Kindness

Group 2

2019-0025 – Dula, Dave

2019-0121 – Pamintuan, Rica
2019-0087 – Morales, Kella Elaija
2019-0218 – Pangan, Joel

Theoretical

1. In stock acquisition resulting in a parent company — subsidiary relationship, differences between

current fair values and book values of the subsidiary's identifiable net assets on the date of acquisition
are:
A. Disregarded
B. Entered in the accounting records of the subsidiary
C. Accounted for in appropriately titled ledger accounts in the parent company's accounting records.
D. Provided in a working paper elimination
Answer: D
Provided in a working paper elimination

2. Consolidated financial statements are prepared when a parent-subsidiary relationship exists, in

recognition of the accounting principle or concept of:
A. Materiality B. Entity C. Reliability D. Going concern
Answer: B
Entity

3. In acquisition of stock resulting in a parent-subsidiary relationship, the parent company's Investment in

Subsidiary Stock account balance is:
A. Allocated to individual asset and liability accounts in a parent company journal entry B. Eliminated with
a working paper elimination for the working paper.
C. Displayed among noncurrent assets in the consolidated statement of financial position. D. Used as a
basis for adjusting the subsidiary's asset and liability account. balance in the subsidiary's books to current
fair values.
Answer: B
Eliminated with a working paper elimination for the working paper.

4. Working paper eliminations are entered in:

a. Both the parent company's and the subsidiary's accounting record

b. Neither the parent company's nor the subsidiary's accounting records

c. The parent company's accounting records only

d. The subsidiary's accounting records only

Answer: B

Neither the parent company's nor the subsidiary's accounting records

5. On the date of acquisition of stock the difference between the fair values and book values of the
subsidiary's identifiable net assets are:

a. Included in a working paper elimination

b. Recognized in the applicable asset and liability accounts of the subsidiary

c. Recognized in the applicable asset and liability accounts of the parent

d. Accounted for in some other manner

Answer: D

Accounted for in some other manner

6. Consolidated financial statements are intended primarily for the use of:
a. Stockholders of the parent company

b. Taxing authorities

c. Management of the parent company

d. Creditors of the parent company

Answer: D
Creditors of the parent company

7. How is the non-controlling interest displayed in a consolidated statement of financial position?

a. As a separate item between liabilities and stockholder’s equity

b. As a deduction from goodwill if any
c. By means of a note to consolidated financial statements

d. As a separate item in the stockholders’ equity section

Answer: C

By means of a note to consolidated financial statements

8. Sulu Company, a subsidiary acquired for cash, owned equipment with a fair value higher than the book
value as of the date of acquisition. A consolidated statement of financial position prepared immediately
after the acquisition would include this difference in:

a. Goodwill

b. Retained Earnings
c. Income Statement
 d. Equipment

Answer: D

Equipment

9. Palawan Company acquired a subsidiary for cash in acquisition combination on January 2, 2013. The
price paid was greater than the fair value of the subsidiary's net assets. The subsidiary owned inventory
with a fair value greater than its cost. A consolidated statement of financial position prepared immediately
after the combination would:

a. Include part of the excess as cost of goods sold

b. Include at least some of the excess as part of the inventory

c. Include all the excess as part of goodwill

d. Not include the excess

Answer: C

Include all the excess as part of goodwill

10. Pasig corporation acquired a subsidiary in combination accounted for as a purchase. The fair market
value of the identifiable net assets acquired exceeds the price paid. Under International Financial
Reporting Standard IFRS 3 the difference should be recognized as:

a. Income from acquisition

b. A reduction of the amounts to non-current assets
c. Goodwill
d. Pro-rated reduction of the amounts assigned to all assets

Answer: C

Goodwill

11. The stockholder’s equity section of a consolidated statement of financial position for a parent and its
partially owned subsidiary consists of:
 a. The parent’s stockholder’s equity accounts

b. The parent’s and the subsidiary’s stockholder’s equity accounts

c. The parent’s equity accounts and the non-controlling interest
d. The parent’s equity accounts, the subsidiary’s equity accounts and the non-controlling
interest
Answer: A
The parent’s stockholder’s equity accounts

12. The retained earnings that appears of the consolidated statement of financial position of a parent
company and its 60% owned subsidiary is

a. The parent company’s retained earnings plus 100% of the subsidiary’s retained earnings
b. The parent company’s retained earnings plus 60% of the subsidiary’s retained earnings.
c. The parent company’s retained earnings
d. Pooled retained earnings

Answer: D
e. Pooled retained earnings

Computational

15-1: On July 1, 2013; Sony Company purchased all the outstanding stock of Aiwa for P4,000,000. At that
time, Aiwa's statement of financial position showed net assets of P2,500,000. Aiwa's assets and liabilities
had fair market values different from their book values, as follows:
Book Value Fair Value
Property and equipment - net P P5,000,000 P5,750,000
Other assets 500,000 350,000
Long-term debt 3,000,000 2,800,000
As a result of the combination above, what amount, if any, will be shown as goodwill in the July 1, 2013,
consolidated statement of financial position of Sony Company and its wholly owned subsidiary, Aiwa
Company?
A. P 0 B. P600,000 C. P800,000 D. P700,000

Answer: D
Solution:
Price paid P4,000,000
Less fair value of net assets acquired (P6,100 – P2,800) 3,300,000
Goodwill P 700,000

15-2: On the day of acquisition Sub Inc. had the following assets and liabilities:
 Book Value Fair Value
Current assets P100,000 P100,000
Plant assets (net) 220.000 260,000
Liabilities (40,000) (40,000)
Pub Company paid P450,000 for 90% of the outstanding voting stock of Sub. The goodwill in the
consolidated statement of financial position at acquisition is:
A. P180,000 B. P130,000 C. PI 70,000 D. P220,000

Answer: A
Solution:
Price paid P 450,000
Non-controlling interest (P450,000/90%) x 10% 50,000
Total 500,000
Less fair value of net assets acquired (P360,000 – P40,000) 320,000
Goodwill P 180,000

15-3: On the day of acquisition Pall and Mall had the following assets and liabilities
Paul Company Alan Company
Book Value Fair value Book Value Fair Value
Current assets P140,000 P140,000 P10.000 P10,000
Plant assets (net) 220,000 340,000 130,000 180,000
Liabilities (100,000) (100,000) (50,000) (50,000)
Pall Company paid P140,000 in cash for 80% of the outstanding stock of Mall Company. In the
consolidated statement of financial position at acquisition, plant assets should be shown at what
amount?
A. P350,000 B. P390,000 C. P400,000 D. P520,000

