ABC Co. engaged your services to compute the goodwill and purchase price forthe acquisition of XYZ Corp. The following data are available for XYZ Corp.:Current Asset6,000,000 Current Liabilities3,500,0002,500,0007,000,0001,500,000Investments2,500,000 Non-current liabilitiesP.P.E13,000,000 Ordinary sharesShare PremiumAccumulated Profits21,500,000 Total Liabilities and Equity7,000,000Total Assets21,500,000You found out that the investments have a fair value of P2,000,000 and thecurrent assets and property, plant and equipment are understated by P800,000and P1,850,000. All assets and equities are properly stated. An examination ofthe company's income for the last 4 years revealed that the total earningsamounted to P9,000,000. The said earnings include gain on sale during the lastyear of P100,000 and P150,000 annual bonus of the president. The normal rateof return is 10%.Compute for the goodwill (purchase of goodwill for 4 years). ARISE Co. has suffered operating losses for some time, but is now operating profitablyand expects to continue to do so. Current and projected income, however will not besufficient to eliminate the deficit in the near term. It also appears that plant assets areoverstated considering current prices and economic conditions. After receivingpermission from the government authorities and approval from shareholders, the boardof directors decides to restate the company assets and paid-in capital balances in orderto remove the deficit and make possible the declaration of dividends from profitableoperations. A balance sheet for the company just prior to this action is presented:250,0001,500,000Current AssetsP.P.E(600,000)1,150,000Accumulated DepreciationTotalLiabilities300,000Ordinary shares, P10 par, 100,000 shares1,000,000100,000(250,000)Share PremiumRetained Earnings (deficit)Total1,150,000Assuming that the quasi reorganization shall be accomplished as follows:a. Property, plant and equipment are to be reduced to their present fair marketvalue of P800,000b. Inventories are to be written down by P50,000C. Unaccrued liabilities shall be recognized at P150,000d. Ordinary shares are to be reduced to a par value of P5What is the balance of share premium after the quasi reorganization?

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ABC Co. engaged your services to compute the goodwill and purchase price for the acquisition of XYZ Corp. The following data are available for XYZ Corp.: Current Asset Investments 6,000,000 Current Liabilities 2,500,000 Non-current liabilities 3,500,000 2,500,000 P.P.E 13,000,000 Ordinary shares 7,000,000 Share Premium 1,500,000 Accumulated Profits 7,000,000 21,500,000 Total Assets 21,500,000 Total Liabilities and Equity You found out that the investments have a fair value of P2,000,000 and the current assets and property, plant and equipment are understated by P800,000 and P1,850,000. All assets and equities are properly stated. An examination of the company's income for the last 4 years revealed that the total earnings amounted to P9,000,000. The said earnings include gain on sale during the last year of P100,000 and P150,000 annual bonus of the president. The normal rate of return is 10%. Compute for the goodwill (purchase of goodwill for 4 years).

ABC Co. engaged your services to compute the goodwill and purchase price for the acquisition of XYZ Corp. The following data are available for XYZ Corp.: Current Asset Investments 6,000,000 Current Liabilities 2,500,000 Non-current liabilities 3,500,000 2,500,000 P.P.E 13,000,000 Ordinary shares 7,000,000 Share Premium 1,500,000 Accumulated Profits 7,000,000 21,500,000 Total Assets 21,500,000 Total Liabilities and Equity You found out that the investments have a fair value of P2,000,000 and the current assets and property, plant and equipment are understated by P800,000 and P1,850,000. All assets and equities are properly stated. An examination of the company's income for the last 4 years revealed that the total earnings amounted to P9,000,000. The said earnings include gain on sale during the last year of P100,000 and P150,000 annual bonus of the president. The normal rate of return is 10%. Compute for the goodwill (purchase of goodwill for 4 years).

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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