quired the assets and assumed the liabilities of Sheeran Inc. on June 30, 2022. The consideration transferred by the acquirer were as follows: Cash amounting to P2,000,000. Issued 10,000 ordinary shares at P10 par with a market price of P15. Issued 5 year interest bearing bonds payable with a face value of P3,000,000 with a nominal rate of 10% and effective interest of 12%. (use two decimal places for the present value factor) Acquisition related costs incurred were as follows: Legal fees amounting to P120,000, 70% of which is not yet paid. Share issue costs paid amounted to P15,000. Bond Issue costs paid amounting to P120,000.
Ed Company acquired the assets and assumed the liabilities of Sheeran Inc. on June 30, 2022.
The consideration transferred by the acquirer were as follows:
Cash amounting to P2,000,000.
Issued 10,000 ordinary shares at P10 par with a market price of P15.
Issued 5 year interest bearing bonds payable with a face value of P3,000,000 with a nominal rate of 10% and effective interest of 12%. (use two decimal places for the present value factor)
Acquisition related costs incurred were as follows:
Legal fees amounting to P120,000, 70% of which is not yet paid.
Share issue costs paid amounted to P15,000.
Bond Issue costs paid amounting to P120,000.
The
|
|
Taylor Company |
Swift Inc. |
|
Total Assets |
16,500,000 |
5,235,000 |
|
Total Liabilities |
2,500,000 |
500,000 |
|
Ordinary Shares |
5,000,000 |
1,250,000 |
|
Share premium |
1,500,000 |
750,000 |
|
|
7,500,000 |
2,735,000 |
It was determined that the book value of the assets and liabilities of the two entities were equivalent to its fair value except for the following:
Inventories of Ed Company and Sheeran Inc. are understated by P50,000 and P75,000, respectively.
Specialized equipment of Sheeran Inc. has a book value of P300,000 with a fair value of P450,000.
Sheeran Inc. has a pre-existing
a. Which of the following item is incorrect:
Goodwill arising from business combination is 230,000.
The acquirer’s total assets after business combination is P19,769,000.
The acquirer’s total liabilities after business combination is P5,954,000
Total Retained earnings after business combination is 7,380,000
b. What is the total shareholder’s equity after business combination:
14,135,000
14,015,000
14,150,000
14,030,000
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