On January 31, 2022, Parent Company purchased all the identifiable net assets of Sub Company by transferring cash of P1,200,000 and issuing 100,000 shares with par value of P20 and fair value of P32. Parent will pay additional amount depending on the net income achieved by Sub at year-end: Net Income @year-end Consideration to be transferred 50,000,000 1,000,000 75,000,000 2,000,000 3,000,000 100,000,000 Book value of Parent and Sub at the date of acquisition were as follows: Parent Case 1 Cash Accounts receivable Inventory Buildings Total assets Accounts payable Common stock, P2 par Share premium Retained earnings Total liabilities and equities 1,000,000 1,600,000 2,400,000 5,000,000 10,000,000 2,400,000 2,000,000 1,600,000 4,000,000 10,000,000 Sub 800,000 1,400,000 800,000 2,800,000 5,800,000 1,000,000 1,200,000 800,000 2,800,000 5,800,000 At the date of acquisition, Parent assessed that Sub will reach at least 60,000,000 of net income for 2022. Book value of the identifiable net assets of Sub on January 31, 2022 is P4,800,000. Temporary appraisal at the date of acquisition is P5,000,000. On December 31, 2022 an additional valuation resulted to a decrease of P500,000 from previous appraisal and fair value of the net assets were finalized on February 6, 2023 by a subsequent increase of P1,000,000 from last valuation. Parent paid P100,000 business combination expenses, 2/5 are direct, 2/5 are share issue costs, and 1/5 are indirect costs. Net income of Sub at 12/31/22 is P90M.
On January 31, 2022, Parent Company purchased all the identifiable net assets of Sub Company by transferring cash of P1,200,000 and issuing 100,000 shares with par value of P20 and fair value of P32. Parent will pay additional amount depending on the net income achieved by Sub at year-end: Net Income @year-end Consideration to be transferred 50,000,000 1,000,000 75,000,000 2,000,000 3,000,000 100,000,000 Book value of Parent and Sub at the date of acquisition were as follows: Parent Case 1 Cash Accounts receivable Inventory Buildings Total assets Accounts payable Common stock, P2 par Share premium Retained earnings Total liabilities and equities 1,000,000 1,600,000 2,400,000 5,000,000 10,000,000 2,400,000 2,000,000 1,600,000 4,000,000 10,000,000 Sub 800,000 1,400,000 800,000 2,800,000 5,800,000 1,000,000 1,200,000 800,000 2,800,000 5,800,000 At the date of acquisition, Parent assessed that Sub will reach at least 60,000,000 of net income for 2022. Book value of the identifiable net assets of Sub on January 31, 2022 is P4,800,000. Temporary appraisal at the date of acquisition is P5,000,000. On December 31, 2022 an additional valuation resulted to a decrease of P500,000 from previous appraisal and fair value of the net assets were finalized on February 6, 2023 by a subsequent increase of P1,000,000 from last valuation. Parent paid P100,000 business combination expenses, 2/5 are direct, 2/5 are share issue costs, and 1/5 are indirect costs. Net income of Sub at 12/31/22 is P90M.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 31, 2022, Parent Company purchased all the identifiable net assets of Sub Company by transferring cash of P1,200,000 and issuing 100,000 shares with
par value of P20 and fair value of P32. Parent will pay additional amount depending on the net income achieved by Sub at year-end:
Net Income @ year-end
50,000,000
Consideration to be transferred
1,000,000
2,000,000
3,000,000
Case
1
75,000,000
100,000,000
Book value of Parent and Sub at the date of acquisition were as follows:
Parent
1,000,000
1,600,000
2,400,000
Sub
800,000
1,400,000
800,000
Cash
Accounts receivable
Inventory
Buildings
5.000,000
10,000,000
2,800,000
5,800,000
1,000,000
1,200,000
800,000
Total assets
Accounts payable
Common stock, P2 par
Share premium
Retained earnings
Total liabilities and equities
2,400,000
2,000,000
1,600,000
4,000,000
10,000,000
2,800,000
5,800,000
At the date of acquisition, Parent assessed that Sub will reach at least 60,000,000 of net income for 2022. Book value of the identifiable net assets of Sub on
January 31, 2022 is P4,800,000. Temporary appraisal at the date of acquisition is P5,000,000. On December 31, 2022 an additional valuation resulted to a decrease
of P500,000 from previous appraisal and fair value of the net assets were finalized on February 6, 2023 by a subsequent increase of P1,000,000 from last valuation.
Parent paid P100,000 business combination expenses, 2/5 are direct, 2/5 are share issue costs, and 1/5 are indirect costs. Net income of Sub at 12/31/22 is P90M.
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