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On October 1, 2019, Alpha Company is interested in the business of Beta Company. Negotiations have been made and on January 3, 2020, an agreement was reached and the net assets with a fair value of P6,000,000 were exchanged on this date for the following: 100,000 shares in Alpha Company, par P10, market value, P25 P4,000,000 cash, half to be paid on date of exchange and the other payable in semi- annual installments of P500,000 beginning June 30, 2020. (assume a market rate of interest of 12%) Non-cash assets, book value of P200,000, fair market value of P240,000 In issuing the equity instruments, Alpha Company incurred the following: o underwriting cots and brokerage fees, P20,000 transaction costs such as stamp duties and professional advisers fee, P5,000. • Legal and accounting fees related with the business combination, P30,000. The total amount that will affect the P/L as of the date of acquisition is: a P30,000 b. Р55,000 c. P25,000 d. P297,500 e. P-0-

On October 1, 2019, Alpha Company is interested in the business of Beta Company. Negotiations have been made and on January 3, 2020, an agreement was reached and the net assets with a fair value of P6,000,000 were exchanged on this date for the following: 100,000 shares in Alpha Company, par P10, market value, P25 P4,000,000 cash, half to be paid on date of exchange and the other payable in semi- annual installments of P500,000 beginning June 30, 2020. (assume a market rate of interest of 12%) Non-cash assets, book value of P200,000, fair market value of P240,000 In issuing the equity instruments, Alpha Company incurred the following: o underwriting cots and brokerage fees, P20,000 transaction costs such as stamp duties and professional advisers fee, P5,000. • Legal and accounting fees related with the business combination, P30,000. The total amount that will affect the P/L as of the date of acquisition is: a P30,000 b. Р55,000 c. P25,000 d. P297,500 e. P-0-

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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34. On October 1, 2019, Alpha Company is interested in the business of Beta Company. Negotiations have been made and on January 3, 2020, an agreement was reached and the net assets with a fair value of P6,000,000 were exchanged on this date for the following: • 100,000 shares in Alpha Company, par P10, market value, P25 P4,000,000 cash, half to be paid on date of exchange and the other payable in semi- annual installments of P500,000 beginning June 30, 2020. (assume a market rate of interest of 12%) • Non-cash assets, book value of P200,000, fair market value of P240,000 • In issuing the equity instruments, Alpha Company incurred the following: o underwriting cots and brokerage fees, P20,000 o transaction costs such as stamp duties and professional advisers fee, P5,000. Legal and accounting fees related with the business combination, P30,000. The total amount that will affect the P/L as of the date of acquisition is: а. Р30,000 b. Р55,000 c. P25,000 d. P297,500 e. P-0-
Transcribed Image Text:34. On October 1, 2019, Alpha Company is interested in the business of Beta Company. Negotiations have been made and on January 3, 2020, an agreement was reached and the net assets with a fair value of P6,000,000 were exchanged on this date for the following: • 100,000 shares in Alpha Company, par P10, market value, P25 P4,000,000 cash, half to be paid on date of exchange and the other payable in semi- annual installments of P500,000 beginning June 30, 2020. (assume a market rate of interest of 12%) • Non-cash assets, book value of P200,000, fair market value of P240,000 • In issuing the equity instruments, Alpha Company incurred the following: o underwriting cots and brokerage fees, P20,000 o transaction costs such as stamp duties and professional advisers fee, P5,000. Legal and accounting fees related with the business combination, P30,000. The total amount that will affect the P/L as of the date of acquisition is: а. Р30,000 b. Р55,000 c. P25,000 d. P297,500 e. P-0-
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