DIRECT VALUATION OF GOODWILL

2019 100,000.00
2018 120,000.00
2017 140,000.00
2016 144,000.00
2015 116,000.00

CASE 1 Expected/Average income 124,000.00

Normal income 940,000.00 10% 94,000.00
Excess earnings (Attributable to goodwill) 30,000.00
Capitalization rate 12%
Goodwill 250,000.00

Cash 595,000.00
Equity instrument of the acquirer 29,750 shares
20.00 595,000.00
Fair value of consideration (squeeze) 1,190,000.00
Fair value of net assets acquired 940,000.00
Goodwill 250,000.00

CASE 2 Excess earnings (Attributable to goodwill) 30,000.00

Number of years 7.00
Goodwill 210,000.00

Equipment 250,000.00
Equity instrument of the acquirer 45,000 shares
20.00 900,000.00
Fair value of consideration (squeeze) 1,150,000.00
Fair value of net assets acquired 940,000.00
Goodwill 210,000.00

CASE 3 Year 1 30,000.00

Year 2 30,000.00
Year 3 30,000.00
Year 4 30,000.00
Year 5 30,000.00
Year 6 30,000.00
Year 7 30,000.00
Goodwill Present value, ordinary annuity 150,988.59

Fair value of consideration (squeeze) 1,090,988.59

Fair value of net assets acquired 940,000.00
Goodwill 150,988.59

CASE 4 Expected/Average income ----> FV of consideration

 Normal income ----> FV of Net assets
Excess earnings ----> Goodwill

Average annual earnings 124,000.00

Capitalization rate 10%
FV of consideration transferred 1,240,000.00
FV of net assets (940,000.00)
Goodwill 300,000.00

ZENAIDA VERA-CRUZ MANUEL

SITUATION 1
ACQUISITION ANALYSIS
FV of consideration transferred
Cash 400,000.00
Land 1,000,000.00
Total 1,400,000.00
FV of net assets 925,000.00
Goodwill 1.A 475,000.00

ACQUIRER'S BOOKS
Other Current Assets 175,000.00
Land 300,000.00
Equipment 800,000.00
Goodwill 475,000.00
Liabilities 300,000.00
Contingent liability 50,000.00
Cash 400,000.00
Land 500,000.00
Retained earnings 500,000.00

Retained earnings 55,000.00

Cash 55,000.00

Cash 125,000.00
Cash consideration received 400,000.00
Total cash available for distribution to former owners 525,000.00
Outstanding shares 50.00 800,000.00 16,000.00
Cash per share 32.81
No. of shares owned 500.00
Cash received for 500 shares 16,406.25 1.C

Suntan Debit Credit Post-comb

Cash 500,000.00 - 455,000.00 45,000.00
Other Current Assets 250,000.00 175,000.00 - 425,000.00
Current assets 750,000.00 470,000.00
Land 500,000.00 300,000.00 500,000.00 300,000.00
Equipment 1,500,000.00 800,000.00 - 2,300,000.00
Goodwill 475,000.00 - 475,000.00
Noncurrent assets 2,000,000.00 - - 3,075,000.00
Total assets 2,750,000.00 3,545,000.00

Liabilities 1,100,000.00 - 300,000.00 1,400,000.00

Contingent liability - 50,000.00 50,000.00
Total liabilities 1,100,000.00 1,450,000.00
Share capital 1,000,000.00 1,000,000.00
Share premium 200,000.00 - - 200,000.00
Retained earnings 450,000.00 55,000.00 500,000.00 895,000.00
Shareholders' equity 1,650,000.00 2,095,000.00
2,750,000.00 3,545,000.00

SITUATION 2
2.A
Number of acquirer's shares issued 8,000.00 4,000.00
FV per share 150.00
Equity instruments of the acquirer 600,000.00
Cash contingency 500,000.00 0.80 356,000.00
FV of consideration transferred 956,000.00
FV of net assets acquired 1,000,000.00
Goodwill (Bargain purchase gain) (44,000.00)

Acquirer's books
Cash 350,000.00
Other Current Assets 200,000.00
Land 500,000.00
Equipment 300,000.00
Bargain purchase gain 44,000.00
Liabilities 350,000.00
Share capital 400,000.00
Share premium 200,000.00
Liability for contingent consideration 356,000.00

Expense 50,000.00
Share premium 10,000.00
Cash 60,000.00

2.B
Bargain purchase gain 44,000.00
Liability for contingent consideration 44,000.00

SITUATION 3

Suntan Lilac
 Expected earnings 320,000.00 150,000.00
Normal earnings 2,850,000.00 285,000.00
1,000,000.00 100,000.00
Excess earnings 35,000.00 50,000.00

35,000.00 50,000.00
35,000.00 50,000.00
35,000.00 50,000.00
35,000.00 50,000.00

Goodwill 127,046.00 181,495.00

FV of net assets acquired 2,850,000.00 1,000,000.00
FV of consideration transferred 2,977,046.00 1,181,495.00
83.17 83.17
Number of shares issued to former owners 35,794.71 14,205.78

Total consideration 4,158,541.00

SL Perfumery shares issued 50,000.00
FV per share of SL Perfumery 83.17

SITUATION 4

Rose
Expected earnings 125,000.00
Capitalization rate 10%
FV of consideration transferred 1,250,000.00
FV of net assets acquired 100.00 1,050,000.00 --> PS 10,500.00
Goodwill 50.00 200,000.00 --> OS 4,000.00

Lilac
Expected earnings 150,000.00
Capitalization rate 10%
FV of consideration transferred 1,500,000.00
FV of net assets acquired 100.00 1,000,000.00 --> PS 10,000.00
Goodwill 50.00 500,000.00 --> OS 10,000.00

Preference Ordinary
Rose 10,500.00 4,000.00
Lilac 10,000.00 10,000.00
Total share issuance 4.A 20,500.00 14,000.00

Rose Lilac
Preference shares received 10,500.00 10,000.00
Outstanding shares 16,000.00 8,000.00
Number of Roslac PS for every share of acquiree 0.66 1.25
Number of shares owned by Paul 300.00
Number of Roslac PS received by Paul 196.88 4.B
 Rose Lilac
Ordinary shares received 4,000.00 10,000.00
Outstanding shares 16,000.00 8,000.00
Number of Roslac OS for every share of acquiree 0.25 1.25
Number of shares owned by Hanz 200.00
Number of Roslac OS received by Hanz 4.C 250.00
 308,541.00 3.B
3,850,000.00

3.A
 DEF
Issued 70,000
Treasury (2,000)
Outstanding 68,000

CASE 1
Tim Coching:
ACQUISITION ANALYSIS FV of CI + control
premium (if any)
90%

CI

Shares owned 61,200

FV per DEF share 30
Fair valueof CI/NCI/subs 1,836,000
FV per ABC share 40
Number of ABC shares to be issued 45,900

ACQUISITION ANALYSIS 1
Consideration transferred/FV of NCI/FV of subs 1,836,000
FV of net assets acquired (778,500)
Goodwill (Bargain purchase gain) 1,057,500
Partial GW

ACQUISITION ANALYSIS 2
Consideration transferred/FV of NCI/FV of subs 1,836,000
BV of net assets acquired (SHE of subs) (754,200)
Excess of acquisition cost over book value 1,081,800
Over and under valuation in acquiree's net assets
Fair Book Under (Over)
Receivables 55,000 50,000 5,000
Inventories 110,000 100,000 10,000
Equipment 342,000 360,000 (18,000)
Land 1,050,000 1,000,000 50,000
Bonds payable 880,000 860,000 20,000
(24,300)
Goodwill (Bargain purchase gain) 1,057,500

