PROBLEM 1 Papa Corporation is contemplating the acquisition of the net assets of Baby Company on December 31, 2011. It is considering making an offer, which would include a cash payout of P400,000 along with giving 15,000 shares of its P4 par value common stock that is currently selling for P40 per share. Papa also agrees that it will pay an additional P100,000 on January 1, 2014, if the average net income of Baby's business unit exceeds P160,000 for 2012 and 2013. The likelihood of reaching that target is estimated to be 75%%. The Statement of Financial Position of Baby Company along with estimated fair values of the net assets to be acquired is as follows: Baby Company Statement of Financial Position December 31, 2011 Book value Fair value Current assets 274,000 256,000 Non-current assets 1,020,000 660,000 Total assets 1,294,000 16,000 Current liabilities 162,000 162,000 Non-current liabilities 464,000 440,000 Total liabilities 626,000 602,000 Ordinary shares 100,000 Additional paid in capital 400,000 Retained earnings 168,000 Total equity 668,000 Total liabilities and equity 1,294,000 Papa's shareholders' equity are recorded at P2,500,000 at December 31, 2010, which is five times its liability. Prior to the acquisition of Baby, its equity has increased by 30% with a corresponding decreased in liability to 80%%. PROBLEM 2 The following Statement of Financial Position were prepared for Kulpy and Chicken Corporations on January 1, 2013, just before they entered into a business combination: Kulpy Chicken Book Fair Book Fair Cash 160,000 160,000 24,000 24,000 Receivables 80,000 80,000 16,000 16,000 Inventory 320,000 384,000 80,000 72,000 Buildings and equipment 640,000 528,000 240,000 180,000 Less: Accumulated depreciation (160,000 120,000) Total assets 1,040,000 1,152,000 240,000 292,000 Accounts payable 80,000 80,000 32,000 32,000 Bonds payable 320,000 352,000 48,000 57,600 Share capital 24,000 shares P10 par 240,000 16,000 shares P5 par 80,000 Share premium 80,000 16,000 Retained earnings 320,000 64,000 Total liabilities 1,040,000 240,000 Kulpy acquires some assets and assume some of the liabilities of Chicken by issuing shares of stock. Stock exchange ratio is 1.00:2.00. Kulpy acquires all assets except for Chicken's cash of P24000 and all its inventories. Kulpy will transfer 25% of its inventories to Chicken as part of the consideration. All liabilities, except 25%% of Chicken's accounts payable, will be assumed by Kulpy. The fair value of Kulpy's ordinary share is P20 at acquisition date. PROBLEM 3 Prittano Company acquired all the net assets of Succo Company on December 31, 2017, for P944,000 cash. The statement of financial position of Succo Company immediately prior to the acquisition showed the following: Book Fair Book Fair Value Value Value Value Cash 24,000 24,000 Land 800,000 1,000,000 Receivables 232,000 208,800 Equipment 160,000 136,000 Inventories 80,000 76,000 Current liabilities 35,200 35,200 Other current assets 16,000 11,200 Bonds payable 400,000 392,000 Goodwill 32,000 35,200