Solutions To Problems AFAR2 Chap2

CHAPTER 2 - ConSta - Acquisition Date
Problem 2 - Per Co. And Sia Co.

Requirement 1 - D & A of Excess Schedule
Case 1 - Wholly Owned

Consideration Given 408,000.00
Less: BV of Equity Acquired:
Common Stock 240,000.00
PIC in Excess of Par 24,000.00
Retained Earnings 96,000.00 360,000.00
Allocated Excess 48,000.00
Less: Allocation:
Increase in Inventory 18,000.00
Increase in Land 72,000.00
Decrease in B&E (12,000.00)
Increase in Bonds Payable (42,000.00) 36,000.00
Goodwill 12,000.00

Consideration Given:
Cash 288,000.00
Common Stock (12,000 x P12) 144,000.00 432,000.00
Less: Allocation:
Goodwill 36,000.00
Case 3 - Partially Owned (B) (A)

Total Parent (80%)
FV of Subsidiary (360,000 / 80%) 450,000.00 360,000.00
Less: BV of Interest Acquired 360,000.00 288,000.00
Allocated Excess 90,000.00 72,000.00
Allocation:
Increase in BP (42,000.00) 36,000.00 28,800.00
Goodwill 54,000.00 43,200.00
Full GW Partial GW

Cash 288,000.00
Common Stock (12,000 x P12) 144,000.00 432,000.00
Add: Existing Goodwill of Subsidiary 6,000.00
Total Allocated Excess 78,000.00
Less: Allocation:
Goodwill 42,000.00

Cash 408,000.00
Dividends-on (6,000.00) 402,000.00
Less: Allocation:
Goodwill 6,000.00
Requirement 2 - Consolidated Balances

Case 1 Case 2 Case 3 - FGW
a. Total Assets - Per Co @ BV 912,000.00 1,011,600.00 945,600.00
Total Assets - Sia Co @ FV 678,000.00 678,000.00 678,000.00
Goodwill 12,000.00 36,000.00 54,000.00
Conso Total Assets 1,602,000.00 1,725,600.00 1,677,600.00
b. Total Liabilities - Per Co. @ BV 360,000.00 360,000.00 360,000.00

Total Liabilities - Sia Co. @ FV 282,000.00 282,000.00 282,000.00
Conso Total Liabilities 642,000.00 642,000.00 642,000.00
c. Common Stock - Per Co. 600,000.00 600,000.00 600,000.00

New Shares Issued - Per - 120,000.00 -
Common Stock - Sia - - -
Conso Common Stock 600,000.00 720,000.00 600,000.00
d. APIC - Per Co. 60,000.00 60,000.00 60,000.00

APIC on New Issuance - 15,600.00 -
APIC - Sia - - -
Conso APIC 60,000.00 75,600.00 60,000.00
e. RE - Per Co. 300,000.00 300,000.00 300,000.00

RE on Acquisition - (12,000.00) (14,400.00)
RE - Sia - - -
Conso RE 300,000.00 288,000.00 285,600.00
f. Conso Common Stock 600,000.00 720,000.00 600,000.00

Conso APIC 60,000.00 75,600.00 60,000.00
Conso RE 300,000.00 288,000.00 285,600.00
NCI - - 90,000.00
Conso SHE 960,000.00 1,083,600.00 1,035,600.00
g. NCI - - 90,000.00
Conso Liabilities and SHE 1,602,000.00 1,725,600.00 1,677,600.00

NCI (20%)
90,000.00 NCI under Full GW
72,000.00
18,000.00
678,000.00
282,000.00
396,000.00 79,200.00
7,200.00
10,800.00 79,200.00 NCI under Partial GW
6,000.00 Existing GW
36,000.00 Newly Acquired
Case 3 - PGW Case 4 Case 5
945,600.00 1,011,600.00 912,000.00
678,000.00 672,000.00 678,000.00
43,200.00 42,000.00 6,000.00
1,666,800.00 1,725,600.00 1,596,000.00
360,000.00 360,000.00 360,000.00

282,000.00 282,000.00 276,000.00
642,000.00 642,000.00 636,000.00
600,000.00 600,000.00 600,000.00

- 120,000.00 -
- - -
600,000.00 720,000.00 600,000.00
60,000.00 60,000.00 60,000.00

- 15,600.00 -
- - -
60,000.00 75,600.00 60,000.00
300,000.00 300,000.00 300,000.00

(14,400.00) (12,000.00) -
- - -
285,600.00 288,000.00 300,000.00
600,000.00 720,000.00 600,000.00

