STOCK ACQUISITION – SUBSEQUENT TO DATE OF ACQUISITION

STOCK ACQUISITION – SUBSEQUENT TO DATE OF ACQUISITION

Problem 1:
KINGSMAN Company acquired 75% of STATESMAN Corporation on January 1, 2018. KINGSMAN Company
also had ownerships in other entities on which KINGSMAN has no significant influence nor control over those
entities. Moreover, STATESMAN Corporation has no ownership over KINGSMAN Company. For the year
ended December 31, 2018. KINSMAN and STATESMAN reported the following with respect to dividend
transactions during 2018:
KINGSMAN STATESMAN
Dividend income 210,000 160,000
Dividends declared 180,000 90,000

These dividends are to be paid on January 15, 2019. As of December 31, 2018, KINGSMAN and STATESMAN
reported the following:
KINGSMAN STATESMAN
Total Assets 380,000 220,000
Total Liabilities 220,000 130,000

1. What amount of dividend income shall be reported on the consolidated income statement for the year
ended December 31, 2018?
A. 142,500
B. 302,500
C. 280,000
D. 370,000

2. What amount of dividends payable shall be reported on the consolidated income statement of financial
position on December 21, 2018?
A. 90,000
B. 112,500
C. 202,500
D. 270,000

3. What amount of total assets shall be reported on the consolidated income statement of financial position
on December 21, 2018?
A. 312,500
B. 380,000
C. 532,500
D. 600,000

Problem 2:
The ABC Co. owns 75% of the DEF Corp. the following figures are from their separate financial statements:

ABC: Trade Receivables, P1,040,000, including P30,000 due from DEF.

DEF: Trade Receivables, P215,000, including P40,000 due from ABC.

4. What figure should appear for trade receivables in ABC’s consolidated statement of financial position?
A. 888,750
B. 1,185,000
C. 1,225,000
D. 1,255,000

Problem 3:
Pork Company acquired a 90% interest in Chicken Company on December 31, 2017 for P320,000. During 2018,
Chicken had a net income of P22,000 and paid a cash dividend of P7,000.

5. Applying the cost method would give a debit balance in the Investment in Stock of Chicken Company
account on its separate balance sheet at the end of 2018 of:
A. 335,000 B. 333,500 C. 313,700 D. 320,000

6. Applying the equity method would give a debit balance in the Investment in Stock of Chicken Company
account on its separate balance sheet at the end of 2018 of:
A. 335,000 B. 333,500 C. 313,700 D. 320,000
 7. Applying the cost method would give a debit balance in the Investment in Stock of Chicken Company
account on the consolidated balance sheet at the end of 2018 of:
A. 0
B. 320,000
C. 333,500
D. 335,000

8. Applying the equity method would give a debit balance in the Investment in Stock of Chicken Company
account on the consolidated balance sheet at the end of 2018 of:
A. 0
B. 320,000
C. 333,500
D. 335,000

Problem 4:
On January 1, 2018, Brazil Corp. purchased 70% of the common stock of Guangzhou Company for P550,000.
At that date, Guangzhou had P575,000 of common stock outstanding and retained earnings of P185,000.
Equipment with the remaining life of 5 years had a book value of P280,000 and a fair value of P300,000.
Guangzhou’s remaining assets had book values equal to their fair values. Relevant information are as follows:

Income from own Dividends declared

operations and paid
Brazil Corp. 2018 185,000 50,000
2019 210,000 60,000
Guangzhou Company 2018 40,000 10,000
2019 67,000 15,000

Brazil Corp.’s retained earnings balance at the date of acquisition was P701,000.

9. On December 31, 2019, the consolidated net income and consolidated retained earnings are:
A. P254,100 and P1,055,300
B. P256,900 and P701,000
C. P253,700 and P1,054,500
D. P273,000 and P1,055,300

Problem 5:
On January 1 2018, Ulysses Corp. purchased 70% of the common stock of Klaue Company for P550,000. At
that date, Klaue had P575,000 of common stock outstanding and retained earnings of P185,000. Klaue’s
equipment with a remaining life of 5 years had a book value of P280,000 and a fair value of P300,000 while
Klaue’s inventory has a fair value of P10,000 in excess of its book value. Klaue’s remaining assets had book
values equal to their fair values. The net income and dividend figures for both entities for 2019 are as follows:

Ulysses Corp. Klaue Company

Net income 210,000 67,000
Dividends declared and paid 180,000 15,000
All inventory existing at the date of acquisition were sold during 2018.

