On January 1, 2013, the Sara Company entered into a transaction for acquisition of assets and liabilities of Ana Company. Sara issued P400 in long-term liabilities and 40 shares of common stock having a par value of P1 per share but a fair value of P10 per share. Sara paid P20 to lawyers, accountants and brokers for assistance in bringing about this purchase. Another P15 was paid in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows: Sara Ana Cash P180 P 40 Accounts receivable 810 180 Inventory 1,080 280 Land 600 360 Buildings (net) 1,260 440 Equipment (net) 480 100 Accounts Payable ( 450) ( 80) Long-term liabilities (1,290) (400) Common stock, P1 par (330) Common stock, P20 par (240) Additional paid-in capital (1,080) (340) Retained earnings (1,260) (340) In Sara’s appraisal of Ana, three assets were deemed to be undervalued in the books of Ana: Inventory by P10, Land by P40 and Buildings by P60. 2. Compute the amount of additional paid in capital after the combination.
1. On January 1, 2013, the Sara Company entered into a transaction for acquisition of assets and
liabilities of Ana Company. Sara issued P400 in long-term liabilities and 40 shares of common stock
having a par value of P1 per share but a fair value of P10 per share. Sara paid P20 to lawyers,
accountants and brokers for assistance in bringing about this purchase. Another P15 was paid in
connection with stock issuance costs. Prior to these transactions, the
companies were as follows:
Sara Ana
Cash P180 P 40
Inventory 1,080 280
Land 600 360
Buildings (net) 1,260 440
Equipment (net) 480 100
Accounts Payable ( 450) ( 80)
Long-term liabilities (1,290) (400)
Common stock, P1 par (330)
Common stock, P20 par (240)
Additional paid-in capital (1,080) (340)
In Sara’s appraisal of Ana, three assets were deemed to be undervalued in the books of Ana: Inventory
by P10, Land by P40 and Buildings by P60.
2. Compute the amount of additional paid in capital after the combination.
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