CHAPTER 15
MULTIPLE CHOICES - COMPUTATIONAL
15-1:
d
Price paid
Less fair value of net assets acquired (P6,100 – P2,800)
Goodwill
15-2:
a
Price paid
Non-controlling interest (P450,000/90%) x 10%
Total
Less fair value of net assets acquired (P360,000 – P40,000)
Goodwill
15-3:
P 220,000
180,000
P 400,000
a
Price paid
Less fair value of net assets acquired:
Cash
Inventory
Property and equipment
Liabilities
Gain on acquisition
15-5:
P 450,000
50,000
500,000
320,000
P 180,000
c
Plant assets – Pall Company (at book value)
Plant assets – Mall Company (at fair value)
Consolidated
15-4:
P4,000,000
3,300,000
P 700,000
P 495,000
P 60,000
125,000
385,000
( 70,000)
500,000
P ( 5,000)
a
Price paid
Non-controlling interest (P350,000/80%) x 20%
Total
Less fair value of net assets excluding goodwill
Goodwill
P350,000
87,500
437,500
330,000
P107,500
51
15-6:
15-7:
15-8:
a
Inventory (P360,000 + P130,000)
P490,000
Plant and equipment (P500,000 + P420,000)
P920,000
a
Building (at fair value)
P180,000
Land (at fair value)
P 90,000
a
Price paid
NCI [(P480,000/80%) x 20%]
Total
Less fair value of net assets acquired
Goodwill
15-9:
P480,000
120,000
600,000
450,000
P150,000
d
Price paid
Non-controlling interest (P160,000/80%) x 20%
Total
Less fair value of net assets acquired (P300,000 – P160,000)
Goodwill
P160,000
40,000
200,000
140,000
P 60,000
Therefore:
Total assets (P800,000 + P300,000 + P60,000)
Total liabilities (P250,000 + P155,000 + P160,000 + P5,000)
P1,160,000
570,000
15-10: b (P900,000 x 1%)
15-11: d
Number of shares acquired (P120,000/P120)
Divided by outstanding shares of Soda (P125,000/P100)
Controlling interest
1,000
1,250
80%
Non-controlling interest [(P120,000/80%) x 20%}
P30,000
52
15-12: a
Goodwill
FV of net assets acquired excluding goodwill (P700,000 – P150,000)
NCI
Price paid by the Pepsi Company
P250,000
550,000
(100,000)
P700,000
15-13: b
Price paid (P247,095 + P69,955)
NCI [(P317,050/85%) x 15%*)
Total
Less net assets at fair value excluding goodwill:
Net assets at book value
Inventories
Plant and equipment
Patent
Goodwill
P317,050
55,950
373,000
P290,700
6,630
48,450
7,650
353,430
P 19,570
* P43,605/P290,700 = 15%
15-14: d (P500,000 + P300,000)
15-15: b
Price paid
NCI [(P260,000/80%) x 20%]
Total
Less fair value of net acquired (P450,000 – P210,000)
Goodwill
P260,000
65,000
325,000
240,000
P 85,000
15-16: a (The retained earnings of the parent only).
15-17: b
Controlling interest (Stockholders’ equity of the parent)
Non-controlling interest (per no. 15-15)
Stockholders equity
P550,000
65,000
P615,000
15-18: a (refer to 15-15)
15-19: c (P380,000 + P210,000)
53
15-20: a
Cash and cash equivalent (P70,000 + P90,000)
Inventory (P100,000 + P60,000)
Property and equipment (P500,000 + P300,000)
Goodwill
Total assets
15-21: a:
Fair value per share:
New acquisition (P630,000/7,000 shares)
Fair value of previously owned shares (1,000* shares x P90)
Acquisition of new shares
Total price paid for 80% interest
Non-controlling interest (P720,000/80%) x 20%
P 160,000
160,000
800,000
85,000
P1,205,000
P90
P 90,000 (10%)
630,000 (70%)
P 720,000
P 180,000
* P200,000 / P20 x 10% = 1,000 shares
15-22: c
Fair value of previously owned interest (10%)
Price paid for new additional interest (70%)
Non-controlling interest
Total
Less fair value of net assets acquired (P910,000 – P130,000)
Goodwill
P 90,000
630,000
180,000
900,000
780,000
P120,000
15-23: a
The amount reported is equal to Primo’s retained earnings of P567,000
15-24: a
(340,000- 200,000)
15-25: b
Cash
Accounts receivable
Inventories (see 15-25)
Equipment (800,000 - 500,000)
Accounts payable
Fair value of net assets
15-26: d
P 40,000
20,000
140,000
300,000
(40,000)
P460,000
100% - (P163,000/P460,000) = 65% rounded
15-27: d
Goodwill
Fair value of net assets acquired (15-25)
Total
NCI
Price paid by Primo
P 10,000
460,000
470,000
(163,000)
P 307,000
54
15-28: b
Company implied value
Less fair value of net assets
Goodwill
Total
P470,000
460,000
P 10,000
Parent
65%
P307,000
299,000
P 8,000
NCI
35%
P163,000
161,000
P 2,000
15-29: b
Non-controlling interest should be valued at the higher amount between the following:
At estimated fair value (P512,000/80%) x 20%
P128,000
At proportionate share of acquiree’s net identifiable assets (P670,000 x 20%) 134,000
Therefore, NCI is measured at P134,000.
