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    The document describes an acquisition of Company S by Company P for $40 million cash. It reports that P recorded goodwill of $9 million, calculated as the difference between the acquisition price and net assets acquired. In a second scenario where P acquired S for $30 million, P would record a gain on acquisition of $1 million. The document then provides financial information for companies II and JJ that are consolidating into a new company, Bats Inc. Bats will issue preferred stock equivalent to the net assets of II and JJ, and common stock for the remaining amount, based on total shares equivalent to average annual earnings capitalized at 10%. The correct answers are that Bats will issue 8,640 preferred shares and recognize $

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    The document describes an acquisition of Company S by Company P for $40 million cash. It reports that P recorded goodwill of $9 million, calculated as the difference between the acquisition price and net assets acquired. In a second scenario where P acquired S for $30 million, P would record a gain on acquisition of $1 million. The document then provides financial information for companies II and JJ that are consolidating into a new company, Bats Inc. Bats will issue preferred stock equivalent to the net assets of II and JJ, and common stock for the remaining amount, based on total shares equivalent to average annual earnings capitalized at 10%. The correct answers are that Bats will issue 8,640 preferred shares and recognize $

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    9 views1 page

    Ans:C

    Uploaded by

    yes yesno
    The document describes an acquisition of Company S by Company P for $40 million cash. It reports that P recorded goodwill of $9 million, calculated as the difference between the acquisition price and net assets acquired. In a second scenario where P acquired S for $30 million, P would record a gain on acquisition of $1 million. The document then provides financial information for companies II and JJ that are consolidating into a new company, Bats Inc. Bats will issue preferred stock equivalent to the net assets of II and JJ, and common stock for the remaining amount, based on total shares equivalent to average annual earnings capitalized at 10%. The correct answers are that Bats will issue 8,640 preferred shares and recognize $

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    © All Rights Reserved
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    of 1

    P Company pays P40,000,000 in cash for S Company, in an acquisition properly reported as a

    statutory merger. P records goodwill of:

    a. P18,000,000
    b. P17,300,000
    c. P 9,000,000
    d. P 4,300,000

    ANS:C
    Rationale: P9,000,000 = P40,000,000 – (P1,000,000 + P35,000,000 + P2,000,000 + P13,000,000 -
    P20,000,000).

    7. Now assume P Company pays P30,000,000 in cash to acquire S Company, in an acquisition properly
    reported as a statutory merger. P records a gain on acquisition of:

    a. Zero
    b. P1,000,000
    c. P1,700,000
    d. P 5,700,000

    ANS: B
    Rationale: P(1,000,000) = P30,000,000 – (P1,000,000 + P35,000,000 + P2,000,000 + P13,000,000 -
    P20,000,000).

    8.Bats Inc, a new corporation formed and organized because of the recent consolidation of II Inc, and JJ
    Inc., shall issue 10% participating preferred stocks with a par value of P100 for II and JJ net assets
    contribution, and common shares with a par value of P50 for the difference between the total shares to be
    issued and the preferred shared issued. The total shares to be issued by Bats shall be equivalent to
    average annual earnings capitalized at 10%. Relevant data on II and JJ follows:

    II JJ

    Total assets P720,000 P921,600

    Total liabilities 432,000 345,600

    Annual earnings(average) 46,080 69,120

    The total preferred shares to be issued and the amount of goodwill to be recognized by Bats are:

    a. Preferred shares: 8,640 Goodwill: P288,000

    b. Preferred shares: 5,760 Goodwill: P288,000

    c. Preferred shares: 2,880 Goodwill: P864,000

    d. Preferred shares: 7,280 Goodwill: P864,000

    ANSWER: A

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