LATIHAN PRAKTIKUM AKUNTANSI KEUANGAN LANJUTAN FATA 2019

LATIHAN LAB 2
BUSINESS COMBINATION

I. Multiple Choice
1. Assets that represent the economic benefits derived from other assets acquired in a
business combination that cannot be recognized independently and separately are the
definition of …

a. Patent

b. License

c. Bargain Purchase

d. Goodwill

2. What is the effect on the company's balance sheet after doing a business combination if
the fair value of the net assets of the company being acquired is greater than the
investment cost?

a. There is an increase in liability

b. There is an increase in asset

c. There is an increase in equity

d. There is a decrease in asset

3. Bragi Company purchased net assets from Forseti Company with paid $1,000,000 in
cash and issued 100,000 par $5 common stock, and the stock market value was $10.
The Bragi Company also paid various costs for the acquisition of $10,000 and a share
issuance fee of $8,000. The fair value of the net assets acquired by the Bragi Company
is $1,850,000. How much goodwill or gain on bargain purchase will Bragi Company
record?

a. Gain on bargain purchase $160,000

b. Goodwill $160,000

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c. Gain on bargain purchase $150,000

d. Goodwill $150,000

4. In a business combination, which of the following would occur?

a. Goodwill is recorded when the fair value of the net assets acquired exceeds the book
value of the net assets acquired

b. All identifiable assets and liabilities are recorded at book value on acquisition date

c. Goodwill is recognized before the acquisition date

d. All identifiable assets and liabilities are recorded at fair value at the acquisition date

5. Ravona Company paid $198,000,000 cash for Mobius Company's net assets, which
consisted of (in $000):

Book Value Fair Value

Current Assets 50,000 54,000
Buildings 160,800 190,200
Liabilities (30,000) (29,000)
180,800 215,200

Mobius Company was dissolved after this acquisition. Buildings acquired in this business
combination should be recorded at ...

a. 120,900

b. 160,800

c. 190,200

d. 215,200

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II. Mini Essay

1. Frigg Company acquired Heimdall Corporation by issuing 6,300 common shares with par
value of $12 on April 1, 2022. The market value for those common shares was $27 per
share at the date of acquisition. Frigg Company incurred the cost of registering and issuing
the securities for $319, cost of printing the shares for $78, and cost of accountant for the
business combination for $325.

Required: Calculate the total amount of additional paid-in capital that affected Frigg
Company from this acquisition!

2. On June 15, 2022, Thor Inc. issued 715,000 common shares of $14 par value and paid
$1,496,500 cash for the net assets of Odin Corporation. The stocks of Thor had a market
value of $22.5 per share. After the acquisition, Odin Corporation was dissolved
immediately. Thor also paid cash $9,800 for printing and issuing net stock certificates,
$44,000 for stock registration, $82,000 for legal fees to arrange the business
combination, and had $179,000 indirect costs of combining which consisted of
employee salaries.
The information related to Odin Corporation net assets is as follows (in $000):
Book Value Fair
Value
Cash 6,215 6,215
Accounts Receivable 3,982 3,460
Inventories 5,120 5,200
Plant Assets 9,360 9,700
Accounts Payable 2,290 2,290
Notes Payable 6,120 6,310
Common stock, $14 par 7,938
Retained Earnings 8,329

Required: Prepare all journal entries to record the acquisition!

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3. Aerglo Company issued 456,780 common share of $9 par value and paid $1,223,400 cash
to purchased the net assets of Triton Company. The stock market value of Aerglo Company
was $12 and the fair value of the net assets Triton company was $5,785,400. Addition,
Aerglo paid cash $23,400 for stock registration, $10,100 for printing and issuing net stock
certificates and $61,000 for legal fees to arrange the business combination. After the
acquisition, Triton Company was dissolved immediately
Presented below were information about the assets of Aerglo Company and Triton
Company before the acquisition (in $000).

Aerglo Triton
(BV) (FV)
Cash 11,798 2,150
Current Assets 12,561 2,659
Plant Assets 9,780 2,241

Required: Calculate the total assets of Aerglo Company after acquisition!

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III. Grand Essay

Over the past 5 years, the business growth of PT Adhi Medika Indonesia
(hereinafter referred to as PT Adhimed) has increased rapidly and has become an
opportunity to strengthen its business position in Indonesia. Therefore, in 2022 the Board
of Directors of PT Adhimed decided to expand the business. Based on research and
evaluation from management, it would be more profitable if PT Adhimed acquired PT
Maju Jaya, which was one of the main suppliers of PT Adhimed based in Tangerang.

PT Adhimed decided to acquire PT Maju Jaya. After the negotiation process, PT

Adhimed finally succeeded in acquiring 100% of PT Maju Jaya on January 1, 2023, with
an initial investment cost of Rp12.500.000.000 that assessed by Kantor Jasa Penilai
Publik Herly and Ariawan’s service. PT Maju Jaya was dissolved in this acquisition. The
purchase price consisted of 460,000 common stocks of PT Adhimed with a market value
of Rp9.200.000.000 and the remaining was cash. In the acquisition process, PT Adhimed
hired a lawyer to prepare a contract and to conducted negotiations which incurred cost
1,2% of the initial investment cost to acquire PT Maju Jaya, hired a notary for
Rp7.000.000 to certify the acquisition, hired a tax consultant for Rp110.000.000 to
optimize tax benefits from the acquisition process, and also hired the appraiser Kantor
Jasa Penilai Publik Herly and Ariawan for Rp82.000.000 to assess the overall business
obtained.

