Problems 13-14.pptx

 ADVANCED ACCOUNTI NG  VOL.2PROBLEM 1413 Bus i nes sComb mbi nat i ons Gomon Pal aganas

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Re q ui r e d : 1 . Pr e par et he e nt r yo n t he b o o ks o f Papa Co r po r at i o nt or e c o r dt he ac qui s i t i o no fBaby Co mpa ny . 2.As s umet hene ti nc o meo fBaby Co mpany i s P240, 000f o r2014.Asar e s ul t ,t hel i ke l i ho o do f pa yi ngt hec o nt i nge ntc o ns i de r at i o ni sbe l i e v edt o be90%.Whati fany ,adj us t i nge nt r yi sr e qui r e d aso fDec ember31,2014.

PROBLEM 1413 Pa pa Co r po r a t i o ni sc o nt e mp l a t i ng t he ac q ui s i t i o no ft he ne ta s s e t so fBa by Co mp an yo n De c e mb e r3 1 ,2 01 1.I ti sc o ns i d e r i ngma ki ngan o ffe r ,whi c h wo ul di nc l udea c a s h pa y o uto f P4 00 , 0 00al o ngwi t hg i v i ng15 , 0 00s ha r e so fi t sP4pa rv al uec o mmo ns t o c kt ha ti sc ur r e nt l y s e l l i ngf o rP4 0pe rs ha r e .Pa paa l s oa gr e e st ha ti twi l lpa ya na ddi t i o na lP1 00 , 0 00o nJ anua r y1 , 2 01 4,i ft hea v e r a g ene ti nc o meo fBa by ’ sb us i ne s suni te x c e e dsP1 60 , 0 00f o r2 01 2a nd20 13.The l i ke l i ho o do fr e a c hi ngt hatt ar g e ti se s t i mat e dt obe75%.TheSt at e me nto fFi nanc i alPo s i t i o no f Ba byCo mpa nya l o ngwi t he s t i ma t e df a i rv a l ue so fne ta s s e t st obeac q ui r e di sa sf o l l o ws . BabyCompany St atementofFi nanci alPosi t i on Dec31,2013

BookVal ue

Fai rVal ue

Cur r e ntas s e t s

P274, 000

P256, 000

No nc ur r e ntas s e t s

1, 020, 000

660, 000

P1, 294, 000

P9 1 6, 0 0 0

P162, 000

P162, 000

464, 000

440, 000

To t all i abi l i t i e s

P626, 000

P602, 000

Co mmo ns t o c k

P100, 000

To t alas s e t s

Cur r e ntl i abi l i t i e s No nc ur r e ntl i abi l i t i e s

1. Price Paid

400,000

Stock issued (15000 x 40)

600,000

Contingent liability (100000 x 75)

75,000

 !otal Consideration

1,075,000

"ess# $% o& 'et ssets Current ssets

56,000

'on*current ssets

660,000

Current "iabilities

(16,000)

'on*current "iabilities

(440,000)

ood-i ll

761,000

 !o record te ac/uisition o& net assets

Current ssets

56,000

'on*current ssets

660,000

ood-i ll

+14,000

761,000

 ADVANCED ACCOUNTI NG  VOL.2PROBLEM 1414 Bus i nes sCombi nat i ons Pal aganas

PROBLEM 1414 Re q ui r e d :



1.

Whatamo untofgo o dwi l lwasr e c o r dedbyAc eCo mpanywhe ni t ac qui r e dHe ar tCo mpany?

2.

Us i ng t he i nf o r ma t i o n ab o v e ,ans we rt he f o l l o wi ng i nde pe nde nt que s t i o ns :

a .On De c e mbe r3 1,20 14,t he r e we r ei ndi c a t i o ns t ha tg o o dwi l l mi g htha v eb e e ni mpa i r e d.Att ha tt i me ,t hec a r r y i ngv al ueo ft he  Ac eCo mpany’ sne tas s e t s ,i nc l udi ng go o dwi l l ,wasP500, 000and t he r e c o v e r abl e amo unto ft he uni ti s P520, 000.I sgo o dwi l l i mpai r e d?I fs o ,wha tadj us t me nti sne e de d? b .On De c e mbe r3 1,20 15,t he r e we r ei ndi c a t i o ns t ha tg o o dwi l l mi g htha v ebe e ni mpai r e d.Att hatt i me ,t hec ar r y i ngval ueo fAc e ’ s ne t as s e t s ,e x c l udi ng g o odwi l lwas P340, 000.The r e c o v e r abl e a mo unto ft he uni twa se s t i mat e dt ob e P4 00, 00 0.I sg o o dwi l l i mpai r e d?I fs o ,wha ta dj us t me nti sne e de d?

