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Advanced Accounting Part 2 Dayag 2015 Chapter 15
Advanced Accounting Part 2 Dayag 2015 Chapter 15
Problem I
Investment in Shy Inc. [P2,500,000 + (15,000 P40)] 3,100,000
Cash 2,500,000
Common Stock 30,000
Paid in capital in excess of par (P40 - P2) 15,000 570,000
Problem II
Cash consideration transferred P 300,000
Contingent performance obligation __15,000
Fair value of Subsidiary P 315,000
Less: Book value of SS Company (P90,000 + P100,000) 190,000
Allocated excess P125,000
Less: Over/under valuation of assets and liabilities:
Increase in building: P40,000 x 100% P 40,000
Increase in customer list: P22,000 x 100% 22,000
Increase in R&D: P30,000 x 100% 30,000 __92,000
Goodwill P 33,000
Problem III
Case 1:
Proportionate Basis (Partial-goodwill Approach)
Partial-goodwill
Fair value of subsidiary (80%):
Consideration transferred: Cash……………………….......P12,000,000 (80%)
Less: Book value of stockholders’ equity (net assets)
– S Company: P7,200,000 x 80%...................................... 5,760,000 (80%)
Allocated excess.……………………………………………….......P 6,240,000 (80%)
Less: Over/undervaluation of assets and liabilities:
(P9,600,000 – P7,200,000) x 80%........................................... 1,920,000 (80%)
Positive excess: Goodwill (partial)…………………………….... P 4,320,000 (80%)
Non-controlling interest
Book Value of stockholders’ equity of subsidiary…………. P 7,200,000
Adjustments to reflect fair value (over/ undervaluation
of assets and liabilities): (P9,600,000 – P7,200,000)….. 2,400,000
Fair value of stockholders’ equity of subsidiary…………… P 9,600,000
Multiplied by: Non-controlling interest percentage............ 20%
Non-controlling Interest (partial)……………………………….. P1,920,000
Fair Value Basis (Full-goodwill Approach)
Full-goodwill
Fair value of subsidiary (100%):
Consideration transferred: Cash (P12,000,000 / 80%).. P 15,000,000 (100%)
Less: Book value of stockholders’ equity (net assets)
– S Company: P7,200,000 x 100%.............................. 7,200,000 (100%)
Allocated excess.……………………………………………….. P 7,800,000 (100%)
Less: Over/Undervaluation of assets and liabilities:
(P9,600,000 – P7,200,000) x 100%.................................... 2,400,000 (100%)
Positive excess: Goodwill (full)………………………………........P 5,400,000 (100%)
The full – goodwill of P5,400,000 consists of two parts:
Full-goodwill……………………………………………....... P 5,400,000
Less: Controlling interest on full-goodwill
or partial-goodwill…………………………….…. 4,320,000
NCI on full-goodwill…………………………………….......P 1,080,000
Non-controlling interest
Non-controlling interest (partial)……………………………….......P1,920,000
Add: Non-controlling interest on full -goodwill
(P5,400,000 – P4,320,000 partial-goodwill) or
(P5,400,000 x 20%)*…………………………………...... 1,080,000
Non-controlling interest (full)…………………………………........ P3,000,000
* applicable only when the fair value of the non-controlling interest of subsidiary is not given.
Case 2:
Proportionate Basis (Partial-goodwill Approach)
Partial-goodwill
Fair value of subsidiary (60%):
Consideration transferred: Cash……………………….....P 7,560,000 (60%)
Less: Book value of stockholders’ equity (net assets)
– S Company: P6,000,000 x 60%................................ 3,600,000 (60%)
Allocated Excess.……………………………………………….... P 3,960,000 (60%)
Less: Over/undervaluation of assets and liabilities:
(P8,400,000 – P6,000,000) x 60%...................................... 1,440,000 (60%)
Positive excess: Goodwill (partial)……………………………....P 2,520,000 (60%)
Non-controlling interest
Book value of stockholders’ equity of subsidiary…………. P 6,000,000
Adjustments to reflect fair value (over/ undervaluation
of assets and liabilities): (P8,400,000 – P6,000,000)…. 2,400,000
Fair value of stockholders’ equity of subsidiary…………….P 8,400,000
Multiplied by: Non-controlling Interest percentage............. 40%
Non-controlling interest (partial)……………………………….P 3,360,000
Non-controlling interest
Non-controlling interest (partial)………………………………P 3,360,000
Add: Non-controlling interest on full -goodwill
(P3,960,000 – P2,520,000 partial-goodwill)………….. 1,440,000
Non-controlling Interest (full)…………………………………..P 4,800,000
Case 3;
Proportionate Basis (Partial-goodwill Approach)
Partial-goodwill
Fair value of subsidiary (75%):
Non-controlling interest
Book value of stockholders’ equity of subsidiary…………..P 7,200,000
Adjustments to reflect fair value (over/ undervaluation
of assets and liabilities): (P9,600,000 – P7,200,000)…. 2,400,000
Fair value of stockholders’ equity of subsidiary……………P 9,600,000
Multiplied by: Non-controlling Interest percentage.............. 25%
Non-controlling interest (partial)……………………………….P 2,400,000
Non-controlling interest
Non-controlling interest (partial)………………………………P 2,400,000
Add: Non-controlling interest on full -goodwill
(P2,040,000 – P1,800,000 partial-goodwill)…..…….... . 240,000
Non-controlling Interest (full)…………………………………..P 2,640,000
Case 4:
Proportionate Basis (Partial-goodwill Approach)
Partial-goodwill
Fair value of subsidiary (75%):
Consideration transferred: Cash………………………..P 2,592,000 (60%)
Fair value of previously held equity interest
in acquiree P2,592,000/60% = P4,320,000 x 15%......... 648,000 . (15%)
Fair value of Subsidiary ..………………………………………. P 3,240,000 (75%)
Less: Book value of stockholders’ equity (net assets)
– S Company: (P4,680,000 – P2,280,000) x 75%.......... 1,800,000 .(75%)
Allocated Excess.………………………………………………....P 1,440,000 (75%)
Less: Over/undervaluation of assets and liabilities:
[(P6,120,000 – P2,280,000) –
(P4,680,000 – P2,280,000)] x 75%..................................... 1,080,000 (75%)
Positive excess: Goodwill (partial)……………………………...P 360,000 (75%)
Non-controlling interest
Book value of stockholders’ equity of subsidiary…………..P 2,400,000
