BUSINESS COMBINATIONS

1) Lakandula Company issued 96,000 shares of its P25 par common stock for the net assets of Lakambini Company in a business combination completed on January 1, 2021. Lakambini Company's net assets are worth P3,040,000 at FMV.

Out of pocket costs of the combination were as follows:

Legal fees 20,800

Contingent consideration (probable & measurable) 14,400

Printing costs of stock certificates 6,800

Finder's fees 21,600

Professional fees paid to a CPA 16,800

Fees paid to company lawyers 18,760

Fees paid to company accountants 31,120

The goodwill from the business combination is P334,400.

How much is the FMV per share of Lakandula Company at January 1, 2021? Suggested answer here is 28 (How to compute that?)

2) BLACKBELT COMPANY issues 400,000 shares of its own P1 par common stock for the net assets of YELLOWTOWN CORPORATION in a merger consummated on July 1, 2020. On this date, BLACKBELT stock is quoted at P10 per share.

Balance sheet data for the two companies at July 1, 2020, just before combination, are as follows:

BLACKBELT YELLOWTOWN

Current Assets P14,400,000 P1,200,000

Plant Assets 17,600,000 5,200,000

Total Assets P32,000,000 P6,400,000

Liabilities P9,600,000 P1,600,000

Stock (10 par) 16,000,000 2,400,000

Share Premium 2,400,000 800,000

Retained earnings 4,000,000 1,600,000

Total equities P32,000,000 P6,400,000

BLACKBELT COMPANY also paid finder's fees of P40,000 and legal fees of P8,000; as well as indirect expenses of 32,000.

How much will be the retained earnings on the combined balance sheet after the combination?

Assuming that BLACKBELT COMPANY is an SME, how much is the retained earnings right after the combination?