Ping Company acquires all of Sun Corp. in an asset acquisition. Ping paid P1,000,000 more than Sun’s book value, and this excess was attributed entirely to goodwill, as all of Sun’s assets and liabilities were carried at amounts equivalent to fair value. At the time of the combination, a lawsuit was pending against Sun, which Sun had not recorded on its books. It was felt at the time that Sun would win the lawsuit, so no provision for it was made when Ping recorded the asset acquisition Assuming that the value change as a result of event subsequent (more than 1 yr) to the acquisition. The appropriate entry on Ping's books to record the new information. Debit, Retained Earnings, P400,000; Credit, Estimated lawsuit liability, P400,000 Debit, Loss on lawsuit, P400,000; Credit, Estimated lawsuit liability, P400,000 Debit, Goodwill, P400,000; Credit, Estimated lawsuit liability, P400,000 No entry required
Ping Company acquires all of Sun Corp. in an asset acquisition. Ping paid P1,000,000 more than Sun’s book value, and this excess was attributed entirely to goodwill, as all of Sun’s assets and liabilities were carried at amounts equivalent to fair value. At the time of the combination, a lawsuit was pending against Sun, which Sun had not recorded on its books. It was felt at the time that Sun would win the lawsuit, so no provision for it was made when Ping recorded the asset acquisition Assuming that the value change as a result of event subsequent (more than 1 yr) to the acquisition. The appropriate entry on Ping's books to record the new information. Debit, Retained Earnings, P400,000; Credit, Estimated lawsuit liability, P400,000 Debit, Loss on lawsuit, P400,000; Credit, Estimated lawsuit liability, P400,000 Debit, Goodwill, P400,000; Credit, Estimated lawsuit liability, P400,000 No entry required
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Ping Company acquires all of Sun Corp. in an asset acquisition. Ping paid P1,000,000 more than Sun’s book value, and this excess was attributed entirely to goodwill , as all of Sun’s assets and liabilities were carried at amounts equivalent to fair value. At the time of the combination, a lawsuit was pending against Sun, which Sun had not recorded on its books. It was felt at the time that Sun would win the lawsuit, so no provision for it was made when Ping recorded the asset acquisition
Assuming that the value change as a result of event subsequent (more than 1 yr) to the acquisition. The appropriate entry on Ping's books to record the new information.
- Debit,
Retained Earnings , P400,000; Credit, Estimated lawsuit liability, P400,000 - Debit, Loss on lawsuit, P400,000; Credit, Estimated lawsuit liability, P400,000
- Debit, Goodwill, P400,000; Credit, Estimated lawsuit liability, P400,000
- No entry required
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