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Chapter 15

Problem I
Investment in Shy Inc. [P2,500,000 + (15,000  P40)]
Cash
Common Stock
Paid in capital in excess of par (P40 - P2)  15,000
Paid in capital in excess of par
Acquisition Expense
Deferred Acquisition Charges
Acquisition Costs Payable

3,100,000
2,500,000
30,000
570,000
30,000
67,000
90,000
7,000

Problem II
Cash consideration transferred
Contingent performance obligation
Fair value of Subsidiary
Less: Book value of SS Company (P90,000 + P100,000)
Allocated excess
Less: Over/under valuation of assets and liabilities:
Increase in building: P40,000 x 100%
Increase in customer list: P22,000 x 100%
Increase in R&D: P30,000 x 100%
Goodwill
Investment in SS Company
Cash
Estimated Liability on Contingent Consideration
Acquisition Expense
Cash

P 300,000
__15,000
P 315,000
190,000
P125,000
P 40,000
22,000
30,000__92,000
P 33,000
315,000
300,000
15,000
10,000
10,000

Not Required: The working paper eliminating entry on the date of acquisition,
6/30/20x4
would be:
Receivables
Inventory
Buildings
Equipment
Customer list
Capitalized R&D
Goodwill
Current liabilities
Long-term liabilities
Investment in SS Company
315,000

80,000
70,000
115,000
25,000
22,000
30,000
33,000

10,000
50,000

Problem III
1.
A.
Investment in Sewell
675,000
Cash
675,000
B.
Investment in Sewell
675,000
Cash
675,000
C.
Investment in Sewell
318,000
Cash
318,000
2.
A.
Fair value of Subsidiary:
Consideration transferred
P675,000
Less: BV of SHE of S (P450,000 + P180,000 +
705,000
P75,000)x100%
Allocated excess
P( 30,000)
Less: Over/under valuation of A and L: Inc. (Dec.)
Inventory (P30,000 – P20,000) x 100%
(P10,000)
Land (P50,000 – P70,000) x 100%
__20,000
__10,000
Bargain Purchase Gain – full
(P 40,000)

B.
Partial Goodwill
Fair value of Subsidiary:
Consideration transferred
Less: BV of SHE of S (P450,000 + P180,000 + P75,000)
x 90%
Allocated excess
Less: Over/under valuation of A and L: Inc. (Dec.)
Inventory (P30,000 – P20,000) x 90%
Land (P50,000 – P70,000) x 90%
Goodwill – partial
Full-Goodwill
Fair value of Subsidiary:
Consideration transferred (P675,000/90%)
Less: BV of SHE of S (P450,000 + P180,000 +
P75,000)x100%
Allocated excess
Less: Over/under valuation of A and L: Inc. (Dec.)
Inventory (P30,000 – P20,000) x 100%
Land (P50,000 – P70,000) x 100%
Goodwill – full

P675,000
634,500
P 40,500
(P9,000)
__18,000

__9,000
P 31,500
P750,000
705,000
P 45,000

(P10,000)
__20,000

__10,000
P 35,000

C.
Partial Goodwill
Fair value of Subsidiary:
Consideration transferred
Less: BV of SHE of S (P620,000 + P140,000 + P20,000)
x 80%
Allocated excess
Less: Over/under valuation of A and L: Inc. (Dec.)
Inventory (P30,000 – P20,000) x 80%
Land (P50,000 – P70,000) x 80%
Bargain Purchase Gain – partial (parent only)

P318,000
624,000
(P306,000)
(P 8,000)
__16,000

__8,000
(P314,000)

Full-Goodwill
Fair value of Subsidiary:
Consideration transferred
FV of NCI*
Less: BV of SHE of S (P620,000 + P140,000 + P20,000)
x 100%
Allocated excess
Less: Over/under valuation of A and L: Inc. (Dec.)
Inventory (P30,000 – P20,000) x 100%
Land (P50,000 – P70,000) x 100%
Bargain Purchase Gain – full (parent only)
*BV of SHE of S
Adjustments to reflect fair value
FV of SHE of S
x: NCI%
FV of NCI
3.

P 318,000
_158,000
P 476,000
780,000
(P304,000)
(P10,000)
__20,000

_10,000
(P314,000)

P780,000
P790,000
20%
P158,000

10,000

A.
Common Stock – Sewell
Paid in capital in excess of par – Sewell
Retained Earnings – Sewell
Land
Inventory
Investment in Sewell
Retained earnings (gain) – Parent (since
balance sheet accounts are being
examined)

450,000
180,000
75,000
20,000
10,000
675,000
40,000

B.
Partial-Goodwill (Proportionate Basis)
Common Stock – Sewell
450,000
Paid in capital in excess of par – Sewell
180,000
Retained Earnings – Sewell
75,000
Land
20,000
Goodwill
31,500
Inventory
Investment in Sewell
Non-controlling Interest
BV – SHE of Sewell
(P450,000 + P180,000 + P75,000) P705,000
Adjustments to reflect fair value
10,000
FV of SHE of Sewell
P715,000
x: NCI%
10%
FV of NCI (partial)
P 71,500
Full-Goodwill (Fair Value Basis)
Common Stock – Sewell
450,000
Paid in capital in excess of par – Sewell
180,000
Retained Earnings – Sewell
75,000
Land
20,000
Goodwill
35,000
Inventory
Investment in Sewell
Non-controlling Interest
BV – SHE of Sewell
(P450,000 + P180,000 + P75,000) P705,000
Adjustments to reflect fair value
10,000
FV of SHE of Sewell
P715,000
x: NCI%
10%
FV of NCI (partial)
P 71,500
NCI on Full-Goodwill
(P35,000 – P31,500)
3,500
FV of NCI (full)
P 75,000
C.

Partial-Goodwill (Proportionate Basis)
Common Stock – Sewell
620,000
Paid in capital in excess of par – Sewell
140,000
Retained Earnings – Sewell
20,000
Land
20,000
Inventory
Investment in Sewell
Retained earnings (gain)–Parent (refer to 3A)
Non-controlling Interest
BV – SHE of Sewell
(P620,000 + P140,000 + P20,000) P780,000
Adjustments to reflect fair value
10,000
FV of SHE of Sewell
P790,000
x: NCI%
20%
FV of NCI (partial)
P158,000
Full-Goodwill (Fair Value Basis)
Common Stock – Sewell
620,000
Paid in capital in excess of par – Sewell
140,000
Retained Earnings – Sewell
20,000
Land
20,000
Inventory
Investment in Sewell
Retained earnings (gain)–Parent (refer to 3A)
Non-controlling Interest

BV – SHE of Sewell
(P620,000 + P140,000 + P20,000) P780,000
Adjustments to reflect fair value
10,000

10,000
675,000
71,500

10,000
675,000
75,000

10,000
318,000
314,000
158,000

10,000
318,000
314,000
158,000

Retained earnings (P96.000 72.000) 36.000 (2) 72..000 (E2) Inventory………………………………………………………….000 (2) 18.000 x 100%) …….000 12..000 P 12. Less: Book value of stockholders’ equity of S: Common stock (P240. P 12. Positive excess: Goodwill (excess of cost over fair value) ……………………………………………………. January 1.000 Goodwill…………………… 480.000 60. Increase in bonds payable (P42. Eliminations Assets Cash*………………………….. 20x4 Fair value of Subsidiary (100%) Consideration transferred………………………………..000) ( 42.000 ..000 x 100%) …………….000 24.000 Eliminate investment against allocated excess. P 60. 4.. 20x4 Investment in S Company…………………………………………… 408..000 48.000 24. Increase in land (P72.000 (2) 12.000 (E1) Common stock – S Co………………………………………… Additional paid-in capital – S Co…………………………… Retained earnings – S Co…………………………………… Investment in S Co……………………………………… Eliminate investment against stockholders’ equity of S Co. Paid-in capital in excess of par (P24. P 408.000 P 240.000 P 48.000 ( 12. 210.. Schedule of Determination and Allocation of Excess Date of Acquisition – January 1.000 42.000 Dr. 240.. Accounts receivable…….000 x 100%).FV of SHE of Sewell x: NCI% FV of NCI (full) P790.000 408. Land……………………………………………………………… Goodwill………………………………………………………….000 (2) 12.000 x 100%) ………………. P Co.000 72.000 Land…………………………….000 Cash…………………………………………………………………….000 828. Buildings and equipment (net) Cr. 2.000 360.000 Consolidated P Inventory………………….000 x 100%) …………………………………….000 12.000 360. Buildings and equipment……………………………… Premium on bonds payable……………………………… Investment in S Co………………………………………… 18.000 x 100%) ………………….000 P 18.000 210..000 72.000 96.000 360.000 12. 90.000 150. 72.000 20% P158.000 48.000 Problem IV 1.000 S Co.000 x 100%) …………………… Decrease in buildings and equipment (P12..000 330. Allocated excess (excess of cost over book value) …… Less: Over/under valuation of assets and liabilities: Increase in inventory (P18...000 120.000 96.

000 (1) 240.00 P600.000 600.000 = P12. January 1..000 – P408.000 P 462. 408.000 (1) 96.000 P120.00 Equity 0 0 (1) Eliminate investment against stockholders’ equity of S Co. (3) Paid-in capital in excess of par………………………………………. P10 par……… Paid in capital in excess of par.. Costs to issue and register stocks.000 240.000 432.000 330. P10 par……… (3) 600.Investment in S Co………….000 24. P10 par…………………………………………….000 __________ P 462.000 12.000 120. 20x4 P 72. 300.602. 42.320.000 P 120.00 0 P600.000 P 642.000 Cash…………………………………………………………………….000 (1) Investment in S Company…………………………………………… 402.000 P 960. Common stock.602.000 42.000 _________ P1.000 Bonds payable………………… 360.000 240. Retained earnings…………… 42.602.000 210.400 Cash…………………………………………………………………….. (2) Retained earnings (acquisition-related expense .000 60.close to retained earnings since only balance sheets are being examined) …………………………………………………………… 120.000 P1. 2.000 288.000 P1.000 300.000 24.000 (2) 48.000 - P1.000 60.000 P 360. Paid-in capital in excess of par……………………………………. * P420.320.000 12.related costs. 8.000 P 600.000 12.000 60. Schedule of Determination and Allocation of Excess .000 96.602.000 Paid in capital in excess of par.000 828.00 Retained earnings…………… _________ 0 Total Liabilities and Stockholders’ P1.00 0 P 240.00 0 P1.400 8.000 150.000 Common stock. Acquisition.000 300. (2) Eliminate investment against allocated excess.000 Total Assets Liabilities and Stockholders’ Equity Accounts payable…………… (1) 360.000 5. P10 par Paid-in capital in excess of par Retained earnings Total Stockholders’ Equity Total Liabilities and Stockholders’ Equity Problem V 1.000 P 240.000.000 Premium on bonds payable Common stock.000 (1) 24. Assets Cash Accounts receivables Inventories Land Buildings and equipment (net) Goodwill Total Assets Liabilities and Stockholders’ Equity Liabilities Accounts payable Bonds payable Premium on bonds payable Total Liabilities Stockholders’ Equity Common stock.000 Cash…………………………………………………………………….

