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    2 PFRS For SMEs Business Combination

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    Ray Allen Uy
    Philips Company acquired 60% of Sony Company for P1,200,000 plus P30,000 in acquisition costs. Sony's carrying values equaled fair values. The amount of goodwill to be recognized is P0 since Philips is an SME and goodwill is not recognized for SME business combinations. JL Company, an SME, issued shares worth P2,800,000 for FG Company's net assets. Additional acquisition costs totaled P83,000. The amount to be capitalized as the cost of acquiring FG's net assets is P2,800,000. The amount charged to business combination expenses is P83,000. P Company, an SME

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    2 PFRS For SMEs Business Combination

    Uploaded by

    Ray Allen Uy
    197 views1 page
    Philips Company acquired 60% of Sony Company for P1,200,000 plus P30,000 in acquisition costs. Sony's carrying values equaled fair values. The amount of goodwill to be recognized is P0 since Philips is an SME and goodwill is not recognized for SME business combinations. JL Company, an SME, issued shares worth P2,800,000 for FG Company's net assets. Additional acquisition costs totaled P83,000. The amount to be capitalized as the cost of acquiring FG's net assets is P2,800,000. The amount charged to business combination expenses is P83,000. P Company, an SME

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    2 PFRS for SMEs Business Combination

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    Philips Company acquired 60% of Sony Company for P1,200,000 plus P30,000 in acquisition costs. Sony's carrying values equaled fair values. The amount of goodwill to be recognized is P0 since Philips is an SME and goodwill is not recognized for SME business combinations. JL Company, an SME, issued shares worth P2,800,000 for FG Company's net assets. Additional acquisition costs totaled P83,000. The amount to be capitalized as the cost of acquiring FG's net assets is P2,800,000. The amount charged to business combination expenses is P83,000. P Company, an SME

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    197 views1 page

    2 PFRS For SMEs Business Combination

    Uploaded by

    Ray Allen Uy
    Philips Company acquired 60% of Sony Company for P1,200,000 plus P30,000 in acquisition costs. Sony's carrying values equaled fair values. The amount of goodwill to be recognized is P0 since Philips is an SME and goodwill is not recognized for SME business combinations. JL Company, an SME, issued shares worth P2,800,000 for FG Company's net assets. Additional acquisition costs totaled P83,000. The amount to be capitalized as the cost of acquiring FG's net assets is P2,800,000. The amount charged to business combination expenses is P83,000. P Company, an SME

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    © All Rights Reserved
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    PFRS for SMEs Business Combination (Date of Acquisition)

    PROBLEM I
    Philips Company acquired 60% of Sony Company on January 1, 2017, when the stockholders’ Equity of Sony consisted of:
    Ordinary Shares, P100 par P800,000
    Paid in capital in excess of par 300,000
    Retained Earnings 600,000
    It paid P1,200,000 for the interest acquired plus P10,000 for costs directly attributable to the acquisition and P20,000 for indirect
    costs. Sonny Company’s carrying value of net assets is equal to their fair market values.
    1. The amount of goodwill to be recognized resulting from this combination assuming Philips Company is an SME is:

    PROBLEM II
    P Company, an SME, issued 120,000 shares of P25 par value ordinary shares for all the outstanding stock of S Company in
    business consummated on July 1, 2005. P Company’s ordinary shares were selling at P40 per share at the time of consummation
    of the combination. The bool value of S net assets was P3.8M. out of pocket cost s of combination were as follows: legal fees
    for the business combination, P12,000; printing cost for stock certification, P9,400; finders’ fee, P27,000 and CPA audit fees for
    business combination, P19,000. A contingent consideration which is probable and can be reasonably estimated amounted to
    P18,200.
    1. The total amount capitalized as cost of investment in S Company is:

    PROBLEM III
    On January 31, 2017, Pine Inc. issued 100,000 shares of its P100 par value ordinary shares for the net assets of Tree, Inc. The
    market value of Pine’s ordinary shares on January 31 was P116 per share. Pine paid a fee of P80,000 to the consultant who
    arranged this acquisition. Cost of registering and issuing the equity securities amounted to P40,000. No goodwill was involved
    in the purchase. The business combination is between two (2) SMEs.
    1. The amount to be capitalized ad the cost of acquiring Tree’s net assets and the amount charged to business combination
    expenses are:

    PROBLEM IV
    JL Company is classified as SME. JL Company issued 120,000 shares of P10 par common stock with a fair value of P2,800,000
    for all the net assets of FG Company. JL Company’s retained earnings prior to business combination amounted to P500,000. JL
    Company incurred the following additional costs:
    Legal fees to arrange the business combination P25,000
    Accounting and consultancy fees 12,000
    Cost of printing and issuing new stock certificates 3,000
    Indirect costs of combination 20,000
    Finder’s fees related with business combination 23,000

    Immediately before the business combination in which FG Company was dissolved, FG’s assets and equities were as follows:
    Book Value Fair Value
    Current assets P1,000,000 P1,100,000
    Plant assets 1,500,000 2,200,000
    Total Assets P2,500,000

    Liabilities 300,000
    Common stock 2,000,000
    Retained earnings 200,000
    Total Equities P2,500,000

    1. The amount of goodwill or (gain from a bargain purchase) resulting from the business combination is:
    2. The retained earnings immediately after the business combination is:

    PROBLEM V
    The stockholder equity section of P Company and S Company on January 1, 2015 is given on the other page:

    P Company S Company
    Capital stock, P10 par P1,500,000 P800,000
    Additional paid in capital 200,000 400,000
    Retained earnings 600,000 300,000

    On this date, P Company issued 150,000 shares, P18 fair market value, for 80% of the outstanding shares of S Company. P
    Company paid P30,000 for printing and registering the new shares issued, P25,000 for legal and other professional fees,
    P25,000 for CPA audit fees and P10,000 for miscellaneous direct costs. On this date, S Company identifiable assets and
    liabilities carrying values are equal to their fair market values except for Inventories which is P100,000 less than its carrying
    value. The business combination is between two SMEs.
    1. The amount of goodwill to be recognized is:
    2. The stockholder’s equity to appear in the consolidated balance sheet on date of acquisition is:

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