On January 1, 2020, ABC Company acquired DEF Company for all its assets, except cash,

and assumes all its liabilities. The statemeng of financial position of both entities prior
to the business combination are as follows:

ABC Company DEF Company

Book Fair Book Fair
Cash 300,000 300,000 90,000 90,000
Accounts Receivable 125,000 125,000 37,500 37,500
Inventory 150,000 154,500 45,000 46,500
Equipment 900,000 756,000 270,000 205,200
Accumulated Depreciation - 180,000 - 54,000
Land 1,500,000 1,560,000 500,000 520,000
Patent 200,000 196,000 50,000 49,000
Investment Property 450,000 468,000
Total Assets 2,995,000 1,388,500

Accounts Payable 120,000 120,000 36,000 36,000

Bonds Payable, 150,000 face value 150,000 156,000
Estimated Restructuring Liability 200,000 200,000
Ordinary Shares, Php 10 par 1,000,000 500,000
Share Premium 500,000 50,000
Retained Earnings 1,475,000 462,500
Treasury Shares , Php 5 per share - 100,000 - 10,000
Total Liabilities and Shareholders E 2,995,000 1,388,500

Fair value per share 50 30

Case 1:
The Following are the payments ade by ABC Company:
Cash 79,500
Land at Fair Value 520,000
Bonds Payable, at 200,000 face value 180,000
Ordinary Shares, 1 share of ABC for every 5 outstanding shares of DEF
Contingent Liability 100,000

Additional Information:
(a) ABC Company will pay the former owners of DEF if ABC's average net income
within 2 years after the business combination will exceed Php 300,000. At
acquisition date, the entity estimated that there is a 60% chance that the
average net income in the next 2 years will exceed Php 300,000.
(b) The acquiree has a research and development with a fair value of Php 40,000.
(c) The cash payments include expenditure as follows:
Finder's Fee 5,000
Legal Fee 10,000
Stoch Registraton 12,000
 Bond issue cost 2,500
(d) On December 31, 2020, one year after the business combination, ABC's net
income amounted to Php 300,000. There is a 70% likelihood that the net
income of ABC in 2021 will amount to Php 320,000. In 2021, the net income of
ABC Company is Php 380,000.

On January 1, 2020, ABC Company acquired DEF Company for all its assets, except cash,
and assumes all its liabilities. The statemeng of financial position of both entities prior
to the business combination are as follows:

ABC Company DEF Company

Book Fair Book Fair
Cash 300,000 300,000 90,000 90,000
Accounts Receivable 125,000 125,000 37,500 37,500
Inventory 150,000 154,500 45,000 46,500
Equipment 900,000 756,000 270,000 205,200
Accumulated Depreciation - 180,000 - 54,000
Land 1,500,000 1,560,000 500,000 520,000
Patent 200,000 196,000 50,000 49,000
Investment Property 450,000 468,000
Total Assets 2,995,000 1,388,500

Accounts Payable 120,000 120,000 36,000 36,000

Bonds Payable, 150,000 face value 150,000 156,000
Estimated Restructuring Liability 200,000 200,000
Ordinary Shares, Php 10 par 1,000,000 500,000
Share Premium 500,000 50,000
Retained Earnings 1,475,000 462,500
Treasury Shares , Php 5 per share - 100,000 - 10,000
Total Liabilities and Shareholders E 2,995,000 1,388,500

Fair value per share 50 30

Case 2:
ABC Company will acquire all non-cash assets and will assume all liabilities of DEF
Company in exchange of the following considerations payable to its former owners.
i. Cash of Php 3 per two outstanding ordinary shares of DEF Company
ii. 2 ABC shares for every 5 oustanding shares of DEF
iii. Additional shares to compensate any decrease in the fair value f ABC's ordinary
shares on December 31, 2021

