AT ACQUISITION DATE

On January 1, 2020, Tik Corporation acquired 80% Tok Company's outstanding ordinary shares Issued Shares
for P9 per share. The trial balance as of December 31, 2019 are as follows: Percentage of Owner
No. of shares purcha
Tik Tok Cost per share
Book Value Fair Value Book Value Fair Value Acquisition Cost
Cash 8,000 8,000 6,400 6,400
Accounts Receivable 800 784 640 640
Inventory 300 78 240 236 Parent's Books - Tik
Land 1,500 1,200 1,200 1,300 Investment in Subsid
Equipment (9 yrs remaining life) 500 432 400 342
Accum. Depreciation - Equipment 50 40
Building (13 yrs remaining life) 2,250 1,235 1,800 1,014
Accum. Depreciation - Building 300 240
Patent (5 yrs remaining life) 400 375 320 335
Accounts Payable 150 150 120 120 Acquisition Cost/FV
Bonds Payable (5 yrs maturity) 5,000 5,050 4,000 4,050 Book Value of Acqu
Share Capital, P2 per share 2,000 1,600 Excess Over Book V
Share Premium 500 400 Fair Value Changes
Retained Earnings 5,700 4,560
Sale 1,900 1,520
Cost of Sales 1,200 960
Operating Expenses 400 320
Non-Operating Expenses 50 40
Dividends Paid 200 160
Overvaluation of Acq
Required: Goodwill
(1) Prepare the necessary JE in the books of the parent
(2) Prepare the table for acquisition analysis
(3) Prepare the working paper eliminating JE Acquiree's Total Ass
(4) Prepare the consolidated financial statement Acquiree's Total Liab
BV of Net Assets/SH

Book Value of Acqu

Fair Value of Change
Goodwill
Total

Eliminating Entry
Share Capital, P2 per
Share Premium
Retained Earnings
Land
Accum. Depreciation
Accum. Depreciation
Patent
Goodwill
Cash
Accounts Receivable
Inventory
Land
Equipment
Accum. Depreciation
Building
Accum. Depreciation
Patent
Investment in Subsid
Goodwill
Total Assets

Accounts Payable
Bonds Payable
Premiums on Bonds
Share Capital, P2 per
Share Premium
Retained Earnings
Non-Controlling Inte
Total Liabilities & E
Issued Shares 800
Percentage of Ownership 1
No. of shares purchased 640
Cost per share 9
Acquisition Cost 5,760

Parent's Books - Tik Company

Investment in Subsidiary 5,760
Cash 5,760

80% 20%
CI NCI Total
Acquisition Cost/FV of NCI/FV of Acquiree 5,760 1,440 7,200
Book Value of Acquiree's Net Assets (5,280) (1,320) (6,600)
Excess Over Book Value 480 120 600
Fair Value Changes FV BV
Inventory 236 240 3 1 4 OV
Land 1,300 1,200 (80) (20) (100) UV
Equipment 342 360 14 4 18 OV
Building 1,014 1,560 437 109 546 OV
Patent 335 320 (12) (3) (15) UV
Bonds Payable 4,050 4,000 40 10 50 UV
Overvaluation of Acquiree's Net Assets 402 101 503
Goodwill 882 221 1,103

Acquiree's Total Assets, BV 10,720

Acquiree's Total Liabilities, BV 4,120
BV of Net Assets/SHE 6,600

Investment
NCI Total
in Subsidiary
Book Value of Acquiree's Net Assets 5,280 1,320 6,600
Fair Value of Changes (402) (101) (503)
Goodwill 882 221 1,103
Total 5,760 1,440 7,200

Eliminating Entry
Share Capital, P2 per share 1,600
Share Premium 400
Retained Earnings 4,600
Land 100
Accum. Depreciation - Equipment 40
Accum. Depreciation - Building 240
Patent 15
Goodwill 1,103
Inventory 4
Equipment 58
Building 786
Premium on Bonds Payable 50
 Investment in Subsidiary 5,760
Non-Controlling Interest 1,440
checking 8,098 8,098

Eliminating Entries Consolidated

Tik Tok DR CR SFP
Cash 2,240 6,400 8,640
Accounts Receivable 800 640 1,440
Inventory 300 240 4 536
Land 1,500 1,200 100 2,800
Equipment 500 400 58 842
Accum. Depreciation - Equipment (50) (40) 40 (50)
Building 2,250 1,800 786 3,264
Accum. Depreciation - Building (300) (240) 240 (300)
Patent 400 320 15 735
Investment in Subsidiary 5,760 - 5,760 -
Goodwill - - 1,103 1,103
Total Assets 13,400 10,720 19,010

