Accounting for Business Combination

03 Activity 1

PROBLEM SOLVING
1.
a. Determine the amount of goodwill or gain on bargain purchases that should be
recognized at the acquisition date.

P3,250,000
Contingent Consideration (300,000 x 156,000
52%)
Total Consideration 3,406,000
Less: Fair Value of Assets 1,076,000
Goodwill 2,330,000
Answer: P2,330,000
b. Give the adjusting entry to be made by Yanna Corporation if it estimated as of
July 1, 202Y that there is a 63% probability of achieving the target income.
Loss on Increase in Contingent Consideration P 33,000
Contingent Consideration Payable
P 33,000

2.
a. Determine the amount of goodwill or gain on bargain purchase that should be
recognized if the non-controlling interest is measured on a proportionate basis.

Fair Value of Consideration - 70% P2,520,000

Fair Value of Previously Acquired Shares (2,520,000 / 648,000
0.70 x 0.18)
Non-controlling Interest (3,350,000 x 0.12) 402,000
Total Consideration 3,570,000
Less: Fair Value of Net Assets 3,350,000
Goodwill 220,000
Answer: P220,000

b. Determine the amount of goodwill or gain on bargain purchase that should be

recognized if the non-controlling interest is measured on a fair value basis.

Fair Value of Consideration - 70% P2,520,000

Fair Value of Previously Acquired Shares (2,520,000 / 648,000
0.70 x 0.18)
Non-controlling Interest (3,168,000/0.88 x 0.12) 432,000
Total Consideration 3,600,000
Less: Fair Value of Net Assets 3,350,000
Goodwill 250,000
Answer: P250,000

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