Reference no: EM133134133
Question - On January 1, 2013, the Sara Company entered into a transaction for acquisition of assets and liabilities of Ana Company. Sara issued P400 in long-term liabilities and 40 shares of common stock having a par value of P1 per share but a fair value of P10 per share. Sara paid P20 to lawyers, accountants and brokers for assistance in bringing about this purchase. Another P15 was paid in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows:
Sara Ana
Cash P180; P 40
Accounts receivable 810; 180
Inventory 1,080; 280
Land 600; 360
Buildings (net) 1,260; 440
Equipment (net) 480; 100
Accounts Payable (450); (80)
Long-term liabilities (1,290); (400)
Common stock, P1 par (330)
Common stock, P20 par (240)
Share premium (1,080); (340)
Retained earnings (1,260) (340) In Sara's appraisal of Ana, three assets were deemed to be undervalued in the books of Ana: Inventory by P10, Land by P40 and Buildings by P60.
Required -
1. If the transaction is accounted for as an acquisition, what is the amount of consideration transferred?
2. What is the amount of inventories after combination?
3. What is the amount of building (net) after combination?
4. What is the amount of land after combination?
5. What is the amount of equipment after combination?
6. What is the amount of ordinary shares at after combination?
7. What is the amount of share premium at after combination?
8. What is the amount of cash after combination?
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