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  • Problem 4

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    G-Malacas, Sheryn Mae
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    Company D acquired all of the net assets of Company K in an asset acquisition. D issued 80,000 shares of its common stock, valued at $8,000,000, to K in exchange for its net assets. While most of K's assets and liabilities reflected their book values, K had an unreported customer list asset valued at $3,000,000 and its plant assets were overvalued by $5,000,000 on K's balance sheet. Prior to the acquisition, D had total assets of $30,000,000 and K had total assets of $10,000,000.

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    Company D acquired all of the net assets of Company K in an asset acquisition. D issued 80,000 shares of its common stock, valued at $8,000,000, to K in exchange for its net assets. While most of K's assets and liabilities reflected their book values, K had an unreported customer list asset valued at $3,000,000 and its plant assets were overvalued by $5,000,000 on K's balance sheet. Prior to the acquisition, D had total assets of $30,000,000 and K had total assets of $10,000,000.

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    6 views1 page

    Problem 4

    Uploaded by

    G-Malacas, Sheryn Mae
    Company D acquired all of the net assets of Company K in an asset acquisition. D issued 80,000 shares of its common stock, valued at $8,000,000, to K in exchange for its net assets. While most of K's assets and liabilities reflected their book values, K had an unreported customer list asset valued at $3,000,000 and its plant assets were overvalued by $5,000,000 on K's balance sheet. Prior to the acquisition, D had total assets of $30,000,000 and K had total assets of $10,000,000.

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    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

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