LATIHAN PRAKTIKUM AKUNTANSI KEUANGAN LANJUTAN FATA 2016

LAB 2
BUSINESS COMBINATION

I. Multiple Choice (10 Menit)

1. A transaction or other event in which an acquirer obtains control of one or more
business is the definition of..... and regulate in PSAK….
a. Merger and PSAK 19
b. Consolodation and PSAK 21
c. Business Combination and PSAK 22
d. Joint Venture and PSAK 12

2. A business combination in which a new corporation is formed to take over the assets
and operations of two or more separate business entities, with the previously separate
entities being dissolved, is a/an:
a. Consolidation
b. Joint Venture
c. Acquisition
d. Merger

3. An excess of the price paid over the fair value of net assets acquired in a business
combination is..
a. Reported as a gain from a bargain purchase
b. Applied to a reduction of noncash asset
c. Reported as Goodwill
d. Applied to reduce goodwill

4. The direct cost of a business combination other than those for account legal and
consultant fee are..
a. Added to the parent/investor company’s investment account
b. Record as Investment expense
c. Deducted from income in the period of combination
d. Reduction of additional paid-in capital

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5. The pooling of interest method was eliminated for the following reasons, except...
a. Provides less relevant information to statement users
b. Ignores economic value exchanged in the transaction and makes subsequent
performance evaluation possible
c. Ignores economic value exchanged in the transaction and makes subsequent
performance evaluation impossible
d. Comparing firms using the alternative method is difficult for investor

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II. Mini Essay

1. On March 1, 2019, Round Corporation acquired Triangle Corporation by issuing 1,100
common shares with par value of $10. The market value for those common shares was
$15 per share at the date of acquisition. Round Corporation incurred the cost of
registering and issuing the securities for $225, cost of printing the shares for $75, and
cost of accountant for the business combination for $150.
Required :
Calculate the additional paid-in capital that should be recorded by Round Corporation
from the transaction!

2. On January 1, J Inc paid $1,525,000 by cash to acquire V Inc. V Inc was dissolved after
the acquisition. The information of V Inc net assets fair value is as follows (in $) :
Fair Value Book Value
Cash 250,000 275,000
Account Receivable 435,000 350,000
Inventories 550,000 600,000
Plant Assets 810,000 800,000
Account Payable 250,000 270,000
Notes Payable 590,000 560,000
Required :
Calculate the goodwill or the gain from bargain purchase of the business combination!

3. Thunder Inc issued 625,000 common shares of $12.5 at par, and paid $1,250,000 for
the net assets of Wind Company on July 16, 2019. The market value of Thunder’s
stocks was $25 per share. Wind Corporation was dissolved immediately after the
acquisition. In addition, Thunder incurred the following costs:
 Legal fees to arrange the business combination $90,000
 Cost of SEC registration $42,000
 Cost of printing and issuing net stock certificates $11,000
 Indirect costs of combining, including allocated overhead and executive salaries
$87,000

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The information related to Wind Corporation’s net assets is as follows (in $000) :
Book Value Fair Value
Cash 2,500 2,500
Account Receivable 1,000 750
Inventories 4,000 3,750
Plant Assets 17,000 16,500
Account Payable 1,625 1,875
Notes Payable 5,375 5,750
Common stock, $12.5 par 6,625
Retained Earnings 11,250

Required : Prepare all journal entries to record the acquisition!

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III. Grand Essay

Persona Corporation paid $12,000,000 for Intro Corporation’s voting common stock on
January 1, 2019, and Intro was dissolved. The purchase price consisted of 250,000 shares
of Persona’s common stock with a market value of $8,000,000, plus $4,000,000 cash. In
addition, Persona paid $170,000 for registering and issuing the 250,000 shares of common
stock and $300,000 for other costs of combination. Balance sheet information for the
companies immediately before the acquisition is summarized as follows (in $000):
Persona Intro
Book Value Book Value Fair Value
Cash 15,600 1,960 1,960
Account Receivable-net 6,760 1,440 1,440
Notes Receivable-net 7,800 1,400 1,400
Inventories 13,000 1,880 2,500
Other Current Assets 3,640 820 1,050
Land 10,400 1,300 1,850
Buildings-net 46,800 3,400 5,900
Equipment-net 52,000 3,200 2,900
Total Aset $156.000 $15,400 $19,000
Account Payable 5,200 1,400 1,400
Mortgage Payable 26,000 3,400 3,000
Capital Stock, $15 par 52,000 3,700
Additional Paid in Capital 41,600 5,000
Retained Earnings 31,200 1,900
Total Liabilities + Equities $156,000 $15,400

Required :
1. Prepare journal entries for Persona Corporation to record its acquisition of Intro
Corporation, including all allocations to individual asset and liability accounts!.
2. Prepare a Statement of Financial Position for Persona Corporation on January 1, 2019,
immediately after the acquisition and dissolution of Intro!

