Solution Chapter 15 PDF

Chapter 15
Problem I
Investment in Shy Inc. [P2,500,000 + (15,000 P40)] 3,100,000
Cash 2,500,000
Common Stock 30,000
Paid in capital in excess of par (P40 - P2) 15,000 570,000
Paid in capital in excess of par 30,000

Acquisition Expense 67,000
Deferred Acquisition Charges 90,000
Acquisition Costs Payable 7,000
Problem II
Cash consideration transferred P 300,000
Contingent performance obligation __15,000
Fair value of Subsidiary P 315,000
Less: Book value of SS Company (P90,000 + P100,000) 190,000
Allocated excess P125,000
Less: Over/under valuation of assets and liabilities:
Increase in building: P40,000 x 100% P 40,000
Increase in customer list: P22,000 x 100% 22,000
Increase in R&D: P30,000 x 100% 30,000 __92,000
Goodwill P 33,000
Investment in SS Company 315,000

Cash 300,000
Estimated Liability on Contingent Consideration 15,000
Acquisition Expense 10,000

Cash 10,000
Not Required: The working paper eliminating entry on the date of acquisition, 6/30/20x4 would
be:
Receivables 80,000
Inventory 70,000
Buildings 115,000
Equipment 25,000
Customer list 22,000
Capitalized R&D 30,000
Goodwill 33,000
Current liabilities 10,000
Long-term liabilities 50,000
Investment in SS Company 315,000
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 + P75,000)x100% 705,000
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
Less: BV of SHE of S (P450,000 + P180,000 + P75,000) x 90% 634,500
Allocated excess P 40,500
Inventory (P30,000 P20,000) x 90% (P9,000)
Land (P50,000 P70,000) x 90% __18,000 __9,000
Goodwill partial P 31,500
Full-Goodwill
Consideration transferred (P675,000/90%) P750,000
Less: BV of SHE of S (P450,000 + P180,000 + P75,000)x100% 705,000
Inventory (P30,000 P20,000) x 100% (P10,000)
Land (P50,000 P70,000) x 100% __20,000 __10,000
Goodwill full P 35,000
C.
Partial Goodwill
Allocated excess (P306,000)
Inventory (P30,000 P20,000) x 80% (P 8,000)
Land (P50,000 P70,000) x 80% __16,000 __8,000
Bargain Purchase Gain partial (parent only) (P314,000)
Full-Goodwill
Consideration transferred P 318,000
FV of NCI* _158,000
P 476,000
Allocated excess (P304,000)
Inventory (P30,000 P20,000) x 100% (P10,000)
Land (P50,000 P70,000) x 100% __20,000 _10,000
Bargain Purchase Gain full (parent only) (P314,000)
*BV of SHE of S P780,000
Adjustments to reflect fair value 10,000
FV of SHE of S P790,000
x: NCI% 20%
FV of NCI P158,000
3.
A.
Common Stock Sewell 450,000
Paid in capital in excess of par Sewell 180,000
Retained Earnings Sewell 75,000
Land 20,000
Inventory 10,000
Investment in Sewell 675,000
Retained earnings (gain) Parent (since
balance sheet accounts are being
examined) 40,000
B.
Partial-Goodwill (Proportionate Basis)
Land 20,000
Goodwill 31,500
Inventory 10,000
Non-controlling Interest 71,500
BV SHE of Sewell
(P450,000 + P180,000 + P75,000) P705,000
FV of SHE of Sewell P715,000
x: NCI% 10%
FV of NCI (partial) P 71,500
Full-Goodwill (Fair Value Basis)
Land 20,000
Goodwill 35,000
Inventory 10,000
BV SHE of Sewell
(P450,000 + P180,000 + P75,000) P705,000
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)
Land 20,000
Inventory 10,000
Retained earnings (gain)Parent (refer to 3A) 314,000
BV SHE of Sewell
(P620,000 + P140,000 + P20,000) P780,000
x: NCI% 20%
FV of NCI (partial) P158,000
Full-Goodwill (Fair Value Basis)

Land 20,000
Inventory 10,000
Retained earnings (gain)Parent (refer to 3A) 314,000
BV SHE of Sewell
(P620,000 + P140,000 + P20,000) P780,000
x: NCI% 20%
FV of NCI (full) P158,000
Problem IV
1.
January 1, 20x4
Investment in S Company 408,000
Cash.. 408,000
2.
Schedule of Determination and Allocation of Excess
Date of Acquisition January 1, 20x4
Fair value of Subsidiary (100%)
Consideration transferred.. P 408,000
Less: Book value of stockholders equity of S:
Common stock (P240,000 x 100%).. P 240,000
Paid-in capital in excess of par (P24,000 x 100%)... 24,000
Retained earnings (P96,000 x 100%)... 96,000 360,000
Allocated excess (excess of cost over book value) P 48,000
Increase in inventory (P18,000 x 100%).. P 18,000
Increase in land (P72,000 x 100%) 72,000
Decrease in buildings and equipment
(P12,000 x 100%)... ( 12,000)
Increase in bonds payable (P42,000 x 100%).. ( 42,000) 36,000
Positive excess: Goodwill (excess of cost over fair
value).. P 12,000
3.
(E1) Common stock S Co. 240,000
Additional paid-in capital S Co. 24,000
Retained earnings S Co... 96.000
Investment in S Co 360,000
Eliminate investment against stockholders equity of S Co.
(E2) Inventory. 18,000

Land. 72,000
Goodwill. 12,000
Buildings and equipment.. 12,000
Premium on bonds payable 42,000
Investment in S Co.. 48,000
Eliminate investment against allocated excess.
4.
Eliminations
Assets P Co. S Co. Dr. Cr. Consolidated
Cash*. P 12,000 P 60,000 P 72,000
Accounts receivable.. 90,000 60,000 150,000
Inventory. 120,000 72,000 (2) 18,000 210,000
Land. 210,000 48,000 (2) 72,000 330,000
Buildings and equipment (net) 480,000 360,000 (2) 12,000 828,000
Goodwill (2) 12,000 12,000
Investment in S Co. 408,000 (1) 360,000
(2) 48,000 -
Total Assets P1,320,000 P600,000 P1,602,000
Liabilities and Stockholders Equity
Accounts payable P 120,000 P120,000 P 240,000
Bonds payable 240,000 120,000 360,000
Premium on bonds payable (3) 42,000 42,000
Common stock, P10 par 600,000 600,000
Common stock, P10 par 240,000 (1) 240,000
Paid in capital in excess of par. 60,000 60,000
Paid in capital in excess of par. 24,000 (1) 24,000
Retained earnings 300,000 300,000
Retained earnings _________ 96,000 (1) 96,000 __________ _________
Total Liabilities and Stockholders
Equity P1,320,000 P600,000 P 462,000 P 462,000 P1,602,000
(1) Eliminate investment against stockholders equity of S Co.
(2) Eliminate investment against allocated excess.
* P420,000 P408,000 = P12,000.
5.
Assets
Cash P 72,000
Accounts receivables 150,000
Inventories 210,000
Land 330,000
Buildings and equipment (net) 828,000
Goodwill 12,000
Total Assets P1,602,000

Liabilities
Accounts payable P 240,000
Bonds payable P 360,000
Premium on bonds payable 42,000 402,000
Total Liabilities P 642,000
Stockholders Equity
Common stock, P10 par P 600,000
Paid-in capital in excess of par 60,000
Retained earnings 300,000
Total Stockholders Equity P 960,000
Total Liabilities and Stockholders Equity P1,602,000
Problem V
1.
January 1, 20x4
(1) Investment in S Company 432,000
Cash.. 288,000
Common stock, P10 par.. 120,000
Paid-in capital in excess of par. 24,000
(2) Retained earnings (acquisition-related expense - close to

retained earnings since only balance sheets are being
examined) 12,000
Cash. 12,000
Acquisition- related costs.
(3) Paid-in capital in excess of par.. 8,400

Cash. 8,400
Costs to issue and register stocks.
2.