Acquirer's books
12/31/2019
Investment in subsidiary 1,836,000
Ordinary shares 459,000
Share premium 1,377,000
 ABC Company
Pre Post
Book Book
Cash 1,000,000 1,000,000
Receivables 250,000 250,000
Inventories 500,000 500,000
Equipment 2,000,000 2,000,000
Accumulated depreciation (200,000) (200,000)
Land 3,000,000 3,000,000
Investment in subsidiary 1,836,000
Goodwill -
Total assets 6,550,000 8,386,000

Accounts payable 300,000 300,000

Bonds payable 1,500,000 1,500,000
Discount on bonds payable (40,000) (40,000)
Ordinary shares , P10 par value 1,000,000 1,459,000
Share premium 500,000 1,877,000
Retained earnings 3,300,000 3,300,000
Treasury shares , P5 and P2, respectively (10,000) (10,000)
Noncontrolling interest
Total liabilities and shareholders' equity 6,550,000 8,386,000

ELIMINATING ENTRIES - at acquisition date

Eliminate the subsidiary's SHE
Ordinary shares 700,000
Share premium 50,000
Retained earnings 92,000
Treasury shares 4,000
Investment in subsidiary 754,200
Noncontrolling interest 83,800
842,000 842,000

Adjustment to fair value

Receivables 5,000
Inventories 10,000
Accumulated depreciation 40,000
Land 50,000
Discount on bonds payable 20,000
Equipment 58,000
Investment in subsidiary 24,300
Noncontrolling interest 2,700
105,000 105,000
Recognition of goodwill - Full GW
Goodwill 1,175,000
Investment in subsidiary 1,057,500
Noncontrolling interest 117,500

CASE 2
Tim Coching:
FV of NCI Tim Coching:
FV of the subsidiary +
10% 100% control premium (if any)

NCI Total

6,800 68,000
30 30
204,000 2,040,000

Tim Coching:
NCI under full GW
approach

204,000 2,040,000
(86,500) (865,000) Tim Coching:
117,500 1,175,000 NCI under partial GW
approach
Full GW or NCI is BPG

204,000 2,040,000 Elim. Entry

(83,800) (838,000) 1
120,200 1,202,000

(5,000)
(10,000)
18,000
(50,000)
20,000
(2,700) (27,000) 2
117,500 1,175,000 3
DEF Company Full-GW
Eliminating entries Consolidated Eliminating entries
Book Debit Credit SFP Debit Credit
200,000 - - 1,200,000 - -
50,000 5,000 - 305,000 5,000 -
100,000 10,000 - 610,000 10,000 -
400,000 - 58,000 2,342,000 - 58,000
(40,000) 40,000 - (200,000) 40,000 -
1,000,000 50,000 - 4,050,000 50,000 -
- 1,836,000 - - 1,836,000
1,175,000 - 1,175,000 1,057,500 -
1,710,000 9,482,000

12,000 - - 312,000 - -
900,000 - - 2,400,000 - -
(40,000) - 20,000 (60,000) - 20,000
700,000 700,000 - 1,459,000 700,000 -
50,000 50,000 - 1,877,000 50,000 -
92,000 92,000 - 3,300,000 92,000 -
(4,000) - 4,000 (10,000) - 4,000
- 204,000 204,000 - 86,500
1,710,000 9,482,000

Eliminate the subsidiary's SHE

Ordinary shares 700,000
Share premium 50,000
Retained earnings 92,000
Treasury shares 4,000
Investment in subsidiary 754,200
Noncontrolling interest 83,800

Adjustment to fair value

Receivables 5,000
Inventories 10,000
Accumulated depreciation 40,000
Land 50,000
Discount on bonds payable 20,000
Equipment 58,000
Investment in subsidiary 24,300
Noncontrolling interest 2,700

Recognition of goodwill - Partial GW

Goodwill 1,057,500
Investment in subsidiary 1,057,500
 Partial-GW
Consolidated
SFP
1,200,000 -
305,000 -
610,000 -
2,342,000 -
(200,000) -
4,050,000 -
- -
1,057,500 117,500
9,364,500

312,000 -
2,400,000 -
(60,000) -
1,459,000 -
1,877,000 -
3,300,000 -
(10,000) -
86,500 117,500
9,364,500
CASE 2

ACQUISITION ANALYSIS #2 90% 10%

CI NCI
No. of shares 61,200.00 6,800.00
FV of acquiree - DEF shares 12.00 12.00
FV of CI/NCI/subs 734,400.00 81,600.00
Control premium (discount) None N/E
Acquisition cost/FV of NCI/FV of subs 734,400.00 81,600.00
Book value of net assets acquired (754,200.00) (83,800.00)
(19,800.00) (2,200.00)
Over (under) valuation of net assets
Receivables (4,500.00) (500.00)
Inventories (9,000.00) (1,000.00)
Equipment 16,200.00 1,800.00
Land (45,000.00) (5,000.00)
Bonds payable 18,000.00 2,000.00
Net under (24,300.00) (2,700.00)
Goodwill (Bargain purchase gain) (44,100.00) (4,900.00)

Tim Co
ACQUISITION ANALYSIS #1
Entry in
Acquisition cost/FV of NCI/FV of subs 734,400.00 81,600.00 books
FV of net assets acquired (778,500.00) (86,500.00)
Goodwill (Bargain purchase gain) (44,100.00) (4,900.00)

Equity instruments of the acquirer 30,600.00

FV of ABC shares 20.00
Total fair value of equity shares 612,000.00
Cash consideration 122,400.00
Acquisition cost 734,400.00

ABC-ACQUIRER'S BOOKS
Investment in subsidiary 734,400.00
Cash 122,400.00
Ordinary shares 306,000.00
Share premium 306,000.00

ABC Company
Pre Post
Book Book
Cash 1,000,000.00 877,600.00
Receivables 250,000.00 250,000.00
Inventories 500,000.00 500,000.00
Equipment 2,000,000.00 2,000,000.00
Accumulated depreciation (200,000.00) (200,000.00)
Land 3,000,000.00 3,000,000.00
Investment in subsidiary 734,400.00
Goodwill
Total assets 6,550,000.00 7,162,000.00

Accounts payable 300,000.00 300,000.00

Bonds payable 1,500,000.00 1,500,000.00
Discount on bonds payable (40,000.00) (40,000.00)
Ordinary shares , P10 par value 1,000,000.00 1,306,000.00
Share premium 500,000.00 806,000.00
Retained earnings 3,300,000.00 3,300,000.00
Treasury shares , P5 and P2, respectively (10,000.00) (10,000.00)
Noncontrolling interest -
Total liabilities and shareholders' equity 6,550,000.00 7,162,000.00

ELIMINATING ENTRIES - at acquisition date

Eliminate the subsidiary's SHE
Ordinary shares 700,000.00
Share premium 50,000.00
Retained earnings 92,000.00
Treasury shares 4,000.00
Investment in subsidiary 754,200.00
Noncontrolling interest 83,800.00

Adjustment to fair value

Receivables 5,000.00
Inventories 10,000.00
Accumulated depreciation 40,000.00
Land 50,000.00
Discount on bonds payable 20,000.00
Equipment 58,000.00
Investment in subsidiary 24,300.00
Noncontrolling interest 2,700.00

