ADVANCE ACCOUNTING 2015 | ANTONIO DAYAG JR.

Chapter 15
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.

Problem III
Case 2:
Proportionate Basis (Partial-goodwill Approach)
 ADVANCE ACCOUNTING 2015 | ANTONIO DAYAG JR.

 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

Fair Value Basis (Full-goodwill Approach)

 Full-goodwill
Fair value of subsidiary (100%):
Consideration transferred: Cash ………………………...P 7,560,000 ( 60%)
Fair value of NCI (given)………………………………….. 4,800,000 ( 40%)
Fair value of subsidiary…………………………………………...P12,360,000 (100%)
Less: Book value of stockholders’ equity (net assets)
– S Company: P6,000,000 x 100%........................... 6,000,000 (100%)
Allocated Excess.…………………………………………………..P 6,360,000 (100%)
Less: Over/undervaluation of assets and liabilities:
(P8,400,000 – P6,000,000) x 100%.................................. 2,400,000 (100%)
Positive excess: Goodwill (full)………………………………......P 3,960,000 (100%)

The full – goodwill of P3,960,000 consists of two parts:

Full-goodwill……………………………………………...P 3,960,000
Less: Controlling interest on full-goodwill
or partial-goodwill……………………………. 2,520,000
NCI on full-goodwill……………………………………..P 1,440,000

 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