Jeny Lou T.

Dacasin
BSA 3B
Consolidated Financial Statements – Stock Acquisition
A. Date of Acquisition
Activity 1 – Problems:
PROBLEM 1
A. If the fair value of NCI is assessed to be P 345,000.

Q1. Schedule of determination and schedule of excess:

Total Parent (80%) NCI at FV

(20%)
Fair value of Subsidiary P 1,770,000 P 1,425,000 P 345,000
Less: Book value of net assets acquired:
Ordinary Share P 150,000
Share Premium 300,000
Retained Earnings 900,000
Total P 1,350,000 P 1,080,000 P 270,000
Allocated Excess: P 420,000 P 345,000 P 75,000
Allocation:
Current Assets 75,000
Plant, Property, and Equipment (150,000)
Bonds payable (60,000)
Total (P 135,000) (108,000) (27,000)
Goodwill P 285,000 P 237,000 P 48,000

Q2. Working paper eliminating entries on January 1, 2021:

1) Ordinary shares – SSS Company P 150,000

Share premium – SSS Company 300,000
Retained earnings – SSS Company 900,000
Investment in SSS Company P 1,080,000
NCI 270,000
To eliminate subsidiary Stockholders
Equity accounts against investment

2) Plant, Property, and Equipment 150,000

Bonds payable 60,000
Goodwill 285,000
Current Assets 75,000
Investment in SSS Company 345,000
NCI 75,000
Allocation of excess
 Q3. The full Goodwill:

Consideration transferred P 1,425,000

Add: NCI – fair value (assessed) 345,000
Total value of subsidiary P 1,770,000
Less: Fair value of net assets of subsidiary 1,485,000
Full Goodwill P 285,000

Q4. The partial Goodwill:

Consideration transferred P 1,425,000

Add: NCI – proportionate share basis (P 1,485,000 x 20%) 297,000
Total value of subsidiary P 1,722,000
Less: Fair value of net assets of subsidiary 1,485,000
Goodwill – partial P 237,000

Q5. The total goodwill (income from acquisition) attributable to parent: P 237,000.

Q6. The total goodwill (income from acquisition) attributable to NCI: P 48,000.

B. If fair value of NCI is assessed to be P 295,000.

Q1. Schedule of determination and allocation schedule of excess:

Total Parent (80%) NCI at FV

(20%)
Fair value of Subsidiary P 1,720,000 P 1,425,000 P 295,000
Less: Book value of net assets acquired:
Ordinary Share P 150,000
Share Premium 300,000
Retained Earnings 900,000
Total P 1,350,000 P 1,080,000 P 270,000
Allocated Excess: P 370,000 P 345,000 P 25,000
Allocation:
Current Assets 75,000
Plant, Property, and Equipment (150,000)
Bonds payable (60,000)
Total (P 135,000) (108,000) (27,000)
Goodwill P 235,000 P 237,000 (P 2,000)

Q2. Working paper eliminating entries on January 1, 2021:

1) Ordinary shares – SSS Company P 150,000

Share premium – SSS Company 300,000
Retained earnings – SSS Company 900,000
 Investment in SSS Company P 1,080,000
NCI 270,000
To eliminate subsidiary Stockholders
Equity accounts against investment

2) Plant, Property, and Equipment 150,000

Bonds payable 60,000
Goodwill 235,000
Current Assets 75,000
Investment in SSS Company 345,000
NCI 25,000
Allocation of excess

Q3. The Allocated excess:

Consideration transferred P 1,425,000

NCI assessed 295,000
Total value of subsidiary P 1,720,000
Less: Book value of net assets of subsidiary (2,550,000 – 1,200,000) 1,350,000
Allocated excess P 370,000

Q4. The total goodwill (income from acquisition) attributable to parent: P 237,000.
Q5. The total goodwill (income from acquisition) attributable to NCI: (P 2,000)

C. If there is no available fair value of NCI.

Q1. Schedule of determination and allocation schedule of excess:

Total Parent (80%) NCI at FV

(20%)
Fair value of Subsidiary P 1,781,250 P 1,425,000 P 356,250
Less: Book value of net assets acquired:
Ordinary Share P 150,000
Share Premium 300,000
Retained Earnings 900,000
Total P 1,350,000 P 1,080,000 P 270,000
Allocated Excess: P 431,250 P 345,000 P 86,250
Allocation:
Current Assets 75,000
Plant, Property, and Equipment (150,000)
Bonds payable (60,000)
Total (P 135,000) (108,000) (27,000)
Goodwill P 296,250 P 237,000 P 59,250

NCI – fair value = P1,425,000/80% = P1,781,250 x 20% = P 356,250

 Q2. Working paper eliminating entries on January 1, 2021:

1) Ordinary shares – SSS Company P 150,000

Share premium – SSS Company 300,000
Retained earnings – SSS Company 900,000
Investment in SSS Company P 1,080,000
NCI 270,000
To eliminate subsidiary Stockholders
Equity accounts against investment

2) Plant, Property, and Equipment 150,000

Bonds payable 60,000
Goodwill 296,250
Current Assets 75,000
Investment in SSS Company 345,000
NCI 86,250
Allocation of excess

Q3. The allocated excess:

Consideration transferred P 1,425,000

NCI – fair value 356,250
Total value of subsidiary P 1,781,250
Less: Book value of net assets of subsidiary (2,550,000 – 1,200,000) 1,350,000
Allocated excess P 431,250

Q4. Full Goodwill: P 296,250

Q4. The partial Goodwill:

Full Goodwill P 296,250

Less: NCI share in goodwill 59,250
Partial Goodwill P 237,000

NCI – fair value P 356,250

NCI – proportionate share basis (2,625,000 – 1,140,000 x 20%) 297,000
NCI share in full goodwill P 59,250
Q5. The total goodwill (income from acquisition) attributable to parent: P 237,000.
Q6. The total goodwill (income from acquisition) attributable to NCI: P 59,250.
 PROBLEM 2
Requirement 1:

2020
Jan. 2 Investment in S Company (950,000/80%) P 1,187,500
Cash P 1,187,500
Acquired outstanding common
stock of S Company

Requirement 2:
Allocation schedule to compute goodwill:

Total value of Subsidiary P 1,187,500

Less: Book value of net assets acquired:
Ordinary Shares P 200,000
Share Premium 100,000
Retained Earnings 650,000 950,000
Allocated Excess: P 237,500
Allocation:
Inventory (40,000)
Land (15,000)
Building 75,000
Equipment 80,000 100,000
Goodwill P 337,500

Requirement 3:
Working paper eliminating entries:

1) Ordinary shares – S Company P 200,000

Share premium – S Company 100,000
Retained earnings – S Company 650,000
Investment in S Company P 950,000
To eliminate subsidiary Stockholders
Equity accounts against investment

2) Inventory 40,000
Land 15,000
Goodwill 337,500
Building 75,000
Equipment 80,000
 Investment in S Company 237,500
Allocation of excess

Requirement 4:

Total value of subsidiary P 1,187,500

Less: Fair value of net assets of subsidiary (1,220,000 – 330,000) 890,000
Goodwill P 297,500

Requirement 5:
P Group
Consolidated Statement of Financial Position
As of January 2, 2020

ASSETS
Cash P 475,000
Accounts Receivable 450,000
Inventory 410,000
Land 240,000
Building, net 1,025,000
Equipment, net 920,000
Goodwill 297,500
TOTAL ASSETS P 3,817,500

LIABILITIES AND EQUITY

Accounts payable P 300,000
Bonds payable 230,000
Total Liabilities P 530,000

Ordinary shares P 1,000,000

Share premium 400,000
Retained earnings (P 1,670,000 – P 20,000) 1,650,000
Non-controlling interest 237,500
Total Equity P 3,287,500
TOTAL LIABILITIES AND EQUITY P 3,817,500
 Activity 2 – Multiple Choice Problems
1. C – P 110,000

Consideration transferred P 1,500,000

Add: NCI – fair value (assessed) 330,000
Total value of subsidiary P 1,830,000
Less: Fair value of net assets of subsidiary 1,720,000
Goodwill P 110,000