Additional Information:
(a) As of acquisition date, it is expected that there is a 70% chance that he fair
 value of ABC ordinary shares on December 31, 2021 will decrease by Php 5, and
a 30% chance that it will decrease by Php 4.
(b) The former owners of DEF Company will pay ABC Company for an amount
equal to the decrease in the fair value of DEF's investment property if as of
2021 year-end it will decrease to 90% of its acquisition date fair value or below.
It is estimated that on December 31, 2021 there is a 70% profitability that the
fair value of the investment property will decrease to Php 400,000.
(c) DEF Company has a contingent liability from a lawsuit. The entitys legal
counsel estimates that there is a 60% possibility that a total of Php 100,000
will be the amount of damages.
(d) ABC intends to sell the patent of DEF immediately after the business
combination. The estimated cost to sell the patent is Php 5,000.
(e) DEF Company has a customer list amounting to Php 300,000.
(f) On December 31, 2020, ABC expected that there is a 60% chance that the fair
value of its ordinary shares on Dececmber 31, 2021 will decrease by Php 5, and
a 40% chance that it will decrease by Php 4.
(g) On December 31, 2020, it is estmated that on December 31, 2021 there is a 70%
probability that the fair value of the investment property will decrease to Php
390,000
(h) On December 31, 2021, the fair value of ABC's ordinary shares dropped to
Php 40. On the same date, the value of the investment property acquired by
ABC amounted to Php 380,000.

The statements of financial position, including fair value of their assets, of PARDO
Company and SAMANTHA Company as of December 31. The qouted market share of
PARDO on this date is P202.50 per share

Pardo Samantha
BV FV BV FV
Cash 6,500,000 6,500,000 1,000,000 1,000,000
Accounts Receivable 2,000,000 3,000,000 3,000,000 2,800,000
Inventories 3,000,000 2,500,000 2,000,000 2,500,000
PPE 5,000,000 3,000,000 3,000,000 3,000,000
TOTAL 16,500,000 9,000,000

Liabilities 3,500,000 2,000,000 2,500,000

Share capital. P200 par 10,000,000 4,000,000
Retained Earnings 3,000,000 3,000,000
TOTAL 16,500,000 9,000,000
On January 2, 2014, PARDO purchased all the net assets of SAMANTHA. Aside from
paying the required purchase price, PARDO has estimated that the additional contingent
consideration of P500,000, which is reasonable and measurable, and P500,000 future
losses on reorganization/ restructuring costs are expected to be incurred as a result of
business combination.
Out of pocket costs of the business combination are as follows:
Legal fees 450,000 Fees paid to company lawyers ###
Finders fees 200,000 Additional indirect costs ###
Professional fee paid to a CPA 100,000

Case A: Cash of P7,500,000 was paid to SAMANTA Co.

Case B: PARDO issued 30,000 shares of its P200 par ordinary shares
Cost of registering, printing and issuing
new stock certificates amounted to P150,000

How much retained earnings would be shown on the

consolidated statement of financial position?

Case C: PARDO issued P7,500,000 face amount of 10 year 10% bonds

with a present value of P7,150,025

How much is the consolidated total assets?

Case D: Cash of P7,500,000 was paid to SAMANTA Co.

If on (1) December 31, 2014 and on (2) December 31, 2015, the amount of
contingent consideration was increased by 100,000 each year due to
anticipated market turnaround

How much goodwill would be shown on the SFP as of (1)2014 and (2) 2015?
Assume no impairment on goodwill

On January 2, 2021, ABC Company purchased the net assets of DEF Corp by paying
P4,531,250 cash. On this date, the fair value of the net identifiable assets of DEF was
P4,500,000. it was further agreed that ABC would pay an additional amount in January 1,
2022 if the average earning during the 2 year period (2021 and 2022) exceededP1,200,000
per year. The expected value of this consideration was computed at P275,000. The
measurement period is one year

However on October 1, 2021, ABC revised the amount of the expected vlaue consideration
to P220,000 due to prevailing market constraints.

How much is the goodwill on January 2, 2021?

How much goodwill should be recorded on October 1, 2021?

Assuming that on January 12, 2022, the date of settlement of the contingent consideration,
the contingent clause becomes 200,000, what should be the entry?
Summary information if given for PRINCE and SCARLET Company at August 1, 2021. the
quoted market price of PRINCE shares on this date is P40 per share.

Scarlet Prince
BV FV BV FV
Current asset 8,000,000 9,000,000 24,000,000 24,000,000
Plant asset 22,000,000 26,000,000 26,000,000 25,000,000
Total 30,000,000 35,000,000 50,000,000 49,000,000

Liabilities 5,000,000 5,000,000 15,000,000 15,500,000

Share capital, P10 par 10,000,000 20,000,000
Share premiums 1,000,000 1,000,000
Retained earnings 14,000,000 14,000,000
Total 30,000,000 50,000,000

Prince Co. acquires all the net assets of SCARLET by issuing 1,000,000 shares of its own shares.
SCARLET shares are selling in the market at P36. PRINCE incurred the following costs:

Legal fees to arrange the business combination 25,000

Cost of SEC registration 12,000
Cost of printing and issuing new stock certificates 3,000
Indirect cost of combination 20,000

How much is the godwill from the business combination?

