For item nos.

30-40

On January 1, 2019, Parent Company acquired 90% of Subsidiary Company in exchange for 5, 400 shares
of P10 par common stock having a market value of P280, 800. Parent and Subsidiary condensed balance
sheets were as follows:

Parent Company and Subsidiary Company

Balance Sheets at January 1, 2019
(before combination)

Parent Subsidiary
Company Company

Cash P 60, 900 P 37, 400

Accounts receivable (net) 14, 200 9, 100
Inventories 12, 900 16, 100
Equipment (net) 179, 000 40, 000
Patents ______- 10, 000
Total assets P 267, 000 P 112, 600
Liabilities and stockholders’ equity
Accounts payable P 4, 000 P 6, 600
Bonds payable, 10% 100, 000 -
Common stock, P10 par 100, 000 50, 000
Additional paid-in capital 15, 000 15, 000
Retained earnings 48, 000 41, 000
Total liabilities and Stockholders’ equity P 267, 000 P 112, 600
At the date of acquisition, all assets and liabilities of Subsidiary Company have book value approximately
equal to their respective market values except the following as determined by appraisal as follows:

Inventories (FIFO method) P15,100

Equipment (net-remaining life – 4 years) 32, 000
Patents (remaining life 10 years) 15, 000
Goodwill impairment 10% per year
In addition, Parent company pays the following at the time of the acquisition

o Finders’ fee P5,000

o Accounting fees, P12,000
o Legal fees to arrange the business combination P15,000
o Cost of SEC registration, including accounting and legal fees P6,000
o Cost of printing and issuing stock certificates P7,500

Required: Use full goodwill method

1. Prepare a consolidated work paper on January 1,2019 ( 6pts)
2. Prepare a consolidated balance sheet on January 1,2019. ( 3pts)
3. Prepare journal entry to record the acquisition on January 1,2019. ( 1pt)
4. Prepare journal entry to record the acquisition expense ( 1pt)