P Company acquires 80% of S Company’s outstanding stock on January 1, 2021, by paying

P360,000 cash, and immediately prepares a consolidated balance sheet. P also pays P41,400 in
indirect cost to accomplish the purchase. The separate balance sheets of the two companies
immediately before the consolidation with acquiree’s fair value were presented as follows:
P Co. S Co. S Co.

Assets Book value Book value Fair value

Cash  ₱      420,000.00  ₱    60,000.00  ₱    60,000.00

Accounts             90,000.00         60,000.00         60,000.00

receivable

Inventory          120,000.00         72,000.00         90,000.00

Land          210,000.00         48,000.00      120,000.00

Buildings and          960,000.00      720,000.00      348,000.00

equipment

Accumulated -        480,000.00 -    360,000.00

depreciation

Total Assets  ₱  1,320,000.00  ₱  600,000.00  ₱  678,000.00

Liabilities and
Stockholders'
Equity

Accounts payable  ₱      120,000.00  ₱  120,000.00  ₱  120,000.00

Bonds Payable          240,000.00      120,000.00      162,000.00

Common stock,          600,000.00      240,000.00

P10 par

Paid in capital in             60,000.00         24,000.00

excess of par

Retained earnings          300,000.00         96,000.00

Total Liabilities and  ₱  1,320,000.00  ₱  600,000.00

Stockholders'
Equity
 
Required:
1.       Prepare journal entry to record investment in the books of the acquirer company.

2.       Prepare schedule for determination and allocation excess:

a.       Partial Goodwill (Proportionate Basis) Approach
b.       Full-Goodwill (Fair Value Basis) Approach
3.       Prepare the working paper eliminating entries for purposes of preparing consolidated
balance sheet.
a.       Partial Goodwill (proportionate Basis) Approach
b.       Full-Goodwill (Fair Value Basis) Approach
4.       Prepare a consolidated workpaper on January 1, 2021.
a.       Partial Goodwill (Proportionate Basis) Approach
b.       Full-Goodwill (Fair Value Basis) Approach
5.       Compute the Non-controlling interest on acquisition.
a.       Partial Goodwill (Proportionate Basis) Approach
b.       Full-Goodwill (Fair Value Basis) Approach
6.       Prepare the consolidated balance sheet immediately after acquisition.
7.       In relation to No. 6 requirement and using Partial Goodwill (Proportionate Basis):
determine the following consolidated amounts: 
a) total assets; (b) total liabilities; (c) Ordinary share/Common stock; ( d) Share
premium/additional paid-in capital; and (e) Accumulated profit/Common stock (Retained
earnings).
8.       In relation to No. 6 requirement and using Full-Goodwill (Fair Value Basis) Approach:
determine the following consolidated amounts:
(a) total assets; (b) total liabilities; (c) ordinary share/Common stock; (d) Share
premium/additional paid-in capital; and (e Accumulated profit/loss (Retained earnings).
Assume that on January 1, 2021, P Co. acquires 80% of the common stock of S Co. for P372,000.
At that time, the fair value of the 20% non-controlling interest is estimated to be P93,000. On
that day, the following assets and liabilities of S Co. had book values that were different from
their respective market values:
S Co.  S Co.
   Book Value  Fair Value
Inventory       24,000.00       30,000.00
Land       48,000.00       55,200.00
Equipment     180,000.00       18,000.00
Accum. Dep-Equipment -     96,000.00  
Buildings     360,000.00     144,000.00
Accum. Dep-Buildings -   192,000.00  
Bonds Payable     120,000.00     115,200.00
 
All other assets and liabilities had books values approximately equal to their respective fair
values.
On January 1, 2021, the equipment and buildings had a remaining life of 8 and 4 years,
respectively. Inventory is sold in 2021 and FIFO inventory costing is used. Goodwill, if any, is
reduced by a P3,750 impairment loss during 2021 based on the fair value (or full-goodwill),
meaning the management has determined that the goodwill arising in the acquisition of S Co.
relates proportionately to the controlling and non-controlling interest, as does the impairment.
Trial balances for the companies for the year ended December 31, 2021 are as follow:
 
Debits  P Co.  S Co.
Cash        232,800.00          90,000.00

Accounts receivable          90,000.00          60,000.00

Inventory        120,000.00          90,000.00
Land        210,000.00          48,000.00
Equipment        240,000.00        180,000.00

Buildings        720,000.00        540,000.00

Investment in S Co.        372,000.00
Cost of goods sold        204,000.00        138,000.00
Discount on bonds payable

Depreciation expense          60,000.00          24,000.00

Interest expense
Other expense          48,000.00          18,000.00
Goodwill impairment loss
Dividends paid          72,000.00          36,000.00

Totals    2,368,800.00    1,224,000.00

Credits
Accum. Dep-Equipment        135,000.00          96,000.00
Accum. Dep-Buildings        405,000.00        288,000.00

Accounts payable        120,000.00        120,000.00

Bonds payable        240,000.00        120,000.00
Common Stock, P10 par        600,000.00        240,000.00
Retained earnings        360,000.00        120,000.00

Sales        480,000.00        240,000.00

Dividends income          28,800.00
Totals    2,368,800.00    1,224,000.00
Required:
1.           Prepare journal entry to record investment in the books of the acquirer company.
2.           Prepare schedule for determination and allocated excess.
3.           Prepare the working paper eliminating entries for 2021 for the purpose of preparing
consolidated balance sheet.
4.           Prepare a consolidated workpaper on December 31, 2021.

5.           Determine the following items for January 1, 2021:

a.           Consolidated Retained Earnings
b.           Non-controlling Interests
c.            Consolidated Stockholders’ Equity

6.           Determine the following items for December 31, 2021:

a.           Controlling Interest in Consolidated Net Income
b.           Non-controlling Interest in Consolidated Net Income
c.            Consolidated Net Income
d.           Consolidated Retained Earnings
e.           Non-Controlling Interests
f.            Consolidated Stockholders’ Equity