Consideration transferred
Cash. P 288,000
Common stock: 12,000 shares x P12 per share.. 144,000 P 432,000
Common stock (P240,000 x 100%).. P 240,000
Paid-in capital in excess of par (P96,000 x 100%).. 96,000
Add: Existing Goodwill of Sky Co. (P6,000 x 100%) 6,000
Adjusted allocated excess. P 78,000
(P12,000 x 100%)... ( 12,000)
value).. P 42,000
Alternatively, the unrecorded goodwill may also be computed by ignoring the existing
goodwill in the books of the subsidiary, thus:
Date of Acquisition January 1, 20x4 (refer to previous table for details of computation)
Consideration transferred P 432,000
Less: Book value of stockholders equity of S.. 360,000
Allocated excess (excess of cost over book value). P 72,000
Less: Over/under valuation of assets and liabilities 36,000
Positive excess: Goodwill (excess of cost over fair value)... P 36,000
Add: Existing Goodwill 6,000
value) P 42,000
3.
Eliminations
Cash*.. P 111,600 P 54,000 P 165,600
Inventory. 120,000 72,000 (2) 18,000 210,000
Land. 210,000 48,000 (2) 72,000 330,000
Buildings and equipment (net) 480,000 360,000 (2) 12,000 828,000
Goodwill 6,000 (2) 36,000 42,000
Investment in S Co. 432,000 (4) 360,000
(5) 72,000 -
Total Assets P1,443,600 P600,000 P1,725,600
Accounts payable P 120,000 P120,000 P 240,000
Bonds payable 240,000 120,000 360,000
Common stock, P10 par**.. 720,000 720,000
Additional paid in capital*** 75,600 75,600
Additional paid in capital 24,000 (1) 24,000
Retained earnings**** 288,000 288,000
Retained earnings _________ 96,000 (1) 96,000 __________ _________
Equity P1,443,600 P600,000 P 486,000 P 486,000 P1,725,600
(1) Eliminate investment against stockholders equity of Sky Co.
* P420,000 P288,000 P12,000 P8,400 = P111,600.
* *P600,000 + P120,000 (12,000 shares x p10 par) = P720,000.
*** P50,000 + P20,000 P7,000 = P63,000.
****P300,000 P12,000 = P288,000.
4.
Assets
Cash P 165,600
Inventories 210,000
Land 330,000
Goodwill 42,000

Liabilities
Stockholders Equity
Additional paid-in capital in excess of par 75,600
Total Stockholders Equity P 1083,600
Problem VI
1.

Consideration transferred (P408,000 P6,000).. P 402,000
Common stock (P240,000 x 100%).. P 240,000
(P12,000 x 100%)... ( 12,000)
value).. P 6,000
2. Goodwill, P6,000
Problem VII
1.

Consideration transferred:
Common stock: 24,000 shares x P14 per share P 336,000
Less: Book value of stockholders equity of Sky:
Common stock (P240,000 x 100%).. P 240,000
Allocated excess (excess of book value over cost) (P 24,000)
(P12,000 x 100%)... ( 12,000)
Increase in patent (P24,000 x 100%)... 24,000
Increase in contingent liability (P18,000 x 100%). ( 18,000)
Negative excess: Bargain Purchase Gain (excess of
fair value over cost) (P 66,000)
2. Gain on acquisition, P66,000

Problem VIII
Case 1:
Proportionate Basis (Partial-goodwill Approach)
Partial-goodwill
Fair value of subsidiary (80%):
Consideration transferred: Cash.......P12,000,000 (80%)
Less: Book value of stockholders equity (net assets)
S Company: P7,200,000 x 80%................................. 5,760,000 (80%)
Allocated excess.........P 6,240,000 (80%)
Less: Over/undervaluation of assets and liabilities:
(P9,600,000 P7,200,000) x 80%....................................... 1,920,000 (80%)
Positive excess: Goodwill (partial)..... P 4,320,000 (80%)
Non-controlling interest
Book Value of stockholders equity of subsidiary. P 7,200,000
Adjustments to reflect fair value (over/ undervaluation
of assets and liabilities): (P9,600,000 P7,200,000).. 2,400,000
Fair value of stockholders equity of subsidiary P 9,600,000
Multiplied by: Non-controlling interest percentage............ 20%
Non-controlling Interest (partial).. P1,920,000
Fair Value Basis (Full-goodwill Approach)
Full-goodwill
Consideration transferred: Cash (P12,000,000 / 80%).. P15,000,000 (100%)
S Company: P7,200,000 x 100%.............................. 7,200,000 (100%)
Allocated excess... P 7,800,000 (100%)
Less: Over/Undervaluation of assets and liabilities:
(P9,600,000 P7,200,000) x 100%.................................... 2,400,000 (100%)
Positive excess: Goodwill (full)........P 5,400,000 (100%)
The full goodwill of P5,400,000 consists of two parts:
Full-goodwill....... P 5,400,000
Less: Controlling interest on full-goodwill
or partial-goodwill... 4,320,000
NCI on full-goodwill.......P 1,080,000
Non-controlling interest (partial).......P1,920,000
Add: Non-controlling interest on full -goodwill
(P5,400,000 P4,320,000 partial-goodwill) or
(P5,400,000 x 20%)*...... 1,080,000
Non-controlling interest (full)........P3,000,000
* applicable only when the fair value of the non-controlling interest of subsidiary is not given.
Case 2:
Partial-goodwill
Consideration transferred: Cash.....P 7,560,000 (60%)
S Company: P6,000,000 x 60%................................ 3,600,000 (60%)
Allocated Excess...... P 3,960,000 (60%)
(P8,400,000 P6,000,000) x 60%...................................... 1,440,000 (60%)
Positive excess: Goodwill (partial).... P 2,520,000 (60%)
Book value of stockholders equity of subsidiary. P 6,000,000
of assets and liabilities): (P8,400,000 P6,000,000). 2,400,000
Fair value of stockholders equity of subsidiary.P 8,400,000
Multiplied by: Non-controlling Interest percentage............ 40%
Non-controlling interest (partial).P 3,360,000

Full-goodwill
Consideration transferred: Cash ...P 7,560,000 ( 60%)
Fair value of NCI (given).. 4,800,000 ( 40%)
Fair value of subsidiary...P12,360,000 (100%)
S Company: P6,000,000 x 100%........................... 6,000,000 (100%)
Allocated Excess...P 6,360,000 (100%)
(P8,400,000 P6,000,000) x 100%.................................. 2,400,000 (100%)
Positive excess: Goodwill (full)......P 3,960,000 (100%)

Full-goodwill...P 3,960,000
or partial-goodwill. 2,520,000
NCI on full-goodwill..P 1,440,000
Non-controlling interest (partial)P 3,360,000
(P3,960,000 P2,520,000 partial-goodwill).. 1,440,000
Non-controlling Interest (full)..P 4,800,000
Case 3;
Partial-goodwill
Consideration transferred: Cash..P 9,000,000 (75%)

S Company: P7,200,000 x 75%.......................... 5,400,000 (75%)
Allocated Excess....P 3,600,000 (75%)
(P9,600,000 P7,200,000) x 75%................................. 1,800,000 (75%)
Positive excess: Goodwill (partial).P 1,800,000 (75%)
Book value of stockholders equity of subsidiary..P 7,200,000
Fair value of stockholders equity of subsidiaryP 9,600,000
Non-controlling interest (partial).P 2,400,000

Full-goodwill
Fair value of subsidiary. P 11,640,000 (100%)
S Company: P7,200,000 x 100%........................... 7,200,000 (100%)
Allocated Excess..P 4,440,000 (100%)
(P9,600,000 P7,200,000) x 100%.................................. 2,400,000 (100%)
Positive excess: Goodwill (full).....P 2,040,000 (100%)

Full-goodwill...P 2,040,000
or partial-goodwill.... 1,800,000
NCI on full-goodwill. .P 240,000
Non-controlling interest (partial)P 2,400,000
(P2,040,000 P1,800,000 partial-goodwill)....... 240,000
Non-controlling Interest (full)..P 2,640,000
Case 4:
Partial-goodwill
Fair value of previously held equity interest
in acquiree P2,592,000/60% = P4,320,000 x 15%......... 648,000 (15%)
Fair value of Subsidiary ... P 3,240,000 (75%)
S Company: (P4,680,000 P2,280,000) x 75%......... 1,800,000 (75%)
Allocated Excess.....P 1,440,000 (75%)
[(P6,120,000 P2,280,000)
(P4,680,000 P2,280,000)] x 75%................................ 1,080,000 (75%)
Positive excess: Goodwill (partial)... P 360,000 (75%)
Book value of stockholders equity of subsidiary..P 2,400,000
Fair value of stockholders equity of subsidiaryP 3,840,000
Non-controlling interest (partial)P 960,000

Full-goodwill
Fair value of previously held equity interest
in acquiree P2,592,000/60% = P4,320,000 x 15%...... 648,000 (15%)
Fair value of NCI (given). 1,080,000 (25%)
Fair value of subsidiary.P 4,320,000 (100%)
S Company: P2,400,000 x 100%........................ 2,400,000 (100%)
Allocated Excess...P 1,920,000 (100%)
(P3,840,000 P2,400,000) x 100%................................ 1,440,000 (100%)
Positive excess: Goodwill (full)...P 480,000 (100%)
The full goodwill of P480,000 consists of two parts:

Full-goodwill...P 480,000
or partial-goodwill. 360,000
NCI on full-goodwill..P 120,000
Non-controlling interest (partial)P 960,000
(P480,000 P360,000 partial-goodwill)....... 120,000
Non-controlling Interest (full)P 1,080,000
Problem IX
Partial-goodwill (Proportionate Basis)
Consideration transferred: Cash.. P270,000 (75%)
Less: Book value of stockholders equity
(net assets) S Company:
(P480,000 P228,000) x 75%....................................... 189,000 (75%)
Allocated excess... P 81,000 (75%)
[(P612,000 P228,000) (P480,000 P228,000) x 75% 99,000 (75%)
Negative excess: Bargain purchase gain (to controlling
interest or attributable to parent only). (P18,000) (75%)
Full-goodwill (Fair Value Basis)

Consideration transferred: Cash.. P270,000 ( 75%)
Fair value of non-controlling interest (given) 98,400 ( 25%)
Fair value of subsidiary P368,400 (100%)
Less: Book value of stockholders equity
(net assets) S Company:
(P480,000 P228,000) x 100%..................................... 252,000 (100%)
Allocated excess... P116,400 (100%)
[(P612,000 P228,000) (P480,000 P228,000) x 100% 132,000 (100%)
Negative excess: Bargain purchase gain (to controlling
interest or attributable to parent only). (P15,600) (100%)
Problem X
Partial-goodwill Approach
Schedule of Determination and Allocation of Excess (Partial-goodwill)
Consideration transferred.. P 360,000
Common stock (P240,000 x 80%). P 192,000
Paid-in capital in excess of par (P96,000 x 80%).... 76,800
Retained earnings (P24,000 x 80%).... 19,200 288,000
Allocated excess (excess of cost over book value).. P 72,000
Increase in inventory (P18,000 x 80%) P 14,400
Increase in land (P72,000 x 80%). 57,600
(P12,000 x 80%)..... ( 9,600)
Increase in bonds payable (P42,000 x 80%). ( 33,600) 28,800
Positive excess: Partial-goodwill (excess of cost over
fair value)... P 43,200
The over/under valuation of assets and liabilities are summarized as follows:

Sky Co. Sky Co. Over/ Under
Book value Fair value Valuation
Inventory... 72,000 90,000 18,000
Land 48,000 120,000 72,000
Buildings and equipment (net)......... 360,000 348,000 ( 12,000)
Bonds payable (120,000) (162,000) 42,000
Net.. 360,000 396,000 36,000
The buildings and equipment will be further analyzed for consolidation purposes as follows:
Sky Co. Sky Co.
Book value Fair value (Decrease)
Buildings and equipment .................. 720,000 348,000 ( 372,000)
Less: Accumulated depreciation.. 360,000 - ( 360,000)
Net book value... 360,000 348,000 ( 12,000)
The following entry on the date of acquisition in the books of Parent Company:
January 1, 20x4
(1) Investment in Sky Company 360,000
Cash.. 360,000
Acquisition of Sky Company.

examined) 14,400
Cash. 14,400
The schedule of determination and allocation of excess provides complete guidance for the
worksheet eliminating entries on January 1, 20x4:
(E1) Common stock Sky Co. 240,000
Additional paid-in capital Sky Co. 24,000
Retained earnings Sky Co... 96,000
Investment in Sky Co 288,000
Non-controlling interest (P300,000 x 20%).. 72,000
Eliminate investment against stockholders equity of Sky Co.

Accumulated depreciation. 360,000
Land. 72,000
Goodwill. 43,200
Investment in Sky Co.. 72,000
Worksheet for Consolidated balance Sheet, January 1, 20x4. Date of Acquisition: 80%-Owned
Subsidiary (Partial-goodwill)
Eliminations
Assets Peer Co. Sky Co. Dr. Cr. Consolidated
Cash*. P 45,600 P 60,000 P 105,600
Inventory. 120,000 72,000 (2) 18,000 210,000
Land. 210,000 48,000 (2) 72,000 330,000
Buildings and equipment 960,000 720,000 (2) 372,000 1,308,000

Goodwill (2) 43,200 43,200
Investment in Sky Co. 360,000 (1) 288,000
(2) 72,000 -
Total Assets P1,785,600 P960,000 P 2,146,800
Accumulated depreciation P 480,000 P360,000 (2) 360,000 P 480,000
Accounts payable 120,000 120,000 240,000
Bonds payable 240,000 120,000 360,000
Retained earnings** 285,600 285,600
Retained earnings 96,000 (1) 96,000
Non-controlling interest (1 ) 72,000
_________ _______ _________ (2) 7,200 _79,200
Equity P1,785,600 P960,000 P 853,200 P 853,200 P2,146,800
* P420,000 P360,000 P14,400 = P45,600.
**P300,000 P14,400 = P285,600.
Incidentally, the non-controlling interest on the date of acquisition is computed as

follows:
Common stock Sky company P 240,000
Paid-in capital in excess of par Sky co 24,000
Book value of stockholders equity Sky Co.... P 360,000
of assets and liabilities). 36,000
Fair value of stockholders equity of subsidiary P 396,000
Multiplied by: Non-controlling Interest percentage... 20
Non-controlling interest (partial).. P 79,200
The balance sheet:

Peer Company and Subsidiary
Consolidated Balance Sheet
January 1, 20x4
Assets
Cash P 105,600
Inventories 210,000
Land 330,000
Buildings and equipment 1,308,000
Accumulated depreciation ( 480,000)
Goodwill 43,200

Liabilities
Stockholders Equity
Parents Stockholders Equity/Equity Attributable to the
Owners of the Parent P 945,600
Non-controlling interest 79,200
Total Stockholders Equity (Total Equity) P 1,024,800
Full-goodwill Approach
Schedule of Determination and Allocation of Excess (Full-goodwill)

Consideration transferred (P360,000 / 80%).. P 450,000
Common stock (P240,000 x 100%). P 240,000
Paid-in capital in excess of par (P96,000 x 100%).. 96,000
Allocated excess (excess of cost over book value).. P 90,000
(P12,000 x 100%)..... ( 12,000)
Increase in bonds payable (P42,000 x 100%). ( 42,000) 36,000
Positive excess: Full -goodwill (excess of cost over
fair value)... P 54,000
January 1, 20x4
(1) Investment in Sky Company 360,000
Cash.. 360,000
Acquisition of Sky Company.

examined) 14,400
Cash. 14,400
240,000
(E1) Common stock Sky Co.
Additional paid-in capital Sky Co. 24,000
Investment in Sky Co 288,000
Eliminate investment against stockholders equity of Sky Co.

Accumulated depreciation. 360,000
Land. 72,000
Goodwill. 54,000
Non-controlling interest [(P30,000 x 20%) +
(P45,000 P36,000)]. 18,000
Investment in Sky Co.. 72,000
Subsidiary (Full-goodwill)
Eliminations
Assets Peer Co. Sky Co. Dr. Cr. Consolidated
Cash*. P 45,600 P 60,000 P 105,600
Inventory. 120,000 72,000 (2) 18,000 210,000
Land. 210,000 48,000 (2) 72,000 330,000
Buildings and equipment 960,000 720,000 (2) 372,000 1,308,000

Goodwill (2) 54,000 54,000
Investment in Sky Co. 360,000 (1) 288,000
(2) 72,000 -
Total Assets P1,785,600 P960,000 P 2,157,600
Accumulated depreciation P 480,000 P360,000 (2) 360,000 P 480,000
Accounts payable 120,000 120,000 240,000
Bonds payable 240,000 120,000 360,000
Retained earnings** 285,600 285,600
_________ _______ _________ (2) 18,000 _90,000
Equity P1,785,600 P960,000 P 864,000 P 864,000 P2,157,600
* P420,000 P360,000 P14,400 = P45,600.
**P300,000 P14,400 = P285,600.

follows:
Add: Non-controlling interest (P54,000, full P43,200, partial). 10,800
Non-controlling interest (full). P 90,000
The balance sheet;

Peer Company and Subsidiary
Consolidated Balance Sheet
January 1, 20x4
Assets
Cash P 105,600
Inventories 210,000
Land 330,000
Buildings and equipment 1,308,000
Accumulated depreciation ( 480,000)
Goodwill 54,000

Liabilities
Stockholders Equity
Parents Stockholders Equity/Equity Attributable to the P 945,600
Owners of the Parent
Total Stockholders Equity (Total Equity) P 1,035,600
Problem XI
Partial-goodwill Approach (Proportionate Basis)
Schedule of Determination and Allocation of Excess (Proportionate Basis))
Common stock: 12,000 shares x P25 per share... P 300,000
Common stock (P12,000 x 80%). P 9,600
Increase in buildings and equipment
(P150,000 x 80%)...... 120,000
Increase in copyrights (P60,000 x 80%).. 48,000
Increase in contingent liabilities estimated
liability for contingencies (P6,000 x 80%)..... ( 4,800) 196,800
Negative excess: Bargain purchase gain to controlling
interest or attributable to parent only).. (P 50,400)
The over/under valuation of assets and liabilities are summarized as follows:
S Co. S Co. Over/Under

