On January 1, 2020, Lettuce Co. acquired all the assets and assumed all the liabilities of Spinach Corp.

by paying P1,380,000. Lettuce Co. paid

acquisition related cost of the combination totaling P50,000 on that date. The balance sheet of Spinach and Lettuce at book value and fair market
values are as follows:
Spinach Lettuce
Book Value Fair Value Book Value Fair Value
Cash P 150,000 P 150,000 P2,500,000 P2,500,000
Inventory 420,000 500,000 500,000 400,000
Buildings and Equipment 600,000 750,000 9,700,000 10,500,000
Patents 150,000 150,000 500,000 400,000
Total Assets P1,320,000 P1,550,000 P13,200,000 P13,800,000

Accounts Payable P 250,000 P250,000 P 800,000 P 800,000

Ordinary shares 600,000 2,500,000
Share Premium 200,000 7,000,000
Retained Earnings 270,000 2,900,000
Total Liabilities and Equities P1,320,000 P13,200,000
1. Prepare the following immediately after the acquisition:
a. Journal entry on Lettuce Co.’s books to record the acquisition of Spinach Corp.
b. Close the books of Spinach Corp..
c. Balance Sheet of Lettuce Co.
2. Prepare the following immediately after the acquisition assuming that Lettuce purchased 100% interest of Spinach Corp.
a. Journal entry on Lettuce Co.’s books to record the acquisition of Spinach Corp.
b. Elimination Entry
c. Consolidated Balance Sheet immediately after the business combination.