Accounts Payable 150 120 270

Bonds Payable 5,000 4,000 9,000
Premiums on Bonds Payable - - 50 50
Share Capital, P2 per share 2,000 1,600 1,600 2,000
Share Premium 500 400 400 500
Retained Earnings 5,750 4,600 4,600 5,750
Non-Controlling Interest - - 1,440 1,440
Total Liabilities & Equity 13,400 10,720 19,010
Added to Excess over Book Value
Total Liability 9,320
Total Equity 9,690
Conso RE 5,750
ONE YEAR AFTER ACQUISITION DATE (subsequent to acquisition date)

The following are the trial balance of Tik and Tok Company as of December 31, 2020, Eliminating Entry (December
after the first year of business combination. At Acquisition Date
Share Capital, P2 per share
Tik Tok Share Premium
Cash 3,605 2,786 Retained Earnings
Accounts Receivable 820 656 Accum. Depreciation - Equipme
Inventory 315 252 Accum. Depreciation - Building
Land 1,500 2,700 Patent
Equipment 500 400 Land
Accum. Depreciation - Equipment 100 80 Goodwill
Building 2,250 1,800 Equipment
Accum. Depreciation - Building 600 480 Building
Investment in Subsidiary 5,760 Inventory
Investment Property 3,000 Premiums on Bonds Payable
Patent 320 256 Investment in Subsidiary
Accounts Payable 130 58 Non-Controlling Interest
Bonds Payable 4,990 3,992
Share Capital, P2 per share 2,000 1,600
Share Premium 500 400 Subsequent to Acquisition Dat
Retained Earnings 5,750 4,600 Elimination of Intercompany
Sales 3,000 2,490 Dividend Income
Cost of Sales 1,200 960 Noncontrolling Interest
Operating Expenses 600 480 Dividends Paid
Non-Operating Expenses 20 10
Dividend Income 320 Amortization of Excess Over B
Dividends Paid 500 400
Fair Value Changes
Additional Information: Inventory
a) During the year, goodwill is impaired by P10. Land
b) Tok Company purchased land from Snapchat Corporation during the year for P1,500 Equipment
Tok Company purchased land for P3,000 and classified it as an investment property. Building
c) The property has no available fair vaalu, hence, the cost model is used. Patent
Bonds Payable
Required: Net Effect of FV changes
(1) Prepare the necessary JE in the books of the parent Goodwill
(3) Prepare the working paper eliminating JE Net Effect of Subsidiary's Net In
(4) Prepare the consolidated financial statement
Inventory
Cost of Sales

Accum. Depreciation - Equipme

Operating Expenses

Accum. Depreciation - Building

Operating Expenses

Operating Expenses
Patent

Premiums of Bonds Payable

Non-Operating Expenses

Non-Operating Expenses
Goodwill

Share of NCI in Subsidiary's N

Share of NCI in Subsidiary's Ne
Non-Controlling Interest

Share of NCI in Subsidiary's N

Sales
Cost of Sales
Gross Profit
Operating Expenses
Non-Operating Expenses
Net Income
Percentage of NCI
Share of NCI in Subsidiary's NI

Sales
Cost of Sales
Gross Profit
Operating Expenses
Non-Operating Expenses
Dividend Income
Net Income
Share of NCI in Subsidiary's Ne
Share of Controlling Interest in
Dividends Paid
Retained Earnings
Retained Earnings, End

Cash
Accounts Receivable
Inventory
Land
Equipment
Accum. Depreciation - Equipme
Building
Accum. Depreciation - Building
Investment in Subsidiary
Investment Property
Patent
Goodwill
Total Assets

Accounts Payable
Bonds Payable
Premiums of Bonds Payable
Share Capital, P2 per share
Share Premium
Retained Earnings, End
Non-Controlling Interest
Total Liabilities & SHE

Consolidated Statement of Ch

January 1, 2020
Consolidated Net Income
Dividends Paid
Dividends Paid to NCI
December 31, 2020 balance
Eliminating Entry (December 31, 2020)
At Acquisition Date
Share Capital, P2 per share 1,600
Share Premium 400
Retained Earnings 4,600
Accum. Depreciation - Equipment 40
Accum. Depreciation - Building 240
15
100
1,103
Equipment 58
786
Inventory 4
Premiums on Bonds Payable 50
Investment in Subsidiary 5,760
Non-Controlling Interest 1,440

Subsequent to Acquisition Date

Elimination of Intercompany Transactions
Dividend Income 320
Noncontrolling Interest 80
Dividends Paid 400

Amortization of Excess Over Book Value

Remaining Years FV BV Over (Under)
Fair Value Changes
Inventory 236 240 4
1,300 1,200 (100)
Equipment 9 342 360 18
13 1,014 1,560 546
5 335 320 (15)
Bonds Payable 5 4,050 4,000 50
Net Effect of FV changes

