PROBLEM V

On January 2, 2020, P Company purchased the net assets of S Company (excluding cash) by paying P850,000 cash and issuing
shares of stocks at P3,110,000 fair market value. Book value and fair value data on the Statement of Financial Position on January
2, 2020 are as follows:

P Company S Company
Book Value Fair Value Book Value Fair Value
Cash 4,600,000 4,600,000 300,000 300,000
Accounts Receivable 1,000,000 1,000,000 980,000 980,000
Inventory 1,500,000 1,300,000 710,000 600,000
Building, net 1,800,000 1,460,000 1,520,000 1,064,000
Goodwill 90,000 80,000
Total 8,900,000 8,360,000 3,600,000 3,024,000

Liabilities 1,000,000 1,000,000 570,000 570,000

Share Capital 1,600,000 600,000
Share Premium 900,000 960,000
Retained Earnings 5,400,000 1,470,000
Total 8,900,000 3,600,000

P incurred and paid legal and brokerage fees of P25,600 for business combination; share issue costs of P23,000 and P12,000
indirect acquisition costs. It is determinable that contingency fee of P11,800 would be paid within the year.

1. Goodwill arising from the business combination

2. The total assets after the business combination is

3. The total shareholder’s equity after the business combination is

PROBLEM VI

A condensed Statement of Financial Position at December 31, 2017 for Acquiree Company follows:

Carrying Value Fair Value

Current Assets, including cash of P250,000 P1,368,000 P1,300,000
Plant Assets 1,592,500 1,500,000
Goodwill 585,000
Total Assets P3,545,500

Current Liabilities 607,500 607,600

Long-term debt 780,000 797,500
Ordinary shares, par P20 1,000,000
Share premium 500,000
Retained earnings 657,500
Total Liabilities and Equity P3,545,500

On January 2, 2018, Acquirer Company paid P1,500,000 cash for the net assets of the Acquiree Company (excluding cash), after
which the acquiree was dissolved. This amount includes a reimbursement of the acquisition related cost paid by the Acquiree
Company. A total of P147,500 out of the pocket cost was paid on this date, P57,500 of which were paid by the Acquirer Company
and the reminder pertains to legal fees directly related to the business combination which was paid by the Acquiree Company.

1. What amount of goodwill is recognized by the acquirer in its financial statements?

2. How much is the increase in the assets of the surviving company as a result of the business combination?