Malabanan, Jayvee L.

BSA 3—1

Activity (Consolidation at Acquisition Date)

Problem 1 – AA Corporation

1. Journal entry to record investment in the book of acquirer.

Investment in AA Corporation 576,000

Cash 576,000

2. Schedule of allocated excess.

Consideration transferred 576,000

Less: BV of subsidiary’s entity 450,000

Allocated excess 126,000

Less: under/over valuation of assets 80,000

Goodwill 46,000

AA Corporation BV FV Under/over valuation

Inventory 120,000 140,000 20,000

Land 70,000 60,000 (10,000)

Building and equipment (net) 480,000 550,000 70,000

Undervaluation total 80,000

3. Working paper eliminating entries.

Inventory 20,000

Building and equipment 70,000

Common stock – AA corporation 250,000

Retained earnings – AA corporation 200,000

Goodwill 46,000

Land 10,000

Investment in AA corporation 576,000

4. Compute for the following amount that would appear in consolidated fs:
(4,1) Inventory 140,000
(4.2) Land 60,000

(4.3) Building 550,000

(4.4) Goodwill 46,000

(4.5) Investment in AA (576,000 – 450,000 – 126,000) 0 / none

Problem 2 - PP Corporation and SS Corporation

1. Journal entry to record investment in the book of acquirer.

(E1) Investment in SS corporation 760,000

Common stock, 20 par value 380,000
Paid-in capital in excess of par (760,000 – 380,000) 380,000

(E2) Acquisition expense 20,000

Additional paid-in capital 5,000

Cash 25,000

2. Schedule of allocated excess.

Consideration transferred 760,000

Less: BV of subsidiary’s equity

Common stock, 5 par value 210,000

Additional paid-in capital 90,000

Retained earnings 240,000 540,000

Allocated excess 220,000

Less: Under/over valuation of asset 120,000

Goodwill 100,000
AA Corporation BV FV Under/over valuation

Inventory 210,000 260,000 50,000

Land 130,000 110,000 (20,000)

Building and equipment (net) 270,000 330,000 60,000

Franchise agreements 190,000 220,000 30,000

120,000

3. Working paper eliminating entries.

(E1) Common stock – SS Co. 210,000

Additional paid-in capital 90,000

Retained earnings 240,000

Investment in SS Co. 540,000

(E2) Inventory 50,000

Building and equipment 60,000

Franchise agreement 30,000

Goodwill 100,000

Land 20,000

Investment in SS Co. 220,000

(E3) Revenue 330,000

Expenses 310,000

Investment in SS Co. 20,000

4. Compute for the following amount that would appear in the consolidated BS immediately after
the acquisition:
PP Co. SS Co. Dr Cr Consolidated

BV - 12/31 BV - 12/31

ASSETS

Cash ₱ 290,000.00 ₱ 120,000.00 ₱ 25,000.00 ₱ 385,000.00

Receivables ₱ 220,000.00 ₱ 300,000.00 ₱ 520,000.00

Inventory ₱ 410,000.00 ₱ 210,000.00 ₱ 50,000.00 ₱ 670,000.00

Land ₱ 600,000.00 ₱ 130,000.00 ₱ 20,000.00 ₱ 710,000.00

Building and ₱ 600,000.00 ₱ 270,000.00 ₱ 60,000.00 ₱ 930,000.00

equipment
(net)

Franchise ₱ 220,000.00 ₱ 190,000.00 ₱ 30,000.00 ₱ 440,000.00

agreements

Investment in ₱ 760,000.00 ₱ 540,000.00

SS Co.

₱ 220,000.00 (₱ 20,000.00)

₱ 20,000.00

Goodwill ₱ 100,000.00 ₱ 100,000.00

Accounts (₱ 190,000.00) (₱ 120,000.00) (₱ 310,000.00)

payable

Accrued (₱ 90,000.00) (₱ 30,000.00) (₱ 120,000.00)

expenses

Long-term (₱ 900,000.00) (₱ 510,000.00) (₱ 1,410,000.00)

liabilities

Common (₱ 1,040,000.00) (₱ 1,040,000.00)

stock, 20

Common (₱ 210,000.00) ₱ 210,000.00

stock, 5

Additional (₱ 450,000.00) (₱ 90,000.00) ₱ 90,000.00

paid-in
capital

₱ 5,000.00 -₱ 445,000.00
 Retained (₱ 390,000.00) (₱ 240,000.00) ₱ 240,000.00 (₱ 390,000.00)
earnings

Revenue (₱ 960,000.00 ) (₱ 330,000.00) ₱ 330,000.00 (₱ 960,000.00)

Expenses ₱ 920,000.00 ₱ 310,000.00 ₱ 20,000.00 ₱ 310,000.00 ₱ 940,000.00

₱ 1,135,000.00 ₱ 1,135,000.00

1. Inventory ₱ 670,000.00
2. Land ₱710,000.00
3. Building and ₱ 930,000.00 12. Controlling interest on
equipment Parent's SHE:
4. Franchise ₱ 440,000.00 Common stock, 20 ₱1,040,000.00
Agreement
5. Goodwill ₱ 100,000.00 Additional paid-in capital ₱450,000.00
6. Revenues ₱ 960,000.00 Retained earnings ₱390,000.00
7. APIC ₱445,000.00 Revenue ₱960,000.00
8. Expenses ₱ 940,000.00 Expenses -₱920,000.00
9. Retained ₱ 390,000.00 ₱1,920,000.00
Earnings
10. Total Assets: 13. NCI P0
14. Consolidated SHE:
Cash ₱ 385,000.00 Common Stock - P20
Receivables ₱ 520,000.00 Additional Paid - In ₱ 1,040,000.00
Capital
Inventory ₱ 670,000.00 Retained Earnings ₱ 445,000.00
Land ₱ 710,000.00 Revenue
Building and ₱ 930,000.00 Expenses (₱ 940,000.00)
Equipment (net)
Total ₱ 3,735,000.00 Total ₱ 1,895,000.00
11. Total Liabilities:
Accounts Payable ₱ 310,000.00
Accrued Expense ₱ 120,000.00
Long - Term ₱ 1,410,000.00
Liabilities
Total ₱ 1,840,000.00