Net Effect of Subsidiary's Net Income (for consolidation purposes)

4
Cost of Sales 4

Accum. Depreciation - Equipment 2

Operating Expenses 2

Accum. Depreciation - Building 42

Operating Expenses 42

Operating Expenses 3
3

Premiums of Bonds Payable 10

Non-Operating Expenses 10

Non-Operating Expenses 10
 10

Share of NCI in Subsidiary's Net Income

Share of NCI in Subsidiary's Net Income 217
Non-Controlling Interest 217

Share of NCI in Subsidiary's Net Income

Subs. NI per books DR CR Subs. NI in Conso FS
2,490 2,490
Cost of Sales (960) 4 (956)
Gross Profit 1,530 1,534
Operating Expenses (480) 3 44 (439)
Non-Operating Expenses (10) 10 10 (10)
1,040 13 58 1,085
Percentage of NCI 0
Share of NCI in Subsidiary's NI (for consolidation purposes) 217

Acquisition Date Subsequent Consolidated

Tik Tok DR CR DR CR SFP
3,000 2,490 5,490
Cost of Sales (1,200) (960) 4 (2,156)
Gross Profit 1,800 1,530 3,334
Operating Expenses (600) (480) 3 44 (1,039)
Non-Operating Expenses (20) (10) 10 10 (30)
Dividend Income 320 - 320 -
1,500 1,040 2,265
Share of NCI in Subsidiary's Net Income 217 (217)
Share of Controlling Interest in Subs' NI 2,048
Dividends Paid (500) (400) 400 (500)
Retained Earnings 5,750 4,600 4,600 5,750
Retained Earnings, End 6,750 5,240 7,298

3,605 2,786 6,391

Accounts Receivable 820 656 1,476
315 252 4 4 567
1,500 2,700 100 4,300
500 400 58 842
Accum. Depreciation - Equipment (100) (80) 40 2 (138)
2,250 1,800 786 3,264
Accum. Depreciation - Building (600) (480) 240 42 (798)
Investment in Subsidiary 5,760 - 5,760 -
Investment Property - 3,000 3,000
320 256 15 3 588
1,103 10 1,093
Total Assets 14,370 11,290 20,585

Accounts Payable 130 58 188

Bonds Payable 4,990 3,992 8,982
Premiums of Bonds Payable 50 10 40
Share Capital, P2 per share 2,000 1,600 1,600 2,000
Share Premium 500 400 400 500
Retained Earnings, End 6,750 5,240 7,298
Non-Controlling Interest 1,440 80 217 1,577
Total Liabilities & SHE 14,370 11,290 20,585

Consolidated Statement of Changes in SHE

Share
Capital, Share Conso
RE, End NCI
P2 per Premium SHE
share
January 1, 2020 2,000 500 5,750 1,440 9,690
Consolidated Net Income 2,048 217 2,265
Dividends Paid (500) (217)
Dividends Paid to NCI (80) 2,048
December 31, 2020 balance 2,000 500 7,298 1,577 13,786
Over (Under) 2020 effect on Subs' NI

4 4
(100)
18 2
546 42
(15) (3)
50 10
55
(10)
45
Subs. NI in Conso FS
2,490
(956) Subsidiary's COS, for conso purposes
1,534
(439) Subsidiary's OPEX, for conso purposes
(10) Subsidiary's NOPEX, for conso purposes
1,085
0
217
TWO YEAR AFTER ACQUISITION DATE (subsequent to acquisition date)

The following are the trial balance of Tik and Tok Company as of December 31, 2021, Eliminating Entry (December 31, 2
after the first year of business combination. At Acquisition Date
Share Capital, P2 per share
Tik Tok Share Premium
Cash 5,330 2,996 Retained Earnings
Accounts Receivable 780 800 Accum. Depreciation - Equipment
Inventory 332 266 Accum. Depreciation - Building
Land 1,500 2,700 Patent
Equipment 500 200 Land
Accum. Depreciation - Equipment 150 60 Goodwill
Building 2,250 1,800 Equipment
Accum. Depreciation - Building 900 720 Building
Investment in Subsidiary 5,760 Inventory
Investment Property 3,000 Premiums on Bonds Payable
Patent 240 192 Investment in Subsidiary
Accounts Payable 105 80 Non-Controlling Interest
Bonds Payable 4,980 3,984
Share Capital, P2 per share 2,000 1,600
Share Premium 500 400 Subsequent to Acquisition Date
Retained Earnings 6,750 5,240 Adjustment to Beginning Balances
Sales 3,600 1,385 Changes in Subsidiary's RE & OCI
Cost of Sales 1,440 700 Retained Earnings (Subsidiary)
Operating Expenses 720 570 Retained Earnings (Parent)
Non-Operating Expenses 25 20 Non-Controlling Interest
Gain on Sale of Equipment 15
Dividend Income 192 Prior Period Amortization of Exces
Dividends Paid 300 240 Inventory
Accum. Depreciation - Equipment
Additional Information: Accum. Depreciation - Building
a) During the year, goodwill is impaired by P25. Premiums of Bonds Payable
b) On December 31, 2021, Tok Company sold half of its equipment with carrying Patent
amount of P140. Goodwill
Retained Earnings
Required: Non-Controlling Interest
(1) Prepare the necessary JE in the books of the parent
(3) Prepare the working paper eliminating JE
(4) Prepare the consolidated financial statement
Parent's RE per TB
Eliminating Entries:
Acquisition Date Balance
Share in Increase in Subs' RE
Share in the Amortization of Exces
Consolidated Balances, January 1, 20

