Accounting

On January 1, 2011, Petron Corporation acquires the net assets of the Shell Corporation for P625,000 cash. Prior to the business combination, Shell Corporation has the following statement of financial position (pls see attached photo)

The carrying values of Shell's identifiable net assets approximated their fair value, except for inventories and property, plant, and equipment, which have fair market values of P175,000 and P375,000 respectively. To effect the business combination, Petron paid its legal advisers P6,250 representing their professional fees.

Required:

1. Prepare journal entries to record the acquisition on the Petron Corporation's books. Provide computations to support your entry.

2. Prepare journal entries to record the sale on the books of Shell Corporation and the subsequent total liquidation of the corporation.

answer both the subparts

Shell Corporation Statement of Financial Position January 1, 2011 Assets Liabilities and Equity Current assets: Current Liabilities P 62,500 Accounts P150,000 Shareholders' Receivable equity: Inventories 125,000 P275,000 Ordinary Share Property, Plant, Capital, P10 P250,000 and par Equipment 350,000 Accumulated 312,500 562,500 Profits Total Assets P625,000 Total Liabilities P625,000 and Equity