Answer: C
Solution:
Plant assets – Pall Company (at book value) P 220,000
Plant assets – Mall Company (at fair value) 180,000
Consolidated P 400,000

15-4: On December 31, 2013. Ping Inc. paid P495,000 cash for all the outstanding stock of Sing Company.
Sing's assets and liabilities on that day were as follows:
Cash P60,000
Inventory 150,000
Property and equipment (net of Acc.Dep ofP100,000) 350.000
Liabilities 70,000
On the day of business combination, the fair value of the inventory was P125,000 and the fair value of
the property and equipment (net) was P385,000. The goodwill (income from acquisition) resulting from
this acquisition amounts to:
A. (P5,000) B. P85,000 C. P40,000 D. P 5,000

Answer: A
Solution:
Price paid P 495,000
Less fair value of net assets acquired:
 Cash P 60,000
Inventory 125,000
Property and equipment 385,000
Liabilities ( 70,000) 500,000
Gain on acquisition P (5,000)

15-5: On January 1, 2013, Pop Company acquired 80% of the outstanding stock of Sap Company for
P350,000 in cash. Relevant information for Sap on this day is as follows:
Common' stock, P100 par P220,000
Retained earnings 100,000
Book Value Fair Value
Inventory P100,000 P120,000
Land 150,000 240,000
Goodwill 10,000 —
Mortgage payable 35,000 30,000
The consolidated statement of financial position on January 1, 2013, should show the following amounts
of goodwill.
A. P107,500 B. P117,500 C. P 97,500 D. P 0

Answer: A
Solution:
Price paid P350,000
Non-controlling interest (P350,000/80%) x 20% 87,500
Total 437,500
Less fair value of net assets excluding goodwill 330,000
Goodwill P107,500

15-6: Panay Company purchased 100 percent of the common stock of Sulu Company on January 1, 2013,
for P400,000. Selected accounts from Panay's statement of financial position at the date of combination
are as follows:
Inventory P360,000
Plant and equipment (net) 500,000
Common stock 420,000
Retained earnings 550,000
Selected accounts from the statement of financial position of Sulu at acquisition are as follows:
Inventory 120,000
Plant and equipment (net) 440,000
Common stock 175,000
Additional paid-in capital 225,000
Retained earnings (30,000)
On the date of purchase, Sulu's inventory and plant and equipment had fair values of P130,000 and
P420,000, respectively. Immediately after the combination, the amounts to be reported for inventory
and plant and equipment in the consolidated statement of financial position are:
A. P490,000 for inventory and P920,000 for plant and equipment.
B. P360,000 for inventory and P940,000 for plant and equipment.
C. P480,000 for inventory and P920,000 for plant and equipment
D. P490,000 for inventory and P500,000 for plant and equipment.
Answer: A
Solution:
Inventory (P360,000 + P130,000) P490,000
Plant and equipment (P500,000 + P420,000) P920,000

15-7: On December 31, 2013, Sisa Company held the following assets.
Fair Value Book Value
Current assets P190,000 P180,000
Building 180,000 150,000
Land 90,000 70,000
On this date, Pilo Company purchased all of Sisa Company's common stock for P440,000.
What amounts will Sisa's building, and land be reported in the consolidated statement of financial
position prepared at the date of combination
Building Land
A. P180,000; P90,000
B. P150,000; P70,000
C. P160,000; P90,000
D. P166,667; P83,333

Answer: A
Solution:
Building (at fair value) P180,000
Land (at fair value) P 90,000

15-8: On October 1, 2013, Par Company acquired 80% of the outstanding common stock of Son
Company for P480,000. The working paper elimination entry for Par Company and subsidiary on October
I, 2013, was as follows:
Common stock - Son Company 100,000
APIC - Son Company 120,000
Retained earnings - Son Company 180,000
Plant assets 50,000
Goodwill ?
Investment in Son Company 480,000
Non-controlling interest ?
Non-controlling interest is recorded at estimated fair value. What amounts of Goodwill and non-
controlling interest (respectively) be reported in the consolidated statement of financial position
prepared at the date of acquisition?
A. P150,000 P1;20,000
B. P120,000; P 90,000
C. PI 50,000; P 90,000
D. P120,000; P150,000

Answer: A
Solution:
Price paid P480,000
NCI [(P480,000/80%) x 20%] 120,000
Total 600,000
Less fair value of net assets acquired 450,000
Goodwill P150,000

15-9: On July 1, 2013, Pepe Company borrowed P160,000 to purchase 80 percent of the outstanding
common stock of Sara Company. This loan, carrying a 12 percent annual rate, is payable in 10 annual
installments beginning July 1, 2014. Summarized portions of Pepe's and Sara's statement of financial
position as of June 30, 2013, are as follows:
Pepe Company Sara Company
Total assets P800,000 P300,000
Total liabilities 250,000 155,000
Total stockholders' equity 550,000 145,000
The book values of Sara's assets and liabilities approximated market values except for accounts payable,
which had a fair value that was P5,000 more than the book value. Any remaining difference is
attributable to goodwill. The amounts to be recorded on the consolidated statement of financial position
on July 1, 2013, for total assets and total liabilities respectively are.
A. P1,025,000; P586,750
B. P1,100,000; P565,000
C. P1,151, 000; P408,750
D. P1,160, 000; P570,000

Answer: D
Solution:
Price paid P160,000
Non-controlling interest (P160,000/80%) x 20% 40,000
Total 200,000
Less fair value of net assets acquired (P300,000 – P160,000) 140,000
Goodwill P 60,000

Therefore:
Total assets (P800,000 + P300,000 + P60,000) P1,160,000
Total liabilities (P250,000 + P155,000 + P160,000 + P5,000) 570,000

15-10: On December 31, 2013, Palo Company paid P990,000 for 99% of the outstanding common stock
of Sota Company. The remaining 1% was held by a stockholder who was unwilling to sell the stock.
Sota's nct assets had a book value of P850,000 and a fair market value of P900,000 when it was
acquired by Palo. If Sota uses push-down accounting, the non-controlling interest should be reported at:

a. P 8,500

b. P9,000

c. P 9,900
d. P10,000
ANSWER: B
Solution: P900,000 x 1% = P9,000
15-11: Pita Company acquires a controlling interest in Soda Company in the open market for P120,000.
The P100 par value capital stock of Soda Company at the date of acquisition is P125,000 and its retained
earnings amounts to P50,000. The market value per share of Soda Company is P120 per share. In the
consolidated statement of financial position on the date of acquisition, noncontrolling interest would show
a balance of:
a. P40,000

b. P35,000

c. P17,500

d. P30,000

ANSWER: D
Solution:

Number of shares acquired (P120,000/P120) 1,000

Divided by outstanding shares of Soda (P125,000/P100) 1,250

Controlling interest 80%

Non-controlling interest [(P120,000/80%) x 20%} P30,000

15-12: On December 1, 2013, Pepsi Company purchased an 80 percent interest in Sarsi Company. On
that date, the book values and fair values of Sarsi Company's assets and liabilities were the same. A
consolidated statement of financial position prepared on that date is as follows:

Assets
Current assets P200,000

Property, plant and equipment (net) 500,000

Goodwill 250,000
Total P950,000

Liabilities and Stockholders' Equity

Current liabilities P150,000

Non-controlling interest 100,000

Common stock 200,000
Retained earnings 500,000

Total P950,000

The price paid by Pepsi Company for its 80 percent investment in Soda Company is:
a. P700,000
b. P250,000
c. P850,000
 d. P600,000

ANSWER: A

Solution: Goodwill SP250,000

FV of net assets acquired excluding goodwill (P700,000 – P150,000) 550,000

NCI (100,000)
Price paid by the Pepsi Company P700,000

15-13: On June 1, 2013, Paco, Inc. acquired most of the outstanding common stock of Sota Company for
cash. The incomplete working paper elimination entries on that date for the consolidated statement of
financial position of Paco, Inc. and its subsidiary are shown below:

E(1) Stockholders' Equity - Sota Company 290, 700

Investment in Sota Company 247,095

NCI 43,605

E(2) Inventories 6,630

Equipment 48,450

Patent 7,650
Goodwill ?

Investment in Sota Company 69,955

NCI ?
Assuming NCl is measured at fair value, what is the amount of goodwill to be reported in consolidated
statement of financial position on June 1, 2013?
a. P20,000
b. P19,570
c. P25,000
d. P10,000

ANSWER: B

Solution: Price paid (P247,095 + P69,955) P317,050

NCI [(P317,050/85%) x 15%*) 55,950
Total 373,000
Less net assets at fair value excluding goodwill:
Net assets at book value P290,700
Inventories 6,630
Plant and equipment 48,450
Patent 7,650 353,430
Goodwill P 19,570

Consider the following information for the questions below:

Statement of financial position for Puro Corporation and Sato Company on December 31, 2013, are given
below:
 Puro Sato

Corporation Company

Cash and cash equivalents P 70,000 P 90,000

Inventory 100,000 60,000

Property and equipment (net) 500,000 250,000

Investment in Sato Company 260,000

Total assets P930,000 P400,000

Current liabilities P180,000 P 60,000

Long-term liabilities 200,000 90,000

Common stock 300,000 100,000

Retained earnings 250,000 150,000

Total liabilities and stockholders' equity P930,000 P400,000

Puro Corporation purchased 80 percent ownership of Sato Company on December 31, 2013, for
P260,000. On that date, Sato Company's property and equipment had a fair value of P50,000 more than
the book value shown, while its long-term liabilities has a market value of P150,000. All other book values
approximated fair value. In the consolidated statement of financial position on December 31, 2013:

15-14: What amount of total property and equipment will be reported?

a. P500,000

b. P750,000

c. P790,000

d. P800,000
ANSWER: D

Solution: P500,000 + P300,000 = P800,000

15-15: What amount of goodwill will be reported?

a. P 0
b. P85,000

c. P25,000

d. P60,000
ANSWER: B

Solution: Price paid P260,000

NCI [(P260,000/80%) x 20%] 65,000
Total 325,000
Less fair value of net acquired (P450,000 – P210,000) 240,000
Goodwill P 85,000

15-16: What amount of consolidated retained earnings will be reported?

a. P250,000
b. P280,000
c. P370,000
d. P400,000

ANSWER: A. (The retained earnings of the parent only).

15-17: What amount of total stockholders’ equity will be reported?

a. P550,000
b. P615,000
c. P750,000
d. P800,000

Answer: B

Controlling interest (Stockholders’ equity of the parent) P550,000

Non-controlling interest (per no. 15-15) 65,000

Stockholders’ equity P615,000

15-18: What amount of non-controlling interest will be reported?

a. P 65,000
b. P 60,000
c. P110,000
d. P160,000

Answer: A

(Refer to 15-15)

15-19: What amount of total liabilities will be reported?

 a. P240,000
b. P290,000
c. P590,000
d. P530,000

Answer: C

(P380,000 + P210,000)

15-20: What amount of the total assets will be reported?

a. P1,205,000
b. P1,070,000
c. P1,145,000
d. P1,140,000

Answer: A

Cash and cash equivalent (P70,000 + P90,000) P 160,000

Inventory (P100,000 + P60,000) 160,000

Property and equipment (P500,000 + P300,000) 800,000

Goodwill 85,000

Total assets P1,205,000

15-21: Pacman Corporation purchased a 10% interest in Hoya Company on January 2,2008, as an
available for sale investment for a price of P80,000. On January 2, 2013, Pacman Corporation purchases
7,000 additional shares of Hoya Company from existing shareholders for P630,000. The purchase raised
Pacman's interest to 80%. Hoya Company had the following statement of financial position just prior to
Pacman's second purchase:

Assets Liabilities and Equity

Current assets P330,000 Liabilities P130,000

Buildings (net) 280,000 Common Stock, P20 par 200,000

Equipment (net) 200,000 Retained Earnings 480,000

Total Assets P810,000 Total Liabilities & Equity P810,000

On the date of the second purchase, Pacman determines that Hoya's equipment was undervalued by
P100,000 and had a 5-year remaining life. All other book values approximate fair values. Any remaining
excess is attributed to goodwill.
What is the estimated fair value of the 20% non-controlling interest on January 2, 2013?

a. P180,000

b. P188,750
c. P172,000
d. P168,000

Answer: A

Fair value per share:

New acquisition (P630,000/7,000 shares) P90

Fair value of previously owned shares (1,000* shares x P90) P 90,000 (10%)
Acquisition of new shares 630,000 (70%)

Total price paid for 80% interest P 720,000

Non-controlling interest (P720,000/80%) x 20% P 180,000

* P200,000 / P20 x 10% = 1,000 shares

5-22: Using the data in 15-21, what is the amount of goodwill to be reported in consolidated statement of
financial position on January 2, 2013?

a. P 60,000

b. P 53,750

c. P120,000

d. P110,000

Answer: C

Fair value of previously owned interest (10%) P 90,000

Price paid for new additional interest (70%) 630,000

Non-controlling interest 180,000

Total 900,000
Less fair value of net assets acquired (P910,000 – P130,000) 780,000
 Goodwill P120,000

Items 15-23 to 15-27 were based on the following data:

Primo Corporation acquired majority of the stock of Sonia Company on January 2, 2013, and a
consolidated statement of financial position was prepared. Partial statement of financial position for
Primo, Sonia, and the consolidated entity follow:

Primo Corporation and Sonia Company

Partial Statement of Financial Position

January 2, 2013

Primo Sonia Consolidated

Accounts Corporation Company Entity

Cash and cash equivalents P100,000 P 40,000 P140,000

Accounts receivable 80,000 20,000 100,000

Inventory 200,000 100,000 340,000

Equipment 500,000 200,000 800,000

Investment in Sonia Company ?