60,000.00 75,600.00 60,000.00
285,600.00 288,000.00 300,000.00
79,200.00 - -
1,024,800.00 1,083,600.00 960,000.00
79,200.00 - -
1,666,800.00 1,725,600.00 1,596,000.00


Requirement 3 to 6 are applicable to Case 1 and 2 Only:
CASE 1
3.) Investment in Sia Co. 408,000.00
Cash 408,000.00
4.) Elimination Entries - Working Papers

Consideration Given 408,000.00
Less: Allocation:
Goodwill 12,000.00
E1 - Common Stock - Sia 240,000.00

PIC in Excess of Par - Sia 24,000.00
Retained Earnings - Sia 96,000.00
Investment in Sia Co. 360,000.00
E2 - Inventory 18,000.00
Land 72,000.00
Goodwill 12,000.00
Buildings & Equipment, net 12,000.00
Premiums on Bonds Payable 42,000.00
5.) Conso Working Paper - for discussion
6.) Informal Conso Balance Sheet

Assets
Cash 72,000.00
Accounts Receivale 150,000.00
Inventory 210,000.00
Land 330,000.00
Building & Equipment, net 828,000.00
Goodwill 12,000.00
Total Assets 1,602,000.00
Liabilities and Equity

Liabilities:
Accounts Payable 240,000.00
Bonds Payable 360,000.00
Premiums on BP 42,000.00 402,000.00 642,000.00
Stockholder's Equity:
Common Stock, P10 par 600,000.00
Total Liabilities and SHE 1,602,000.00
CASE 2
Cash 288,000.00
Common Stock (12,000 x P10) 120,000.00
PIC in Excess of Par (12,000 x P2) 24,000.00
Retained Earnings/ARE 12,000.00

Cash 12,000.00

Cash 8,400.00
4.) Elimination Entries

Cash 288,000.00
Common Stock (12,000 x P12) 144,000.00 432,000.00
Less: Allocation:
Goodwill 36,000.00
E1- Common Stock - Sia 240,000.00

Land 72,000.00
Goodwill 36,000.00
6.) Informal Conso Balance Sheet

Assets
Cash 171,600.00
Land 330,000.00
Goodwill 36,000.00

Liabilities:
Premiums on BP 42,000.00 402,000.00 642,000.00
Retained Earnings 288,000.00 1,083,600.00

Requirement 7 to 11 are applicable to Case 3 Only:

Cash 360,000.00
Retained Earnings/ARE 14,400.00

Cash 14,400.00
8.) D& A of Excess Schedule

Case 3 - Partially Owned (B) (A)
Total Parent (80%)
FV of Subsidiary (360,000 / 80%) 450,000.00 360,000.00
Allocation:
Increase in BP (42,000.00) 36,000.00 28,800.00
Goodwill 54,000.00 43,200.00
Full GW Partial GW
9.) Working Papers Elimination Entries

a.) Partial Goodwill Approach
Non-controlling Interest 72,000.00
Land 72,000.00
Goodwill 43,200.00
11.) Informal Conso Balance Sheet - Partial GW

Assets
Cash 105,600.00
Land 330,000.00
Goodwill 43,200.00

Liabilities:
Premiums on BP 42,000.00 402,000.00 642,000.00
NCI 79,200.00
NCI (20%)
90,000.00
72,000.00
18,000.00
7,200.00
10,800.00
b.) Full Goodwill Approach

Land 72,000.00
Goodwill 54,000.00
Informal Conso Balance Sheet - Full GW

Assets
Cash
Accounts Receivale
Inventory
Land
Building & Equipment, net
Goodwill
Total Assets

Liabilities:
Premiums on BP 42,000.00 402,000.00
Retained Earnings 285,600.00
NCI
Total Liabilities and SHE
105,600.00
150,000.00
210,000.00
330,000.00
828,000.00
54,000.00
1,677,600.00
642,000.00
945,600.00
90,000.00
1,677,600.00
Problem 3 - Pakistan and Syria

1.) Investment in Syria Co. 300,000.00
Common Stock (12,000 x P1) 12,000.00
PIC In Excess of Par (12,000 x P24) 288,000.00
2.) D & A of Excess Schedule

Total Parent (80%)
FV of Subsidiary 390,000.00 300,000.00
Allocation:
Increase in B&E 150,000.00
Recovered Copy Right 60,000.00
Est Liab for C (6,000.00) 246,000.00 196,800.00
Gain on Acquisition (48,000.00) (50,400.00)
Full GW Partial GW
3.) Compute for the consolidated balances of the following:

a.) Assets - Pakistan 1,381,200.00
Assets - Syria - FV 606,000.00
Consolidated 1,987,200.00
b.) Liabilities - Pakistan 336,000.00