Adjustments to reflect fair value (over/ undervaluation
of assets and liabilities): (P3,840,000 – P2,400,000)…. 1,440,000
Fair value of stockholders’ equity of subsidiary……………P 3,840,000
Multiplied by: Non-controlling Interest percentage............ 25%
Non-controlling interest (partial)………………………………P 960,000
Non-controlling interest
Non-controlling interest (partial)………………………………P 960,000
Add: Non-controlling interest on full -goodwill
(P480,000 – P360,000 partial-goodwill)…..…………....... 120,000
Non-controlling Interest (full)……………………………………P 1,080,000
Problem IV
Partial-goodwill (Proportionate Basis)
Fair value of subsidiary (75%):
Consideration transferred: Cash……………………….. P270,000 (75%)
Less: Book value of stockholders’ equity
(net assets) – S Company:
(P480,000 – P228,000) x 75%....................................... 189,000 (75%)
Allocated excess………………………………………………... P 81,000 (75%)
Less: Over/undervaluation of assets and liabilities:
[(P612,000 – P228,000) – (P480,000 – P228,000) x 75% 99,000 (75%)
Negative excess: Bargain purchase gain (to controlling
interest or attributable to parent only)………………. (P18,000) (75%)
Full-goodwill (Fair Value Basis)
Fair value of subsidiary (100%):
Consideration transferred: Cash……………………….. P270,000 ( 75%)
Fair value of non-controlling interest (given)………… 98,400 ( 25%)
Fair value of subsidiary ………………………………………… P368,400 (100%)
Less: Book value of stockholders’ equity
(net assets) – S Company:
(P480,000 – P228,000) x 100%..................................... 252,000 (100%)
Allocated excess………………………………………………... P116,400 (100%)
Less: Over/undervaluation of assets and liabilities:
[(P612,000 – P228,000) – (P480,000 – P228,000) x 100% 132,000 (100%)
Negative excess: Bargain purchase gain (to controlling
interest or attributable to parent only)………………. (P15,600) (100%)
Problem V
1.
A. Investment in Sewell 675,000
Cash 675,000
B. Investment in Sewell 675,000
Cash 675,000
C. Investment in Sewell 318,000
Cash 318,000
2.
A.
Fair value of Subsidiary:
Consideration transferred P675,000
Less: BV of SHE of S (P450,000 + P180,000 + P75,000)x100% 705,000
Allocated excess P( 30,000)
Less: Over/under valuation of A and L: Inc. (Dec.)
Inventory (P30,000 – P20,000) x 100% (P10,000)
Land (P50,000 – P70,000) x 100% __20,000 __10,000
Bargain Purchase Gain – full (P 40,000)
B.
Partial Goodwill
Fair value of Subsidiary:
Consideration transferred P675,000
Less: BV of SHE of S (P450,000 + P180,000 + P75,000) x 90% 634,500
Allocated excess P 40,500
Less: Over/under valuation of A and L: Inc. (Dec.)
Inventory (P30,000 – P20,000) x 90% (P9,000)
Land (P50,000 – P70,000) x 90% __18,000 __9,000
Goodwill – partial P 31,500
Full-Goodwill
Fair value of Subsidiary:
Consideration transferred (P675,000/90%) P750,000
Less: BV of SHE of S (P450,000 + P180,000 + P75,000)x100% 705,000
Allocated excess P 45,000
Less: Over/under valuation of A and L: Inc. (Dec.)
Inventory (P30,000 – P20,000) x 100% (P10,000)
Land (P50,000 – P70,000) x 100% __20,000 __10,000
Goodwill – full P 35,000
C.
Partial Goodwill
Fair value of Subsidiary:
Consideration transferred P318,000
Less: BV of SHE of S (P620,000 + P140,000 + P20,000) x 80% 624,000
Allocated excess (P306,000)
Less: Over/under valuation of A and L: Inc. (Dec.)
Inventory (P30,000 – P20,000) x 80% (P 8,000)
Land (P50,000 – P70,000) x 80% __16,000 __8,000
Bargain Purchase Gain – partial (parent only) (P314,000)
Full-Goodwill
Fair value of Subsidiary:
Consideration transferred P 318,000
FV of NCI* _158,000
P 476,000
Less: BV of SHE of S (P620,000 + P140,000 + P20,000) x 100% 780,000
Allocated excess (P304,000)
Less: Over/under valuation of A and L: Inc. (Dec.)
Inventory (P30,000 – P20,000) x 100% (P10,000)
Land (P50,000 – P70,000) x 100% __20,000 _10,000
Bargain Purchase Gain – full (parent only) (P314,000)
*BV of SHE of S P780,000
Adjustments to reflect fair value 10,000
FV of SHE of S P790,000
x: NCI% 20%
FV of NCI P158,000
3.
A.
Common Stock – Sewell 450,000
Paid in capital in excess of par – Sewell 180,000
Retained Earnings – Sewell 75,000
Land 20,000
Inventory 10,000
Investment in Sewell 675,000
Retained earnings (gain) – Parent (since
balance sheet accounts are being
examined) 40,000
B.
Partial-Goodwill (Proportionate Basis)
Common Stock – Sewell 450,000
Paid in capital in excess of par – Sewell 180,000
Retained Earnings – Sewell 75,000
Land 20,000
Goodwill 31,500
Inventory 10,000
Investment in Sewell 675,000
Non-controlling Interest 71,500
BV – SHE of Sewell
(P450,000 + P180,000 + P75,000) P705,000
Adjustments to reflect fair value 10,000
FV of SHE of Sewell P715,000
x: NCI% 10%
FV of NCI (partial) P 71,500
BV – SHE of Sewell
(P620,000 + P140,000 + P20,000) P780,000
Adjustments to reflect fair value 10,000
FV of SHE of Sewell P790,000
x: NCI% 20%
FV of NCI (full) P158,000
Problem VI
1.
January 1, 20x4
Investment in S Company…………………………………………… 408,000
Cash…………………………………………………………………….. 408,000
2.
Schedule of Determination and Allocation of Excess
Date of Acquisition – January 1, 20x4
Fair value of Subsidiary (100%)
Consideration transferred……………………………….. P 408,000
Less: Book value of stockholders’ equity of S:
Common stock (P240,000 x 100%)………………….. P 240,000
Paid-in capital in excess of par (P24,000 x 100%)... 24,000
Retained earnings (P96,000 x 100%)………………... 96,000 360,000
Allocated excess (excess of cost over book value)…… P 48,000
Less: Over/under valuation of assets and liabilities:
Increase in inventory (P18,000 x 100%)…………….. P 18,000
Increase in land (P72,000 x 100%)…………………… 72,000
Decrease in buildings and equipment
(P12,000 x 100%)……………………………………... ( 12,000)
Increase in bonds payable (P42,000 x 100%)…….. ( 42,000) 36,000
Positive excess: Goodwill (excess of cost over fair
value)…………………………………………………….. P 12,000
4.
