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Papa-Mama Company Acquisition Analysis

Papa Corporation is acquiring Mama Company by issuing 8,000 shares of its common stock. Papa will record the acquisition by increasing its assets to include Mama's assets and cash, increasing common stock and additional paid-in capital, and recognizing goodwill for the excess of fair values over book values. The combined financial statements will report total common stock of $280,000, total cash and receivables of $190,000, total land of $185,000, and total buildings and equipment of $530,000.

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270 views7 pages

Papa-Mama Company Acquisition Analysis

Papa Corporation is acquiring Mama Company by issuing 8,000 shares of its common stock. Papa will record the acquisition by increasing its assets to include Mama's assets and cash, increasing common stock and additional paid-in capital, and recognizing goodwill for the excess of fair values over book values. The combined financial statements will report total common stock of $280,000, total cash and receivables of $190,000, total land of $185,000, and total buildings and equipment of $530,000.

Uploaded by

NURHAM SUMLAY
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
  • Problem Statement
  • Financial Data
  • Acquisition Entries
  • Requirements
  • Financial Position Items

Problem 14-5

Kayla Cruz & Gabriel Tekiko

Papa Corporation and Mama Company have announced


terms of an exchange agreement under which Papa will
issue 8,000 shares of its P10 par value common stock to
acquire all the assets of Mama Company. Papa shares
currently are trading at P50, and Mama P5 par value
shares are trading at P18 each. Book value and fair
value statement of financial position data on January 1,
2013, are as follows:

This study source was downloaded by 100000848076649 from [Link] on 08-21-2022 07:07:01 GMT -05:00
Papa Corporation Mama Company

Items Book Value Fair Value Book Value Fair Value

Cash & Receivables P150,000 P150,000 P40,000 P40,000

Land 100,000 170,000 50,000 85,000

Buildings & Equipment (net) 300,000 400,000 160,000 230,000

Total Assets P550,000 P720,000 P250,000 P355,000

Common Stock P200,000 100,000

Additional Paid-in Capital 20,000 10,000

Retained Earnings 330,000 140,000

Total Equities P550,000 P250,000

This study source was downloaded by 100000848076649 from [Link] on 08-21-2022 07:07:01 GMT -05:00
Acquirer’s books:

To record the acquisition:

Cash & Receivables 40,000

Land 85,000

Buildings & Equipment (net) 230,000

Goodwill 45,000

Common Stock (8000 x P10) 80,000

APIC (8000x (P50-10)) 320,000

This study source was downloaded by 100000848076649 from [Link] on 08-21-2022 07:07:01 GMT -05:00
Requirements:
What will be the amount reported immediately following the
business combination for each of the following items in the
company’s combined statement of financial position:

This study source was downloaded by 100000848076649 from [Link] on 08-21-2022 07:07:01 GMT -05:00
1. Common Stock Papa Corporation P200,000
Mama Company 80,000
Total P280,000

2. Cash & Receivables Papa CorporationP150,000


Mama Company 40,000
Total P190,000

3. Land Papa CorporationP100,000


Mama Company 85,000
Total P185,000

This study source was downloaded by 100000848076649 from [Link] on 08-21-2022 07:07:01 GMT -05:00
4. Building & Equipment Papa Corporation P300,000
Mama Company 230,000
Total P530,000

5. Goodwill (8,000 x 50) P400,000


Total Assets (FV) (355,000)
Total P45,000

6. Additional Paid-in Capital Papa Corporation P20,000


Mama Company 320,000
(8,000 x 40)
Total P340,000

This study source was downloaded by 100000848076649 from [Link] on 08-21-2022 07:07:01 GMT -05:00
7. Retained Earnings P330,000

This study source was downloaded by 100000848076649 from [Link] on 08-21-2022 07:07:01 GMT -05:00
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Papa Corporation and Mama Company have announced terms of an exchange agreement under which Papa will issue 8,000 shares
Papa Corporation Mama Company Items Book Value Fair Value Book Value Fair Value Cash & Receivables P150,000 P150,000 P40,000
Acquirer’s books: To record the acquisition: Cash & Receivables 40,000 Land 85,000 Buildings & Equipment (net) 230,00
Requirements: What will be the amount reported immediately following the business combination for each of the following item
1. Common Stock Papa CorporationP200,000 Mama Company 80,000 Total P280,000 2. Cash & Receivables Papa CorporationP150,0
4. Building & Equipment Papa CorporationP300,000 Mama Company 230,000 Total P530,000 5. Goodwill (8,000 x 50) P400,000 To
7. Retained Earnings P330,000 This study source was downloaded by 100000848076649 from CourseHero.com on 08-21-2022 07:07:01

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