How much is the cost of investment? * On January 31. 2022. Parent Company purchased al the identifiable net assets of Sub Company by transferring cash of P1.200,000 and issuing 100,000 shares with par value of P20 and fair value of P32. Parent will pay additional amount depending on the net income achieved by Sub at year-end: Not income e year-end 50,000.000 75,000.000 100,000.000 Consideration to be transferred 1.000.000 2,000.000 Case 3,000.000 Book value of Parent and Sub at the date of acquisition were as folows: Sub 800,000 1,400.000 Parent 1,000.000 1,600.000 2,400.000 5.000.000 10,000.000 2,400.000 2,000.000 1,600,000 Cash Accounts receivable Inventory Buldings Total assets 800.000 2,800.000 5,800.000 1,000.000 Accounts payable Common stock P2 par Share premium Retained eamings Total kabilies and equities 1,200.000 800.000 2,800.000 5,800.000 4,000.000 10,000.000 At the date of acquisition, Parent assessed that Sub will reach at least 60.000.000 of net income for 2022. Book value of the identifiable net assets of Sub on January 31, 2022 is P4,800,000. Temporary appraisal at the date of acquisition is P5,000,000. On December 31, 2022 an additional valuation resulted to a decrease of P500.000 from previous appraisal and fair value of the net assets were finalized on February 6, 2023 by a subsequent increase of P1,000,000 from last valuation. Parent paid P100,000 business combination expenses, 2/5 are direct, 2/5 are share issue costs, and 1/5 are indirect costs. Net income of Sub at 12/31/22 is PSOM.
How much is the cost of investment? * On January 31. 2022. Parent Company purchased al the identifiable net assets of Sub Company by transferring cash of P1.200,000 and issuing 100,000 shares with par value of P20 and fair value of P32. Parent will pay additional amount depending on the net income achieved by Sub at year-end: Not income e year-end 50,000.000 75,000.000 100,000.000 Consideration to be transferred 1.000.000 2,000.000 Case 3,000.000 Book value of Parent and Sub at the date of acquisition were as folows: Sub 800,000 1,400.000 Parent 1,000.000 1,600.000 2,400.000 5.000.000 10,000.000 2,400.000 2,000.000 1,600,000 Cash Accounts receivable Inventory Buldings Total assets 800.000 2,800.000 5,800.000 1,000.000 Accounts payable Common stock P2 par Share premium Retained eamings Total kabilies and equities 1,200.000 800.000 2,800.000 5,800.000 4,000.000 10,000.000 At the date of acquisition, Parent assessed that Sub will reach at least 60.000.000 of net income for 2022. Book value of the identifiable net assets of Sub on January 31, 2022 is P4,800,000. Temporary appraisal at the date of acquisition is P5,000,000. On December 31, 2022 an additional valuation resulted to a decrease of P500.000 from previous appraisal and fair value of the net assets were finalized on February 6, 2023 by a subsequent increase of P1,000,000 from last valuation. Parent paid P100,000 business combination expenses, 2/5 are direct, 2/5 are share issue costs, and 1/5 are indirect costs. Net income of Sub at 12/31/22 is PSOM.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 25E
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How much is the cost of investment ?
Transcribed Image Text:How much is the cost of investment? *
On January 31. 2022. Parent Company purchased al the identifiable net assets of Sub Company by transferring cash of P1.200,000 and issuing 100,000 shares with
par value of P20 and fair value of P32. Parent will pay additional amount depending on the net income achieved by Sub at year-end:
Not income e year-end
50,000.000
75,000.000
100,000.000
Consideration to be transferred
1.000.000
2,000.000
Case
3,000.000
Book value of Parent and Sub at the date of acquisition were as folows:
Sub
800,000
1,400.000
Parent
1,000.000
1,600.000
2,400.000
5.000.000
10,000.000
2,400.000
2,000.000
1,600,000
Cash
Accounts receivable
Inventory
Buldings
Total assets
800.000
2,800.000
5,800.000
1,000.000
Accounts payable
Common stock P2 par
Share premium
Retained eamings
Total kabilies and equities
1,200.000
800.000
2,800.000
5,800.000
4,000.000
10,000.000
At the date of acquisition, Parent assessed that Sub will reach at least 60.000.000 of net income for 2022. Book value of the identifiable net assets of Sub on
January 31, 2022 is P4,800,000. Temporary appraisal at the date of acquisition is P5,000,000. On December 31, 2022 an additional valuation resulted to a decrease
of P500.000 from previous appraisal and fair value of the net assets were finalized on February 6, 2023 by a subsequent increase of P1,000,000 from last valuation.
Parent paid P100,000 business combination expenses, 2/5 are direct, 2/5 are share issue costs, and 1/5 are indirect costs. Net income of Sub at 12/31/22 is PSOM.
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