.. Allocated excess (excess of cost over book value) …… Add: Existing Goodwill of Sky Co. Total Assets Liabilities and Stockholders’ Equity Accounts payable…………… 480..00 0 P 240. 20x4 (refer to previous table for details of computation) Fair value of Subsidiary (100%) Consideration transferred……………………………………………………… Less: Book value of stockholders’ equity of S……………………………….000 P 42.. thus: Date of Acquisition – January 1.000 Dr. Positive excess: Goodwill (excess of cost over fair value) …………………………………………………….000 P 42...000 x 100%) ……… Adjusted allocated excess………………………………….000 x 100%) ……………….000 Land…………………………….000 .000 P120. Increase in land (P72... 120. Less: Book value of stockholders’ equity of S: Common stock (P240.000 (4) 360.. Accounts receivable…….00 0 P1.. P 54.60 0 P600.000 60.000 (5) 72.000 - P1.000 72. P 111.000 24. Allocated excess (excess of cost over book value) …………………………. Eliminations Assets P Co.000 3. Less: Over/under valuation of assets and liabilities: Increase in inventory (P18.000 96. P 288..000) 36.600 150..000 6.000 330.000 Cash*………………………….000 Alternatively.000 x 100%) …………………… Decrease in buildings and equipment (P12..000 360. the unrecorded goodwill may also be computed by ignoring the existing goodwill in the books of the subsidiary. 432.000 78.000 (2) 18.000 P 6.000) ( 42.000 x 100%) ……………………………………..000 P 36.000 x 100%) …….Date of Acquisition – January 1.443.000 72. (2) 36. Add: Existing Goodwill……………………………………………………………… Positive excess: Goodwill (excess of cost over fair value) …………………………………………………………………………… P 432.000 P 18.000 P 240.000 90. Increase in bonds payable (P42. Retained earnings (P24. Less: Over/under valuation of assets and liabilities…………………………… Positive excess: Goodwill (excess of cost over fair value) ………………….000 6. 210. (P6.000 shares x P12 per share….600 S Co.000 x 100%) ………………….000 x 100%) …………….000 36.000 42.000 P 72. 20x4 Fair value of Subsidiary (100%) Consideration transferred Cash………………………………………………………. Common stock: 12.000 (2) 12.000 ( 12.000 144.000 360.000 P 432.000 828.000 P 72.000 Consolidated P 165. Paid-in capital in excess of par (P96.000 (2) 72..000 Inventory………………….600 P 120.000 48.725.000 Cr.000 360.000 210.000 x 100%). Buildings and equipment (net) Goodwill…………………… Investment in S Co………….

… (6) Common stock.600 24. (2) Eliminate investment against allocated excess.000 + P120. P 402.000 P 6.000 x 100%) ……………….000 402. Schedule of Determination and Allocation of Excess Date of Acquisition – January 1...000 x 100%) …………………………………….000 x 100%) …………………… Decrease in buildings and equipment (P12.000 P 18. Paid-in capital in excess of par (P96.000 240.000. *** P50.000 __________ P 486..725.000 .60 P600.000 – P6.000) 36.000 + P20..000 720..600 P1.000 – P12.000 (1) 24. Less: Book value of stockholders’ equity of S: Common stock (P240..000 shares x p10 par) = P720.00 Equity 0 0 (1) Eliminate investment against stockholders’ equity of Sky Co.000 (12..000 P 42.00 Retained earnings…………… _________ 0 Total Liabilities and Stockholders’ P1. P10 par Additional paid-in capital in excess of par Retained earnings Total Stockholders’ Equity Total Liabilities and Stockholders’ Equity P 165.000 P 240.000 288. * *P600.600. Assets Cash Accounts receivables Inventories Land Buildings and equipment (net) Goodwill Total Assets Liabilities and Stockholders’ Equity Liabilities Accounts payable Bonds payable Premium on bonds payable Total Liabilities Stockholders’ Equity Common stock. Allocated excess (excess of cost over book value) …… Less: Over/under valuation of assets and liabilities: Increase in inventory (P18..000 – P288. ****P300. P10 par……… Additional paid in capital*** 42.000.725.000 _________ P1. * P420.600 P 240.000 75.000 120. Increase in bonds payable (P42.000 P 720.000 x 100%).000 720.725.000 P 486.000 P 642.000 330.000 ( 12.000 x 100%) ………………….000 – P7. P10 par**…..000 = P63.000 x 100%) ……………..000 – P8.000 x 100%) ……..600 4.000 96. Positive excess: Goodwill (excess of cost over fair value) …………………………………………………….000) ( 42.600 Problem VI 1.000 72.600 Additional paid in capital…… Retained earnings**** 42.Bonds payable………………… 240.000 Premium on bonds payable Common stock..000.000 – P12.000 (1) 96. Increase in land (P72. Retained earnings (P24.000 828.443.000 P 1083.000 96.600 150.000 (1) 240.000 42.000 P1. 288.000 360.000 42.000 360. 20x4 Fair value of Subsidiary (100%) Consideration transferred (P408.400 = P111.600 288.000 P 360.000 24.000) …….000 210.000 75.000 75.000 = P288.

.2.....600..... Increase in patent (P24.000) 24.000 (80%) Positive excess: Goodwill (partial)…………………………….000 Fair value of stockholders’ equity of subsidiary…………… P 9.600.000) ( 42... Increase in bonds payable (P42.. P66.. Allocated excess (excess of book value over cost) …… Less: Over/under valuation of assets and liabilities: Increase in inventory (P18.. Paid-in capital in excess of par (P96.000 x 100%) ………………...600....000)…..000....000 Fair Value Basis (Full-goodwill Approach)  Full-goodwill Fair value of subsidiary (100%): Consideration transferred: Cash (P12.000 x 100%) ………………….000) x 80%....000 Problem VIII Case 1: Proportionate Basis (Partial-goodwill Approach)  Partial-goodwill Fair value of subsidiary (80%): Consideration transferred: Cash……………………….. Retained earnings (P24.000 ( 18.. Schedule of Determination and Allocation of Excess Date of Acquisition – January 1.. Goodwill...200...000 ( 12..000 x 80%........ P 7.. 2.P12..920.......000 72..000 (P 24..000) P 18..000 x 100%) ……………………………………....000 x 100%) …………………… Decrease in buildings and equipment (P12.. 5....000 – P7. Gain on acquisition..320. Increase in land (P72....………………………………………………...000 x 100%) ……………...000 (P 66.000 96..000 – P7.000 (80%) Less: Over/undervaluation of assets and liabilities: (P9..200..200..000....000 Multiplied by: Non-controlling interest percentage. P6.000 (100%) .........000 360..000 x 100%) …….000 / 80%)... 1.000) 2... 20% Non-controlling Interest (partial)……………………………….... 20x4 Fair value of Subsidiary (100%) Consideration transferred: Common stock: 24....000 shares x P14 per share Less: Book value of stockholders’ equity of Sky: Common stock (P240.000 x 100%)….000 (80%) Allocated excess.200..000 Adjustments to reflect fair value (over/ undervaluation of assets and liabilities): (P9. Increase in contingent liability (P18..000 (80%) Less: Book value of stockholders’ equity (net assets) – S Company: P7.000 Problem VII 1.... Less: Book value of stockholders’ equity (net assets) P 15...920..000) 42..000 x 100%) ……………….000.......000 P 240...... Negative excess: Bargain Purchase Gain (excess of fair value over cost) …………………………………… P 336.000 (80%)  Non-controlling interest Book Value of stockholders’ equity of subsidiary………….000 x 100%).. P1..240.760..P 6.400....000 24. P 4.

000 (100%) Less: Book value of stockholders’ equity (net assets) – S Company: P6..560......000 x 100%.....000 ( 60%) Fair value of NCI (given)………………………………….000 (100%) Less: Over/Undervaluation of assets and liabilities: (P9. 2..000 (60%) Less: Over/undervaluation of assets and liabilities: (P8..000 Non-controlling interest (full)…………………………………....P 5.000. 1...000 (100%) The full – goodwill of P3.000 * applicable only when the fair value of the non-controlling interest of subsidiary is not given.400.000 partial-goodwill)…………..P12....P 3...400....080.000 (60%) Less: Book value of stockholders’ equity (net assets) – S Company: P6..P 8...400.400..000) x 100%.960....P1.000.. 6.000 Add: Non-controlling interest on full -goodwill (P5.000) x 100%.440..000 Less: Controlling interest on full-goodwill or partial-goodwill……………………………........960.440......920...600... 2.000)….....000 Fair value of stockholders’ equity of subsidiary…………….400....000 Less: Controlling interest on full-goodwill or partial-goodwill……………………………..960.080.... 1...400.200. P 5..800........960. 40% Non-controlling interest (partial)……………………………….. Case 2: Proportionate Basis (Partial-goodwill Approach)  Partial-goodwill Fair value of subsidiary (60%): Consideration transferred: Cash……………………….. P 3..000 partial-goodwill) or (P5...400. 4....000.000 x 60%....000 (60%)  Non-controlling interest Book value of stockholders’ equity of subsidiary…………....000 – P4.....400.......………………………………………………….. P 7..000  Non-controlling interest Non-controlling interest (partial)………………………………P 3..............520.... 1....000 – P6..000  Non-controlling interest Non-controlling interest (partial)……………………………….......520....000 NCI on full-goodwill……………………………………...000..000 NCI on full-goodwill…………………………………….......360.000........P 3. 3.400.. P3... 7.......200...P 7.320...000 Non-controlling Interest (full)…………………………………..360....P 3...P 2..000 x 100%........800......... Proportionate Basis (Partial-goodwill Approach) ......000 Fair Value Basis (Full-goodwill Approach)  Full-goodwill Fair value of subsidiary (100%): Consideration transferred: Cash ………………………..200.000 (100%) The full – goodwill of P5...000 Positive excess: Goodwill (full)………………………………....000 consists of two parts: Full-goodwill……………………………………………..440....320.000 – P6.P 6...400..000 consists of two parts: Full-goodwill…………………………………………….000 (100%) Allocated Excess. 4.000......000 – P2.000 (100%) Positive excess: Goodwill (full)……………………………….(100%) – S Company: P7.…...000 (60%) Allocated Excess.....000.400.360...000 – P7.………………………………………………...000 x 20%)*…………………………………...960.000 Adjustments to reflect fair value (over/ undervaluation of assets and liabilities): (P8.000 Multiplied by: Non-controlling Interest percentage........………………………………………………..P 4.. 2... 2.400..000 (100%) Allocated excess.....520...P 1.600...........560.000 (100%) Less: Over/undervaluation of assets and liabilities: (P8..P 7.....800..360......000 Case 3.000....P 1... P 6....000 Add: Non-controlling interest on full -goodwill (P3...000 (60%) Positive excess: Goodwill (partial)……………………………...000 ( 40%) Fair value of subsidiary………………………………………….000) x 60%...000 – P6..

