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Concept explainers
a.
Introduction: Acquisition of Net Assets is a process in which the acquiring company acquires all the assets and liabilities of the acquired company in exchange for consideration. In this process, the acquiring company records all identifiable assets and liabilities at fair values and any excess of the consideration paid over fair value is recognized as
To compute:The amount of common stock reported immediately following the business combination.
a.
![Check Mark](/static/check-mark.png)
Explanation of Solution
Calculate the amount of common stock reported immediately following the business combination:
Particulars | Amount ($) |
Existing Common Stock | 200,000 |
Add: Common Stock issued in exchange for net assets | |
Total common stock to be reported | 280,000 |
Table (1)
b.
Introduction: Acquisition of Net Assets is a process in which the acquiring company acquires all the assets and liabilities of the acquired company in exchange for consideration. In this process, the acquiring company records all identifiable assets and liabilities at fair values and any excess of the consideration paid over fair value is recognized as goodwill.
To compute: The amount of cash and receivables reported immediately following the business combination.
b.
![Check Mark](/static/check-mark.png)
Explanation of Solution
Calculate the amount of cash and receivables reported immediately following the business combination:
Particulars | Amount ($) |
Existing Cash and Receivables | 150,000 |
Add: Fair value of Cash and Receivables acquired | 40,000 |
Total Cash and Receivables reported | 190,000 |
Table (2)
c.
Introduction: Acquisition of Net Assets is a process in which the acquiring company acquires all the assets and liabilities of the acquired company in exchange for consideration. In this process, the acquiring company records all identifiable assets and liabilities at fair values and any excess of the consideration paid over fair value is recognized as goodwill.
To compute: The amount of land reported immediately following the business combination.
c.
![Check Mark](/static/check-mark.png)
Explanation of Solution
Compute the amount of land reported immediately following the business combination:
Particulars | Amount ($) |
Existing Land | 100,000 |
Add: Fair value of Land acquired | 85,000 |
Total Land reported | 185,000 |
Table (3)
d.
Introduction: Acquisition of Net Assets is a process in which the acquiring company acquires all the assets and liabilities of the acquired company in exchange for consideration. In this process, the acquiring company records all identifiable assets and liabilities at fair values and any excess of the consideration paid over fair value is recognized as goodwill.
To compute: The amount of building and equipment reported immediately following the business combination.
d.
![Check Mark](/static/check-mark.png)
Explanation of Solution
Compute the amount of building and equipment reported immediately following the business combination:
Particulars | Amount ($) |
Existing Building and Equipment | 300,000 |
Add: Fair value of Building and Equipment acquired | 230,000 |
Total Building and Equipment reported | 530,000 |
Table (4)
e.
Introduction: Acquisition of Net Assets is a process in which the acquiring company acquires all the assets and liabilities of the acquired company in exchange for consideration. In this process, the acquiring company records all identifiable assets and liabilities at fair values and any excess of the consideration paid over fair value is recognized as goodwill.
To compute: The amount of goodwill reported immediately following the business combination.
e.
![Check Mark](/static/check-mark.png)
Explanation of Solution
Compute the amount of goodwill reported immediately following the business combination:
Particulars | Amount ($) |
Consideration | |
Less: Fair value net assets acquired | 355,000 |
Goodwill | 45,000 |
Table (5)
f.
To compute: The amount of additional paid-in capital reported immediately following the business combination.
Introduction:Acquisition of Net Assets is a process in which the acquiring company acquires all the assets and liabilities of the acquired company in exchange for consideration. In this process, the acquiring company records all identifiable assets and liabilities at fair values and any excess of the consideration paid over fair value is recognized as goodwill.
f.
![Check Mark](/static/check-mark.png)
Explanation of Solution
Calculate the amount of additional paid-in capital reported immediately following the business combination:
Particulars | Amount ($) |
Fair value net assets acquired | 355,000 |
Add: Goodwill | 45,000 |
Total Consideration | 400,000 |
Less: Common Stock issued | 80,000 |
Additional Paid-in Capital raised | 320,000 |
Add: Existing Paid-in Capital | 20,000 |
Total Additional Paid-in Capital Reported | 340,000 |
Table (6)
g.
To compute: The amount of
Introduction:Acquisition of Net Assets is a process in which the acquiring company acquires all the assets and liabilities of the acquired company in exchange for consideration. In this process, the acquiring company records all identifiable assets and liabilities at fair values and any excess of the consideration paid over fair value is recognized as goodwill.
g.
![Check Mark](/static/check-mark.png)
Explanation of Solution
The amount of retained earnings would continue to be at its existing level of $330,000 immediately following the business combination.