Current Year Eliminating Entries

Elimination of Intercompany Tran
Dividend Income
Non-Controlling Interest
Dividends Paid
Amortization of Excess Over Book

Fair Value Changes

Inventory
Land
Equipment
Building
Patent
Bonds Payable
Net Effect of FV changes
Goodwill
Net Effect of Subsidiary's Net Income

Accum. Depreciation - Equipment

Accum. Depreciation - Building
Premiums of Bonds Payable
Non-Operating Expenses
Patent
Goodwill
Oprerating Expenses
ng Entry (December 31, 2020)

ital, P2 per share 1,600

400
4,600
epreciation - Equipment 40
epreciation - Building 240
15
100
1,103
58
786
4
ms on Bonds Payable 50
ent in Subsidiary 5,760
ntrolling Interest 1,440

nt to Acquisition Date
nt to Beginning Balances of Conso. RE, Conso OCI, & NCI
n Subsidiary's RE & OCI
Earnings (Subsidiary) 640.00
d Earnings (Parent) 512.00
ntrolling Interest 128.00

od Amortization of Excess over Book Value

4.00
epreciation - Equipment 2.00
epreciation - Building 42.00
of Bonds Payable 10.00
3.00
10.00
36.00
ntrolling Interest 9.00

Conso RE NCI
6,750.00

ion Date Balance 1,440.00

Increase in Subs' RE 512.00 128.00
the Amortization of Excess 36.00 9.00
ed Balances, January 1, 2021 7,298.00 1,577.00

Year Eliminating Entries

on of Intercompany Transactions
192.00
olling Interest 48.00
240.00
ion of Excess Over Book Value
Remaining Years FV BV Over (Under) 2020 effect on Subs' NI

236 240 4
1,300 1,200 (100)
9 342 360 18
13 1,014 1,560 546
5 335 320 (15)
5 4,050 4,000 50
ect of FV changes
(
of Subsidiary's Net Income (for consolidation purposes)

epreciation - Equipment 2.00

epreciation - Building 42.00
of Bonds Payable 10.00
ating Expenses 15.00
3.00
25.00
ng Expenses 41.00
2020 effect on Subs' NI 2021 effect on Subs' NI

2 2
42 42
(3) (3)
10 10
55 51
(10) (21)
45 30
PUSH DOWN ACCOUNTING

On January 1, 2014, Parent Company acquired Subsidiary Company. The pre-consolidated trial balance of each
company is as follows:

Parent Book Subsidiary Book Fair

Current Assets 2,000,000.00 400,000.00 500,000.00
Non-Current Assets 7,000,000.00 1,400,000.00 1,550,000.00
Total Assets 9,000,000.00 1,800,000.00 2,050,000.00

Current Liabilities 600,000.00 120,000.00 130,000.00

Ordinary Shares, P1 par 1,000,000.00 103,000.00
Share Premium 500,000.00 51,500.00
Retained Earnings 6,900,000.00 1,525,500.00
Total Liabilities and Shareholders' Equity 9,000,000.00 1,800,000.00

Parent purchases 70% of subsidiary's outstanding shares for P1,400,000.