... 1...........592..000 Adjustments to reflect fair value (over/ undervaluation of assets and liabilities): (P3.040...000 – P2......... 25% Non-controlling interest (partial)………………………………P 960.000 Adjustments to reflect fair value (over/ undervaluation of assets and liabilities): (P9. P 11...680. Partial-goodwill Fair value of subsidiary (75%): Consideration transferred: Cash……………………….280..800.000) x 75%.440...640.... 1..000 (75%) Less: Over/undervaluation of assets and liabilities: (P9...320..000 – P7.P 9... 1.. ..000 Case 4: Proportionate Basis (Partial-goodwill Approach)  Partial-goodwill Fair value of subsidiary (75%): Consideration transferred: Cash………………………..P 1.......000 Multiplied by: Non-controlling Interest percentage.....000)] x 75%..000 (75%)  Non-controlling interest Book value of stockholders’ equity of subsidiary………….... 5.……………………………………………….....440.000) x 100%.600.280..000 ....200....P 240...000 ............280....000 – P7..000 NCI on full-goodwill……………………………………..P 2.000)…...000 Add: Non-controlling interest on full -goodwill (P2..200. 240.000 Less: Controlling interest on full-goodwill or partial-goodwill……………………………......P 2....040........000 Fair Value Basis (Full-goodwill Approach)  Full-goodwill .. 25% Non-controlling interest (partial)……………………………….000 (100%) Allocated Excess.. 7.. P 3..000 (100%) Positive excess: Goodwill (full)……………………………….P 360.000 – P2...(75%) Allocated Excess......000)…. (15%) Fair value of Subsidiary .080.P 2.000 – P1...000 x 100%..000 – P2..800.000 (75%)  Non-controlling interest Book value of stockholders’ equity of subsidiary…………..840...………………………………………………..000 (75%) Allocated Excess. 1.400..000 Multiplied by: Non-controlling Interest percentage.000 (100%) The full – goodwill of P2....000 Fair value of stockholders’ equity of subsidiary……………P 9...800...000 x 15%.600...………………………………………………….000 partial-goodwill)….400.840.000 Fair value of stockholders’ equity of subsidiary……………P 3..240.000 (75%) Less: Over/undervaluation of assets and liabilities: [(P6.000) x 75%. 2.000/60% = P4........000 – P7...P 7.200...200.400...000 (60%) Fair value of previously held equity interest in acquiree P2.....000 (75%) Positive excess: Goodwill (partial)……………………………. ..600...P 2.P 1.440......680..400..... 1.000 (75%) Less: Book value of stockholders’ equity (net assets) – S Company: (P4.000 (100%) Less: Over/undervaluation of assets and liabilities: (P9......000 – P2.P 2....000 x 75%.000 (75%) Positive excess: Goodwill (partial)……………………………...200..P 2..P 4.400.000 (75%) Less: Book value of stockholders’ equity (net assets) – S Company: P7...P 3...... 648..400.400..000) – (P4...200..040.200.040..............………………………………………....800.....000  Non-controlling interest Non-controlling interest (partial)………………………………P 2..600.640....000 Fair Value Basis (Full-goodwill Approach)  Full-goodwill Fair value of subsidiary…………………………………………..800. 2......592...…….120.000 consists of two parts: Full-goodwill……………………………………………....000 (100%) Less: Book value of stockholders’ equity (net assets) – S Company: P7..000 Non-controlling Interest (full)………………………………….......000...600.

120...000 ( 75%) 98....000) x 100%.000 – P228..000 – P228..... 648..000 (15%) Fair value of NCI (given)…………………………………........... 1...P.. Allocated excess………………………………………………..Fair value of subsidiary (100%): Consideration transferred: Cash……………………….....000 (100%) Positive excess: Goodwill (full)…………………………………...000 Less: Controlling interest on full-goodwill or partial-goodwill……………………………..000 – P228. Fair value of non-controlling interest (given) ………… Fair value of subsidiary ………………………………………… Less: Book value of stockholders’ equity (net assets) – S Company: (P480.000 (100%) P116....080.000 – P228..592...000 (100%) Less: Over/undervaluation of assets and liabilities: (P3...... 120................P 480..000 (100%) Allocated Excess...... Less: Book value of stockholders’ equity (net assets) – S Company: (P480..  Full-goodwill (Fair Value Basis) Fair value of subsidiary (100%): Consideration transferred: Cash………………………....920...000 NCI on full-goodwill……………………………………..000 – P2..840.000  Non-controlling interest Non-controlling interest (partial)………………………………P 960...000 x 15%.400..000 – P228.... Allocated excess……………………………………………….000) (75%) P270...000) x 100%..400 ( 25%) P368.000 (100%) The full – goodwill of P480.....000 (75%) (P18. P270...000) – (P480.000 x 100%.080..320.000 – P360.P 2..000 (100%) Less: Book value of stockholders’ equity (net assets) – S Company: P2...400 (100%) 132... Less: Over/undervaluation of assets and liabilities: [(P612.000 (75%) P 81.000 consists of two parts: Full-goodwill……………………………………………..400.…………........000) x 75%.…………………………………………………P 1.....320....000 (25%) Fair value of subsidiary…………………………………………...000 – P228.000 (60%) Fair value of previously held equity interest in acquiree P2...400 (100%) 252...592.....000 Non-controlling Interest (full)……………………………………P 1....000 partial-goodwill)….000 (75%) 99.000) x 75% Negative excess: Bargain purchase gain (to controlling interest or attributable to parent only) ……………….....1. 2.....600) (100%) ...…..000) x 100% Negative excess: Bargain purchase gain (to controlling interest or attributable to parent only) ……………….440......... Less: Over/undervaluation of assets and liabilities: [(P612. 360...P 480.000 (75%) 189....000 Problem IX  Partial-goodwill (Proportionate Basis) Fair value of subsidiary (75%): Consideration transferred: Cash……………………….000/60% = P4......... ….....400.000 Add: Non-controlling interest on full -goodwill (P480.000 (100%) (P15.......P 4..000) – (P480...

..000 90.000 18.... P 360. ……………..000 Cash……………………………………………………………………... Paid-in capital in excess of par (P96. Fair value Over/ Under Valuation 72.. 20x4: (E1) Common stock – Sky Co……………………………………………….000) 360......000 x 80%) ……………………. Decrease in buildings and equipment (P12.600 ( 9. The schedule of determination and allocation of excess provides complete guidance for the worksheet eliminating entries on January 1..000 48. Increase in bonds payable (P42......400 57... Retained earnings – Sky 240.000 96.. Retained earnings (P24. Sky Co. Acquisition of Sky Company.000 P 14.000 x 80%) ……………… Increase in land (P72. Net book value………………………. 20x4 Fair value of Subsidiary (80%) Consideration transferred………………………………....000 x 80%) ……………….000 - ( 360. Additional paid-in capital – Sky Co………………………………….000 396. Less: Accumulated depreciation….000 360..000 . 360.000 ( 12.. (2) Retained earnings (acquisition-related expense ..related costs. Allocated excess (excess of cost over book value) …. Less: Over/under valuation of assets and liabilities: Increase in inventory (P18.000) (120...000 x 80%)..Problem X Partial-goodwill Approach Schedule of Determination and Allocation of Excess (Partial-goodwill) Date of Acquisition – January 1..400 Cash…………………………………………………………………….000) 42.000) 360.000 x 80%) ……………………. Book value Inventory………………….800 P 43..000 Less: Book value of stockholders’ equity of Sky: Common stock (P240..000 348..000 360.000 ( 12.. Fair value (Decrease) 720.000 x 80%) …………………………………….. P 192. Positive excess: Partial-goodwill (excess of cost over fair value) ………………………………………………. Sky Co.000 ( 372.000 24.000 348.600) ( 33.000 76.000 72.000 Land……………………………………… Buildings and equipment (net).200 288..200 The over/under valuation of assets and liabilities are summarized as follows: Sky Co.000) (162.000 120.800 19.000 P 72.000 36. Book value Buildings and equipment .600) 28.000 348...000) The following entry on the date of acquisition in the books of Parent Company: January 1.. Acquisition.000 The buildings and equipment will be further analyzed for consolidation purposes as follows: Sky Co...close to retained earnings since only balance sheets are being examined) …………………………………………………………… 14.. 20x4 (1) Investment in Sky Company…………………………………………… 360.400 14.000 x 80%) ………. Bonds payable………………………… Net……………………………………….

Investment in Sky Co………………………………………………. Investment in Sky Co………………………………………………… Non-controlling interest (P300.000 Eliminate investment against stockholders’ equity of Sky Co. P 45. Buildings and equipment Goodwill…………………… Investment in Sky Co………….000 x 20%) ………………………. Adjustments to reflect fair value (over/ undervaluation of assets and liabilities)…………………………………………. Accounts receivable……. 210. 288.000 72.200 (1 ) 72.000 72.. P10 par……… 42.000 120.000 Land…………………………….000 Common stock.146.  1.00 0 Common stock.200 372..000 Inventory………………….000 240.………………………………………. Premium on bonds payable……………………………………… Non-controlling interest (P30. 20x4..00 0 120. 60.200 .000 24.000 P 2..000 Cash*………………………….000 Paid in capital in excess of par.000 (2) 18. the non-controlling interest on the date of acquisition is computed as follows: Common stock – Sky company…………………………………… Paid-in capital in excess of par – Sky co………………………… Retained earnings – Sky Co.000 P 396.000 (2) 72.600. (1) 96..000 - P 480. Non-controlling interest (partial)………………………………….00 0 Bonds payable………………… 240.00 Equity 0 0 (1) Eliminate investment against stockholders’ equity of Sky Co.800 Incidentally.000 360.000 (2) 7.000 42. P10 par……… Cr.600 Sky Co.000 – P14. Buildings and equipment………………………………………….200 P960.000 Retained earnings**…………… 210. January 1.000 43.000 7.000 60. Accumulated depreciation………………………………………….000 x 20%) ……………………….000 72.000 80..000 48.000 – P360.000 600. Date of Acquisition: 80%-Owned Subsidiary (Partial-goodwill) Eliminations Assets Peer Co.000 60.308.800 Premium on bonds payable Retained earnings…………… Non-controlling interest………… 330.………….000 43.000 600. (2) Eliminate investment against allocated excess.200 P 853.400 = P285.. Fair value of stockholders’ equity of subsidiary………………… Multiplied by: Non-controlling Interest percentage………….60 0 Total Assets Liabilities and Stockholders’ Equity Dr. 150.000 P 480..146.200 72.000 20 P 79.000 (1) 24.000 _________ P 853. Land……………………………………………………………………….000 36.785.000 Accounts payable…………… 120.000 720. **P300.600 285.00 0 _________ _______ Total Liabilities and Stockholders’ P1.000 Worksheet for Consolidated balance Sheet.200 P2.. (E2) Inventory………………………………………………………………….000 24.600 96.000 P1.200 (2) 360.000 90.200 _79.60 P960.000 P 360. 18.000 240. P 60.000 – P14.000 Accumulated depreciation Paid in capital in excess of par. Goodwill………………………………………………………………….000 (1) 288..000 285. * P420. 120.785.000 (3) 42.000 P360. Book value of stockholders’ equity – Sky Co……….000 (2) 72.000 360..400 = P45.Co………………………………………….000 360. Consolidated P 105... 960.000 (2) 372.600 (2) 43.600.000 (1) 240. P 240.

Retained earnings (P24.000 P 90.000 210.000 P 54.000 P 600. 20x4 Fair value of Subsidiary (100%) Consideration transferred (P360. Positive excess: Full -goodwill (excess of cost over fair value) ……………………………………………….000) ( 42.000 The following entry on the date of acquisition in the books of Parent Company: January 1.The balance sheet: Peer Company and Subsidiary Consolidated Balance Sheet January 1. 20x4 Assets Cash Accounts receivables Inventories Land Buildings and equipment Accumulated depreciation Goodwill Total Assets P 105.600 150.000 / 80%) …………. Less: Over/under valuation of assets and liabilities: Increase in inventory (P18.666.308. Decrease in buildings and equipment (P12.024.....000 72.000 60.800 Total Liabilities and Stockholders’ Equity Full-goodwill Approach Schedule of Determination and Allocation of Excess (Full-goodwill) Date of Acquisition – January 1.. Increase in bonds payable (P42.800 Liabilities and Stockholders’ Equity Liabilities Accounts payable Bonds payable Premium on bonds payable Total Liabilities Stockholders’ Equity Common stock.000 24.. Less: Book value of stockholders’ equity of Sky: Common stock (P240.000 x 100%) …….000 P 240..000) 43.400 .000 P 18.. (2) Retained earnings (acquisition-related expense .close to retained earnings since only balance sheets are being examined) 14.000 P 642. Allocated excess (excess of cost over book value) ….000 360.000 330.. Paid-in capital in excess of par (P96.600 79.000 285.000 P 360.000 ( 12.000 360.000 1.000 x 100%) …………….000) 36.000 Cash…………………………………………………………………….000 x 100%) …………… Increase in land (P72..000 42.000 ( 480.. P10 par Paid-in capital in excess of par Retained earnings Parent’s Stockholders’ Equity/Equity Attributable to the Owners of the Parent Non-controlling interest Total Stockholders’ Equity (Total Equity) P 240..200 P1.600 P 945.000 402.000 x 100%) ………………….200 P 1. P 450. 20x4 (1) Investment in Sky Company…………………………………………… 360. Acquisition of Sky Company.800 P1.000 96..000 x 100%) ………………………………….666.000 x 100%) ………………….000 x 100%).