15-30: c
Price paid (8,000 shares x P64)
NCI
Total
Less fair value of net assets acquired excluding goodwill:
Cash
P 20,000
Inventory
400,000
Equipment
500,000
Current liabilities
( 250,000)
Gain on acquisition
P512,000
134,000
646,000
670,000
P(24,000)
Proof:
Total
Fair value of the company
Fair of net assets excluding goodwill
Gain on acquisition
P646,000
670,000
P(24,000)
Parent (80%)
NCI (20%)
P512,000
536,000
P(24,000)
P134,000
134,000
P -
NCI does not share a gain on the acquisition. IFRS 3 (2008) provides that the gain is
attributed to the acquirer only.
55
PROBLEMS
Problem 15-1
a.
Investment in Solo Company stock
Cash
To record acquisition of 90%
of the outstanding shares of Solo.
1,080,000
1,080,000
Retained earnings – Polo Company
Cash
To record acquisition-related costs direct to
Retained earnings of Polo Company.
b.
50,000
50,000
Working paper elimination entries:
(1)
(2)
Common stock – Solo
400,000
Retained earnings – Solo
500,000
Investment in Solo company stock
Non-controlling interest
To eliminate Solo’s equity accounts at date of acquisition.
Inventories
Plant assets
Goodwill
Investment in Solo company stock
Non-controlling interest
To allocate excess
810,000
90,000
30,000
60,000
210,000
270,000
30,000
Determination and Allocation of Excess Schedule:
Company fair value
Less BV of interest acquired:
Common stock
Retained earnings
Total equity
Interest aquired
Book value
Excess
Adjustments:
Inventory
Plant assets
Goodwill
Total
P1,200,000
400,000
500,000
900,000
P 300,000
Parent (80%)
P1,080,000
NCI (10%)
P120,000*
P 900,000
90%
P 810,000
P 270,000
P900,000
10%
P 90,000
P 30,000
(30,000)
(60,000
P 210,000
* (P1,080,000/90%) x 10% = P120,000
56
Problem 15-2
a.
b.
c.
Investment in Straw Company
Cash
To record acquisition of 100% of Straw stock.
Price paid
Less: Book value of interest acquired (100%)
Difference
Allocation (100%:
Inventories
Land
Building
Equipment
Patents
Goodwill
600,000
600,000
P600,000
420,000
180,000
P( 40,000)
( 80,000)
150,000
( 20,000)
( 20,000)
( 10,000)
P170,000
Working paper elimination entries:
(1)
(2)
Common stock – Straw
Retained earnings – Straw
Investment in Straw Company
To eliminate equity accounts of Straw at
date of acquisition.
100,000
320,000
Inventories
Land
Equipment
Patents
Goodwill
Buildings
Investment in Straw Company
To allocate excess.
40,000
80,000
20,000
20,000
170,000
420,000
150,000
180,000
57
Problem 15-3
a.
Investment in Soto Company
Cash
To record acquisition of 80% stock of Sotto.
Retained earnings – Pedro Company
Cash
To record acquisition costs.
b.
c.
Price paid by the Parent Company
Non-controlling interest (NCI)
Total
Less: Book value of net assets
Excess
Allocation:
Current assets
Property and equipment
Long-term debt
Goodwill
950,000
950,000
80,000
80,000
P950,000
230,000
1,180,000
900,000
280,000
P 50,000
(100,000)
( 40,000)
( 90,000)
P190,000
Working paper elimination entries:
(1)
(2)
Common stock – Sotto
100,000
APIC – Sotto
200,000
Retained earnings – Sotto
600,000
Investment in Sotto stock
Non-controlling interest
To eliminate equity accounts of Sotto at date of
acquisition.
