On January 1, 2022, the Acts Co. acquired 100% of the Titus Co. when the fair value of Titus net assets was P4,000,000 and their carrying amount was P3,500,000 The consideration transferred comprised P4,400,000 in cash transferred at the acquisition date, plus another P200,000 in cash to be transferred 10 months after (November 1, 2022) the acquisition date if a specified profit target was met by Titus. At the acquisition date, there was only a low probability, around 40%, of the profit target being met. On November 1, 2022, additional P200,000 was paid by Acts to Titus after the latter met the specified profit target.
On January 1, 2022, the Acts Co. acquired 100% of the Titus Co. when the fair value of Titus net assets was P4,000,000 and their carrying amount was P3,500,000 The consideration transferred comprised P4,400,000 in cash transferred at the acquisition date, plus another P200,000 in cash to be transferred 10 months after (November 1, 2022) the acquisition date if a specified profit target was met by Titus. At the acquisition date, there was only a low probability, around 40%, of the profit target being met. On November 1, 2022, additional P200,000 was paid by Acts to Titus after the latter met the specified profit target.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Please answer numbers 26 and 27 and provide a complete solution.
Transcribed Image Text:TAT O
How much is the goodwill to be reported on December 31, 2022?
a. P480,000
b. P600,000
c. P980,000
d. P400,000
27. In connection to #26, the entry in the books of Acts on November 1,
002022 will include:
000,08 a.
Debit to loss account, P120,000.
000,01 b. Credit to goodwill, P120,000.
Debit to goodwill, P120,000.
d. Credit to liability account, P120,000.
e. Debit to loss account, P80,000.
с.
Transcribed Image Text:26. On January 1, 2022, the Acts Co. acquired 100% of the Titus Co. when
the fair value of Titus net assets was P4,000,000 and their carrying
amount was P3,500,000 The consideration transferred comprised
P4,400,000 in cash transferred at the acquisition date, plus another
P200,000 in cash to be transferred 10 months after (November 1,
2022) the acquisition date if a specified profit target was met by Titus.
At the acquisition date, there was only a low probability, around 40%,
of the profit target being met.
On November 1, 2022, additional P200,000 was paid by Acts to Titus
after the latter met the specified profit target.
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