The following is a summary of the statement of financial position of Stratification Company showing data regarding
Question:
The following is a summary of the statement of financial position of Stratification Company showing data regarding the carrying values and fair values as of December 31, 2011:
Statement of Financial Position Item | Book Value | Fair Value | ||
Cash | P 70,000 | P 70,000 | ||
Trade and other Receivables | 125,000 | 125,000 | ||
Merchandise Inventory | 80,000 | 140,000 | ||
Land | 62,500 | 90,500 | ||
Buildings and Machinery | 500,000 | 443,250 | ||
Accumulated Depreciation | (187,500) | |||
Total Assets | P650,000 | P868,750 | ||
Trade and other Payables | P 12,500 | P 12,500 | ||
Bonds Payable | 200,000 | 180,000 | ||
Ordinary Share Capital (P5 par value) | 187,500 | |||
Share Premium | 87,500 | |||
Accumulated Profits | 162,500 | |||
Total Liabilities and Equities | P650,000 |
On January 1, 2012, Permutation Corporation entered into a business combination agreement by issuing 15,000 shares of its P10 par value ordinary share capital in exchange for the net assets of Stratification Company. As of this date, the shares of Stratification were selling at P18 per share while that of the Permutation were selling at P50 per share.
Permutation Corporation in carrying out the business combination agreement incurred the following additional cash payments:
Consultancy fee paid to broker that located Stratification P 12,500
Legal fee for stock issued by Permutation 3,750
Share issue cost of new shares of Permutation 6,250
General and administrative expenses 11,250
Cost of SEC registration of Permutation shares 1,250
Required:
Prepare all indicated entries to record the acquisition on the books of Permutation Corporation.
Financial Accounting and Reporting
ISBN: 978-0273744443
14th Edition
Authors: Barry Elliott, Jamie Elliott