Problem 3 - 9

Character Corporation Honesty Corporation

2022 2023 2022
Net income 1,360,000 2,040,000 3,600,000
Dividends declared 280,000 520,000 880,000

BV FV
Equipment 9,000,000 10,520,000
Ordinary shares 16,000,000
Retained earnings 6,400,000

1.) Result of Business Combination

Consideration tranferred
NCI
Fair value (19M-500K/80%*20%) 4,625,000
PSB (23,920,000*20%) 4,784,000
Higher amount
FVINAS-S
BVINAS-S
Ordinary shares 16,000,000
Retained earnings 6,400,000
Equipment - undervalued (10,520,000-9M) 1,520,000
FVNAA
Gain on bargain purchase
Honesty Corporation
2023
4,400,000
1,560,000

* Fair value 10,520,000

Book value 9,000,000
increase 1,520,000
/5 yrs 304000

1.1) Consolidated net income in 2023 Conso

Separate income from parent 4,400,000
19,000,000 Subsidiary's net income 2,040,000
Dividend received (520K*80%) -416,000
* Depreciation of undervalued equipment -304,000
G & B purchase at the yr of buscom 136,000
4,784,000 Net income 5,856,000

2.) Non-controlling interest in net assets in 2023 (NCINAS)

NCI, beg
NCI - NI
-23,920,000 Dividends declared by subsidiary (520K*20%)
-136,000 NCI, end
Parent (80%) NCI (20%)
4,400,000
1632000 408000
-416,000
-243200 -60800
136,000
5,508,800 347,200

4,784,000
347,200
-104,000
5,027,200