BUSINESS COMBI - ACQUISITION DOCX

Title	BUSINESS COMBI - ACQUISITION
Author	G. Panganiban
Pages	5
File Size	27.6 KB
File Type	DOCX
Total Downloads	318
Total Views	599

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ASIA PACIFIC COLLEGE OF ADVANCED STUDIES MIDTERM EXAMINATION ADVANCED ACCOUNTING II Name : _________________________________________________ Score :____________________ Professor : Gemine Ailna C. Panganiban Date : ___________________ Multiple Choice. Show your SOLUTIONS. PROBLEM 1. STAR Corporation is a company involved in manufacturing cars. On January 1, 2013, the board of directors of the said company has decided to acquire the net assets of NOVA Corporation and RISE Corporation, suppliers of materials they use in production. The merger is expected to result in producing higher quality cars with lower total cost. The deal was closed on February 29, 2013 and the following information was gathered from the books of the entities: STAR NOVA RISE Current Assets P1,375,000 P390,000 P260,000 Noncurrent Assets 3,125,000 2,550,000 1,700,000 Total Assets P4,500,000 P2,940,000 P1,960,000 Liabilities P325,000 P210,000 P140,000 Common stock, P100 par 2,748,500 1,780,200 1,186,800 Additional Paid-in capital 176,500 169,800 113,200 Retained earnings 1,250,000 780,000 520,000 Total equity & liability P4,500,000 P2,940,000 P1,960,000 Star will issue 22,500 of its common stock in exchange for the net assets of Nova and 11,200 of its common stock in exchange for the net assets of Rise. The fair value of Star's shares is P150. In addition, the following adjustments should be made: Current assets of Nova and Rise have a fair value of P450,000 and P230,000 respectively. Noncurrent assets have a fair value of P2,150,000 and P1,975,000 for Nova and Rise, respectively. Compute for the following balances of Star Company on the date of acquisition: 1. Stockholders' equity a. P6,118,500 b. P7,980,000 c. P3,496,500 d. P9,615,000 2. Assets a. P10,290,000 b. P9,240,000 c. P10,500,000 d. P9,840,000 PROBLEM 2. Denim Co. merged into Kraft Corp. on July 1, 2016. In exchange for the net assets at fair market value of Denim Co. amounting to P696,450, Kraft issued 68,000 common shares at P9 par value with a market price of P12 per share. Out of pocket costs of the combination were as follows: Legal fees for the contract of business combination P35,600 Audit fee for SEC registration of stock issue 90,000 Printing costs of stock certificates 14,500 Broker's fee 23,600 Accountant's fee for pre-acquisition audit 80,000...