Discussion Problem no. 1

The illustration will involve the acquisition of net assets with cash and the issuance of shares as a means of payment.

	Simon			Paul
	Book Value	Fair Value		Book Value	Fair Value
Assets------	P600,000	P 650,000		P176,000	P218,000
Liabilities-----	P240,000	P180,000		P60,000	P 58,000
Stockholders/Shareholders'Equity:
Common stock/Ordinary Shares (20 Par x 10,000 shares = 200K ) & (10Par x 5,000 shares = 50k)	200,000			50,000
Retained earnings/Accumulated profit or loss	160,000			66,000
Total Liabilities and Equities	P 600,000			P176,000

Assume that on January 1, 2019, Simon Company pays P100,000 in cash and issued 3,600 common stock (ordinary shares) with a fair value of P24 per share to Paul Corporation for all the net assets of that company, and that no other direct costs are involved. Because cash and stock are the means of payment, Required: 1. Determine the acquirer and acquiree 2. Determine the Acquisition date 3. Compute for goodwill or gain on bargain purchase 4. Prepare the journal entry of the acquirer to record the acquisition. 5. Prepare the journal entry of the acquiree to record the sale of its assets and liabilities (or net assets). 6. Prepare the acquirer Balance sheet(Statement of Financial Position) after the business combination. 7. Prepare the acquiree Balance sheet(Statement of Financial Position) immediately after the sale of all of its net assets.