Book value Fair value Valuation
Inventory.... P 60,000 P 66,000 P 6,000
Land. 48,000 84,000 36,000
Buildings and equipment (net)......... 222,000 372,000 150,000
Copyright.. -0- 60,000 60,000
Estimated liability for contingencies.. 0 ( 6,000) ( 6,000)
Net undervaluation. P 330,000 P 576,000 P246,000
The following entry on the date of acquisition in the books of Parent Company
January 1, 20x4
(1) Investment in S Company... 300,000
Common stock, P1 par 12,000
Paid-in capital in excess of par (P300,000 P12,000 par).. 288,000
Acquisition of S Company.
Retained earnings S Co 72,000
Eliminate investment against stockholders equity of S Co
(E2) Inventory.. 6,000

Land.. 36,000
Buildings and equipment 150,000
Copyright.... 60,000
Estimated liability for contingencies.. 6,000
Investment in S Co... 146,400
Non-controlling interest (P246,000 x 20%). 49,200
Retained earnings (bargain purchase gain - closed to
examined)............................................................................. 50,400
Subsidiary (Proportionate Basis)
Eliminations
Cash P 334,800 P 334,800
Accounts receivable.. 86,400 P 24,000 110,400
Inventory. 96,000 60,000 (2) 6,000 162,000
Land 120,000 48,000 (2) 36,000 204,000
Buildings and equipment (net). 744,000 222,000 (2) 150,000 1,116,000

Copyright... (2) 60,000 60,000
Investment in S Co.. 300,000 (1) 153,600
__________ _________ (2) 146,400 -
Total Assets P1,681,200 354,000 P1,987,200
Accounts payable P 96,000 42,000 P 138,000
Estimated liability for
contingencies (2) 6,000 6,000
Bonds payable 240,000 120,000 360,000
Common stock, P1 par*.. 44,160 44,160
Paid-in capital in excess of
par** 723,840 723,840
Paid-in capital in excess of par 108,000(1) (1) 108,000
Retained earnings 577,200 (2) 50,400 627,600
_________ _______ _________ (2) 49,200 _87,600
Equity P1,681,200 P354,000 P 444,000 P 444,000 P1,987,200
(1) Eliminate investment against stockholders equity of Scud Co.
* P32,160 + (12,000 shares xP1 par) = P44,160.
**P435,840 + [12,000 shares x (P25 P1)] = P723,840.
follows:
Common stock S Co. P 12,000
Paid-in capital in excess of par S Co.. 108,000
Book value of stockholders equity S Co. P 192,000
of assets and liabilities). 246,000
Fair value of stockholders equity of subsidiary P 438,000
Multiplied by: Non-controlling Interest percentage... 20
The balance sheet:
Assets
Cash P 334,800
Inventories 162,000
Land 204,000
Buildings and equipment (net) 1,116,000
Copyright 60,000

Liabilities
Estimated liability for contingencies 6,000
Bonds payable 360,000
Stockholders Equity
Owners of the Parent P1,395,600
Total Stockholders Equity (Total Equity) P1,483,200
Full-goodwill Approach (Fair Value Basis)
Schedule of Determination and Allocation of Excess (Full-goodwill or Fair Value Basis)
Common stock: 12,000 x P25 (80%) P 300,000
Fair value of NCI (given) (20%). 90,000
Fair value of subsidiary (100%). P 390,000
Common stock (P12,000 x 100%). P 12,000
Paid-in capital in excess of par (P108,000 x 100%). 108,000
Increase in buildings and equipment
(P150,000 x 100%).... 150,000
Increase in copyrights (P60,000 x 100%) 6,000
Increase in contingent liabilities estimated
liability for contingencies (P6,000 x 100%).. ( 6,000) 246,000
Negative excess: Bargain purchase gain to controlling
interest or attributable to parent only).. (P 48,000)
January 1, 20x4
(1) Investment in S Company... 300,000
Common stock, P1 par 12,000
Paid-in capital in excess of par (P300,000 P12,000 par).. 288,000
Acquisition of S Company.
Eliminate investment against stockholders equity of S Co
(E2) Inventory.. 6,000

Land.. 36,000
Buildings and equipment 150,000
Copyright.... 60,000
Estimated liability for contingencies.. 6,000
Investment in S Co... 146,400
Non-controlling interest (P90,000 given P38,400) 51,600
Retained earnings (bargain purchase gain - closed to
examined)............................................................................. 48,000
Subsidiary (Fair Value Basis)
Eliminations
Cash P 334,800 P 334,800
Accounts receivable.. 86,400 P 24,000 110,400
Inventory. 96,000 60,000 (2) 6,000 162,000
Land 120,000 48,000 (2) 36,000 204,000
Buildings and equipment (net). 744,000 222,000 (2) 150,000 1,116,000

Copyright... (2) 60,000 60,000
Investment in S Co.. 300,000 (1) 153,600
__________ _________ (2) 146,400 -
Total Assets P1,681,200 P354,000 P1,987,200
Accounts payable P 96,000 42,000 P 138,000
Estimated liability for
contingencies (2) 6,000 6,000
Bonds payable 240,000 120,000 360,000
Common stock, P1 par*.. 44,160 44,160
Paid-in capital in excess of par** 723,840 723,840
Paid-in capital in excess of par 108,000(2) (1) 108,000
Retained earnings 577,200 (2) 48,000 625,200
_________ _______ _________ (2) 51,600 _90,000
Equity P1,681,200 P354,000 P 444,000 P 444,000 P1,987,200
(1) Eliminate investment against stockholders equity of Scud Co.
* P32,160 + (12,000 shares xP1 par) = P44,160.
**P435,840 + [12,000 shares x (P25 P1)] = P723,840.
The balance sheet:
Assets
Cash P 334,800
Inventories 162,000
Land 204,000
Buildings and equipment (net) 1,116,000
Copyright 60,000

Liabilities
Estimated liability for contingencies 6,000
Bonds payable 360,000
Stockholders Equity
Owners of the Parent P1,393,200
Total Stockholders Equity (Total Equity) P1,483,200
Problem XII
1. Inventory P 140,000
2. Land P 60,000
3. Buildings and Equipment P 550,000
4. Goodwill
Fair value of consideration given P 576,000

Less; Book value of SHE 450,000
Allocated excess: P126,000
Increase / decrease in fair value (Fair value
increment) for:
Inventory P 20,000
Land (10,000)
Buildings and equipment 70,000 80,000
Goodwill P 46,000
5. Investment in AA Corporation: Nothing would be reported; the balance in the
investment account is eliminated.
Problem XIII
1. Inventory (P120,000 + P20,000) P140,000
2. Land (P70,000 P10,000) P 60,000
3. Buildings and Equipment (P480,000 + P70,000) 550,000
4. Full-Goodwill, P57,500
Add: FV of NCI 117,500 P587,500
Less: BV of SHE of Slim (P250,000 + P200,000) 450,000
Inventory P 20,000
Land (10,000)
Buildings and equipment (net) 70,000 80,000
or,
Fair value of consideration given by Ford P470,000
Fair value of noncontrolling interest 117,500
Total fair value P587,500
Book value of Slims net assets P450,000
Fair value increment for:
Inventory 20,000
Land (10,000)
Fair value of identifiable net assets (530,000)
Goodwill - full P 57,500
Partial Goodwill, P46,000

