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    Case Study (Business Combination)

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    Princes S. Roque
    ABC Cars Philippines acquired 75% of XYZ Motors on January 1, 2021 for a total consideration of PHP 457.74 million. This included cash of PHP 441 million, a consideration payable of PHP 14.93 million, and contingent consideration of PHP 24,000. The acquisition resulted in identifiable assets of PHP 1.5 million for land and PHP 300,000 for common stock. Goodwill amounted to PHP 12.5 million. The combined financial statements of ABC Cars and XYZ Motors on December 31, 2021 showed total assets and equities of PHP 2,040.81 million. ABC Cars is recommended to maintain sufficient cash and properly classify acquired financial assets and liabilities.

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    © All Rights Reserved
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    Case Study (Business Combination)

    Uploaded by

    Princes S. Roque
    279 views23 pages
    ABC Cars Philippines acquired 75% of XYZ Motors on January 1, 2021 for a total consideration of PHP 457.74 million. This included cash of PHP 441 million, a consideration payable of PHP 14.93 million, and contingent consideration of PHP 24,000. The acquisition resulted in identifiable assets of PHP 1.5 million for land and PHP 300,000 for common stock. Goodwill amounted to PHP 12.5 million. The combined financial statements of ABC Cars and XYZ Motors on December 31, 2021 showed total assets and equities of PHP 2,040.81 million. ABC Cars is recommended to maintain sufficient cash and properly classify acquired financial assets and liabilities.

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    case study (business combination)

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    ABC Cars Philippines acquired 75% of XYZ Motors on January 1, 2021 for a total consideration of PHP 457.74 million. This included cash of PHP 441 million, a consideration payable of PHP 14.93 million, and contingent consideration of PHP 24,000. The acquisition resulted in identifiable assets of PHP 1.5 million for land and PHP 300,000 for common stock. Goodwill amounted to PHP 12.5 million. The combined financial statements of ABC Cars and XYZ Motors on December 31, 2021 showed total assets and equities of PHP 2,040.81 million. ABC Cars is recommended to maintain sufficient cash and properly classify acquired financial assets and liabilities.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    279 views23 pages

    Case Study (Business Combination)

    Uploaded by

    Princes S. Roque
    ABC Cars Philippines acquired 75% of XYZ Motors on January 1, 2021 for a total consideration of PHP 457.74 million. This included cash of PHP 441 million, a consideration payable of PHP 14.93 million, and contingent consideration of PHP 24,000. The acquisition resulted in identifiable assets of PHP 1.5 million for land and PHP 300,000 for common stock. Goodwill amounted to PHP 12.5 million. The combined financial statements of ABC Cars and XYZ Motors on December 31, 2021 showed total assets and equities of PHP 2,040.81 million. ABC Cars is recommended to maintain sufficient cash and properly classify acquired financial assets and liabilities.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 23

    Group 4 (AC12)

    Princesa Christopher Jay Marinella

    Gialeine Jewell May Friday Kimberly


    CASE STUDY
    A.Introduction
    A.Introduction

    •• Company’s
    Company’s Informationo
    Informationo
    •• Identify
    Identify the
    the acquirerand
    acquirerand the
    the
    acquiree;
    acquiree;
    •• Determinethe
    Determinethe acquisition
    acquisition date;
    date;

    1 2 3
    CASE STUDY
    B.Body/Discussion
    B.Body/Discussion
    •• Calculate
    Calculate the
    the fair
    fair value
    value ofof the
    the purchase
    purchase
    consideration
    consideration transferred;
    transferred;
    •• Recognizing
    Recognizing and and measuring
    measuring the the identifiable
    identifiable
    assets
    assets acquired,
    acquired, the the liabilities
    liabilities assumed,
    assumed, andand
    any
    any controlling
    controlling interest
    interest in
    in the
    the acquiree;
    acquiree;
    •• Recognizing
    Recognizing goodwill,
    goodwill, oror in
    in the
    the case
    case of
    of aa
    bargain
    bargain purchase,
    purchase, aa gain;
    gain; Prepare
    Prepare the
    the
    worksheet,
    worksheet, including
    including the
    the journal
    journal entries
    entries

    1 2 3
    CASE STUDY
    C.
    C. Analysis,
    Analysis, Conclusion
    Conclusion and
    and
    Recommendation
    Recommendation
    •• Results
    Results of
    of the
    the business
    business
    combination
    combination
    •• Prepare
    Prepare the
    the Combined
    Combined Financial
    Financial
    Statement
    Statement immediately
    immediately after
    after the
    the
    combinationand
    combinationand on on December
    December 31, 31,
    2021.
    2021.

