Group 4 (AC12)

Princesa Christopher Jay Marinella

Gialeine Jewell May Friday Kimberly

CASE STUDY
A.Introduction
A.Introduction

•• Company’s
Company’s Informationo
Informationo
•• Identify
Identify the
the acquirerand
acquirerand the
the
acquiree;
acquiree;
•• Determinethe
Determinethe acquisition
acquisition date;
date;

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CASE STUDY
B.Body/Discussion
B.Body/Discussion
•• Calculate
Calculate the
the fair
fair value
value ofof the
the purchase
purchase
consideration
consideration transferred;
transferred;
•• Recognizing
Recognizing and and measuring
measuring the the identifiable
identifiable
assets
assets acquired,
acquired, the the liabilities
liabilities assumed,
assumed, andand
any
any controlling
controlling interest
interest in
in the
the acquiree;
acquiree;
•• Recognizing
Recognizing goodwill,
goodwill, oror in
in the
the case
case of
of aa
bargain
bargain purchase,
purchase, aa gain;
gain; Prepare
Prepare the
the
worksheet,
worksheet, including
including the
the journal
journal entries
entries

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CASE STUDY
C.
C. Analysis,
Analysis, Conclusion
Conclusion and
and
Recommendation
Recommendation
•• Results
Results of
of the
the business
business
combination
combination
•• Prepare
Prepare the
the Combined
Combined Financial
Financial
Statement
Statement immediately
immediately after
after the
the
combinationand
combinationand on on December
December 31, 31,
2021.
2021.

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1
Company’s
Information
ABC Cars Philippines
Incorporated:
Primarily engages in the business
trading of goods such as Motor
Vehicles, a wholesaler of spare parts
and also provides car maintenance
services.
XYZ Motors Incorporated:
A company that engages in car
dealership business.
1
Acquiarer &
Acquiree
ABC Cars Philippines
Incorporated – Acquirer

XYZ Motors
Incorporated – Acquiree
1
DATE OF
ACQUISITI
ON
January 1, 2021 is the
date of Acquisition
2
FAIR VALUE OF
CONSIDERATION
TRANSFERRED
2
IDENTIFIABLE
ASSETS
ACQUIRED
2
PREVIOUSLY HELD
EQUITY INTEREST
2
PREVIOUSLY HELD
EQUITY INTEREST
2
DEFERRED TAX
LIABILITY
2
GOODWILL
WORKSHEET
 JOURNAL

2
ENTRIES
January 1, 2015
Investment in Associate   42,050,000    
Cash      42,050,000

January 1, 2021 180,000

Investment in Subsidiary   12,500,000    
Investment in Associate      12,500,000

Investment in Associate   450,000    

Unrealized Gain - P/L      450,000

Investment in Subsidiary   457,738,484    

Cash 440,986,254
Consideration Payable 14,928,230
Land 1,500,000
Common Stock 300,000
Contingent Consideration      24,000
to recognize the newly acquired shares
 JOURNAL

2
ENTRIES
Acquisition-related Expense   720,000    
Cash       720,000

General Expense   3,500,000    

Cash       3,500,000

Paid-in capital in excess of par   180,000    

Cash       180,000

Land   150,000    
Gain on sale of land       150,000

December 31, 2021

Consideration Payable   14,928,230    
Interest Expense 671,770  
Cash       15,600,000

Estimated Liability for Contingent Consideration 24,000    

Gain on Contingent Consideration       24,000
contingency not having to be paid
 ACQUISITION

2
COST
Acquisition-related costs  

Running Cost 120,000

Transport and Installation Costs 100,000

Reimbursement Costs 250,000

Unresolved Claim Settlement 100,000

Other Acquisition-related Costs 150,000

Total Acquisition-related Expenses 720,000

 ANALYSIS

3
• After the business combination the
balance of total assets is
2,040,811,767 and liabilities and
equities totals are also 2,040,811,767.
• The composition of the company's
capital ownership 75% of it will be of
ABC car’s Phils Inc.
• The combined entity increases
investment and business
opportunities that can reach out new
business segments due to increased
in capital.
• The acquisition results in a larger
entity which increases the potential
of ABC Cars Phils. Inc due to the
benefits of economies of scale and
operational reach especially in areas
that were previously related to the
XYZ motor.
 CONCLUSION

3
• After the acquisition, having acquired a
total of 75% of XYZ Motors Inc. Interest,
ABC Cars Phils. Inc has gained control of
XYZ motors. Therefore, from the date of
the acquisition, the financial statements of
XYZ Motors were combined into ABC Cars
Phils. Inc.’s financial statements..
• The combination will benefit ABC Cars as
there’s now less threat in competitor, the
collaboration of the entities will result to
greater productivity than it is before the
business combination.
• ABC Cars Phils. Inc on its own would
struggle to survive a recession or
depression but after the merger the
combined company will be able to
withstand future business calamities being
teamed up and having vast resources,
knowledge, business experiences.
 RECOMMENDA

3
TION
• Given that the balance of Cash at the
end of the year and after the merger
results in a negative amount, it is
notable that ABC Cars Phils. Inc
should maintain a sufficient amount
of cash to be able to meet its
maturing obligations.
• After the acquisition that has taken
placed, it is stated that the merged
entity should classify and assess the
financial assets acquired and
foreclosed financial liabilities based
on contractual requirements,
economic conditions, and other
associated conditions that exist at the
time of the acquisition. This includes
grouping derivatives embedded in
the main contract by the acquired
party.
BALANCE
SHEET
BALANCE
SHEET