The separate trial balances of Parent and Subsidiary Company at December 31, 2015, second year after acquisition
date are shown below:

Parent Subsidiary
Current Assets 648,000.00 540,000.00
Investment in Subsidiary 1,400,000.00 -
Non-Current Assets 9,000,000.00 1,674,000.00
Goodwill - 80,000.00
Current Liabilities (648,000.00) (140,400.00)
Ordinary Shares, P1 par (1,000,000.00) (103,000.00)
Share Premium (500,000.00) (51,500.00)
Push-Down Capital (1,845,500.00)
Retained Earnings (8,300,000.00) (384,000.00)
Dividends Paid 120,000.00 40,000.00
Sales (2,992,000.00) (29,600.00)
Cost of Sales 1,800,000.00 70,000.00
Operating Expenses 500,000.00 150,000.00
Dividend Income (28,000.00) -

Goodwill is impaired by P5,000

The undervaluation of the subsidiary's net assets pertains to the following:
Current Assets Inventory, all sold in 2014
Non-Current Assets Land
Current Liabilities Notes Payable, paid in two equal installments in 2014 and 2015
EQUITY METHOD

Parent company acquired 70% of the stocks of subsidiary company for P540,000 on January 1, 2019.
The shareholders' equity accounts of subsidiary as of acquisition date is as follow:

Common Stock 200,000.00

Share Premium 300,000.00
Retained Earnings 95,000.00
Other Comprehensive Income 15,000.00
Treasury Shares, P2 per share (4,000.00)
Shareholders' Equity 606,000.00

As of the date of acquisition the following appraisals on the subsidiary's net assets were determined:

Book Value Fair Value

Inventory 12,000.00 17,000.00
Building 350,000.00 315,000.00
Accumulated Depreciation - Building (87,500.00)
Equipment 225,000.00 144,000.00
Accumulated Depreciation - Equipment (45,000.00)
Land 200,000.00 250,000.00
Bonds Payable (115,000.00) (109,400.00)
Discount on Bonds Payable 16,000.00

The building and equipment of Subsidiary Company have a remaining life of 15 and 8 years, respectively.
The bonds payable has a remaining term of 8 years and is being amortized using straight line mehtod of
amortization. The fair value of non-controlling interest aas of acquisition date is P210,000.

As of December 31, 2019 and 2020, the separate trial balances of each company are as follows:

2019 2020
Parent Subsidiary Parent Subsidiary
Cash 120,000.00 60,000.00 250,000.00 150,000.00
Accounts Receivable 53,000.00 25,000.00 90,000.00 54,000.00
Inventory 140,000.00 15,000.00 189,000.00 20,000.00
Financial Assets at FV through OCI 40,000.00 22,500.00 37,500.00 26,000.00
Building 550,000.00 350,000.00 550,000.00 350,000.00
Accumulated Depreciation - Building (165,000.00) (105,000.00) (192,500.00) (96,250.00)
Equipment 450,000.00 225,000.00 450,000.00 225,000.00
Accumulated Depreciation - Equipment (135,000.00) (67,500.00) (180,000.00) (90,000.00)
Land 200,000.00 200,000.00
Investment in Subsidiary 515,010.00 - 572,585.00 -
Accounts Payable (90,000.00) (45,000.00) (108,000.00) (64,800.00)
Bonds Payable (230,000.00) (115,000.00) (230,000.00) (115,000.00)
Discount on Bonds Payable - 14,000.00 - 12,000.00
Common Stock (500,000.00) (200,000.00) (500,000.00) (200,000.00)
Share Premium (250,000.00) (300,000.00) (250,000.00) (300,000.00)
Retained Earnings (300,000.00) (95,000.00) (378,260.00) (65,500.00)
Dividends Paid 50,000.00 30,000.00 60,000.00 30,000.00
Other Comprehensive Income (120,000.00) (15,000.00) (124,750.00) (17,500.00)
Treasury Shares 5,000.00 4,000.00 5,000.00 4,000.00
Sales (589,000.00) (328,000.00) (710,500.00) (446,050.00)
Cost of Sales 275,000.00 237,500.00 330,000.00 198,000.00
Expenses 180,000.00 90,000.00 216,000.00 129,600.00
Unrealized Gain or Loss - OCI (3,000.00) (2,500.00) 2,500.00 (3,500.00)
Investment Income - OCI (1,750.00) (2,450.00)
Investment Income (Loss) - P&L 5,740.00 (76,125.00)
- - - -

As of December 31, 2019 and 2020, goodwill is tested for impairment. The impairment amounted
to P6,000 and P12,000, respectively.
CHAPTER 3
Problem 11

On January 1, 20x4, PS Corporation acquired 80% of the 100,000 outstanding voting shares
of SR, Inc., in exchange for P31.25 per share cash. The remaining 20% of SR's shares
continued trade for P30.00 both before and after PS's acquisition. On January 1, 20x4, SR's
book and fair values were s follows:

Book Value Fair Value Remaining Life

Current Assets 80,000.00 80,000.00
Building and Equipment 1,250,000.00 1,000,000.00 5 yrs
Trademarks 700,000.00 900,000.00 10 yrs
Patented Technology 940,000.00 2,000,000.00 4 yrs
2,970,000.00

Current Liabilities 180,000.00 180,000.00

Long-Term Notes Payable 1,500,000.00 1,500,000.00
Common Stock 50,000.00
Additional Paid-In Capital 500,000.00
Retained Earnings 740,000.00
2,970,000.00

In addition, PS assigned a P600,000 value to certain unpatented technologies recently

developed by SR. These technologies were estimated to have a 3-year remaining life.

