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accountancy architecture, Essays (university) of Accounting

helppppppp 1. A and B formed a partnership. The following are their contributions: A B Cash 200,000 - Accounts receivable 100,000 - Inventory 160,000 - Land 100,000 Building 240,000 Total 460,000 340,000 Note payable 120,000 A, capital 340,000 B, capital 340,000 Total 460,000 340,000 Additional information: • Included in accounts receivable is an account amounting to ₱40,000 which is deemed uncollectible.

Typology: Essays (university)

2019/2020

Uploaded on 10/19/2020

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a. P100,000; P400,000 c. P100,000; P600,000
b. P150,000;P500,000 d. P200,000; P600,000
ANSWER: C
Company A Company B
Net Asset Contribution P300,000 P400,000
Add:
Goodwill Average/Annual
Earnings
P50,000 P80,000
Less: Normal Earnings (10%of
net asset)
30,000 40,000
Excess earnings P20,000 P40,000
Divided by: Capitalized at 20% 20%
Goodwill P100,000 P200,000
Total contribution(stock to be
issued
P400,000 P600,000
10. Malakas Company acquired all of Maganda Corporation's assets and liabilities on January 2,2013, in
a business combination. At that date, Maganda reported assets with a book value of P624,000 and
liabilities of P356,000. Malakas noted that Maganda had P40,000 of research and development costs on
its books at the acquistion date that did not appear to be of value. Malakas also determined that patents
developed by Maganda had a fair value of P120,000 but had not been recorded by Maganda. Except for
building and equipment, Malakas determined the fair value of all other assets and liabilities reported by
Maganda approximated Malakas recorded amounts. In recording the transfer of assets and liabilities to its
books, Malakas recorded goodwill of P93,000. Malakas paid P517,000 to acquire Maganda's asset and
liabilities.
If the book value of Maganda's buildings and equipment was P341,000 at the date of acquisition, what
was their fair value?
a. P441,000
b. P417,000
c. P341,000
d. P417,000
Answer: B.
Solution
Computation of Fair Value
Amount paid P517,000
Book Value of assets P624,000
Book Value of liabilities. (356,000)
Book Value of net assets. P268,000
Adjustment for RandD costs. (40,000)
Adjusted book value. P228,000
Fair value of patent. 120,000
Goodwill recorded. 93,000 (441,000)
Fair value increment of
building and equipment P76,000
Book value of building and Equipment. 341,000
Fair Value of buildings and equipment P417,000
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a. P100,000; P400,000 c. P100,000; P600, b. P150,000;P500,000 d. P200,000; P600, ANSWER: C Company A Company B Net Asset Contribution P300,000 P400, Add: Goodwill Average/Annual Earnings

P50,000 P80,

Less: Normal Earnings (10%of net asset)

Excess earnings P20,000 P40, Divided by: Capitalized at 20% 20% Goodwill P100,000 P200, Total contribution(stock to be issued

P400,000 P600,

  1. Malakas Company acquired all of Maganda Corporation's assets and liabilities on January 2,2013, in a business combination. At that date, Maganda reported assets with a book value of P624,000 and liabilities of P356,000. Malakas noted that Maganda had P40,000 of research and development costs on its books at the acquistion date that did not appear to be of value. Malakas also determined that patents developed by Maganda had a fair value of P120,000 but had not been recorded by Maganda. Except for building and equipment, Malakas determined the fair value of all other assets and liabilities reported by Maganda approximated Malakas recorded amounts. In recording the transfer of assets and liabilities to its books, Malakas recorded goodwill of P93,000. Malakas paid P517,000 to acquire Maganda's asset and liabilities. If the book value of Maganda's buildings and equipment was P341,000 at the date of acquisition, what was their fair value? a. P441, b. P417, c. P341, d. P417, Answer: B. Solution Computation of Fair Value Amount paid P517, Book Value of assets P624, Book Value of liabilities. (356,000) Book Value of net assets. P268, Adjustment for RandD costs. (40,000) Adjusted book value. P228, Fair value of patent. 120, Goodwill recorded. 93,000 (441,000) Fair value increment of building and equipment P76, Book value of building and Equipment. 341, Fair Value of buildings and equipment P417,
  1. Richard Ltd. and Liway Ltd. are two family owned ice cream producing companies in Pampanga. Richard Ltd. is owned by the Melad family, while the Basilio family owns Liway Ltd. The Melad family has only one son. and he is engaged to be married to the daughter of Basilio family. Because the son currently managing Liway Ltd., it is proposed that he be allowed to manage both companies after the wedding. As a result, it is agreed by the two families that Richard and Ltd. should take over the net assets of Liway Ltd. The balance sheet at Liway Ltd. immediately prior to the takeover is as follows: Carrying Amount Fair Value Accounts receivable P20,000 P 20, Inventory 140,000 125, Land 620,000 840, Buildings (net) 530,000 550, Farm equipment (net) 360,000 364, Irrigation equipment (net) 220,000 225, Vehicles (net) 160,000 172, Total assets P2,050, Accounts payable P80,000 P 80, Loan-Metrobank 480,000 480, Share capital 670, Retained earnings 820, Total P2,050, The takeover agreement specified the following details:
  • Richard Ltd. is to acquire all the assets of Liway Ltd. and except one of the vehicles (having a carrying amount of P45,000 and of fair value of P48,000) and assume all the liabilities except for the loan from Metrobank. Liway Ltd. is then to go, into liquidation.
  • Cash at P20,000, half to be paid on date of exchange and half in one year's time. The incremental borrowing rate is 10% per annum (present value for P1 at 10% for 1 period is 0.909091).
  • Supply of a patent relating to the manufacture of ice cream. This has a fair value of P60,000 but has not been recognized in the records of Liway Ltd. because it resulted from an internally generated research project.
  • Richard Ltd. is to supply sufficient cash to enable the debt to Metrobank to be paid for and to cover the liquidation costs of P5,500. it will also give P150. 000 to be distributed to Mr. an Mrs. Melad to assists in paying the wedding costs.
  • Richard Ltd. is also to give a piece of its own prime land to Liway Ltd. to be distributed to Mr and Mrs. Melad, this eventually being available to be given to any offspring of the forthcoming marriage. The piece of land in question has a carrying amount of P80,000 and a fair value of P220,000.
  • Richard Ltd. is to issue 90,000 shares, these having a fair value of P14 per share, to be distributed via Liway Ltd. to the soon to-be-married-daughter of Mr. and Mrs. Melad, who is currently a shareholder in Liway Ltd. The takeover proceeded as per the agreement with Richard Ltd. incurring incidental acquisition costs of P25,000, while there were P 18,000 share issue costs.