A Company acquired the assets and assumed the liabilities of B 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 P15. • 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 paid. • 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: A Company B 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 A Company and B Inc. are understated by P50,000 and P75,000, respectively. • Specialized equipment of B Inc. has a book value of P300,000 with a fair value of P450,000. • B Inc. has a pre-existing goodwill amounting to P250,000. What is the total shareholder’s equity after business combination: The Answer is 14,015,000. Please explain why
A Company acquired the assets and assumed the liabilities of B 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 P15.
• 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 paid.
• Share issue costs paid amounted to P15,000.
• Bond Issue costs paid amounting to P120,000.
The
A Company B 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 A Company and B Inc. are understated by P50,000 and P75,000,
respectively.
• Specialized equipment of B Inc. has a book value of P300,000 with a fair value of
P450,000.
• B Inc. has a pre-existing
What is the total shareholder’s equity after business combination:
The Answer is 14,015,000. Please explain why
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