Assume the same information as above but, Sandy has an

additional previously unreported intangible that meets the

requirements for capitalization: A non-competition agreement
with a fair value of P6,000,000. All the fair value calculations
have been doubled checked for accuracy and found to be
correct.
 11-13 Prepare the journal entries to record the acquisitions on
Velasco’s book
Cash & Receivable 200,000
Inventories 150,000
Property, Plant an Equipment 7,700,000
Customer Contracts 25,000
In-Process R&D 300,000
Intangible Asset/Non-Competition Agreement 6,000,000
Current Liabilities 400,000
Long-term Debt 7,280,000
Warrant Liability 10,000
Est. Liability Contingent Consideration 50,000
Ordinary Share 3,000,000
Gain on Acquisition/RE 3,635,000

Acquisition Related Expense/RE 155,000

Cash 155,000

APIC/ Share Premium 120,000

Cash 120,000
Consideration Transferred To:
Ordinary Share 3,000,000
Estimated Liability for Contingent Consideration 50,000
Total: 3,050,000
Less: Market Value of Asset & Liabilities
Cash & Receivable 200,000
Inventories 150,000
Property, Plant and Equipment, Net 7,700,000
Customer Contracts 25,000
In-Process R&D 300,000
Intangible Asset/Non-Competition Agreement 6,000,000

Current Liability (400,000)

Long-term Debt (7,280,000)

Warranty Liability (10,000) 6,685,000

Negative Goodwill/Gain on Acquisition (3,635,000)

14-16 Prepare Velasco’s balance sheet on the date of
combination.
Post Combination Balance Sheet
Asset Liabilities & Stockholder's Equity
Cash & Receivable 26,925,000 Liabilities:
Inventories 20,150,000 Current Liabilities 900,000
Property, Plant an Equipment 107,200,000 Long-term Debt 77,280,000
Customer Contracts 25,000 Warrant Liability 10,000
In-Process R&D 300,000 Est. Liability Contingent Consideration 50,000
Intangible Asset/Non-
Competition Agreement 6,000,000 Total Liabilities 78,240,000
Trademarks 5,000,000 Stockholders Equity
Ordinary Share 5,000,000
APIC/Share Premium 54,880,000
Retained Earnings 28,480,000

Treasury Shares (1,000,000) 87,360,000

Total Liabilities and Stockholders
Total Asset 165,600,000 Equity 165,600,000