On January 1, 2021, ABC acquired all the assets and assumed all the liabilities of DEF Co. for P4,500,000. Relevant informationfollows:ASSETSFair ValuesCarrying Value55,000Cash55,000800,000Receivable800,000Allowance for Doubtful Accounts150,000700,0003,500,000150,000180,000750,0004,000,000200,0001,555,0000InventoryLandGoodwillLiabilities1,555,000DEC Co. has research and development projects with fair value of P100,000. ABC does not intend to use those R&Ds.However, there have been exchange transactions involving the information generated from DEF, but those transactions areinfrequent.> All fair value adjustments result to temporary differences but do not affect the tax bases of the assets and liabilities. Thetax rate is 30%.ABC incurred P200,000 on general administrative costs of maintaining an internal acquisition department.Compute the goodwill (gain on bargain purchase)? The following are the balances of BIG Company and GIRL Company as of January 1, 20x1.FairFairВookВookBIG COMPANYMarketMarketValueValueValueValueASSE TSLIABILITY AND EQUITY105,000 Accounts Payable470,000 Mortgage Payable300,000 Ordinary Share, 20 par 2,000,000Cash105,000300,000330,000Accounts Receivable550,0001,300,000 1,320,000InventoryProperty, Plant and Equipment, net220,0004,790,000 4,500,000 Share Premium?775,000?Goodwill100,000100,000 Retained Earnings1,390,000?FairВookFair MarketВookGIRL COMPANYMarketValueValueValueValueCash300,000300,000 Accounts Payable550,000500,000Accounts Receivable600,000470,000 Mortgage Payable300,000 Ordinary Share, 20 par2,500,000 2,480,000350,0008,910,000 10,000,000 Share PremiumInventory3,000,000?Property, Plant and Equipment, net2,760,000?Goodwill150,000100,000 Retained Earnings1,500,000The companies combined their resources and formed BIGGEST Co. Research and development with a fairmarket value of P120,000 was not included in the books of Big Company. An unrecorded interest payableworth P20,000 was also not included in the books of Girl Company. The new company issues 16,000 sharesof 500 par value common stocks with fair value of P550 and pays additional 1,500,000 and incurs a mortgageloan of P1,000,000. The company also paid a direct costs of 50,000 and indirect cost of 20,000. P15,000direct cost and P5,000 stock issue cost remain unpaid. Chan Co. also pay BIG and GIRL additional P100,000net income after 1 year if its net income exceed P3,000,000, there is a 90% chance of meeting the targetincome. Determine the total EQUITY of BIGGEST CO. immediately after the business combination.

Given questions deal with IFRS 3 ' business combination'. The first question deals with…

Answered: income after 1 year if its net income…

income after 1 year if its net income exceed P3,000,000, there is a 90% chance of meeting the t ome. Determine the total EQUITY of BIGGEST CO. immediately after the business combination.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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