Liabilities - Syria - FV 168,000.00
Consolidated 504,000.00
c.) Common Stock - Pakistan 32,160.00

Newly Issued 12,000.00
d.) APIC - Pakistan 435,840.00

APIC on Newly Issued 288,000.00
Full GW Partial GW
e.) Retained Earnings - Pakistan 577,200.00 577,200.00
Gain on Acquisition 48,000.00 50,400.00
Consolidated 625,200.00 627,600.00
f.) Conso Common Stock 44,160.00 44,160.00 Explanation: The non controlli
Conso APIC 723,840.00 723,840.00 statement as part of stakehold
Conso RE 625,200.00 627,600.00 interest. The non controlling i
NCI 90,000.00 87,600.00 ownership in the business.
Conso SHE 1,483,200.00 1,483,200.00
g.) NCI 90,000.00 87,600.00
4.) Working Paper Elimination Entries

a.) Full Goodwill Approach
E1- Common Stock - Syria 12,000.00
PIC in Excess of Par - Syria 108,000.00
Retained Earnings - Syria 72,000.00
Investment in Syria 153,600.00
NCI 38,400.00
E2- Inventory 6,000.00

Land 36,000.00
Building & Equipment 150,000.00
Copyright 60,000.00
Estimated Liab for Contingencies 6,000.00
Retained Earnings (Gain) 48,000.00
NCI (P90,000 - 38,400) 51,600.00
NCI (20%)
90,000.00 ==> NCI under Full GW
38,400.00
51,600.00
606,000.00
168,000.00
438,000.00 87,600.00
NCI under PGW ====> 87,600.00

49,200.00
2,400.00
tion: The non controlling interest amount is generally presented in the consolidated financial
nt as part of stakeholders equity. The non controlling interest is also known as the minority
. The non controlling interest arises where the parent company has less than 100%
hip in the business.
b.) Partial Goodwill Approach

Common Stock - Syria 12,000.00
PIC in Excess of Par - Syria 108,000.00
Retained Earnings - Syria 72,000.00
NCI 38,400.00
Inventory 6,000.00
Land 36,000.00
Building & Equipment 150,000.00
Copyright 60,000.00
Estimated Liab for Contingencies 6,000.00
Retained Earnings (Gain) 50,400.00
Investment in Seria 146,400.00
NCI (P87,600 - 38,400) 49,200.00
Problem 3 - Pakistan and Syria

5.) Working Papers - Full GW Approach
Assets Pakistan Co. Syria Co.

Cash 334,800.00 -
Accounts Receivable 86,400.00 24,000.00
Inventory 96,000.00 60,000.00 2.)
Land 120,000.00 48,000.00 2.)
Buildings & Equipment, net 744,000.00 222,000.00 2.)
Copyright - - 2.)
Investment in Syria Co. 300,000.00 -
Total Assets 1,681,200.00 354,000.00
Liabilities & SHE

Accounts Payable 96,000.00 42,000.00
Est. Liabilities for Contingencies - -
Bonds Payable 240,000.00 120,000.00
Common Stock - Pakistan 44,160.00
Common Stock - Syria 12,000.00 1.)
PIC in Excess of Par - Pakistan 723,840.00
PIC in Excess of Par - Syria 108,000.00 1.)
Retained Earnings - Pakistan 577,200.00
Retained Earnings - Syria 72,000.00 1.)
Noncontrolling Iinterest
Total Liabilities and SHE 1,681,200.00 354,000.00
6.) Consolidated Balance Sheet - Full GW

Assets
Cash 334,800.00
Accounts Receivable 110,400.00
Land 204,000.00
Buildings & Equipment, net 1,116,000.00
Copyright 60,000.00
Liabilities and Stockholders' Equity

Liabilities:
Est. Liabilities for Contingencies 6,000.00
Bonds Payable 360,000.00 504,000.00
Stockholders' Equity:
Retained Earnings 625,200.00 1,393,200.00
Non-contrlling Interest 90,000.00
1,987,200.00
Eliminations
Dr. Cr. Consolidated
334,800.00
110,400.00
6,000.00 162,000.00
36,000.00 204,000.00
150,000.00 1,116,000.00
60,000.00 60,000.00
1.) 153,600.00 -
2.) 146,400.00 -
1,987,200.00
138,000.00
2.) 6,000.00 6,000.00
360,000.00
44,160.00
12,000.00 -
723,840.00
108,000.00 -
2.) 48,000.00 625,200.00
72,000.00 -
1.) 38,400.00 90,000.00
2.) 51,600.00
444,000.00 444,000.00 1,987,200.00
Partial GW Approach
334,800.00
110,400.00
162,000.00
204,000.00
1,116,000.00
60,000.00
1,987,200.00
138,000.00
6,000.00
360,000.00 504,000.00
44,160.00
723,840.00
627,600.00 1,395,600.00
87,600.00
1,987,200.00
Problem 5 - AA Corporation
Wholly Owned
Consideration Given
Retained Earnings 200,000.00
Allocated Excess
Less: Allocation:
Decrease in Land (10,000.00)
Goodwill
1.) Inventory 140,000.00