Recognition of GW/BPG (Full and Partial GW approach)

Investment in subsidiary 44,100.00
Retained earnings 44,100.00

CASE 3

0.90 0.10
CI NCI
Number of shares 61,200.00 6,800.00
FV of DEF shares 12.00 12.00
FV of CI/NCI/subsidiary 734,400.00 81,600.00
Control premium 61,200.00 3.00 183,600.00
Consideration transferred 918,000.00

CI NCI
Acquisition cost/FV of NCI/FV of subs 918,000.00 81,600.00
Book value of net assets acquired (754,200.00) (83,800.00)
Excess of cost over book value 163,800.00 (2,200.00)
Over (under) valuation of net assets
Receivables (4,500.00) (500.00)
Inventories (9,000.00) (1,000.00)
Equipment 16,200.00 1,800.00
Land (45,000.00) (5,000.00)
Bonds payable 18,000.00 2,000.00
Net under (24,300.00) (2,700.00)
Goodwill (BPG) 139,500.00 (4,900.00)

ACQUIRER'S BOOKS
Investment in subsidiary 918,000.00
Cash 918,000.00

ABC Company
Pre Post
Book Book
Cash 1,000,000.00 82,000.00
Receivables 250,000.00 250,000.00
Inventories 500,000.00 500,000.00
Equipment 2,000,000.00 2,000,000.00
Accumulated depreciation (200,000.00) (200,000.00)
Land 3,000,000.00 3,000,000.00
Investment in subsidiary 918,000.00
Goodwill
Total assets 6,550,000.00 6,550,000.00

Accounts payable 300,000.00 300,000.00

Bonds payable 1,500,000.00 1,500,000.00
Discount on bonds payable (40,000.00) (40,000.00)
Ordinary shares 1,000,000.00 1,000,000.00
Share premium 500,000.00 500,000.00
Retained earnings 3,300,000.00 3,300,000.00
Treasury shares (10,000.00) (10,000.00)
Noncontrolling interest -
Total liabilities and shareholders' equity 6,550,000.00 6,550,000.00

ELIMINATING ENTRIES - at acquisition date

Eliminate the subsidiary's SHE
Ordinary shares 700,000.00
Share premium 50,000.00
Retained earnings 92,000.00
Treasury shares 4,000.00
Investment in subsidiary 754,200.00
Noncontrolling interest 83,800.00

Adjustment to fair value

Receivables 5,000.00
Inventories 10,000.00
Accumulated depreciation 40,000.00
Land 50,000.00
Discount on bonds payable 20,000.00
Equipment 58,000.00
Investment in subsidiary 24,300.00
Noncontrolling interest 2,700.00

Recognition of goodwill/bargain purchas gain

Goodwill 139,500.00
Investment in subsidiary 139,500.00

CASE 4

0.90 0.10
CI NCI
Number of shares 61,200.00 6,800.00
FV of DEF shares 30.00 30.00
FV of CI/NCI/subsidiary 1,836,000.00 204,000.00
Control discount 61,200.00 18.00 (1,101,600.00)
Consideration transferred 734,400.00

CI NCI
Acquisition cost/FV of NCI/FV of subs 734,400.00 204,000.00
Book value of net assets acquired (754,200.00) (83,800.00)
Excess of cost over book value (19,800.00) 120,200.00
Over (under) valuation of net assets
Receivables (4,500.00) (500.00)
Inventories (9,000.00) (1,000.00)
Equipment 16,200.00 1,800.00
Land (45,000.00) (5,000.00)
Bonds payable 18,000.00 2,000.00
Net under (24,300.00) (2,700.00)
Goodwill (BPG) (44,100.00) 117,500.00

ACQUIRER'S BOOKS - ABC

Investment in subsidiary 734,400.00
Cash 367,200.00
Notes payable 367,200.00
 ABC Company
Pre Post
Book Book
Cash 1,000,000.00 632,800.00
Receivables 250,000.00 250,000.00
Inventories 500,000.00 500,000.00
Equipment 2,000,000.00 2,000,000.00
Accumulated depreciation (200,000.00) (200,000.00)
Land 3,000,000.00 3,000,000.00
Investment in subsidiary 734,400.00
Goodwill
Total assets 6,550,000.00 6,917,200.00

Accounts payable 300,000.00 300,000.00

Notes payable 367,200.00
Bonds payable 1,500,000.00 1,500,000.00
Discount on bonds payable (40,000.00) (40,000.00)
Ordinary shares 1,000,000.00 1,000,000.00
Share premium 500,000.00 500,000.00
Retained earnings 3,300,000.00 3,300,000.00
Treasury shares (10,000.00) (10,000.00)
Noncontrolling interest -
Total liabilities and shareholders' equity 6,550,000.00 6,917,200.00

ELIMINATING ENTRIES - at acquisition date

Eliminate the subsidiary's SHE
Ordinary shares 700,000.00
Share premium 50,000.00
Retained earnings 92,000.00
Treasury shares 4,000.00
Investment in subsidiary 754,200.00
Noncontrolling interest 83,800.00

Adjustment to fair value

Receivables 5,000.00
Inventories 10,000.00
Accumulated depreciation 40,000.00
Land 50,000.00
Discount on bonds payable 20,000.00
Equipment 58,000.00
Investment in subsidiary 24,300.00
Noncontrolling interest 2,700.00

Recognition of goodwill/bargain purchase gain

Full Goodwill Approach
Investment in subsidiary 44,100.00
Goodwill 73,400.00
Noncontrolling interest 117,500.00

PROBLEM 4

65.00% 35.00%
CI NCI
Consideration transferred 2,463,750.00 1,282,211.54
Book value of net assets acquired (1,901,250.00) (1,023,750.00)
Excess of cost over book value 562,500.00 258,461.54
Over and (Under)
Inventories (48,750.00) (26,250.00)
Equipment (243,750.00) (131,250.00)
Patent (47,775.00) (25,725.00)
Net undervaluation (340,275.00) (183,225.00)
Goodwill 222,225.00 75,236.54
NO. 2

FV of CI/NCI/Subs 2,381,250.00 1,282,211.54

Control premium 82,500.00
Consideration transferred 2,463,750.00
 Total
68,000.00
12.00
816,000.00
None
816,000.00
(838,000.00) EE1
(22,000.00)

(5,000.00)
(10,000.00)
18,000.00
(50,000.00)
20,000.00
(27,000.00) EE2
(49,000.00) EE3

Tim Coching:
Entry in the acquirer's
816,000.00 books
(865,000.00)
(49,000.00)

DEF Company Full/Partial

Elim. Entries Conso
Book Debit Credit FS
200,000.00 - - 1,077,600.00
50,000.00 5,000.00 - 305,000.00
100,000.00 10,000.00 - 610,000.00
 400,000.00 - 58,000.00 2,342,000.00
(40,000.00) 40,000.00 - (200,000.00)
1,000,000.00 50,000.00 - 4,050,000.00
44,100.00 778,500.00 -
- - -
1,710,000.00 - - 8,184,600.00
- -
12,000.00 - - 312,000.00
900,000.00 - - 2,400,000.00
(40,000.00) - 20,000.00 (60,000.00)
700,000.00 700,000.00 - 1,306,000.00
50,000.00 50,000.00 - 806,000.00
92,000.00 92,000.00 44,100.00 3,344,100.00
(4,000.00) - 4,000.00 (10,000.00)
- 86,500.00 86,500.00
1,710,000.00 8,184,600.00

