Location via proxy:   [ UP ]  
[Report a bug]   [Manage cookies]                
Scribd Logo
Upload

Welcome to Scribd!

  • 245 views

    Business Combination Drill PDF

    Uploaded by

    Melvin Mendoza
    Entity A acquired the net assets of Entity B by issuing shares and bonds. The summary includes: - Entity A paid various acquisition costs totaling $250,000 which shall be expensed. - Stock issuance costs of $160,000 will reduce additional paid-in capital and retained earnings. - Goodwill is calculated based on the fair values of assets and liabilities acquired from Entity B.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Business Combination Drill PDF

    Uploaded by

    Melvin Mendoza
    245 views2 pages
    Entity A acquired the net assets of Entity B by issuing shares and bonds. The summary includes: - Entity A paid various acquisition costs totaling $250,000 which shall be expensed. - Stock issuance costs of $160,000 will reduce additional paid-in capital and retained earnings. - Goodwill is calculated based on the fair values of assets and liabilities acquired from Entity B.

    Original Title

    BUSINESS_COMBINATION_DRILL.pdf

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Entity A acquired the net assets of Entity B by issuing shares and bonds. The summary includes: - Entity A paid various acquisition costs totaling $250,000 which shall be expensed. - Stock issuance costs of $160,000 will reduce additional paid-in capital and retained earnings. - Goodwill is calculated based on the fair values of assets and liabilities acquired from Entity B.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    245 views2 pages

    Business Combination Drill PDF

    Uploaded by

    Melvin Mendoza
    Entity A acquired the net assets of Entity B by issuing shares and bonds. The summary includes: - Entity A paid various acquisition costs totaling $250,000 which shall be expensed. - Stock issuance costs of $160,000 will reduce additional paid-in capital and retained earnings. - Goodwill is calculated based on the fair values of assets and liabilities acquired from Entity B.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    BUSINESS COMBINATION

    PROBLEM 1

    Entity A acquired the net assets of Entity B by issuing 10,000 of its ordinary shares with par value
    of P10 and bonds payable with face value of P500,000. The bonds are classified as financial
    liability at amortized cost.

    At the time of acquisition, the ordinary shares are publicly quoted at P20 per share. On the other
    hand, the bonds payable are trading at 110.

    Assuming entity A paid P160,000 stock issuance costs and P20,000 bond issue costs. Entity A
    also paid P40,000 acquisition related costs and P30,000 indirect costs of business combination.

    Before the date of acquisition, Entity A and Entity B reported the following data:

    Entity A Entity B
    Current assets P1,000,000 P 500,000
    Noncurrent assets 2,000,000 1,000,000
    Current liabilities 500,000 400,000
    Noncurrent liabilities 1,150,000 500,000
    Ordinary shares 500,000 200,000
    Share premium 50,000 300,000
    Retained earnings 800,000 100,000

    At the time of acquisition, the current assets of Entity A have fair value of P1,200,000 while the
    noncurrent assets of Entity B have fair value of P1,300,000. On the same date, the current liabilities
    of Entity B have fair value of P600,000 while the noncurrent liabilities of Entity A have fair value
    of P500,000.
    1. What is the goodwill or (gain on bargain purchase) arising from business combination?(2)
    2. What is the amount that shall be expensed as incurred at the time of business
    combination?(2)
    3. How much Resulting APIC “and” Retained earnings is to be charged or debited for the
    stock issuance cost?(4)

    PROBLEM 2

    On January 1, 2020, Entity A acquires 30,000 out of 100,000 outstanding ordinary shares of Entity
    B for P90,000. For the six months ended June 30, 2020, Entity B reported net income of P40,000.

    On July 1, 2020, Entity A acquires additional 60,000 ordinary shares of Entity B at a price of
    P240,000. Entity A paid P20,000 acquisition related costs and P10,000 indirect costs of business
    combination.

    The acquisition price of per share of the additional shares clearly reflects the fair value of the
    existing interest of Entity A on Entity B. It is the policy of Entity A to initially measure the
    noncontrolling interest in net assets of the acquiree at fair value. The fair value of the
    noncontrolling interest in net assets of the acquire is appraised at P30,000.
    At the acquisition date, the net assets of Entity B are reported at P400,000. An asset of Entity B is
    overvalued by P50,000 while one of its liability is overvalued by P30,000.

    1. What is the gain on remeasurement of existing Investment in Entity B as a result of step


    acquisition?(1)
    2. What is the goodwill or (gain on bargain purchase) as a result of business combination?(2)
    3. Assuming there is no given fair value of NCI , what amount is to be presented as NCI?(2)
    4. Assuming there is no given fair value of NCI and the purchase price is inclusive of
    control premium of 6,000, what amount is to be presented as NCI?(3)
    5. Assuming there is no given fair value of NCI and the purchase price is exclusive of
    control premium of 20,000,
    a. What amount is to be presented as NCI?(2)
    b. What is the goodwill or (gain on bargain purchase) as a result of business
    combination?(3)

    Problem 3
    Entity A acquired 80,000 out of 100,000 outstanding ordinary shares of Entity B which enables
    the former to obtain control of the latter at an acquisition price of P1,000,000. Entity A paid
    P100,000 acquisition related costs and P50,000 indirect costs of business combination.
    At the date of acquisition, the net assets of Entity B are reported at P1,600,000. An asset of Entity
    B is overvalued by P60,000 while one of its liability is undervalued by P40,000. Both entities are
    considered as small-medium enterprises.

    1. What is the initial measurement of noncontrolling interest in net assets in the consolidated
    statement of financial position?(2)
    2. What is the amount that shall be expensed as incurred at the time of business
    combination?(2)
    3. What is the goodwill or (gain on bargain purchase) arising from business combination?(5)

    You might also like