The information below represents the Statement of Financial Position of PT

Adhimed and PT Maju Jaya immediately preceding the acquisition. PT Adhimed's
retained earnings include income from the Bandar Lampung branch. In addition, there
was also information regarding the fair values of PT Maju Jaya as assessed by KJPP
HAR (in Million Rupiah).
PT Adhimed PT Maju Jaya
Book Value Book Value Fair Value
Cash 19.256 8.770 8.770
Accounts Receivable-net 55.080 4.280 4.280
Inventories 4.833 3.720 3.620
Other Current Asset 9.960 2.920 3.110
Notes Receivable-net 4.400 2.740 2.980
Land 18.260 6.000 6.250

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Buildings-net 57.360 5.870 5.980

Equipment-net 85.905 6.180 5.820
Total Assets 255.054 40.480 40.810
Accounts Payable 22.290 7.210 7.210
Mortgage Payable 48.200 6.880 8.400
Capital Stock, Rp16.000 par 77.987
Capital Stock, Rp6.500 par 8.370
Additional Paid-in Capital 39.973 5.120
Retained Earnings 66.604 12.900
Total Liabilities and 255.054 40.480
Stockholders’ Equity

Required:
1. What is the legal form of business combination that occurs? Please explain your
answer briefly!
2. What is the type of business combination between PT Adhimed and PT Maju Jaya?
Please explain your answer briefly!
3. Prepare the journal entries that PT Adhimed would record at the date of
acquisition!
4. Prepare a Statement of Financial Position for PT Adhimed on January 1, 2023,
immediately after the acquisition and dissolution of PT Maju Jaya!

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JAWABAN LATIHAN LAB 2

BUSINESS COMBINATION

I. Multiple Choice

1. D

2. C

3. D ([$1,000,000 + ($10 × 100,000)] - $1,850,000)

4. D

5. C

II. Mini Essay

1.

Investment in Heimdall (6,300 × $27) $170,100

Common stock (6,300 × $12) $75,600

Additional Paid-in Capital $94,500

Investment Expense $325

Additional Paid-in Capital ($319 + $78) $397
Cash $722

So, the total additional Paid-in Capital that affected Frigg Company from this
acquisition: $94,500 - $397 = $94,103

2. Journal entries on Thor’s books to record the acquisition (in $)

a. To record issuance of 715,000 shares of $14 par common stock with a fair value of
$22.5 per share for the common stock and $1,496,500 cash of Odin in a business
combination.

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Investment in Odin 17,584,000

[(715,000 × $22.5) + $1,496,500]
Common Stock, $14 par 10,010,000
Additional Paid-in Capital 6,077,500
Cash 1,496,500

b. To record costs of registering and issuing securities as a reduction of paid-in capital,

and record direct and indirect costs of combination as expenses.

Additional Paid-in Capital ($9,800 + $44,000) 53,800

Investment Expense 82,000
Salaries Expense 179,000
Cash 314,800

c. To record allocation of the $17,584,000 cost of Odin Corporation to identifiable

assets and liabilities according to their fair values and goodwill

Cash 6,215,000
Accounts Receivable 3,460,000
Inventories 5,200,000
Plant assets 9,700,000
Goodwill ($17,584,000 - $15,975,000*) 1,609,000
Accounts Payable 2,290,000
Notes Payable 6,310,000
Investment in Odin 17,584,000

*$15,975,000 is fair value net assets of Odin Corp.

3. Goodwill = Investment cost – FV net assets of Triton Company

= [($12 × 456,780) + $1,223,400] - $5,785,400 = $919,360
Cash = $11,798,000 - $1,223,400 - $23,400 - $10,100 - $61,000 + $2,150,000
= $12,630,100
Current Assets = $12,561,000 + $2,659,000
= $15,220,000
Plant Assets = $9,780,000 + $2,241,000
= $12,021,000
Total Assets = $919,360 + $12,630,100 + $15,220,000 + $12,021,000 = $40,790,460

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III. Grand Essay

1. The legal form of business combination that occured was a merger because after the
business combination, PT Maju Jaya was dissolved and merged with PT Adhimed

2. The type of business combination between PT Adhimed and PT Maju Jaya is vertical
acquisition because the operation between PT Adhimed and PT Maju Jaya were
different but it has successive stage of operations. PT Adhimed was the distributor
while PT Maju Jaya was the supplier.

3. Journal Entries (in Million Rupiah)

Investment in PT Maju Jaya 12.500

Capital Stock (460 × 16) 7.360
Additional Paid-in Capital (9.200 – 7.360) 1.840
Cash 3.300

Investment Expense (150+7+110+82) 349

Cash 349

Cash 8.770
Accounts Receivable-net 4.280

Inventories 3.620

Other Current Asset 3.110

Notes Receivable-net 2.980

Land 6.250

Buildings-net 5.980

Equipment-net 5.820

Accounts Payable 7.210

Mortgage Payable 8.400
Investment in PT Maju Jaya 12.500
Gain on Bargain Purchase 12.700

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4. Statement of Financial Position

PT Adhi Medika Indonesia
Statement of Financial Position
At January 1, 2023 (In Million Rupiah)
Cash (19.256 + 8.770 – 3.300 – 349) 24.377
Accounts Receivable-net (55.080 + 4.280) 59.360
Inventories (4.833 + 3.620) 8.453
Other Current Asset (9.960 + 3.110) 13.070
Notes Receivable-net (4.400 + 2.980) 7.380
Land (18.260 + 6.250) 24.510
Buildings-net (57.360 + 5.980) 63.340
Equipment-net (85.905 + 5.820) 91.725
Total Assets 292.215
Accounts Payable (22.290 + 7.210) 29.500
Mortgage Payable (48.200 + 8.400) 56.600
Capital Stock, Rp16.000 par (77.987 + 7.360) 85.347
Additional Paid-in Capital (39.973 + 1.840) 41.813
Retained Earnings (66.604 + 12.700 – 349) 78.955
Total Liabilities and Stockholders’ Equity 292.215

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