Illustration 1. Measuring Goodwill/Gain on Bargain Purchase
On January 1, 2021, Amahan Co. acquired all of the assets and assumed all of the liabilities of Anak, Inc. As of this date, the carrying amounts and fair values of the assets and liabilities of Anak acquired by Amahan are shown below:
On the negotiation for the business combination, Amahan Co. incurred the following
transaction costs: P25,000.00 for legal fees; P 75,000.00 for accounting fees and P 50,000.00 for consultancy fees.
Case 2: Amahan Co. paid P1,000,000.00 cash as consideration for the assets and liabilities of
Anak, Inc.
1. How much is the previously held equity interest in the acquiree?
a. 0.00
b. 150,000.00
c. 310,000.00
d. 500,000.00
2. .How much is the fair value of the net identifiable assets acquired?
a. 1,965,000.00
b. 1,315,000.00
c. 1,310,000.00
d. 1,190,000.00
3.How much is the goodwill (gain on bargain purchase) on the business
combination?
a. (465,000.00)
b. 185,000.00
c. (190,000.00)
d. 310,000.00
Extracted text: Asset Carrying Amount Fair Value Petty Cash Fund 10,000.00 10,000.00 Receivables 500,000.00 350,000.00 Allowance for Doubtful Accounts (65,000.00) Inventory 420,000.00 280,000.00 Building Accum. Depr.– Building 1,500,000.00 1,200,000.00 (650,000.00) Goodwill 250,000.00 120,000.00 Total Assets 1,965,000.00 1,960,000.00 Liabilities Payables 650,000.00 650,000.00