10. Consolidated net income for the year 2019 is:

A. 243,600
B. 254,100
C. 262,500
D. 273,000

11. Assuming the equipment was sold on April 30,2019, how much is the consolidated net income attributable
to the parent and non-controlling interest (minority interest), respectively for the year 2019?
A. 243,600; 18,900
B. 235,200; 15,300
C. 245,700; 15,300
D. 235,200; 18,900

12. Independent to item no. 11, assuming only 60% of the inventory existing at date of acquisition were sold
during 2018 and the remainder were sold during 2019, how much is the consolidated net income
attributable to the parent and non-controlling interest (minority interest), respectively for the year 2019?
A. 243,600; 18,900
B. 239,400; 17,100
C. 240,800; 17,700
D. 240,800; 20,100
Problem 6:
On June 30, 2018, Lyra Co. purchased 70% of the common stock of Arvie Co. for P700,000. At that date, Arvie
had P650,000 of common stock outstanding and retained earnings of P250,000. All of the purchase difference
was related to a building with a book value of P175,000 and a remaining life of 10 years. Lyra’s retained earnings
balance at December 31, 2017 was P550,000. The net income and dividend figures for both Lyra and Arvie for
2018 are as follows:

Net Income Dividends

Lyra Co. Jan 1 – June 30 120,000 -
July 1 – December 31 155,000 70,000
Arvie Co. Jan 1 – June 30 80,000 30,000
July 1 – December 31 100,000 -

13. On December 31, 2018, the consolidated retained earnings and NCI in the net assets of Arvie are:
A. P821,500 and P328,500
B. P822,550 and P319,950
C. P821,500 and P300,000
D. P576,500 and P319,950

Problem 7:
On June 30, 2018, Lyra Co. purchased 70% of the common stock of Arvie Co. for P700,000. At that date, Arvie
had P650,000 of common stock outstanding and retained earnings of P250,000. All of the purchase difference
was related to a building with a book value of P175,000 and a remaining life of 10 years. Lyra’s retained earnings
balance at December 31, 2017 was P550,000. For the year 2018, Lyra Co. and Arvie Co. reported net income
of P275,000 and P180,000, respectively. Lyra declared and paid dividends of P70,000 on September 30, 2018
while Arvie Co. declared and paid dividends of P30,000 on March 31, 2018.

14. How much is the consolidated net income attributable to the parent and non-controlling interest,
respectively for the year 2018?
A. 331,000; 24;000
B. 197,000; 25,500
C. 394,000; 51,000
D. 334,500; 25,500

15. What amount of consolidated retained earnings shall be reported on December 31, 2018?
A. 814,500
B. 874,000
C. 884,500
D. 1,067,500

COMPREHENSIVE PROBLEM:
On January 1, 2018, Powell Company acquires 80%of the common stock of Scarlett Company for P372,000. At
that time, Scarlett Company’s shareholders’ equity is composed of common stock (P10 par), P240,000 and
retained earnings, P120,000. Also, the fair value of the non-controlling interest is P98,200. On the same date,
the following assets of Scarlett Company had carrying values that were different from their respective fair values:

Carrying value: Fair value:

Inventory 24,000 30,000
Land 48,000 55,200
Equipment, net 84,000 180,000
Building, net 168,000 144,00

Other assets and all liabilities of Scarlett Company had carrying values approximately equal to their respective
fair values.

On January 1, 2018, the equipment and building had a remaining life of 8 and 4 years, respectively. The
inventories of January 1, 2018 were all sold during 2018 and FIFO inventory costing is used. Goodwill, if any, is
impaired by P5,000 during 2018. The investment is to be accounted for using the cost method.

