Taylor Company acquired the assets and assumed the liabilities of Swift 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 ofIssued 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 yetShare issue costs paid amounted to P15,000.Bond Issue costs paid amounting to P120,000. The Balance Sheet of the two entities before acquisition were as follows: Taylor CompanySwift Inc.Total Assets16,500,0005,235,000Total Liabilities2,500,000500,000Ordinary Shares5,000,0001,250,000Share premium1,500,000750,000Retained Earnings 6/30/227,500,0002,735,000 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 Taylor Company and Swift Inc. are understated by P50,000 and P75,000, respectively.Specialized equipment of Swift has a book value of P300,000 with a fair value of P450,000.Swift Inc. has a pre-existing goodwill amounting to P250,000. 1. 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 P5,954,000Total Retained earnings after business combination is 7,380,000 2. What is the total shareholder’s equity after business combination:14,135,00014,015,00014,150,00014,030,000

Stockholder Equity - The amount of assets left over for shareholders to use after all liabilities…

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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Taylor Company acquired the assets and assumed the liabilities of Swift 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
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
Share issue costs paid amounted to P15,000.
Bond Issue costs paid amounting to P120,000.

The Balance Sheet of the two entities before acquisition were as follows:

	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
Retained Earnings 6/30/22	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 Taylor Company and Swift Inc. are understated by P50,000 and P75,000, respectively.
Specialized equipment of Swift has a book value of P300,000 with a fair value of P450,000.
Swift Inc. has a pre-existing goodwill amounting to P250,000.

1. 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

2. What is the total shareholder’s equity after business combination:

14,135,000
14,015,000
14,150,000
14,030,000

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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