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Comprehensive Problem

The document describes two business combination problems involving LOMOBO and PUMAYAT in the first problem, and CLOSE OPEN and JACK ENPOY in the second problem. For each problem, it provides financial information for the parent and subsidiary as of the acquisition date and for the years ending December 31, 2019 and December 31, 2020. It then lists 20 calculations to complete related to consolidated net income, retained earnings, shareholders' equity, and value of non-controlling interest for the periods presented.

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Erik Navarro
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179 views

Comprehensive Problem

The document describes two business combination problems involving LOMOBO and PUMAYAT in the first problem, and CLOSE OPEN and JACK ENPOY in the second problem. For each problem, it provides financial information for the parent and subsidiary as of the acquisition date and for the years ending December 31, 2019 and December 31, 2020. It then lists 20 calculations to complete related to consolidated net income, retained earnings, shareholders' equity, and value of non-controlling interest for the periods presented.

Uploaded by

Erik Navarro
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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BUSINESS COMBINATION-Comprehensive Problem

LOMOBO and PUMAYAT are trade partners. LOMOBO supplies electronic chips to PUMAYAT. During
2019, LOMOBO generated P150,000 of net income from January 1 to March 31.
On March 31, 2019, PUMAYAT bought 80% of LOMOBO’s outstanding capital for P800,000. All of
LOMOBO’s assets and liabilities had a fair value equal to book values except for an equipment which has a book
value of P500,000 and a fair value of P400,000 with remaining life of 10 years.
On the date of acquisition, shareholders’ equity of the two companies were as follows:
PUMAYAT LOMOBO
Ordinary Shares 1,050,500 303,030
Retained Earnings 2,050,020 512,125
On December 31, 2019, LOMOBO reported a Net Income of P415,145 and paid dividends of P12,344 to
PUMAYAT. PUMAYAT reported a Net Income of P567,789 and paid dividends of P215,345.

During 2020, intercompany transactions were as follows:


• PUMAYAT purchased P562,500 worth of merchandise from LOMOBO (20% are still unsold at year end).
• LOMOBO purchased P265,300 worth of merchandise from PUMAYAT (15% are still unsold at year end).
• LOMOBO’s gross profit is 25% on cost.
• PUMAYAT’s gross profit is 25% on sales.

On December 31, 2020, LOMOBO reported a Net Income of P645,546 and paid dividends of P56,456.
PUMAYAT reported Net Income of P1,025,205 and paid dividends of P205,025.

On December 31, 2020, goodwill had been impaired and should be reported at P80,000.

Compute the following:

1. 2019 CNI-NCI
2. 2019 CNI-Parent
3. Value of NCI as of December 31, 2019
4. Consolidated RE as of December 31, 2019
5. Consolidated Shareholders Equity as of December 31, 2019
6. 2020 CNI-NCI
7. 2020 CNI-Parent
8. Value of NCI as of December 31, 2020
9. Consolidated RE as of December 31, 2020
10. Consolidated Shareholders Equity as of December 31, 2020
Problem 2:

CLOSE OPEN and JACK ENPOY are trade partners. CLOSE OPEN supplies electronic chips to JACK ENPOY.
During 2019, CLOSE OPEN generated P150,000 of net income from January 1 to March 31.
On March 31, 2019, JACK ENPOY bought 80% of CLOSE OPEN’s outstanding capital for P600,000. All of
CLOSE OPEN’s assets and liabilities had a fair value equal to book values except for an equipment which has a
book value of P400,000 and a fair value of P500,000 with remaining life of 10 years.
On the date of acquisition, shareholders’ equity of the two companies were as follows:
JACK ENPOY CLOSE OPEN
Ordinary Shares 1,050,500 303,030
Retained Earnings 2,050,020 512,125
On December 31, 2019, CLOSE OPEN reported a Net Income of P415,145 and paid dividends of P12,344
to JACK ENPOY. JACK ENPOY reported a Net Income of P567,789 and paid dividends of P215,345.

During 2020, intercompany transactions were as follows:


• JACK ENPOY purchased P562,500 worth of merchandise from CLOSE OPEN (20% are still unsold at year
end).
• CLOSE OPEN purchased P265,300 worth of merchandise from JACK ENPOY (15% are still unsold at year
end).
• CLOSE OPEN’s gross profit is 25% on cost.
• JACK ENPOY’s gross profit is 25% on sales.

On December 31, 2020, CLOSE OPEN reported a Net Income of P645,546 and paid dividends of P56,456.
JACK ENPOY reported Net Income of P1,025,205 and paid dividends of P205,025.

Compute the following:

11. 2019 CNI-NCI


12. 2019 CNI-Parent
13. Value of NCI as of December 31, 2019
14. Consolidated RE as of December 31, 2019
15. Consolidated Shareholders Equity as of December 31, 2019
16. 2020 CNI-NCI
17. 2020 CNI-Parent
18. Value of NCI as of December 31, 2020
19. Consolidated RE as of December 31, 2020
20. Consolidated Shareholders Equity as of December 31, 2020

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