Here are the pre-aquistion balance sheets of Pop Company and Sicle Company on December 31, 20x5:

Pop Co. Sicle Co.

Book Value Book Value Market Value
Current Assets ₱5,000,000.00 ₱2,000,000.00 ₱1,500,000.00
Investments ₱1,000,000.00 ₱500,000.00 ₱500,000.00
Land ### ₱5,000,000.00 ₱6,000,000.00
Buildings (net) ### ### ###
Equipments (net) ### ### ₱2,000,000.00
Total Assets ### ###
Current Liabilities ₱4,000,000.00 ₱1,500,000.00 ₱1,500,000.00
Long-Term Liabilities ### ### ###
Common Stock, P10 par ₱5,000,000.00 ₱1,000,000.00
Additional paid-in capital ### ###
Retained Earnings ### ###
Total Liabilities & Equity ### ###
In addition to the above, Sicle Co. has identifiable intangibles with fair value of P5,000,000, not recognized on its
books but appropriately capitalized by Pop.
On January 1, 20x6, Pop issues 400,000 shares of its stock, with a par value of P10/share and a market value of
P100/share, to acquire Sicle Company's assets and liabilities, SEC registration fees are P1,100,000, paid in cash.

Required:
1. Determine the following:
a. Total Assets;
b. Total Liabilities;
c. Additional paid-in capital (share premium);
d. Retained Earnings;
e. Stockholders'/Shareholders' Equity

2. Assume Pop issued 90,000 shares of stock at a market value of P100 per share with contingent cash
consideration amounted to P500,000 that is present obligation and reliably measureable, expected present value
at earnout agreement 1of P200,000 and probability present value of stock price contingency agreement of
P300,000. The following out-of-pocket costs in relation to acquisition are as folows:
Legal Fees for the contract of business combinatio ₱80,000.00
Broker's Fee ₱40,000.00
Accountant's fee for pre-acquisiton audit ₱100,000.00
Other direct costs of acquisiton ₱70,000.00
Internal secretarial, general and allocated expense ₱60,000.00
Documentary stamp tax on the new shares ₱20,000.00
SEC registration fee of issued shares ₱90,000.00
Printing costs of share certificates ₱50,000.00
Stock exchange listing fee ₱30,000.00

Determine the following:

a. Total Assets;
b. Total Liabilities;
c. Additional paid-in capital (share premium);
d. Retained Earnings;
e. Stockholders'/Shareholders' Equity

3. Now assume that Pop issues 100,000 shares for all of Sicle's shares, as in requirement (1) above, and Pop
agrees to pay cash to Salt's previous owners if the combined earnings of Pop and Sicle exceeded a certain
threshold over the next two years. The expected present value of the earnings contingency is P8,000,000.
Determine the amount of goodwill (bargain purchase gain or gain on acquisition)
3. Now assume that Pop issues 100,000 shares for all of Sicle's shares, as in requirement (1) above, and Pop
agrees to pay cash to Salt's previous owners if the combined earnings of Pop and Sicle exceeded a certain
threshold over the next two years. The expected present value of the earnings contingency is P8,000,000.
Determine the amount of goodwill (bargain purchase gain or gain on acquisition)

4. Assume the same facts as in requirement (3). Before the contingency period is over, the estimated value of the
earnings contingency declines to P7,800,000. Prepare Pop's entry to reflect the change in value of the earnings
contingency, if
a. the value decline occurs within the measurement period, or;
b. the value decline is due to events occurring subsequent to acquisition
on December 31, 20x5:

000, not recognized on its

hare and a market value of

e P1,100,000, paid in cash.

h contingent cash
e, expected present value
gency agreement of

ent (1) above, and Pop

e exceeded a certain
ency is P8,000,000.
 ent (1) above, and Pop
e exceeded a certain
ency is P8,000,000.

