Accounting for Business Combinations Due on September 13, 2024 (7pm)

Homework #4

Upload a scanned copy of your solutions and answers (that are written in a yellow paper) in the google
classroom; bring the hard copy on Saturday, September 14, 2024.

Problem I
RR Records Inc. acquired all of DD Studios’ voting shares on January 1, 20x4, for P280,000. RR’s
balance sheet immediately after the combination contained the following balances:

RR Records, Inc.
Balance Sheet
January 1, 20x4

Cash and Receivables . . . . . . . . P120,000 Accounts Payable . . . . . . . . . . P 75,000

Inventory . . . . . . . . . . . . . . . . . . . . 110,000 Taxes Payable . . . . . . . . . . . . . . 50,000
Land . . . . . . . . . . . . . . . . . . . . . . . . 70,000 Notes Payable . . . . . . . . . . . . 300,000
Buildings and Equipment (net) . . 350,000 Common Stock . . . . . . . . . . . . 400,000
Investment in DD stock . . . . . . . . 280,000 Retained Earnings . . . . . . . . . . 105,000

DD’s balance sheet at acquisition contained the following balances:

DD Studios
Balance Sheet
January 1, 20x4

Cash and Receivables . . . . . . . . P 40,000 Accounts Payable . . . . . . . . . . P 90,000

Inventory . . . . . . . . . . . . . . . . . . . . 180,000 Notes Payable . . . . . . . . . . . . 250,000
Buildings and Equipment (net) . . 350,000 Common Stock . . . . . . . . . . . . 100,000
Goodwill . . . . . . . . . . . . . . . . . . . . . . 30,000 Additional Paid- in Capital . . 200,000
Retained Earnings . . . . . . . . . . (40,000)

On the date of combination, the inventory held by DD had a fair value of P170,000, and its buildings and
recording equipment had a value of P375, 000. Goodwill reported by DD resulted from a purchase of SS
Enterprises in 20x1. SS was liquidated and its assets and liabilities were brought onto DD’s books.

Compute the balances to be reported in the consolidated balance sheet immediately after the acquisition
for:
1. Inventory
2. Buildings and Equipment (net)
3. Investment in DD Stock
4. Goodwill
5. Common Stock
6. Retained Earnings
Problem II
RR Corporation acquired 80 percent of the stock of GG Company by issuing shares of its common stock
with a fair value of P192,000. At that time, the fair value of non- controlling interest was estimated to be
P48,000 and the fair values of its identifiable assets and liabilities were P310,000 and P95,000,
respectively. GG’s assets and liabilities had book values of P220,000 and P95,000, respectively.

Compute the following amounts to be reported immediately after the combination:

1. Investment in GG reported by RR.
2. Increase in identifiable assets of the combined entity.
3. Increase in total liabilities of the combined entity
4. Full-goodwill for the combined entity
5. Non-controlling interest (full-goodwill) reported in the consolidated balance sheet.

- End of Homework #4 -

SOLUTIONS
 Chapter 2
Problem I (Correction: Research and development should be P5,000 not P50,000)
1. Case 1: Date of Acquisition -
Investment in SS Company 315,000
Cash 300,000
Estimated Liability on Contingent Consideration 15,000

Acquisition Expense (or Retained earnings) 10,000

Cash 10,000

Case 2: Date of Acquisition -

Investment in SS Company 237,500
Cash 237,500

Case 3: Date of Acquisition -

Investment in SS Company 239,400
Cash 239,400

Case 4: Date of Acquisition -

Investment in SS Company 229,500
Cash 229,500
Investment 256 500
Case 5: Date of Acquisition -
Cash 205 200
Investment in SS Company 205,200
Cash
EI 47 500
205,200
Case 6: Date of Acquisition - Gain 3 800
Investment in SS Company 205,000
Cash 205,000

2. Schedule of Determination and Allocated Excess: (Correction: Research and development

should be P5,000 not P50,000)
Case 1: Date of Acquisition -
Fair value of Subsidiary:
Consideration transferred:
Cash P300,000
Contingent performance obligation __15,000
Fair value of Subsidiary P315,000
Less: BV of SHE of SS: (P90,000 + P80,000 + P20,000) x 100% _190,000
Allocated excess P125,000
Less: Over/under valuation of A and L: Inc. (Dec.)
Decrease in Inventory (P20,000 – P30,000) x 100% (P10,000)
Increase in Bldgs & Eqpt. (P76,000 – P50,000) x 100% 26,000
Increase in Customer list (P5,000 x 100%) 5,000
Increase in Favorable lease agreement (P3,000 x 100%) 3,000
Increase in Customer contract (P2,000 x 100%) 2,000
Increase in Purchased IPRD (P5,000 x 100%) 5,000 __31,000
Goodwill P 94,000

Case 2: Date of Acquisition -

a. Proportionate Basis (Partial-goodwill Approach)
Fair value of Subsidiary:
Consideration transferred – cash P 237,500 (80%)
Less: BV of SHE of SS: (P90,000 + P80,000 + P20,000) x 80% _152,000 (80%)
Allocated excess P 85,500 (80%)
Less: Over/under valuation of A and L: Inc. (Dec.)
Decrease in Inventory (P20,000 – P30,000) x 80% (P 8,000)
Increase in Bldgs & Eqpt. (P76,000 – P50,000) x 80% 20,800
Increase in Customer list (P5,000 x 80%) 4,000
Increase in Favorable lease agreement (P3,000 x 80%) 2,400
Increase in Customer contract (P2,000 x 80%) 1,600
Increase in Purchased IPRD (P5,000 x 80%) _4,000 24,800 (80%)
Goodwill – partial P 60,700 (80%)

b. Fair Value Basis (Full-goodwill Approach)