Less: BV of SHE of Slim (P250,000 + P200,000) x 80% 360,000
Inventory (P20,000 x 80%) P 16,000
Land (P10,000 x 80%) ( 8,000)
Buildings and equipment (net) (P70,000 x 80%) 56,000 64,000
5. Investment in Slim Corporation: None would be reported;

the balance in the investment account is eliminated.
Noncontrolling Interest (P587,500 x .20) P117,500
6.
or,
BV SHE of SS P450,000
Adjustments to reflect fair value (P20,000 P10,000 +P 70,000) 80,000
FV of SHE of SS P530,000
Multiplied by: NCI % 20%
NCI partial goodwill P106,000
Add: NCI on full-goodwill (P57,500 P46,000) 11,500
NCI full goodwill P117,500
Problem XIV
(Overview of the steps in applying the acquisition method when shares have been issued to
create a combination No. 8 includes a bargain purchase.)
1. The fair value of the consideration includes
Fair value of stock issued P1,500,000
Contingent performance obligation 30,000
Fair value of consideration transferred P1,530,000
2. Under the acquisition method, stock issue costs reduce additional paid-in capital.
3. The acquisition method records direct costs such as fees paid to investment banks for
arranging the combination as expenses.
4. The par value of the 20,000 shares issued is recorded as an increase of P20,000 in the
Common Stock account. The P74 fair value in excess of par value (P75 P1) is an
increase to additional paid-in capital of P1,480,000 (P74 20,000 shares).
5. Fair value of consideration transferred (above) P1,530,000
Receivables P 80,000
Patented technology 700,000
Customer relationships 500,000
IPR&D 300,000
Liabilities (400,000) 1,180,000
Goodwill P 350,000
6. Revenues and expenses of the subsidiary from the period prior to the combination are
omitted from the consolidated totals. Only the operational figures for the subsidiary after
the purchase are applicable to the business combination. The previous owners earned
any previous profits.
7. The subsidiarys Common Stock and Additional Paid-in Capital accounts have no
impact on the consolidated totals.
8. The fair value of the consideration transferred is now P1,030,000. This amount indicates a
bargain purchase:
Fair value of consideration transferred (above) P1,030,000
Receivables P 80,000
Patented technology 700,000
Customer relationships 500,000
IPR&D 300,000
Liabilities (400,000) 1,180,000
Gain on bargain purchase P 150,000
Problem XV
In acquisitions, the fair values of the subsidiary's assets and liabilities are consolidated (there are
a limited number of exceptions). Goodwill is reported as P80,000, the amount that the P760,000
consideration transferred exceeds the P680,000 fair value of SSs net assets acquired.
1. Inventory = P670,000 (P's book value plus Sun's fair value)

2. Land = P710,000 (P's book value plus Sun's fair value)
3. Buildings and equipment = P930,000 (P's book value plus S's fair value)
4. Franchise agreements = P440,000 P's book value plus S's fair value)
5. Goodwill = P80,000 (calculated above)
6. Revenues = P960,000 (only parent company operational figures are reported at date of
acquisition)
7. Additional Paid-in Capital = P65,000 (P's book value less stock issue costs)
8. Expenses = P940,000 (only parent company operational figures plus acquisition-related costs
are reported at date of acquisition)
9. Retained Earnings, 1/1 = P390,000 (P's book value)
Problem XVI
1. A total of P210,000 (P120,000 + P90,000) should be reported.
2. As shown in the investment account balance, Beryl paid P110,000 for the ownership of SS. The
amount paid was P30,000 greater than the book value of the net assets of SS and is reported
as goodwill in the consolidated balance sheet at January 1, 20X5.
3. In determining the amount to be reported for land in the consolidated balance sheet,
P15,000 (P70,000 + P50,000 - P105,000) was eliminated. BB apparently sold the land to SS for
P25,000 (P10,000 + P15,000).
4. Accounts payable of P120,000 (P75,000 + P55,000 - P10,000) will be reported in the
consolidated balance sheet. A total of P10,000 was deducted in determining the balance
reported for accounts receivable (P90,000 + P50,000 - P130,000). The elimination of an
intercompany receivable must be offset by the elimination of an intercompany payable.
5. The par value of B's stock outstanding is P100,000.
Problem XVII refer also to Multiple Choice; Nos. 24-32

Cash: P74,000 = P44,000 + P30,000
Accounts receivable: P155,000 = P110,000 + P45,000
Inventory: P215,000 = [P130,000 + P70,000 + (P85,000 P70,000)]
Land: P125,000 = [P80,000 + P25,000 + (P45,000 P25,000)]
Buildings and equipment: P900,000 = P500,000 + P400,000
Accumulated depreciation: P388,000 = P223,000 + P165,000
Goodwill (full-goodwill) = P40,000*
Total Assets = P1,121,000 = (P74,000 + P155,000 + P215,000 + P125,000 + P900,000
P388,000 + P40,000, or:
Total Assets of Power Corp. P 791,500
Less: Investment in Silk Corp. (150,500)
P 641,000
Book value of assets of Silk Corp. 405,000
Book value reported by Power and
Silk P1,046,000
Increase in inventory (P85,000 - P70,000) 15,000
Increase in land (P45,000 - P25,000) 20,000
Goodwill 40,000
Total assets reported (based on full-
goodwill) P1,121,000
Accounts payable: P89,500 = P61,500 + P28,000

Taxes payable P132,000 = P95,000 + P37,000
Bonds payable: P480,000 = P280,000 + P200,000
Total liabilities: P701,500 = P89,500 + P132,000 + P480,000
Common stock: P150,000, parent only
Retained earnings: P205,000, the amount reported by parent
Non-controlling interest (full-goodwill): P64,500*
Stockholders equity: P419,500
Consolidated SHE:
Common stock P150,000
Retained Earnings 205,000
Parents SHE or Equity Attributable to Parent P355,000
NCI (full-goodwill) 64,500
Consolidated SHE P419,500
Computation of Goodwill:
Full-goodwill:
Add: FV of NCI **64,500 P215,000
Less: BV of SHE of SS (P50,000 + P90,000) x 100% 140,000
Inventory (P70,000 P85,000) x 100% P 15,000
Land (P25,000 P45,000) x 100% 20,000 35,000
**given amount, but it should not be lower than the fair value of SHE subsidiary amounting to
P52,500 computed as follows :
FV of SHE of SS:
Book value of SHE of SS (P50,000 + P90,000).P 140,000
Adjustments to reflect fair value (P15,000 + P20,000) 35,000
FV of SHE of SS P 175,000
Multiplied by: NCI%.......................................................... 30%
FV of NCI (partial)..P 52,500
or,
Partial Goodwill
Less: BV of SHE of SSD (P50,000 + P90,000) x 70% __98,000
Inventory (P15,000 x 70%) P 10,500
Land (P20,000 x 70%) 14,000 24,500
If partial-goodwill:
Total Assets = P1,109,000 = (P74,000 + P155,000 + P215,000 + P125,000 + P900,000
P388,000 + P28,000,
Non-controlling interest (partial-goodwill): P52,500
NCI
FV of SHE of SSD:
FV of SHE of SSD P 175,000
Consolidated SHE:
Parents SHE or Equity Attributable to Parent P 355,000
NCI (partial-goodwill) 52,500
Problem XVIII
1. P470,000 = P470,000 - P55,000 + P55,000
2. P605,000 = (P470,000 - P55,000) + P190,000
3. P405,000 = P270,000 + P135,000
4. P200,000 (as reported by GG Corporation)
Problem XIX
1. P57,000 = (P120,000 - P25,000) x .60
2. P81,000 = (P120,000 - P25,000) + P40,000 - P54,000
3. P48,800 = (P120,000 - P25,000) + P27,000 - P73,200
Problem XX
1. Investment in Craig Company........................................................... 950,000
Cash ................................................................................................... 950,000
2.
Less: BV of SHE of Craig (P300,000 + P420,000) 720,000
Less: Over/under valuation of A and L: Inc (Decrease)
Land (P250,000 fair P200,000 book value P 50,000
Building (P700,000 fair P600,000 book value) 100,000
Discount on bonds payable P280,000 fair P300,000
book value) 20,000
Deferred tax liability (P40,000 fair P50,000 book value) 10,000
Goodwill P 50,000
3. Adjustments on Craig books:

Land......................................................................................................... 50,000
Building.................................................................................................... 100,000
Discount on Bonds Payable................................................................ 20,000
Goodwill.................................................................................................. 50,000
Deferred Tax Liability ............................................................................ 10,000
Retained Earnings................................................................................. 420,000
Paid-In Capital in Excess of Par..................................................... 650,000
4. Elimination entries:
Common Stock ..................................................................................... 300,000
Paid-In Capital in Excess of Par .......................................................... 650,000
Investment in Craig Company...................................................... 950,000
Problem XXI
Full-Goodwill
Consideration transferred (200 shares x P25) P 5,000
Less: BV of SHE of Public (P200 + P800 + P1,000) _2,000
Fixed assets (P3,000 fair P2,000 book value) _1,000
Goodwill full P2,000
or,
Consideration transferred (200 shares x P25) P 5,000
Less: FV of SHE of Public (P1,0000 + P3,000 P1,000) _3,000
Goodwill full P2,000
Note: The currently issued shares of Public Company and its fair value were used for the following
reasons (refer to Illustration 15-15 for comparison):
Total number of shares for Public Company after acquisition not given
The fair value of share of Private Company not given.
Public Private
Company Company
Fair value of net assets. P3,000 ?
Fair value of common stock per share P25
Public Private
Currently issued 200 40%** ? /40%
Additional shares issued 300 60% 100 /60%
500 ?
15,000 shares / 25,000 shares = 60%
Values are prior to acquisition (200 shares P25 market value).

