ABC Company acquired all of XYZ Corporation's assets and liabilities on June 30, 20X1. XYZ reported assets with a book value of P1,000,000 and liabilities of P550,000. ABC noted that XYZ included the amount P70,000 for an obsolete inventory at the acquisition date that did not appear to have any value. ABC also determined that an old machine previously usec by XYZ had a fair value of P150,000 but had not been recorded by XYZ. Except for machinery and equipment, all the other assets and liabilities of XYZ approximated their fair values. In recording the transfer of assets an iabilities in its books, ABC recorded a gain of P150,000 and paid P340,000 to acquire XYZ's net assets. If the book value of XYZ's machinery and equipment was P360,000, what was their fair value?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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ABC Company acquired all of XYZ Corporation's assets and liabilities on
June 30, 20X1. XYZ reported assets with a book value of P1,000,000 and
liabilities of P550,000. ABC noted that XYZ included the amount P70,000
for an obsolete inventory at the acquisition date that did not appear to
have any value. ABC also determined that an old machine previously used
by XYZ had a fair value of P150,000 but had not been recorded by XYZ.
Except for machinery and equipment, all the other assets and liabilities of
XYZ approximated their fair values. In recording the transfer of assets and
liabilities in its books, ABC recorded a gain of P150,000 and paid
P340,000 to acquire XYZ's net assets. If the book value of XYZ's
machinery and equipment was P360,000, what was their fair value?
Transcribed Image Text:ABC Company acquired all of XYZ Corporation's assets and liabilities on June 30, 20X1. XYZ reported assets with a book value of P1,000,000 and liabilities of P550,000. ABC noted that XYZ included the amount P70,000 for an obsolete inventory at the acquisition date that did not appear to have any value. ABC also determined that an old machine previously used by XYZ had a fair value of P150,000 but had not been recorded by XYZ. Except for machinery and equipment, all the other assets and liabilities of XYZ approximated their fair values. In recording the transfer of assets and liabilities in its books, ABC recorded a gain of P150,000 and paid P340,000 to acquire XYZ's net assets. If the book value of XYZ's machinery and equipment was P360,000, what was their fair value?
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