ofter was Honesty Company started negotiating for the acquisition of integrity Company. for shareholders of Integrity to receive one Honesty share with a market value of P125 for every four shares held in exchange for all assets of Integrity (except shares in listed companies). In addition to the shares, Honesty will transfer its shares in listed companies which has a fair market value of P750,000. Honesty will also pay Integrity sufficient cash to enable Integrity to pay all its creditors then Integrity will liquidate. The shareholders of Integrity accepted the offer. The Balance Sheet on December 31, 2020 is given below (see image below).
ofter was Honesty Company started negotiating for the acquisition of integrity Company. for shareholders of Integrity to receive one Honesty share with a market value of P125 for every four shares held in exchange for all assets of Integrity (except shares in listed companies). In addition to the shares, Honesty will transfer its shares in listed companies which has a fair market value of P750,000. Honesty will also pay Integrity sufficient cash to enable Integrity to pay all its creditors then Integrity will liquidate. The shareholders of Integrity accepted the offer. The Balance Sheet on December 31, 2020 is given below (see image below).
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Honesty Company started negotiating for the acquisition of Integnity Company. The offer was
for shareholders of Integrity to receive one Honesty share with a market value of P125 for
every four shares held in exchange for all assets of Integrity (except shares in listed
companies). In addition to the shares, Honesty will transfer its shares in listed companies which
has a fair market value of P750,000. Honesty will also pay integrity sufficient cash to enable
Integrity to pay all its creditors then Integrity will liquidate. The shareholders of Integrity
accepted the offer. The Balance Sheet on December 31, 2020 is given below (see image
below).
The net assets of Integrity are reflected at their fair values except for the following:
Inventory, P1,300,000 fair market value
Land and building, P4,000,000 fair market value
Shares in listed companies, P900,000 fair market value
How much is the total assets of Honesty after the merger?
Honesty
7,250,000
1,700,000
2,800,000
800,000
3,500,000
6,500,000
22,550,000
Integrity
260,000
1,065,000
1,500,000
1,100,000
2,000,000
5,250,000
11,175,000
Cash
Accounts Receivable
Inventory
Shares in listed company
Land and Building
Property, Plant and Equipment
Total
Accounts Payable
Mortgage Loan
Share Capital, P50 par
Retained Earnings
3,250,000
7,500,000
10,000,000
1,800,000
2,000,000
1,500,000
7,500,000
175,000
11 175 000
Total
22 550 000
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