Subsequent to acquisition, Private Company is the parent with 60% ownership; prior to
acquisition, Private Company has 0% ownership of Public Company.
Prior to acquisition, this represents 100% ownership of Public Company; subsequent to
acquisition, these holders of 100 shares of Public Company become the 40% NCI.
Incidentally, the partial goodwill amounted to P1,200 (P2,000 x 60%); FV of NCI on full-
goodwill amounted to P800 (P2,000 P1,200 or P2,000 x 40%). This approach to determine
partial goodwill is acceptable as long as there is FV of NCI in the acquirer.
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.
1. Investment in Seely Company 570,000

Common Stock*** 95,000
Additional Paid-in-Capital 475,000
***Note: Depending on the wording of this exercise, the credit may be cash instead of common
stock and additional paid-in-capital. If cash is paid, the credit to cash is P570,000.
2. Common Stock - Seely 80,000

Other Contributed Capital Seely 132,000
Retained Earnings - Seely 160,000
Inventory 52,000
Land 25,000
Plant Assets 71,000
Discount on Bonds Payable 20,000
Goodwill** 127,200
Deferred Income Tax Liability* 67,200
Investment in Seely Company 570,000
Non-controlling Interest [(P570,000/.95) x .05] 30,000
*(.40 x (P52,000 + P25,000 + P71,000 + P20,000))
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 Medias losses are limited by contract, and (2) Hillsborough has the right
to receive the residual benefits of the sales generated on the HCO Media internet site
above P500,000, Hillsborough should consolidate HCO Media.
TPC (Nos. 1, 2 and 3 of the requirement are part of the information)
a. 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. They
are designed to provide information useful for making business and economic
decisionsespecially assessing amounts, timing, and uncertainty of prospective cash
flows. Consolidated statements also provide more complete information about the
resources, obligations, risks, and opportunities of an enterprise than separate
statements.
b. An entity qualifies as a VIE and is subject to consolidation if either of the following

conditions exist.
The total equity at risk is not sufficient to permit the entity to finance its activities
without additional subordinated financial support from other parties. In most cases, if
equity at risk is less than 10% of total assets, the risk is deemed insufficient.
The equity investors in the VIE lack any one of the following three characteristics of
a controlling financial interest.
1. The direct or indirect ability to make decisions about an entity's activities through
voting rights or similar rights.
2. The obligation to absorb the expected losses of the entity if they occur (e.g.,
another firm may guarantee a return to the equity investors)
3. The right to receive the expected residual returns of the entity (e.g., the investors'
return may be capped by the entity's governing documents or other arrangements
with variable interest holders).
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, 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. 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, if the parent opts to sell the facility, and
the proceeds are insufficient to repay the VIE investors, TPC may be required to pay up
to 85% of the project's cost. Thus, a potential 15% risk.
During construction 11.1% of project cost potential termination loss.
Risks that remain with TPC
Guarantees of return to VIE investors at market rate, if facility does not perform as
expected TPC is still obligated to pay market rates.
If lease is not renewed, 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. TPC possesses the following characteristics of a primary beneficiary Direct decision-

making ability (end of five-year lease term)
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).
Problem XXIV
1. Implied valuation and excess allocation for S.
Non-controlling interest fair value P 60,000
Consideration transferred by P. 20,000
Total business fair value 80,000
Fair value of VIE net assets 100,000
Excess net asset value fair value P20,000
The P20,000 excess net asset fair value is recognized by PanTech as a bargain purchase.
All SoftPlus assets and liabilities are recognized at their individual fair values.
Cash P20,000
Marketing software 160,000
Computer equipment 40,000
Long-term debt (120,000)
Noncontrolling interest (60,000)
Pantech equity interest (20,000)
Gain on bargain purchase (20,000)
-0-
2. Implied valuation and excess valuation for Softplus.

Noncontrolling interest fair value 60,000
Consideration transferred by Pantech 20,000
Total business fair value 80,000
Fair value of VIE net identifiable assets 60,000
Goodwill P20,000
When the business fair value of a VIE (that is a business) is greater than assessed asset
values, all identifiable assets and liabilities are reported at fair values (unless a previously
held interest) and the difference is treated as a goodwill.
Cash P20,000
Marketing software 120,000
Computer equipment 40,000
Goodwill (excess business fair value) 20,000
Long-term debt (120,000)
Noncontrolling interest (60,000)
Pantech equity interest (20,000)
-0-
Multiple Choice Problems

1. c at fair value
2. c [P300,000 (P35,000 + P60,000 + 125,000 + P250,000 P65,000 P150,000)]
3. d
Less: Book value of SHE of S (P100,000 + P115,000) 215,000
Allocated excess (excess of fair value or cost over book value)
- sometimes termed as Differential P 85,000
4. a Investment in subsidiary in the consolidated statements is eliminated in its entirety.
5. d
Less: Book value of SHE of S (P40,000 + P52,000) 92,000
Allocated excess (excess of fair value or cost over book value)
- sometimes termed as Differential P 58,000
6. b [P150,000 (P173,000 P40,000 P5,000)]
7. d - P600,000 - P15,000 - P255,000 = P330,000
8. c - P475,000 - P300,000 = P175,000 debit
9. b fair value
10. d fair value
11. d fair value
12. c -
Full-goodwill:
Add: FV of NCI 100,000 P400,000
Less: BV of SHE of Silver (P100,000 + P180,000) x 100% 280,000
Inventory (P65,000 P70,000) x 100% P( 5,000)
Land (P100,000 P90,000) x 100% 10,000
Buildings and equipment (P300,000 P250,00) x 100% 50,000 __55,000
If partial-goodwill, no answer available, computed as follows:

Less: BV of SHE of Silver (P100,000 + P180,000) x 75% _210,000
Inventory (P65,000 P70,000) x 75% P( 3,750)
Land (P100,000 P90,000) x 75% 7,500
Buildings and equipment (P300,000 P250,00) x 75% 37,500 __41,250
13. a Investment in Silver will be eliminated in the consolidated balance sheet

14. d
FV of SHE of S:
Book value of SHE of S (P100,000 + P180,000)..P 280,000
FV of SHE of S P 335,000
Multiplied by: NCI%.................................................................... 25%
FV of NCI (partial).P 83,750
Add: NCI on full goodwill (P65,000 P48,750).. 16,250
FV of NCI (full-goodwill)*P100,000
* same with the NCI given per problem
15. b P135,000 = P90,000 + P45,000

16. d
Full-goodwill:
Add: FV of NCI _40,000 P200,000
Less: BV of SHE of Silver (P40,000 + P120,000) x 100% _160,000
Inventory (P45,000 P40,000) x 100% P 5,000
Land (P60,000 P40,000) x 100% 20,000 25,000
17. a
Total Assets of Gulliver (Jonathan) P610,000
Less: Investment in Sea-Gull Corp. (160,000)
P 450,000
Book value of assets of Sea Corp. 230,000
Book value reported by Gulliver/Jonathan and Sea P 680,000
Increase in inventory (P45,000 P40,000) 5,000
Increase in land (P60,000 P40,000) 20,000
Goodwill (full)* 15,000
Total assets reported P 720,000
18. c P100,000 + P95,000 + P30,000 + P40,000 = P265,000
19. c
FV of SHE of S:
Book value of SHE of S (P40,000 + P120,000).P 160,000
Adjustments to reflect fair value [(P45,000 + P60,000) -
(P40,000 + P40,000). 25,000
FV of SHE of S P 185,000
Multiplied by: NCI%.................................................................... 20%
FV of NCI (partial).P 37,000
Add: NCI on full goodwill (P15,000 P12,000).. 3,000
FV of NCI (full-goodwill)* P 40,000
* same with the NCI given per problem
Partial Goodwill
Less: BV of SHE of S (P40,000 + P120,000) x 80% _128,000
Inventory (P5,000 x 80%) P 4,000
Land (P20,000 x 80%) 16,000 __20,000
20. a - The amount reported by Jonathan Corporation

21. a
Jonathan stockholders' equity(P200,000 + P205,000).. P405,000
NCI (full-goodwill) refer to No. 19.. 40,000
Consolidated stockholders equity. P445,000
22. d [P132,000 + (P38,000 + {P60,000 P38,000}] or P132,000 + P60,000
23. b
Total Assets of P. P1,278,000
Less: Investment in Swimmer Corp. (440,000)
P 838,000
Book value of assets of S Corp. 542,000
Book value reported by P and S P1,380,000
Increase in plant assets [P350,000 (P300,000 P60,000)] 110,000
Goodwill (full)* 26,667
Total assets reported P1,566,667
*(P440,000/75%) (P702,000 P142,000) = P26,667
Total Assets of P. P1,278,000
Less: Investment in S Corp. (440,000)
P 838,000
Book value of assets of S Corp. 542,000
Goodwill (partial)* 20,000
*[P440,000 (P702,000 P142,000) x 75%]
24. d P215,000 = P130,000 + P70,000 + (P85,000 - P70,000)