Goodwill __________ __________ 10,000

Total P ? P360,000 P1,390,000

Accounts payable P 70,000 P 40,000 P110,000

Bonds payable 300,000 300,000

Common stock ? 150,000 250,000

Retained earnings 567,000 170,000 ?

Non-controlling interest _________ __________ 163,000

Total P ? P360,000 P1,390,000

15-23: What amount of retained earnings is reported in the consolidated statement of financial position?

a. P567,000
b. P737,000
c. P577,000

d. P747,000
Answer: A

The amount reported is equal to Primo’s retained earnings of P567,000

15-24 What is the fair value of inventory held by Sonia on January 2, 2013?
a. 140,000.00
b. 128,000.00
c. 157,142.85
d. 138,000.00

Answer: A

(340,000- 200,000)

15-25 What is the fair value of Sonia’s net assets at January 2,2013?
a. 420,000
b. 460,000
c. 329,000
d. 430,000
Answer: B

Cash P 40,000
Accounts receivable 20,000
Inventories (see 15-25) 140,000
Equipment (800,000 - 500,000) 300,000
Accounts payable (40,000)
Fair value of net assets P460,000

15-26 What percentage of ownership in Sonia Company does Primo hold? (rounded)

a. 70%
b. 75%
 c. 60%
d. 65%
Answer: D

100% - (P163,000/P460,000) = 65% rounded

15-27 What amount did Primo pay to acquire the stock on January 2, 2013?

a. 332,000
b. 322,000
c. 307,000
d. 300,000

Answer: D
Goodwill P 10,000
Fair value of net assets acquired (15-25) 460,000
Total 470,000
NCI (163,000)
Price paid by Primo P 307,000

15-28 What is the allocation of Goodwill?

Controlling Interest NCI

a. 6,500 3,500
b. 8,000 2000
c. 6,000 4,000
d. 7,000 3,000

Answer: B
Parent NCI
Total 65% 35%
Company implied value P470,000 P307,000 P163,000
Less fair value of net assets 460,000 299,000 161,000
Goodwill P 10,000 P 8,000 P 2,000

15-29 On June 10, 2013, Kim Company purchases 8,000 shares of Jenna Company for P64 per
share. Just prior to the purchase, Jenna company has the following statement of financial position:

Assets Liabilities and Equity

Cash P20,000 Current Liabilities P250,000

Inventory 280,000 Common stock; P5 par 50,000

Equipment 400,000 APIC 130,000

Goodwill 100,000 Retained Earnings 370,000

Total assets P800,000 Total Liabilities & Equity P800,000

On June 10, 2013, Jenna’s inventory has a fair value of P400,000 and that the equipment is worth
P500,000

What is the amount of non-controlling interest in the consolidated statement of financial position on
the date of acquisition?
a. P128,000
b. P134,000
c. P120,000
d. P125,000

Answer: B
Non-controlling interest should be valued at the higher amount between the following:

At estimated fair value (P512,000/80%) x 20% P128,000

At proportionate share of acquiree’s net identifiable assets (P670,000 x 20%) 134,000

Therefore, NCI is measured at P134,000.

15-30 Using the data in 15-29, what is the amount of goodwill (gain on acquisition) to be reported in
the consolidated statement of financial position on the date of acquisition?

a. P (30,000)
b. P 30,000
c. P (24,000)
d. P 24,000
Answer: C

Price paid (8,000 shares x P64) P512,000

NCI 134,000
Total 646,000
Less fair value of net assets acquired excluding goodwill:
Cash P 20,000
Inventory 400,000
Equipment 500,000
Current liabilities (250,000) 670,000
Gain on acquisition P (24,000)

Proof:

Total Parent (80%) NCI (20%)

Fair value of the company P646,000 P512,000 P134,000

Fair of net assets excluding goodwill 670,000 536,000 134,000
Gain on acquisition P (24,000) P (24,000) P -
 NCI does not share a gain on the acquisition. IFRS 3 (2008) provides that the gain is
attributed to the acquirer only.

Straight Problems

Problem 15-1
On May 1, 20 3, Polo Corporation paid P1,080,000 to stockholders of Solo Company for 90% of Solo's
100,000 outstanding shares of no-par common stock but with a fair value per share; in addition, Polo
paid acquisition-related costs of the combination totaling P50,000 on that date. Book values and current
values of Solo's identifiable net assets on May 1, 2013, were as follows:
Common stock P400,000
Retained earnings 500,000

Total net assets at book value P900000

Add: Differences between current fair value and book value:
Inventories (FIFO) 30,000
Property and equipment (net) 60,000
Total current fair value of identifiable net assets P990,000
Required:
a. Prepare journal entries for Polo Corporation on May 1, 2013, to record the acquisition of stock from
Solo Company.
b. Prepare a working elimination entry for Polo Corporation and subsidiary on May 1, 2013.

Solution:

a. Investment in Solo Company stock 1,080,000

Cash 1,080,000
To record acquisition of 90%
of the outstanding shares of Solo.

