Prateroon's asset has a book value of P10,460,00 and a fair market value of P11,500,000 and the book value of its liabilities amounted to P3,250,000 and the fair market value of P4,000,000. On January 1, 2020 Prateroon Company purchased all the net assets of Stranemon Company consisting of: > Issuance of 20,000 unissued shares of its P10 par value ordinary share capital. As of this date, the shares of Prateroon were selling at P40 per share. > Issuance of bonds with a face value of P300,000 but are currently at 110. > A contingent payment of P200,000 cash on January 1, 2020, if the average income of Stranemon Company during the two-year period (2020-2021) exceeds P250,000 per year. Prateroon estimates that there is a 20% chance or probability that the P200,000 payment will be required. > Issuance of 5,000 additional shares on January 1, 2022 to the former shareholders of Stranemon Company if the average income cover the next two years (2020-2021) equalled or exceeded P350,000. The additional 5,000 shares expected to be issued are valued at P75,000. Professional fees of P9,000 were also paid by Prateroon to its external auditors to finalize the business combination. As of the date of acquisition, Stranemon Company reported the following book value and current market data: Вook Book Fair Fair Value Value Value 60,000 Value Cash 60,000 Accounts Payable 36,000 40,000 Inventory 120,000 180,000 Ordinary Share Capital 720,000 Buildings, net 500,000 560,000 Share Premium 164,000 Equipment, net 410,000 440,000 Retained Earnings 170,000
Prateroon's asset has a book value of P10,460,00 and a fair market value of P11,500,000 and the book value of its liabilities amounted to P3,250,000 and the fair market value of P4,000,000. On January 1, 2020 Prateroon Company purchased all the net assets of Stranemon Company consisting of: > Issuance of 20,000 unissued shares of its P10 par value ordinary share capital. As of this date, the shares of Prateroon were selling at P40 per share. > Issuance of bonds with a face value of P300,000 but are currently at 110. > A contingent payment of P200,000 cash on January 1, 2020, if the average income of Stranemon Company during the two-year period (2020-2021) exceeds P250,000 per year. Prateroon estimates that there is a 20% chance or probability that the P200,000 payment will be required. > Issuance of 5,000 additional shares on January 1, 2022 to the former shareholders of Stranemon Company if the average income cover the next two years (2020-2021) equalled or exceeded P350,000. The additional 5,000 shares expected to be issued are valued at P75,000. Professional fees of P9,000 were also paid by Prateroon to its external auditors to finalize the business combination. As of the date of acquisition, Stranemon Company reported the following book value and current market data: Вook Book Fair Fair Value Value Value 60,000 Value Cash 60,000 Accounts Payable 36,000 40,000 Inventory 120,000 180,000 Ordinary Share Capital 720,000 Buildings, net 500,000 560,000 Share Premium 164,000 Equipment, net 410,000 440,000 Retained Earnings 170,000
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 8MC
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Transcribed Image Text:Prateroon's asset has a book value of P10,460,00 and a fair market value of P11,500,000 and the book
value of its liabilities amounted to P3,250,000 and the fair market value of P4,000,000.
On January 1, 2020 Prateroon Company purchased all the net assets of Stranemon Company consisting of:
> Issuance of 20,000 unissued shares of its P10 par value ordinary share capital. As of this date, the shares of
Prateroon were selling at P40 per share.
> Issuance of bonds with a face value of P300,000 but are currently at 110.
> A contingent payment of P200,000 cash on January 1, 2020, if the average income of Stranemon Company during
the two-year period (2020-2021) exceeds P250,000 per year. Prateroon estimates that there is a 20% chance or
probability that the P200,000 payment will be required.
> Issuance of 5,000 additional shares on January 1, 2022 to the former shareholders of Stranemon Company if the
average income cover the next two years (2020-2021) equalled or exceeded P350,000. The additional 5,000
shares expected to be issued are valued at P75,000.
Professional fees of P9,000 were also paid by Prateroon to its external auditors to finalize the business combination.
As of the date of acquisition, Stranemon Company reported the following book value and current market data:
Book
Book
Fair
Fair Value
Value
36,000
720,000
164,000
Value
Value
60,000 Accounts Payable
180,000 Ordinary Share Capital
560,000 Share Premium
Cash
60,000
40,000
Inventory
120,000
Buildings, net
500,000
Equipment, net
410,000
440,000 Retained Earnings
170,000
Compute the Consolidated Total Liabilities on January 1, 2020.
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