25. a
Partial Goodwill
Less: BV of SHE of SSD (P50,000 + P90,000) x 70% __98,000
Inventory (P15,000 x 70%) P 10,500
Land (P20,000 x 70%) 14,000 24,500
26. c
Full-goodwill:
Add: FV of NCI **64,500 P215,000
Less: BV of SHE of SS (P50,000 + P90,000) x 100% 140,000
Inventory (P70,000 P85,000) x 100% P 15,000
Land (P25,000 P45,000) x 100% 20,000 35,000
**given amount, but it should not be lower than the fair value of SHE subsidiary amounting to
P52,500 computed as follows :
FV of SHE of SS:
FV of SHE of SS P 175,000
27. b
P 641,000
Silk P1,046,000
Goodwill (full) 40,000
P 641,000
Silk P1,046,000
Goodwill (partial) 28,000
28. d P701,500 = (P61,500 + P95,000 + P280,000) + (P28,000 + P37,000

+ P200,000)
29. a
Non-controlling interest (partial-goodwill): P52,500
NCI
FV of SHE of SSD:
30. d
Non-controlling interest (fulll-goodwill): P64,500
NCI
FV of SHE of SSD:
Add: NCI on full-goodwill (P40,000 P12,000)... 12,000
FV of NCI (full)..P 64,500
31. d P205,000 = The amount reported by Power Corporation
32. c P419,500 = (P150,000 + P205,000) + P64,500

Consolidated SHE:
Parents SHE or Equity Attributable to Parent P355,000
NCI (partial-goodwill) 52,500
33. b
Consideration transferred ........................................................................................ P60,000
Less: Strand's book value (P50,000 x 80%) .............................................................. (40,000)
Fair value in excess of book value ......................................................................... P20,000
Excess assigned to inventory (60%) .......................................................... P12,000
Excess assigned to goodwill (40%) ........................................................... P 8,000
34. c
Consideration transferred (P60,000 80%) ............................................................ P75,000
Less: Strand's book value .......................................................................................... (50,000)
Fair value in excess of book value ......................................................................... P25,000
Excess assigned to inventory (60%) .......................................................... P15,000
Excess assigned to goodwill (40%) ........................................................... P10,000
35. a
Park current assets ....................................................................................................... P 70,000
Strand current assets ................................................................................................... 20,000
Excess inventory fair value ......................................................................................... 15,000
Consolidated current assets...................................................................................... P105,000
36. c
Park noncurrent assets............................................................................................... P 90,000
Strand noncurrent assets........................................................................................... 40,000
Excess fair value to goodwill (partial) ..................................................................... ___8,000
Consolidated noncurrent assets.............................................................................. P140,000
37. d
Park noncurrent assets................................................................................................ P 90,000
Strand noncurrent assets ............................................................................................ 40,000
Excess fair value to goodwill (full)............................................................................. __10,000
Consolidated noncurrent assets............................................................................... P140,000
38. b Add the two book values and include 10% (the P6,000 current portion) of the loan taken
out by Park to acquire Strand.
39. b Add the two book values and include 90% (the P54,000 noncurrent portion) of the loan
taken out by Polk to acquire Strand.
40. b
Park stockholders' equity........................................................................................... P80,000
NCI (partial):
BV of SHE S ..P50,000
Adjustments to reflect fair value (inventory). 15,000
FV of SHE SP65,000
x: Multiplied by: NCI%........................................................................ 20% 13,000
Total stockholders' equity......................................................................................... P93,000
41. c
Park stockholders' equity.......................................................................... . P80,000
NCI (full):
BV of SHE S ..P50,000
Adjustments to reflect fair value (inventory). 15,000
FV of SHE SP65,000
x: Multiplied by: NCI%......................................................................... 20%
NCI (partial)P13,000
Add: NCI on full-goodwill (P10,,000 P8,000) 2,000
Non-controlling interest at fair value (20% P75,000) 15,000
Total stockholders' equity P95,000
42. b
43. a P150,000 + P500,000
44. a at fair value
45. b
FV, stocks issued P 4,200,000
Less: Par value of stocks issued (500,000 shares x P5).. __2,500,000
APIC P 1,700,000
Add: APIC of P 7,500,000
Less: Stock issuance cost ___100,000
P 9,100,000
46. a ( P10 x 100,000 = P1,000,000 P1,400,000) = P400,000