Total
68,000.00
12.00
816,000.00
 183,600.00
999,600.00

Total
999,600.00
(838,000.00) EE1
161,600.00

(5,000.00)
(10,000.00)
18,000.00
(50,000.00)
20,000.00
(27,000.00) EE2
134,600.00 EE3

DEF Company Full/Partial

Conso
Book Debit Credit SFP
200,000.00 - - 282,000.00
50,000.00 5,000.00 - 305,000.00
100,000.00 10,000.00 - 610,000.00
400,000.00 - 58,000.00 2,342,000.00
(40,000.00) 40,000.00 - (200,000.00)
1,000,000.00 50,000.00 - 4,050,000.00
- 918,000.00 -
139,500.00 - 139,500.00
1,710,000.00 - - 7,528,500.00
- -
12,000.00 - - 312,000.00
900,000.00 - - 2,400,000.00
(40,000.00) - 20,000.00 (60,000.00)
700,000.00 700,000.00 - 1,000,000.00
50,000.00 50,000.00 - 500,000.00
92,000.00 92,000.00 - 3,300,000.00
(4,000.00) - 4,000.00 (10,000.00)
- 86,500.00 86,500.00
1,710,000.00 7,528,500.00
 Total
68,000.00
30.00
2,040,000.00
(1,101,600.00)
938,400.00

Total
938,400.00
(838,000.00) EE1
100,400.00

(5,000.00)
(10,000.00)
18,000.00
(50,000.00)
20,000.00
(27,000.00) EE2
73,400.00 EE3
DEF Company Full GW Partial GW
Conso Conso
Book Debit Credit SFP SFP
200,000.00 - - 832,800.00 832,800.00
50,000.00 5,000.00 - 305,000.00 305,000.00
100,000.00 10,000.00 - 610,000.00 610,000.00
400,000.00 - 58,000.00 2,342,000.00 2,342,000.00
(40,000.00) 40,000.00 - (200,000.00) (200,000.00)
1,000,000.00 50,000.00 - 4,050,000.00 4,050,000.00
44,100.00 778,500.00 - -
73,400.00 - 73,400.00
1,710,000.00 8,013,200.00 7,939,800.00

12,000.00 - - 312,000.00 312,000.00

- - 367,200.00 367,200.00
900,000.00 - - 2,400,000.00 2,400,000.00
(40,000.00) - 20,000.00 (60,000.00) (60,000.00)
700,000.00 700,000.00 - 1,000,000.00 1,000,000.00
50,000.00 50,000.00 - 500,000.00 500,000.00
92,000.00 92,000.00 - 3,300,000.00 3,344,100.00
(4,000.00) - 4,000.00 (10,000.00) (10,000.00)
- 204,000.00 204,000.00 86,500.00
1,710,000.00 8,013,200.00 7,939,800.00

Eliminate the subsidiary's SHE

SAME

Adjustment to fair value

SAME

Partial Goodwill Approach

Investment in subsidiary
 Bargain purchase gain

100%
Total
3,745,961.54 Consideration transferred
(2,925,000.00) Book value of net assets acquired
820,961.54 Excess of cost over book value
Over and (Under)
(75,000.00) Inventories
(375,000.00) Equipment
(73,500.00) Patent
(523,500.00) Net undervaluation
297,461.54 Goodwill
NO. 1

3,663,461.54 FV of CI/NCI/Subs
82,500.00 Control premium
3,745,961.54 Consideration transferred
44,100.00
 44,100.00

65.00% 35.00% 100%

CI NCI Total
2,645,357.14 1,380,000.00 4,025,357.14
(1,901,250.00) (1,023,750.00) (2,925,000.00)
744,107.14 356,250.00 1,100,357.14

(48,750.00) (26,250.00) (75,000.00)

(243,750.00) (131,250.00) (375,000.00)
(47,775.00) (25,725.00) (73,500.00)
(340,275.00) (183,225.00) (523,500.00)
403,832.14 173,025.00 576,857.14
NO. 3

2,562,857.14 1,380,000.00 3,942,857.14

82,500.00 82,500.00
2,645,357.14 4,025,357.14
PROBLEM 3

80%
ACQUISITION ANALYSIS CI
FV of CI/NCI/Subsidiary 360,000.00
Control discount (60,000.00)
Acquisition cost 12,000.00 25.00 300,000.00

Acquisition cost/FV of NCI 300,000.00

Book value of net assets acquired (153,600.00)
Excess of cost over book value 146,400.00
Over (under) valuation Fair Book Undervaluation
Inventory 66,000.00 60,000.00 6,000.00 (4,800.00)
Land 84,000.00 48,000.00 36,000.00 (28,800.00)
Buildings 372,000.00 222,000.00 150,000.00 (120,000.00)
Copyright 60,000.00 - 60,000.00 (48,000.00)
Estimated liability for co 6,000.00 - 6,000.00 4,800.00
Net under valuation (196,800.00)
Bargain purchase gain (50,400.00)
Partial
Tim Coching:
ACQUIRER'S BOOKS Cost Model
Investment in Subsidiary 300,000.00
Common stock 12,000.00
Paid in capital in excess of par 288,000.00

Post-comb
Pakistan Pakistan
Cash 334,800.00 334,800.00
Accounts receivable 86,400.00 86,400.00
Inventory 96,000.00 96,000.00
Land 120,000.00 120,000.00
Buildings and equipment (net) 744,000.00 744,000.00
Copyright -
Investment in Subsidiary 300,000.00
1,381,200.00 1,681,200.00

Accounts payable 96,000.00 96,000.00

Estimated liability for contingencies -
Bonds payable 240,000.00 240,000.00
Common stock 32,160.00 44,160.00
Paid in capital in excess of par 435,840.00 723,840.00
Retained earnings 577,200.00 577,200.00
Noncontrolling interest -
1,381,200.00 1,681,200.00
Elimination of subsidiary's SHE
Common stock 12,000.00
Paid in capital in excess of par 108,000.00
Retained earnings 72,000.00
Investment in Subsidiary 153,600.00
Noncontrolling interest 38,400.00

Adjustments to Fair Value

Inventory 6,000.00
Land 36,000.00
Buildings and equipment (net) 150,000.00
Copyright 60,000.00
Estimated liability for contingencies 6,000.00
Investment in Subsidiary 196,800.00
Noncontrolling interest 49,200.00

Recognition of goodwill (BPG)

Full Goodwill
Investment in Subsidiary 50,400.00
Noncontrolling interest 2,400.00
Retained earnings 48,000.00

Partial Goodwill
Investment in Subsidiary 50,400.00
Retained earnings 50,400.00

PROBLEM 7
100% None
ACQUISITION ANALYSIS CI NCI Total
FV of CI/NCI/Subs 760,000.00 760,000.00
Control premium (discount) None -
Acquisition cost 760,000.00 760,000.00

Cash 360,000.00
Equity instruments of parent 400,000.00
Acquisition cost 760,000.00

Consideration 760,000.00
Book value of net assets acquired/SHE 12/31 (560,000.00)
Excess of cost over book value 200,000.00
Over (under) Fair Book
Inventory 260,000 210,000.00 (50,000.00)
Land 110,000 130,000.00 20,000.00
Buildings 330,000 270,000.00 (60,000.00)
Franchise 220,000 190,000.00 (30,000.00)
Net under valuation (120,000.00)
Goodwill 80,000.00