Retained earnings – Polo Company 50,000

Cash 50,000
To record acquisition-related costs direct to
Retained earnings of Polo Company.

b. Working paper elimination entries:

(1) Common stock – Solo 400,000

Retained earnings – Solo 500,000
Investment in Solo company stock 810,000
Non-controlling interest 90,000
To eliminate Solo’s equity accounts at date of acquisition.
 (2) Inventories 30,000
Plant assets 60,000
Goodwill 210,000
Investment in Solo company stock 270,000
Non-controlling interest 30,000
To allocate excess

Determination and Allocation of Excess Schedule:

Total Parent (80%) NCI (10%)

Company fair value P1,200,000 P1,080,000 P120,000*
Less BV of interest acquired:
Common stock 400,000
Retained earnings 500,000
Total equity 900,000 P 900,000 P900,000
Interest acquired 90% 10%
Book value P 810,000 P 90,000
Excess P 300,000 P 270,000 P 30,000
Adjustments:
Inventory (30,000)
Plant assets (60,000
Goodwill P 210,000

* (P1,080,000/90%) x 10% = P120,000

Problem 15-2
The June 1, 2013, statement of financial position of Straw Company at book value and fair market values
are as follows:
Book Value Fair Value
Current assets P240,000 P280,000
Land 20,000 100,000
Building and equipment (net) 400,000 270,000
Patents 10,000 30,000
Total assets P670,000 P680,000
Liabilities P250,000 P250,000
Common stock 100,000
Retained earnings 320,000 430,000
Total liabilities and stockholders' equity P670,000 P680,000

On June 1, 2013, Pepsi, Inc. purchased all of Straw Company's stock for P600,000.

Required:
a. Prepare journal entry on the books of Pepsi, Inc. to record the stock acquisition.
b. Prepare a schedule showing the determination and allocation of the excess.
c. Prepare the working paper elimination entries.

Solution:

a. Investment in Straw Company 600,000

Cash 600,000
To record acquisition of 100% of Straw stock.

b. Price paid P600,000

Less: Book value of interest acquired (100%) 420,000
Difference 180,000
Allocation (100%:
Inventories P( 40,000)
Land ( 80,000)
Building 150,000
Equipment ( 20,000)
Patents ( 20,000) ( 10,000)
Goodwill P170,000

c. Working paper elimination entries:

(1) Common stock – Straw 100,000

Retained earnings – Straw 320,000
Investment in Straw Company 420,000
To eliminate equity accounts of Straw at
date of acquisition.

(2) Inventories 40,000

Land 80,000
Equipment 20,000
Patents 20,000
Goodwill 170,000
Buildings 150,000
Investment in Straw Company 180,000
To allocate excess.

Problem 15-3
The January 1, 2013, statement of financial position of Sotto Company at book and market values are as
follows:
Book Value Fair Value
Current assets P 800,000 P 750,000
Property and equipment (net) 900,000 1,000,000
Total assets P1,700,000 P1,750,000

Current liabilities P 300,000 P 300,000

Long-term liabilities 500,000 460,000
Common stock, Par P1 100,000
Additional paid-in capital 200,000
Retained earnings 600,000
Total liabilities and stockholders' equity P1,700,000
Pedro Company paid P950,000 in cash for 80% of Sotto Company's common stock. Pedro Company also
pays P80,000 of professional fees to affect the combination. The fair value of the NCI is assessed to be
P230,000.
Required:
a. Prepare journal entry on Pedro's books to record the acquisition of the Sotto stock
b. Prepare a determination and allocation of excess schedule.
c. Prepare the working papa elimination entries.

Solution:

a. Investment in Soto Company 950,000

Cash 950,000
To record acquisition of 80% stock of Sotto.

Retained earnings – Pedro Company 80,000

Cash 80,000
To record acquisition costs.

b. Price paid by the Parent Company P950,000

Non-controlling interest (NCI) 230,000
Total 1,180,000
Less: Book value of net assets 900,000
Excess 280,000

Allocation:
Current assets P 50,000
Property and equipment (100,000)
Long-term debt ( 40,000) ( 90,000)
Goodwill P190,000

c. Working paper elimination entries:

(1) Common stock – Sotto 100,000

APIC – Sotto 200,000
Retained earnings – Sotto 600,000
Investment in Sotto stock 720,000
Non-controlling interest 180,000
To eliminate equity accounts of Sotto at date of
acquisition.

(2) Property, plant and equipment 100,000

Goodwill 190,000
Long-term debt 40,000
 Current assets 50,000
Investment in Sotto stock 230,000
Non-controlling interest 50,000
To allocate excess

Problem 15-4
Paco Company purchased 100 percent of the common stock of Sucat Company by issuing 20,000 shares
of Paco P5 par value common stock. The market value of the stock issued on the date of combination,
January 2, 2013 was P6 per share. Summarized statement of financial position data at December 31,
2013 are as follows:

Paco Sucat
Current assets P375,000 P100,000

Property and equipment 270,000 75,000

Other assets 30,000 40,000

Total debits P675,000 P215,000

Current liabilities P220,000 60,000

Mortgage payable 60,000 25,000

Accumulated depreciation 70,000 15,000

Common stock 100,000 35,000

Additional paid-in capital 45,000

Retained earnings 180,000 80,000

Total credits P675,000 P215,000

On the date of combination, Sucat's property and equipment had a fair value of P85,000.

The book value of all other assets approximated fair value.

Required:

Prepare a consolidated statement of financial position immediately following the acquisition.

Paco Company and Subsidiary
Consolidated Statement of Financial Position
January 2, 2013

Current assets P475,000

Property, plant and equipment 285,000
Other assets 70,000
Total assets P830,000

Current liabilities P280,000

Mortgage payable 85,000
Common stock 200,000
Additional paid-in capital 65,000
Retained earnings (including gain on acquisition of P20,000) 200,000
Total liabilities and stockholders’ equity P830,000
Computation of income from acquisition:
Consideration given (20,000 shares x P6) P120,000
Less fair value of net assets:
Current assets P100,000
Property and equipment 85,000
Other assets 40,000
Current liabilities (60,000)
Mortgage payable (25,000) 140,000
Gain on acquisition P(20,000)
Problem 15-5

On December 31, 2013, Polo Company and Solo Company have the following statement of financial
position:
Polo Solo

Cash P 80,000 P20,000

Receivables 60,000 60,000

Inventory 100,000 70,000

Property and equipment (net) 200,000 100,000

Total assets P440,000 P250,000

Current liabilities P 20,000 10,000

Long-term liabilities 70,000 50,000

Common stock 110,000 90,000

Additional paid-in capital 20,000

Retained earnings 220,000 100,000

Total liabilities and stockholders' equity P440,000 P250,000

On December 31, 2013, Polo issued 10,000 shares of its P10 par value stock for all of the outstanding
shares of Solo. Polo's stock had a P25 per share fair market value. Polo also paid P10,000 in
professional fees for the combination and P20,000 stock issuance costs. Solo holds equipment worth
P40,000 more than its current book value. The retained earnings of Solo on January 1, 2013 amounted to
P70,000.
Required:

Prepare consolidated statement of financial position as of December 31, 2013.

