Reference no: EM132836749
On January 1, 2019, FORESTER Corporation and FORTUNER Company decided to enter into a business combination. FORESTER Corporation's book shows assets and liabilities amounting to P 1,350,000 and P 300,000, respectively.
The shareholder's equity is composed of P300,000 common stocks (P10 par) ; P 150,000 APIC and P 600,000 retained earnings. The book value asset of FORESTER is understated by P 150,000 while its liability is overstated by P 75,000. FORTUNER Company's assets inclusive of P15,000 goodwill amounted to P500,000 while its liabilities amounted to P150,000. The shareholder's equity is composed of P120,000 common stocks (P10 par); P 105,000 APIC and P125,000 retained earnings. The fair value assets without goodwill and liabilities should be reduced both by P75,000.
FORESTER Company acquired the net assets of FORTUNER Company by issuing 25,000 shares and cash of P 10,000. Moreover, a contingent consideration of P80,000 will be paid when the result of the pending litigation existing at the date of acquisition on the quieting of title of the land of FORTUNER is affirmative. The determinable amount of the said contingent consideration at the date of combination amounted to P50,000. The current market price of FORESTER stock is traded at P 12 per share.
FORESTER Corporation paid the following as a result of business combination:
Finder's fee ............................................................ P 50,000
Legal, accounting and other consulting fees ................P 50,000
Cost of stockholder's meeting to vote on the acquisition ...P 20,000
SEC Registration of the business combination ...... P 15,000
General administrative cost.................................. P 15,000
Cost of printing stock certificates ........................... P 10,000
Accountant's fee related to the stock issuance........... P 20,000
SEC Registration of new shares issued................ P 40,000
Problem 1: How much is the result of the combination on January 1, 2019?
a. 10,000 goodwill
b. (10,000) income
c. 25,000 goodwill
d. (25,000) income
Problem 2: How much is the Combined Common Stock?
a. 420,000
b. 550,000
c. 670,000
d. 720,000
Problem 3: How much is the Combined Additional Paid in Capital?
a. 130,000
b. 150,000
c. 235,000
d. 255,000
Problem 4: How much is the Combined Retained Earnings?
a. 430,000
b. 450,000
c. 520,000
d. 540,000
Problem 5: How much is the Combined Total Liability?
a. 350,000
b. 375,000
c. 425,000
d. 450,000
Problem 6: How much is the Combined Total Asset?
a. 1,330,000
b. 1,500,000
c. 1,555,000
d. 1,575,000