During 20x4, SR paid a P30,000 dividend to its shareholders. The companies reported the
following revenues and expenses from their separate operations for the year ending December
31, 20x4.

PS SR
Revenues 3,000,000.00 1,400,000.00
Expenses 1,750,000.00 600,000.00

Required:
1) What total value should PS assign to its SR acquisition in its January 1, 20x4, consolidated
balance sheet?
2) What valuation principle should PS; use to report each of SR's identifiable assets and
liabilities in its January 1, 20x4, consolidated balance sheet?
3) For years subsequent to acquisition, how will SR's identifiable assets and liabilities be
valued in PS' consolidated reports?
4) How much goodwill resulted from PS' acquisition of SR?
5) What is the 20x4 consolidated income and what amounts are allocated to the controlling
non-controlling interests?
6) What is the non-controlling interest amount reported in the December 31, 20x4,
consolidated balance sheet?
7) Assume instead that, based on its share prices, SR's January 1, 20x4, total fair value was
assessed at P2,250,000. How would the reported amounts for SR's assets change on PS'
acquisition-date consolidated balance sheet?

Additional (Sir)
P40,000 impairment of goodwill
Acquisition Analysis
80% 20%
Controlling NCI Total
Consideration Transferred/FV of NCI 2,500,000.00 600,000.00 3,100,000.00
Book Value of Net Assets of SR (1,032,000.00) (258,000.00) (1,290,000.00)
Excess over Book Value 1,468,000.00 342,000.00 1,810,000.00
Over and Under Valuation
FV BV
Buildings & Equipment 1,000,000.00 1,250,000.00 250,000.00
Trademarks 900,000.00 700,000.00 (200,000.00)
Patented Technology 2,000,000.00 940,000.00 (1,060,000.00)
Unpantented Technology 600,000.00 (600,000.00)
Net Undervaluation of Net Assets (1,288,000.00) (322,000.00) (1,610,000.00)
Goodwill (BPG) 180,000.00 20,000.00 200,000.00

Parent Subsidiary Eliminating Entries

Revenues 3,000,000.00 1,400,000.00
Expenses (1,750,000.00) (600,000.00) (475,000.00)
Net Income from Operations per Books 1,250,000.00 800,000.00
Dividend Income 24,000.00 (24,000.00)
Net Income per Books 1,274,000.00 800,000.00
Adjustments
Elimination of Intercompany transactions (24,000.00)
Amortization of Excess (475,000.00)
Net Income for Consolidation Purposes 1,250,000.00 325,000.00
Consolidated NI attributable to NCI (65,000.00)
Consolidated NI attributable to CI 1,250,000.00 260,000.00

NCI (full GW) NCI (partial GW)

January 1, 20x4 600,000.00 580,000.00
Dividend (6,000.00) (6,000.00)
Net Income 65,000.00
December 31, 20x4 659,000.00

Answers:
1 2,500,000.00
2
3 see solution below
4 200,000.00
5 see cells R28-30
6 659,000.00
7 4,760,000.00

If Partial Goodwill:
Parent Subsidiary Eliminating Entries
Revenues 3,000,000.00 1,400,000.00
Expenses (1,750,000.00) (600,000.00) (435,000.00)
Net Income from Operations per Books 1,250,000.00 800,000.00
Dividend Income 24,000.00 (24,000.00)
Net Income per Books 1,274,000.00 800,000.00
Adjustments
Elimination of Intercompany transactions (24,000.00)
Amortization of Excess (435,000.00)
Net Income for Consolidation Purposes Before Impairment 1,250,000.00 365,000.00
Goodwill Impairment (32,000.00)
Consolidated Net Income 1,250,000.00 333,000.00
Consolidated NI attributable to NCI (73,000.00)
Consolidated NI attributable to CI 1,250,000.00 260,000.00

NO.7 80% 20%

Parent NCI Total
Consideration Transferred 2,500,000.00 450,000.00 2,950,000.00
FV of Net Assets Acquired (2,320,000.00) (580,000.00) (2,900,000.00)
Goodwill (BPG) 180,000.00 (130,000.00) 50,000.00
BPG is not applicaable to NCI

