On January 2, 2018, Pole Company purchased 100% of the outstanding capital shares of

Sole Company for P950,000 payable in cash. On that date, the assets and liabilities of
Sole Company had fair market value as shown below:

BOOK VALUE MARKET VALUE

Pole Co. Sole Co. Sole Co.
Cash 300,000 50,000 50,000
Accounts Receivable 200,000 100,000 100,000
Inventory 150,000 60,000 90,000 30,000
Land 70,000 120,000 50,000
Equipment (net) 600,000 470,000 600,000 130,000
Investments in Sole Co. 950,000
Totals 2,200,000 750,000

Accounts Payable 100,000 50,000 50,000

Ordinary Share Capital - Pole Co. 600,000
Ordinary Share Capital - Sole Co. 200,000
Additional Paid-in Capital 100,000
Retained Earnings - Pole Co. 1,500,000
Retained Earnings - Sole Co. 400,000
Totals 2,200,000 750,000

Requirements:

1.) a. Prepare an allocation schedule to compute goodwill (gain on bargain purchase)

b. Prepare the eliminatory entry
c. Prepare the consolidated working paper

2.) Assuming that only 90% of the outstanding shares of Sole Company was acquired by
Pole Company for P810,000 payable in cash and all other information remain the same:

nci 91,000
a. Prepare an allocation schedule to compute goodwill (gain on bargain
purchase) assuming the non-controlling interest is measured proportionate to
the identifiable net assets
b. Prepare the eliminatory entry
c. Prepare the consolidated working paper

3.) Assuming that only 40% of the outstanding shares of Sole Co. was acquired by Pole
Co. for P400,000 payable in cash and all other information remain the same. Pole
Company, though, holds a substantive option to acquire the majority shares that is
exercisable and deeply in the money nci 546,000

a. Prepare an allocation schedule to compute goodwill (gain on bargain

purchase) assuming the non-controlling interest is measured proportionate to
the identifiable net assets
a. Prepare an allocation schedule to compute goodwill (gain on bargain
purchase) assuming the non-controlling interest is measured proportionate to
the identifiable net assets
b. Prepare the eliminatory entry
c. Prepare the consolidated working paper
1.) a. Prepare an allocation schedule to compute goodwill (gain on bargain purchase)
Consideration transferred 950,000
Less: BV of acquired investment 700,000
Excess of cost over BV 250,000
Less: Increase in MV 210,000
Goodwill 40,000

c. Prepare the consolidated working paper

Pole Co. Sole Co. Adjustments and Eliminations Consolidated FS
BV BV DEBIT CREDIT
Cash 300,000 50,000 350,000
Accounts Receivable 200,000 100,000 300,000
Inventory 150,000 60,000 30,000 240,000
Land 70,000 50,000 120,000
Equipment (net) 600,000 470,000 130,000 1,200,000
Goodwill 40,000 40,000
Investments in Sole Co. 950,000 950,000 -
Total Assets 2,200,000 750,000 2,250,000

Accounts Payable 100,000 50,000 150,000

Ordinary Share Capital - Pole Co. 600,000 600,000
Ordinary Share Capital - Sole Co. 200,000 200,000 -
Additional Paid-in Capital - Sole Co. 100,000 100,000 -
Retained Earnings - Pole Co. 1,500,000 1,500,000
Retained Earnings - Sole Co. 400,000 400,000 -
Total Liab & Equity 2,200,000 750,000 950,000 950,000 2,250,000

2.) Assuming that only 90% of the outstanding shares of Sole Company was acquired by
Pole Company for P810,000 payable in cash and all other information remain the same:

a. Prepare an allocation schedule to compute goodwill (gain on bargain

purchase) assuming the non-controlling interest is measured proportionate to
the identifiable net assets
Consideration transferred 810,000
Less: BV of acquired investment 630,000
Excess of cost over BV 180,000
Less: Increase in MV 189,000
Gain on Bargain Purchase 9,000

c. Prepare the consolidated working paper

Pole Co. Sole Co. Adjustments and Eliminations Consolidated FS
BV BV DEBIT CREDIT
Cash 440,000 50,000 490,000
Accounts Receivable 200,000 100,000 300,000
Inventory 150,000 60,000 30,000 240,000
Land 70,000 50,000 120,000
Equipment (net) 600,000 470,000 130,000 1,200,000
Investments in Sole Co. 810,000 810,000 -
Total Assets 2,200,000 750,000 2,350,000

Accounts Payable 100,000 50,000 150,000

Ordinary Share Capital - Pole Co. 600,000 600,000
Ordinary Share Capital - Sole Co. 200,000 200,000 -
Additional Paid-in Capital - Sole Co. 100,000 100,000 -
Retained Earnings - Pole Co. 1,500,000 9,000 1,509,000
Retained Earnings - Sole Co. 400,000 400,000 -
Non-Controlling Interest 91,000 91,000
Total Liab & Equity 2,200,000 750,000 910,000 910,000 2,350,000

3.) Assuming that only 40% of the outstanding shares of Sole Co. was acquired by Pole
Co. for P400,000 payable in cash and all other information remain the same. Pole
Company, though, holds a substantive option to acquire the majority shares that is
exercisable and deeply in the money

a. Prepare an allocation schedule to compute goodwill (gain on bargain

purchase) assuming the non-controlling interest is measured proportionate to
the identifiable net assets
Consideration transferred 400,000
Less: BV of acquired investment 280,000
Excess of cost over BV 120,000
Less: Increase in MV 84,000
Goodwill 36,000

c. Prepare the consolidated working paper

Pole Co. Sole Co. Adjustments and Eliminations Consolidated FS
BV BV DEBIT CREDIT
Cash 850,000 50,000 900,000
Accounts Receivable 200,000 100,000 300,000
Inventory 150,000 60,000 30,000 240,000
Land 70,000 50,000 120,000
Equipment (net) 600,000 470,000 130,000 1,200,000
Goodwill 36,000 36,000
Investments in Sole Co. 400,000 400,000 -
Total Assets 2,200,000 750,000 2,796,000

Accounts Payable 100,000 50,000 150,000

Ordinary Share Capital - Pole Co. 600,000 600,000
Ordinary Share Capital - Sole Co. 200,000 200,000 -
Additional Paid-in Capital - Sole Co. 100,000 100,000 -
Retained Earnings - Pole Co. 1,500,000 1,500,000
Retained Earnings - Sole Co. 400,000 400,000 -
Non-Controlling Interest 546,000 546,000
Total Liab & Equity 2,200,000 750,000 946,000 946,000 2,796,000
b. Prepare the eliminatory entry
Inventory 30,000
Land 50,000
Equipment 130,000
Goodwill 40,000
Ordinary Share Capital - Sole Co. 200,000
Additional Paid-in Capital - Sole Co. 100,000
Retained Earnings - Sole Co. 400,000
Investment in Subsidiary 950,000

b. Prepare the eliminatory entry

Inventory 30,000
Land 50,000
Equipment 130,000
Ordinary Share Capital - Sole Co. 200,000
Additional Paid-in Capital - Sole Co. 100,000
Retained Earnings - Sole Co. 400,000
Investment in Subsidiary 810,000
Gain on Bargain Purchase 9,000
Non-Controlling Interest 91,000
b. Prepare the eliminatory entry
Inventory 30,000
Land 50,000
Equipment 130,000
Goodwill 36,000
Ordinary Share Capital - Sole Co. 200,000
Additional Paid-in Capital - Sole Co. 100,000
Retained Earnings - Sole Co. 400,000
Investment in Subsidiary 400,000
Non-Controlling Interest 546,000