The following statement of financial position were prepared for HIJ Corp. and NOP corp on
January 1, 2019, just before they entered into a business combination.

HIJ NOP
Cash 210,000 5,000
AR 75,000 20,000
Inventory 200,000 50,000
Building and equipment 400,000 100,000
Acc. Dep -100,000 -25,000
Goodwill 50,000
Total assets 785,000 200,000

Accounts payable 125,000 70,000

Bonds Payable 200,000 30,000
Common Stock
P30 par value 210,000
P20 par value 50,000
 Share Premium 50,000 10,000
Retained Earnings 200,000 40,000
Tota liab and equity 785,000 200,000

On that date, the fair market value of NOP's inventories and building and equipment were
P78,000 and P124,000 respectively, while bonds payable has a fair value of P42,000. The fair
value of all other assets and liabilities of NOP (except goodwill) were equal to their book
values. HIJ acquired the net assets of NOP by issuing 2,500 shares of its P30 par value
common stock (current FV is P36 per share) and purchase price in cash amounting to P28,000.
Contingent consideration that is determinable amount of P2,000. Additional cash payments
made by HIJ in completing the acquisition were:

Legal fees for contract of business combination 9,000

Acctg and legal fees for SEC registration 14,000
Printing costs of stock certificates 7,000
Finder's fee 7,000
Indirect cost 6,000

As a result of the business combination, the amount of total assets and total liabilities,
common stock, additional paid-in capital and retained earnings, in the books of the
surviving company are___________
On January 1, 2019, Parent Company purchased 10% of Subsidiary Company's
outstanding ordinary shares for Php 100 per share. The equity instruments were
designated as financial asset at fair value through profit or loss. On this date, the
shareholder's equity of parent and subsidary are as follows:

Parent Subsidiary
Ordinary Share, Php 50 par 7,500,000 5,000,000
Share Premium 500,000 200,000
Retained Earnings 3,000,000 1,800,000
Other Comprehensinve Income 600,000 25,000
Treasury Shares, Php 5 per share - 50,000 - 25,000
Total 11,550,000 7,000,000

On Fabruray 1, 2020, Parent Company purchased additional 19,000 ordinary shares

from the Subsidiary's outstanding ordinary shares at Php 90 per share. On this date,
the parent Company obtained significant influence over Subsidiary Company.

On June 1, 2021, Parent Company purchased additional 55,000 ordinary shares

from the Subsidiary's for Php 110 per share. The additional acquisition were obtained
from Subsidiary's treasury share balance, 20,000 from unissued shares , and the
remainder from the outstanding shares. On this date, the Parent Company obtained
control over the Subsidiary Company.

Parent and Subsidiary Company reported the following:

2019 2020 2021
Parent Company
Dividend Declared, Oct 1 96,000 144,000 180,000
Net Income (earned evenly) 1,026,000 889,200 1,296,000
Fair value per share, Dec 31 150 151 149
Subsidiary Companay
Dividend Declared, April 1 80,000 120,000 150,000
Net Income (earned evenly) 855,000 741,000 1,080,000
Fair value per share, Dec 31 120 115 118

All assets and liabilities of Subsidiary Company at acquisition date have fair value that
approximates book value, except for the following:

Book Value Fair Value

Equiptment, remaining 8 years life 1,000,000 800,000
Accumulated Depreciation - 200,000
Bonds Payable, remaining 5 years term 2,000,000 1,900,000
On January 1, 2021, Tik Corporation acquired 80% Tok Company's outstanding
ordinary shares for Php 9 per share. The trial balance as of the acquistion date are
as follows:
Tik Tok
BV FV BV FV
Cash 8,000 8,000 6,400 6,400
Accounts Receivable 800 784 640 640
Inventory 300 78 240 236
Land 1,500 1,200 1,200 1,300
Equipment (9 years remaining life) 500 432 400 342
Accum. Deprn. - Equipemnt - 50 - 40
Building ( 13 years remaining life) 2,250 1,235 1,800 1,014
Accum. Deprn. - Building - 300 - 240
Patent (5 years remaining life) 400 375 320 335
Accounts Payable 150 150 120 120
Bonds Payable (5 years maturity) 5,000 5,050 4,000 4,050
Share Capital, Php 2 per share 2,000 1,600
Share Premium 500 400
Retained Earnings 5,700 4,560
Sale 1,900 1,520
Cost of Sales - 1,200 - 960
Operating Expenses - 400 - 320
Non-operating Exepenses - 50 - 40
Dividends Paid - 200 - 160

