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    Hồ Trần Minh Thư
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    P Company acquired S Company by issuing 6 million shares at $3 per share for a total consideration of $18,947,258. This included assumption of $200,000 in short-term liabilities and a $747,258 loan payable to V Company. P Company recorded the acquisition by debiting investment in S for the consideration and crediting share capital, loan payable, and short-term liabilities. P Company also expensed $230,000 in due diligence costs and $35,000 in business development expenses. In consolidation entries, P Company credited share capital for $18 million, credited non-controlling interest for $4.7 million, and debited goodwill for $12.8

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    P Company acquired S Company by issuing 6 million shares at $3 per share for a total consideration of $18,947,258. This included assumption of $200,000 in short-term liabilities and a $747,258 loan payable to V Company. P Company recorded the acquisition by debiting investment in S for the consideration and crediting share capital, loan payable, and short-term liabilities. P Company also expensed $230,000 in due diligence costs and $35,000 in business development expenses. In consolidation entries, P Company credited share capital for $18 million, credited non-controlling interest for $4.7 million, and debited goodwill for $12.8

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    Found Errors in Solution? : Search More Solutions!

    Uploaded by

    Hồ Trần Minh Thư
    P Company acquired S Company by issuing 6 million shares at $3 per share for a total consideration of $18,947,258. This included assumption of $200,000 in short-term liabilities and a $747,258 loan payable to V Company. P Company recorded the acquisition by debiting investment in S for the consideration and crediting share capital, loan payable, and short-term liabilities. P Company also expensed $230,000 in due diligence costs and $35,000 in business development expenses. In consolidation entries, P Company credited share capital for $18 million, credited non-controlling interest for $4.7 million, and debited goodwill for $12.8

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    8/24/23, 11:36 AM Loading..

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    Answer

    1. Calculation of Business Combination :-

    Particular   Amt

    Fair value of shares issued (6m x $3) 


       $          18,000,000

    Loan payable to V Co (1m@6% end of 5 years) 


     =1m*0.747258  $                747,258

    Assumption of short-term liabilities 


       $                200,000

    Consideration transferred  
       $          18,947,258

    2. journal entries in P's books to record the payment items and share issue of P Co.in Feb
    20X5 ;-

    Particular Dr  Cr 

    Investment in S  
     $          18,947,258  

                To Share capital 


       $          18,000,000

                To Loan payable to V Co 


       $                747,258

                To Short-term liabilities 


       $                200,000

       
    Consideration transferred

    https://exedustack.nl/the-pilot-shortage-may-be-easing-slightly-but-aviation-now-needs-mechanics/ 1/3
    8/24/23, 11:36 AM Loading..

         

    Acquisition-related expenses
     $                230,000  

    (due diligence + legal fee=200+ 30) 


       

    Business development expenses


     $                   35,000  

    (manager + travelling = 20+15) 


       

    Share Capital 
     $                   10,000  

                    To Cash 
       $                275,000

    (Transaction costs expensed off)


       

    3. Partial Consolidation Entries :-

    Particulars-consolidation entries dr cr

    Share capital issued for consideration    $           18,000,000

    ((6m x $3)     

    Retained Earning   -

    Other Reserve   -

    Liabilites of V accepted by P    $                 200,000

    amt payable to v    $                 792,093

    (747258+ 747258*6%=792093)    

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    8/24/23, 11:36 AM Loading..

    Intangilbe Asset  $                     1,600,000  

    (2000000-2000000/5)    

    Amortization of Intagible asset  $                         400,000  

    Non controling Interest at Fv    $             4,700,000

    Goodwill  $                   12,847,258  

         

         

    Working Note    

    Goodwill    

    1. FV of NCI  $                     4,700,000  

    2. Consideration paid  $                   18,947,258  

       $                   23,647,258  

    Less = FV of net idetifible asset  $                   10,800,000  

    (in absence of information amt as


    reported in interim financial
    statement of s co is considered so)    

    Goodwill  $                   12,847,258  

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