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LAB 2
BUSINESS COMBINATION

SOLUTION

I. Multiple Choice
1. C
2. A
3. C
4. D
5. B

II. Mini Essay

1. March 1, 2019 :
Investment in Triangle Corporation (1,100 × $15) $16,500
Common stock (1,100 × $10) $11,000
Additional Paid-in Capital $5,500

Investment expense (Accountant fee) $150

Additional Paid-in Capital ($225 + $75) $300
Cash $450

Additional Paid-in Capital that should be recorded by Round Corporation :

$5,500 - $300 = $5,200

2. Cash $250,000
Account Receivable $435,000
Inventories $550,000
Plant Assets $810,000
Good Will $320,000
Account Payable $250,000
Notes Payable $590,000
Investment in Wan Inc $1,525,000

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3. Journal entries on Thunder’s books to record the acquisition (in $)

Investment in Set {(625,000 x $25) + $1,250,000} 16,875,000
Common stock, $10 par 7,812,500
Additional paid-in capital 7,812,500
Cash 1,250,000
(To record issuance of 625,000 shares of $25 par common stock with a fair value of
$25 per share for the common stock and $1,250,000 cash of Set in a business
combination.)

Additional paid-in capital 53,000

Investment expenses 90,000
Salary and overhead expenses 87,000
Cash 230,000
(To record costs of registering and issuing securities as a reduction of paid-in capital,
and record direct and indirect costs of combination as expenses.)

Cash 2,500,000
Account Receivable 750,000
Inventories 3,750,000
Plant assets 16,500,000
Goodwill 1,000,000
Account Payable 1,875,000
Notes Payable 5,750,000
Investment in Set 16,875,000
(To record allocation of the $16,875,000 cost of Wind Company to identifiable
assets and liabilities according to their fair values and the gain from the bargain
purchase)

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III. Grand Essay

1. Journal Entries in $
 Investment in Intro 12,000,000
Capital Stock (250.000*15) 3,750,000
Additional Paid-in Capital 4,250,000
Cash 4,000,000

 Investment Expense 300,000

Additional Paid-in Capital 170,000
Cash 470,000

 Cash 1,960,000
Account Receivable 1,440,000
Notes Receivable 1,400,000
Inventories 2,500,000
Other Current Assets 1,050,000
Land 1,850,000
Buildings 5,900,000
Equipment 2,900,000
Account Payable 1,400,000
Mortgage Payable 3,000,000
Investment in Intro 12,000,000
Gain on Bargain Purchase 2,600,000

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2. Statement of Financial Position

Persona Corporation
Statement of Financial Position
At January 1, 2019
(After Business Combination) (in 000)
Assets
Current Assets
Cash (15,600 + 1,960 – 4,000 - 470) $13,090
Account Receivable-net (6,760 + 1,440) 8,200
Notes Receivable-net (7,800 + 1,400) 9,200
Inventories (13,000 + 2,500) 15,500
Other Current Assets (3,640 + 1,050) 4,690
Total Current Asset $50,680
Plant Assets
Land (10,400 + 1,850) $12,250
Buildings-net ($46,800 + 5,900) 52,700
Equipment-net (52,000 + 2,900) 54,900
Total Plant Assets $119,850
Total Assets $170,530
Liabilities and Stockholders’ Equity
Liabilities
Account Payable (5,200 + 1,400) $ 6,600
Mortgage payable, 10% (26,000 + 3,000) 29,000
Total Liabilities $35,600
Stockholders’ Equity
Capital Stock, $10 par ($52,000 + 3,750) $55,750
Additional paid-in Capital (41,600 + 4,250 - 170) 45,680
Retained Earnings ($31,200 + 2,600 - 300) 33,500
Total Stockholders’ Equity $134,930
Total Liabilities and Stockholders’ equity $170,530

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