Chapter 14 (Business Combination)

GUILARAN, KERR JOHN B.
BSA51KB1
Problem 14-2
1. Computation of Goodwill/Gain on Acquisition:
Acquisition Cost
P
Less: Fair Value of Net Assets
Gain on Acquisition
565,000
670,000
P
(105,000)
2. Journal Entries:
Cash & Receivables (CAT Corp.)

Inventory
Buildings & Equipment
Patent
Accounts Payable
Gain on Acquisition
Cash (DOG Company)
P
50,000
150,000
300,000
200,000
30,000
105,000
565,000
To record the acquisition of the net assets of CAT Corporation
Acquisition Expense
Cash
5,000
5,000
To record acquisition-related costs
Problem 14-4
Acquisition Cost
P
Goodwill
600,000
505,000
95,000
2. Journal Entries:
Cash
Accounts Receivable
Inventory
Land
60,000
100,000
115,000
70,000
Buildings & Equipment

Goodwill
Accounts Payable
Bonds Payable
Common Stock (P10 par)
Additional Paid-in Capital
350,000
95,000
10,000
180,000
120,000
480,000
To record the acquisition of the net assets of Tan Company
Acquisition Expense
Additional Paid-in Capital
Cash
10,000
18,000
28,000
To record acquisition-related costs
Problem 14-6
Acquisition Cost (P40)

P
600,000
420,000
Goodwill
180,000
Acquisition Cost (P20)

P
300,000
420,000
Gain on Acquisition
(120,000)
2. Combined Balance Sheet After Acquisition
P40/share
Cash and receivables

Inventory
Building and equipment
Accumulated depreciation
Goodwill
TOTAL ASSETS
Accounts payable
Bonds payable
Common stock P10 Par value
Additional paid-in capital
Retained Earnings (including gain from
acquisition)
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
P20/share
P 350,000
645,000
1,050,000
(200,000)
180,000
P 2,025,000
P 140,000
485,000
450,000
550,000
400,000
P 350,000
645,000
1,050,000
(200,000)
P 1,845,000
P 140,000
485,000
450,000
250,000
520,000
P 2,025,000
P 1,845,000
Problem 14-8
Acquisition Cost
P
Goodwill
2,400,000
2,200,000
200,000
2. Dollars Transport Comparative Statement of Comprehensive Income:
Revenue
2,100,000
Net Income
Earnings per share
P 5.60
2011
P 1,400,000
500,000
2012
2013
P 1,800,000
P
565,000
P 5.00
700,000
P 4.52
Revenue for 2012:

P 2,000,000
(200,000)
P 1,800,000
Net Income 2012:
P 620,000
(55,000)
P 565,000
Earnings per share 2012:
P 565,000 / 125,000 shares = P 4.52
Earnings per share 2013:
P 700,000 / 125,000 shares = P 5.60
Problem 14-10
a.
Increase in common stock (P240,000 P200,000)
40,000
Increase in APIC (P420,000 P60,000)
Value of shares issued
400,000
360,000
P
b.
Total assets of Subic after acquisition

P1,130,000
Total assets of Subic before acquisition
650,000
Total fair value of assets of Clark before combination

P 480,000
c.
Par value of common stock after acquisition
240,000
Par value of common stock before acquisition
200,000
Par value of common stock issued
40,000
Divided by par value per share
P5
Number of shares issued
d.
8,000 shares
Value of shares computed in
400,000
Number of shares issued
Market price per share
8,000
P
50
Problem 14-12
1)
Liability from contingent consideration

Loss on contingent payment
Cash
To record the payment of the Contingent Liability
80,000
40,000
120,000
2011 Income
2012 Income
Total Income
Divide
Average Income
(2)
100,000.00
120,000.00
220,000.00
2.00
110,000.00
Average Income
Less
Total
Multiply
Cash Payment
Additional paid in capital

Common stock, P1 par
110,000.00
50,000.00
60,000.00
2.00
120,000.00
6,000
6,000
To record issuance for additional stocks issued
Average Income
Less
Estimated Recoverable Amount
Total
Carrying Amount
Divide
Fair Value Of Goodwill
Shares to be Issued
Goodwill Carying Amount
Impairment Loss on Goodwill
110,000.00
50,000.00
400,00060,000.00
340000
10
60,000
6,000
100000
40,000 )
(3)
Additional paid in capital

Common stock, P1 par
100,000
100,000
To record the issuance for additional stocks issued
Deficiency (P12 P8) x 200,000 shares
P800,000
Divided by fair value per share
8.00
Additional shares to be issued
100,000
Problem 14-14
Acquisition Cost
P
500,000
400,000
Goodwill
100,000
2.
a.) The goodwill is not impaired. As a rule, Goodwill is considered to be
impaired only if carrying amount of the units net assets (including
goodwill) exceeds the recoverable amount of the unit.
b.)
Journal Entry:
Goodwill Impairment Loss 40,000
Goodwill
40,000
To record the impairment of Goodwill

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GUILARAN, KERR JOHN B.

Cash & Receivables (CAT Corp.)

To record the acquisition of the net assets of CAT Corporation

To record acquisition-related costs

Buildings & Equipment

To record the acquisition of the net assets of Tan Company

To record acquisition-related costs

Acquisition Cost (P40)

Acquisition Cost (P20)

2. Combined Balance Sheet After Acquisition

Cash and receivables

2. Dollars Transport Comparative Statement of Comprehensive Income:

Revenue for 2012:

Increase in common stock (P240,000 P200,000)

Total assets of Subic after acquisition

Total fair value of assets of Clark before combination

Par value of common stock after acquisition

Value of shares computed in

Liability from contingent consideration

Additional paid in capital

To record issuance for additional stocks issued

Additional paid in capital

To record the issuance for additional stocks issued

Deficiency (P12 P8) x 200,000 shares

Divided by fair value per share

Additional shares to be issued

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