Shareholders of the two companies agree that a single class of shares be issued, that their contributions be measured by net assets plus allowances for goodwill, and that 10% be considered as a normal rate of return. Earnings in excess of the normal rate of return shall be capitalized at 20% in calculating goodwill. It was also agreed that the authorized capital stock of the new corporation shall be 20,000 shares with a par value of P100 per share. The amount of goodwill credited to Co. A, and the total contribution of Co. B (net assets plus goodwill) is: a. P100,000; P400,000 b. P100,000; P600,000 c. P150,000; P500,000 d. P200,000; P600,000
Shareholders of the two companies agree that a single class of shares be issued, that their contributions be measured by net assets plus allowances for goodwill, and that 10% be considered as a normal rate of return. Earnings in excess of the normal rate of return shall be capitalized at 20% in calculating goodwill. It was also agreed that the authorized capital stock of the new corporation shall be 20,000 shares with a par value of P100 per share. The amount of goodwill credited to Co. A, and the total contribution of Co. B (net assets plus goodwill) is: a. P100,000; P400,000 b. P100,000; P600,000 c. P150,000; P500,000 d. P200,000; P600,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
BUSINESS COMBINATION
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Transcribed Image Text:Shareholders of the two companies agree that a single class of shares
be issued, that their contributions be measured by net assets plus
allowances for goodwill, and that 10% be considered as a normal
rate of return. Earnings in excess of the normal rate of return shall
be capitalized at 20% in calculating goodwill. It was also agreed that
the authorized capital stock of the new corporation shall be 20,000
shares with a par value of P100 per share.
The amount of goodwill credited to Co. A, and the total contribution
of Co. B (net assets plus goodwill) is:
a. P100,000; P400,000
b.
P100,000; P600,000
c. P150,000; P500,000
d. P200,000; P600,000
Transcribed Image Text:45. Companies A and B decide to consolidate. Asset and estimated annual
earnings contributions are as follows:
Net asset contribution
Estimated annual earnings
Contribution
Co. A
Co. B Total
P300,000 P400,000 P700,000
50,000
80,000
130,000
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