On December 31, 2019, Manama Corporation issued 90,000 shares of its no-par, no-stated-value common stock (current...
On December 31, 2019, Manama Corporation issued 90,000 shares of its no-par, no-stated-value common stock (current fair value $14 a share) for 36,000 shares of the outstanding $10 par common stock of Bahrain Company. The $100,000 out-of-pocket costs of the business combination paid by Manama on December 31, 2019, were allocable as follows: 45% to finders, legal, and accounting fees directly related to the business combination: 55% to the SEC registration statement for Manama’s common stock issued in the businesses combination. There was no contingent consideration.
Immediately prior to the business combination, separate balance sheets of the constituent companies were as follows:
MANAMA CORPORATION AND BAHRAIN COMPANY
Separate Balance Sheets (prior to business combination)
December 31, 2019
Manama Bahrain Assets
Cash $ 200,000 $ 100,000
Trade accounts receivable (net) 400,000 200,000
Buildings (net) 600,000 300,000
Land (net) 1,300,000 1,000,000
Total assets $ 2,500,000 $ 1,600,000
Liabilities and Stockholders’ Equity
Current liabilities $ 800,000 $ 400,000
Long-term debt 100,000
Common stock, no par or stated value 1,200,000
Common stock, $10 par 400,000
Retained earnings 500,000 700,000
Total liabilities and stockholder’s equity $ 2,500,000 $ 1,600,000
Current fair values of Bahrain’s identifiable net assets differed from their carrying amounts as follows:
|
Buildings |
$ 250,000 |
|
Land |
$ 1,300,000 |
- Prepare a working paper for consolidated balance sheet for Manama Corporation and subsidiary on December 31, 2017. (8 marks)
- *.note :help me
Homework Answers
| Consolidated Financials of Manama as on 31 December 2019 | |||||||
| Assets/ Liabilities | Manama | Bahrain | Investment accounted | Fair Value entry recorded | NCI created | Consolidation entry recorded | Consolidated amounts |
| Assets | |||||||
| Cash | 200,000 | 100,000 | 300,000 | ||||
| Trade receivables (net) | 400,000 | 200,000 | 600,000 | ||||
| Buildings (net) | 600,000 | 300,000 | 50,000 | 950,000 | |||
| Land (net) | 1,300,000 | 1,000,000 | 300,000 | 2,600,000 | |||
| Investments | 1,205,000 | (1,205,000) | - | ||||
| Total assets | 2,500,000 | 1,600,000 | 1,205,000 | 350,000 | - | (1,205,000) | 4,450,000 |
| Liabilities and equity | |||||||
| Current liabilities | 800,000 | 400,000 | 1,200,000 | ||||
| Long term debt | - | 100,000 | 100,000 | ||||
| Common stock, no par or stated value | 1,200,000 | - | 1,205,000 | 2,405,000 | |||
| Common stock, $10 par | - | 400,000 | (40,000) | (360,000) | - | ||
| Retained Earnings | 500,000 | 700,000 | (70,000) | (630,000) | 500,000 | ||
| Fair Value Reserve | - | - | 350,000 | (35,000) | (315,000) | - | |
| Non Contorlling Interest | - | - | 145,000 | 145,000 | |||
| Capital Reserve | - | - | 100,000 | 100,000 | |||
| Total | 2,500,000 | 1,600,000 | 1,205,000 | 350,000 | - | (1,205,000) | 4,450,000 |
| Computation of Synergy- | |
| Purchase consideration | |
| Issue of 90,000 stock at $14 fair value | 1,260,000 |
| Less: cost of issue | (55,000) |
| Less: | |
| Share capital acquired | (360,000) |
| Retained earnings acquired | (630,000) |
| Fair value gainof land | (270,000) |
| Fair value gainof Buildings | (45,000) |
| Bargain Purchase | (100,000) |
| Journal Entries in Standalone Financials of Manama- | |||
| Date | General Ledger Account | Debit | Credit |
| 31/12/19 | Investment in Bahrain A/c---Dr | 1,205,000 | |
| To Equity Share Capital A/c | 1,205,000 | ||
| (Being investment made in Bahrain) |
| Journal Entries in Consolidated Financials of Manama- | |||
| Date | General Ledger Account | Debit | Credit |
| 31/12/19 | Land A/c---Dr | 300,000 | |
| Building A/c---Dr | 50,000 | ||
| To Fair Value Reserve in Bahrain A/c | 350,000 | ||
| (Being land and building recorded at fair value in consol) | |||
| 31/12/19 | Fair Value Reserve in Bahrain A/c---Dr | 35,000 | |
| Share Capital in Bahrain A/c---Dr | 40,000 | ||
| Retained Earnings in Bahrain A/c---Dr | 70,000 | ||
| To Non Controlling Interest | 145,000 | ||
| 31/12/19 | Share capital in Bahrain Ltd---Dr | 360,000 | |
|
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