UM Tagum College

Arellano Street, Tagum City, 8100 Philippines

STATUTORY MERGER
Problem 1
In October 1, 2013, Water Corporation acquired all the assets and assumed all the liabilities of Gulaman Company by
issuing 20,000 shares with a fair value of P67.5 per share and an obligation to pay a contingent consideration with a fair
value of P750,000.
In addition, Water paid the following acquisition related costs:
Legal fees P 105,600
Audit fee for SEC registration of stock issue 320,400
Costs of stock certificates 35,000
Broker’s fee 49,000
Other direct cost of acquisition 50,000
General and Allocated expenses 14,000
The Statement of Financial Position as of September 30, 2013 of Water and Gulaman, together with the fair market value
of the assets and liabilities are presented below:
Water Gulaman
Book Value Fair Value Book Value Fair Value
Cash P 640,000 P 640,000 P 45,000 P 45,000
Accounts Receivable 360,000 335,000 70,000 54,000
Inventories 475,000 390,000 87,000 78,000
Prepaid Expenses 25,000 - 13,500 5,000
Land 2,000,000 2,900,000 900,000 1,550,000
Building 800,000 900,000 723,000 768,000
Equipment 700,000 585,000 361,500 360,000
Goodwill - - 300,000 -
Total assets P 5,000,000 P 5,750,000 P 2,500,000 P 2,860,000

Accounts Payable 312,500 312,500 200,000 200,000

Notes Payable 937,500 980,000 700,000 765,000
Capital stock,50 par 2,000,000 850,000
Additional paid in cap.1,000,000 400,000
Retained Earnings 750,000 350,000
Total Equities P 5,000,000 P 2,500,000
Compute for the balances that will be shown on October 1,2013 statement of financial position of the surviving
company:
1. Total Assets
2. Total liabilities
3. Total Shareholder’s Equity

PROBLEM 2
On January 1, 2016, Sampalok’s net assets were as follows:
Fair Value Book Value
Current Assets P 1,000,000 P 800,000
Equipment 1,500,000 1,200,000
Land 500,000 200, 000
Buildings 3,000,000 2,500,000
Liabilities ( 800,000) ( 1,000,000)
On January 1, 2016, purchases the net assets of the Sampalok Company issuing 100,000 shares of its P
10 par value stock when the fair value was P 62. It was further agreed that additional consideration will be
paid if contributed income of Sampalok exceeds P 1,000,0000. The expected value of this consideration
was calculated at P 1,840,000; the measurement period is one year.

1. What amount will be recorded as goodwill on January 1, 2016?

2. Using the same information in number 4, assuming that on July 1, 2016, the contingent
consideration happens to be P 1,700,000, what amount will then be recorded as goodwill on the
said date?

3. The adjusting entry on July 1, 2016 is ____

PROBLEM 3
The condensed balance sheets of the companies joining in a stock acquisition are as follows: (in thousand pesos)
Rhinox Optimus Rattrap
Assets P9,600 P13,200 P1,200
Liabilities P6,840 P 3,600 P 420
Common stock, P10 par 3,600 2,400 600
Additional paid in capital 960 300
Retained earnings ( 840) 6,240 ( 120)
Total equities P9,600 P13,200 P1,200
Rhinox’s shares are quoted at P12 while those of Optimus and Rattrap being held closely, have no known market value.
Rhinox acquired all of the stocks outstanding of Optimus and Rattrap in exchange for 720,000 and 70,000 shares
respectively of its common stock.
Compute for the balances that will be shown on statement of financial position of the surviving company
immediately after the acquisition
1. Goodwill/ (Gain on acquisition)
2. Total Assets
3. Total Liabilities
4. Retained earnings
5. Total Shareholder’s equity

PROBLEM 4
Bruno Mars Company acquired Billboard Company’s net assets by issuing its own P 14 par value ordinary
shares totaling 50,000 shares at market price of P 14.55. Bruno Mars Company had the following expenditures
incurred:
Finder’s fee paid P 50,000
Pre-acquisition audit fee, 30% was paid 40,000
General administrative costs 15,000
Legal fees for the combination paid 32,000
Audit fees for SEC registration of share issue 46,000
SEC registration for the share issue paid 10,000
Share issuance costs paid 10,000
Other indirect costs paid 16,000

The total amount debited to expense is______