Accumulated depreciation…………………………………………. Additional paid-in capital – Sky Co…………………………………. Accounts receivable…….000 72.000 Accumulated depreciation Paid in capital in excess of par..000 120.000 18.000 600.000 x 20%) ………………………. 24.000 P 360..000 54. 210.000 (1) 240. 120. 285.000 .000 48.000 (1) 288.000 P1. 20x4: 240.000 360. 18. Date of Acquisition: 80%-Owned Subsidiary (Full-goodwill) Eliminations Assets Peer Co.000 60.00 0 Bonds payable………………… 240.000 285.600 (2) 54.600 96.00 0 Common stock. P 45.000 x 20%) + (P45.related costs. 20x4.000 54.000 600.157. P10 par……… P 2.000)] …………………………………………….000 Paid in capital in excess of par..000 Land…………………………….000 (2) 372.000 24.00 0 (1) 96. 150. Investment in Sky Co………………………………………………. The schedule of determination and allocation of excess provides complete guidance for the worksheet eliminating entries on January 1.000 Common stock.000 (2) 72. (E2) Inventory…………………………………………………………………. Investment in Sky Co………………………………………………… Non-controlling interest (P300.000 (2) _90.000 372.600 Sky Co. Goodwill…………………………………………………………………. 960.308.000 72. Retained earnings – Sky Co………………………………………….000 Inventory………………….000 60.000 Eliminate investment against stockholders’ equity of Sky Co.785.000 720. P 60.600 Premium on bonds payable Retained earnings…………… Non-controlling interest………… 330.000 – P36.000 P360.000 240. Acquisition.000 60.000 1.400 Cash…………………………………………………………………….000 (1) 24..…………………………………………………………… 14. Buildings and equipment Goodwill…………………… Investment in Sky Co…………. Buildings and equipment………………………………………….000 90.000 Accounts payable…………… 120.600 _________ 42. P10 par……… Cr.000 Retained earnings**…………… 210.000 (E1) Common stock – Sky Co……………………………………………….000 360.000 (2) 72. 480. Premium on bonds payable……………………………………… Non-controlling interest [(P30.000 (2) 42.60 0 Total Assets Liabilities and Stockholders’ Equity Dr.000 (2) 18.000 72.000 P960..000 Eliminate investment against allocated excess. Consolidated P 105.000 96. January 1.000 (2) 360.000 P 480..000 288.000 _______ _________ (1 ) 72. Worksheet for Consolidated balance Sheet.00 0 120. Land……………………………………………………………………….000 42.000 240.000 Cash*………………………….000 72.

.800 P 90. (2) Eliminate investment against allocated excess. partial).200.600 Total Liabilities and Stockholders’ Equity Problem XI Partial-goodwill Approach (Proportionate Basis) Schedule of Determination and Allocation of Excess (Proportionate Basis)) Date of Acquisition – January 1.000 Total Liabilities and Stockholders’ P1.600 153.000 P 864.000 285.035..600 86. * P420.600 P 146.  P 864.000 330.000 – P360.000.600 150.000 P2.000 P1.000 ( 48. P10 par Paid-in capital in excess of par Retained earnings Parent’s Stockholders’ Equity/Equity Attributable to the Owners of the Parent Non-controlling interest Total Stockholders’ Equity (Total Equity) P 105. Increase in copyrights (P60..400 = P285. Peer Company and Subsidiary Consolidated Balance Sheet January 1.400 = P45. Non-controlling interest (full)……………………………………….800 28. the non-controlling interest on the date of acquisition is computed as follows: Non-controlling interest (partial)………………………………….800 120.000 x 80%) …………………….677.157. full – P43.000 P 600. 20x4 Fair value of Subsidiary (80%) Consideration transferred: Common stock: 12..000 x 80%) …………….00 Equity 0 0 (1) Eliminate investment against stockholders’ equity of Sky Co.000 – P14. Less: Book value of stockholders’ equity of S: Common stock (P12.60 P960.600 P 945.600 P 240..18.000 P 9.000 P 1..000 ( 480.800) 196.000 210.. Allocated excess (excess of cost over book value) …… Less: Over/under valuation of assets and liabilities: Increase in inventory (P6.200 10.600 P1. P 79. **P300.000 – P14. Add: Non-controlling interest (P54.000 4.600 Incidentally.000 x 80%) ……………….677.000 shares x P25 per share….000 x 80%).400 57. Increase in buildings and equipment (P150..000 P 642.000 x 80%) …………………….800 . 20x4 Assets Cash Accounts receivables Inventories Land Buildings and equipment Accumulated depreciation Goodwill Total Assets Liabilities and Stockholders’ Equity Liabilities Accounts payable Bonds payable Premium on bonds payable Total Liabilities Stockholders’ Equity Common stock.000 1..000 x 80%) ……………… Increase in land (P36.000 The balance sheet.000 42..785.000 x 80%) ………………………………….400 P 4... Paid-in capital in excess of par (P108..600 90.000 402. Retained earnings (P72.000) 54. Increase in contingent liabilities – estimated P 300.600..000 60.308.600.000 P 360.

Copyright………………………………... 300..000 -0- 60.000 372...400 examined)..000) P246......400 Eliminate investment against stockholders’ equity of S Co (E2) Inventory………………………………………………………………….. Estimated liability for contingencies....000 12. Book value Inventory………………….. Retained earnings – S Co………………………………………… Investment in S Co……………………………………………… Non-controlling interest (P192...800 S Co.....000 60. Buildings and equipment (net).000 84... Investment in S Co……………………………………………. The schedule of determination and allocation of excess provides complete guidance for the worksheet eliminating entries on January 1.000 36.......000 (2) 6.. Fair value 60. …………….. Buildings and equipment……………………………………………… 150. Negative excess: Bargain purchase gain to controlling interest or attributable to parent only) ……………. Net undervaluation……………………..000) ( P 576....000 P Over/Under Valuation 66. Cr.. Consolidated P P 24.....000 (2) 36. P 334.. 20x4 (1) Investment in S Company….000 162...000 6. Worksheet for Consolidated balance Sheet.200 50. Eliminate investment against allocated excess..000 48..400) The over/under valuation of assets and liabilities are summarized as follows: S Co.000 60. 12...000 Copyright……………………………………………………………….... Non-controlling interest (P246. Estimated liability for contingencies……………………………... Retained earnings (bargain purchase gain .. Dr.000 x 20%) ………………………. 96.000 288..000 222.000 – P12..000 108.800 Accounts receivable……..... Date of Acquisition: 80%-Owned Subsidiary (Proportionate Basis) Eliminations Assets Cash………………… P Co.... 20x4: (E1) Common stock – S Co…………………………………………….400 ..000 The following entry on the date of acquisition in the books of Parent Company January 1.000 48..…………………………………… Common stock.000 x 20%) ………………………..000 Land………………………… 110.600 38..000 204..000 153.400 49......000 150. 86.000 334....000 120... January 1....000 0 P 330..000 P 6.000 x 80%) ……..liability for contingencies (P6.000 ( 6... 6.. 20x4.closed to retained earnings since only balance sheets are being 6.000 Land……………………………………………………………………….........000 146. Additional paid-in capital – S Co……………………………….000 72.... (P 50... Land……………………………………… .000 par) ……..000 60..000 Acquisition of S Company....000 36. P1 par……………………………………………… Paid-in capital in excess of par (P300.400 Inventory………………….. P S Co..

200 72.20 0 354. Investment in S Co…….840. Non-controlling interest (partial)………………………………….000 360.600 (1) 72.800 110.000 6.840 + [12.000 42.400 (1) (1) Retained earnings 1.000 204. 20x4 Fair value of Subsidiary (100%) Consideration transferred: P 300.… Common stock.000 60.200 Full-goodwill Approach (Fair Value Basis) Schedule of Determination and Allocation of Excess (Full-goodwill or Fair Value Basis) Date of Acquisition – January 1..000 20 P 87.600 P1.000 _87.681.000 P 192. P1 par Paid-in capital in excess of par Retained earnings Parent’s Stockholders’ Equity/Equity Attributable to the Owners of the Parent Non-controlling interest Total Stockholders’ Equity (Total Equity) Total Liabilities and Stockholders’ Equity P 334.000 (1) 12.000 P1.116.000 .840 627..………………………………… Paid-in capital in excess of par – S Co……………………. (2) Eliminate investment against allocated excess.000 (1 ) 38.000 shares xP1 par) = P44.000 shares x (P25 – P1)] = P723.987.160 723.395.000 __________ _________ P1.. Retained earnings – S Co……………………………………… Book value of stockholders’ equity – S Co………………….483.681.000 246.200 P1.000 P 504..600 The balance sheet: Assets Cash Accounts receivables Inventories Land Buildings and equipment (net) Copyright Total Assets Liabilities and Stockholders’ Equity Liabilities Accounts payable Estimated liability for contingencies Bonds payable Total Liabilities Stockholders’ Equity Common stock.600 87..000 120.000 1. Adjustments to reflect fair value (over/ undervaluation of assets and liabilities)………………………………………….000 6.160 44.840 723.000 627.400 577. Total Assets Liabilities and Stockholders’ Equity Accounts payable……… Estimated liability for contingencies… Bonds payable……… Common stock.160 12.400 (2) 49.116.. **P435.000 300.400 162.600 (2) 146.000 _________ P 444.987.  - (2) 6.200 Incidentally.000 723.000 (1) 153.600 P1.000 72.00 0 (2) 50.840 108.000 44.000 P1.Buildings and equipment (net).000 (2) 60.000 360.200 P 138.200 P 444.200 P 138.987.000 _________ _______ Total Liabilities and Stockholders’ P1.000 P 438.00 Equity 0 0 (1) Eliminate investment against stockholders’ equity of Scud Co.600 P1.20 P354.000 108. P 12. Copyright…………………….000 Paid-in capital in excess of par Retained earnings…………… Non-controlling interest………… 60. the non-controlling interest on the date of acquisition is computed as follows: Common stock – S Co………..160 + (12.000 108.160. Fair value of stockholders’ equity of subsidiary………………… Multiplied by: Non-controlling Interest percentage…………. P1 par……… Paid-in capital in excess of par** 744.000 240.. P1 par*…. * P32.987.00 0 (2) 150.00 0 222.000 P 44.000 P 96.

.000 108...400 51...000 given – P38... P1 par……………………………………………… Paid-in capital in excess of par (P300.000 12..000 P 6... 20x4 (1) Investment in S Company….000 150.600 38. Less: Book value of stockholders’ equity of S: Common stock (P12. Eliminate investment against stockholders’ equity of S Co (E2) Inventory………………………………………………………………….......000 par) ……. 6.. Negative excess: Bargain purchase gain to controlling interest or attributable to parent only) …………….....000 6. Retained earnings – S Co………………………………………… Investment in S Co……………………………………………… Non-controlling interest (P192.000 36.000 x 20%) ………………………..000 60..000 (P 48.. Additional paid-in capital – S Co………………………………......000 x P25 (80%) ……………… Fair value of NCI (given) (20%) ………………………. 90.000 x 100%) ……………………......... Increase in copyrights (P60.000 x 100%) …………………… Increase in buildings and equipment (P150...000 x 100%). 300... Retained earnings (P72...400) …………… Retained earnings (bargain purchase gain .......000 P 198... Eliminate investment against allocated excess...000 x 100%) …………………………………. Fair value of subsidiary (100%) ………………………..000 – P12.... Paid-in capital in excess of par (P108...400 6..600 48.…………………………………… Common stock..000 146.000 The schedule of determination and allocation of excess provides complete guidance for the worksheet eliminating entries on January 1.000 108.000 .Common stock: 12.000 36.000 72..000 Land………………………………………………………………………...000 288.closed to retained earnings since only balance sheets are being examined)..... Non-controlling interest (P90... 12.. Acquisition of S Company.000 x 100%) ……………….. 20x4: (E1) Common stock – S Co……………………………………………..000 153.. Estimated liability for contingencies……………………………..000) 246... Buildings and equipment……………………………………………… 150.000) The following entry on the date of acquisition in the books of Parent Company: January 1..000 72..000 x 100%) ……………… Increase in land (P36.000 P 390.000 P 12..........000 x 100%) …….. Investment in S Co…………………………………………….. Allocated excess (excess of cost over book value) …… Less: Over/under valuation of assets and liabilities: Increase in inventory (P6.000 x 100%) …………… Increase in contingent liabilities – estimated liability for contingencies (P6..000 192.000 ( 6...000 Copyright………………………………………………………………...

