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Merger
Merger
non-interest-bearing notes. Applicable discount rate is 10%. The financial records of both companies were as
follows before the business combination:
All assets and liabilities of Jak Company are fairly valued except for machinery that has a book value of P
300,000 and a fair value of P 250,000 and accounts receivable with book value of P 150,000 and a net
realizable value of P 130,000. Use three decimal places in your computation.
All assets and liabilities of Kay Company are fairly valued except for machinery that has a book value of P
300,000 and a fair value of P 350,000 and accounts receivable with book value of P150,000 and a net
realizable value of P 135,000. Also, Kay should recognize accrued expense of 35,000. Use three decimal
places in your computation.
10. Consolidated retained earnings after the business combination amounts to:
a. P 1,600,000 c. P 1,006,000
b. P 1,660,000 d. P 1,060,000
Space Jam Company acquired all of the net assets of Moonstar Company for P700,000 cash and P200,000
two-year non-interest-bearing notes payable in lump sum upon maturity. Applicable discount rate is 12%
(use two decimal places for present value factors). In addition, Space Jam issued 100,000 shares of its P1 par
ordinary shares. Share premium is computed based on the difference between the fair value of the net assets
and the considerations transferred. Prior to the acquisition, Space Jam holds 10% of the shares of Moonstar
as trading securities. The shares are valued at 90,000 in the books of Space Jam but is valued at 100,000
based on current fair values. The financial records of both companies were as follows before the business
combination:
All assets and liabilities of Moonstar Company are fairly valued except for machinery that has a book value
of P 300,000 and a fair value of P 375,000 and accounts receivable with book value of P150,000 and a net
realizable value of P130,000. Also, Moonstar should recognize accrued expense of 40,000.
15. Consolidated retained earnings after the business combination amounts to:
a. P 1,600,000 c. P 1,006,000
b. P 1,660,000 d. P 1,060,000