PHASE & STOW CO. WITH GOODWILL from COMBINATION Phase Corporation acquires the net assets of Stow Company in a merger business combination in which Stow Company is dissolved. The assets and liabilities of Phase & Stow on January 2, xxx, the date of the merger is as follows: STOW COMPANY BALANCE SHEET Cash Net receivables Inventories Land Buildings- net Equipment-net Patents Investment in STOW Company Total assets PHASE CO. BVs FVs 600,000 50,000 50,000 100,000 150,000 140,000 120,000 200,000 250,000 440,000 50,000 100,000 760,000 300,000 500,000 150,000 250,000 350,000 0 0 50,000 0 0 0 2,170,000 1,000,000 1,440,000 Accounts payable 100,000 60,000 60,000 Notes payable 0 150,000 135,000 Ordinary shares, P 10 par C/S 1,500,000 500,000 Share premium APIC 300,000 200,000 Retained earnings Total liabilities & equity 270,000 2,170,000 90,000 1,000,000 Phase Corporation pays P 380,000 cash and issues 50,000 shares of its P 10 par ordinary shares with a MV of P 20/share for the Net Assets of Stow Company. Phase also paid P 20,000 in direct acquisition costs and P 15,000 stock issuance costs.
PHASE & STOW CO. WITH GOODWILL from COMBINATION Phase Corporation acquires the net assets of Stow Company in a merger business combination in which Stow Company is dissolved. The assets and liabilities of Phase & Stow on January 2, xxx, the date of the merger is as follows: STOW COMPANY BALANCE SHEET Cash Net receivables Inventories Land Buildings- net Equipment-net Patents Investment in STOW Company Total assets PHASE CO. BVs FVs 600,000 50,000 50,000 100,000 150,000 140,000 120,000 200,000 250,000 440,000 50,000 100,000 760,000 300,000 500,000 150,000 250,000 350,000 0 0 50,000 0 0 0 2,170,000 1,000,000 1,440,000 Accounts payable 100,000 60,000 60,000 Notes payable 0 150,000 135,000 Ordinary shares, P 10 par C/S 1,500,000 500,000 Share premium APIC 300,000 200,000 Retained earnings Total liabilities & equity 270,000 2,170,000 90,000 1,000,000 Phase Corporation pays P 380,000 cash and issues 50,000 shares of its P 10 par ordinary shares with a MV of P 20/share for the Net Assets of Stow Company. Phase also paid P 20,000 in direct acquisition costs and P 15,000 stock issuance costs.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Kindly answer the requirement 3 and 4. Thank you
Transcribed Image Text:1
PHASE & STOW co.
WITH GOODWILL from COMBINATION
Phase Corporation acquires the net assets of Stow Company in a merger business combination in which Stow Company
is dissolved.
The assets and liabilities of Phase & Stow on January 2, xxx, the date pf the merger is as follows:
STOW COMPANY
BALANCE SHEET
PHASE CO.
BVs
FVs
Cash
600,000
50,000
50,000
Net receivables
100,000
150,000
140,000
Inventories
120,000
200,000
250,000
Land
440,000
50,000
100,000
Buildings- net
760,000
300,000
500,000
Equipment- net
150,000
250,000
350,000
Patents
50,000
Investment in STOW Company
Total assets
2,170,000
1,000,000
1,440,000
Accounts payable
100,000
60,000
60,000
Notes payable
150,000
135,000
C/S
Ordinary shares, P 10 par
Share premium
Retained earnings
1,500,000
500,000
APIC
300,000
200,000
270,000
90,000
Total liabilities & equity
2,170,000
1,000,000
Phase Corporation pays P 380,000 cash and issues 50,000 shares of its P 10 par ordinary shares with a MV of P 20/share
for the Net Assets of Stow Company.
Phase also paid P 20,000 in direct acquisition costs and P 15,000 stock issuance costs.
STEPS IN BUSINESS COMBINATION: UPON ACQUISITION
1 Determine the acquisition cost
2 Determine the market value of the net assets acquired
3 Compare Acquisition COST with MARKET VALUES of Net Assets acquired
4 On the acquirer's books, RECORD the Assets acquired (including GOODWILL) and Liabilities assumed, with a
corresponding Credit to the consideration paid.
5 Immediately after the business combination, PREPARE the BALANCE SHEET of the ACQUIRER.
REQUIREMENTS:
IN GOOD FORM!
'1. Compute the Acquisition cost
2. Compute to Market Values of Net Assets Acquired
3. Journal entries upon acquisition
4. Balance Sheet upon acquisition
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