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) Equipment (net) Accounts Payable Long-term liabilities Common stock, P1 par Common stock, P20 par Additional paid-in capital Retained earnings 1,260 440 480 100 ( 450) (1,290) (330) ( 80) (400) (1,080) (1,260) (240) (340) (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.

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) Equipment (net) Accounts Payable Long-term liabilities Common stock, P1 par Common stock, P20 par Additional paid-in capital Retained earnings 1,260 440 480 100 ( 450) (1,290) (330) ( 80) (400) (1,080) (1,260) (240) (340) (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.

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 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
1,080
600
Inventory
280
Land
360
Buildings (net)
Equipment (net)
Accounts Payable
Long-term liabilities
Common stock, P1 par
Common stock, P20 par
1,260
440
480
100
( 450)
(1,290)
(330)
( 80)
(400)
Additional paid-in capital
Retained earnings
(1,080)
(1,260)
(240)
(340)
(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.
Compute the amount of additional paid in capital after the combination.

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