On January 1, 2021, ABC Co. acquired all of the identifiable assets and assumed all of the liabilities of XYZ, Inc. by paying cash of ₱4,000,000. On this date, the identifiable assets acquired and liabilities assumed have fair values of ₱6,400,000 and ₱3,600,000, respectively.The terms of the business combination agreement are shown below: A. Half of the ₱4,000,000 agreed consideration shall be paid on January 1,2021 and the other half on December 31, 2025. The prevailing market rate as of January 1, 2021 is 10%. B. In addition, ABC agrees to provide for the following: a. A piece of land with a carrying amount of ₱2,000,000 and fair value of ₱1,200,000 shall be transferred to the former owners of XYZ. b. After the combination, XYZ’s activities shall be continued by ABC. ABC agrees to provide a patented technology for use in the activities of XYZ. The patented technology has a carrying amount of ₱240,000 in the books of ABC and a fair value of ₱320,000. Included in the liabilities assumed is an estimated liability on a pending lawsuit filed against XYZ by a third party with an acquisition-date fair value of ₱400,000. The carrying amount of the liability in XYZ’s books immediately before the business combination is ₱480,000. XYZ guarantees to indemnify ABC for any settlement amount of the liability in excess of ₱480,000. Determine the Fair value of the consideration given
On January 1, 2021, ABC Co. acquired all of the identifiable assets and
assumed all of the liabilities of XYZ, Inc. by paying cash of ₱4,000,000.
On this date, the identifiable assets acquired and liabilities assumed have
fair values of ₱6,400,000 and ₱3,600,000, respectively.The terms of the
business combination agreement are shown below: A. Half of the
₱4,000,000 agreed consideration shall be paid on January 1,2021 and
the other half on December 31, 2025. The prevailing market rate as of
January 1, 2021 is 10%. B. In addition, ABC agrees to provide for the
following: a. A piece of land with a carrying amount of ₱2,000,000 and
fair value of ₱1,200,000 shall be transferred to the former owners of
XYZ. b. After the combination, XYZ’s activities shall be continued by ABC.
ABC agrees to provide a patented technology for use in the activities of
XYZ. The patented technology has a carrying amount of ₱240,000 in the
books of ABC and a fair value of ₱320,000. Included in the liabilities
assumed is an estimated liability on a pending lawsuit filed against XYZ by
a third party with an acquisition-date fair value of ₱400,000. The
carrying amount of the liability in XYZ’s books immediately before the
business combination is ₱480,000. XYZ guarantees to indemnify ABC for
any settlement amount of the liability in excess of ₱480,000. Determine
the Fair value of the consideration given
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