Direction: Read the cases below and solve for what are being asked.

1.On January 1, 20X2, Tanangonan Company acquired all the assets and assumed all the liabilities of Ong Company. In exchange for the net assets of Ong, Tanangonan gave its bond payable with a maturity value of P600,000 with a stated rate of 10% interest payable semiannually on June 30 and December 31. The said bond will mature after 10 years and has a yield rate of 12%.

The Statement of Financial Position (SFP) of both companies as of January 1, 20X2 were as follows:

Tanangonan Ong

Book Value Book Value Fair Value

Cash P250,000 P114,000 P114,000

Receivables 352,700 150,000 135,000

Inventories 848,300 232,000 310,000

Land 700,000 100,000 315,000

Buildings 950,000 410,000 54,900

Accumulated Depreciation - Buildings (325,000) (170,500)

Equipment 262,750 136,450 39,450

Accumulated Depreciation - Equipment (70,050) (90,450)

Total Assets P2,968,700 P881,500 P968,350

Current Liabilities P292,700 P95,300 P95,300

Bond Payable 300,000 260,000

Common Stock, P15 par value 1,200,000

Common Stock, P5 par value 236,500

Other Contributed Capital 950,000 170,000

Retained Earnings 526,000 79,700

Total Equities P2,968,750 P881,500

REQUIRED:

1.Determine the goodwill or gain on bargain purchase from the above acquisition.

2.Give the adjusting entries that will be made on the book of Tanangonan.

3.Prepare the Statement of Financial Position (SFP) of Tanangonan after the merger.

2.Ariadne Corporation acquired the net assets of Turgo Corporation by issuing 10,000 ordinary shares with par value of P10 and bonds payable with a face amount of P500,000. The bonds are classified as financial liability at amortized cost.

At the time of acquisition, the ordinary shares are publicly quoted at P20 per share. On the other hand, the bonds payable, classified as financial liability at amortized cost, are trading at 110.

Ariadne paid P10,0000 share issuance costs and P20,000 bond issue costs. It also paid P40,000 acquisition related costs and P30,000 indirect costs of business combination.

Before the date of acquisition, Ariadne and Turgo reported the following data:

Ariadne Turgo

Current assets 1,000,000 500,000

Non-current assets 2,000,000 1,000,000

Current liabilities 200,000 400,000

Non-current liabilities 300,000 500,000

Ordinary shares 500,000 200,000

Share premium 1,200,000 300,000

Retained earnings 800,000 100,000

At the time of acquisition, the current assets of Ariadne have fair value of P1,200,000, while the non-current assets of Turgo have fair value of P1,300,000. On the same date, the current liabilities of Turgo have fair value of P600,000 while the non-current liabilities of Ariadne have fair value of P500,000.

Required:

1.Determine the goodwill or gain on bargain purchase from the above transaction.

2.Give the adjusting entries that will be made on the book of Ariadne

3.Prepare the SFP of Ariadne after the merger.