2.) Land 60,000.00
3.) Buildings & Equipment 550,000.00
4.) Goodwill 46,000.00
5.) Investment in AA Zero
Problem 6 - PP Company and SS Company

Wholly Owned
Considerations Given:
Cash 360,000.00
Common Stock (10,000 x P40) 400,000.00
APIC 90,000.00
Retained Earnings (240,000 + 20,000NI) 260,000.00
Allocated Excess
Less: Allocation:
Increase in Franchise Agreements 30,000.00
Goodwill
1.) Inventory (410,000 + P260,000) 670,000.00
2.) Land (600,000 + 110,000) 710,000.00
3.) Buildings & Equipment (600,000 + 330,000) 930,000.00
4.) Franchise Agreements (220,000 + 220,000) 440,000.00
5.) Goodwill 80,000.00
6.) Revenues 960,000.00
7.) APIC (70,000 + 200,000 - 5,000) 265,000.00

8.) Expenses 940,000.00
9.) Retained Earnings, Jan 01 390,000.00
Problem 7 - Ford Corp and Slim Corp.

Partially Owned - Full Goodwill
Total
FV of Subsidiary 587,500.00
Less: BV of Interest Acquired 450,000.00
Allocation:
Increase in B&E 70,000.00 80,000.00
Goodwill 57,500.00
Full GW
1.) Inventory 140,000.00

2.) Land 60,000.00
3.) Buildings & Equipment 550,000.00
4.) Goodwill - Full 57,500.00
Goodwill - Partial 46,000.00
5.) Investment in Slim Zero
6.) Total Assets 830,000.00
7.) Total Liabilites 300,000.00
8.) Controlling Interest or Parent's SHE No Available data for parent's SHE
9.) NCI - Full GW 117,500.00
NCI - Partial GW (P117,500 - 11,500) 106,000.00
10.) Consolidated SHE Incomplete data
576,000.00 Consideration 576,000.00
Less: FMV of NA Assets of S
830000 300,000.00 530,000.00
450,000.00 Goodwill 46,000.00
126,000.00
80,000.00
46,000.00
Consideration 760,000.00
760,000.00 Less: FMV of NA Assets of S
1340000 660,000.00 680,000.00
Goodwill 80,000.00
560,000.00
200,000.00
120,000.00
80,000.00
only that of the parent during date of acquisition. Subsidiary's net income is to be
closed to its RE immediately before acquisition by the parent.
only those of the parent during date of acquisition plus the legal and acctg fees paid by the parent
Before closing nominal accounts
Parent (80%) NCI (20%)

470,000.00 117,500.00
360,000.00 90,000.00
110,000.00 27,500.00 830,000.00
300,000.00
530,000.00 106,000.00
64,000.00 16,000.00 106,000.00

46,000.00 11,500.00
Partial GW
587,500.00 470,000.00
530,000.00 424,000.00
57,500.00 46,000.00
e data for parent's SHE

given
by the parent
117,500.00
106,000.00
11,500.00
Case 1 -1 FV Of S Co. CI NCI
Est. Value of Subsidiary 12,500,000.00 10,000,000.00 2,500,000.00
BV of Interest Aacquired 6,000,000.00 4,800,000.00 1,200,000.00
Allocated Excess 6,500,000.00 5,200,000.00 1,300,000.00
Allocation 2,000,000.00 1,600,000.00 400,000.00
Goodwill 4,500,000.00 3,600,000.00 900,000.00
Case 1-2 FV Of S Co. CI NCI

Allocated Excess 5,300,000.00 3,300,000.00 2,000,000.00
Allocation 2,000,000.00 1,200,000.00 800,000.00
Goodwill 3,300,000.00 2,100,000.00 1,200,000.00

Allocated Excess 3,700,000.00 3,000,000.00 700,000.00
Allocation 2,000,000.00 1,500,000.00 500,000.00
Goodwill 1,700,000.00 1,500,000.00 200,000.00
Illustration 2-4 (page 127) FV Of S Co. CI NCI