Property, plant and equipment
Goodwill
Long-term debt
Current assets
Investment in Sotto stock
Non-controlling interest
To allocate excess
720,000
180,000
100,000
190,000
40,000
50,000
230,000
50,000
58
Problem 15-4
Paco Company and Subsidiary
Consolidated Statement of Financial Position
January 2, 2013
Current assets
Property, plant and equipment
Other assets
Total assets
P475,000
285,000
70,000
P830,000
Current liabilities
Mortgage payable
Common stock
Additional paid-in capital
Retained earnings (including gain on acquisition of P20,000)
Total liabilities and stockholders’ equity
P280,000
85,000
200,000
65,000
200,000
P830,000
Computation of income from acquisition:
Consideration given (20,000 shares x P6)
Less fair value of net assets:
Current assets
Property and equipment
Other assets
Current liabilities
Mortgage payable
Gain on acquisition
P120,000
P100,000
85,000
40,000
(60,000)
(25,000)
140,000
P(20,000)
Problem 15-5
The entry to record the acquisition of stock is as follows:
(a)
(b)
Investment in Solo stock
Common stock, at par
Additional paid-in capital
To record acquisition of stock.
250,000
Retained earnings – Polo
Additional paid-in capital
Cash
To record acquisition-related costs.
10,000
20,000
100,000
150,000
30,000
59
Problem 15-5, continued
Palo Company and Subsidiary
Consolidated Statement of Financial Position
December 31, 2013
Cash
Receivables
Inventory
Property and equipment – net
Goodwill
Total assets
P 70,000
120,000
170,000
340,000
20,000
P720,000
Current liabilities
Long-term liabilities
Common stock
Additional paid-in capital (P20,000 + P150,000 – P20,000)
Retained earnings, 12/31 (P220,000 – P10,000)
Total liabilities and stockholders’ equity
P 30,000
120,000
210,000
150,000
210,000
P720,000
Computation of goodwill:
Consideration given
Less fair value of net assets (P290,000 – 60,000)
Goodwill
P250,000
230,000
P 20,000
Problem 15-6
a.
Investment in Seed Company
Cash
To record acquisition of 100% of Seed company stock.
350,000
Determination and Allocation of Excess schedule:
Price paid
Less: Book value of interest acquired
Excess
Allocation:
Inventory
P(20,000)
Plant assets
(80,000)
Long-term liabilities
40,000
Income from acquisition
b.
350,000
P350,000
320,000
30,000
(60,000)
P(30,000)
Working paper elimination entries
(1)
Common stock – Seed
100,000
Additional paid-in capital – Seed
40,000
Retained earnings – Seed
180,000
Investment in Seed stock
To eliminate equity accounts of Seed Company
(2)
Inventory
20,000
Plant assets
80,000
Long-term debt
Investment in Seed stock
Retained earnings – Pill (income from acquisition)
To allocate excess
320,000
40,000
30,000
30,000
60
Problem 15-6, continued:
Pill Corporation and Subsidiary
Consolidated Working Paper
May 31, 2013 – Date of Acquisition
Pill
Corporation
Seed
Company
Assets
Cash
Accounts receivable
Inventories
Investment in Seed company
200,000
700,000
1,400,000
350,000
10,000
60,000
120,000
Plant assets
Total
2,850,000
5,500,000
610,000
800,000
500,000
1,000,000
80,000
400,000
Liabilities & Stockholders’
Equity
Current liabilities
Long-term debt
Common stock:
Pill
Seed
Additional paid-in capital
Pill
Seed
Retained earnings
Pill
Seed
Total
Eliminations
& adjustment
Debit
Credit
(2) 20,000
(1)320,000
(2) 30,000
(2) 80,000
210,000
760,000
1,540,000
3,540,000
6,050,000
(2) 40,000
1,500,000
580,000
1,440,000
1,500,000
100,000
(1)100,000
40,000
(1) 40,000
180,000
800,000
(1)180,000
420,000
1,200,000
1,200,000
1,300,000
5,500,000
Consolidated
(2) 30,000
1,330,000
420,000
6,050,000
Problem 15-7
a.
b.
