On January 1, 2020, Papa acquired all the identifiable assets and assumed all of the liabilities of Mama by paying cash of P5,000,000. On this date, Mama’s identifiable assets and liabilities have fair values of P8,000,000 and P P4,000,000, respectively. Papa agrees to pay an additional amount equal to 10% of the 2020 year end profit that exceeds P2,000,000. Mama historically has reported profits of P1,600,000 to P2,200,000 each year. After assessing the expected level of profits for the year based on the forecast and plans, as well as industry trends. Papa estimated that the fair value of the contingent consideration is P50,000. Required: Compute the goodwill or gain on bargain purchase and prepare the necessary journal entries
On January 1, 2020, Papa acquired all the identifiable assets and assumed all of the liabilities of Mama by paying cash of P5,000,000. On this date, Mama’s identifiable assets and liabilities have fair values of P8,000,000 and P P4,000,000, respectively. Papa agrees to pay an additional amount equal to 10% of the 2020 year end profit that exceeds P2,000,000. Mama historically has reported profits of P1,600,000 to P2,200,000 each year. After assessing the expected level of profits for the year based on the forecast and plans, as well as industry trends. Papa estimated that the fair value of the contingent consideration is P50,000. Required: Compute the goodwill or gain on bargain purchase and prepare the necessary journal entries
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 2020, Papa acquired all the identifiable assets and assumed all of the liabilities of Mama by paying cash of P5,000,000. On this date, Mama’s identifiable assets and liabilities have fair values of P8,000,000 and P P4,000,000, respectively.
Papa agrees to pay an additional amount equal to 10% of the 2020 year end profit that exceeds P2,000,000. Mama historically has reported profits of P1,600,000 to P2,200,000 each year.
After assessing the expected level of profits for the year based on the forecast and plans, as well as industry trends. Papa estimated that the fair value of the contingent consideration is P50,000.
Required: Compute the goodwill or gain on bargain purchase and prepare the necessary journal entries
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