Illustration 1. Share-for-share exchanges On January 1, 2022, Frank Co. and Richard, Inc. combined. As of this date, the fair values of the assets, liabilities and equity of Frank and Richard before the business combination are as follows:   On the negotiation for the business combination, the acquirer incurred the following transaction costs: P45,000.00 for legal fees; P 5,000.00 for due diligence cost and P 80,000.00 for the general admin cost and cost of maintaining an internal acquisition department. Case 1: before the transaction, Frank, Co. have 7,000 outstanding shares. Frank Co. Issued additional 10,000 shares as consideration for a 100% interest in Richard. Frank’s shares currently sells P150 per share in the market, while Richard’s shares are quoted at P200 per share. With the stated facts, answer the following: 1.How much is the Share Premium of the combined company after the business  combination? a. P 730,000.00 b. P 1,230,000.00 c. P 800,000.00 d. P 1,700,000.00 2.How much is the total Retained Earnings of the combined company after the  business combination? a. P 630,000.00 b. P 120,000.00 c. P 100,000.00 d. P 250,000.00 3.How much is the total assets of the combined company after the business  combination? a. P 3,850,000.00 b. P 3,720,000.00 c. P 3,700,000.00 d. P 1,500,000.00

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Chapter1: Financial Statements And Business Decisions
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Illustration 1. Share-for-share exchanges On January 1, 2022, Frank Co. and Richard, Inc. combined. As of this date, the fair values of the assets, liabilities and equity of Frank and Richard before the business combination are as follows:

 

On the negotiation for the business combination, the acquirer incurred the following transaction costs: P45,000.00 for legal fees; P 5,000.00 for due diligence cost and P 80,000.00 for the general admin cost and cost of maintaining an internal acquisition department.

Case 1: before the transaction, Frank, Co. have 7,000 outstanding shares. Frank Co. Issued additional 10,000 shares as consideration for a 100% interest in Richard. Frank’s shares currently sells P150 per share in the market, while Richard’s shares are quoted at P200 per share. With the stated facts, answer the following:

1.How much is the Share Premium of the combined company after the business 
combination?
a. P 730,000.00
b. P 1,230,000.00
c. P 800,000.00
d. P 1,700,000.00
2.How much is the total Retained Earnings of the combined company after the 
business combination?
a. P 630,000.00
b. P 120,000.00
c. P 100,000.00
d. P 250,000.00
3.How much is the total assets of the combined company after the business 
combination?
a. P 3,850,000.00
b. P 3,720,000.00
c. P 3,700,000.00
d. P 1,500,000.00

FRANK, CO.
RICHARD, INC.
Asset
Petty Cash Fund
Cash In bank
10,000.00
10,000.00
300,000.00
400,000.00
Receivables
490,000.00
250,000.00
Inventory
Building
200,000.00
100,000.00
750,000.00
600,000.00
Goodwill
250,000.00
140,000.00
Total Assets
2,000,000.00
1,500,000.00
Liability and Equity
Liabilit ies
750,000.00
350,000.00
Share Capital
700,000.00
400,000.00
Share Premium
300,000.00
430,000.00
Retained Earnings
250,000.00
320,000.00
Total Liability and Equity
2,000,000.00
1,500,000.00
Transcribed Image Text:FRANK, CO. RICHARD, INC. Asset Petty Cash Fund Cash In bank 10,000.00 10,000.00 300,000.00 400,000.00 Receivables 490,000.00 250,000.00 Inventory Building 200,000.00 100,000.00 750,000.00 600,000.00 Goodwill 250,000.00 140,000.00 Total Assets 2,000,000.00 1,500,000.00 Liability and Equity Liabilit ies 750,000.00 350,000.00 Share Capital 700,000.00 400,000.00 Share Premium 300,000.00 430,000.00 Retained Earnings 250,000.00 320,000.00 Total Liability and Equity 2,000,000.00 1,500,000.00
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