APC7- Activity for Consolidated Financial Statements – Business Combination

1. PP Company acquired 100 percent of the stock of SS Corp. on December 31, 2022. The
stockholder's equity section of SS's balance sheet at that date is as follows:

Common Stock P 300,000

Additional Paid-in Capital 500,000
Retained Earnings 400,000
Total P1,200,000

PS financed the acquisition by using P880,000 cash and giving a note payable for P400,000. Book
value approximated fair value for all of SS's assets and liabilities except for buildings which had a
fair value P60,000 more than its book value and a remaining useful life of 10 years. Any remaining
differential was related to goodwill. PP has an account payable to SS in the amount of P30,000.
Required:
1) Present all eliminating entries needed to prepare a consolidated statement of financial position
immediately following the acquisition.
2) What additional eliminating entry must be prepared at December 31, 2022?

2. High Company acquired all of Low Corporation's stock on January 1, 2021 for P1,500,000 cash. On
December 31, 2022, the statement of financial position of the two companies showed the
following amounts:
High Company Low Corp.
Cash P550,000 P250,000
Accounts Receivable 600,000 300,000
Land 800,000 450,000
Buildings and Equipment 3,000,000 2,000,000
Less: Accumulated Depreciation (1,500,000) (800,000)
Investment in Tenzing Corporation 1,550,000
Total Assets P5,000,000 P2,200,000

Accounts Payable P400,000 P150,000

Taxes Payable 200,000 150,000
Notes Payable 750,000 500,000
Common Stock 1,000,000 500,000
Retained Earnings 2,650,000 900,000
Total Liabilities and Equity P5,000,000 P2,200,000

Low Corporation reported retained earnings of P750,000 at the date of acquisition. The difference
between the acquisition price and underlying book value is assigned to buildings and equipment
with a remaining economic life of five years from the date of acquisition.
 Required:
1) Present all eliminating entries needed to prepare a consolidated statement of financial position
immediately following the acquisition.
2) What additional eliminating entry must be prepared at December 31, 2022?
3) What is the amount of consolidated buildings and equipment and its related accumulated
depreciation to be included in the 2022 consolidated financial statements of High and Low
corporation, respectively?

3. On January 1, 2021, Parent Company acquired 80 percent of Subsidiary Company's common stock
for P280,000 cash. At that date, Subsidiary reported common stock outstanding of P200,000 and
retained earnings of P100,000, and the fair value of the noncontrolling interest was P70,000. The
book values and fair values of Subsidiary's assets and liabilities were equal, except for other
intangible assets which had a fair value P50,000 greater than book value and an 8-year remaining
life. Subsidiary reported the following data for 2021 and 2022:
Subsidiary Corporation
Year Net Income Comprehensive Income Dividends Paid
2011 P25,000 P30,000 P5,000
2012 P35,000 P45,000 P10,000

Bristol reported net income of P100,000 and paid dividends of P30,000 for both the years.
Required:
1) What is the amount of consolidated comprehensive income reported for 2021?
2) What is the amount of consolidated comprehensive income reported for 2022?
3) What is the amount of comprehensive income attributable to the controlling interest for
2021?
4) What is the amount of comprehensive income attributable to the controlling interest for
2022?

4. On January 1, 2022, PJ Company purchased 80% of the outstanding shares of SC Company at a

cost of P720,000. On that date, SC had P400,000 of capital stock and P500,000 of retained
earnings while PJ Company had capital stock of P1,000,000 and retained earnings for P600,000.
All the assets and liabilities of SC Company have book values equal to their respective market
values.

For 2022 PJ Company reported net income of P320,000 and paid dividends of P150,000. For 2022,
SC Company reported net income of P85,000 and paid dividends of P40,000.

On January 1, 2022, PJ Company sold equipment to SC Company for P75,000. The book value of
the equipment on that date was P100,000. The equipment is expected to have a useful life of five
years from the date of sale. Also during that year, SC Company sold merchandise to PJ Company
amounting to P80,000 which includes a profit of P20,000. 70% of these merchandise were sold by
PJ to outsiders.
Required:
1) What is the amount of Consolidated stockholders equity for 2022?