PROBLEM 3.(30 points) On April 1, 2015, Newborn Corporation paid P6,000,000 cash for all the net assets (except cash) of Lovely Corporation in a business combination qualifying for acquisition accounting. The carrying amounts of Lovely's other current assets and current liabilities were the same as their current fair values. However, current fair values of Lovely's plant assets and long-term debt were P9,000,000 and P1,800,000 (net of the P200,000 bond discount), respectively. On April 1, Newborn paid the following for the business combination: Legal and audit fees 500,000 Finder's fee 300,000 Indirect cost of combining such as allocated overhead & executive salaries 200,000 TOTAL OUT-OF-POCKET COST OF BUSINESS COMBINATION 1,000,000 The condensed financial position of Lovely Corporation on April 1, 2015 is as follows: ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY Cash 200,000 Current liabilities 800,000 Other current assets 1,400,000 Long-term debt 2,000,000 Plant assets (net) 7,400,000 Common stock, P10 par 1,800.000 Share premium 1,200.000 Retained earnings 3.200.000 TOTAL ASSETS 9.000,000 Total liabilities and stockholders' equity 9,000.000 Required: a) Compute for the goodwill in the business combination (show detailed solution) b) Show journal entries both in the acquirer and acquiree c) Show how much cash will be received by shareholder who owns 12,000 shares. c) Show the effect of the business combination in Newborn's retained earnings search