Case 1 No. 7
Current Assets 80,000.00 80,000.00
Buildings 1,000,000.00 1,000,000.00
Trademarks 900,000.00 900,000.00
Patented Technology 2,000,000.00 2,000,000.00
Unpantented Technology 600,000.00 600,000.00
Goodwill 200,000.00 180,000.00
Subsidiary's Assets 4,780,000.00 4,760,000.00

NO. 3
@ Acquisition Dec 31, 20x4
Current Assets 80,000.00
Buildings 1,000,000.00 800,000.00
Trademarks 900,000.00 810,000.00
Patented Technology 2,000,000.00 1,500,000.00
Unpantented Technology 600,000.00 400,000.00
Goodwill 200,000.00 160,000.00
 3,000,000.00 FV of Subsidiary
100,000.00 Control Premium

IF SILENT - COST METHOD IS USED

Rem. Life: Cost
OV 5 Dividends received from subs Dividend Income
UV 10 Share of parents in subsidiary comprehensive income No Entry
UV 4 Share of parents in subsidiary comprehensive loss No Entry
UV 3
Eliminating entries affecting Net Income
1) Elimination of intercompany transaction
2) Amortization of excess over book value
Conso Assets Depreciable Used/Sold to outside entities
4,400,000.00 Non-Depreciable Sold to entities outside the gro
(2,825,000.00) Liability
1,575,000.00 Goodwill Impairment
-
1,575,000.00 CURRENT YEAR ELIMINATING ENTRIES
Dividend Income 24,000.00
Noncontrolling Interest 6,000.00
Dividends Paid 30,000.00
1,575,000.00
(65,000.00) NCI Accum. Depreciation 50,000.00
1,510,000.00 Conso RE Depreciation Expense 50,000.00

Amortization Expense - TM 20,000.00

Accum. Amortization -TM 20,000.00

Amortization Expense - PT 265,000.00

Accum. Amortization - PT 265,000.00

Amortization Expense - UPT 200,000.00

Accum. Amortization - UPT 200,000.00

Impairment Loss 40,000.00 if full goodwill

Goodwill 40,000.00

Impairment Loss 32,000.00 if partial goodwill

Goodwill 32,000.00

Conso
4,400,000.00
(2,785,000.00)
1,615,000.00
-
1,615,000.00
1,615,000.00
(32,000.00)
1,583,000.00
(73,000.00)
1,510,000.00

2,250,000 FV of subs as a firm

700,000 Contol Premium
 Equity
Dividend Income Deduction from investment in subsidiary
No Entry Addition to investment in subsidiary
No Entry Deduction to investment in subsidiary

Used/Sold to outside entities

Sold to entities outside the group

if full goodwill

if partial goodwill
CHAPTER 3
Problem 7

MM Company acquired an 80% interest in TL Company on January 1, 20x4. MM paid P664,000 in cash Acquisition Ana
to the owners of TL to acquire these shares. In addition, the remaining 20% of TL shares continued to trade
at a total value of P166,000 both before and after MM's acquisition. Consideration tra
Book Value of N
On January 1, 20x4, TL reported a book value of P600,000 (Common Stock = P300,000; Additional Paid Excess over Boo
In Capital = P90,000; Retained Earnings = P210,000). Several of TL's building that had a remaining life of Undervaluation o
20 years were undervalued by a total of P80,000. Goodwill

During the next three years, TL reported the following figures:

Net Income Dividends Paid Eliminating Ent
20x4 70,000.00 10,000.00 Over and Under V
20x5 90,000.00 15,000.00 Goodwill
20x6 100,000.00 20,000.00 Full Goodwill
Common Stock
Required: APIC
1) What amount of excess depreciation expense would be recognized in the consolidated financial Retained Earning
statements for the initial years following this acquisition? Building
2) If a consolidated balance sheet is prepared as of January 1, 20x4, what amount of partial and full-goowill Goodwill
that would be recognized?
3) If a consolidation worksheet is prepared as of January 1, 20x4, what are the eliminating entries under the
partial and full goodwill approach?
4) On the separate financial records of the parent company, what amount of investments in subsidiary and Partial Goodwill
investment income would be reported for 20x4 under the: Common Stock
Cost Model APIC
Equity Model Retained Earning
5) On the parent company's separate financial records, what would be the December 31, 20x6 balance Building
for the investment in TL Company and investment income account under the: Goodwill
Cost Model
Equity Model
6) As of December 31, 20x5, MM's buildings account on its separate records has a balance of P800,000
and TL has a similar account with a P300,000 balance. What would be the consolidated balance for the
buildaings account?
7) What would be the balance of consolidated goodwill as of December 31, 20x6? Jan 1, 20x4
8) Assume that the parent company has been applying the cost model for this investment. On December 31, Investment Incom
20x6, the separate financial statements for the two companies present the following information:
MM Company TL Company
Common Stock 500,000.00 300,000.00
Additional Paid-In Capital 280,000.00 90,000.00
What will be the consolidated balance of each of these accounts?
9) Assume that the parent company has been applying the equity model for this investment. On December 31,
20x6, the separate financial statements for the two companies present the following information:
MM Company TL Company
Common Stock 500,000.00 300,000.00
Additional Paid-In Capital 280,000.00 90,000.00
Retained Earnings, 12/31/x6 620,000.00 425,000.00
What will be the consolidated balance of each of these accounts?