Accounts Receivable
Cash
Investment in Sea Company stock
Common stock ((30,000 shares x P20)
Retained earnings – Pop Corporation
Common stock
Current liabilities
70,000
70,000
600,000
600,000
40,000
30,000
70,000
61
Problem 15-7, continued:
Pop Corporation and Subsidiary
Working Paper for Consolidated Balance Sheet
April 30, 2013 – Date of acquisition
Assets
Cash
Accounts receivable – net
Inventories
Investment in Sea Company
Plant assets
Goodwill
Total
Liabilities & Stockholders’
Equity
Current liabilities
Long-term debt
Common stock
Pop
Sea
Additional paid-in capital
Retained earnings
Pop
Sea
Adjustments
& Eliminatio
Debit
Credit
Pop
Corporation
Sea
Company
50,000
230,000
400,000
600,000
80,000
270,000
350,000
1,300,000
560,000
2,580,000
1,260,000
380,000
800,000
250,000
600,000
(3) 70,000
100,000
360,000
(1)100,000
(1)360,000
(3) 70,000
(2) 90,000
(1)328,000
(2)272,000
(2)220,000
(2) 50,000
1,070,000
560,000
1,420,000
1,070,000
330,000
2,580,000
130,000
430,000
840,000
2,080,000
50,000
3,530,000
(2) 20,000
330,000
(50,000)
(1) 50,000
1,260,000
(1) 82,000
(2) 68,000
890,000
NCI
Total
Consolidated
890,000
150,000
3,530,000
(1) To eliminate equity accounts of Sea Company on the date of acquisition.
(2) To allocate difference, computed as follows:
Price paid
NCI (P600,000/80%) x 20%
Total
Less: Book value of net assets of Sea
Excess
Allocation:
Inventories
P( 90,000)
Plant assets
(220,000)
Long-term debt
20,000
Goodwill
(3) To eliminate intercompany receivables and payables.
P600,000
150,000
750,000
410,000
340,000
(290,000)
P 50,000
62
Problem 15-8
1. Price paid
Less book value of interest acquired
Common stock
APIC
Retained earnings
Excess
Allocation:
Inventory
Land
Building
Equipment
Bonds payable
2.
P500,000
P100,000
200,000
230,000
P( 20,000)
( 10,000)
50,000
60,000
( 50,000)
530,000
( 30,000)
30,000
P Company and Subsidiary
Consolidated Working Paper
January 2, 2013 – Date of acquisition
P
Company
Debits
Cash
Accounts receivable
Inventory
Land
Building
Equipment
Investment in S Company
Total
Credits
Accounts payable
Bonds payable
Common stock – P Company
Common stock – S Company
APIC – S Company
Retained earnings – P Co.
Retained earnings – S Co.
Total
S
Company
Adjustments
& Eliminations
Debit
Credit
300,000
200,000
200,000
100,000
600,000
800,000
500,000
2,700,000
50,000
100,000
80,000
50,000
400,000
200,000
150,000
60,000
290,000
(2) 50,000
100,000
200,000
(1)100,000
(1)200,000
230,000
880,000
(1)230,000
640,000
(2) 20,000
(2) 10,000
(2) 30,000
(2) 50,000
(2) 60,000
(1)530,000
880,000
Consolidated
350,000
300,000
300,000
160,000
950,000
940,000
3,000,000
210,000
240,000
1,500,000
1,500,000
1,050,000
2,700,000
640,000
1,050,000
3,000,000
(1) To eliminate equity accounts of S Company.
(2) To allocate excess
63
Problem 15-9
1.
Price paid
NCI (20% of FV of S Co’s net assets excluding GW (P500,000 x 20%)
Total
Less book of net assets
Excess
Allocation
Inventory
P (20,000)
Land
(10,000)
Building
50,000
Equipment
60,000
Bonds payable
(50,000)
Goodwill
P500,000
100,000*
600,000
530,000
70,000
30,000
P100,000
* NCI is measured at its proportionate interest in S Company’s net assets because the assessed fair
value of P80,000 is smaller.
2.
P Company and Subsidiary
Consolidated Working Paper
January 2, 2013 – Date of acquisition
Debits
Cash
Accounts receivable
Inventory
Land
Building
Equipment
Investment in S Company
Goodwill
Total
Credits
Accounts payable
Bonds payable
Common stock – P Co.
Common stock – S Co.
APIC – S Co.
Retained earnings – P Co.
Retained earnings – S Co.