Parent Subs Conso balance

1 Inventory 410,000.00 260,000.00 670,000.00
2 Land 600,000.00 110,000.00 710,000.00
3 Buildings 600,000.00 330,000.00 930,000.00
4 Franchise 220,000.00 220,000.00 440,000.00
5 Goodwill 80,000.00
6 Revenue 960,000.00
7 APIC 265,000.00
8 Expenses 940,000.00
9 Retained earnings, 1/1 390,000.00
10 Retained earnings, 12/31 410,000.00

PROBLEM 8

1 Inventory 140,000.00
2 Land 60,000.00
3 Buildings 550,000.00
4 Goodwill 57,500.00
0.80 0.20
CI NCI Total
Consideration/FV of NCI 470,000.00 117,500.00 587,500.00
Book value of net assets (360,000.00) (90,000.00) (450,000.00)
Excess of cost over book value 110,000.00 27,500.00 137,500.00
Over (Under)
Inventory (20,000.00)
Land 10,000.00
Buidlings (70,000.00)
(16,000.00) (80,000.00)
Goodwill 11,500.00 57,500.00

5 Investment in Slim Corporation 470,000.00

6 Total assets 887,500.00
7 Total liabilities 300,000.00
8
9 Noncontrolling interest 117,500.00
10

PROBLEM 11

NO. 1
ACQUIRER'S BOOKS
Investment in subsidiary 950,000.00
Cash 950,000.00
NO. 2
ACQUISITION ANALYSIS
Consideration transferred 950,000.00
Book value of net assets acquired (720,000.00) EE1
Excess of cost over book value 230,000.00
Over (under) valuation
Land 150,000.00
Building (100,000.00)
Bonds payable (20,000.00)
DTL (10,000.00)
Net overvaluation 20,000.00 ü
Goodwill (BPG) 250,000.00 ü

REVERSE ACQUISITION

Acquirer -> control -> Acquiree

Form Legal Parent Subsidiary
Substance Accounting Parent Subsidiary

Reverse acquisition Acquirer -> control -> Acquiree

Form Legal Legal acquiree - Bigger (Public) Legal acquirer - Smaller (Privat
Substance Accounting Parent Subsidiary

PROBLEM 9

1 GG's total asset 470,000.00

2 GG's total asset 470,000.00

BB's total asset 190,000.00
Investment in subsdiiary (55,000.00)
Consolidated assets 605,000.00
 Consideration transferred 55,000.00
FV of net assets (55,000.00)
Goodwill -

3 Gg 270,000.00
BB 135,000.00
Consolidated liabilities 405,000.00

4 Consolidated SHE, at acquisition date 200,000.00 --> parent

PROBLEM 10

CASE 1 57,000.00
60% 40% Total
Consideration transferred 57,000.00
FV of net assets acquired (57,000.00) (38,000.00) (95,000.00)
Goodwill (BPG) -

CASE 2

60% 40% Total

Consideration transferred/FV of NCI 81,000.00 54,000.00 135,000.00
FV of net assets acquired (57,000.00) (38,000.00) (95,000.00)
Goodwill (BPG) 24,000.00 16,000.00 40,000.00

CASE 3

60% 40% Total

Consideration transferred/FV of NCI 73,200.00 48,800.00 122,000.00
FV of net assets acquired (57,000.00) (38,000.00) (95,000.00)
Goodwill (BPG) 27,000.00
 Below 20%
20% Fair value Listed entity
NCI Total Cost Method No available FV
90,000.00 450,000.00 Equity Method
(60,000.00)
390,000.00

90,000.00 390,000.00
(38,400.00) (192,000.00) EE1
51,600.00 198,000.00

(1,200.00) (6,000.00)
(7,200.00) (36,000.00)
(30,000.00) (150,000.00)
(12,000.00) (60,000.00)
1,200.00 6,000.00
(49,200.00) (246,000.00) EE2
2,400.00 (48,000.00) EE3
Full

Full Partial
Equity Method
Syria Debit Credit Conso FS
- - 334,800.00 334,800.00
24,000.00 - - 110,400.00 110,400.00
60,000.00 6,000.00 - 162,000.00 162,000.00
48,000.00 36,000.00 - 204,000.00 204,000.00
222,000.00 150,000.00 - 1,116,000.00 1,116,000.00
60,000.00 - 60,000.00 60,000.00
50,400.00 350,400.00 - -
354,000.00 - - 1,987,200.00 1,987,200.00
- -
42,000.00 - - 138,000.00 138,000.00
- 6,000.00 6,000.00 6,000.00
120,000.00 - - 360,000.00 360,000.00
12,000.00 12,000.00 - 44,160.00 44,160.00
108,000.00 108,000.00 - 723,840.00 723,840.00
72,000.00 72,000.00 48,000.00 625,200.00 627,600.00
- 90,000.00 90,000.00 87,600.00 ---> 20% of FV of net assets
354,000.00 1,987,200.00 1,987,200.00
 ACQUIRER'S BOOKS
EE1 Investment in subsdiary 760,000.00
Common stock 200,000.00
APIC 200,000.00
Cash 360,000.00

Expense 20,000.00
APIC 5,000.00
EE2 Cash 25,000.00
EE3

NO. 3
ACQUIREE'S BOOKS
Building 100,000.00
Bonds payable 20,000.00
Deferred tax liability 10,000.00
 Goodwill 250,000.00
Retained earnings 420,000.00
Land 150,000.00
Paid in capital - push down 650,000.00
Pre-comb Post-comb
Cash 80,000.00 80,000
Accounts receivable 260,000.00 260,000
Prepaid expenses 20,000.00 20,000
Land 200,000.00 (150,000.00) 50,000
Building 600,000.00 100,000.00 700,000
Goodwill 250,000.00 250,000
Total assets 1,160,000.00 1,360,000

Current liabilities 90,000.00 90,000

Bonds payable 300,000.00 (20,000.00) 280,000
DTL 50,000.00 (10,000.00) 40,000
Common stock 300,000.00 300,000
Paid in capital - push down - 650,000.00 650,000
Retained earnings 420,000.00 (420,000.00) -
1,160,000.00 1,360,000

NO. 4
Elimination of subsidiary's SHE
Common stock 300,000.00
Paid in capital - push down 650,000.00
Investment in subsidiary 950,000.00

acquirer - Smaller (Private)

 20 to 50% Above 50%

Control
Sig Inf. Conso FS

of FV of net assets
PROBLEM 2

CASE 1
ACQUISITION ANALYIS
Consideration 408,000.00
BV of net assets acquired (360,000.00)
Excess of cost over book value 48,000.00
Over and under valuation of net assets
FV BV
Inventory 90,000.00 72,000.00 18,000.00 (18,000.00)
Land 120,000.00 48,000.00 72,000.00 (72,000.00)
Buildings 348,000.00 360,000.00 (12,000.00) 12,000.00
Bonds pay (162,000.00) (120,000.00) (42,000.00) 42,000.00
Net under valuation of net assets (36,000.00)
Goodwill 12,000.00

ACQUIRER'S BOOKS
Investment in subsidiary 408,000.00
Cash 408,000.00

Per Group of Companies

Statement of Financial Position
Januaruy 1, 20x4
Acquirer
Pre Post
Cash 420,000.00 12,000.00
Accounts receivable 90,000.00 90,000.00
Inventory 120,000.00 120,000.00
Land 210,000.00 210,000.00
Buildings and equipment 480,000.00 480,000.00
Investment in subsidiary 408,000.00
Goodwill
Total assets 1,320,000.00 1,320,000.00