PROBLEM 1414   A c eCo mpany ac qui r e dt hene tas s e t so fHe ar t Co mpa nyo nJ anua r y1 ,2 01 3,f o rP5 00 , 0 00c a s h. Thef ai rv al ueo fAc e ’ sne tas s e t swas4 00, 000.

1. Price Paid

500,000

"ess# $% o& 'et ssets

400,000

ood-ill

100,000

. 3ecoerable ount Carrying %alue including ood-ill

50,000 500,000

'o iairent because te recoerable aount is greater tan te carrying alue. 8

1 4 1 Ma nI nc .p ur c ha s e da l lo fne ta s s e t so fWo ma n Co mp an yo nJ anua r y2 ,2 0 13b yi s s u i ng8 , 0 00 s ha r e so fi t sP1 0pa rc o mmo ns t o c k.Att het i me ,t hes t o c kwa ss e l l i ngf o rP3 0pe rs ha r e .Di r e c t c o s t sa s s o c i a t e dwi t hc o ns u mma t i ngt hec o mb i na t i o nt o t a l e dP4 , 0 00 .Und e rI FRS3 ,wha tt o t a l a mo unts h o ul dt hen e ta s s e t sa c q ui r e dber e c o r d e db yMa nI nc .As s umi ngt ha tt hec o nt i ng e nt c o ns i de r a t i o n5, 00 0i sde t e r mi ne d?

1 4 2 Thene ta s s e t so fAc q ui r e dCo mp an yha v eabo o kv al ueo fP1 50 , 0 00andaf a i rv a l ueo fP1 80 , 0 00 .  Ac qui r i ngCo mpanypai dP250, 000c as hf o ral lt hene tas s e t so fAc q ui r e dCo mpany .Ac qui r i ng Co mp an y al s op ai d P5 0, 0 0 0t oa ni n v e s t me ntho us ea sfi nd e r ’ sf e e .Atwha ta mo unts h o ul d g o o dwi l lb er e c o r de do nAc q u i r i ngCo mp an y’ sb o o k s ?

1 4 3 OnJ une3 0,2 0 13Whi t eCo r p o r a t i o ni s s ue d10 0, 0 0 0s h a r e so fi t sP2 0p arv a l uec o mmo ns t o c kf o r t hene ta s s e t so fBl a c k Co mpa nyi n abus i ne s sc o mb i na t i o na c c o unt e df o rb yt hea c q ui s i t i o n me t ho d .Thema r k e tv a l ueo fWhi t e ’ sc o mmo ns t o c ko nJune3 0wa sP3 6pe rs ha r e .Whi t ep a i da f e eo fP1 00 , 0 00 t ot hebr o k e rwhoar r a ng e dt hi sa c q ui s i t i o n.Co s t so fSEC r e g i s t r a t i o na nd i s s ua nc eo ft hee qui t ys e c ur i t i e sa mo unt e dt oP5 0, 0 00 . Co nt i ng e ntc o ns i d e r a t i o nde t e r mi ne dt ob epa i dt oBl a c kCo mp an ya f t e rt hea c q ui s i t i o na mo unt t oP1 2 0, 0 00 . Wha ta mo unts ho ul dWhi t ec a pi t a l i z ea st hec o s to fa c q ui r i ngBl a c k’ sne ta s s e t s .

1 4 4 On J anua r y1,2 01 3,CJ Co r p o r a t i o na c q ui r e dt hene ta s s e t so fRe x ,I nc . ,b yi s s ui ng60 0, 0 00 s ha r e so fi t sP1 0pa rv a l uec o mmo ns t o c k.Sub s e q ue nt l y ,Re xwa sl i q ui da t e da ndi t sa s s e t sa nd l i a bi l i t i e sme r g e di nt oCJCo r p or a t i o n.CJ’ ss t o c kwass e l l i ngP50pe rs ha r eo nJanuar y1 ,2013 . Thea mo unto fg o o dwi l lr e c o r de db yCJi nc o nne c t i o nwi t ht hec o mb i na t i o nwa sP6 , 1 20 , 0 00 .CJ i nc u r r e dP3 00 , 0 00o fl e g ala ndb r o ke r sf e e sa s s o c i a t e dwi t ht hec o mb i na t i o na ndP3 0, 0 00ofs t o c k i s s uanc ec o s t s . Wha ti st hef ai rv a l ueo fRe x ’ sne tas s e t sa ndt heamo unto ft hei nc r e as ei nCJ ’ ss t o c k ho l de r s ’ e qui t yasar e s ul to ft hec o mbi nat i o n,r e s pe c t i v el y?

1 4 5 Po o lCo mp an yi s s ue d12 0, 0 00s ha r e so fP1 0p arc o mmo ns t o c kwi t hf a i rv a l ueo fP2 , 5 50 , 0 00f o r t hene tas s e t so fSpo tCo mpany .I naddi t i o n,Po o li nc ur r e dt hef o l l o wi ngac q ui s i t i o nr e l at e dc o s t s