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How should the difference between the consideration

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Question - Dyke Inc. and Erika Inc. agree to combine with Dyke buying the net assets of Erika for P2,050,000. The condensed balance sheet of Erika prior to the combination show:

Current assets 1,830,000

Plant and equipment 2,760,000

Goodwill 300,000

Total assets 4,890,000

Liabilities 1,140,000

Capital stock 2,400,000

APIC 780,000

Retained earnings 570,000

Total liabilities and equity 4,890,000

An appraisal made by an independent appraiser indicated that the fair value of Erika assets are P1,890,000 for current assets and P2,900,000 for plant and equipment. The combination is reckoned as an acquisition of assets.

How should the difference between the consideration given and the net assets acquired be treated in the books of the acquirer?

Reference no: EM133102174

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