Reference no: EM132635165
Question - The following is a summary of the statement of financial position of Stratification Company showing data regarding the carrying values and fair values as of December 31, 2011:
Statement of Financial Position Item Book Value Fair Value
Cash P 70,000 P 70,000
Trade and other Receivables 125,000 125,000
Merchandise Inventory 80,000 140,000
Land 62,500 90,500
Buildings and Machinery 500,000 443,250
Accumulated Depreciation (187,500)
Total Assets P650,000 P868,750
Trade and other Payables P 12,500 P 12,500
Bonds Payable 200,000 180,000
Ordinary Share Capital (P5 par value) 187,500
Share Premium 87,500
Accumulated Profits 162,500
Total Liabilities and Equities P650,000
On January 1, 2012, Permutation Corporation entered into a business combination agreement by issuing 15,000 shares of its P10 par value ordinary share capital in exchange for the net assets of Stratification Company. As of this date, the shares of Stratification were selling at P18 per share while that of the Permutation were selling at P50 per share.
Permutation Corporation in carrying out the business combination agreement incurred the following additional cash payments:
Consultancy fee paid to broker that located Stratification P 12,500
Legal fee for stock issued by Permutation 3,750
Share issue cost of new shares of Permutation 6,250
General and administrative expenses 11,250
Cost of SEC registration of Permutation shares 1,250
Required - Prepare all indicated entries to record the acquisition on the books of Permutation Corporation.