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Topic: consolidated FS at date of acquisition

Problem #1 Easy question
(Wholly-owned subsidiary; With Pre-existing Goodwill) On January 1, 2020, Pasta Co. paid
P1,240,000 for all the issued and outstanding common stocks of Spag Corp. in a transaction
property accounted as a purchase. The recorded assets and liabilities of Spag Corp, on
January 1, 2020 are:

Cash P120,000

Inventory 360,000

Property and 640.000

equipment, net

Goodwill 200,000

Liabilities (240,000)

Net assets 1,080,000

On January 1, 2020, Spag's inventory had a fair value of P300,000 and the property and
equipment, net had a fair value of P760,000,

1. How much is the fair value of identifiable net assets of Spag Corp. on January 1, 2020?

2. What is the amount of goodwill resulting from the

business combination on January 1, 2020?

3.) Is there any goodwill for NCI? Yes or no. What amount?

Problem #2(easy question)

Assume the following information:

Ownership interest purchased 75%

Amount paid by the parent company to 900,000

acquire 75% ownership

Fair value of identifiable assets of the 1,600,000

acquiree company

Fair value of liabilities of the acquiree 600,000

company

Case 1: Assume that the parent company opts to measure NCI at fair value. The fair value
of NCI at acquisition date is determined to be at P350,000.
1. How much is the fair value of the acquiree's identifiable net assets?

2. At what amount shall the NCI be initially measured?

3. How much is the result of the business combination?

4.)Is there any goodwill for NCI? Yes or no. What amount?

Case 2: Assume that the parent company opts to measure NCI at fair value.

1. At what amount shall the NCI be initially measured?

2. How much is the result of the business combination?

3.) Is there any goodwill for NCI? Yes or no. What amount?

Case 3: Assume that the parent company opts to measure NCI at its proportionate share of
the acquiree's identifiable net assets.

1. At what amount shall the NCI be initially measured?

2. How much is the result of the business combination?

3. Is there any goodwill for NCI? Yes or no. What amount?

Case 4: Assume that the parent company opts to measure NCI at fair value. The fair value
of NCI at acquisition date is determined to be at P220,000.

1. At what amount shall the NCI be initially measured?

2. How much is the result of the business combination?

3. Is there any goodwill for NCI? Yes or no. What amount?

Problem 3 easy question

(Partially-owned subsidiary; Initial measurement of NCI; With Control Premium;
Case-to-Case) The balance sheet of SYNTAX Corp. on December 1, 2020 is presented
below:

Current assets 195,000

Land 1.320.000
 Building 660,000

Equipment 525,000

Total Assets 2,700,000

Liabilities 525,000

Ordinary shares, P5 par 900,000

Share premium 825,000

Retained eamings 450.000

Total Liabilities and equity 2,700.000

All the assets and liabilities of SYNTAX are assumed to approximate their fair values except
for land and building. It is estimated that the land have a fair value of P2,100,000 and the fair
value of the building increased by P480,000. JAM Corp. acquired 80% of SYNTAX'S
outstanding shares for P3,000,000. The non-controlling interest is measured at fair value.

CASE 1: The consideration paid includes control premium of P852,000.

1. At what amount should the NCI be initially measured on December 1, 2020?

2. How much is the goodwill or (gain on acquisition) to be recognized on the consolidated

financial statements on December 1, 2020?

CASE 2: The consideration paid excludes control premium of P138,000 and the fair value of
the non-controlling interest is P736,500. How much is the goodwill to be recognized on the
consolidated financial statements on December 1, 2020?

1. At what amount should the NCI be initially measured on December 1, 20207

CASE 3: The consideration paid includes control s control premium of P222,000.

1. At what amount should the NCI be initially measured on December 1, 2020?

2. How much is the goodwill to be recognized on the consolidated financial statements on

December 1, 2020?