Cr. P1 par Paid-in capital in excess of par Retained earnings Parent’s Stockholders’ Equity/Equity Attributable to the Owners of the Parent Non-controlling interest Total Stockholders’ Equity (Total Equity) Total Liabilities and Stockholders’ Equity Problem XII 1.200 P 138.681.000 (1) 153.000 __________ _________ P1.116.000 P 444.000 120. * P32.000 P 504.000 P 44.000 108.840 723. Inventory P 334.000 44.800 Cash………………… Accounts receivable…….000 110.400 (2) 51.483.000 42.… 60. P1 par*….000 222.00 0 (2) 36.200 P1.160..000 (1) 72.. (2) Eliminate investment against allocated excess.160 12. Consolidated P P 24.20 P354.987.000 360. Land………………………… Buildings and equipment (net).000 shares xP1 par) = P44. Total Assets Liabilities and Stockholders’ Equity S Co.681.20 0 P354. 86.987. **P435.200 90.987.00 0 577..00 Equity 0 0 (1) Eliminate investment against stockholders’ equity of Scud Co.00 0 P 96.000 204. P 444.160 + (12.000 300. 20x4.400 96.000 162.200 P1.800 110.000 P1.400 P1. Date of Acquisition: 80%-Owned Subsidiary (Fair Value Basis) Eliminations Assets P Co.840 + [12. Copyright…………………….840 (2) (1) Paid-in capital in excess of par Retained earnings Retained earnings…………… Non-controlling interest………… 108.200 P 138.000 1.987.840.000 204.116.840 652. January 1.000 360. P 334.000 723.000 625.200 The balance sheet: Assets Cash Accounts receivables Inventories Land Buildings and equipment (net) Copyright Total Assets Liabilities and Stockholders’ Equity Liabilities Accounts payable Estimated liability for contingencies Bonds payable Total Liabilities Stockholders’ Equity Common stock.000 P1.400 162.200 P 140.000 (2) 6. Investment in S Co…….000 1.000 240.200 (1 ) 38. P1 par……… Paid-in capital in excess of par** 334.000 (2) 12.393.000 Accounts payable……… Estimated liability for contingencies… Bonds payable……… Common stock.000 P1.160 723.00 0 48.000 (2) 48.000 6.400 Inventory………………….000 6.000 (2) 150. Dr.Worksheet for Consolidated balance Sheet.000 (2) 6.000 .600 (2) 146.000 60..800 44.000 60.000 744.000 _______ _________ Total Liabilities and Stockholders’ P1..600 _90.000 (2) 60.200 _________ 72.000 120.000 shares x (P25 – P1)] = P723.160 Common stock.

000 64.000 Fair value of Subsidiary: Consideration transferred Less: BV of SHE of Slim (P250.000) 70.) Inventory (P20.000) 70. the balance in the investment account is eliminated.) Inventory Land Buildings and equipment (net) Goodwill – full or.000 ( 8.500 .000 P110. Full-Goodwill.000 Investment in AA Corporation: Nothing would be reported. 4. 3.500 P140. Fair value of consideration given by Ford Fair value of noncontrolling interest Total fair value Book value of Slim’s net assets Fair value increment for: Inventory Land Buildings and equipment (net) Fair value of identifiable net assets Goodwill – full P470.000 (10.500 x .000 P 576.000 117.000 x 80%) Buildings and equipment (net) (P70.000 P 20.000 Fair value of Subsidiary: Consideration transferred Add: FV of NCI Less: BV of SHE of Slim (P250. 3 Buildings and Equipment (P480. Noncontrolling Interest (P587. 2 Land (P70.000 + P20. P57.500 P117.000 (530. P587.000 80.000) 56.000 360.500 450.000 117. the balance in the investment account is eliminated.000 + P70.500 P470.000 + P200.000 (10.000 P 46. P46.000) P 57.000 P 46.500 P587.000 P137.000 – P10.20) 6 .000 P126.000 550.500 P470.000) . (Dec.000) Allocated excess Less: Over/under valuation of A and L: Inc.000 20.000) .000 450.000 P450. 80.000 + P200.000) x 80% Allocated excess Less: Over/under valuation of A and L: Inc.000 Investment in Slim Corporation: None would be reported.000 P 60. Problem XIII 1 Inventory (P120. P 60.2.000 x 80%) Goodwill – partial 5 .000 P 16.000) 70. Book value of SHE Allocated excess: Increase / decrease in fair value (Fair value increment) for: Inventory Land Buildings and equipment Goodwill 5 .500 Partial Goodwill.000 P 57. Land Buildings and Equipment 4. Goodwill Fair value of consideration given Less.500 P 20. (Dec.000 x 80%) Land (P10.000 (10.000) .000 P 550.

800 = (P120.000 FV of SHE of SS P530. P81. P405.000) 11.000) 80. Inventory = P670.530.000 fair value of SS’s net assets acquired. 7.480.000 = (P120.000 Contingent performance obligation 30. Revenues and expenses of the subsidiary from the period prior to the combination are omitted from the consolidated totals.000 Goodwill P 350.000 Patented technology 700.000 2. the fair values of the subsidiary's assets and liabilities are consolidated (there are a limited number of exceptions).000 . P470.000. Under the acquisition method.000 Customer relationships 500.000 Receivables P 80.P25.000 Fair value of consideration transferred P1.) 1.180. P48.030.000 shares).000 P's book value plus S's fair value) Goodwill = P80.500 NCI – full goodwill P117. 4.180. 8. The par value of the 20.000 4.000 Liabilities (400.000 (P's book value plus S's fair value) Franchise agreements = P440.000 (calculated above) Revenues = P960. P200.000 +P 70. P605.60 2.000 .000 IPR&D 300.000 (P74 × 20. BV – SHE of SS P450.000 (P's book value plus Sun's fair value) Buildings and equipment = P930.000 = (P470.000 Multiplied by: NCI % 20% NCI – partial goodwill P106.000 (as reported by GG Corporation) Problem XV 1.000 = (P120.000 Add: NCI on full-goodwill (P57. The previous owners earned any previous profits. 1. The fair value of the consideration transferred is now P1.000) + P190.000 3.000 (only parent company operational figures are reported at date of acquisition) .000 + P135. 3. 6.030.P55.P73.000) 1.000 Problem XVII (assuming that acquisition-related costs is treated as expenses) In acquisitions. Only the operational figures for the subsidiary after the purchase are applicable to the business combination.000 – P10. 2.500 – P46.000 Liabilities (400.000 Gain on bargain purchase P 150. This amount indicates a bargain purchase: Fair value of consideration transferred (above) P1.500 Problem XIV 1.000.000 shares issued is recorded as an increase of P20.P25.000 IPR&D 300.000 . 5. Fair value of consideration transferred (above) P1.000 3. The acquisition method records indirect costs as expenses. the amount that the P760. 3.000) + P27.000 .000 = P270.000 .000 (P's book value plus Sun's fair value) Land = P710.000 . 5.500.530. 8 includes a bargain purchase. P57.000 in the Common Stock account. 4.000 Adjustments to reflect fair value (P20.P54. The subsidiary’s Common Stock and Additional Paid-in Capital accounts have no impact on the consolidated totals.000) x . Goodwill is reported as P80.000 Receivables P 80.000 Customer relationships 500.000) 1.P25.200 Problem XVI (Overview of the steps in applying the acquisition method when shares have been issued to create a combination No. The fair value of the consideration includes Fair value of stock issued P1.000 2.or.000 6.P55. stock issue costs reduce additional paid-in capital.000 + P55. The P74 fair value in excess of par value (P75 – P1) is an increase to additional paid-in capital of P1.000) + P40.000 = P470.000 Patented technology 700.000 .000 consideration transferred exceeds the P680.

.000 (P120. 65 percent Capital Stock Retained Earnings = = = 1..000 950.... BB P70......P105.....000 fair – P200.000 + P55....... Beryl paid P110..000 book value Building (P700....................P80...............000) Differential assigned to goodwill Fair value of SS 40.. A total of P210..000 P 230........000 + P46....000 (P10.000 ...........000 book value) Buildings and equipment (net) Goodwill 3.000 P115.000 P259.. In determining the amount to be reported for land in the consolidated balance sheet......000) P120.......P146..000 ......000 book value) Deferred tax liability (P40.........000 .......000) will be reported in the consolidated balance sheet...... 1/1 = P390....000 2.............000 2.....000 50.000 10.. P15.. Fair value of Subsidiary: Consideration transferred Less: BV of SHE of Craig (P300.000 4... SS: P24... Additional Paid-in Capital = P65..000 + P125...000 greater than the book value of the net assets of SS and is reported as goodwill in the consolidated balance sheet at January 1......... 4... 2..000 + P90. Discount on Bonds Payable...000) should be reported....000 20..000 (P70.....000 ....P10.....000 for the ownership of SS.000 + P15...000 9.....000)...000 ..........000) = P94...000 Book value of SS shares Differential assigned to inventory (P195...000 ..... P950......000 = P380..00 – (P90.... Investment in Craig Company.000 .P130....000 .000) + P15......000 100...000 10..000 P 50.............. The par value of B's stock outstanding is P100....... Cash.........000 5..000) was eliminated.000 50....(P46.....000. P15.000 180. Building......... As shown in the investment account balance...........000) ............. 20X5.........000 (P's book value) Problem XVIII 1..650 / P259........ P65.000 . Goodwill..000 20.000 (P75...... 5....... A total of P10.000 + P50....000 + P420.000 fair – P600... The elimination of an intercompany receivable must be offset by the elimination of an intercompany payable....000 book value) Discount on bonds payable P280.....000 10.000 P 50... 3...000 100..000 = (P148......... Accounts payable of P120.........000 = (P115........7..............000 Fair value of SS as a whole: P200.......... Problem XX 1.000 + P75..........P98..000 Problem XVI 1.....P105.. 6.... 950.000 (only parent company operational figures plus acquisition-related costs are reported at date of acquisition) 9.............000 + P110...000 .... Deferred Tax Liability...000) Allocated excess Less: Over/under valuation of A and L: Inc (Decrease) Land (P250....000 3.000 720. The amount paid was P30.. Retained Earnings.000 ............000).000 + P50........000) Differential assigned to buildings and equipment (P780........P24... Expenses = P940...... BB apparently sold the land to SS for P25........ Adjustments on Craig books: Land...000 fair – P300.....000 (P's book value less stock issue costs) 8....P340...000 was deducted in determining the balance reported for accounts receivable (P90...........P400.......000 fair – P50......