Eliminations
Assets P Co. S Co. Dr. Cr. Consolidated
Cash*…………………………. P 12,000 P 60,000 P 72,000
Accounts receivable…….. 90,000 60,000 150,000
Inventory…………………. 120,000 72,000 (2) 18,000 210,000
Land……………………………. 210,000 48,000 (2) 72,000 330,000
Buildings and equipment (net) 480,000 360,000 (2) 12,000 828,000
Goodwill…………………… (2) 12,000 12,000
Investment in S Co…………. 408,000 (1) 360,000
(2) 48,000 -
Total Assets P1,320,000 P600,000 P1,602,000
Liabilities and Stockholders’ Equity
Accounts payable…………… P 120,000 P120,000 P 240,000
Bonds payable………………… 240,000 120,000 360,000
Premium on bonds payable (3) 42,000 42,000
Common stock, P10 par……… 600,000 600,000
Common stock, P10 par……… 240,000 (1) 240,000
Paid in capital in excess of par. 60,000 60,000
Paid in capital in excess of par. 24,000 (1) 24,000
Retained earnings…………… 300,000 300,000
Retained earnings…………… _________ 96,000 (1) 96,000 __________ _________
Total Liabilities and Stockholders’
Equity P1,320,000 P600,000 P 462,000 P 462,000 P1,602,000
(1) Eliminate investment against stockholders’ equity of S Co.
(2) Eliminate investment against allocated excess.
* P420,000 – P408,000 = P12,000.
5.
Assets
Cash P 72,000
Accounts receivables 150,000
Inventories 210,000
Land 330,000
Buildings and equipment (net) 828,000
Goodwill 12,000
Total Assets P1,602,000
Problem VII
Partial-goodwill Approach
Schedule of Determination and Allocation of Excess (Partial-goodwill)
Date of Acquisition – January 1, 20x4
Fair value of Subsidiary (80%)
Consideration transferred……………………………….. P 360,000
Less: Book value of stockholders’ equity of Sky:
Common stock (P240,000 x 80%)……………………. P 192,000
Paid-in capital in excess of par (P96,000 x 80%).... 76,800
Retained earnings (P24,000 x 80%)……………….... 19,200 288,000
Allocated excess (excess of cost over book value)….. P 72,000
Less: Over/under valuation of assets and liabilities:
Increase in inventory (P18,000 x 80%)……………… P 14,400
Increase in land (P72,000 x 80%)……………………. 57,600
Decrease in buildings and equipment
(P12,000 x 80%)……………………………………..... ( 9,600)
Increase in bonds payable (P42,000 x 80%)………. ( 33,600) 28,800
Positive excess: Partial-goodwill (excess of cost over
fair value)………………………………………………... P 43,200
The over/under valuation of assets and liabilities are summarized as follows:
Sky Co. Sky Co. Over/ Under
Book value Fair value Valuation
Inventory………………….…………….. 72,000 90,000 18,000
Land……………………………………… 48,000 120,000 72,000
Buildings and equipment (net)......... 360,000 348,000 ( 12,000)
Bonds payable………………………… (120,000) (162,000) 42,000
Net……………………………………….. 360,000 396,000 36,000
The buildings and equipment will be further analyzed for consolidation purposes as follows:
Sky Co. Sky Co.
Book value Fair value (Decrease)
Buildings and equipment .................. 720,000 348,000 ( 372,000)
Less: Accumulated depreciation….. 360,000 - ( 360,000)
Net book value………………………... 360,000 348,000 ( 12,000)
The following entry on the date of acquisition in the books of Parent Company:
January 1, 20x4
(1) Investment in Sky Company…………………………………………… 360,000
Cash…………………………………………………………………….. 360,000
Acquisition of Sky Company.
(2) Retained earnings (acquisition-related expense - close to
retained earnings since only balance sheets are being
examined)…………………………………………………………… 14,400
Cash……………………………………………………………………. 14,400
Acquisition- related costs.
The schedule of determination and allocation of excess provides complete guidance for the worksheet eliminating
entries on January 1, 20x4:
(E1) Common stock – Sky Co………………………………………………. 240,000
Additional paid-in capital – Sky Co…………………………………. 24,000
Retained earnings – Sky Co…………………………………………... 96,000
Investment in Sky Co………………………………………………… 288,000
Non-controlling interest (P300,000 x 20%)……………………….. 72,000
Eliminate investment against stockholders’ equity of Sky Co.
Eliminations
Assets Peer Co. Sky Co. Dr. Cr. Consolidated
Cash*…………………………. P 45,600 P 60,000 P 105,600
Accounts receivable…….. 90,000 60,000 150,000
Inventory…………………. 120,000 72,000 (2) 18,000 210,000
Land……………………………. 210,000 48,000 (2) 72,000 330,000
Full-goodwill Approach
Schedule of Determination and Allocation of Excess (Full-goodwill)
Date of Acquisition – January 1, 20x4
The following entry on the date of acquisition in the books of Parent Company:
January 1, 20x4
(1) Investment in Sky Company…………………………………………… 360,000
Cash…………………………………………………………………….. 360,000
Acquisition of Sky Company.
The schedule of determination and allocation of excess provides complete guidance for the worksheet eliminating
entries on January 1, 20x4:
240,000
(E1) Common stock – Sky Co……………………………………………….
Additional paid-in capital – Sky Co…………………………………. 24,000
Retained earnings – Sky Co…………………………………………... 96,000
Investment in Sky Co………………………………………………… 288,000
Non-controlling interest (P300,000 x 20%)……………………….. 72,000
Eliminate investment against stockholders’ equity of Sky Co.
