Determine the ordinary shares and share premium

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Question - On January 1, 2009, NOWAN Company exchanges 15,000 shares of its ordinary shares for all of the assets and liabilities of ELSE Inc. Each of NOWAN's shares has a P4 par value and a P50 fair value. The fair value of the stock exchanged in the acquisition was considered equal to ELSE's fair value. NOWAN also paid P25,000 in stock registration and issuance costs in connection with the merger.

Several ELSE's accounts have fair values that differ from their book values on this date:

 

Book Values

Fair Values

Receivables

P65,000

P63,000

Trademarks

95,000

225,000

Record music catalog

60,000

180,000

In process research & development

0

200,000

Notes payable

50,000

45,000

Pre-combination January1, 2009, book values for the two companies are as follows:

 

NOWAN

ELSE

Cash

P60,000

P29,000

Receivables

150,000

65,000

Trademarks

400,000

95,000

Record music catalog

840,000

60,000

Equipment (net)

320,000

105,000

Totals

P1,770,000

P354,000

Accounts payable

P110,000

P34,000

Notes payable

370,000

50,000

Ordinary shares

400,000

50,000

Share premium

30,000

30,000

Retained earnings

860,000

190,000

Totals

P1,770,000

P354,000

Assume that this combination is a statutory merger so that ELSE's accounts will be transferred to the records of NOWAN. ELSE will be dissolved and will no longer exist as a legal entity. Immediately the business combination using the acquisition method, determine:

-The total assets

-The total liabilities

-The ordinary shares

-The share premium

-The retained earnings

Reference no: EM132838254

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