What is the consolidated total assets, and consolidated equity at the date of acquisition.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
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CARDO COMPANY
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Book Value |
Fair Value |
|
Book Value |
Fair Value
|
|
Cash |
P500,000 |
P500,000 |
Accounts Payable |
P450,000 |
P440,000 |
|
|
250,000 |
240,000 |
Mortgage Payable |
200,000 |
220,000
|
|
Inventory |
155,000 |
200,000 |
Ordinary Shares |
595,000
|
- |
|
Fixed Assets (Net) |
600,000 |
520,000
|
|
260,000 |
- |
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SYANO COMPANY
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|
|
Book Value |
Fair Value |
|
Book Value |
Fair Value
|
|
Cash |
P300,000 |
P300,000 |
Accounts Payable |
P350,000 |
P340,000 |
|
Accounts Receivable |
150,000 |
160,000 |
Mortgage Payable |
200,000 |
220,000
|
|
Inventory |
125,000 |
100,000 |
Ordinary Shares |
250,000
|
- |
|
Fixed Assets (Net) |
400,000 |
420,000
|
Retained Earnings |
175,000 |
- |
If CARDO Co purchases the net assets of SYANO Co by issuing 4,000 shares of their P10 par value shares with a fair value of P35 per share, a P40,000 direct cost and a P50,000 stock issue cost however remain unpaid. The companies also agreed on the following:
- CARDO guarantees the prices of their stocks and promises to pay the peso decline in their shares within one year.
- CARDO Co promises to pay the stockholders of SYANO Co an additional P100,000 if the net income of the company in the next year will be more than P500,000. CARDO estimates that there is an 80% probability of achieving the target income.
What is the consolidated total assets, and consolidated equity at the date of acquisition.
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