Solution Manual
Problem 14-10
a. Increase in capital stock (P240,00 P200,000) P 40,000
Increase in APIC (P420,000 P60,000) 360,000
Value of shares issued P 400,000
b. Total assets after combination P1,130,000
Total assets of Subic before combination 650,000
Total fair value of assets of Clark before combination P 480,000
Total liabilities after combination P220,000
Total liabilities of Subic before combination (140,000) ( 80,000)
Fair value of Clarks net assets (including goodwill) P 400,000
Less: Goodwill 55,000
Fair value of Clarks net assets before combination P 345,000
c. Par value of common stock after combination P 240,000
Par value of common stock before combination 200,000
Increase in par value P 40,000
Divided by par value per share ÷ P5
Number of shares issued 8,000 shares
d. Value of shares computed in (a) P 400,000
Number of shares issued computed in © ÷ 8,000
Market price per share P 50
Problem 14-11
a. Inventory reported by Son at date of combination was P70,000
(325,000 P20,000 P55,000 P140,000 P40,000)
b. Fair value of total assets reported by Son:
Fair value of cash P 20,000
Fair value of accounts receivable 55,000
Fair value of inventory 110,000
Buildings and equipment reported following purchase P570,000
Buildings and equipment reported by Papa (350,000) 220,000
Fair value of Sons total assets P405,000
c. Market value of Sons bond:
Book value reported by Son P100,000
Bond premium reported following purchase 5,000
Market value of bond P105,000
Problem 14-11, continued:
d. Shares issued by Papa Corporation:
Par value of stock following acquisition P190,000
Par value of stock before acquisition (120,000)
Increase in par value of shares outstanding P 70,000
Divide by par value per share ÷ P5
Number of shares issued 14,000
e. Market price per share of stock issued by Papa Corporation
Par value of stock following acquisition P190,000
Additional paid-in capital following acquisition 262,000 P452,000
Par value of stock before acquisition P120,000
Additional paid-in capital before acquisition 10,000 (130,000)
Market value of shares issued in acquisition P322,000
Divide by number of shares issued ÷ 14,000
Market price per share P 23.00
f. Goodwill reported following the business combination:
Market value of shares issued by Papa P322,000
Fair value of Sons assets P405,000
Fair value of Sons liabilities:
Accounts payable P 30,000
Bond payable 105,000
Fair value of liabilities (135,000)
Fair value of Sons net assets (270,000)
Goodwill recorded in business combination P 52,000
Goodwill previously on the books of Papa 30,000
Goodwill reported P 82,000
g. Retained earnings reported by Son at date of combination was P90,000
(P325,000 P30,000 P100,000 P50,000 P55,000)
h. Papas retained earnings of P120,000 will be reported.
i. 1. Acquisition expense 8,500
Additional paid-in capital 6,300
Cash 14,800
Goodwill previously computed (no changes) P82,000
Additional paid-in capital reported following combination P262,000
Stock issue costs (6,300)
Total additional paid-in capital reported P255,700
Problem 14-12
(1) Liability from contingent consideration 80,000
Loss on contingent payment 40,000
Cash 120,000
2 x (average income of P110,000 P50,000) = P120,000
(2) Additional paid in capital 12,000
Common stock, P1 par 12,000
2 x (average income of P110,000 P50,000) ÷ P10
(3) Additional paid in capital 100,000
Common stock, P1 par 100,000
Deficiency (P12 P8) x 200,000 shares P800,000
Divided by fair value per share ÷ 8
Additional shares to be issued 100,000 shares
Problem 14-13
(1) To record the acquisition of net assets of Baby Company:
Current assets 256,000
Non-current assets 660,000
Goodwill 761,000
Current liabilities 162,000
Non-current liabilities 440,000
Estimated liability for contingent consideration 75,000
Cash 400,000
Common stock, (15,000 shares x P4) 60,000
Additional paid in capital (15,000 shares x P36) 540,000
Goodwill computation:
Price paid:
Cash P 400,000
Common stock (15,000 shares x P40) 600,000
Contingent consideration (P100,000 x 75%) 75,000
Total price paid 1,075,000
Less: Fair value of net assets acquired
Current assets P 256,000
Non-current assets 660,000
Current liabilities ( 162,000)
Non-current liabilities ( 440,000) 314,000
Goodwill P 716,000
(2) Goodwill 15,000
Estimated liability for contingent consideration 15,000
(P100,000 x 90%) - P75,000
Problem 14-14
(1) Price paid P500,000
Less: Fair value of net assets acquired 400,000
Goodwill recorded P100,000
(2 a) No, because the carrying amount of the net assets of the business is less
than the recoverable of the unit.
(2 b) Yes.
Estimated recoverable amount of the unit P400,000
Carrying value of the unit, excluding goodwill 340,000
Implied fair value of the goodwill 60,000
Existing recorded goodwill (No. 1) 100,000
Estimated impairment loss P(40,000)
Entry:
Impairment loss 40,000
Goodwill 40,000