The entry to record the acquisition of stock is as follows:

(a) Investment in Solo stock 250,000

Common stock, at par 100,000
Additional paid-in capital 150,000
To record acquisition of stock.

(b) Retained earnings – Polo 10,000

Additional paid-in capital 20,000
Cash 30,000
 To record acquisition-related costs.

Palo Company and Subsidiary

Consolidated Statement of Financial Position
December 31, 2013
Cash P 70,000
Receivables 120,000
Inventory 170,000
Property and equipment – net 340,000
Goodwill 20,000
Total assets P720,000

Current liabilities P 30,000

Long-term liabilities 120,000
Common stock 210,000
Additional paid-in capital (P20,000 + P150,000 – P20,000) 150,000
Retained earnings, 12/31 (P220,000 – P10,000) 210,000
Total liabilities and stockholders’ equity P720,000

Computation of goodwill:
Consideration given P250,000
Less fair value of net assets (P290,000 – 60,000) 230,000
Goodwill P 20,000

Problem 15-6

Separate statement of financial positions of Pill Corporation and Seed Company on May 31, 2013,
together with current fair values of Seed's identifiable net assets, are as follows:
Seed Company

Pill Corporation Book Values Fair Values

Assets

Cash P 550,000 P 10,000 P 10,000

Accounts receivable (net) 700,000 60,000 60,000

Inventories 1,400,000 120,000 140,000

Plant assets (net) 2,850,000 610,000 690,000

Total assets P 550,000 P800,000

Liabilities and stockholders’ equity

Current liabilities P500,000 80,000

80,000

Long-term debt 1,000,000 400,000 440,000

Common stock, P10 par 1,500,000 100,000
Additional paid-in capital 1,200,000 40,000
Retained earnings 1,300,000 180,000

Total liabilities and stockholders' equity P5,500,000 P800,000

On May 31, 2013, Pill acquired all 10,000 shares of Seed's outstanding stock by paying P350,000 cash to
Seed's stockholders.
Required:

a.Prepare journal entries for Pill Corporation to record the acquisition of Seed Company stock on May 31,
2013.

Investment in Seed Company 350,000

Cash 350,000
To record acquisition of 100% of Seed company stock.

Determination and Allocation of Excess schedule:

Price paid P350,000
Less: Book value of interest acquired 320,000
Excess 30,000
Allocation:
Inventory P(20,000)
Plant assets (80,000)
Long-term liabilities 40,000 (60,000)
Income from acquisition P(30,000)

b. Prepare consolidation working paper for Pill Corporation and subsidiary on May 31, 2013.
Working paper elimination entries
(1) Common stock – Seed 100,000
Additional paid-in capital – Seed 40,000
Retained earnings – Seed 180,000
Investment in Seed stock 320,000
To eliminate equity accounts of Seed Company

(2) Inventory 20,000

Plant assets 80,000
Long-term debt 40,000
Investment in Seed stock 30,000
Retained earnings – Pill (income from acquisition) 30,000
To allocate excess

Pill Corporation and Subsidiary

Consolidated Working Paper
May 31, 2013 – Date of Acquisition

Pill Seed Eliminations & adjustment Conso-

Corporatio Compan Debit Credit lidated
n y
Assets
Cash 200,000 10,000 210,000
Accounts receivable 700,000 60,000 760,000
Inventories 1,400,000 120,000 (2) 20,000 1,540,00
0
Investment in Seed company 350,000 (1)320,000 -
(2) 30,000
Plant assets 2,850,000 610,000 (2) 80,000 3,540,00
0
Total 5,500,000 800,000 6,050,00
0

Liabilities & Stockholders’

Equity
Current liabilities 500,000 80,000 580,000
Long-term debt 1,000,000 400,000 (2) 40,000 1,440,00
0
Common stock:
Pill 1,500,000 1,500,00
0
Seed 100,000 (1)100,000
Additional paid-in capital
Pill 1,200,000 1,200,00
0
Seed 40,000 (1) 40,000
Retained earnings
Pill 1,300,000 (2) 30,000 1,330,00
0
Seed 180,000 (1)180,000
Total 5,500,000 800,000 420,000 420,000 6,050,00
0

Problem 15-7

On April 30, 2013, Pop Corporation issued 30,000 shares of its no-par value common stock having a
current fair value of P20 a share for 8,000 shares of Sea Company's P10 par common stock. Acquisition-
related costs of the business combination, paid by Sea on behalf of Pop on April 30, 2013, were as
follows:

Professional fees relating to business combination P40,000

SEC registration costs 30,000

Separate statement of financial positions of the two companies on April 30, 2013, prior to the business
combination, were as follows:

Pop Corporation Sea Company

Assets

Cash P 50,000 P 150,000

Account receivable (net) 230,000 200,000

Inventories 400,000 350,000

Plant assets (net) 1,300,000 560,000

Total P1,980,000 P1,260,000

Liabilities and Stockholders’ Equity

Current liabilities P 310,000 P 250,000

Long-term term debt 800,000 600,000

Common stock 500,000 100,000

Additional paid-in capital 360,000

Retained earnings (deficit) 370,000 (50,000)

Total P1,980,000 P1,260,000

Current far values of Sea's identifiable net assets were the same as their book values, except for the
following:

Current Fair Values

Inventories P440,000

Plant assets (net) 780,000

Long-term debt 620,000

NCI is measured at estimated fair value.

Required:
 a. Prepare journal entry for Sea on April 30, 2013, to record it payment of out-of pocket costs of the
business combination on behalf of Pop Corporation.
b. Prepare journal entries for Pop Corporation to record the business combination with Sea
Company on April 30, 2013.
c. Prepare consolidation working paper for consolidated statement of financial position of Pop
Corporation and subsidiary on April 30, 2013.

Answer:

A. Accounts Receivable 70,000

Cash 70,000

B. Investment in Sea Company stock 600,000

Common stock ((30,000 shares x P20) 600,000

Retained earnings – Pop Corporation 40,000

Common stock 30,000

Current liabilities 70,000

C.