NCI
Total
Adjustments
& Eliminations
Debit
Credit
P
Company
S
Company
300,000
200,000
200,000
100,000
600,000
800,000
500,000
50,000
100,000
80,000
50,000
400,000
200,000
2,700,000
880,000
150,000
60,000
290,000
(2) 50,000
100,000
200,000
(1)100,000
(1)200,000
230,000
(1)230,000
880,000
(2) 6,000
716,000
(2) 20,000
(2) 10,000
(2) 50,000
(2) 60,000
(1)424,000
(2) 76,000
(2)100,000
350,000
300,000
300,000
160,000
950,000
940,000
100,000
3,100,000
210,000
240,000
1,500,000
1,500,000
1,050,000
2,700,000
Consolidated
1,050,000
(1)106,000
716,000
100,000
3,100,000
(1) To eliminate equity accounts of S Company
(2) To allocate excess
64
Problem 15-10
1.
2.
Price paid
Less book value of interest acquired (100%):
Excess
Allocation
Inventory
Land
Equipment
Long-term investment in MS
Gain on acquisition
P542,000
670,000
(128,000)
P (10,000)
(40,000)
20,000
(15,000)
( 45,000)
P(173,000)
P Company and Subsidiary
Consolidated Working Paper
January 2, 2013 – Date of acquisition
P
Company
Assets
Cash
Accounts receivable
Inventory
Land
Equipment
Investment in S Company
Long-term investment in MS
Total
Liabilities & Stockholders’
Equity
Accounts payable
Common Stock – P Co.
Common Stock – S Co.
APIC – P Co.
Retained earnings – P Co.
Retained earnings – S Co.
Total
S
Company
100,000
200,000
150,000
50,000
300,000
542,000
100,000
1,442,000
100,000
150,000
130,000
80,000
200,000
175,000
400,000
115,000
125,000
785,000
200,000
Adjustments
& Eliminations
Debit
Credit
(2) 10,000
(2) 40,000
(2)128,000
(2) 15,000
470,000
785,000
200,000
350,000
290,000
170,000
480,000
240,000
1,730,000
290,000
400,000
(1)200,000
200,000
667,000
1,442,000
(2) 20,000
(1)670,000
Consolidated
(1)470,000
863,000
(2)173,000
200,000
840,000
863,000
1,730,000
(1) To eliminate equity accounts of S Company.
(2) To allocate excess
65
Problem 15-11
1.
2.
3.
4.
Investment in Sun Company
Cash
Price paid
Less book value of interest acquired:
Common stock
Retained earnings
Excess
Allocation:
Land
Building
Bond payable (bond discount)
Deferred taxes
Goodwill
Land
Building
Bond discount
Goodwill
Deferred taxes
Retained earnings
Additional paid in capital
Common stock
Additional paid in capital
Investment in Sun Company
1,900,000
1,900,000
P1,900,000
P 600,000
840,000
(100,000)
(200,000)
( 40,000)
( 20,000)
1,440,000
460,000
(360,000)
P 100,000
100,000
200,000
40,000
100,000
20,000
840,000
1,300,000
600,000
1,300,000
1,900,000
Problem 15-12
Supporting computations:
Fair value of existing X Company equity (200 shares P50)
P Company interest in X Company [300/(300 + 200)]
Acquisition price
P10,000
60%
P 6,000
Entry to record the issuance of 300 shares – Books of X Company (legal parent)
Investment in P Company
Common stock (300 shares x P2)
APIC
6,000
600
5,400
66
Problem 15-12, continued:
Fair value analysis:
Company fair value
Fair value of net assets excluding goodwill
Goodwill
1.
Implied FV
Parent (60%)
P10,000
6,000
P 4,000
P6,000
3,600
P2,400
NCI (40%)
P4,000
2,400
P1,600
Distribution and allocation of excess schedule:
Implied FV Parent (60%)
Fair value of subsidiary
Less book value of interest acquired:
Common stock P2 par
APIC
Retained earnings
Total
Interest acquired
Book value
Excess
Allocated to Non-current assets
Goodwill
2.
P10,000
4,000
1,600
2,000
4,000
6,000
( 2,000)
P 4,000
NCI (40%)
P6,000
P4,000
P4,000
60%
P2,500
P3,600
P4,000
40%
P1,600
P2,400
X Company and Subsidiary P Company
Consolidated Statement of Financial Position
December 31, 2013
Assets
Liabilities and Equity
Current assets
Non-current assets
Goodwill
P 4,000
16,000
4,000
Total assets
P24,000
Non-current liabilities
Common stock (300 shares x P2)
APIC
Retained earnings
NCI
Total liabilities and equity
*
Total paid in capital of P Company (P200 + P1800)
New shares issued (300 shares x P2)
APIC
**
Retained earnings of the legal subsidiary – P Company
P 6,000
600
1,400*
6,000**
10,000***
P24,000
P2,000
600
P1,400
*** The remaining shares of the original C Company equity.
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