    1 2 3
    1
    Company’s
    Information
    ABC Cars Philippines
    Incorporated:
    Primarily engages in the business
    trading of goods such as Motor
    Vehicles, a wholesaler of spare parts
    and also provides car maintenance
    services.
    XYZ Motors Incorporated:
    A company that engages in car
    dealership business.
    1
    Acquiarer &
    Acquiree
    ABC Cars Philippines
    Incorporated – Acquirer

    XYZ Motors
    Incorporated – Acquiree
    1
    DATE OF
    ACQUISITI
    ON
    January 1, 2021 is the
    date of Acquisition
    2
    FAIR VALUE OF
    CONSIDERATION
    TRANSFERRED
    2
    IDENTIFIABLE
    ASSETS
    ACQUIRED
    2
    PREVIOUSLY HELD
    EQUITY INTEREST
    2
    PREVIOUSLY HELD
    EQUITY INTEREST
    2
    DEFERRED TAX
    LIABILITY
    2
    GOODWILL
    WORKSHEET
    JOURNAL

    2
    ENTRIES
    January 1, 2015
    Investment in Associate   42,050,000    
    Cash      42,050,000

    January 1, 2021 180,000


    Investment in Subsidiary   12,500,000    
    Investment in Associate      12,500,000

    Investment in Associate   450,000    


    Unrealized Gain - P/L      450,000

    Investment in Subsidiary   457,738,484    


    Cash 440,986,254
    Consideration Payable 14,928,230
    Land 1,500,000
    Common Stock 300,000
    Contingent Consideration      24,000
    to recognize the newly acquired shares
    JOURNAL

    2
    ENTRIES
    Acquisition-related Expense   720,000    
    Cash       720,000

    General Expense   3,500,000    


    Cash       3,500,000

    Paid-in capital in excess of par   180,000    


    Cash       180,000

    Land   150,000    
    Gain on sale of land       150,000

    December 31, 2021


    Consideration Payable   14,928,230    
    Interest Expense 671,770  
    Cash       15,600,000

    Estimated Liability for Contingent Consideration 24,000    


    Gain on Contingent Consideration       24,000
    contingency not having to be paid
    ACQUISITION

    2
    COST
    Acquisition-related costs  

    Running Cost 120,000

    Transport and Installation Costs 100,000

    Reimbursement Costs 250,000

    Unresolved Claim Settlement 100,000

    Other Acquisition-related Costs 150,000

    Total Acquisition-related Expenses 720,000


    ANALYSIS

    3
    • After the business combination the
    balance of total assets is
    2,040,811,767 and liabilities and
    equities totals are also 2,040,811,767.
    • The composition of the company's
    capital ownership 75% of it will be of
    ABC car’s Phils Inc.
    • The combined entity increases
    investment and business
    opportunities that can reach out new
    business segments due to increased
    in capital.
    • The acquisition results in a larger
    entity which increases the potential
    of ABC Cars Phils. Inc due to the
    benefits of economies of scale and
    operational reach especially in areas
    that were previously related to the
    XYZ motor.
    CONCLUSION

    3
    • After the acquisition, having acquired a
    total of 75% of XYZ Motors Inc. Interest,
    ABC Cars Phils. Inc has gained control of
    XYZ motors. Therefore, from the date of
    the acquisition, the financial statements of
    XYZ Motors were combined into ABC Cars
    Phils. Inc.’s financial statements..
    • The combination will benefit ABC Cars as
    there’s now less threat in competitor, the
    collaboration of the entities will result to
    greater productivity than it is before the
    business combination.
    • ABC Cars Phils. Inc on its own would
    struggle to survive a recession or
    depression but after the merger the
    combined company will be able to
    withstand future business calamities being
    teamed up and having vast resources,
    knowledge, business experiences.
    RECOMMENDA

    3
    TION
    • Given that the balance of Cash at the
    end of the year and after the merger
    results in a negative amount, it is
    notable that ABC Cars Phils. Inc
    should maintain a sufficient amount
    of cash to be able to meet its
    maturing obligations.
    • After the acquisition that has taken
    placed, it is stated that the merged
    entity should classify and assess the
    financial assets acquired and
    foreclosed financial liabilities based
    on contractual requirements,
    economic conditions, and other
    associated conditions that exist at the
    time of the acquisition. This includes
    grouping derivatives embedded in
    the main contract by the acquired
    party.
    BALANCE
    SHEET
    BALANCE
    SHEET

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