2. B – P 375,000

NCI (1,500,000/80% x 20%) P 375,000

3. C – P 344,000

NCI (1,720,000 x 20%) P 344,000

4. A – P 112,000

Consideration transferred P 320,000

Add: NCI – fair value (540,000 x 20%) 108,000
Total value of subsidiary P 428,000
Less: Fair value of net assets of subsidiary 540,000
Gain on bargain purchase (P 112,000)

5. D – P 80,000

Consideration transferred P 320,000

Add: NCI – fair value 140,000
Total value of subsidiary P 460,000
Less: Fair value of net assets of subsidiary 540,000
Gain on bargain purchase (P 80,000)

6. B – P 25,000 goodwill

Ordinary shares issued (25,000 x P 12) P 300,000

Cash transferred 10,000
Contingent consideration 50,000
 Total P 360,000
Less: Fair value of net assets acquired (410,000 – 75,000) 335,000
Goodwill P 25,000

7. C – P 550,000

Ordinary shares – Good Corporation P 320,000

Ordinary shares, P 10 par (25,000 x P 10) 140,000
Combined Ordinary Shares (P 80,000)

8. D – P 130,000

Share premium – Good Corporation P 150,000

Less: Cost of printing stock certificates P 10,000
Accountant’s fee related to stock issuance 20,000
SEC registration of new shares issued 40,000 70,000
Total P 80,000
Issued ordinary shares (25,000 x P 2) 50,000
Combined Share Premium P 130,000

9. C – P 450,000

Share premium – Good Corporation P 600,000

Less: Finder’s fee 50,000
Legal, accounting and other consulting fees 50,000
Cost of stockholder’s meeting to vote on acquisition 20,000
SEC registration of the business combination 15,000
General and administrative costs 15,000
Combined Share Premium P 450,000

10. B – P 425,000

Liabilities – Good Corporation P 300,000

Fair value of liabilities acquired 75,000
Contingent consideration 50,000
Combined Total Liability P 425,000

11. B – P 1,555,000

Assets – Good Corporation P 1,350,000

Fair value of assets acquired 410,000
 Goodwill 25,000
Acquisition-related costs (150,000)
Stock issuance costs (70,000)
Cash paid (50,000)
Combined Total Liability P 1,555,000

12. B – P 35,000

Ordinary shares issued (25,000 x P 12) P 300,000

Cash transferred 10,000
Contingent consideration 60,000
Total P 370,000
Less: Fair value of net assets acquired (410,000 – 75,000) 335,000
Goodwill P 35,000

13. Entry on March 31, 2020:

2020
Mar. 31 Goodwill P 10,000
Contingent consideration payable P 10,000
Increase in fair value of
contingent consideration

14. Entry on June 30, 2020:

2020
Jun. 30 Contingent consideration payable P 60,000
Cash P 60,000
Payment of contingent
consideration

15. A – P 5,000 goodwill

Ordinary shares issued (25,000 x P 12) P 300,000

Cash transferred 10,000
Contingent consideration 30,000
Total P 340,000
Less: Fair value of net assets acquired (410,000 – 75,000) 335,000
Goodwill P 5,000

16. D – P 20,000
20. D – zero
21. Entry on March 31, 2020:

2020
Mar. 31 Contingent consideration payable P 30,000
Goodwill P 25,000
Gain on acquisition 5,000
Decrease in fair value of
contingent consideration

22. Entry on January 2, 2021:

2021
Jan. 2 Goodwill P 45,000
Gain on acquisition 5,000
Contingent consideration payable P 50,000
Decrease in fair value of
contingent consideration

23. Entry to record settlement of contingent consideration on June, 30, 2021:

2021
Jun. 30 Contingent consideration payable P 70,000
Cash P 70,000
Settlement of contingent
consideration

24. The entry if the count decision is negative on June 30, 2021:

2021
Jun. 30 Contingent consideration payable P 70,000
Gain on extinguishment of liability P 70,000
Settlement of contingent
consideration