Accounts payable 120,000.00 120,000.00

Bonds payable 240,000.00 240,000.00
Common stock 600,000.00 600,000.00
Paid capital in excess of par 60,000.00 60,000.00
Retained earnings 300,000.00 300,000.00
1,320,000.00 1,320,000.00

CASE 2
ACQUISITION ANALYIS
Consideration
 Cash 288,000.00
Equity instrument of the acquirer 144,000.00
Acquisition cost 432,000.00
BV of net assets acquired (360,000.00)
Excess of cost over book value 72,000.00
Over and under valuation of net assets
FV BV
Inventory 90,000.00 72,000.00 18,000.00 (18,000.00)
Land 120,000.00 48,000.00 72,000.00 (72,000.00)
Buildings 348,000.00 360,000.00 (12,000.00) 12,000.00
Bonds pay (162,000.00) (120,000.00) (42,000.00) 42,000.00
Net under valuation of net assets (36,000.00)
Goodwill 36,000.00

ACQUIRER'S BOOKS
Investment in subsidiary 432,000.00
Cash 288,000.00
Common stock 120,000.00
Paid capital in excess of par 24,000.00

Retained earnings 12,000.00

Paid capital in excess of par 8,400.00
Cash 20,400.00

Pre Debit
Cash 420,000.00 -
Accounts receivable 90,000.00 -
Inventory 120,000.00 -
Land 210,000.00 -
Buildings and equipment 480,000.00 -
Investment in subsidiary 432,000.00
Goodwill -
Total assets 1,320,000.00

Accounts payable 120,000.00 -

Bonds payable 240,000.00 -
Common stock 600,000.00 -
Paid capital in excess of par 60,000.00 8,400.00
Retained earnings 300,000.00 12,000.00
1,320,000.00

CASE 3 0.80 0.20

CI NCI Total
No. of shares 19,200.00 4,800.00 24,000.00
Fair value 360,000.00 90,000.00 450,000.00
FV of CI = Acquisition cost --> No control premium (discount)

CI
Acquisition cost/FV of NCI 360,000.00
BV of net assets acquired (288,000.00)
Excess of cost over book value 72,000.00
Over and under valuation of net assets
FV BV
Inventory 90,000.00 72,000.00 18,000.00
Land 120,000.00 48,000.00 72,000.00
Buildings 348,000.00 360,000.00 (12,000.00)
Bonds pay (162,000.00) (120,000.00) (42,000.00)
Net under valuation of net assets (28,800.00)
Goodwill 43,200.00
Partial

Acquirer
Pre Post
Cash 420,000.00 45,600.00
Accounts receivable 90,000.00 90,000.00
Inventory 120,000.00 120,000.00
Land 210,000.00 210,000.00
Buildings and equipment 480,000.00 480,000.00
Investment in subsidiary 360,000.00
Goodwill
Total assets 1,320,000.00 1,305,600.00

Accounts payable 120,000.00 120,000.00

Bonds payable 240,000.00 240,000.00
Common stock 600,000.00 600,000.00
Paid capital in excess of par 60,000.00 60,000.00
Retained earnings 300,000.00 285,600.00
Noncontrolling interest
1,320,000.00 1,305,600.00

CASE 4
ACQUISITION ANALYIS
Consideration
Cash 288,000.00
Equity instrument of the acquirer 144,000.00
Acquisition cost 432,000.00
BV of net assets acquired except existing goodwill ---> (354,000.00)
Excess of cost over book value 78,000.00
Over and under valuation of net assets
 FV BV
Inventory 90,000.00 72,000.00 18,000.00 (18,000.00)
Land 120,000.00 48,000.00 72,000.00 (72,000.00)
Buildings 348,000.00 360,000.00 (12,000.00) 12,000.00
Bonds pay (162,000.00) (120,000.00) (42,000.00) 42,000.00
Net under valuation of net assets (36,000.00)
Goodwill 42,000.00

Same in case 2
Acquirer Acquiree Debit
Cash 111,600.00 54,000.00 -
Accounts receivable 90,000.00 60,000.00 -
Inventory 120,000.00 72,000.00 18,000.00
Land 210,000.00 48,000.00 72,000.00
Buildings and equipment 480,000.00 360,000.00 -
Investment in subsidiary 432,000.00 -
Goodwill - 6,000.00 36,000.00
Total assets 1,443,600.00 600,000.00

Accounts payable 120,000.00 120,000.00 -

Bonds payable 240,000.00 120,000.00 -
Common stock 720,000.00 240,000.00 240,000.00
Paid capital in excess of par 75,600.00 24,000.00 24,000.00
Retained earnings 288,000.00 96,000.00 96,000.00
1,443,600.00 600,000.00 486,000.00

CASE 5

ACQUISITION ANALYSIS
Consideration transferred 402,000.00
Book value of net assets acquired (360,000.00)
Excess of cost over book value 42,000.00
Over and under valuation of net assets
 FV BV
Inventory 90,000.00 72,000.00 18,000.00 (18,000.00)
Land 120,000.00 48,000.00 72,000.00 (72,000.00)
Buildings 348,000.00 360,000.00 (12,000.00) 12,000.00
Bonds pay (162,000.00) (120,000.00) (42,000.00) 42,000.00
Net under valuation of net assets (36,000.00)
Goodwill 6,000.00

Acquirer
Pre Post
Cash 420,000.00 12,000.00
Accounts receivable 90,000.00 90,000.00
Dividends receivable 6,000.00
Inventory 120,000.00 120,000.00
Land 210,000.00 210,000.00
Buildings and equipment 480,000.00 480,000.00
Investment in subsidiary 402,000.00
Goodwill
Total assets 1,320,000.00 1,320,000.00

Accounts payable 120,000.00 120,000.00

Dividends payable
Bonds payable 240,000.00 240,000.00
Common stock 600,000.00 600,000.00
Paid capital in excess of par 60,000.00 60,000.00
Retained earnings 300,000.00 300,000.00
1,320,000.00 1,320,000.00
 EE1 Common stock
Paid capital in excess of par
Retained earnings
EE1 Investment in subsidiary

EE2 Inventory
Land
Buildings and equipment
Bonds payable
Investment in subsidiary

EE2 EE3 Goodwill

EE3 Investment in subsidiary

Question No. 2
Acquiree Debit Credit Conso SFP a
60,000.00 - - 72,000.00 b
60,000.00 - - 150,000.00 c
72,000.00 18,000.00 - 210,000.00 d
48,000.00 72,000.00 - 330,000.00 e
360,000.00 - 12,000.00 828,000.00 f
- 408,000.00 - g
12,000.00 - 12,000.00
600,000.00 - - 1,602,000.00
- -
120,000.00 - - 240,000.00
120,000.00 - 42,000.00 402,000.00
240,000.00 240,000.00 - 600,000.00
24,000.00 24,000.00 - 60,000.00
96,000.00 96,000.00 - 300,000.00
600,000.00 1,602,000.00
 EE1 Common stock
Paid capital in excess of par
Retained earnings
EE1 Investment in subsidiary

EE2 Inventory
Land
Buildings and equipment
Bonds payable
Investment in subsidiary

