GROUP 4: Case 1 BSA- 3Q

Danganan, Abednego N.
Dela Cruz, Jinel Fate A.
Dizon, Kyla C.
Esguerra, Levie S.
Geraldo, Tyron Vincent S.

On January 1, 20x1, SMUTTY acquired all of the identifiable assets and assumed all of the liabilities
of OBSCENE, Inc. On this date, the identifiable assets acquired and liabilities assumed have fair
values of ₱3,200,000 and ₱1,800,000, respectively.
SMUTTY incurred the following acquisition-related costs: legal fees, ₱20,000, due diligence costs,
₱200,000, and general administrative costs of maintaining an internal acquisitions department,
₱40,000.
Case #1: As consideration for the business combination, SMUTTY Co. transferred 8,000 of its own
equity instruments with par value per share of ₱200 and fair value per share of ₱250 to OBSCENE’s
former owners. Costs of registering the shares amounted to ₱80,000. How much is the goodwill (gain
on bargain purchase) on the business combination?

SOLUTION:

Consideration transferred (8,000 sh. x ₱250) 2,000,000

Non-controlling interest in the acquiree –
Previously held equity interest in the acquiree –
TOTAL 2,000,000
Fair value of net identifiable assets acquired (3.2M- 1.8M) (1,400,000)

Goodwill 600,000