On January 2, 2022, P Company purchased the net asset of S Company by paying P500,000 cash and issuing 100,000 shares of stocks at P3,000,000 fair market value. The par value of P's shares is P24 per share. Book value and fair value data on the Statement of Financial Positions on January 2, 2022 are as follows: P Company Book Value Fair Value Book Value Fair Value 4,600,000 4,600,000 1,000,000 1,000,000 1,500,000 1,300,000 1,800,000 1,460,000 S Company Cash Accounts Receivable 300,000 980,000 710,000 1,520,000 1,064,000 90,000 3,600,000 3,024,000 300,000 980,000 600,000 Inventory PPE, net Goodwill 80,000 Total 8,900,000 8,360,000 570,000 Liabilities Share Capital Share Premium Retained Earnings 1,000,000 1,600,000 900,000 5,400,000 8,900,000 570,000 600,000 960,000 1,470,000 3,600,000 d1,000,000 Total P incurred and paid legal and brokerage fees of P50,000 for business combination; share issue costs of P30,000 and P20,000 indirect acquisition costs. It is determinable that contingency fee of P150,000 (estimated fair value) would be paid within the year.

On January 2, 2022, P Company purchased the net asset of S Company by paying P500,000 cash and issuing 100,000 shares of stocks at P3,000,000 fair market value. The par value of P's shares is P24 per share. Book value and fair value data on the Statement of Financial Positions on January 2, 2022 are as follows: P Company Book Value Fair Value Book Value Fair Value 4,600,000 4,600,000 1,000,000 1,000,000 1,500,000 1,300,000 1,800,000 1,460,000 S Company Cash Accounts Receivable 300,000 980,000 710,000 1,520,000 1,064,000 90,000 3,600,000 3,024,000 300,000 980,000 600,000 Inventory PPE, net Goodwill 80,000 Total 8,900,000 8,360,000 570,000 Liabilities Share Capital Share Premium Retained Earnings 1,000,000 1,600,000 900,000 5,400,000 8,900,000 570,000 600,000 960,000 1,470,000 3,600,000 d1,000,000 Total P incurred and paid legal and brokerage fees of P50,000 for business combination; share issue costs of P30,000 and P20,000 indirect acquisition costs. It is determinable that contingency fee of P150,000 (estimated fair value) would be paid within the year.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: if a firms expense equal or exceed it's revenue what actio might management take

A: Explanation is given below,

Q: Which one of the following statements regarding IFRS accounting for goodwill is correct: a. If…

A: Goodwill is calculates on business combination by subtracting net assets acquired from purchase…

Q: How do you view goodwill on the balance sheet - specifically, if certain levels of it would cause…

A: 1.) I see the goodwill on the balance sheet as synergies , which was estimated at the time of the…

Q: what is accounting for goodwill and what are its implications?

A: Goodwill is an intangible asset. It generally arises from the acquisition of a business. In other…

Q: What type of "event" results in goodwill being recorded on a company's balance sheet? How is…

A: Goodwill is an non-physical asset i.e. intangible. It shows the customer base in loyalty or brand…

Q: A seller recognizes the amount of returns from right to return sales as a/an ________. Group of…

A: The question is asking about how a seller recognizes the amount of returns from right to return…

Q: Which of the following statements is true about goodwill? The intangible asset goodwill may be…

A: Goodwill is an intangible asset which appears in the asset side of entities balance sheet.

Q: If a company uses the fair value model to value investment property, changes in the fairvalue of the…

A: Under the fair value model, remeasuring of investment property is made at the end of each reporting…

Q: What is goodwill? What is a bargain purchase?

Q: What Is Goodwill And How Is It Accounted For?

A: Definition: Goodwill: Goodwill is a good reputation developed by a company over the years. This is…

Q: Define goodwill for accounting purposes

A: When one firm is acquired by another, an intangible asset known as goodwill is transferred together…

Q: Explain how a not for profit determines whether a resource provider is participating in an exchange…

A: The objective of this question is to understand how a not-for-profit organization determines whether…

Q: Is goodwill a long-lived asset?

A: Goodwill is known as asset that includes company image. It is an intangible assets which do not…

Q: Passive activity income and losses are netted against one another on what form or s

A: Passive Activity Income: 1) Passive income is earnings from a rental property, limited partnership,…

Q: How Goodwill is accounted for on financial statement. What is inter-company long-term construction…

A: Goodwill is an intangible asset reported under the non-current assets in the Balance sheet. Only…

Q: How should goodwill be amortized?

