COLLEGE OF BUSINESS AND ACCOUNTANCY

SUGGESTED SOLUTION: (Traditional Method)

1. Prepare the journal entries to record the acquisition in XYZ's separate book of accounts.

Investment in Subsidiary P 560,000

Cash P560,000
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2. Compute the goodwill arising from this business combination (Note: show your computation)

Computation of Goodwill

Computation
Consideration Transferred P 560,000
Add: Non-controlling interest in the acquire (fair P 600,000 x 30% 180,000
value)
Previously held equity interest in the acquiree 0
Total 740,000
Less: Fair value of net identifiable assets acquired Total FV of asset less Liabilities
(20,000+20,000+100,000+10,000+540,000-90,000) 600,000
Goodwill P 140,000
 3. Prepare eelimination entries: (To eliminate investment in subsidiary and recognize the changes in fair value of the asset and goodwill).

Elimination Entries: (To eliminate investment in subsidiary and recognize the changes in fair value of the asset and goodwill)

Goodwill 140,000
Investment in Subsidiary 140,000
#

Building, net 140,000

Account Receivable 20,000
Investment in Subsidiary 84,000
Non Controlling Interest 36,000
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Share Capital – ABC, Inc. 200,000

Share Premium – ABC, Inc. 50,000
Retained Earnings – ABC Inc. 230,000
Investment in Subsidiary 336,000
Non-Controlling Interest 144,000
#

OR

Building, net 140,000

Share Capital – ABC, Inc 200,000
Share Premium – ABC, Inc 50,000
Retained Earnings – ABC, Inc 230 000 COMPOUND ENTRY
Goodwill 140 000
Accounts Receivable  20 000
Investment In Subsidiary 560 000
Non-controlling interest (600k x 30%) 180 000

#
 4. Prepare a consolidation worksheet

Consolidation Worksheet

XYZ Group
Consolidation Worksheet
January 1, 2020
ABC Co. XYZ Co. Elimination Entries Consolidated Amounts
(Parent) (Subsidiary) (Adjustments)
ASSETS DR. CR.
Cash 100,000 20,000 120,000
Accounts Receivable 120,000 40,000 20,000 140,000
Inventory 400,000 100,000 500,000
Investment in Subsidiary 560,000 560,000
Prepaid Assets 30,000 10,000 40,000
Building ,net 1,200,000 400,000 140,000 1,740,000
Goodwill 140,000 140,000
TOTAL ASSETS 2,410,000 570,000 2,680,000
LIABILITIES AND EQUITY
Accounts Payable 70,000 90,000 160,000
Total Liabilities
Share Capital 1,000,000 200,000 200,000 1,000,000
Share Premium 350,000 50,000 50,000 350,000
Retained Earnings 990,000 230,000 230,000 990,000
Non-Controlling Interest 180,000 180,000
Total Equity 2,340,000 480,000 2,520,000

TOTAL LIABILITIES AND EQUITY 2,410,000 570,000 760,000 760,000 2,680,000

.5. Prepare the consolidated Statement of Financial Position

 XYZ Group.
Consolidated Statement of Financial Position
As of January 1, 2021

ASSETS

Current Assets
Cash P120,000
Accounts Receivable 140,000
Inventory 500,000
Prepaid Assets 40,000
Total Current Assets 800,000

Non-Current Assets
Building, net 1,740,000
Goodwill 140,000
Total Non-Current Assets 1,880,000
Total Assets P 2,680,000

LIABILITIES AND EQUITY

Current Liability
Account Payable P160,000

Shareholder’s Equity
Share Capital 1,000,000
Share Premium 350,000
Retained Earnings 990,000
Owners of Parent 2,340,000
Non-controlling Interest 180,000
Total Equity P2,520,000

Total Liabilities and Equity P 2,680,00