Activity 5

Direction: Provide what is asked. Show your solution.

1. On January 1, 20x1, ABC Co. acquired 80% interest in XYZ, Inc. by issuing 5,000 shares with fair value of P30 per share and
par value of P20 per share. The financial statements of ABC Co. and XYZ, Inc. immediately after the acquisition are shown
below:

Jan. 1, 20x1
ABC Co. XYZ, Inc.
Cash 20,000 10,000
Accounts receivable 60,000 24,000
Inventory 80,000 46,000
Investment in subsidiary 150,000
Equipment 400,000 100,000
Accumulated depreciation (40,000) (20,000)
Total assets 670,000 160,000

Accounts payable 40,000 12,000

Bonds payable 60,000 -
Share capital 340,000 100,000
Share premium 130,000 -
Retained earnings 100,000 48,000
Total liabilities and equity 670,000 160,000

On January 1, 20x1, the fair value of the assets and liabilities of XYZ, Inc. were determined by appraisal, as follows:
Carrying Fair Fair value
XYZ, Inc.
amounts values increment
Cash 10,000 10,000 -
Accounts receivable 24,000 24,000 -
Inventory 46,000 62,000 16,000
Equipment 100,000 120,000 20,000
Accumulated depreciation (20,000) (24,000) (4,000)
Accounts payable (12,000) (12,000) -
Net assets 148,000 180,000 32,000

The equipment has a remaining useful life as of 4 years from January 1, 20x1.

Requirement: Prepare the consolidated statement of financial position as at January 1, 20x1. ABC Co. elects to measure non-
controlling interest as its proportionate share in XYZ’s net identifiable assets.

“The roots of education are bitter, but the fruit is sweet.” –

Aristotle