On the negotiation for the business combination, DIMINUTIVE Co. incurred transaction costs amount P200,000 for legal, accounting, consultancy fees. If DIMINUTIVE Co. paid P2,000,000 cash as consideration for the assets and liabilities of SMALL, Inc., how much is the goodwill (gain on bargain purchase) on the business combination?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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6. On Jan. 1, 20x1, DIMINUTIVE Co.
acquired all of the assets and assumed
all of the liabilities of SMALL, Inc. As of
this date, the carrying amounts and fair
values of the assets and liabilities of
SMALL acquired by DIMINUTIVE are
shown below:
Assets
Carrying amounts Fair values
Cash in bank
20,000
20,000
Receivables
400,000
240,000
Allowance for probable losses on
receivables (60,000)
Inventory
1,040,000
700,000
Building - net
2,000,000
Goodwill
2,200,000
200,000
40,000
Total assets
3,600,000
3,200,000
Liabilities Payables
800,000
800,000
On the negotiation for the business
combination, DIMINUTIVE Co. incurred
transaction costs amount P200,000 for
legal, accounting, consultancy fees. If
DIMINUTIVE Co. paid P2,000,000 cash
as consideration for the assets and
liabilities of SMALL, Inc., how much is
the goodwill (gain on bargain purchase)
on the business combination?
Transcribed Image Text:6. On Jan. 1, 20x1, DIMINUTIVE Co. acquired all of the assets and assumed all of the liabilities of SMALL, Inc. As of this date, the carrying amounts and fair values of the assets and liabilities of SMALL acquired by DIMINUTIVE are shown below: Assets Carrying amounts Fair values Cash in bank 20,000 20,000 Receivables 400,000 240,000 Allowance for probable losses on receivables (60,000) Inventory 1,040,000 700,000 Building - net 2,000,000 Goodwill 2,200,000 200,000 40,000 Total assets 3,600,000 3,200,000 Liabilities Payables 800,000 800,000 On the negotiation for the business combination, DIMINUTIVE Co. incurred transaction costs amount P200,000 for legal, accounting, consultancy fees. If DIMINUTIVE Co. paid P2,000,000 cash as consideration for the assets and liabilities of SMALL, Inc., how much is the goodwill (gain on bargain purchase) on the business combination?
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