.......000) Allocated excess Less: Over/under valuation of A and L: Inc.... Subsequent to acquisition.000 – P1...000 Problem XXI Full-Goodwill Fair value of Subsidiary: Consideration transferred (200 shares x P25) Less: BV of SHE of Public (P200 + P800 + P1. the credit to cash is P570.......000 P25 Public 200 300 500 Private Company ? Private 40%* * 60% ? 100 / 40% / 60% ? Values are prior to acquisition (200 shares × P25 market value)..... This approach to determine partial goodwill is acceptable as long as there is FV of NCI in the acquirer............. Paid-In Capital in Excess of Par.000 fair – P2. 2........000 _1................... 420.Retained Earnings.... Elimination entries: Common Stock.......000 Less: FV of SHE of Public (P1.... Fair value of Subsidiary: Consideration transferred (200 shares x P25) P 5..000.......... 4..000 Note: The currently issued shares of Public Company and its fair value were used for the following reasons (refer to Illustration 15-14 for comparison):  Total number of shares for Public Company after acquisition – not given unlike Illustration 15-14..000 or..........000 650...000 95...000 shares = 60%     Public Company P3...000 25.  The fair value of share of Private Company – not given unlike Illustration 15-14 Fair value of net assets…………….....................000 ***Note: Depending on the wording of this exercise........... Private Company has 0% ownership of Public Company...000 52..000 P 3... the partial goodwill amounted to P1. Investment in Seely Company Common Stock*** Additional Paid-in-Capital 570..... (Dec.......200 or P2..000 Goodwill – full P2. FV of NCI on full-goodwill amounted to P800 (P2...... Paid-In Capital in Excess of Par.. subsequent to acquisition...000 160......0000 + P3..200 (P2...........000 book value) Goodwill – full 950...... If cash is paid... Investment in Craig Company.. Incidentally.....Seely Inventory Land 80...000 P 5.000 P2.....000 300..000 x 40%).000 – P1.. Prior to acquisition...000) _3..000 .000 475...Seely Other Contributed Capital – Seely Retained Earnings ..... prior to acquisition......000 x 60%)...... this represents 100% ownership of Public Company....... Private Company is the “parent” with 60% ownership.000 132.......000 shares / 25........000 _2.... 1....000 650... Problem XXII (Assume the use of Full-Goodwill Method) Note: This solution assumes a difference between the basis of acquired assets for accounting and tax purposes for this stock acquisition... these holders of 100 shares of Public Company become the 40% NCI.. Fair value of common stock per share Currently issued Additional shares issued 15...... the credit may be cash instead of common stock and additional paid-in-capital..... Common Stock ........) Fixed assets (P3.........

200 67. The right to receive the expected residual returns of the entity (e. 1. The direct or indirect ability to make decisions about an entity's activities through voting rights or similar rights. An entity qualifies as a VIE and is subject to consolidation if either of the following conditions exist. another firm may guarantee a return to the equity investors) 3.95) x .. and the proceeds are insufficient to repay the VIE investors. TPC possesses the following characteristics of a primary beneficiary Direct decisionmaking ability (end of five-year lease term) . if the parent opts to sell the facility. The purpose of consolidated financial statements is to present the financial position and results of operations of a group of businesses as if they were a single entity. and uncertainty of prospective cash flows. risks.000 + P20. Risks of the construction project that has TPC has effectively shifted to the owners of the VIE  At the end of the 1st five-year lease term.g. the investors' return may be capped by the entity's governing documents or other arrangements with variable interest holders).000 30. and (2) Hillsborough has the right to receive the residual benefits of the sales generated on the HCO Media internet site above P500.200 570. b.g. Hillsborough should consolidate HCO Media. if facility does not perform as expected TPC is still obligated to pay market rates.000)) 71.05] *(.000 + P25.000. a direct or indirect ability to make decisions that significantly affect the results of the activities of a variable interest entity is a strong indication that an enterprise has one or both of the characteristics that would require consolidation of the variable interest entity. c. Thus. In most cases. Risks that remain with TPC  Guarantees of return to VIE investors at market rate. the risk is deemed insufficient.000 Problem XXIII  HB Country and HCO Media Consolidation of a variable interest entity is required if a parent has a variable interest that will  Absorb a majority of the entity's expected losses if they occur  Receive a majority of the entity's expected residual returns if they occur Because (1) HCO Media’s losses are limited by contract.  The equity investors in the VIE lack any one of the following three characteristics of a controlling financial interest.000 20. timing.000 127. 1.  During construction 11. if equity at risk is less than 10% of total assets.000 + P71. 2..  If lease is not renewed.40 x (P52. Consolidation is required if a parent has a variable interest that will  Absorb a majority of the entity's expected losses if they occur  Receive a majority of the entity's expected residual returns if they occur Also. TPC must either purchase the facility or sell it on behalf of the VIE with a guarantee of Investors' (debt and equity) balances representing a risk of decline in market value of asset  Debt guarantees d. Consolidated statements also provide more complete information about the resources. obligations.000/. The obligation to absorb the expected losses of the entity if they occur (e. They are designed to provide information useful for making business and economic decisions—especially assessing amounts.Plant Assets Discount on Bonds Payable Goodwill** Deferred Income Tax Liability* Investment in Seely Company Non-controlling Interest [(P570. 2 and 3 of the requirement are part of the information) a. a potential 15% risk.  The total equity at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support from other parties.1% of project cost potential termination loss. TPC may be required to pay up to 85% of the project's cost.  TPC (Nos. and opportunities of an enterprise than separate statements.

000 Non-controlling interest fair value __ 60.000 Excess net asset value fair value/Bargain purchase gain P( 20.000 .000 (120. P20.000 20.000) (20.000 80. Absorb a majority of the entity's expected losses if they occur (via debt guarantees and guaranteed lease payments and residual value)  Receive a majority of the entity's expected residual returns if they occur (via use of the facility and potential increase in its market value).000) __60. 5. FV of VIE: Consideration transferred by P.000) (60.000 + (P140.000 Computer equipment 40. P 20. d Consideration transferred P300.000 Excess fair value over net assets/ Goodwill P 20.000 60.000 FV/Total business fair value of VIE P 80. d Consideration transferred P150.000 Goodwill (excess business fair value) 20.000 Less: Book value of SHE of S (P100.000) 215.sometimes termed as “Differential” P 85.000) __100.000 Allocated excess (excess of fair value or cost over book value) . Problem XXIV 1.000 + (P140.P20.000) . c – at fair value 2.000 Less: Fair value of VIE net assets [P20.000 160.000 + P115.000 40. All SP’ assets and liabilities are recognized at their individual fair values.000 Less: Fair value of VIE net assets [P20.000)] 3.000 Long-term debt (120. Cash P20. all identifiable assets and liabilities are reported at fair values (unless a previously held interest) and the difference is treated as a goodwill.000) 92.000 + P250.000 P20.0- Implied valuation and excess valuation for SP.000) Noncontrolling interest (60.000 .000 – P120.000) PT equity interest (20.000) The P20. c [P300.000 Less: Book value of SHE of S (P40.000 FV/Total business fair value of VIE P 80.000 + P20. Cash Marketing software Computer equipment Long-term debt Noncontrolling interest Pantech equity interest Gain on bargain purchase 2. FV of VIE: Consideration transferred by P.000 4.000 – P120. a – Investment in subsidiary in the consolidated statements is eliminated in its entirety.000 excess net asset fair value is recognized by PT as a bargain purchase.000 – P65.000 Marketing software 120.000) (20.000 – P150.000 + 125.000) + P40.000 + P52. Implied valuation and excess allocation for SP.000) + P40.000) -0Multiple Choice Problems 1.000 When the business fair value of a VIE (that is a business) is greater than assessed asset values.000 Non-controlling interest fair value __ 60.000 Noncontrolling interest fair value Consideration transferred by Pantech Total business fair value Fair value of VIE net identifiable assets Goodwill 60.000 – (P35. P 20.000 + P60.

(Dec..750 Add: NCI on full goodwill (P65.P 83.. d Full-goodwill: Fair value of Subsidiary: Consideration transferred Add: FV of NCI Less: BV of SHE of Silver (P40.. (Dec.000 P 58....Allocated excess (excess of fair value or cost over book value) .000 __55.P255..000) x 100% Buildings and equipment (P300.000 – P5..000 – P40......000 – P48. d FV of SHE of S: Book value of SHE of S (P100. 16..000 P 40. (Dec.000 25.500 Buildings and equipment (P300...... b – P135.000 = P90..000 – P90.000) x 100% Allocated excess Less: Over/under valuation of A and L: Inc.000 280...000 If partial-goodwill..000 P610.P15.000) x _210...000)] 7. a Total Assets of Gulliver (Jonathan) P160..000 .00) x 37.000 . b – fair value 10..000 – P250...P300..000 debit 9.000 + P45.000 20.000 + P180.000 = P175..75 0) Land (P100.000 – P40.000 – P250..000 P 65....000 100. d .. d – fair value 12.000 _40.000 P( 5..500 __41.000) x 75% P( 3.....000 P400.000 – (P173...P600.000 * same with the NCI given per problem 15..000 75% Allocated excess P 90.000 50. d – fair value 11.) Inventory (P65.000 + P180.000 FV of SHE of S……………………………………………………… P 335...000 – P70..000 – P40.750 13.sometimes termed as “Differential” 6. a – Investment in Silver will be eliminated in the consolidated balance sheet 14.P 280.000)……………….000) x 100% Land (P60.. 25% FV of NCI (partial)………………………………………………….000 = P330.000) x 100% Goodwill – full 17.750)………………..000 8.250 FV of NCI (full-goodwill)*…………………………………………P100.000 – P70.00) x 100% Goodwill – full P300.) Inventory (P65.) Inventory (P45.000 ...000 P200..000 – P90.000 ) 10.. b – [P150.000 + P120.250 75% Goodwill – full P 48.000 Less: Over/under valuation of A and L: Inc.P475.000 P120. c ....000 + P180.000 Less: BV of SHE of Silver (P100. no answer available..000) x 75% 7.000 P 15...000 Adjustments to reflect fair value ……………………………… 55. c Full-goodwill: Fair value of Subsidiary: Consideration transferred Add: FV of NCI Less: BV of SHE of Silver (P100.000 _160...000) x 100% Land (P100..000 Multiplied by: NCI%..000 16. computed as follows: Fair value of Subsidiary: Consideration transferred P300.000 P 5...000) x 100% Allocated excess Less: Over/under valuation of A and L: Inc.....000 .

.000 + P60...380..000 – P38.000 5. 19……………………………………..000) 28.000 – P32..000 FV of SHE of S……………………………………………………… P 185...000) 22.278. Less: Investment in S Corp...000 – (P300.000 230..000) P 838.000 _128..000 + P40... a ....000 20.……………………………… 25.000 + (P38.000 22.000 Increase in plant assets [P350.. 20% FV of NCI (partial)…………………………………………………. c FV of SHE of S: Book value of SHE of S (P40.000 P 12..000 16.000)………………....000)] Goodwill (partial)* P1.000 Book value reported by P and S P1...667 Total assets reported P1.000 = P265..000 Add: NCI on full goodwill (P15.000) P 838.278.000 + P205. P445...000 – P40. Book value reported by P and S Increase in inventory (P60.00 P60.000) Increase in land (P60.P 37.000) (P40. c – P100.000 20...000 + {P60.....000 x 80%) Land (P20.000)……………….P 160.000 Multiplied by: NCI%. Book value of assets of S Corp.000) Increase in plant assets [P350.000 x 80%) Goodwill – partial P160..000 Book value of assets of S Corp.000 P 32.00 0 22. (440.000 Consolidated stockholders’ equity……………………………………....000}] or P132.000)………………….. 3..000) Goodwill (full)* Total assets reported 18. P1.000 + P120... a Jonathan stockholders' equity(P200...000 P1.00 0 Increase in inventory (P60.000 FV of NCI (full-goodwill)*………………………………………… P 40.000 – P142.000 110.000 – P12..000) Increase in land (P60.. b Total Assets of P.380.000 23..000 28.Less: Investment in Sea-Gull Corp.000 Adjustments to reflect fair value [(P45.000 __20...000/75%) – (P702.000 + P60.000 Book value of assets of Sea Corp..000 – P60..000 * same with the NCI given per problem Partial Goodwill Fair value of Subsidiary: Consideration transferred Less: BV of SHE of S (P40..566...000 15..000 – (P300.000 (440.The amount reported by Jonathan Corporation 21.000 19.000 – P38..000 – 110.000) x 80% Allocated excess Less: Over/under valuation of A and L: Inc.000 + P120...000)] 0 Goodwill (full)* 26...000 + P40.000 NCI (full-goodwill) – refer to No. 542.000 542.000 – P32. d – [P132.000 – P38..000) = P26. P405. Book value reported by Gulliver/Jonathan and Sea Increase in inventory (P45. 40.000)…………..000 Less: Investment in Swimmer Corp.000 – P40.) Inventory (P5.000 P 720. (Dec.667 If partial-goodwill: Total Assets of P..000 + P95.00 0 20... (160.667 *(P440.000 + P30.000 P 680.....000 Increase in land (P60...000) P 450.000 .000 P 4.