Required:
(1) Prepare the necessary journal entries in the books of the parent.
(2) Prepare the table for acquisition analysis.
(3) Prepare the working paper elimination journal entries.
(4) Prepare the consilidated financial statements.

The following are the trial balance of Tik and Tok Company as of December 31,
2020, after the first year of business combination:

Tik Tok
Cash 3,605 2,786
Accounts Receivable 820 656
Inventory 315 252
Land 1,500 2,700
Equipment 500 400
Accum. Deprn. - Equipemnt - 100 - 80
Building 2,250 1,800
Accum. Deprn. - Building - 600 - 480
Investment in Subsidiary 5,760
Investment in Property 3,000
Patent 320 256
Accounts Payable 130 58
Bonds Payable 4,990 3,992
Share Capital, Php 2 per share 2,000 1,600
Share Premium 500 400
Retained Earnings 5,750 4,600
Sale 3,000 2,490
Cost of Sales - 1,200 - 960
Operating Expenses - 600 - 480
Non-operating Exepenses - 20 - 10
Dvidend Income - 320
Dividends Paid - 500 - 400

Additional Information:
(a) During the year, goodwill is impaired by Php 10.
(b) Tok Company purchsed land from Snapchat Corporation during the year
for Php 1,500.
(c) Tok Company purchased land for Php 3,000 and classified it as an
investment property.
(d) The property has no available fair value, hence, the cost model is used.

Required:
(1) Prepare the necessary journal entries in the books of the parent.
(2) Prepare the working paper eliminating journal entries.
(3) Prepare the consilidated financial statement.

The following are the trial balance of Tik and Tok Company as of December 31,
2021, second year after the business combination:

Tik Tok
Cash 5,330 2,996
Accounts Receivable 780 800
Inventory 332 266
Land 1,500 2,700
Equipment 500 200
Accum. Deprn. - Equipemnt - 150 - 60
Building 2,250 1,800
Accum. Deprn. - Building - 900 - 720
Investment in Subsidiary 5,760
Investment in Property 3,000
Patent 240 192
Accounts Payable 105 80
Bonds Payable 4,980 3,984
Share Capital, Php 2 per share 2,000 1,600
Share Premium 500 400
Retained Earnings 6,750 5,240
Sale 3,600 1,385
Cost of Sales - 1,440 - 700
Operating Expenses - 720 - 570
Non-operating Exepenses - 25 - 20
Gain on sale of equipment 15
Dvidend Income 192
Dividends Paid - 300 - 240

Additional Information:
(a) During the year, goodwill is impaired by Php 15.
(b) On December 31, 2021, Tok Company sold half of its equipment with a
carrying amount of Php 140.

Required:
(1) Prepare the necessary journal entries in the books of the parent.
(2) Prepare the working paper eliminating journal entries.
(3) Prepare the consilidated financial statement.
Acquirer Shares, 01/01/2018
Acquirer Shares, 06/01/2020
Consideration Transferred
Fair Value of Net Asset
Goodwill
Consideration Transferred
NCI
Fair Value of Net Asset
Goodwill

Cash
FVNA
 Ja Company
1:4 Php 125

Consideration Transferred
Shares 4,687,500
Shares to listed 750,000
Payment for Liab 3,500,000
8,937,500
FVNA 11,610,000
Gain on BP - 2,672,500

21,750
11,610
- 3,500
29,860

Acquirer Shares, 01/01/2018 30,000 5 150,000

Acquirer Shares, 06/01/2020 60,000 6 360,000
Consideration Transferred 510,000
Fair Value of Net Asset 360,000
150,000
Consideration Transferred 920,000 1,200,000 77%
280,000 23%
Fair Value of Net Asset 1,000,000
200,000

32,000
29,000
3,000