INSTRUCTION: SHOW YOUR SOLUTION.

NO SOLUTION = INCORRECT ANSWER.

On January 1, 2019, ABC Corporation and XYZ Company decided to enter into a business combination.
ABC Corporation’s book shows assets and liabilities amounting to P6,750,000 and P1,500,000,
respectively. The shareholders’ equity is composed of P1,500,000 common stocks (P50 par); P750,000
Share Premium and P3,000,000 Retained Earnings. The book value asset of ABC is understated by
P750,000 while its liability is overstated by P375,000. 
 
XYZ Company’s assets inclusive of P75,000 goodwill amounted to P2,500,000 while its liabilities
amounted to P750,000. The shareholders’ equity is composed of P600,000 common stocks (P50 par);
P525,000 Share Premium and P625,000 retained earnings. The fair value assets without goodwill and
liabilities should be reduced both by P375,000. 
 
ABC Company acquired the net assets of XYZ Company by issuing 25,000 shares and cash of P50,000.
Moreover, a contingent consideration of P400,000 will be paid when the result of the pending litigation
existing at the date of acquisition on the quieting of title of the land of XYZ is affirmative. The
determinable amount of the said contingent consideration at the date of combination amounted to
P250,000. The current market price of ABC stock is traded at P60 per share. 
 
ABC Corporation paid the following as a result of business combination: 
Accountant’s fee related to the stock issuance P100,000 
Cost of printing stock certificates P50,000 
Cost of Stockholder’s meeting to vote for the acquisition P100,000 
Finder’s Fee P250,000 
General Administrative Cost P75,000 
Legal, Accounting and Other Consulting Fees P250,000 
SEC registration of new shares issued P200,000 
SEC Registration of the business combination P75,000 
 
How much is the goodwill or gain on acquisition on January 1, 2019?
 
How much is the combined Share Premium?  
 
How much is the combined Retained Earnings? 
 
How much is the combined Total Liabilities? 
 
How much is the combined Total Assets? 
 
If on March 31, 2019, the fair value of contingent consideration increased to P300,000 when there is
90% chance of winning the said pending case. Then on June 30, 2019, the court decided in affirmative.
How much will be the goodwill or income as of December 31, 2019?
 
If on March 2, 2019, the fair value of contingent consideration changed to P100,000 when there is 60%
chance of losing the said pending case. Then on January 2, 2020, the contingent liability increased by
P250,000 due to 90% chance of winning the case. What will be the goodwill or income as a result
of combination as of December 31, 2019?