St. Vincent de Ferrer College of Camarin Prof.

Adrigado

BUSINESS COMBINATION – IFRS 3

CONSOLIDATED FINANCIAL STATEMENTS

Date of business combination

Computation for total assets

1. Total Assets of Parent @ BV xxx

2. Total Assets of the subsidiary@FV xxx
3. Purchase Price(Cash or non-cash) (xx)
4. Goodwill xxx
5. Direct Cost (xx) (if paid)
6. Indirect Cost (xx) (if paid)
7. CTIR (xx) (if paid)
Consolidated Assets xxx

Computation Liabilities
1. Liability of parent @ BV xxx
2. Liability of Subs @ FV xxx
3. Purchase Price (Bonds or Note Payable) xxx
4. Contingent Consideration (CCP) xxx
5. DC xxx (if unpaid)
6. IDC xxx (if unpaid)
7. CTIR xxx (if unpaid)
Consolidated liabilities xxx

Computation of SHE

1. SHE of Parent xxx

2. Non controlling Interest xxx
3. Purchase Price (stock issuance@FV) xxx
4. Gain -BPO, PHI xxx
5. Direct Cost (xx) whether paid or not
6. Indirect Cost (xx) whether paid or not
7. CTIR (xx) whether paid or not
Consolidated SHE xxx
Chapter 2- Business Combination 31

Problem 1
The following balance sheets were prepared for the Gold and Diamond
Corporation on December 31, 2005.

Assets Gold Diamond

Current Assets 350,000 185,000
Land 80,000 25,000
Buildings (net) 325,000 250,000
Goodwill 120,000 100,000
TOTAL ASSETS 875,000 560,000
Liabilities & Equity
Accounts payable 115,000 85,000
Bonds payable 170,000 150,000
Common Stock, P10 par 150,000 75,000
Paid-in Capital in excess of par 200,000 40,000
Retained Earnings, 240,000 210,000
TOTAL LIABILITIES & EQUITY 875,000 560,000

The appraised values of the Diamond Corporation land and buildings are
P50,000 and P350,000 respectively. The appraised values of the bonds
payable is P170,000. Gold will issue 15,000 shares of its P10 par common
stock with a market value of P20 each for the net assets of Diamond
Corporation. Gold will also pay P15,000 in cash for direct acquisition
costs and P10,000 for indirect costs.

Required: 1. The entries on the books of Gold Corporation.

1. Balance sheet of Gold Corporation after the combination.
2. How much is the consolidated Assets, liabilities and equity

Purchased Price 300,000 (15k*20)

Less: FVNIA
CA 185,000
LAND 50,000
32 Practical Accounting 2
BUILDING 350,000
AP (85,000)
BP (170,000) 330,000
GAIN ON BP 30,000
Assets -P @BV 875,000
Assets -S @FV 585,000
Direct cost (15,000)
Indirect cost (10,000)
Consolidated Assets 1,435,000

Liabilities - P 285,000
Liabilitied - S 255,000
Consolidated Liabilities 540,000

SHE- P @BV 590,000

NCI 0
PURCHASE PRICE 300,000
GAIN 30,000
DC (15,000)
INC (10,000)
CONSOLIDATED SHE 895,000
Chapter 2- Business Combination 33

Problem 2
Condensed balance sheets of Toyota Corporation and Nissan Company on
July 31, 2005 were as follows:
Toyota Nissan
Corporation Company
Total assets P700,000 P670,000

Total liabilities P300,000 P300,000

Common stock, P10 par 200,000 250,000
Additional paid-in capital 80,000 130,000
Retained earnings (deficit) 120,000 (10,000)
Total liabilities & SE P700,000 P670,000
On July 31, 2005, Toyota acquired the net assets of Nissan Company by
issuing 30,000 shares of its P10 par value stocks (FMV P14).
Instructions:
1. Prepare journal entries for Toyota Corporation on July 31, 2005 to
record the business combination as a purchase. Assume that Toyota
Corporation is the combinor, and that the current fair values of
identifiable assets are P700,000 for Nissan; that the company’s
liabilities are fairly stated at P300,000.

PURCHASE PRICE 420,000

Less: FVNIA
Assets 700,000
Liabilities (300,000) 400,000
Goodwill 20,000

Assets -P @BV 700,000

Assets -S @FV 700,000
Goodwill 20,000
Consolidated Assets 1,420,000

Liabilities - P 300,000
34 Practical Accounting 2
Liabilitied - S 300,000
Consolidated Liabilities 600,000

SHE- P @BV 400,000

NCI 0
PURCHASE PRICE 420,000
CONSOLIDATED SHE 820,000