On January 1, 2022, Frank Co. and Richard, Inc. combined. As of this date, the fair values of
Illustration 1. Share-for-share exchanges
On January 1, 2022, Frank Co. and Richard, Inc. combined. As of this date, the fair values of
the assets, liabilities and equity of Frank and Richard before the business combination are as
follows:
On the negotiation for the business combination, the acquirer incurred the following
transaction costs: P45,000.00 for legal fees; P 5,000.00 for due diligence cost and P 80,000.00
for the general admin cost and cost of maintaining an internal acquisition department.
Case 2: before the transaction, Richard, Inc. have 20,000 outstanding shares. Richard issued
12,000 shares as consideration for a 60% interest in Frank. Richard’s shares currently sell P55 per
share in the market, while Frank’s shares are quoted at P225 per share. Richard, Inc. elected
to measure NCI at “proportionate share”.
With the stated facts, answer the following:
20.How much is the total
combination?
a. P 140,000.00
b. P 190,000.00
c. P 300,000.00
d. P (300,000.00)
22.How much is the total Share Premium in the books of Richard, Inc. after the business
combination?
a. P 830,000.00
b. P 730,000.00
c. P 800,000.00
d. P 850,000.00
23.How much is the total
business combination?
a. P 630,000.00
b. P 150,000.00
c. P 170,000.00
d. P 190,000.00
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