Solution

1.(in thousands)
Acquisition of assets and liabilities:
Cash 90
Receivables 190
Inventories 7,000
Plant & equipment 40,000
Trademarks 4,000
Brand names 5,000
Secret formulas 7,000
Goodwill 6,120
Current liabilities 400
Long-term liabilities 47,000
Cash 18,000
Common stock, P2 par 100
APIC (P4,000 – P100) 3,900

Consideration transferred:
Cash 18,000,000
Common stock 4,000,000
Consideration transferred 22,000,000
Less: MV of Assets and Liabilities Acquired:
Cash 90,000
Receivables 190,000
Inventories 7,000,000
Plant & equipment, net 40,000,000
Trademarks 4,000,000
Brand names 5,000,000
Secret formulas 7,000,000
Current liabilities ( 400,000)
Long-term liabilities (47,000,000) 15,880,000
Positive excess: Goodwill 6,120,000

Acquisition expenses
Acquisition/merger expenses 1,100
Cash 1,100

Costs to Issue and Register Stocks

APIC 500
Cash 500
2.(in thousands)
Cash 90
Receivables 190
Inventories 7,000
Plant & equipment 40,000
Trademarks 4,000
Brand names 5,000
Secret formulas 7,000
Noncompetition agreements 10,000
Current liabilities 400
Long-term liabilities 47,000
Cash 18,000
Common stock, P2 par 100
APIC (P4,000 – P100) 3,900
Gain on acquisition 3,880

Consideration transferred:
Cash 18,000,000
Common stock 4,000,000
Consideration transferred 22,000,000
Less: MV of Assets and Liabilities Acquired:
Cash 90,000
Receivables 190,000
Inventories 7,000,000
Plant & equipment, net 40,000,000
Trademarks 4,000,000
Brand names 5,000,000
Secret formulas 7,000,000
Noncompetition agreement 10,000,000
Current liabilities ( 400,000)
Long-term liabilities (47,000,000) 25,880,000
Negative excess: Gain on Acquisition ( 3,880,000)

Acquisition expenses
Acquisition/merger expenses 1,100
Cash 1,100

Costs to Issue and Register Stocks

APIC/Share Issue Costs 500
Cash 500
3.
Post-Combination Balance Sheet: (requirement 1)
Assets Liabilities and Stockholders’ Equity
Cash P 5,490,000 Current liabilities P 900,000
Receivables 2,190,000 Long-term liabilities 117,000,000
Inventories 27,000,000
Plant and equipment 139,500,000
Trademarks 9,000,000 Common stock 2,100,000
Brand names 5,000,000 Paid- in capital – par 58,400,000
Secret formulas 7,000,000 Retained earnings* 23,900,000
Goodwill __6,120,,000 Treasury stock ( 1,000,000)
Total P201,300,000 Total P 201,300,000

*25,000,000 – 1,100,000, merger expenses = 23,900,000.

Post-Combination Balance Sheet: (requirement 2)

Assets Liabilities and Stockholders’ Equity
Cash P 5,490,000 Current liabilities P 900,000
Receivables 2,190,000 Long-term liabilities 117,000,000
Inventories 27,000,000
Plant and equipment 139,500,000
Trademarks 9,000,000 Common stock 2,100,000
Brand names 5,000,000 Paid- in capital – par 58,400,000
Secret formulas 7,000,000 Retained earnings* 27,780,000
Noncompetition agreement _10,000,,000 Treasury stock __( 1,000,000)
Total P205,180,000 Total P 205,180,000

*25,000,000 – 1,100,000 + 3,880,000 = 27,780,000

4.
Post-Combination Balance Sheet: (requirement 1)
a. P201,300,000 c. P58,400,000 e. P83,400,000
b. P117,900,000 d. P23,900,000

Post-Combination Balance Sheet: (requirement 2)

a. P205,180,000 c. P58,400,000 e. P87,280,000
b. P117,900,000 d. P27,780,000
Solution:

