As a result of the acquisition, ABC should record goodwill of: ___ The statement of financial position of XYZ Company on December 31, 2011 is as follows:AssetsLiabilities and Stockholders' equityP 300,000CashP 100,000Current liabilitiesAccounts receivable200,000Long-term liabilities500,000Capital stock, P1 par valueRetained earningsInventories500,000100,000Property and equipmentTotal900,000800,000P1,700,000P1,700,000On December 31, 2011, ABC Corporation purchases all of the outstanding stock of XYZ Company forP1,500,000 cash. On that date, the fair value of XYZ's inventories and property and equipment areP450,000 and P1,000,000 respectively. The fair values of all other assets and liabilities were equal to theirbook values.

Calculation of fair value of net identifiable assets acquired : Particulars Amount Cash…

The statement of financial position of XYZ Company on December 31, 2011 is as follows: Assets Liabilities and Stockholders' equity P 100,000 Current liabilities P 300,000 Cash Accounts receivable 200,000 Long-term liabilities 500,000 Inventories 500,000 Capital stock, P1 par value 100,000 Property and equipment Total Retained earnings _800,000 P1,700,000 900,000 P1,700,000 On December 31, 2011, ABC Corporation purchases all of the outstanding stock of XYZ Company for P1,500,000 cash. On that date, the fair value of XYZ's inventories and property and equipment are PA50,000 and P1,000,000 respectively. The fair values of all other assets and liabilities were equal to their book values.

The statement of financial position of XYZ Company on December 31, 2011 is as follows: Assets Liabilities and Stockholders' equity P 100,000 Current liabilities P 300,000 Cash Accounts receivable 200,000 Long-term liabilities 500,000 Inventories 500,000 Capital stock, P1 par value 100,000 Property and equipment Total Retained earnings _800,000 P1,700,000 900,000 P1,700,000 On December 31, 2011, ABC Corporation purchases all of the outstanding stock of XYZ Company for P1,500,000 cash. On that date, the fair value of XYZ's inventories and property and equipment are PA50,000 and P1,000,000 respectively. The fair values of all other assets and liabilities were equal to their book values.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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if the value implied by the purchase price of an acquired company exceeds the fair values of the identifiable net assets, the excess should be a. allocated to reduce any previously recorded goodwill and classify any remainder as an ordinary gain b. allocated to reduce current and longlived assets c. allocated to gain on acquisition d. allocated to goodwill
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