Question

Corporations on January 1, 2017, just before they entered into a business combination: 13 The following Statement of Financial Position were prepared for Red and Blue So Problem 13-6 Blue Corporation Fair Value P 50,000 245,000 250,000 Items Cash and Receivables Inventory Buildings and Equipment Less: Accumulated Depreciation Total Assets Red Corporation Book Value Fair value Book Value P 300,000 P 300,000 P 50,000 400,000 600,000 100,000 800,000 870,000 300,000 ( 200,000) ( 150,000) P1,300,000 P1,770,000 P300,000 P545,000 P 100,000 400,000 P 100,000 440,000 P 40,000 60,000 P 40,000 85,000 300,000 Accounts Payable Bonds Payable Common Stock: P10 par value Ps par value Additional Paid-in Capital Retained Earnings Total Liabilities and Equities 100,000 400,000 P1,300,000 100,000 20,000 80,000 P300,000 Required: Assume that Red Corporation acquires the net assets of Blue Corporation by issuing 15,000 shares of stock. Prepare a Statement of Financial Position for the combined company immediately after the acquisition if the market price of Red Corporation shares is (1) P40 and (2) P20 at the time the acquisition occurs.

Answer 1

Combined financial position of the company immediately after acquisition in the both cases along with workings are attached.
Cast when market price of Red Corporation is 40 working Notes (1) Calculation of Goodwill or gain on Bargain Purchase Investment (15000X 40) 600000 NCI (25%) 105,000 ( 420,000 X 25%) (-) Identifiable Net Assets 420.000 Goodwill 285,000 (2) Calculation of Identifiable Net Asseto Cash and Receivables 50 980 Inventory 245,000 Building & Equipment 2, 50,000 (~) Accounts payable 1408002 85000 420,000 Bonds Payable ( 32 Biflucation of Investment into common Stock and Additional paid in capital Shores issued (15000 X 40' 600980 1 common stock Additional Paid in Cap 3 15000 x 10 7600040 - 150000 150 poo 4500

Combited Statement of Financial Position 0% Red Corporation Amount Items Cash and Receivables 300000 + 50000] 350 000 Inventory [400080 1715000] 646.000 10,50,000 Building & Equipment [800cb0+850000] ( pccumulated der 1200000) Goodwill 2,85,000 Total Assets 21,30 000 140,000 485,000 Accounts Payable (100080 + 40000] Bonds Payable (400,000 1 85 000] Common Stock plo par Value [ 300000 + 150,000] Additional Paid en Capital (100000+ 450000 Non-Conholling Interest Retained Earlings Total liabilities & Equity 450 000 550.000 105,000 yooooo 2130 000