Problem 13

AA Corporation owns 75% of KR Company's common stock, acquired at underlying book value on
January 1, 20x4. At the acquisition date, the book values and fair values of KR's assets and liabilities
were equal, and the fair value of the non-controlling interest was equal to 25% of the total book value
 of KR. The income statements for AA and KR for 20x4 include the following amounts:
AA Corporation KR Corporation
Sales 528,000.00 150,000.00
Dividend Income 9,000.00 -
Total Income 537,000.00 150,000.00
Less: COGS 380,000.00 87,000.00
Depreciation Expense 32,000.00 20,000.00
Other Expenses 66,000.00 23,000.00
Total Expenses 478,000.00 130,000.00
Net Income 59,000.00 20,000.00

AA uses the cost model in accounting for its ownership of KR, KR paid dividends of P12,000 in 20x4.

Required:
1) What amount should AA report in its income statement as income from its investment in KR using
equity - method accounting?
2) What amount of income should be assigned to non-controlling interest in the consolidated income
statement for 20x4?
3) What amount should AA report as consolidated net income for 20x4?
4) Why should AA not report consolidated net income of P79,000 (59,000+20,000) for 20x4?

Problem 15

Following are the individual financial statements for BB and DD for the year ending December 31, 20x4: Acquisition Ana
BB DD
Sales (600,000.00) (300,000.00)
COGS 300,000.00 140,000.00
Operating Expenses 174,000.00 60,000.00
Dividend Income (24,000.00) -
Net Income (150,000.00) (100,000.00)
Retained Earnings, 1/1/x4 (700,000.00) (400,000.00)
Net Income (150,000.00) (100,000.00)
Dividends Paid 80,000.00 40,000.00
Retained Earnings, 12/31/x9 (770,000.00) (460,000.00)
Cash and Receivables 250,000.00 100,000.00
Inventory 500,000.00 190,000.00
Investment in DD 526,000.00 -
Building (Net) 524,000.00 600,000.00
Equipment (Net) 400,000.00 400,000.00
Total Assets 2,200,000.00 1,290,000.00
Liabilities (800,000.00) (490,000.00)
Common Stock (630,000.00) (340,000.00)
Retained earnings, 12/31/x4 (770,000.00) (460,000.00)
 Total Liabilities and Equity (2,200,000.00) (1,290,000.00)

BB acquired 60% od DD an April 1, 20x4, for P526,000. On that date, equipment (with a 5-year life)
was overvalued by P30,000. Also on that date, the fair value of the 40% non-controlling interest was
P300,000. DD earned income evenly during the year paid but received the entire dividend on
November 1, 20x4.

Required:
1) Determine the consolidated balance for each of the following accounts as of December 31, 2-x4:
Revenues
COGS
OPEX
Conso NI
NCI in CNI
CI in CNI
2) Determine the consolidated balance for each of the following accounts as of December 31, 2-x4:
Goodwill
Equipment (net)
Common Stock
Building (net)
Dividends paid
Acquisition Analysis 80% 20%
CI NCI
Consideration transferred/FV of NCI 664,000.00 166,000.00 830,000.00
Book Value of Net Assets (600,000.00) 20x4 20x5
Excess over Book Value 230,000.00
Undervaluation of Building (80,000.00) (4,000.00) (4,000.00)
Goodwill #2 120,000.00 30,000.00 150,000.00
Partial GW Full GW

Eliminating Entries of SHE of Subsidiary #3

Over and Under Valuation
Goodwill
Full Goodwill
Common Stock 300,000.00
APIC 90,000.00
Retained Earnings 210,000.00
Building 80,000.00
Goodwill 150,000.00
Investment in Subsidiary 664,000.00
Non-Controlling Interest 166,000.00

Partial Goodwill
Common Stock 300,000.00
APIC 90,000.00
Retained Earnings 210,000.00
Building 80,000.00
Goodwill 120,000.00
Investment in Subsidiary 664,000.00
Non-Controlling Interest 136,000.00

Cost Method Equity Method

Jan 1, 20x4 664,000.00 664,000.00
Investment Income
Acquisition Analysis - Apr 1, 20x4
 FV of subs 830,000.00
20x6

(4,000.00) #1