Worksheet for Consolidated balance Sheet, January 1, 20x4. Date of Acquisition: 80%-Owned Subsidiary
(Full-goodwill)
Eliminations
Assets Peer Co. Sky Co. Dr. Cr. Consolidated
Cash*…………………………. P 45,600 P 60,000 P 105,600
Accounts receivable…….. 90,000 60,000 150,000
Inventory…………………. 120,000 72,000 (2) 18,000 210,000
Land……………………………. 210,000 48,000 (2) 72,000 330,000
Problem VIII
Partial-goodwill Approach (Proportionate Basis)
Schedule of Determination and Allocation of Excess (Proportionate Basis))
Date of Acquisition – January 1, 20x4
Fair value of Subsidiary (80%)
Consideration transferred:
Common stock: 12,000 shares x P25 per share…... P 300,000
Less: Book value of stockholders’ equity of S:
Common stock (P12,000 x 80%)……………………. P 9,600
Paid-in capital in excess of par (P108,000 x 80%)... 86,400
Retained earnings (P72,000 x 80%)……………….... 57,600 153,600
Allocated excess (excess of cost over book value)…… P 146,400
Less: Over/under valuation of assets and liabilities:
Increase in inventory (P6,000 x 80%)……………… P 4,800
Increase in land (P36,000 x 80%)……………………. 28,800
Increase in buildings and equipment
(P150,000 x 80%)…………………………………...... 120,000
Increase in copyrights (P60,000 x 80%)…………….. 48,000
Increase in contingent liabilities – estimated
liability for contingencies (P6,000 x 80%)……..... ( 4,800) 196,800
Negative excess: Bargain purchase gain to controlling
interest or attributable to parent only)…………….. (P 50,400)
The following entry on the date of acquisition in the books of Parent Company
January 1, 20x4
(1) Investment in S Company…...…………………………………… 300,000
Common stock, P1 par……………………………………………… 12,000
Paid-in capital in excess of par (P300,000 – P12,000 par)…….. 288,000
Acquisition of S Company.
The schedule of determination and allocation of excess provides complete guidance for the worksheet eliminating
entries on January 1, 20x4:
(E1) Common stock – S Co……………………………………………. 12,000
Additional paid-in capital – S Co………………………………. 108,000
Retained earnings – S Co………………………………………… 72,000
Investment in S Co……………………………………………… 153,600
Non-controlling interest (P192,000 x 20%)……………………….. 38,400
Eliminate investment against stockholders’ equity of S Co
Worksheet for Consolidated balance Sheet, January 1, 20x4. Date of Acquisition: 80%-Owned Subsidiary
(Proportionate Basis)
Eliminations
Assets P Co. S Co. Dr. Cr. Consolidated
Cash………………… P 334,800 P 334,800
Accounts receivable…….. 86,400 P 24,000 110,400
Inventory…………………. 96,000 60,000 (2) 6,000 162,000
Land………………………… 120,000 48,000 (2) 36,000 204,000
The following entry on the date of acquisition in the books of Parent Company:
January 1, 20x4
(1) Investment in S Company…...…………………………………… 300,000
Common stock, P1 par……………………………………………… 12,000
Paid-in capital in excess of par (P300,000 – P12,000 par)…….. 288,000
Acquisition of S Company.
The schedule of determination and allocation of excess provides complete guidance for the worksheet eliminating
entries on January 1, 20x4:
(E1) Common stock – S Co……………………………………………. 12,000
Additional paid-in capital – S Co………………………………. 108,000
Retained earnings – S Co………………………………………… 72,000
Investment in S Co……………………………………………… 153,600
Non-controlling interest (P192,000 x 20%)……………………….. 38,400
Eliminate investment against stockholders’ equity of S Co
Worksheet for Consolidated balance Sheet, January 1, 20x4. Date of Acquisition: 80%-Owned Subsidiary
(Fair Value Basis)
Eliminations
Assets P Co. S Co. Dr. Cr. Consolidated
Cash………………… P 334,800 P 334,800
Accounts receivable…….. 86,400 P 24,000 110,400
Inventory…………………. 96,000 60,000 (2) 6,000 162,000
Land………………………… 120,000 48,000 (2) 36,000 204,000
Assets
Cash P 334,800
Accounts receivables 110,400
Inventories 162,000
Land 204,000
Buildings and equipment (net) 1,116,000
Copyright 60,000
Total Assets P1,987,200
Problem IX
1.
Schedule of Determination and Allocation of Excess
Problem X
1.
January 1, 20x4
(1) Investment in S Company…………………………………………… 432,000
Cash…………………………………………………………………….. 288,000
Common stock, P10 par…………………………………………….. 120,000
Paid-in capital in excess of par……………………………………. 24,000
2.
Schedule of Determination and Allocation of Excess
Date of Acquisition – January 1, 20x4
Fair value of Subsidiary (100%)
Consideration transferred
Cash………………………………………………………. P 288,000
Common stock: 12,000 shares x P12 per share….. 144,000 P 432,000
Less: Book value of stockholders’ equity of S:
Common stock (P240,000 x 100%)………………….. P 240,000
Paid-in capital in excess of par (P96,000 x 100%).. 96,000
Retained earnings (P24,000 x 100%)………………... 24,000 360,000
Allocated excess (excess of cost over book value)…… P 72,000
Add: Existing Goodwill of Sky Co. (P6,000 x 100%)……… 6,000
Adjusted allocated excess…………………………………. P 78,000
Less: Over/under valuation of assets and liabilities:
Increase in inventory (P18,000 x 100%)…………….. P 18,000
Increase in land (P72,000 x 100%)…………………… 72,000
Decrease in buildings and equipment
(P12,000 x 100%)……………………………………... ( 12,000)
Increase in bonds payable (P42,000 x 100%)…….. ( 42,000) 36,000
Positive excess: Goodwill (excess of cost over fair
value)…………………………………………………….. P 42,000
Alternatively, the unrecorded goodwill may also be computed by ignoring the existing goodwill in the books of
the subsidiary, thus:
Date of Acquisition – January 1, 20x4 (refer to previous table for details of computation)
Fair value of Subsidiary (100%)
Consideration transferred……………………………………………………… P 432,000
Less: Book value of stockholders’ equity of S……………………………….. 360,000
Allocated excess (excess of cost over book value)…………………………. P 72,000
Less: Over/under valuation of assets and liabilities…………………………… 36,000
Positive excess: Goodwill (excess of cost over fair value)…………………... P 36,000
Add: Existing Goodwill……………………………………………………………… 6,000
Positive excess: Goodwill (excess of cost over fair
value)…………………………………………………………………………… P 42,000
3.
Eliminations
Assets P Co. S Co. Dr. Cr. Consolidated
Cash*………………………….. P 111,600 P 54,000 P 165,600
Accounts receivable…….. 90,000 60,000 150,000
Inventory…………………. 120,000 72,000 (2) 18,000 210,000
Land……………………………. 210,000 48,000 (2) 72,000 330,000
Buildings and equipment (net) 480,000 360,000 (2) 12,000 828,000
Goodwill…………………… 6,000 (2) 36,000 42,000
Investment in S Co…………. 432,000 (4) 360,000
(5) 72,000 -
Total Assets P1,443,600 P600,000 P1,725,600
Liabilities and Stockholders’ Equity
Accounts payable…………… P 120,000 P120,000 P 240,000
Bonds payable………………… 240,000 120,000 360,000
Premium on bonds payable (6) 42,000 42,000
Common stock, P10 par**…..… 720,000 720,000
Common stock, P10 par……… 240,000 (1) 240,000
Additional paid in capital*** 75,600 75,600
Additional paid in capital…… 24,000 (1) 24,000
Retained earnings**** 288,000 288,000
Retained earnings…………… _________ 96,000 (1) 96,000 __________ _________
Total Liabilities and Stockholders’
Equity P1,443,600 P600,000 P 486,000 P 486,000 P1,725,600
(1) Eliminate investment against stockholders’ equity of Sky Co.
(2) Eliminate investment against allocated excess.
* P420,000 – P288,000 – P12,000 – P8,400 = P111,600.
* *P600,000 + P120,000 (12,000 shares x p10 par) = P720,000.
*** P50,000 + P20,000 – P7,000 = P63,000.
****P300,000 – P12,000 = P288,000.
4.
Assets
Cash P 165,600
Accounts receivables 150,000
Inventories 210,000
Land 330,000
Buildings and equipment (net) 828,000
Goodwill 42,000
Total Assets P1,725,600
Problem XI
1.
Schedule of Determination and Allocation of Excess
2. Goodwill, P6,000
Problem XII
1. Inventory P 140,000
2. Land P 60,000
3. Buildings and Equipment P 550,000
4. Goodwill
Problem XIII
1. Inventory (P120,000 + P20,000) P140,000
2. Land (P70,000 – P10,000) P 60,000
3. Buildings and Equipment (P480,000 + P70,000) 550,000
4. Full-Goodwill, P57,500
Fair value of Subsidiary:
Consideration transferred P470,000
Add: FV of NCI 117,500 P587,500
Less: BV of SHE of Slim (P250,000 + P200,000) 450,000
Allocated excess P137,500
Less: Over/under valuation of A and L: Inc. (Dec.)
Inventory P 20,000
Land (10,000)
Buildings and equipment (net) 70,000 80,000
Goodwill – full P 57,500
or,
Fair value of consideration given by Ford P470,000
Fair value of noncontrolling interest 117,500
Total fair value P587,500
Book value of Slim’s net assets P450,000
Fair value increment for:
Inventory 20,000
Land (10,000)
Buildings and equipment (net) 70,000
Fair value of identifiable net assets (530,000)
Goodwill – full P 57,500
Partial Goodwill, P46,000
Fair value of Subsidiary:
Consideration transferred P470,000
Less: BV of SHE of Slim (P250,000 + P200,000) x 80% 360,000
Allocated excess P110,000
Less: Over/under valuation of A and L: Inc. (Dec.)
Inventory (P20,000 x 80%) P 16,000
Land (P10,000 x 80%) ( 8,000)
Buildings and equipment (net) (P70,000 x 80%) 56,000 64,000
Goodwill – partial P 46,000
Problem XIV
1. P470,000 = P470,000 - P55,000 + P55,000
2. P605,000 = (P470,000 - P55,000) + P190,000
3. P405,000 = P270,000 + P135,000
4. P200,000 (as reported by GG Corporation)
Problem XV
1. P57,000 = (P120,000 - P25,000) x .60
2. P81,000 = (P120,000 - P25,000) + P40,000 - P54,000
3. P48,800 = (P120,000 - P25,000) + P27,000 - P73,200
Problem XVII
1. Investment in Craig Company........................................................................ 950,000
Cash........................................................................................................... 950,000
2.
Fair value of Subsidiary:
Consideration transferred P950,000
Less: BV of SHE of Craig (P300,000 + P420,000) 720,000
Allocated excess P 230,000
Less: Over/under valuation of A and L: Inc (Decrease)
Land (P250,000 fair – P200,000 book value P 50,000
Building (P700,000 fair – P600,000 book value) 100,000
Discount on bonds payable P280,000 fair – P300,000
book value) 20,000
Deferred tax liability (P40,000 fair – P50,000 book value) 10,000
Buildings and equipment (net) 180,000
Goodwill P 50,000
4. Elimination entries:
Common Stock............................................................................................... 300,000
Paid-In Capital in Excess of Par..................................................................... 650,000
Investment in Craig Company.................................................................. 950,000
Problem XXI
1.
* Man Mask
(Public Co.) (Private Co.)
Currently issued…………………… 10 M 40% 4 M 40%
Additional shares issued……….. 15 M 60% ** 6 M / 60%
Total shares………………………… 25 M 10 M
**15M/25M
FV of net assets………………………P 18 M P30 M
BV of net assets (same with FV)…. 18 M ?
Fv per share of stock……………….P 8 P 6
2.
Consideration transferred (4,000,000 shares* x P6)…………………………..P24,000,000
Less: Book value of SHE – Man: P18,000,000 x 100%.................................... 18,000,000
Allocated excess …………………………………………………………………..P 6,000,000
Less: Over/Under valuation of assets and liabilities
(book value same fair value)……………………………………………… 0
Goodwill………………………………………………………………………………P 6,000,000
***Note: Depending on the wording of this exercise, the credit may be cash instead of common stock and additional
paid-in-capital. If cash is paid, the credit to cash is P570,000.
2. Common Stock - Seely 80,000
Other Contributed Capital – Seely 132,000
Retained Earnings - Seely 160,000
Inventory 52,000
Land 25,000
Plant Assets 71,000
Discount on Bonds Payable 20,000
Goodwill** 127,200
Deferred Income Tax Liability* 67,200
Investment in Seely Company 570,000
Non-controlling Interest [(P570,000/.95) x .05] 30,000
*(.40 x (P52,000 + P25,000 + P71,000 + P20,000))
Problem XXIII
HB Country and HCO Media
Consolidation of a variable interest entity is required if a parent has a variable interest that will
Absorb a majority of the entity's expected losses if they occur
Receive a majority of the entity's expected residual returns if they occur
Because (1) HCO Media’s losses are limited by contract, and (2) Hillsborough has the right to receive the
residual benefits of the sales generated on the HCO Media internet site above P500,000, Hillsborough should
consolidate HCO Media.
The P20,000 excess net asset fair value is recognized by PT as a bargain purchase. All SP’ assets and
liabilities are recognized at their individual fair values.
Cash P20,000
Marketing software 160,000
Computer equipment 40,000
Long-term debt (120,000)
Noncontrolling interest (60,000)
Pantech equity interest (20,000)
Gain on bargain purchase (20,000)
- 0-
When the business fair value of a VIE (that is a business) is greater than assessed asset values, all
identifiable assets and liabilities are reported at fair values (unless a previously held interest) and the
difference is treated as a goodwill.
Cash P20,000
Marketing software 120,000
Computer equipment 40,000
Goodwill (excess business fair value) 20,000
Long-term debt (120,000)
Noncontrolling interest (60,000)
PT equity interest (20,000)
-0-
Multiple Choice Problems
1. c – at fair value
2. c [P300,000 – (P35,000 + P60,000 + 125,000 + P250,000 – P65,000 – P150,000)]
3. d
Consideration transferred P300,000
Less: Book value of SHE of S (P100,000 + P115,000) 215,000
Allocated excess (excess of fair value or cost over book value)
- sometimes termed as “Differential” P 85,000
4. a – Investment in subsidiary in the consolidated statements is eliminated in its entirety.
5. d
Consideration transferred P150,000
Less: Book value of SHE of S (P40,000 + P52,000) 92,000
Allocated excess (excess of fair value or cost over book value)
- sometimes termed as “Differential” P 58,000
6. b – [P150,000 – (P173,000 – P40,000 – P5,000)]
7. d - P600,000 - P15,000 - P255,000 = P330,000
8. c - P475,000 - P300,000 = P175,000 debit
9. b – fair value
10. d – fair value
11. d – fair value
12. c -
Full-goodwill:
Fair value of Subsidiary:
Consideration transferred P300,000
Add: FV of NCI 100,000 P400,000
Less: BV of SHE of Silver (P100,000 + P180,000) x 100% 280,000
Allocated excess P120,000
Less: Over/under valuation of A and L: Inc. (Dec.)
Inventory (P65,000 – P70,000) x 100% P( 5,000)
Land (P100,000 – P90,000) x 100% 10,000
Buildings and equipment (P300,000 – P250,00) x 100% 50,000 __55,000
Goodwill – full P 65,000
17. a
Total Assets of Gulliver (Jonathan) P610,000
Less: Investment in Sea-Gull Corp. (160,000)
P 450,000
Book value of assets of Sea Corp. 230,000
Book value reported by Gulliver/Jonathan and Sea P 680,000
Increase in inventory (P45,000 – P40,000) 5,000
Increase in land (P60,000 – P40,000) 20,000
Goodwill (full)* 15,000
Total assets reported P 720,000
19. c
FV of SHE of S:
Book value of SHE of S (P40,000 + P120,000)………………….P 160,000
Adjustments to reflect fair value [(P45,000 + P60,000) -
(P40,000 + P40,000)………….……………………………… 25,000
FV of SHE of S……………………………………………………… P 185,000
Multiplied by: NCI%.................................................................... 20%
FV of NCI (partial)………………………………………………….P 37,000
Add: NCI on full goodwill (P15,000 – P12,000)……………….. 3,000
FV of NCI (full-goodwill)*………………………………………… P 40,000
* same with the NCI given per problem
Partial Goodwill
Fair value of Subsidiary:
Consideration transferred P160,000
Less: BV of SHE of S (P40,000 + P120,000) x 80% _128,000
Allocated excess P 32,000
Less: Over/under valuation of A and L: Inc. (Dec.)
Inventory (P5,000 x 80%) P 4,000
Land (P20,000 x 80%) 16,000 __20,000
Goodwill – partial P 12,000
If partial-goodwill:
Total Assets of P. P1,278,000
Less: Investment in S Corp. (440,000)
P 838,000
Book value of assets of S Corp. 542,000
Book value reported by P and S P1,380,000
Increase in inventory (P60,000 – P38,000) 22,000
Increase in land (P60,000 – P32,000) 28,000
Increase in plant assets [P350,000 – (P300,000 – P60,000)] 110,000
Goodwill (partial)* 20,000
Total assets reported P1,540,000
*[P440,000 – (P702,000 – P142,000) x 75%]
26. c
Full-goodwill:
Fair value of Subsidiary:
Consideration transferred P150,500
Add: FV of NCI **64,500 P215,000
Less: BV of SHE of SS (P50,000 + P90,000) x 100% 140,000
Allocated excess P 75,000
Less: Over/under valuation of A and L: Inc. (Dec.)
Inventory (P70,000 – P85,000) x 100% P 15,000
Land (P25,000 – P45,000) x 100% 20,000 35,000
Goodwill – full P 40,000
**given amount, but it should not be lower than the fair value of SHE – subsidiary amounting to
P52,500 computed as follows :
FV of SHE of SS:
Book value of SHE of SS (P50,000 + P90,000)…………….P 140,000
Adjustments to reflect fair value (P15,000 + P20,000)… 35,000
FV of SHE of SS……………………………………………… P 175,000
Multiplied by: NCI%.......................................................... 30%
FV of NCI (partial)……………………………………………..P 52,500
27. b
Total Assets of Power Corp. P 791,500
Less: Investment in Silk Corp. (150,500)
P 641,000
Book value of assets of Silk Corp. 405,000
Book value reported by Power and
Silk P1,046,000
Increase in inventory (P85,000 - P70,000) 15,000
Increase in land (P45,000 - P25,000) 20,000
Goodwill (full) 40,000
Total assets reported P1,121,000
If partial-goodwill:
Total Assets of Power Corp. P 791,500
Less: Investment in Silk Corp. (150,500)
P 641,000
Book value of assets of Silk Corp. 405,000
Book value reported by Power and
Silk P1,046,000
Increase in inventory (P85,000 - P70,000) 15,000
Increase in land (P45,000 - P25,000) 20,000
Goodwill (partial) 28,000
Total assets reported P1,109,000
28. d P701,500 = (P61,500 + P95,000 + P280,000) + (P28,000 + P37,000
+ P200,000)
29. a
Non-controlling interest (partial-goodwill): P52,500
NCI
FV of SHE of SSD:
Book value of SHE of SS (P50,000 + P90,000)…………….P 140,000
Adjustments to reflect fair value (P15,000 + P20,000)… 35,000
FV of SHE of SSD P 175,000
Multiplied by: NCI%.......................................................... 30%
FV of NCI (partial)……………………………………………..P 52,500
30. d
Non-controlling interest (fulll-goodwill): P64,500
NCI
FV of SHE of SSD:
Book value of SHE of SS (P50,000 + P90,000)…………….P 140,000
Adjustments to reflect fair value (P15,000 + P20,000)… 35,000
FV of SHE of SSD P 175,000
Multiplied by: NCI%.......................................................... 30%
FV of NCI (partial)……………………………………………..P 52,500
Add: NCI on full-goodwill (P40,000 – P12,000)…………... 12,000
FV of NCI (full)…………………………………………………..P 64,500
34. c
Consideration transferred (P60,000 ÷ 80%).......................................................................... P75,000
Less: Strand's book value ...................................................................................................... (50,000
Fair value in excess of book value ........................................................................................ P25,000
Excess assigned to inventory (60%) ........................................................................P15,000
Excess assigned to goodwill (40%) ..........................................................................P10,000
35. a
Park current assets.................................................................................................................... P 70,000
Strand current assets................................................................................................................. 20,000
Excess inventory fair value...................................................................................................... 15,000
Consolidated current assets...................................................................................................... P105,000
36. c
Park noncurrent assets............................................................................................................. P 90,000
Strand noncurrent assets.......................................................................................................... 40,000
Excess fair value to goodwill (partial).................................................................................... ___8,000
Consolidated noncurrent assets............................................................................................... P140,000
37. d
Park noncurrent assets.............................................................................................................. P 90,000
Strand noncurrent assets........................................................................................................... 40,000
Excess fair value to goodwill (full).......................................................................................... __10,000
Consolidated noncurrent assets................................................................................................ P140,000
38. b Add the two book values and include 10% (the P6,000 current portion) of the loan taken out by Park to
acquire Strand.
39. b Add the two book values and include 90% (the P54,000 noncurrent portion) of the loan taken out by Polk
to acquire Strand.
40. b
Park stockholders' equity......................................................................................................... P80,000
NCI (partial):
BV of SHE – S ……………………………………………………………..P50,000
Adjustments to reflect fair value (inventory)………………………. 15,000
FV of SHE – S………………………………………………………………P65,000
x: Multiplied by: NCI%........................................................................ 20% 13,000
Total stockholders' equity....................................................................................................... P93,000
41. c
Park stockholders' equity..................................................................................... …………. P80,000
NCI (full):
BV of SHE – S ……………………………………………………………..P50,000
Adjustments to reflect fair value (inventory)………………………. 15,000
FV of SHE – S………………………………………………………………P65,000
x: Multiplied by: NCI%......................................................................... 20%
NCI (partial)………………………………………………………………P13,000
Add: NCI on full-goodwill (P10,,000 – P8,000)……………………… 2,000
Non-controlling interest at fair value (20% × P75,000)………… 15,000
Total stockholders' equity P95,000
42. b
P’s acquisition entry is:
Investment in Silicon 2,500,000
Merger expenses 250,000
C/S (100,000@P1) 100,000
APIC [(100,000@P24) – P400,000] 2,000,000
Cash (P400,000 + P250,000) 650,000
The following discussions focus on the books of parent entity regarding direct acquisition-related costs.
Currently, the Interpretation Committee (IFRIC) of IASB is discussing the topic of Contingent Pricing of Property, Plant and Equipment and
Intangible Assets. The scope of those deliberations does not include the cost of investment in associate, joint venture or subsidiary but it is
possible that the scope of the project might be expanded in future. (IGAAP 2013 under IFRS by Ernst and Young, page 530,)
This raises the question of the treatment of the transaction costs as, under PFRS 3 these costs are usually recognized as expenses in the
consolidated accounts.
Revised PAS 27 does not define what is meant by “cost”, but in the glossary to PFRS provides an over-riding definition of “cost” as “the
amount of cash or cash equivalents paid or the fair value of the other consideration given to acquire an asset at the time of its acquisition or
construction”
As a general rule under PFRS, “cost” includes the purchase price and other costs directly attributable to the acquisition or issuance of the
asset such as professional fees for legal services, transfer taxes and other transaction costs”
* Answer d – P1,600,000 (P1,500,000 + P100,000) – Position of Ernst and Young (EY). Given that Revised PAS 27 does not separately
define “cost”, it is appropriate to apply the general meaning of “cost” to separate financial statements. Therefore, in the opinion of EY, the
cost of investment in subsidiary in the separate financial statements includes any costs incurred even if such costs are expensed in the
consolidated financial statements.
The view of EY, maybe based on the assumption that under the revised PAS 27 since it applies only to “Separate Financial Statements” not
consolidated statements; therefore PFRS 3 which is a standard for business combination/consolidation will not be the basis for the
definition of “cost”). Unlike before the revision of PAS 27 and implementation of PFRS 10, the basis of the old PAS 27, which is
“Consolidated and Separate Statements”, is PFRS 3, wherein the definition of “cost” was clearly defined. That is why the general rule in the
definition of “cost” was applied. This view is also as suggest by the IASB since they introduced the requirement to expense acquisition
costs within PFRS 3, it only applies to financial statements in which a business combination is accounted for under PFRS 3. It follows
that this requirement does not extend to the individual (or separate) financial statements of the investing or parent entity.
So, it seems that the basis of the general rule applies to PAS 16 (Property, Plant and Equipment) and PAS 38 (Intangible Assets) wherein
the direct costs is capitalized in the books of parent entity and eventually become expense through eliminating entry to prepare
consolidated statements.
** Answer c – P1,500,000; In Revised PAS 27 “Separate Financial Statements” in relation to PFRS 3 par. 33, which refers to any
acquisition-related costs incurred by the acquirer in relation to the business combination (for example legal costs, due diligence costs – such
as finder’s fee are expensed off and not included in the consideration transferred. The key reasons given for this approach are provided in
paragraph BC366:
Acquisition-related costs are not part of the fair value exchange between the buyer and seller.
They are separate transactions for which the buyer pays the fair value for the services received.
These amounts do not generally represent assets of the acquirer at acquisition date because the benefits obtained are consumed as
the services are received.
The PFRS 3 accounting for these outlays is a result of the decision to record the identifiable assets acquired and liabilities assumed at fair
value. In contrast, under PAS 16 and PAS 38, the assets acquired are initially recorded at cost. The following items are worth noting to
justify the use of this approach:
1. This view is supported by Hilton and Herauf in their book Modern Advanced Accounting in Canada, 7 th Edition (2013) which is
an IFRS based discussion, in the solution they presented in one of their end-of-chapter problems, they expensed the direct costs in
recording the investment in subsidiary in the book of parent company
2. Similar with No. 1 above, in the book Applying IFRS, 3 rd edition (2013), by Picker, et al (which is also Ernst and Young book,
which seems to contradict their position in the discussion above) in chapter 24 end-of-the chapter problems, the direct costs (or
“costs incurred in undertaking taking the acquisition” as the term used in the book) were not part of the investment in subsidiary
as evidenced by the amount in the eliminating entry.
3. One respected author in accounting even commented that, despite the above analysis capitalizing the direct costs seems to be
correct and have basis since the segregation of old PAS 27 to Revised PAS 27 and PFRS 10, the problem is, if the parent records
the direct costs as part of Investment in subsidiary, it may be a problem when there will be an impairment test which will reveal
the costs are in fact unrecoverable and thus that there must be an impairment charge at the parent level (in which the direct costs
is included as part the investment), which would have the effect of bringing the parent’s accounting (with the impairment
investment including the direct costs) in line with what would later appear on the consolidated financial statements.
The author believes that the there is logic on the basis of applying the general rule in interpreting the definition of “costs” in PAS 27
wherein the basis are PAS 16 and PAS 38, giving rise to an effect wherein the direct costs will be part of the investment in the books of
parent entity. But because of the three reasons mentioned above, the author believes that the direct costs still be considered as expenses
applying PFRS 3, aside from the fact that in substance the ultimate objective is to consolidate, eventhough there was a separation of
standard between Revised PAS 27 and PFRS 10.
77. a
78. d – Since, CC Corp. is not a subsidiary, no elimination of intercompany accounts will be made. Therefore, the
P200,000 remains to be a receivable. On the other hand, WW Corp. is a consolidated subsidiary, so the
P300,000 intercompany account will be eliminated.
79. d
80. a
81. c – In the combined financial statements (which normally used to described financial statements in a “common
control” situation), intercompany accounts are eliminated in full.
82. d – In consolidating the subsidiary's figures, all intercompany balances must be eliminated in their entirety for
external reporting purposes. Even though the subsidiary is less than fully owned, the parent nonetheless
controls it.
83. d
The acquisition method consolidates assets at fair value at acquisition date regardless of the parent’s percentage
ownership.
84. c
85. c
An asset acquired in a business combination is initially valued at 100% acquisition-date fair value and
subsequently amortized its useful life.
Patent fair value at January 1, 2009....................................................................................... P45,000
Amortization for 2 years (10 year life).................................................................................. (9,000
Patent reported amount December 31, 2010.......................................................................... P36,000
86 a
PP - building ..........................................................................................................P510,000
TT building acquisition-date fair value P300,000
Amortization for 3 years (10-year life) (90,000) 210,000
Consolidated buildings ............................................................................................................. P720,000
-OR-
PP - building .......................................................................................................................... 510,000
TT building 12/31/x4 P182,000
Excess acquisition-date fair value allocation 40,000
Excess amortization for (P40,000/ 10 x 3 years) (12,000) 210,000
Consolidated buildings ............................................................................................................. P720,000
87. b
Target not met: 100,000 shares x .75 share x P10 = P750,000
Target met: 100,000 shares x .8 x P10 = P800,000
88. c
Target not met: 250,000 shares x 1.50 share x P30 = P11,250,000
Target met: 250,000 shares x 1.8 x P30 = P13,500,000
89. c
500,000 shares x 1.7 exchange ratio x P25 = P21,250,000
The investment value does not change as a result of a change in the share prices.
90. d
Cost of Investment (40 shares* x P40)………………………………………………………P 1,600
Less: Book value of SHE – Pedro Ltd (P300 + P800) x 100%............................................ 1,100
Allocated excess……………………………………………………………………………… P 500
Less: Over/Under valuation of Assets and Liabilities:
Increase in Non-current assets: [(P1,500 – P1,300) x 100% x 70%......................... 140
Goodwill………………………………………………………………………………………….P 360
100%
* Pedro Ltd Santi Ltd
Currently issued…………………… 100 40% 40 40%
Additional shares issued……….. 150 60%** 60 / 60%
Total shares………………………… 250 100
**150/250
FV of net assets [P.5M + P1.5M – P.7M)] P1.3M P ?
BV of net assets (same with FV)……….. 1.1 M ?
Fv per share of stock……………………… P 16 P 40
Pedro ltd issues 2 ½ shares in exchange for each ordinary share of Santi Ltd. All of Santi Ltd’s shareholders
exchange their shares for Pedro Ltd. Pedro Ltd therefore issues 150 shares (60 x 2 ½) for the 60 shares in Santi
Ltd.
Pedro Ltd is now the legal parent of the subsidiary Santi Ltd. However, analyzing the shareholding in Pedro Ltd
shows that it consists of the 100 shares existing prior to the merger and 150 new shares held by former
shareholders in Santi Ltd. In essence, the former shareholders of Santi Ltd now control both entities Pedro Ltd
and Santi Ltd. The former Santi Ltd shareholders have a 60% interest in Pedro Ltd [150/(100+150]. The IASB
argues that there has been a reverse acquisition, and that Santi Ltd is effectively the acquirer of Pedro Ltd.
Reverse acquisition occurs when the legal subsidiary has this form of control over the legal parent. The usual
circumstance creating a reverse acquisition is where an entity (the legal parent) obtains ownership of the equity
of another entity (the legal subsidiary) but, as part of the exchange transaction, it issues enough voting equity as
consideration for control of the combined entity to pass to the owners of the legal subsidiary.
The key accounting effect of deciding that Santi Ltd is the acquirer is that the assets and liabilities of Pedro ltd
are to be valued at fair value. This is contrary to normal acquisition accounting, based on Pedro Ltd being the
legal parent of Santi Ltd, which would require the assets and liabilities of Santi Ltd to be valued at fair value.
Theories
1. c 6. B 11. c 16. d 21. b 26. d 31 c 36. d
2. a 7. b 12. c 17. c 22. a 27. c 32. d 37. d
3. e 8. A 13. d 18. b 23. a 28. c 33. b 38. c
4. e 9. D 14. d 19. c 24. b 29. d 34. d 39. b
5. b 10, a 15, b 20. c 25. c 30. b 35. d 40. c