the estimated value of the

e in value of the earnings
a.
Assets of Pop (P81000000-P1,100000) ₱79,900,000.00 Consideration Transferred (P100*400,000
Assets of Sicle: Less: FV of Assets and Liabilities Acquire
Current Assets ₱1,500,000.00
Investment ₱500,000.00 Investment
Land ₱6,000,000.00 Land
Building ###
Equipment ₱2,000,000.00
Initial Goodwill ₱5,000,000.00
Goodwill ### ₱53,500,000.00
Total Assets ₱133,400,000.00
b.
Liabilities of Pop: (P4,000,000+P20,000,000) ₱24,000,000.00
Liabilities of Sicle:
Current Liabilities ₱1,500,000.00
Long-Term Liabilities ### ₱13,500,000.00
Total Liabilities ₱37,500,000.00
c.
Pop: [P40,000,000+(90*400,000)-P1,100,000] ₱74,900,000.00
Sicle: -
APIC ₱74,900,000.00
d.
Pop ###
Sicle -
Retained Earnings (AP/L) ###
e.
Pop: P5,000,000+(10*400000) ₱9,000,000.00
APIC ###
Retained Earnings ###
Stockholders' Equity ###
Consideration Transferred (P100*400,000 shar 40000000
Less: FV of Assets and Liabilities Acquired
Current Assets ₱1,500,000.00
Investment ₱500,000.00
Land ₱6,000,000.00
Building (net) ₱16,000,000.00
Equipment (net) ₱2,000,000.00
Identifiable Intangibles ₱5,000,000.00
Current Liabilities -₱1,500,000.00
Long-term Liabilities ### ###
Goodwill 0 ###
a.
Assets of Pop (P81,000,000-P540,000) ₱80,460,000.00 Consideration Transferred (P100*9
Assets of Sicle PV of Cash Contingent Considerat
Current Assets ₱1,500,000.00 PV of Stock Price Contingent
Investment ₱500,000.00 Total Consideration Transferred
Land ₱6,000,000.00 Less: FV of assets and liabilities ac
Building (net) ₱16,000,000.00 Current Assets
Equipment (net) ₱2,000,000.00 Investment
Identifiable Goodwill ₱5,000,000.00 ₱31,000,000.00 Land
Total Assets ### Building (net)
b. Equipment (net)
Liabilities of Pop (P4,000,000+P20,000,000+P200,000 ₱24,200,000.00 Identifiable Intangibles
Liabilties of Sicle: Current Liabilities
Current Liabilities ₱1,500,000.00 Long Term Liabilities
Long-term Liabilities ₱12,000,000.00 ₱13,500,000.00 Negative Goodwill
Total Liabilities ₱37,700,000.00
c.
Pop: (P40,000,000+(90*90000)+300000 ₱48,400,000.00
Less: Stock Issuance Cost
DS ₱20,000.00
SEC Reg Fee ₱90,000.00
Printing Costs SC ₱50,000.00 ₱160,000.00
APIC of Pop ₱48,240,000.00
Sicle -
APIC ₱48,240,000.00
d.
Pop: Retained Earnings, Initial ₱12,000,000.00
Legal Fees -₱80,000.00
Broker's Fee -₱40,000.00
Accountant's Fee for Pre-Acquisition Audit -₱100,000.00
Other direct cost of acquisition -₱70,000.00
Internal Secretarial, general and allcoated expenses -₱60,000.00
Stock Exchange Listing Fee -₱30,000.00
Total ₱11,620,000.00
Negative Goodwill/Gain ₱8,000,000.00
Sicle: -
Retained Earnings ₱19,620,000.00
e.
Pop: (P5,000,000 + (10*90,000)) ₱5,900,000.00
APIC ₱48,240,000.00
Retained Earnings ₱19,620,000.00
Stockholders' Equity ₱73,760,000.00
 sideration Transferred (P100*90,000 shares) ₱9,000,000.00
of Cash Contingent Consideration ₱200,000.00
of Stock Price Contingent ₱300,000.00
al Consideration Transferred ₱9,500,000.00
s: FV of assets and liabilities acquired
₱1,500,000.00
₱500,000.00
₱6,000,000.00
₱16,000,000.00
ipment (net) ₱2,000,000.00
ntifiable Intangibles ₱5,000,000.00
rent Liabilities -₱1,500,000.00
g Term Liabilities -₱12,000,000.00 ###
ative Goodwill ###
Consideration Transferred (P100*100,000 shares ###
Estimated Liability for Contingent Consideration ₱8,000,000.00
Total Consideration Transferred ###
Less: FV of assets and liabilities acquired
Current Assets ₱1,500,000.00
Investment ₱500,000.00
Land ₱6,000,000.00
Building(net) ₱16,000,000.00
Equipment (net) ₱2,000,000.00
Identifiable Intangibles ₱5,000,000.00
Current Liabilities -₱1,500,000.00
Long-term Liabilities ### ###
Goodwill ₱500,000.00
Journal Entries:
a.
Goodwill (P8,000,000-P7,800,000) ₱200,000.00
Estimated Liability for contingent consideration ₱200,000.00
b.
Gain on Acquisition (P8,000,000-P7,800,000) ₱200,000.00
Estimated Liability for contingent consideration ₱200,000.00
Gain on Acquisition ₱200,000.00
Retained Earnings ₱200,000.00