ADVANCE ACCOUNTING 2015 | ANTONIO DAYAG JR.

Problem IX
1.
Schedule of Determination and Allocation of Excess

Date of Acquisition – January 1, 20x4

Fair value of Subsidiary (100%)
Consideration transferred:
Common stock: 24,000 shares x P14 per share P 336,000
Less: Book value of stockholders’ equity of Sky:
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 book value over cost)…… (P 24,000)
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 patent (P24,000 x 100%)………………... 24,000
Increase in contingent liability (P18,000 x 100%)…. ( 18,000)
Increase in bonds payable (P42,000 x 100%)…….. ( 42,000) 42,000
Negative excess: Bargain Purchase Gain (excess of
fair value over cost)…………………………………… (P 66,000)

2. Gain on acquisition, P66,000