47. a at fair value
48. c
49. a
[P15 x 100,000 = P1,500,000 (P1,900,000 P100,000 600,000 )+ P100,000 increase +
P100,000 in increase in PPE] = P100,000
50. b
P1,500,000 (1,700,000 50,000 decrease in inventories) + (P100,000 increase in PPE
P300,000 P500,000) = P550,000
51. a
52. d (P1,000,000 + P250,000) = P1,250,000 P only.
53. d [P99,000 + (P45,000 P26,000)] or (P99,000 + P45,000) = P144,000
54. b [(P330,000/75%) (P565,000 P105,000)] = (P20,000) full-goodwill approach
55. a - P only
56. d
Total Assets of P P 960,000
Less: Investment in S (330,000)
P 630,000
Book value of assets of S 405,000
Goodwill (full) _____0
If partial-goodwill same answer with full-goodwill approach, since there is no gain.
57. b step-acquisition
60% FV, stocks issued: 60,000 shares x P6, fair value P360,000
30% FV of previously held equity interest: 30,000 shares x P5, fair value 150,000
10% FV of NCI (100,000 60,000 30,000) x P, fair value 40,000
100% Fair value of subsidiary P560,000
Less: Fair value of net assets (SHE) of subsidiary 500,000
P 60,000
58. b
59. a
60. a [(P700,000 + P980,000) + (34,000 shares x P35)] = P2,780,000
61. d
Book value of Assets (P80,000 + P50,000 + P200,000) P330,000
Fair value of Assets (P85,000 + P60,000 + P250,000) 395,000
P 65,000
62. a zero, since the revaluation of P65,000 is already recorded in the books of subsidiary (not in
the worksheet or eliminating entries.
63. b (P250,000 P200,000)/10 years = P5,000 depreciation to reduce net income of Sirius.
64. c
65. a
66. d Since, CC Corp. is not a subsidiary, no elimination of intercompany accounts will be
made. Therefore, the P200,000 remains to be a receivable. On the other hand, WW Corp. is a
consolidated subsidiary, so the P300,000 intercompany account will be eliminated.
67. d
68. a
69. c In the combined financial statements (which normally used to described financial
statements in a common control situation), intercompany accounts are eliminated in full.
70. d In consolidating the subsidiary's figures, all intercompany balances must be eliminated in
their entirety for external reporting purposes. Even though the subsidiary is less than fully
owned, the parent nonetheless controls it.
71. d
The acquisition method consolidates assets at fair value at acquisition date regardless of the
parents percentage ownership.
72. c
73. c
An asset acquired in a business combination is initially valued at 100% acquisition-date
fair value and subsequently amortized its useful life.
Patent fair value at January 1, 2009 ....................................................................... P45,000
Amortization for 2 years (10 year life) ..................................................................... (9,000)
Patent reported amount December 31, 2010 ...................................................... P36,000
74. a
PP - building .................................................................................................................. P510,000
TT building acquisition-date fair value P300,000
Amortization for 3 years (10-year life) (90,000) 210,000
Consolidated buildings ............................................................................................... P720,000
-OR-
PP - building ................................................................................................................... 510,000
TT building 12/31/x4 P182,000
Excess acquisition-date fair value allocation 40,000
Excess amortization for (P40,000/ 10 x 3 years) (12,000) 210,000
Consolidated buildings ............................................................................................... P720,000
75. d
Cost of Investment (40 shares* x P40)P 1,600
Less: Book value of SHE Pedro Ltd (P300 + P800) x 100%............................................ 1,100
Allocated excessP 500
Less: Over/Under valuation of Assets and Liabilities:
Increase in Non-current assets: [(P1,500 P1,300) x 100% x 70%......................... 140
GoodwillP 360
100%
* Pedro Ltd Santi Ltd
Currently issued 150 60% ** 60 60%
Additional shares issued.. 100 40% 40 / 40%
Total shares 250 100
**150/250
Pedro ltd issues 2 shares in exchange for each ordinary share of Santi Ltd. All of Santi Ltds
shareholders exchange their shares for Pedro Ltd. Pedro Ltd therefore issues 150 shares (60 x 2
) for the 60 shares in Santi Ltd.
Pedro Ltd is now the legal parent of the subsidiary Santi Ltd. However, 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. In essence, the former
shareholders of Santi Ltd now control both entities Pedro Ltd and Santi Ltd. The former Santi
Ltd shareholders have a 60% interest in Pedro Ltd [150/(100+150]. The IASB argues that there
has been a reverse acquisition, and that Santi Ltd is effectively the acquirer of Pedro Ltd.
Reverse acquisition occurs when the legal subsidiary has this form of control over the legal
parent. 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, as part of
the exchange transaction, it issues enough voting equity as consideration for control of the
combined entity to pass to the owners of the legal subsidiary.
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. This is contrary to normal acquisition
accounting, based on Pedro Ltd being the legal parent of Santi Ltd, which would require the
assets and liabilities of Santi Ltd to be valued at fair value.
76. d
Consideration transferred (4,000,000 shares* x P6)P24,000,000
Less: Book value of SHE Man: P18,000,000 x 100%.................................... 18,000,000
Allocated excess P 6,000,000
Less: Over/Under valuation of assets and liabilities
(book value same fair value) 0
Goodwill P 6,000,000
100%
* Man Mask
Currently issued 15 M 60% ** 6 M 60%
Additional shares issued.. 10 M 40% 4 M / 40%
Total shares 25 M 10 M
**15M/25M
77. c
P60,000 allocation to equipment is "pushed-down" to subsidiary and increases balance
from P330,000 to P390,000. Consolidated balance is P420,000 plus P390,000.
78. b
Target not met: 100,000 shares x .75 share x P10 = P750,000
Target met: 100,000 shares x .8 x P10 = P800,000
79. c
Target not met: 250,000 shares x 1.50 share x P30 = P11,250,000
Target met: 250,000 shares x 1.8 x P30 = P13,500,000
80. c
500,000 shares x 1.7 exchange ratio x P25 = P21,250,000
The investment value does not change as a result of a change in the share prices.
Quiz- XV
1. P290,000
2. None, since there are no revenues and expenses of the acquire up to the date of
acquisition
3. P525,000
4. P80,000 = P250,000 - P170,000
5. P99,000 = (P10,000 + P80,000 + P350,000 - P110,000)(.30)
6. P21,000 = (P60,000 - P12,000 - P5,000 - P8,000 - P14,000)
7. P70,000 = P56,000/.8
8. P56,000 = (P220,000 - P120,000 - P44,000)
9. P700,000 = P490,000/.70
10. P180,000 = [(P490,000/.70) - (P30,000 + P140,000 + P460,000 - P110,000)]
11. P90,000 = P460,000 - P370,000
12. P160,000 = (P430,000 - P210,000 - P60,000)
13. P700,000 = P560,000/.80
14. P80,000 = [(P560,000/.80) - (P50,000 + P200,000 + P600,000 - P230,000)]
15. P70,000 = P600,000 - P530,000
16. P130,000 = ($60,000 + $210,000 + $630,000 - $250,000)(.20)
17. P50,000
18. P420,000
19. P201,000 = (P40,000 + P230,000 + P700,000 - P300,000)(.30)
20. P80,000 = (P700,000 - P620,000)
21. P90,000 credit (P260,000 - P350,000)
22. P110,000 debit
23. P120,000 credit (P300,000 - P420,000)
24. P180,000 debit
25. P50,000 debit (P300,000 - P250,000)
26. P56,000 debit
27. P150,000 debit (P600,000 - P450,000)
28. P260,000 debit
29. c
30. 500,000 shares x 1.7 exchange ratio x P25 = P21,250,000. The investment value does not
change as a result of a change in the share prices.
31. Inventories (P110,000 + P180,000 P10,000) = P280,000
32. Buildings and equipment, net (P350,000 + P350,000 + P25,000 = P725,000
33. Investment in DD stock will be fully eliminated and will not appear in the consolidated
balance sheet
34. P35,000
Less: BV of SHE of DD (P100,000 + P200,000 P40,000) 260,000
Less: Over/under valuation of A and L: Inc (Decrease)
Inventory (P 10,000)
Buildings and equipment (net) 25,000 15,000
P 5,000
Add: Existing goodwill (to be eliminated 30,000
Goodwill to be reported P 35,000
or, (Approach used in business combination statutory merger/consolidation)

Fair value of consideration given P280,000
Fair value of Decibel's net assets:
Cash and receivables P 40,000
Inventory 170,000
Accounts payable (90,000)
Notes payable (250,000)
Fair value of net identifiable
Assets (245,000)
Goodwill to be reported P 35,000
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.
35. Common stock, P400,000 (parent only, SHE of subsidiary is eliminated)

36. Retained earnings, P105,000 (parent only, SHE of subsidiary is eliminated)
37. The investment balance reported by Roof will be P192,000.
38. Total assets will increase by P310,000.
39. Total liabilities will increase by P95,000.
40. The amount of goodwill for the entity as a whole will be P25,000
[(P192,000 + P48,000) - (P310,000 - P95,000)].
41. Non-controlling interest will be reported at P48,000 (P240,000 x .20).
Theories
1. c 6. B 11. c 16. d 21. b 26. d 31 c 36. d
2. a 7. b 12. c 17. c 22. a 27. c 32. d 37. d
3. e 8. A 13. d 18. b 23. a 28. c 33. b 38. c
4. e 9. D 14. d 19. c 24. b 29. d 34. d 39. b
5. b 10, a 15, b 20. c 25. c 30. b 35. d 40. c
41. c 46. b 51. c 56. c

42. c 47. a 52. b 57. d
43. c 48. c 53. a
44. c 49. d 54. a
45. c 50, b 55, b

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Chapter 15

Paid in capital in excess of par 30,000

Investment in SS Company 315,000

Acquisition Expense 10,000

Full-Goodwill (Fair Value Basis)

(E2) Inventory. 18,000

Liabilities and Stockholders Equity

(2) Retained earnings (acquisition-related expense - close to

(3) Paid-in capital in excess of par.. 8,400

Date of Acquisition January 1, 20x4

Liabilities and Stockholders Equity

Date of Acquisition January 1, 20x4

Date of Acquisition January 1, 20x4

2. Gain on acquisition, P66,000

Fair Value Basis (Full-goodwill Approach)

The full goodwill of P3,960,000 consists of two parts:

Consideration transferred: Cash..P 9,000,000 (75%)

Fair Value Basis (Full-goodwill Approach)

The full goodwill of P2,040,000 consists of two parts:

Fair Value Basis (Full-goodwill Approach)

The full goodwill of P480,000 consists of two parts:

Full-goodwill (Fair Value Basis)

The over/under valuation of assets and liabilities are summarized as follows:

(2) Retained earnings (acquisition-related expense - close to

(E2) Inventory. 18,000

Buildings and equipment 960,000 720,000 (2) 372,000 1,308,000

Incidentally, the non-controlling interest on the date of acquisition is computed as

The balance sheet:

Liabilities and Stockholders Equity

Fair value of Subsidiary (100%)

(2) Retained earnings (acquisition-related expense - close to

(E2) Inventory. 18,000

Buildings and equipment 960,000 720,000 (2) 372,000 1,308,000

Incidentally, the non-controlling interest on the date of acquisition is computed as

The balance sheet;

Liabilities and Stockholders Equity

The over/under valuation of assets and liabilities are summarized as follows:

S Co. S Co. Over/Under

(E2) Inventory.. 6,000

Buildings and equipment (net). 744,000 222,000 (2) 150,000 1,116,000

The balance sheet:

Liabilities and Stockholders Equity

(E2) Inventory.. 6,000

Buildings and equipment (net). 744,000 222,000 (2) 150,000 1,116,000

The balance sheet:

Liabilities and Stockholders Equity

Fair value of consideration given P 576,000

Partial Goodwill, P46,000

5. Investment in Slim Corporation: None would be reported;

1. Inventory = P670,000 (P's book value plus Sun's fair value)

Problem XVII refer also to Multiple Choice; Nos. 24-32

Accounts payable: P89,500 = P61,500 + P28,000

3. Adjustments on Craig books:

Values are prior to acquisition (200 shares P25 market value).

Problem XXII (Assume the use of Full-Goodwill Method)

1. Investment in Seely Company 570,000

2. Common Stock - Seely 80,000

b. An entity qualifies as a VIE and is subject to consolidation if either of the following

Consolidation is required if a parent has a variable interest that will

d. TPC possesses the following characteristics of a primary beneficiary Direct decision-

2. Implied valuation and excess valuation for Softplus.

Multiple Choice Problems

If partial-goodwill, no answer available, computed as follows: