D Company acquired all of the net assets of K Company in exchange for 80,000 shares of D Company stock worth P8,000,000. K Company's balance sheet did not properly reflect the fair value of its customer lists, which were worth P3,000,000, or its overvalued plant assets, which were overstated by P5,000,000 compared to fair value. Prior to the acquisition, D Company had total assets of P30,000,000 and K Company had total assets of P10,000,000.
D Company acquired all of the net assets of K Company in exchange for 80,000 shares of D Company stock worth P8,000,000. K Company's balance sheet did not properly reflect the fair value of its customer lists, which were worth P3,000,000, or its overvalued plant assets, which were overstated by P5,000,000 compared to fair value. Prior to the acquisition, D Company had total assets of P30,000,000 and K Company had total assets of P10,000,000.
D Company acquired all of the net assets of K Company in exchange for 80,000 shares of D Company stock worth P8,000,000. K Company's balance sheet did not properly reflect the fair value of its customer lists, which were worth P3,000,000, or its overvalued plant assets, which were overstated by P5,000,000 compared to fair value. Prior to the acquisition, D Company had total assets of P30,000,000 and K Company had total assets of P10,000,000.
D Company acquires all of K Company in an acquisition properly accounted for as an asset
acquisition. D issues 80,000 shares of common stock with a fair value of P8,000,000 for K’s net assets. The fair values of K’s assets and liabilities approximate their book values, except K has customer lists valued at P3,000,000 that are not reported on its balance sheet, and its plant assets are overvalued by P5,000,000. Here are the balance sheets of D and K prior to the acquisition: D Company K Company Assets P30,000,000 P10,000,000
Liabilities P16,000,000 P6,000,000
Common stock, $1 par 1,000,000 100,000 Additional paid-in capital 9,000,000 2,900,000 Retained Earnings 4,000,000 1,000,000 P30,000,000 P10,000,000