Problem 4: easy question

(Previously-Held Securities)

On this. PROCTOR Company acquires 25% of SRAM Corporation's ordinary shares for
P190,000 cash and carries the investment using the cost method. After three months,
PROCTOR Company purchases another 60% of SRAM Corporation's ordinary shares for
P540.000 date, SRAM Corporation reports identifiable net assets with carrying value of
P720,000 and fair value of P920,000. The liabilities of SRAM Corporation has a book value
and fair value of P280,000. The fair value of the non-controlling interest is P125,000.

1.How much is the total ownership interest of PROCTOR Co. over SRAM Corporation at
date of acquiring control?

2.How much is the minority interest in SRAM Corporation?

3.At what amount should the previously held securities be valued at date of acquisition of
control?

4.At what amount should the NCI be initially measured?

5.How much is the result of a business combination?

Problem #5 Medium question

Igme Company acquired 90% interest from Julian Company on January 2, 20x0. In 20x1, the
inventories acquired from the affiliate are:

Beginning inventory P125,000

Ending inventory 250,000

Intercompany sales of merchandise during the year amounts to P500,000 at a gross profit
rate of 20%. On December 31, 20x1, Igme Company and Julian Company reported the
following results of own operations:

Igme Company Julian Company

Sales P5,250,000 P4,000,000

Cost of sales 3,000,000 2,000,000

Net income 1,250,000 750,000

Dividends paid 500,000 250,000

Ending inventory 450,000 315,000

The company uses the perpetual inventory system. Company accounts for its investment
using the cost method in its separate financial statement.

1.How much should be presented as consolidated cost of sales if the transaction is

Downstream and Upstream?

2.How much should be presented as consolidated net income if the transaction is

Downstream and Upstream?
22. How much should be presented as consolidated net income attributable to noncontrolling
interest if the transaction is Downstream and Upstream?

23. The ending inventory to be presented in the consolidated statement of financial position
in Downstream and Upstream

Problem #6 Hard Question

(Intercompany Sales of Fixed Assets)

Several years ago, P Company acquired 80% of the outstanding ordinary shares of S
Corporation by paying an amount equal to the fair value of S's net assets. All the assets and
liabilities of S Corporation had carrying values equal to their fair values at that time.

For the years 2023 and 2024, Both P and S had intercompany sales of fixed assets with
each other, information resulting from intercompany sales of equipment are summarized
below:

Date of Seller Selling Original Accumulated Book Remaining

sale price cost depreciation value life

1/1/2023 S P15,000 P72,000 P43,200 P28,800 8 years

Company

3/31/2023 P 90,000 120,000 45,000 75,000 5 years

Company

5/1/2024 S 300,000 250,000 None 250,000 None

Company

9/30/2024 S 125,000 400,000 300,000 100,000 10 years

Company

The net income and dividends paid for 2023 and 2024 are as follows:

P COMPANY S CORPORATION

Net income Dividends paid Net income Dividends Paid

2023 196,800 72,000 60,000 36,000

2024 234,200 80,000 50,000 30,000

1. How much is the consolidated net income for 2023?

2. How much of the consolidated net income is attributable to the parent or controlling
interest for 2023?
3. How much of the consolidated net income is attributable to the non-controlling interest for
2023?

4. How much is the consolidated net income for 2024?

5. How much of the consolidated net income is attributable to the parent or controlling
interest for 2024?

6. How much of the consolidated net income is attributable to the non-controlling interest for
2024?

Problem #7 conso fs
Presented below are the financial balances for ALPHA COMPANY and BETACOMPANY as
of December 31, 2022, immediately before ALPHA COMPANY acquired BETA COMPANY.
Also included are the fair values for BETA COMPANY's net assets at that date.

