciation
Total
Liabilities
300,000
Ordinary shares, P10 par, 100,000 shares
1,000,000
100,000
(250,000)
Share Premium
Retained Earnings (deficit)
Total
1,150,000
Assuming that the quasi reorganization shall be accomplished as follows:
a. Property, plant and equipment are to be reduced to their present fair market
value of P800,000
b. Inventories are to be written down by P50,000
C. Unaccrued liabilities shall be recognized at P150,000
d. Ordinary shares are to be reduced to a par value of P5
What is the balance of share premium after the quasi reorganization?
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