EE2 EE3 Goodwill

EE3 Investment in subsidiary

Acquirer Conso
Credit Post Acquiree Debit Credit SFP
308,400.00 111,600.00 60,000.00 - - 171,600.00
- 90,000.00 60,000.00 - - 150,000.00
- 120,000.00 72,000.00 18,000.00 - 210,000.00
- 210,000.00 48,000.00 72,000.00 - 330,000.00
- 480,000.00 360,000.00 - 12,000.00 828,000.00
- 432,000.00 - 432,000.00 -
- - 36,000.00 - 36,000.00
1,443,600.00 600,000.00 - - 1,725,600.00

- 120,000.00 120,000.00 - - 240,000.00

- 240,000.00 120,000.00 - 42,000.00 402,000.00
120,000.00 720,000.00 240,000.00 240,000.00 - 720,000.00
24,000.00 75,600.00 24,000.00 24,000.00 - 75,600.00
- 288,000.00 96,000.00 96,000.00 - 288,000.00
1,443,600.00 600,000.00 1,725,600.00

ACQUIRER'S BOOKS
Investment in subsidiary 360,000.00
Cash

Retained earnings 14,400.00

 Cash

NCI Total EE1 Common stock

90,000.00 450,000.00 Paid capital in excess of par
(72,000.00) (360,000.00) EE1 Retained earnings
18,000.00 90,000.00 Investment in subsidiary
Noncontrolling interest

(18,000.00) EE2 Inventory

(72,000.00) Land
12,000.00 Buildings and equipment
42,000.00 Bonds payable
(7,200.00) (36,000.00) EE2 Investment in subsidiary
10,800.00 54,000.00 EE3 Noncontrolling interest
Full GW
EE3 Goodwill
Noncontrolling interest
Investment in subsidiary
Full Partial
Acquiree Debit Credit Conso FS Conso FS Question No. 2
60,000.00 - - 105,600.00 105,600.00 a
60,000.00 - - 150,000.00 150,000.00 b
72,000.00 18,000.00 - 210,000.00 210,000.00 c
48,000.00 72,000.00 - 330,000.00 330,000.00 d
360,000.00 - 12,000.00 828,000.00 828,000.00 e
- 360,000.00 - - f
54,000.00 - 54,000.00 43,200.00 g
600,000.00 - - 1,677,600.00 1,666,800.00
- -
120,000.00 - - 240,000.00 240,000.00
120,000.00 - 42,000.00 402,000.00 402,000.00
240,000.00 240,000.00 - 600,000.00 600,000.00
24,000.00 24,000.00 - 60,000.00 60,000.00
96,000.00 96,000.00 - 285,600.00 285,600.00
- 90,000.00 90,000.00 79,200.00 79,200.00
600,000.00 1,677,600.00 1,666,800.00 90,000.00

ACQUIRER'S BOOKS
Investment in subsidiary 432,000.00
Cash
Common stock
Paid capital in excess of par

EE1 Retained earnings 12,000.00

Paid capital in excess of par 8,400.00
Cash
 EE1 Common stock
Paid capital in excess of par
Retained earnings
Investment in subsidiary
EE2
EE3 EE2 Inventory
Land
Buildings and equipment
Bonds payable
Investment in subsidiary

EE3 Goodwill
Investment in subsidiary
Conso
Credit SFP Question No. 2
- 165,600.00 a 1,725,600.00
- 150,000.00 b 642,000.00
- 210,000.00 c 720,000.00
- 330,000.00 d 75,600.00
12,000.00 828,000.00 e 288,000.00
432,000.00 - f 1,083,600.00
- 42,000.00 g None
1,725,600.00

- 240,000.00
42,000.00 402,000.00
- 720,000.00
- 75,600.00
- 288,000.00
486,000.00 1,725,600.00

ACQUIRER'S BOOKS
Investment in subsidiary 402,000.00
Cash 402,000.00

Dividends receivable 6,000.00

Cash 6,000.00

---> exclude the dividends on

----> not affected EE1 Common stock
EE1 Paid capital in excess of par
Retained earnings
 Investment in subsidiary

EE2 Inventory
Land
Buildings and equipment
EE2 Bonds payable
EE3 Investment in subsidiary

EE3 Goodwill
Investment in subsidiary

Dividends payable
Dividends receivable

Group
Acquiree Debit Credit Conso FS Question No. 2
60,000.00 - - 72,000.00 a
60,000.00 - - 150,000.00 b
- 6,000.00 - c
72,000.00 18,000.00 - 210,000.00 d
48,000.00 72,000.00 - 330,000.00 e
360,000.00 - 12,000.00 828,000.00 f
- 402,000.00 - g
6,000.00 - 6,000.00
600,000.00 1,596,000.00

114,000.00 - - 234,000.00
6,000.00 6,000.00 - -
120,000.00 - 42,000.00 402,000.00
240,000.00 240,000.00 - 600,000.00
24,000.00 24,000.00 - 60,000.00
96,000.00 96,000.00 - 300,000.00
600,000.00 1,596,000.00
 240,000.00
24,000.00
96,000.00
360,000.00

18,000.00
72,000.00
12,000.00
42,000.00
36,000.00

12,000.00
12,000.00

stion No. 2
1,602,000.00
642,000.00
600,000.00
60,000.00
300,000.00
960,000.00
None
 240,000.00
24,000.00
96,000.00
360,000.00

18,000.00
72,000.00
12,000.00
42,000.00
36,000.00

36,000.00
36,000.00

Question No. 2
a 1,725,600.00
b 642,000.00
c 720,000.00
d 75,600.00
e 288,000.00
f 1,083,600.00
g None

360,000.00
 14,400.00

240,000.00
24,000.00
96,000.00
288,000.00
72,000.00

18,000.00
72,000.00
12,000.00
42,000.00
28,800.00
7,200.00

54,000.00
10,800.00
43,200.00

stion No. 2
1,677,600.00
642,000.00
600,000.00
60,000.00
285,600.00
1,035,600.00
90,000.00

---> share of NCI in the FV of subsidiary's net assets

---> share of NCI in the FV of the subsidiary

288,000.00
120,000.00
24,000.00

20,400.00
240,000.00
24,000.00
96,000.00
360,000.00

18,000.00
72,000.00
12,000.00
42,000.00
36,000.00

36,000.00
36,000.00

240,000.00
24,000.00
96,000.00
 360,000.00

18,000.00
72,000.00
12,000.00
42,000.00
36,000.00

6,000.00
6,000.00

6,000.00
6,000.00

stion No. 2
1,596,000.00
636,000.00
600,000.00
60,000.00
300,000.00
960,000.00
None
 PROBLEM 1
CASE 1

NO. 1 Investment in subsidiary 315,000.00

Cash 300,000.00
Liability for contingent consideration 15,000.00

Acquisition related expense 10,000.00

Cash 10,000.00

NO. 2 ACQUISITION ANALYSIS

Consideration transferred 315,000.00
Book value of net assets acquired (190,000.00)
Allocated excess 125,000.00
Over and under valuation of net assets
FV BV
Inventories 20,000.00 30,000.00 (10,000.00) 10,000.00
Buildings and equipment 76,000.00 50,000.00 26,000.00 (26,000.00)
Customer list 5,000.00 5,000.00 (5,000.00)
Favorable lease agreeme 3,000.00 3,000.00 (3,000.00)
Signed customer contract 2,000.00 2,000.00 (2,000.00)
In process R & D 50,000.00 50,000.00 (50,000.00)
Net undervaluation of net assets (76,000.00)
Goodwill 49,000.00

