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Assignment

Francis acquires Marc Company on January 1, 20x5 by paying $800,000 cash and issuing 20,000 shares of common stock. Francis also pays $30,000 to an investment firm and $20,000 for stock issuance costs. Goodwill will be reported as $360,000. Receivables will be reported as $320,000. Inventory will be reported as $600,000. Buildings (net) will be reported as $560,000. Long-term liabilities will be reported as $600,000. Common stock will be reported as $720,000. Retained earnings will be reported as $1,120,000. Additional paid-in capital will be reported as

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172 views3 pages

Assignment

Francis acquires Marc Company on January 1, 20x5 by paying $800,000 cash and issuing 20,000 shares of common stock. Francis also pays $30,000 to an investment firm and $20,000 for stock issuance costs. Goodwill will be reported as $360,000. Receivables will be reported as $320,000. Inventory will be reported as $600,000. Buildings (net) will be reported as $560,000. Long-term liabilities will be reported as $600,000. Common stock will be reported as $720,000. Retained earnings will be reported as $1,120,000. Additional paid-in capital will be reported as

Uploaded by

Jayzell Monroy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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ASSIGNMENT

Francis acquires assets and liabilities of Marc Company on January 1, 20x5. To obtain these shares,
Francis pays P 800 (in thousands) and issues 20,000 shares of P 20 par value common stock on this date.
Francis stock had a fair value of P 36 per share on that date. Francis also pays P 30 (in thousands) to a
local investment firm for arranging the transaction. An additional P 20 (in thousands) was paid by Francis
stock issuance costs.

The book values for both Francis and Marc as of January 1, 20x5 follow. The fair value of each of Francis
and Marc accounts is also included. In addition, Marc holds a fully amortized trademark that still retains
a P 80 (in thousands) value. The figures below are in thousands. Any related question also is in
thousands.

Marc Company / Francis Inc.

Book Value Fair Value


Cash P 1,800 P 160 P 160
Receivables 960 360 320
Inventory 1,320 520 600
Land 600 240 260
Buildings (net) 2,400 440 560
Equipment (net) 720 200 150
Accounts Payable 960 120 120
Long-term Liabilities 2,280 680 600
Common Stock 2,400 160
Retained Earnings 2,160 960

Assuming the combination is accounted for as an acquisition, immediately after the acquisition in the
balance sheet of Francis:

Assignment Questions:

1. What amount will be reported for goodwill?


2. Using the same information above, what amount will be reported for receivables?
3. Using the same information above, what amount will be reported for inventory?
4. Using the same information above, what amount will be reported for buildings (net)?
5. Using the same information above, what amount will be reported for equipment (net)?
6. Using the same information above, what amount will be reported for long-term liabilities?
7. Using the same information above, what amount will be reported for common stock?
8. Using the same information above, what amount will be reported for retained earnings?
9. Using the same information above, what amount will be reported for additional paid in
capital?
10. Using the same information above, what amount will be reported for cash after the purchase
transaction?
On January 1, 20x5, the fair values of Pia’s net assets were as follows.

Current Asset P 200,000

Equipment 300,000

Land 100,000

Buildings 600,000

Liabilities 160,000

On January 1, 20x5, Ruth Company purchased the net assets of Pia Company by issuing 200,000 shares
of its P 1 per value stock when the fair value of the stock was P 6.20. It was further agreed that Ruth’s
would pay an additional amount on January 1, 20x7, if the average income during the 2-year period of
20x5-20x6 exceeded P 160,000 per year. The expected value of this consideration was calculated as P
268,000, the measurement period is one year.

What amount will be recorded as goodwill on January 1, 20x5?

A. Zero
B. P 200,000
C. P 360,000
D. P 568,000

Using the same information above, assuming that on August 1, 20x5 the contingent consideration
happens to be P 340,000, what amount will then be recorded as goodwill on the said date?

A. Zero
B. P 172,000
C. P 332,000
D. P 540,000

Using the same information above, assuming that on January 1, 20x7, the date of settlement of the
contingent consideration clause agreement for P 350,000, the entry should be:

A. Estimated liability for contingent consideration P 340,000


Loss on estimated contingent consideration 10,000
Cash P350,000
B. Estimated liability for contingent consideration P 350,000
Cash P350,000
C. Estimated liability for contingent consideration P 368,000
Cash P350,000
Gain on estimated contingent consideration 18,000

D. No entry required.

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