Reference no: EM132744934
LION Company, a small-medium enterprise acquires the net assets of BEAR Company, a small-medium enterprise paying P2,000,000 and incurring a loan 2,000,000. The loan is to be paid in 5 years paying annual interest of 10%. On the date of acquisition BEAR Company reports net assets of P4,500,000 and liabilities of P1,500,000. On the date of acquisition BEAR's non-cash assets approximated their fair values except for equipment which was understated by P20,000. LION incurred the following expenses, Direct costs related to the acquisition of P30,000 and indirect costs of P20,000. Only 80% of the total costs had been paid LION.
Problem 1: Compute the increase in the total assets of LION Company as a result of the business combination.
a) 3,470,000
b) 3,464,000
c) 3,984,000
d) 3,960,000
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