Should Gwapo Co. proceed with the acquisition of Beauty Co.?yes or no The management team of Gwapo Co. is deciding to acquire Beauty Co.,an entity that sells a product that compliments its own product. Themanagement of Beauty Co. demands a price of P18,000,000 for it toagree with the acquisition by Gwapo Co. Relevant data gathered forannual operations are as follows:Gwapo Co. Beauty Co. CombinedAverage Net IncomeDepreciation Expense3,500,000 2,500,000 6,500,000250,000150,000350,000WACC12%15%12.50%

The question is related Business Acquisition. We will first Calculate the Capitalized Value of…

Answered: The management team of Gwapo Co. is…

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter8: Investing Activities

Section: Chapter Questions

Problem 1.2CIC

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Should Gee Co. proceed with the acquisition of Bea Co.? yes or no? show your solution. The management team of Gee Co. is deciding to acquire Bea Co. an entity that sells a product that compliments its own product. The management of Bea Co. demands a price of P18,000,000 for it to agree with the acquisition by Gee Co. Relevant data gathered for annual operations are as follows: Gee Co. Вea Co. Combined Average Net Income Depreciation Expense 3,500,000 2,500,000 6,500,000 250,000 150,000 350,000 WACC 12% 15% 12.50%
Genie Inc. is thinking about undertaking vertical integration by taking over the functions performed by one of their suppliers, Rogers Inc. Genie can either buy the net assets of, or 100% of the outstanding stock of Rogers for $500,000 plus $10,000 in direct acquisition costs. Below is financial information for Rogers as of 7/1/20X1: Assets Cash A/R Inventory Trademark Net Fixed Assets Total Assets $ Book 100,000 50,000 550,000 $ 700,000 $ Accounts Receivable Inventory Trademark Net Fixed Assets Goodwill Acquisition Expenses A/P Accrued Expenses Common Stock at Par APIC, Common Stock Cash Rogers, Inc. Balance Sheet as of 7/1/20x1 FMV 75,000 50,000 25,000 300,000 Liabilities A/P Accrued Expenses Equity Total Liabilities & O.E. Debit $ 0 Book 25,000 $ 75,000 A) Complete the journal entry made by Genie to account for an asset purchase of Rogers on 7/1/20X1 by entering the proper amounts in the gray-shaded cells. Genie paid for the purchase price by issuing 10,000 shares of its stock which…
Heartland Telecom provides communication services in Iowa, Nebraska, the Dakotas, and Montana. Heartland Telecom purchased goodwill as part of the acquisition of Samson Wireless Enterprises, which had the following figures: Data table: Book value of assets $800,000 Market value of assets 900,000 Market value of liabilities 510,000 Requirements: 1. Journalize the entry to record Heartland Telecom's purchase of SamsonSamson Wireless for $400,000cash plus a $600,000 note payable. 2. What special asset does Heartland Telecom'sHeartland Telecom's acquisition of SamsonSamson Wirelessidentify? How should HeartlandHeartland Telecom account for this asset after acquiring SamsonSamson Wireless? Explain in detail.
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The Alhambra Company had these accounts at the time it was acquired by Kingdom Co.: Cash P 108,000 Accounts Receivable 1,371,000 Inventories 360,000 PPE 1,948,200 Accounts Payable 1,052,400 Kingdom Co. paid P4,200,000 for net assets of Alhambra Company. It has determined the fair market values of investment and PPE were P399,000 and P2,700,000, respectively. An assumed contingent liability arising from past events with a fair value amounting to P30,000 and such amount is considered a reliable measurement. In the books of Kingdom Co., this transaction resulted in: a. Goodwill recorded at P1,324,200 b. Retained Earnings increased by P704,400| Goodwill recorded at P704,400 d. Current Assets increased by P704,400 С.
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On January 1, 20X2, Sansa Company purchases two (2) separate sets of assets and activities from thirdparties, as follows:i. A manufacturing plant of Arya Company. The set of assets acquired and liabilities assumed are as follows:Plant premise P100,000,000Machinery 60,000,000Equipment 30,000,000A mortgage loan secured on the plant premise 120,0000Sansa will continue to employ the existing employees of the manufacturing plant and will pay them thesame salaries as before. The above manufacturing plant is a cash-generating unit that generatesoutputs that are sold to outside customers. Sansa pays a cash consideration of P100 million to AryaCompany.ii. A set of assets and liabilities of Bron Company.Plant premise P100,000,000Machinery 60,000,000Equipment 30,000,000A mortgage loan secured on the plant premise 120,0000The vendor will retrench the existing employees of the factory and pay their termination benefits. The setof assets is not capable of generating independent cash flows. However,…
Columbia recently acquired all of Mercury's net assets in a business acquisition. The cash purchase price was $22,000,000. Mercury's assests and liabilites had the following costs and appraised values: Current assets Land, building and equipment Current liabilites Mortgage payable How much goodwill will rewult from this transaction? Cost Basis $ 6,000,000 $ 14,000,000 Appraised Value $ 6,000,000 $23,000,000 $4,000,000 $4,000,000 $ 10,000,000 $10,000,000
Iris Company purchased another entity for P8,000,000 cash. The assets and liabilities of the acquire are as follows: Carrying Amount Fair Value 1,000,000 500,000 Cash 1,000,000 400,000 Inventory In-process R&D 6,000,000 5,000,000 Assembled workforce 1,100,000 1,200,000 3,000,000 Liabilities 2,500,000 What is the goodwill arising from the acquisition? A. 4,500,000 В. 3,300,000 с. 3,100,000 D. 2,000,000
On January 1, 20X2, Sansa Company purchases two (2) separate sets of assets and activities from third-parties, as follows:i. A manufacturing plant of Arya Company. The set of assets acquired and liabilities assumed are as follows:Plant premise P100,000,000Machinery 60,000,000Equipment 30,000,000A mortgage loan secured on the plant premise 120,0000Sansa will continue to employ the existing employees of the manufacturing plant and will pay them the same salaries as before. The above manufacturing plant is a cash-generating unit that generates outputs that are sold to outside customers. Sansa pays a cash consideration of P100 million to Arya Company.ii. A set of assets and liabilities of Bron Company.Plant premise P100,000,000Machinery 60,000,000Equipment 30,000,000A mortgage loan secured on the plant premise 120,0000The vendor will retrench the existing employees of the factory and pay their termination benefits. The set of assets is not capable of generating independent cash flows.…
Alpha Company plans to acquire the net assets of Company Beta, the following data are available from Company Beta: net income in year 1: 55000 JD, year 2: 60000 JD. Assets include: equipment with FV 10% higher than book value, building with FV 5% higher than book value, patents with 8% lower than book value, discontinued gain 600 (year 2), extraordinary loss 1000 (year 1), equipment depreciation (each year) 14000 JD, building depreciation (each year) 9000 JD, patent amortization (each year) 12000 JD, salaries exp. 600 JD (each year). Compute future earnings. Select one: a. 55390 O b. 59610 O c. 58190 O d. 56810

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