Pop Corporation and Subsidiary

Working Paper for Consolidated Balance Sheet

April 30, 2013 – Date of acquisition

Pop Sea Adjustment & Consoli-

s Eliminatio
Corporatio Company Debit Credit dated
n
Assets

Cash 50,000 80,000 130,000

Accounts receivable – net 230,000 270,000 (3) 70,000 430,000
Inventories 400,000 350,000 (2) 90,000 840,000
Investment in Sea 600,000 (1)328,000 -
Company
(2)272,000

Plant assets 1,300,000 560,000 (2)220,000 2,080,000

Goodwill (2) 50,000 50,000
Total 2,580,000 1,260,000 3,530,000

Liabilities & Stockholders’

Equity
Current liabilities 380,000 250,000 (3) 70,000 560,000
Long-term debt 800,000 600,000 (2) 20,000 1,420,000
Common stock
Pop 1,070,000 1,070,000

Sea 100,000 (1)100,000

Additional paid-in capital 360,000 (1)360,000
Retained earnings
Pop 330,000 330,000

Sea (50,000) (1) 50,000

NCI (1) 82,000 150,000

(2) 68,000
Total 2,580,000 1,260,000 890,000 890,000 3,530,000

(1) To eliminate equity accounts of Sea Company on the date of acquisition.

(2) To allocate difference, computed as follows:
Price paid P600,000
NCI (P600,000/80%) x 20% 150,000

Total 750,000
Less: Book value of net assets of Sea 410,000

Excess 340,000

Allocation:

Inventories P( 90,000)

Plant assets (220,000)

Long-term debt 20,000 (290,000)

 Goodwill P 50,000

(3) To eliminate intercompany receivables and payables.

Problem 15-8
On January 2, 2013, P Company purchased 100 percent of the outstanding common stock of Company
for P500,000 payable in cash. On that date, the assets and liabilities of Company had fair market values
as indicated below. Statement of financial positions of the companies on January 2, 2013 are also
indicated below.

Book Values S Company

P Company S Company Fair Market

Values

Cash P300,000 P 50,000 P 50,000

Accounts receivable 200,000 100,000 100,000

Inventory 200,000 80,000 100,000

Land 100,000 50,000 60,000

Building (net of accumulated depreciation) 600,000 400,000 350,000

Equipment (net of accumulated depreciation) 800,000 200,000 140,000

Investment in S company 500,000 _________

Total P2,700,000 P 880,000

Accounts payable P150,000 P 60,000 P 60,000

8% bonds payable (P300,000 face amount) 290,000 240,000

Common stock – P Company 1,500,000

Common stock – S Company 100,000

Additional paid-in capital – S Company 200,000

Retained Earnings – P Company 1,050,000

Retained Earnings – S Company __________ 230,000

 Totals P2,700,000 P880,000

1. Prepare the D&A of excess schedule to compute goodwill. If any.

2. Prepare a consolidated working paper.

Answer:

1. Price paid P500,000

Less book value of interest acquired

Common stock P100,000

APIC 200,000

Retained earnings 230,000 530,000

Excess ( 30,000)

Allocation:
Inventory P( 20,000)

Land ( 10,000)

Building 50,000
Equipment 60,000

Bonds payable ( 50,000) 30,000

2. P Company and Subsidiary

Consolidated Working Paper

January 2, 2013 – Date of acquisition

P S Adjustments & Consoli-

Eliminations
Company Company Debit Credit dated
Debits

Cash 300,000 50,000 350,000

Accounts receivable 200,000 100,000 300,000
Inventory 200,000 80,000 (2) 20,000 300,000
Land 100,000 50,000 (2) 10,000 160,000
Building 600,000 400,000 (2) 50,000 950,000

Equipment 800,000 200,000 (2) 60,000 940,000

Investment in S Company 500,000 (2) 30,000 (1)530,000 -
Total 2,700,000 880,000 3,000,000

Credits
Accounts payable 150,000 60,000 210,000

Bonds payable 290,000 (2) 50,000 240,000

Common stock – P 1,500,000 1,500,000
Company
Common stock – S 100,000 (1)100,000
Company
APIC – S Company 200,000 (1)200,000

Retained earnings – P Co. 1,050,000

Retained earnings – S Co. 230,000 (1)230,000 1,050,000
Total 2,700,000 880,000 640,000 640,000 3,000,000

(1) To eliminate equity accounts of S Company.

(2) To allocate excess

Problem 15.9
Using the statement of financial positions that appear in Problern 15-8, assume that only 80 percent of the
outstanding stock of Company was acquired by P Company for P500,000 payable in cash. All other
information in the problem is unchanged.

Required:
1. Prepare the D&A of excess schedule assuming NCI is measured at fair value of P80,000.
2. Prepare a consolidated working paper.

Answer:

1. Price paid P500,000

NCI (20% of FV of S Co’s net assets excluding GW (P500,000 x 20%) 100,000*
 Total 600,000

Less book of net assets 530,000

Excess 70,000
Allocation

Inventory P (20,000)

Land (10,000)

Building 50,000
Equipment 60,000
Bonds payable (50,000) 30,000

Goodwill P100,000

* NCI is measured at its proportionate interest in S Company’s net assets because the assessed
fair value of P80,000 is smaller.

2. P Company and Subsidiary

Consolidated Working Paper

January 2, 2013 – Date of acquisition

P S Adjustments & Consoli-

Eliminations

Company Company Debit Credit dated

Debits
Cash 300,000 50,000 350,000
Accounts receivable 200,000 100,000 300,000

Inventory 200,000 80,000 (2) 20,000 300,000

Land 100,000 50,000 (2) 10,000 160,000

Building 600,000 400,000 (2) 50,000 950,000

Equipment 800,000 200,000 (2) 60,000 940,000
Investment in S Company 500,000 (1)424,000 -
(2) 76,000

Goodwill (2)100,000 100,000

Total 2,700,000 880,000 3,100,000
Credits

Accounts payable 150,000 60,000 210,000

Bonds payable 290,000 (2) 50,000 240,000
Common stock – P Co. 1,500,000 1,500,000
Common stock – S Co. 100,000 (1)100,000
APIC – S Co. 200,000 (1)200,000
Retained earnings – P Co. 1,050,000 1,050,000
Retained earnings – S Co. 230,000 (1)230,000

NCI (2) 6,000 (1)106,000 100,000

Total 2,700,000 880,000 716,000 716,000 3,100,000
(1) To eliminate equity accounts of S Company
(2) To allocate excess

15-10 On January 2, 2013, Perez company purchased 100 percent of its outstanding common stock of
Santos Company for 542,000 payables in cash. On that date, the assets and liabilities of Santos
Company had fair market values of as indicated below. Statements of Financial positions of the
companies on January 2,2013 are also indicated below.