Both entities did not issue additional shares during 2018. Trial balances for the legal entities for the year ended
2018 are as follows:
 Powell Company Scarlett Company
Debit Credit Debit Credit
Cash 232,800 90,000
Accounts receivable, net 90,000 60,000
Inventory, 12/31/2018 120,000 90,000
Land 210,000 48,000
Equipment, net 105,000 84,000
Building, net 315,000 252,000
Investment in Scarlett 372,000
Accounts Payable 120,000 120,000
Bond Payable 240,000 120,000
Common stock, P10 par 600,000 240,000
Retained earnings, 1/1/18 360,000 120,000
Dividends 72,000 36,000
Sales 480,000 240,000
Dividend revenue 28,800
Cost of goods sold 204,000 138,000
Operating expense 108,000 42,000
1,828,800 1,828,800 840,000 840,000

The trial balances for the legal entities for the year ended 2019 are as follows:
Powell Company Scarlett Company
Debit Credit Debit Credit
Cash 189,000 102,000
Accounts receivable, net 180,000 96,000
Inventory, 12/31/2019 216,000 108,000
Trading securities 100,000 50,000
Land 210,000 48,000
Equipment, net 90,000 78,000
Building, net 270,000 234,000
Investment in Scarlett 372,000
Accounts Payable 140,000 200,000
Bond Payable 240,000 120,000
Common stock, P10 par 600,000 240,000
Retained earnings, 1/1/19 484,800 144,000
Dividends 72,000 48,000
Sales 540,000 360,000
Dividend revenue 48,000 5,000
Cost of goods sold 216,000 192,000
Operating expense 137,800 113,000
2,052,800 2,052,800 1,069,000 1,069,000

No goodwill impairment occurred during 2019.

16. Goodwill arising from business combination on January 1, 2018 is
A. 15,840 B. 25,000 C. 84,000 D. 110,200

17. How much of the goodwill is attributable to the parent and non-controlling interest, respectively?
A. 15,840; 9,160 B. 15,840; 0 C. 84,000; 26,200 D. 191,840; 47,960

18. How much is the (1) operating income and (2) net income of the parent for the year ended 2018?
A. (1) 196,800; (2) 196,800
B. (1) 168,000; (2) 168,000
C. (1) 196,800; (2) 168,000
D. (1) 168,000; (2) 196,800

19. How much is the consolidated net income for the year 2018?
A. 203,232 B. 211,000 C. 239,800 D. 256,800

20. How much of the 2018 consolidated net income is attributable to the parent and non-controlling interest,
respectively?
A. 202,400; 8,600 B. 168,800; 42,200 C. 203,232; 7,768 D. 191,840; 47,960
21. What amount of dividend revenue shall be presented in the (1) separate income statement and (2)
consolidated income statement for the year ended December 31, 2018?
A. 0; 0 B. 28,800; 28,800 C. 28,800; 0 D. 0; 28,800

22. What amount of cost of good sold shall be presented in the consolidated net income statement for the
year ended December 31, 2018?
A. 204,000 B. 336,000 C. 342,000 D. 348,000

23. What amount of expenses (other than cost of goods sold) shall be presented in the consolidated income
statement for the year ended December 31, 2018?
A. 150,000 B. 156,000 C. 161,000 D. 167,000

24. What amount of inventory shall be presented on the consolidated statement of financial position on
December 31, 2018?
A. 120,000 B. 204,000 C. 210,000 D. 216,000

25. What amount of land shall be presented on the consolidated statement of financial position on December
31, 2018?
A. 248,400 B. 254,160 C. 258,000 D. 265,200

26. What amount of equipment shall be presented on the consolidated statement of financial position on
December 31, 2018?
A. 177,000 B. 189,000 C. 273,000 D. 285,000

27. What amount of building shall be presented on the consolidated statement of financial position on
December 31, 2018?
A. 543,000 B. 549,000 C. 567,000 D. 573,000

28. What amount of Investment in Scarlett shall be presented on the consolidated statement of financial
position on December 31, 2018?
A. 0 B. 297,600 C. 372,000 D. 378,432

29. What amount of goodwill shall be presented on the (1) separate statement of financial position and (2)
consolidated statement of financial position on December 31, 2018?
A. (1) 20,000; (2) 20,000
B. (1) 0; (2) 20,000
C. (1) 0; (2) 25,000
D. (1) 25,000; (2) 25,000