1.
Current assets 1,500,000
Investments 500,000
Land 6,000,000
Buildings 16,000,000
Equipment 2,000,000
Identifiable intangibles 5,000,000
Goodwill 22,500,000
Current liabilities 1,500,000
Long-term liabilities 12,000,000
Common stock 4,000,000
Additional paid-in capital 36,000,000

Consideration transferred:
Shares (400,000 x P100) 40,000,000
Less: MV of Assets and Liabilities Acquired:
Current assets 1,500,000
Investments 500,000
Land 6,000,000
Buildings 16,000,000
Equipment 2,000,000
Identifiable intangibles 5,000,000
Current liabilities ( 1,500,000)
Long-term liabilities (12, 000,000) (17,500,000)
Positive excess: Goodwill 22,500,000

Costs to Issue and Register Stocks

Share Issue Costs/APIC 1,100,000
Cash 1,100,000

2.
a. P133,400,000 c. P74,900,000 e. P95,900,000
b. P37,500,000 d. P12,000,000

3.
Current assets 1,500,000
Investments 500,000
Land 6,000,000
Buildings 16,000,000
Equipment 2,000,000
Identifiable intangibles 5,000,000
Current liabilities 1,500,000
Long-term liabilities 12,000,000
Common stock 1,000,000
Additional paid-in capital 9,000,000
Gain on acquisition/RE 7,500,000
 Consideration transferred:
Shares (100,000 x P100) 10,000,000
Less: MV of Assets and Liabilities Acquired:
Current assets 1,500,000
Investments 500,000
Land 6,000,000
Buildings 16,000,000
Equipment 2,000,000
Identifiable intangibles 5,000,000
Current liabilities ( 1,500,000)
Long-term liabilities (12, 000,000) (17,500,000)
Negative excess: Gain on acquisition ( 7,500,000)

Costs to Issue and Register Stocks

Share Issue Costs/APIC 800,000
Cash 800,000

a. P111,200,000 c. P48,200,000 e. P73,700,000

b. P37,500,000 d. P19,500,000

4.
Current assets 1,500,000
Investments 500,000
Land 6,000,000
Buildings 16,000,000
Equipment 2,000,000
Identifiable intangibles 5,000,000
Goodwill 500,000
Current liabilities 1,500,000
Long-term liabilities 12,000,000
Estimated liability for Contigent Cons. 8,000,000
Common stock 1,000,000
Additional paid-in capital 9,000,000

Consideration transferred:
Shares (100,000 x P100) 10,000,000
Estimated liability for Contigent Cons. _8,000,000
Consideration transferred 18,000,000
Less: MV of Assets and Liabilities Acquired:
Current assets 1,500,000
Investments 500,000
Land 6,000,000
Buildings 16,000,000
Equipment 2,000,000
Identifiable intangibles 5,000,000
Current liabilities ( 1,500,000)
Long-term liabilities (12, 000,000) (17,500,000)
Positive excess: Goodwill 500,000
 Costs to Issue and Register Stocks
Share Issue Costs/APIC 800
Cash 800

5.
(a)
6/30/20x6
Estimated liability for Contingent
Cons. 3,000,000
Goodwill 500,000
Gain on acquisition/IFAc 2,500,000

8/1/20x6
Estimated liability for Contingent
Cons. 200,000
Gain on change in FV of CCP 200,000

(b)
Estimated liability for Contingent
Cons. 3,000,000
Gain on reduction in
liability 3,000,000

Change in FV of CCP
If the condition causing the FV change exists on the DOA and the date of re-measurement is
within the measurement period (max of 1 year from the DOA)- adjust against GW/IFAC.
If the condition causing the FV change exists subsequent to the DOA, regardless of the date of
re-measurement, do not adjust GW/IFAc. Meaning, all FV change will be recognized in P/L.

Change in FV of Assets/Liabilities
Change in the value of the Assets/liabilities of the ACQUIREE will be adjusted against goodwill if
the conditions causing the change exist on the DOA and the re-measurement date is within the
measurement period.