Santos Company

Book Values Fair Market Values

Perez Company Santos Company

Cash P100,000 P100,000 P100,000

Accounts Receivable 200,000 150,000 150,000

Inventory 150,000 130,000 140,000
Equipment (net) 300,000 200,000 180,000

Investment in S Company 542,000

Long term investment in MS 100,000 125,000 140,000

Totals P1,442,000 P785,000

Accounts Payable P175,000 P115,000 P115,000

Common Stock – P company 400,000

Common Stock- S company 200,000

Additional paid in capital – P company 200,000

Retained earnings – P company 667,000

Retained earnings- S company 470,000

Totals P1,442,000 P785,000

Required:

1.Prepare the determination and allocation of excess schedule to compute goodwill/ gain on acquisition.

2. Prepare a consolidated working paper

Answer:

1. Price paid P542,000

Less book value of interest acquired (100%): 670,000
Excess (128,000)
Allocation
Inventory P (10,000)
Land (40,000)
Equipment 20,000
Long-term investment in MS (15,000) ( 45,000)
Gain on acquisition P(173,000)

2. P Company and Subsidiary

Consolidated Working Paper
January 2, 2013 – Date of acquisition

P S Adjustment & Consoli-

s Eliminations
Company Compan Debit Credit dated
y
Assets
Cash 100,000 100,000 200,000
Accounts receivable 200,000 150,000 350,000
Inventory 150,000 130,000 (2) 10,000 290,000
Land 50,000 80,000 (2) 40,000 170,000
Equipment 300,000 200,000 (2) 20,000 480,000
Investment in S Company 542,000 (2)128,000 (1)670,000 -
Long-term investment in MS 100,000 125,000 (2) 15,000 240,000
Total 1,442,000 785,000 1,730,000

Liabilities & Stockholders’

Equity
Accounts payable 175,000 115,000 290,000
Common Stock – P Co. 400,000 400,000
Common Stock – S Co. 200,000 (1)200,000
APIC – P Co. 200,000 200,000
Retained earnings – P Co. 667,000 (2)173,000 840,000
Retained earnings – S Co. 470,000 (1)470,000
Total 1,442,000 785,000 863,000 863,000 1,730,000

1. To eliminate equity accounts of S Company.

2. To allocate excess

15-11 On January 2,2013, Pol Inc. purchases all outstanding shares of Sun Company for P1,900,000. It
has been decided that Sun Company will push down accounting principles account for this transaction.
The current statement of financial position is state at historical cost.

The following statement of financial position is prepared for Sun Company on January 2, 2013:

Assets Liabilities & Equity

Current asset: Current Liabilities

Cash P160,000 Long term liabilities P180,000

Accounts receivable 520,000 Bonds payable 600,000

Prepaid expenses 40,000 Deferred Taxes

Property, plant, and equipment Stockholder’s equity

Land 400,000 Common stock, 10 par 600,000

Building (net) 1,200,000 Retained earnings 840,000

Total assets P2,320,000 Total liabilities and equity P2,320,000

Required:

1. Record the investment

2. Prepare the determination and allocation of excess schedule
3. Record the adjustment on the books of Sun Company
4. Prepare entries that would be made on the consolidated working paper to eliminate the
investment account

Answer:

1. Investment in Sun Company 1,900,000

Cash 1,900,000

2. Price paid P1,900,000

Less book value of interest acquired:
Common stock P 600,000
Retained earnings 840,000 1,440,000
Excess 460,000
Allocation:
Land (100,000)
Building (200,000)
Bond payable (bond discount) ( 40,000)
Deferred taxes ( 20,000) (360,000)
Goodwill P 100,000

3. Land 100,000
Building 200,000
Bond discount 40,000
Goodwill 100,000
Deferred taxes 20,000
Retained earnings 840,000
Additional paid in capital 1,300,000

4. Common stock 600,000

Additional paid in capital 1,300,000
Investment in Sun Company 1,900,000

15-12 P company acquired a controlling interest in X company. P company had the following statement of
financial position on the acquisition data:

P company (the acquirer) – Legal Subsidiary

Statement of Financial Position
December 31, 2013

Assets Liabilities & Equity

Current Assets P 2,000 Non-current liabilities P 4,000

Non-current assets 10,000 Common stock, P2 par 200
APIC 1,800
Retained earnings 6,000

Total assets P12,000 Total liabilities and equity P12,000

X Company had the following statement of financial position on the acquisition date:

P company (the acquirer) – Legal Parent

Statement of Financial Position

December 31, 2013

Assets Liabilities & Equity

Current Assets P 2,000 Non-current liabilities P 2,000

Non-current assets 4,000 Common stock, P2 par 400
APIC 1,600
Retained earnings 2,000

Total assets P 6,000 Total liabilities and equity P 6,000

The fair value of the non-current assets of X company is P6,000. The shareholders of P company
requested 300 X company shares in exchange for all their 100 shares. This is an exchange ratio of 3 to 1.
The fair value of a share of X company is P50.

Answer:
Supporting computations:

Fair value of existing X Company equity (200 shares P50) P10,000

P Company interest in X Company [300/(300 + 200)] 60%
Acquisition price P 6,000

Entry to record the issuance of 300 shares – Books of X Company (legal parent)

Investment in P Company 6,000

Common stock (300 shares x P2) 600
APIC 5,400

Problem 15-12, continued:

Fair value analysis: Implied FV Parent (60%) NCI (40%)

Company fair value P10,000 P6,000 P4,000

Fair value of net assets excluding goodwill 6,000 3,600 2,400
Goodwill P 4,000 P2,400 P1,600

1. Distribution and allocation of excess schedule:

Implied FV Parent (60%) NCI (40%)

Fair value of subsidiary P10,000 P6,000 P4,000

Less book value of interest acquired:
Common stock P2 par 4,000
APIC 1,600
Retained earnings 2,000
Total 4,000 P4,000 P4,000
Interest acquired 60% 40%
Book value P2,500 P1,600
Excess 6,000 P3,600 P2,400
Allocated to Non-current assets ( 2,000)
Goodwill P 4,000

2. X Company and Subsidiary P Company

Consolidated Statement of Financial Position
December 31, 2013

Assets Liabilities and Equity

Current assets P 4,000 Non-current liabilities P 6,000

Non-current assets 16,000 Common stock (300 shares x P2)
600
Goodwill 4,000 APIC 1,400*
Retained earnings 6,000**
NCI 10,000***
Total assets P24,000 Total liabilities and equity P24,000

* Total paid in capital of P Company (P200 + P1800) P2,000

New shares issued (300 shares x P2) 600
APIC P1,400

** Retained earnings of the legal subsidiary – P Company

*** The remaining shares of the original C Company equity.