Reference no: EM133188850
Question - On January 1, 2022, Entity A and Entity B entered into a contract of merger wherein Entity B will issue 100,000 ordinary shares with par value of P10 and quoted price of P20 to the existing shareholders of Entity B in exchange for the net assets of Entity B. Entity A paid acquisition related cost of business combination amounting to P100,000 and stock issuance cost of P200,000. As of December 31, 2022, Entity A has total assets with book value of P50,000,000 and fair market value of P60,000,000 while Entity B has total assets with book value of P5,000,000 and fair market value of P4,000,000. The net assets of Entity B on Dec 31, 2022 is P2,600,000.
Required -
1. What is the total assets on Entity A on January 1, 2022 after the merger?
2. What is the goodwill/ (gain on bargain purchase) arising from business combination?