NO. 3 EE1 Common stock 90,000.00

Paid-in capital in excess of par 80,000.00
Retained earnings 20,000.00
Investment in subsidiary 190,000.00

EE2 Buildings and equipment 26,000.00

Customer list 5,000.00
Favorable lease agreement 3,000.00
Signed customer contracts 2,000.00
In process R & D 50,000.00
Inventories 10,000.00
Investment in subsidiary 76,000.00

EE3 Goodwill 49,000.00

Investment in subsidiary 49,000.00
 CASE 2

Investment in subsidiary 237,500.00

Cash 237,500.00
0.80 0.20
CI NCI
FV 237,500.00 59,375.00
FV of CI = Acquisition cost --> No control premium (discount)

ACQUISITION ANALYSIS
Acquisition cost/FV of NCI
EE1 Book value of net assets acquired
Allocated excess
Over and under valuation of net assets
FV BV
Inventories 20,000.00 30,000.00 (10,000.00)
Buildings and equipment 76,000.00 50,000.00 26,000.00
Customer list 5,000.00 5,000.00
Favorable lease agreeme 3,000.00 3,000.00
Signed customer contract 2,000.00 2,000.00
In process R & D 50,000.00 50,000.00
EE2 Net undervaluation of net assets
EE3 Goodwill
Full GW Approach
EE1 Common stock 90,000.00
Paid-in capital in excess of par 80,000.00
Retained earnings 20,000.00
Investment in subsidiary 152,000.00
Noncontrolling interest 38,000.00

EE2 Buildings and equipment 26,000.00

Customer list 5,000.00
Favorable lease agreement 3,000.00
Signed customer contracts 2,000.00
In process R & D 50,000.00
Inventories 10,000.00
Investment in subsidiary 60,800.00
Noncontrolling interest 15,200.00

EE3 Goodwill 30,875.00

Investment in subsidiary 24,700.00
Noncontrolling interest 6,175.00
 CASE 3

Investment in subsidiary
Cash

Subsidiary
296,875.00 FV
(discount) Control premium
Acquisition cost
CI NCI Total ACQUISITION ANALYSIS
237,500.00 59,375.00 296,875.00 Acquisition cost/FV of NCI
(152,000.00) (38,000.00) (190,000.00) EE1 Book value of net assets acquired
85,500.00 21,375.00 106,875.00 Allocated excess
Over and under valuation of net assets
FV
10,000.00 Inventories 20,000.00
(26,000.00) Buildings and equipment 76,000.00
(5,000.00) Customer list 5,000.00
(3,000.00) Favorable lease agreeme 3,000.00
(2,000.00) Signed customer contract 2,000.00
(50,000.00) In process R & D 50,000.00
(60,800.00) (15,200.00) (76,000.00) EE2 Net undervaluation of net assets
24,700.00 6,175.00 30,875.00 EE3 Goodwill
Partial GW Full GW
SAME EE1 Common stock
Paid-in capital in excess of par
Retained earnings
Investment in subsidiary
Noncontrolling interest

SAME EE2 Buildings and equipment

Customer list
Favorable lease agreement
Signed customer contracts
In process R & D
Inventories
Investment in subsidiary
Noncontrolling interest

24,700.00 EE3 Goodwill

24,700.00 Investment in subsidiary
Noncontrolling interest
 CASE 5
NO. 1
239,400.00
239,400.00
0.60 0.40
CI NCI Subsidiary
228,000.00 152,000.00 380,000.00
11,400.00
239,400.00
CI NCI Total
239,400.00 152,000.00 391,400.00
(114,000.00) (76,000.00) (190,000.00) EE1 NO. 2
125,400.00 76,000.00 201,400.00

BV
30,000.00 (10,000.00) 10,000.00
50,000.00 26,000.00 (26,000.00)
5,000.00 (5,000.00)
3,000.00 (3,000.00)
2,000.00 (2,000.00)
50,000.00 (50,000.00)
(45,600.00) (30,400.00) (76,000.00) EE2
79,800.00 45,600.00 125,400.00 EE3
Full GW Approach Partial GW Approach
90,000.00 SAME
80,000.00
20,000.00
114,000.00 No. 3
76,000.00

26,000.00 SAME
5,000.00
3,000.00
2,000.00
50,000.00
10,000.00
45,600.00
30,400.00

125,400.00 79,800.00
79,800.00 79,800.00
45,600.00
Investment in equity 47,500.00
Cash 47,500.00 FV of 15%
Acquisition cost - 60%
Investment in equity 3,800.00 Acquisition cost
Gain on reclassification 3,800.00

Investment in subsidiary 256,500.00

Cash 205,200.00
Investment in equity 51,300.00

0.75 0.25
CI NCI Subsidiary
Fair value 256,500.00 85,500.00 342,000.00
Control premium -
Acquisition cost 256,500.00

ACQUISITION ANALYSIS CI NCI Total

Acquisition cost/FV of NCI 256,500.00 85,500.00 342,000.00
Book value of net assets acquired (142,500.00) (47,500.00) (190,000.00)
Allocated excess 114,000.00 38,000.00 152,000.00
Over and under valuation of net assets
BV FV
Assets 370,500.00 484,500.00
Net undervaluation of net assets (85,500.00) (28,500.00) (114,000.00)
Goodwill 28,500.00 9,500.00 38,000.00

Full GW Approach Partial GW Approach

EE1 Common stock 90,000.00 SAME
Paid-in capital in excess of par 80,000.00
Retained earnings 20,000.00
Investment in subsidiary 142,500.00
Noncontrolling interest 47,500.00

EE2 Assets 114,000.00 SAME

Investment in subsidiary 85,500.00
Noncontrolling interest 28,500.00

EE3 Goodwill 38,000.00 28,500.00

Investment in subsidiary 28,500.00
Noncontrolling interest 9,500.00
 CASE 6
No. 1 Investment in subsidiary 205,000.00
51,300.00 Cash
205,200.00
256,500.00

NO. 2

Fair value
Control discount
Acquisition cost

ACQUISITION ANALYSIS
Acquisition cost/FV of NCI
EE1 Book value of net assets acquired
Allocated excess
Over and under valuation of net assets
FV BV
Assets 462,000.00 362,000.00
EE2 Liabilities 172,000.00 172,000.00
EE3 Net under valuation
Goodwill/Bargain purchase gain
al GW Approach
No. 3
EE1 Common stock
Paid-in capital in excess of par
Retained earnings
Investment in subsidiary
Noncontrolling interest

EE2 Assets
Investment in subsidiary
Noncontrolling interest

EE3 Investment in subsidiary

28,500.00 Bargain purchase gain
Noncontrolling interest
 205,000.00

0.75 0.25
CI NCI Subsidiary
222,600.00 74,200.00 296,800.00
(17,600.00)
205,000.00

CI NCI Total
205,000.00 74,200.00 279,200.00
(142,500.00) (47,500.00) (190,000.00) EE1
62,500.00 26,700.00 89,200.00

(100,000.00)

(75,000.00) (25,000.00) (100,000.00) EE2

(12,500.00) 1,700.00 (10,800.00) EE3
Full GW Approach Partial GW Approach
90,000.00 SAME
80,000.00
20,000.00
142,500.00
47,500.00

100,000.00 SAME
75,000.00
25,000.00

12,500.00 12,500.00
10,800.00 12,500.00
1,700.00