PROBLEM 5 - 5 (PFRS for SMES)Shadow Company acquired the net assets of Recruit Company on July 1, 2019, and made thefollowing entry to record the acquisition (both using PFRS for SME):Current and Non-current assetsGoodwill3,600,000600,000LiabilitiesOrdinary share capital, P1 parShare Premium480,000600,0003,120,000The agreement further provides that additional cash consideration would be paid on June 30,2020, equal to twice the amount by which net eamings of Recruit Company exceed P300,000with the first 12 months of acquisition. Net income was P260,000 in 2019 (earned evenly) andP160,000 for the first six months of 2020. Included in the goodwill computation and liabilitiesabove is the fair value of the contingent consideration, which was estimated to be P80,000 asof July 1, 2019, although assessed as not probable at this date.What should be the amount of Goodwill on December 31, 2020?

Shadow company acquired net assets of Recruit company on July 1, 2019 and recorded the value of…

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What should be the amount of Goodwill on December 31, 2020?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Question

PROBLEM 5 - 5 (PFRS for SMES)
Shadow Company acquired the net assets of Recruit Company on July 1, 2019, and made the
following entry to record the acquisition (both using PFRS for SME):
Current and Non-current assets
Goodwill
3,600,000
600,000
Liabilities
Ordinary share capital, P1 par
Share Premium
480,000
600,000
3,120,000
The agreement further provides that additional cash consideration would be paid on June 30,
2020, equal to twice the amount by which net eamings of Recruit Company exceed P300,000
with the first 12 months of acquisition. Net income was P260,000 in 2019 (earned evenly) and
P160,000 for the first six months of 2020. Included in the goodwill computation and liabilities
above is the fair value of the contingent consideration, which was estimated to be P80,000 as
of July 1, 2019, although assessed as not probable at this date.
What should be the amount of Goodwill on December 31, 2020?

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