On April 1, 2010, Aileen Co paid P620,000 for all the assets and liabilities of Joy Co. in a transaction properly accounted as a acquisition. The recorded assets and liabilities of Joy Co. on April 1, 2010 are: Cash Inventory Property and equipment (net of accumulated depreciation of P220,000) Goodwill Liabilities P60,000 180,000 320,000 100,000 (120,000) P540,000 Net assets On April 1, 2010, Joy's inventory had a fair value of P150,000 and the property and equipment (net) had a fair value of P380,000. Also, Joy has an unrecorded contingent liability amounting which has a P 10,000 provisional fair value on April 1, 2010. An additional valuation received on June 30, 2010 increased this provisional fair value of P25,000 and on May 10, 2011, this fair value was finalized at P22,000. Required: Prepare journal entries in the books of Aileen Co. and Joy Co for the year 2010 and 2011.

On April 1, 2010, Aileen Co paid P620,000 for all the assets and liabilities of Joy Co. in a transaction properly accounted as a acquisition. The recorded assets and liabilities of Joy Co. on April 1, 2010 are: Cash Inventory Property and equipment (net of accumulated depreciation of P220,000) Goodwill Liabilities P60,000 180,000 320,000 100,000 (120,000) P540,000 Net assets On April 1, 2010, Joy's inventory had a fair value of P150,000 and the property and equipment (net) had a fair value of P380,000. Also, Joy has an unrecorded contingent liability amounting which has a P 10,000 provisional fair value on April 1, 2010. An additional valuation received on June 30, 2010 increased this provisional fair value of P25,000 and on May 10, 2011, this fair value was finalized at P22,000. Required: Prepare journal entries in the books of Aileen Co. and Joy Co for the year 2010 and 2011.

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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Question

On April 1, 2010, Aileen Co paid P620,000 for all the assets and liabilities of Joy Co. in a transaction properly accounted as a
acquisition. The recorded assets and liabilities of Joy Co. on April 1, 2010 are:
Cash
P60,000
180,000
320,000
100,000
(120,000)
P540,000
Inventory
Property and equipment (net of accumulated depreciation of P220,000)
Goodwill
Liabilities
Net assets
On April 1, 2010, Joy's inventory had a fair value of P150,000 and the property and equipment (net) had a fair value of P380,000.
Also, Joy has an unrecorded contingent liability amounting which has a Pi0,000 provisional fair value on April 1, 2010. An
additional valuation received on June 30, 2010 increased this provisional fair value of P25,000 and on May 10, 2011, this fair
value was finalized at P22,000.
Required: Prepare journal entries in the books of Aileen Co. and Joy Co for the year 2010 and 2011.

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Step 1: Introduction to the Accounting of Business Combination

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Step 2: Calculation of Net Assets on April 1, 2010

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Step 3: Calculation of Goodwill on business combination

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Step 4: Preparation of Journal Entries

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