A: Goodwill is an example of intangible assets which has no physical identity.

Q: Define capital gain (loss)

A: Whenever an asset is sold, the seller incurs either a profit or a loss. The asset may be a real…

Q: 1. If a Revaluation of an asset is done for the first time and there is a revaluation gain, this…

A: Income Statement - Income Statement is a financial statement that includes revenue earned and…

Q: The unamortized excess account is a. the excess purchase cost that is attributable to goodwill. b.…

A: The unamortized excess account seems to be the account that is utilized to allocate the amount of…

Question

Determine:

1. Amount of consideration

2. Amount of goodwill (gain)

3. Assuming that P Company is an SME, how much is the goodwill or gain?

On January 2, 2022, P Company purchased the net asset of S Company by
paying P500,000 cash and issuing 100,000 shares of stocks at P3,000,000
fair market value. The par value of P's shares is P24 per share. Book value
and fair value data on the Statement of Financial Positions on January 2,
2022 are as follows:
P Company
Book Value Fair Value
S Company
Book Value Fair Value
Cash
Accounts Receivable
300,000
980,000
600,000
4,600,000
300,000
980,000
710,000
1,520,000 1,064,000
90,000
3,600,000 3,024,000
4,600,000
1,000,000
1,500,000 1,300,000
1,800,000
1,000,000
Inventory
PPE, net
Goodwill
1,460,000
80,000
Total
8,900,000 8,360,000
570,000
Liabilities
Share Capital
Share Premium
Retained Earnings
570,000
600,000
960,000
1,470,000
3,600,000
1,000,000
1,000,000
1,600,000
900,000
5,400,000
8,900,000
Total
P incurred and paid legal and brokerage fees of P50,000 for business
combination; share issue costs of P30,000 and P20,000 indirect acquisition
costs. It is determinable that contingency fee of P150,000 (estimated fair
value) would be paid within the year.

Definition Definition Intangible asset that includes proprietary or intellectual property and brand value of a firm. Goodwill is recorded in the books when a firm purchases another firm and the purchase price is more than the fair value of net identifiable assets of the acquired business. The amount of goodwill is recorded on the asset side of the balance sheet (statement of financial position).

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Business Acquisition: Introduction

VIEW

Step 2: Consideration amount

VIEW

Step 3: Goodwill / Gain on Bargain Purchase

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

The meaning of goodwill in accounting is: Multiple Choice The amount by which a company's value exceeds the value of its individual assets and liabilities. Long term assets held as investment. The support of the board of directors for the operating decisions of management. The cost of developing, maintaining, or enhancing the value of a trademark. Rights granted to an entity to deliver a product or service under specified conditions.
25. A parent company’s investment account would include an element which is representative of : Multiple Choice the unrecorded difference between fair value and book value of the investee’s assets. the unrecorded book value of the investor’s assets. the goodwill accrued since the purchase of the investee. the recorded current value of the investee’s assets.
How are accounts payable treated to compute the net worth of abusiness entity
shares on January 1. Promise paid $300,000 and issued $200,000 in long-term liabilities and paid Promise also agreed to pay $80,000 to the former owners of SaidSo contingent on meeting certain revenue goals during the following year. Promise estimated the present value of its probability adjusted expected payment for the contingency or contingent obligation at $30,000 in legal fees. $23,000 Precombination book values for SaidSo, Inc. are as follows: 80,000 90,000 175,000 Current assets 24 Equipment Buildings Goodwill 33,000 $378,000 Total $ (45,000) (180,000) (115,000) (138,000) 100,000 $(378,000) Current liabilities 2$ Common stock Retained earnings Revenues Expenses Total Promise's appraisal of SaidSo found two balance sheet accounts that differed from fair value. Equipment was undervalued by $15,000 and Buildings by $5,000. Promise noted that SaidSo has unrecorded client contracts worth $60,000 and résearch and development activity in process with an appraised fair value of $90,000
What are the similarities between the income, market, and asset approaches to business valuation?
If an asset is sold at a gain, why is the gain deducted from net income when computing the netcash provided by operating activities under the indirect method?