ALPHA COMPANY BETA COMPANY BETA COMPANY

(Book Values) (Book value) (Fairvalue)

Cash P870,000 P240,000 P240,000

Receivables 600,000 600,000 600,000

Inventory 1,230,000 420,000 580,000

Land 1,800,000 260,000 250,000

Buildings 1,800,000 540,000 650,000

Equipment 720,000 380,000 400,000

Accounts payable (570,000) (240,000) (240,000)

Accrued expenses (270,000) (60,000) (60,000)

Long-term liab. (2,700,000) (1,020,000) (1,120,000)

Common stock P20 (1,980,000)

Common stock P5 (420,000)

APIC (210,000) (180,000)

Retained Earnings (1,290,000) (520,000)

On December 31, 2022, ALPHA COMPANY issued 50,000 share of its common stock with a
fair value of P35 per share for all of the assets and liabilities of BETA COMPANY. Stock
issuance costs of P15,000 and direct costs of P10,000 were paid, however, a P20,000 direct
cost and a P5,000 indirect cost remain unpaid. ALPHA COMPANY is applying the
acquisition method in accounting for BETA COMPANY. To settle a difference of opinion
regarding BETA COMPANY's fair value, ALPHA COMPANY promises to pay an additional
P5,200 to the former owners if BETA COMPANY's earnings exceed a certain sum during the
next year. Given the probability of the required contingency payment and utilizing a 4%
discount rate, the expected present value of the contingency is P5,000.

1) Compute the amount of goodwill at the date of acquisition.

2) Compute the total assets to be reported in the consolidated balance sheet.
3) Compute the total liabilities to be reported in the consolidated balance sheet.
4) Compute the total stockholders' equity to be reported in the consolidated balance sheet

Problem #8
Steeple Corp. is a 90% subsidiary of Peake Corp. acquired by Peake at book value on
January 1, 2012. Separate income statements for Peake and Steeple for 2012 and 2013 are
as follows:

Peake Steeple

2023 2024 2023 2024

Sales 1,000,000 1,200,000 500,000 700,000

Cost of sales (600,000) (720,000) (250,000) (350,000)

Other expenses (200,000) (250,000) (100,000) (200,000)

Net Income 200,000 230,000 150,000 150,000

Intercompany sales were P80,000 during 2023 and P120,000 during 2024. 20% of the 2023
intercompany sales were still unsold at the end of 2023 and 30% of the intercompany sales
in 2024 were still unsold at the end of 2024

Part A assume that all intercompany sales are from steeple to peake
1.Consolidated cost of sales 2023
2. Minority interest income for 2023
3.Consolidated Net income for 2023 attributable to the owners of the parent

Part B assume that all intercompany sales are from Peake to Steeple
1.Consolidated cost of sales 2024
2. Minority interest income for 2024
3.Consolidated Net income for 2024 attributable to the owners of the parent

Problem #9
The following were taken from the trial balance of ABC Company and XYZ Company at the
start of the fiscal year 2022:
ABC CO XYZ CO

Book Value Fair Value Book Value Fair Value

Cash 3,000,000 3,000,000 750,000 750,000

Accounts 200,000 215,000 100,000 90,000

 Receivable

Inventory 150,000 140,000 50,000 40,000

PPE (10 years) 5,000,000 5,300,000 2,000,000 2,100,000

Goodwill 650,000 700,000 100,000 80,000

Accounts 4,000,000 4,200,000 1,500,000 1,450,000

Payable

Ordinary 3,000,000 750,000

Shares

APIC 1,800,000 500,000

Accumulated 200,000 250,000

Earnings

From the data above, we are to compute for the goodwill/gain on acquisition and the total
assets, liabilities and stockholders' equity and the required journal entries of the acquiring
company after the acquisition if:

1) If ABC Co purchases the net assets of XYZ Co by issuing 50,000 shares of their P20 par
value shares with a fair value of P40 per share, pays P100,000 cash and paying direct and
indirect cost of P75,000 and P50,000 respectively. P25,000 direct cost and P10,000 stock
issue cost however, remain unpaid.

2) If ABC Co purchases the net assets of XYZ Co by issuing 50,000 shares of their P20 par
value shares with a fair value of P20 per share, entered into a mortgage loan of P350,000.
XYZ also has the following unrecorded intangible assets, Customer List, P20,000; R&D,
P30,000 and Skilled Workforce, P10,000.