Est. Value of Subsidiary 3,600,000.00 2,160,000.00 -
FV of Existing Interest - 540,000.00 900,000.00
Total FV of Subsidiary 3,600,000.00 2,700,000.00 900,000.00
BV of Interest Aacquired 2,000,000.00 1,500,000.00 500,000.00
Allocated Excess 1,600,000.00 1,200,000.00 400,000.00
Allocation 1,200,000.00 900,000.00 300,000.00
Goodwill 400,000.00 300,000.00 100,000.00

Total FV of Subsidiary 307,000.00 225,000.00 82,000.00
BV of Interest Aacquired 210,000.00 157,500.00 52,500.00
Allocated Excess 97,000.00 67,500.00 29,500.00
Allocation 110,000.00 82,500.00 27,500.00
Goodwill (13,000.00) (15,000.00) 2,000.00

Total FV of Subsidiary 400,000.00 300,000.00 100,000.00
BV of Interest Aacquired 300,000.00 225,000.00 75,000.00
Allocated Excess 100,000.00 75,000.00 25,000.00
Add: Existing Goodwill 5,000.00 3,750.00 1,250.00
Adjusted Allocated Excess 105,000.00 78,750.00 26,250.00
Allocation 30,000.00 22,500.00 7,500.00
Goodwill 75,000.00 56,250.00 18,750.00
2800000
2000000
P3,600,000 x 15%
80000
81,250.00
325000
82500

Solutions To Problems AFAR2 Chap2

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Solutions To Problems AFAR2 Chap2

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CHAPTER 2 - ConSta - Acquisition Date

Problem 2 - Per Co. And Sia Co.

Case 1 - Wholly Owned

Case 2 - Wholly Owned

Case 3 - Partially Owned (B) (A)

Case 4 - Wholly Owned

Case 5 - Wholly Owned

Requirement 2 - Consolidated Balances

b. Total Liabilities - Per Co. @ BV 360,000.00 360,000.00 360,000.00

c. Common Stock - Per Co. 600,000.00 600,000.00 600,000.00

d. APIC - Per Co. 60,000.00 60,000.00 60,000.00

e. RE - Per Co. 300,000.00 300,000.00 300,000.00

f. Conso Common Stock 600,000.00 720,000.00 600,000.00

Conso Liabilities and SHE 1,602,000.00 1,725,600.00 1,677,600.00

360,000.00 360,000.00 360,000.00

600,000.00 600,000.00 600,000.00

60,000.00 60,000.00 60,000.00

300,000.00 300,000.00 300,000.00

600,000.00 720,000.00 600,000.00

1,666,800.00 1,725,600.00 1,596,000.00

Problem 2 - Per Co. And Sia Co.

4.) Elimination Entries - Working Papers

E1 - Common Stock - Sia 240,000.00

5.) Conso Working Paper - for discussion

6.) Informal Conso Balance Sheet

Liabilities and Equity

Retained Earnings/ARE 12,000.00

PIC in Excess of Par 8,400.00

4.) Elimination Entries

E1- Common Stock - Sia 240,000.00

5.) Conso Working Paper - for discussion

6.) Informal Conso Balance Sheet

Liabilities and Equity

Problem 2 - Per Co. And Sia Co.

7.) Investment in Sia Co. 360,000.00

Retained Earnings/ARE 14,400.00

8.) D& A of Excess Schedule

9.) Working Papers Elimination Entries

10.) Conso Working Paper - for discussion

11.) Informal Conso Balance Sheet - Partial GW

Liabilities and Equity

b.) Full Goodwill Approach

Informal Conso Balance Sheet - Full GW

Liabilities and Equity

Problem 3 - Pakistan and Syria

2.) D & A of Excess Schedule

3.) Compute for the consolidated balances of the following:

b.) Liabilities - Pakistan 336,000.00

c.) Common Stock - Pakistan 32,160.00

d.) APIC - Pakistan 435,840.00

g.) NCI 90,000.00 87,600.00

4.) Working Paper Elimination Entries

E2- Inventory 6,000.00

NCI under PGW ====> 87,600.00

b.) Partial Goodwill Approach

Problem 3 - Pakistan and Syria

Assets Pakistan Co. Syria Co.

Total Assets 1,681,200.00 354,000.00

Liabilities & SHE

Total Liabilities and SHE 1,681,200.00 354,000.00

6.) Consolidated Balance Sheet - Full GW

Liabilities and Stockholders' Equity

1.) Inventory 140,000.00