30. What amount of total assets shall be presented on the consolidated statement of financial position on
December 31, 2018?
A. 1,770,000 B. 1,790,000 C. 2,142,000 D. 2,162,000

31. What amount of common stock shall be presented on the consolidated statement of financial position on
December 31, 2018?
A. 0 B. 240,000 C. 600,000 D. 840,000

32. What amount of retained earnings shall be presented on the consolidated statement of financial position
on December 31, 2018?
A. 491,232 B. 499,000 C. 583,000 D. 628,800

33. What amount of non-controlling interest shall be presented on the (1) separate statement of financial
position and (2) consolidated statement of financial position on December 31, 2018?
A. (1) 0; (2) 99,600
B. (1) 0; (2) 98,768
C. (1) 98,768; (2) 0
D. (1) 99,600; (2) 0

34. How much of the consolidated shareholder’s equity on December 31, 2018 is attributable to the
controlling interest?
A. 952,000 B. 1,091,232 C. 1,190,000 D. 1,790,000

35. What amount of dividend revenue shall be presented in the consolidated income statement for the year
ended December 31, 2019?
B. 0 B. 9,600 C. 38,400 D. 48,000

36. How much is the consolidated net income for the year 2019?
A. 205,400 B. 216,200 C. 239,000 D. 249,800
37. How much of the 2019 consolidated net income is attributable to the parent and non-controlling interest,
respectively?
A. 239,000; 10,800 B. 199,840; 49,960 C. 239,000; 1,200 D. 277,400; 10,800

38. What amount of retained earnings shall be presented on the consolidated statement of financial position
on December 31, 2019?
A. 658,232 B. 610,232 C. 621,032 D. 669,032

39. What amount of non-controlling shall be presented on the consolidated statement of financial position on
December 31, 2019?
A. 0 B. 98,768 C. 99,968 D. 101,168

40. What amount of land shall be presented on the consolidated statement of financial position on December
31, 2019?
A. 217,200 B. 250,800 C. 258,000 D. 265,200

41. What amount of equipment shall be presented on the consolidated statement of financial position on
December 31, 2019?
A. 144,000 B. 156,000 C. 240,000 D. 252,000

42. What amount of building shall be presented on the consolidated statement of financial position on
December 31, 2019?
A. 486,000 B. 492,000 C. 504,000 D. 516,000

43. What amount of total assets shall be presented on the consolidated statement of financial position on
December 31, 2019?
A. 2,038,200 B. 2,058,200 C. 2,410,200 D. 2,430,200

INDEPENDENT ASSUMPTION: Non-controlling interest is to be measured at its proportionate share basis.

44. Goodwill arising from business combination on January 1, 2018 is
A. 15,840 B. 25,000 C. 84,000 D. 110,200

45. How much of the goodwill is attributable to the parent and non-controlling interest, respectively?
A. 15,840; 9,160 B. 15, 840; 0 C. 84,000; 26,200 D. 84,000; 0

46. How much of the 2018 consolidated net income is attributable to the parent and non-controlling interest,
respectively?
A. 202,400; 8,600 B. 201,400; 9,600 C. 203,232; 7,768 D. 191,840; 47,960

47. What amount of retained earnings shall be presented on the consolidated statement of financial position
on December 31, 2018?
A. 489,400 B. 491,232 C. 583,000 D. 628,800

48. What amount of non-controlling interest shall be presented on the consolidated statement of financial
position on December 31, 2018?
A. 0 B. 91,440 C. 98,768 D. 99,600

49. What amount shall be presented as goodwill on the consolidated statement of financial position on
December 31, 2018?
A. 0 B. 10,840 C. 15,840 D. 20,000
 SUGGESTED ANSWERS
STOCK
ACQUISITION
SUBSEQUENT TO
DATE OF
ACQUISITION

1.B
2.C
3.C
4.B
5.D
6.B
7.A

8.A
9.D
10.C
11.B
12.C
13.A
14.D
15.A
16.B
17.A
18.D
19.B
20.C
21.C
22.D
23.C
24.C
25.D
26.C
27.B
28.A
29.B
30.B
31.C
32.A
33.B
34.B
35.B
36.D
37.A
38.A
39.C
40.D
41.C
42.C
42.B
43.B
44.A
45.B
46.B
47.A
48.B
49.B