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Chapter 1 Solutions
Advanced Financial Accounting
- Determine the following balances that would appear in the consolidated financial statements of P COMPANY and S COMPANY:1. Total Assets2. Total Liabilities3. Equityarrow_forwardOn January 1, 2018, PNB and Allied Bank entered into a contract of merger wherein PNB will issue 100,000 ordinary shares with par value of P10 and quoted price of P20 to the existing shareholders of Allied in exchange for the net assets of Allied Bank. PNB paid acquisition related cost of business combination amounting to P100,000 and stock issuance cost amounting to P200,000. As of December 31, 2017, PNB has total assets with book value of P50M and fair market value of P60M while Allied Bank has total assets with book value of P5M and fair market value of P4M. The amount net assets of Allied Bank on December 31, 2017 is P2.6M. What is the amount of total assets of PNB on January 1, 2018 after the merger? Group of answer choices 54,100,000 64,100,000 65,100,000 55,100,000arrow_forwardOn January 1, 2018, PNB and Allied Bank entered into a contract of merger wherein PNB will issue 100,000 ordinary shares with par value of P10 and quoted price of P20 to the existing shareholders of Allied in exchange for the net assets of Allied Bank. PNB paid acquisition related cost of business combination amounting to P100,000 and stock issuance cost amounting to P200,000. As of December 31, 2017, PNB has total assets with book value of P50M and fair market value of P60M while Allied Bank has total assets with book value of P5M and fair market value of P4M. The amount net assets of Allied Bank on December 31, 2017 is P2.6M. What is the goodwill/(gain on bargain purchase) arising from business combination? Group of answer choices 400,000 (600,000) 600,000 800,000arrow_forward
- BUSINESS COMBINATION SHOW SOLUTIONarrow_forwardABC Corp. acquired all the assets and liabilities of XYZ Corporation by issuing shares of its common stock. On January 1, 2020, partial balance sheet data for the companies prior to the business combination and immediately following the combination is provided. ABC Corp. XYZ Corp. Combination Cash 65,000 25,000 90,000 Accounts receivable 72,000 20,000 94,000 Inventory 33,000 45,000 88,000 PPE (net) 400,000 150,000 650,000 Goodwill ? Total Assets 570,000 240,000 ? Accounts payable 50,000 25,000 75,000 Bonds payable 250,000 100,000 350,000 Common stock, P2 par 100,000 25,000 160,000 Share Premium 65,000 20,000 245,000 Retained earnings 105,000 70,000 ? Total Liab and Equity 570,000 240,000 ? What is the fair value of the net assets held by XYZ Corp at the date of combination? a. 270,000 b. 227,000 c. 497,000 d. 115,000arrow_forward1) In the consolidated balance sheet, the total temporary investment should be reported at: 2) In the consolidated balance sheet, the receivables should be reported atarrow_forward
- BUSINESS COMBINATION Answer it with solution:arrow_forwardHow much is the investment balance on December 31?arrow_forwardOn March 1, 2020 Ajax Corporation acquired all the assets and liabilities of Chelsea Corporation by issuing shares of its common stock. The following is a balance sheet data for the companies prior to the business combination and immediately following the combination: Ajax Chelsea Combined Corporation Corporation Cash $ $ 75,000 $ 35,000 $ 110,000 Accounts 92,000 30,000 122,000 receivable Inventory 45,000 43,000 98,000 Equipment (net) 420,000 150,000 620,000 Goodwill XXX Total $ 632,000 $ 258,000 XXX Assets Accounts $ 375,000 $ 125,000 $ 500,000 payable Common stock, $2 120,000 40,000 200,000 par Additional 85,000 30,000 245,000 paid-in capital Retained 52,000 63,000 XX earnings Total $ 632,000 $ 258,000 XXX Liabilities & Equity What balance in Retained earnings will the combined entity report immediately following the combination? Select one: O a. $ 52,000 O b. $ 0 O c. $ 63,000 O d. $ 115,000arrow_forward
- On January 1, Parent Company acquired 90% of Subsidiary Company in exchange for 5,400 shares of P10 par common stock having a market value of P120,600. Parent and Subsidiary condensed balance sheet on January 1, were as follows: REQUIREMENTS: USING THE ADDITIONAL INFORMATION WHAT IS THE AMOUNT OF THE: a. The investment balance on December 31 b. Dividend Income for the year c. Non-controlling interest in net income on December 31arrow_forward13 ABC Corp. acquired all the assets and liabilities of XYZ Corporation by issuing shares of its common stock. On January 1, 2020, partial balance sheet data for the companies prior to the business combination and immediately following the combination is provided. ABC Corp. XYZ Corp. Combination Cash 65,000 25,000 90,000 Accounts receivable 72,000 20,000 94,000 Inventory 33,000 45,000 88,000 PPE (net) 400,000 150,000 650,000 Goodwill ? Total Assets 570,000 240,000 ? Accounts payable 50,000 25,000 75,000 Bonds payable 250,000 100,000 350,000 Common stock, P2 par 100,000 25,000 160,000 Share Premium 65,000 20,000 245,000 Retained earnings 105,000 70,000 ? Total Liab and Equity 570,000 240,000 ? What is the fair value of the net assets held by XYZ Corp at the date of combination? Group of answer choices 115,000 227,000…arrow_forwardCompute for the NCI on December 31, 2023arrow_forward
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