ACQUISITION OF NET ASSETS

The following Financial Position was prepared for ACT Corp and HBP Corp on January 1, 2016, just
before they entered into a business combination.

ACT Corp HBP Corp

Cash 210,000.00 5,000.00

Accounts Receivable 75,000.00 20,000.00
Inventory 200,000.00 50,000.00
Building and Equipment 400,000.00 100,000.00
Accumulated Depreciation (100,000.00) (25,000.00)
Goodwill 50,000.00

Accounts Payable 125,000.00 70,000.00

Bonds Payable 200,000.00 30,000.00
Common Stock
P30 par value 210,000.00
P20 par value 50,000.00
Additional Paid-in Capital 50,000.00 10,000.00
Retained Earnings 200,000.00 40,000.00

On that date, the fair market value of HBPs inventories and building and equipment were P78,000 and
P124,000 respectively, while bonds payable has a fair value of P42,000. The fair market value of all other
assets and liabilities of HBP (except for Goodwill) were equal to their book values. ACT Corp acquired the
net assets of HBP Corp by issuing 2,500 shares of its P30 par value common stock (current fair value P38
per share) and purchase price in cash amounting to P22,000. Contingent consideration that is
determinable (probable and reasonably estimated) amount to P3,000. Additional cash payments made
by ACT Corp in completing the acquisition were: Legal fees for contract for business combination,
P6,000; Accounting and Legal fees for SEC registration, P15,000; Printing costs of stock certificates,
P8,000; Finders fee, P7,000; Cost of maintaining a department, P2,000; General and Administrative,
P3,000.

Required:

Prepare journal entries in the books of ACT Corp and in the books of HBP Corp upon the
acquisition of net assets.
Prepare the balance sheet of ACT Corp after the acquisition of net assets.
Compute for the Total Assets, Total Liabilities and Total Stockholders Equity of ACT Corp
after the acquisition of net assets.