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    Stock Acquisition Quiz 100% Answer

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    John Balanquit
    Jay Company acquired 100% of Kay Company's shares for P1,200,000 cash and P300,000 one-year notes. Jay previously held 10% of Kay's shares, valued at P90,000. The acquisition cost was P1,473,000 and the fair value of Kay's net assets acquired was P1,040,000, resulting in goodwill of P523,000. Several adjustments were made to Kay's assets and liabilities, including machinery and accounts receivable fair values, and an accrued expense. Consolidated financial statements were prepared, showing total assets of P9,143,000 and net income of P1,025,000.

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    Stock Acquisition Quiz 100% Answer

    Uploaded by

    John Balanquit
    265 views2 pages
    Jay Company acquired 100% of Kay Company's shares for P1,200,000 cash and P300,000 one-year notes. Jay previously held 10% of Kay's shares, valued at P90,000. The acquisition cost was P1,473,000 and the fair value of Kay's net assets acquired was P1,040,000, resulting in goodwill of P523,000. Several adjustments were made to Kay's assets and liabilities, including machinery and accounts receivable fair values, and an accrued expense. Consolidated financial statements were prepared, showing total assets of P9,143,000 and net income of P1,025,000.

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    Jay Company acquired 100% of Kay Company's shares for P1,200,000 cash and P300,000 one-year notes. Jay previously held 10% of Kay's shares, valued at P90,000. The acquisition cost was P1,473,000 and the fair value of Kay's net assets acquired was P1,040,000, resulting in goodwill of P523,000. Several adjustments were made to Kay's assets and liabilities, including machinery and accounts receivable fair values, and an accrued expense. Consolidated financial statements were prepared, showing total assets of P9,143,000 and net income of P1,025,000.

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    265 views2 pages

    Stock Acquisition Quiz 100% Answer

    Uploaded by

    John Balanquit
    Jay Company acquired 100% of Kay Company's shares for P1,200,000 cash and P300,000 one-year notes. Jay previously held 10% of Kay's shares, valued at P90,000. The acquisition cost was P1,473,000 and the fair value of Kay's net assets acquired was P1,040,000, resulting in goodwill of P523,000. Several adjustments were made to Kay's assets and liabilities, including machinery and accounts receivable fair values, and an accrued expense. Consolidated financial statements were prepared, showing total assets of P9,143,000 and net income of P1,025,000.

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    JAY Company acquired 100% of the ordinary shares of KAY Company for P1,200,000 cash and P300,000

    one-year non-interest-bearing notes. Applicable discount rate is 10% (use two decimal places for present
    value factors). Prior to the acquisition, Jay holds 10% of the shares of Kay as trading securities. The shares
    are fairly valued at 90,000 in the books of Jay. The financial records of both companies were as follows before
    the business combination:

    Jay Company Kay Company

    Current Assets 2,560,000 1,800,000


    Non-Current Assets 5,000,000 550,000
    Total Assets 7,560,000 2,350,000

    Liabilities 2,000,000 1,250,000


    Ordinary Shares 4,000,000 800,000
    Share Premium 500,000 100,000
    Retained Earnings 1,060,000 200,000
    Total Liabilities and SHE 7,560,000 2,350,000

    All assets and liabilities of Kay Company are fairly valued except for machinery that has a book value of
    P300,000 and a fair value of P350,000 and accounts receivable with book value of P150,000 and a net
    realizable value of P135,000. Also, Kay should recognize accrued expense of 95,000. Jay Company incurred
    acquisition expense of P35,000.

    100% Subsidiary Acquisition

    ACCOUNTS PARENT SUBSIDIARY


    CURRENT ASSETS 2,560,000.00 1,800,000.00
    NON-CURRENT ASSETS 5,000,000.00 550,000.00
    TOTAL 7,560,000.00 2,350,000.00

    LIABILITIES 2,000,000.00 1,250,000.00


    ORDINARY SHARES 4,000,000.00 800,000.00
    SHARE PREMIUM 500,000.00 100,000.00
    RETAINED EARNINGS 1,060,000.00 200,000.00
    TOTAL 7,560,000.00 2,350,000.00

    CONSIDERATION
    TRANSFERRED 1,473,000.00
    PREVIOUS INTEREST 90,000.00
    NCI -
    TOTAL 1,563,000.00
    FV OF NAA 1,040,000.00
    GOODWILL OR GAIN 523,000.00

    BOOKS OF PARENT
    INVESTMENT IN SUBSIDIARY 1,563,000.00
    Discount on NP 27,000.00
    CASH 1,200,000.00
    Note Payable 300,000.00
    Trading Securities 90,000.00

    Retained Earnings 35,000.00


    Cash 35,000.00

    BOOKS OF SUBSIDIARY
    MEMO ENTRY FOR CHANGE IN SHARE
    OWNERSHIP

    Elimination Entries

    NON-CURRENT ASSETS 50,000.00


    ORDINARY SHARES 800,000.00
    SHARE PREMIUM 100,000.00
    RETAINED EARNINGS 200,000.00
    GOODWIL
    L 523,000.00
    LIABILITIES 95,000.00
    CURRENT
    ASSETS 15,000.00
    INVESTMENT IN SUBSIDIARY 1,563,000.00

    CONSOLIDATED REPORT

    CURRENT ASSETS 3,020,000.00


    NON-CURRENT
    ASSETS 5,600,000.00
    GOODWILL 523,000.00
    TOTAL 9,143,000.00

    LIABILITIES 3,618,000.00
    ORDINARY SHARES 4,000,000.00
    SHARE PREMIUM 500,000.00
    RETAINED
    EARNINGS 1,025,000.00
    NCI -
    TOTAL 9,143,000.00

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