000 + (P85.000 – P85. P150.000) a Partial Goodwill Fair value of Subsidiary: Consideration transferred Less: BV of SHE of SSD (P50..000 20.P70.P25.000 Goodwill – partial 26.000) x 70% Allocated excess Less: Over/under valuation of A and L: Inc..000 P 52.500 P 28.000 P1.000 15.000 – P142.000 20.000 + P90.P25....000 35.500 **64.000)… 35.) Inventory (P15.500 + P95.046.000) x 100% Allocated excess Less: Over/under valuation of A and L: Inc....000 P 75.000 + P280..000 140..000 FV of SHE of SS……………………………………………… P 175..000 P1.000 P215.500) P 641.000) x 100% Goodwill – full P150...000 40.500 27.000 **given amount.500 P 791..000 . 25..000 – P45..500 (150.500 24.121.000 ..000 c Full-goodwill: Fair value of Subsidiary: Consideration transferred Add: FV of NCI Less: BV of SHE of SS (P50.000) x 100% Land (P25. but it should not be lower than the fair value of SHE – subsidiary amounting to P52..000 Multiplied by: NCI%.000 + P37...046.000 405.000 x 70%) 14.000 + P70.500 Land (P20.000) + (P28. Book value of assets of Silk Corp.000) Goodwill (full) Total assets reported If partial-goodwill: Total Assets of Power Corp. Book value reported by Power and Silk Increase in inventory (P85..000 15.000 d P215..500 computed as follows : FV of SHE of SS: Book value of SHE of SS (P50.500 P 15....000 + P90..... Book value of assets of Silk Corp...540..000 . Less: Investment in Silk Corp... Book value reported by Power and Silk Increase in inventory (P85.P 140....500) P 641.000 P1.000 P 791.P 52.000 Adjustments to reflect fair value (P15.500 (150.000 = (P61..000 P1. P1...000)…………….000 – (P702.Total assets reported *[P440....500 __98.000 20..000 405. Less: Investment in Silk Corp.000) Increase in land (P45..000) Increase in land (P45.000 + P20.000 ..) Inventory (P70. (Dec...000) x 75%] 24. b Total Assets of Power Corp...000 .000 28. d P701.000 x 70%) P 10.P70....109.000 + P90.000 P 40.P70.000) Goodwill (partial) Total assets reported 28 ...000 . (Dec... 30% FV of NCI (partial)……………………………………………..000 = P130.

...... Strand noncurrent assets.......... 30% FV of NCI (partial)……………………………………………..................000 P140..............500 NCI FV of SHE of SSD: Book value of SHE of SS (P50.....000 ___8.....................000 + P205.........000 P60..P12.000 15.. Fair value in excess of book value .000 Excess assigned to goodwill (40%) ..000 FV of SHE of SSD P 175.........000)…………..........000 40..........................000 + P20.....................000 P105.........................000 (50.................000) 29....P 52..................... c ...... a Non-controlling interest (partial-goodwill): P52........................................... Consolidated current assets...............................000 + P90.............000 Adjustments to reflect fair value (P15...000 Multiplied by: NCI%...500 P404..... a Park current assets.000) + P64...000 (40.000)……………...500 NCI FV of SHE of SSD: Book value of SHE of SS (P50.....000 Multiplied by: NCI%......000 205.........000 + P90.P 64.........................................000 Park noncurrent assets................... Less: Strand's book value (P50..000 P75.......................................................000 ÷ 80%)............................ Excess assigned to inventory (60%) ........000 FV of SHE of SSD P 175..............500 30 ...... c P419..............000) P20..........000 52....000)……………............P 140...............000 – P12........ d P205...... P 70..............................................................................500 31 ......000 35....000 36.....P 140..P 8............ P 90...000 Excess assigned to goodwill (40%) ............................ c Consideration transferred ..............000) P25.000)… 35.......P 52............. Less: Strand's book value ...................500 = (P150....... d Non-controlling interest (fulll-goodwill): P64............................+ P200.500 Add: NCI on full-goodwill (P40........................000 = The amount reported by Power Corporation 32 ...500 Consolidated SHE: Common stock Retained Earnings Parent’s SHE or Equity Attributable to Parent NCI (partial-goodwill) Consolidated SHE P150..........................000 Consideration transferred (P60.......................................P10...000 + P20.......... Strand current assets.......000 Adjustments to reflect fair value (P15....P15........................................................... Excess inventory fair value......................................................................500 33............. b 34. 30% FV of NCI (partial)…………………………………………….... Fair value in excess of book value ...............000 FV of NCI (full)…………………………………………………..........000 P355............500 If partial-goodwill: Stockholders’ equity: P419..................... Excess fair value to goodwill (partial)............. 12.... Consolidated noncurrent assets........000 x 80%).000 20............ Excess assigned to inventory (60%) ..........................................................000)… 35..................

000 P140...........200... ………….. 15........000 – P100...000) = P550......000 Adjustments to reflect fair value (inventory)………………………..........000)………… 15.............. 56.........000) – full-goodwill approach a ...000 FV of SHE – S………………………………………………………………P65.........000 7......000 + (P45.000) P 630.......500......700.000 P only. 55...000 40......100....000 Non-controlling interest at fair value (20% × P75.......... 51.......37....... P93........000 ___100...........000 – P500...000 Add: NCI on full-goodwill (P10..000 a d (P1.......000 in increase in PPE] = P100.......................000 – P1.......000 Less: Investment in S (330.........000 – 600......500.000 shares x P5) …….000 NCI (partial): BV of SHE – S ……………………………………………………………..... APIC Add: APIC of P Less: Stock issuance cost 46.............000 a ( P10 x 100.000 44.......000 = P1.......000 + P45.000 __10....... Strand noncurrent assets.............000) = P144..000 increase + P100.000 x: Multiplied by: NCI%..........000 a – at fair value c a [P15 x 100................. 20% 13. 49..... 15........000 b [(P330.....000 – P26.....P only d Total Assets of P P 960.........000) = P1... 20% NCI (partial)………………………………………………………………P13..000 P 9......000 42..000 ... a – P150... 48.....000/75%) – (P565..700..000) = P400........ 39...000 current portion) of the loan taken out by Park to acquire Strand...........000.. P 4...000)……………………… 2...000 noncurrent portion) of the loan taken out by Polk to acquire Strand.... stocks issued………………………………………………… Less: Par value of stocks issued (500. b Add the two book values and include 90% (the P54....000 x: Multiplied by: NCI%........ 52.. d [P99........ b Park stockholders' equity.00 0 P 1...000 decrease in inventories) + (P100....900......P50. d Park noncurrent assets......000 – P8.000 NCI (full): BV of SHE – S ……………………………………………………………....000)] = (P20...400. 40..........000 41.........000 b P1.........000 – (P1........... Excess fair value to goodwill (full)....000 + P500......000 – 50... 54....000 – P105..000 – (1.....000)] or (P99.. 47.........000 Total stockholders' equity P95....000 Adjustments to reflect fair value (inventory)……………………….. 53..............000 38.........000 FV of SHE – S………………………………………………………………P65...000 increase in PPE – P300...........500. Consolidated noncurrent assets..........................................P50...........000 + P250..000 = P1.. a – at fair value 45....... P80.......000 __2..500...000 )+ P100.250..... b FV......... b 43........ P80. c Total stockholders' equity....................... P 90. b Add the two book values and include 10% (the P6.........000...000 Park stockholders' equity....... 50..................

57.) This raises the question of the treatment of the transaction costs as.000 If partial-goodwill – same answer with full-goodwill approach.195.000) P330.000) – Position of Ernst and Young (EY).780.000 shares x P35)] = P2.000 P 60.000 – P45.500.000 + P250. So.000 + P50. which is “Consolidated and Separate Statements”.000 395. fair value 10% FV of NCI (100.000 + P200.500.000) + (34.000 150.000) Increase in land (P45.000) x P.Book value of assets of S Book value reported by P and S Increase in inventory (P45. maybe based on the assumption that under the revised PAS 27 since it applies only to “Separate Financial Statements” not consolidated statements. It follows that this requirement does not extend to the individual (or separate) financial statements of the investing or parent entity. but in the glossary to PFRS provides an overriding definition of “cost” as “the amount of cash or cash equivalents paid or the fair value of the other consideration given to acquire an asset at the time of its acquisition or construction” As a general rule under PFRS. Plant and Equipment) and PAS 38 (Intangible Assets) wherein the direct costs is capitalized in the books of parent entity and eventually become expense through eliminating entry to prepare consolidated statements. “cost” includes the purchase price and other costs directly attributable to the acquisition or issuance of the asset such as professional fees for legal services. does not affect the computation of goodwill wherein under PFRS 3.000 P 65. wherein the definition of “cost” was clearly defined.000 + P60.000 shares x P5. ** Answer c – P1.000 shares x P6. a – zero. in the opinion of EY.035. In Revised PAS 27 “Separate Financial Statements” in relation to PFRS 3 par. transfer taxes and other transaction costs” * Answer d – P1.000 – 30.000 P560.000 500. which refers to any acquisition-related costs incurred by the acquirer in relation to the business combination (for example legal costs. 33.000 is already recorded in the books of subsidiary (not in the worksheet or eliminating entries.000 21. b – step-acquisition 60% FV. the basis of the old PAS 27.000) Increase in plant assets [P300.000) Fair value of Assets (P85. 63. the cost of investment in subsidiary in the separate financial statements includes any costs incurred even if such costs are expensed in the consolidated financial statements. Currently. The following discussions focus on the books of parent entity regarding direct acquisition-related costs. P360. The view of EY. The scope of those deliberations does not include the cost of investment in associate. b – (P250.000 depreciation to reduce net income of Sirius.000 – P200. since there is no gain.000 19.000 – P26.000 + P100.000 62. the Interpretation Committee (IFRIC) of IASB is discussing the topic of Contingent Pricing of Property. Given that Revised PAS 27 does not separately define “cost”.000 – 60. stocks issued: 60.000 – (P225.000 . it is appropriate to apply the general meaning of “cost” to separate financial statements.000 120. Revised PAS 27 does not define what is meant by “cost”. This view is also as suggest by the IASB since they introduced the requirement to expense acquisition costs within PFRS 3. is PFRS 3.000 (P1.000)] Goodwill (full) Total assets reported 405.000 P1. 61. 59. fair value 30% FV of previously held equity interest: 30. 64. c**/d* Note: The following discussion regarding the treatment of direct acquisition-related costs in the books of parent entity. (IGAAP 2013 under IFRS by Ernst and Young.000 b a a [(P700. under PFRS 3 these costs are usually recognized as expenses in the consolidated accounts. it only applies to financial statements in which a business combination is accounted for under PFRS 3. Plant and Equipment and Intangible Assets.000.000 _____0 P1. joint venture or subsidiary but it is possible that the scope of the project might be expanded in future.000 d Book value of Assets (P80.000 + P980. due diligence costs – such as finder’s fee are expensed off and not . since the revaluation of P65. it seems that the basis of the general rule applies to PAS 16 (Property. That is why the general rule in the definition of “cost” was applied. page 530.000 40. 60. Unlike before the revision of PAS 27 and implementation of PFRS 10. fair value 100% Fair value of subsidiary Less: Fair value of net assets (SHE) of subsidiary 58.600.P24. Therefore. acquisition-related costs direct or indirect are considered as expensed. therefore PFRS 3 which is a standard for business combination/consolidation will not be the basis for the definition of “cost”).000)/10 years = P5.

.....000 TT building 12/31/x4 P182... 510..... the parent nonetheless controls it......... d P510.000 Excess acquisition-date fair value allocation 40.. intercompany accounts are eliminated in full..... -ORPP .............000 Amortization for 3 years (10-year life) (90. 71.... The following items are worth noting to justify the use of this approach: 1...000) P36............ despite the above analysis capitalizing the direct costs seems to be correct and have basis since the segregation of old PAS 27 to Revised PAS 27 and PFRS 10... The author believes that the there is logic on the basis of applying the general rule in interpreting the definition of “costs” in PAS 27 wherein the basis are PAS 16 and PAS 38............. 3 rd edition (2013)..... in the solution they presented in one of their end-ofchapter problems............... it may be a problem when there will be an impairment test which will reveal the costs are in fact unrecoverable and thus that there must be an impairment charge at the parent level (in which the direct costs is included as part the investment)........building. c – In the combined financial statements (which normally used to described financial statements in a “common control” situation)........000 .000 210.......... 3.  They are separate transactions for which the buyer pays the fair value for the services received. no elimination of intercompany accounts will be made........000 74........... is not a subsidiary. they expensed the direct costs in recording the investment in subsidiary in the book of parent company Similar with No..... which would have the effect of bringing the parent’s accounting (with the impairment investment including the direct costs) in line with what would later appear on the consolidated financial statements..........000 intercompany account will be eliminated... d – In consolidating the subsidiary's figures.. CC Corp...................000 P720.... aside from the fact that in substance the ultimate objective is to consolidate........ d 68.................. eventhough there was a separation of standard between Revised PAS 27 and PFRS 10....... c 73.... On the other hand...... a 69.... the author believes that the direct costs still be considered as expenses applying PFRS 3......... 65....... 67.......000 210.. d The acquisition method consolidates assets at fair value at acquisition date regardless of the parent’s percentage ownership. a PP .... in the book Applying IFRS... the assets acquired are initially recorded at cost.. The key reasons given for this approach are provided in paragraph BC366:  Acquisition-related costs are not part of the fair value exchange between the buyer and seller... Even though the subsidiary is less than fully owned.. One respected author in accounting even commented that.... all intercompany balances must be eliminated in their entirety for external reporting purposes...... c An asset acquired in a business combination is initially valued at 100% acquisitiondate fair value and subsequently amortized its useful life..... 1 above.... 75....included in the consideration transferred...... so the P300.... by Picker........ Therefore..building........ Patent reported amount December 31. the direct costs (or “costs incurred in undertaking taking the acquisition” as the term used in the book) were not part of the investment in subsidiary as evidenced by the amount in the eliminating entry... 72.................... 2.000/ 10 x 3 years) (12.......... Amortization for 2 years (10 year life).......  These amounts do not generally represent assets of the acquirer at acquisition date because the benefits obtained are consumed as the services are received. the problem is............... d – Since............................................. the P200...... 2009.....000 Excess amortization for (P40... is a consolidated subsidiary................000 remains to be a receivable. under PAS 16 and PAS 38.... if the parent records the direct costs as part of Investment in subsidiary....... giving rise to an effect wherein the direct costs will be part of the investment in the books of parent entity.......... The PFRS 3 accounting for these outlays is a result of the decision to record the identifiable assets acquired and liabilities assumed at fair value..........000) Consolidated buildings ........... a 66.. This view is supported by Hilton and Herauf in their book Modern Advanced Accounting in Canada... But because of the three reasons mentioned above.. et al (which is also Ernst and Young book.000 (9... 70............... Patent fair value at January 1........ WW Corp.... P45. In contrast. TT building acquisition-date fair value P300...000 P720. which seems to contradict their position in the discussion above) in chapter 24 end-of-the chapter problems...... 2010........000) Consolidated buildings ....... 7 th Edition (2013) which is an IFRS based discussion.....

. 1....000.000 plus P390....1 M Fv per share of stock……………………… P 16 P ? ? P 40 Pedro ltd issues 2 ½ shares in exchange for each ordinary share of Santi Ltd... as part of the exchange transaction.000... However.. Reverse acquisition occurs when the legal subsidiary has this form of control over the legal parent.) Currently issued…………………… 10 M 40% Additional shares issued………. 15 M 60% ** Total shares………………………… 25 M **15M/25M FV of net assets………………………P 18 M BV of net assets (same with FV)…....... 78.....000 * Man (Public Co.........100 Allocated excess……………………………………………………………………………… P 500 Less: Over/Under valuation of Assets and Liabilities: Increase in Non-current assets: [(P1.... Pedro Ltd therefore issues 150 shares (60 x 2 ½) for the 60 shares in Santi Ltd..... Consolidated balance is P420.500 – P1..7M)] P1..... The usual circumstance creating a reverse acquisition is where an entity (the legal parent) obtains ownership of the equity of another entity (the legal subsidiary) but..... 1.000 shares* x P6)…………………………P24...... which would require the assets and liabilities of Santi Ltd to be valued at fair value.P 360 * Currently issued…………………… Additional shares issued……….000 allocation to equipment is "pushed-down" to subsidiary and increases balance from P330.000 Allocated excess …………………………………………………………………P 6.... analyzing the shareholding in Pedro Ltd shows that it consists of the 100 shares existing prior to the merger and 150 new shares held by former shareholders in Santi Ltd.. d Consideration transferred (4.. based on Pedro Ltd being the legal parent of Santi Ltd.Cost of Investment (40 shares* x P40)………………………………………………………P 1....... The IASB argues that there has been a reverse acquisition.000 to P390. and that Santi Ltd is effectively the acquirer of Pedro Ltd.. The key accounting effect of deciding that Santi Ltd is the acquirer is that the assets and liabilities of Pedro ltd are to be valued at fair value...000. The former Santi Ltd shareholders have a 60% interest in Pedro Ltd [150/(100+150].. Pedro Ltd is now the legal parent of the subsidiary Santi Ltd..P 8 Mask (Private Co.600 Less: Book value of SHE – Pedro Ltd (P300 + P800) x 100%.......000...5M – P. 140 Goodwill…………………………………………………………………………………………..000.000 Less: Over/Under valuation of assets and liabilities (book value same fair value)…………………………………………… 0 Goodwill…………………………………………………………………………… P 6.300) x 100% x 70%. In essence. 18.000 x 100%..... Total shares………………………… 100% Pedro Ltd 100 40% 150 60%** 250 Santi Ltd 40 40% 60 / 60% 100 **150/250 FV of net assets [P. b .) 4 M 40% 6 M / 60% 10 M P30 M ? P 6 77.5M + P1.000. it issues enough voting equity as consideration for control of the combined entity to pass to the owners of the legal subsidiary.......000 Less: Book value of SHE – Man: P18.. the former shareholders of Santi Ltd now control both entities Pedro Ltd and Santi Ltd.3M BV of net assets (same with FV)……….. c P60.....000... 18 M Fv per share of stock……………….. This is contrary to normal acquisition accounting....000..... 76.... All of Santi Ltd’s shareholders exchange their shares for Pedro Ltd.

70) . 9.000 Fair value of Subsidiary: Consideration transferred P280.000 shares x 1.000 + $630.000 . 19. 24.000 P160. 20.P110.000 debit P150.000 = P600.000 .000 Buildings and equipment (net) 375.20) P50.000 .70 P180.000 shares x 1.000)] P70. 27.000 + P25.000 = P725.000 Less: BV of SHE of DD (P100.000 debit 3.000 or.000) P180.000 32.000)(.P12.000 = P30.000 + P230. 15.000 + P350.XV 1.000 + P120. 21.P44.000 = (P40. c 500.000 . 18. 2.000 + P460. Investment in DD stock will be fully eliminated and will not appear in the consolidated balance sheet 34.000 .P14.000 + $210.7 exchange ratio x P25 = P21.000 = ($60. 13.70) P201.000) Allocated excess P 20. Quiz.000 = P250. 31.7 exchange ratio x P25 = P21.000 = P56.P170. 23.000)(. c Target not met: 100.000 + P700.30) P80.000) P110.000 = (P430.000)] P90.000 = P460.000 P40.000 = (P10.79.000 .000 + P300.000 .250.000 + P600. Buildings and equipment.000 = [(P490.000 Target met: 250. 7.000 .000 + P700.000 .000.000) P56. 29.80 P80.P300.P60.000 + P230.000 80.000 credit (P260. since there are no revenues and expenses of the acquire up to the date of acquisition P525.000 . 8.000 debit (P600.000 Add: Existing goodwill (to be eliminated 30.000 = P490.000 33.8 x P30 = P13.P420.P450.30) P21.P120.000 + P80.000 .000 . 25.000 .000/.250.$250.000 P 5.000 = [(P560.000 + P350.250.000 .P300.000 . 11.P110.000 shares x .000 P99.000 – 260.000 Target met: 100.000 15.P210.(P50.000 Target not met: 250. 12. P290.000) P70.50 share x P30 = P11. 5.000)(.000 credit (P300.P5.000) = P280.000 . 10. 22.000) P700.P115. P35.P530.P45.000 .000 Less: Over/under valuation of A and L: Inc (Decrease) Inventory (P 10.000 debit P120.P370.000 – P10.000 shares x 1. 6.000 The investment value does not change as a result of a change in the share prices.000) Buildings and equipment (net) 25.P350.000 shares x .000 .000/.000 + P140.000 = (P220.(P30.000 Goodwill to be reported P 35. c 30.75 share x P10 = P750.000 . 28.000 = (P60.000 P130. (Approach used in business combination – statutory merger/consolidation) Fair value of consideration given P280. 4. 500.000 .000 + P180.P230. 16.000 shares x 1.000 .P8.000/. 26. The investment value does not change as a result of a change in the share prices.P620.000 debit (P300. 17.80) .000) P700.000 P80.000)(.000 Fair value of Decibel's net assets: Cash and receivables P 40.000 None.000 + P200.000) P90.000 + P200.P250.000 .8 P56.000) P260.000 = P560.000 . 14.000 = (P700.000/.000 Inventory 170.000 .8 x P10 = P800. Inventories (P110.000 = (P40.000/. net (P350.500.000 debit P50.000 .000 P469.

b 38. a c 49. c 16. d 39.000 (parent only.(P310. 40 . Total liabilities will increase by P95.Accounts payable Notes payable Fair value of net identifiable Assets Goodwill to be reported (90. b b 10. c 53. a 28. b 20. 45 . a 27.000 . P105. 42 . d 31 c 36. SHE of subsidiary is eliminated) The investment balance reported by Roof will be P192. D 14.000) (245. b 57. A 13. 2 . Total assets will increase by P310. 41 . 38 . d c 48. b 12. d a 7. The amount of goodwill for the entity as a whole will be P25. d 18. a 52.000 x . c c 46. b . d 40. c e 9.000 (parent only. 44 . c 32. c 22. Common stock.000) (250. c c 47. d 34. d 19. c 17. a c 50.000) . 3 . c 24.000 Note: Goodwill on books of DD is not an identifiable asset and therefore is not included in the computation of Decibel's net identifiable assets at the date of acquisition. b 23. b 29. SHE of subsidiary is eliminated) Retained earnings. d 54. 37 . 35. b 35. c 6. b 51. b 55. Non-controlling interest will be reported at P48. Theories 1 . 4 . d 21.000 [(P192. c 30. P400. 39 . d e 8.000)].000 (P240.P95. d 37. B 11.000.000) P 35.000.000. 5 . a 15.20). b 26. 43 . 41 . c 56. c 25.000 + P48. 36. c 33.