Fair value of Subsidiary:
Consideration transferred – cash (P237,500 / 80%) P 296,875
(100%)
 Less: BV of SHE of SS: (P90,000 + P80,000 + P20,000) x 100% _190,000 (100%)
Allocated excess P 106,875
(100%)
Less: Over/under valuation of A and L: Inc. (Dec.)
Decrease in Inventory (P20,000 – P30,000) x 100% (P10,000)
Increase in Bldgs & Eqpt. (P76,000 – P50,000) x 100% 26,000
Increase in Customer list (P5,000 x 100%) 5,000
Increase in Favorable lease agreement (P3,000 x 100%) 3,000
Increase in Customer contract (P2,000 x 100%) 2,000
Increase in Purchased IPRD (P5,000 x 100%) _5,000 __31,000 (100%)
Goodwill – full P 75,875
(100%)

Case 3: Date of Acquisition -

a. Proportionate Basis (Partial-goodwill Approach)
Fair value of Subsidiary:
Consideration transferred - cash P 239,400 (60%)
Less: BV of SHE of SS: (P90,000 + P80,000 + P20,000) x 60% _114,000 (60%)
Allocated excess P 125,400 (60%)
Less: Over/under valuation of A and L: Inc. (Dec.)
Decrease in Inventory (P20,000 – P30,000) x 60% (P 6,000)
Increase in Bldgs & Eqpt. (P76,000 – P50,000) x 60% 15,600
Increase in Customer list (P5,000 x 60%) 3,000
Increase in Favorable lease agreement (P3,000 x 60%) 1,800
Increase in Customer contract (P2,000 x 60%) 1,200
Increase in Purchased IPRD (P5,000 x 60%) __3,000 __18,600 (60%)
Goodwill – partial P 106,800 (60%)

b. Fair Value Basis (Full-goodwill Approach)

Fair value of Subsidiary:
Consideration transferred – cash P 239,400 (
Fair value of NCI (given)** 60%)
_152,000 ( 40%)
Fair value of Subsidiary P 391,400
(100%)
Less: BV of SHE of SS: (P90,000 + P80,000 + P20,000) x 100% _190,000 (100%)
Allocated excess P 201,400
(100%)
Decrease in Inventory (P20,000 – P30,000) x 100% (P10,000)
Increase in Bldgs & Eqpt. (P76,000 – P50,000) x 100% 26,000
Increase in Customer list (P5,000 x 100%) 5,000
Increase in Favorable lease agreement (P3,000 x 100%) 3,000
Increase in Customer contract (P2,000 x 100%) 2,000
Increase in Purchased IPRD (P5,000 x 100%) _5,000 __31,000 (100%)
Goodwill – full P 170,400
100%)
* the P11,400 control premium is computed as follows: P152,000/40% = P380,000 x 60% =
P228,000; P239,400 – P228,000 = P11,400.
**FV of NCI given or NCI on FV of SHE-S, whichever is HIGHER rule.
NCI on FV-SHE of Subsidiary:
Book value of stockholders’ equity of subsidiary…………. ……………………………………P 190,000
Adjustments to reflect fair value (over/ undervaluation of assets and liabilities)……….. 31,000
Fair value of stockholders’ equity of subsidiary………………………………………………….P 221,000
Multiplied by: Non-controlling Interest percentage............................................................... 40%
P 88,400
Therefore, the given amount of P152,000 is higher compared to P88,400. In the event that the amount
assumed to be P79,000, therefore the higher amount of P88,400 (compared to P79,000) should be used
to determine the FV of Subsidiary.

Case 4: Date of Acquisition -

a. Proportionate Basis (Partial-goodwill Approach)
Fair value of Subsidiary
Consideration transferred – cash P 229,500 (75%)
Less: BV of SHE of SS: (P90,000 + P80,000 + P20,000) x 75% _142,500 (75%)
Allocated excess P 87,000 (75%)
Less: Over/under valuation of A and L: Inc. (Dec.)
Decrease in Inventory (P20,000 – P30,000) x 75% (P 7,500)
Increase in Bldgs & Eqpt. (P76,000 – P50,000) x 75% 19,500
 Increase in Customer list (P5,000 x 75%) 3,750
Increase in Favorable lease agreement (P3,000 x 75%) 2,250
Increase in Customer contract (P2,000 x 75%) 1,500
Increase in Purchased IPRD (P5,000 x 75%) __3,750 __23,250 (75%)
Goodwill – partial P 63,750 (75%)

b. Fair Value Basis (Full-goodwill Approach)

Fair value of Subsidiary – given P 322,525
(100%)
Less: BV of SHE of SS: (P90,000 + P80,000 + P20,000) x 100% _190,000 (100%)
Allocated excess P 132,525
(100%)
Less: Over/under valuation of A and L: Inc. (Dec.)
Decrease in Inventory (P20,000 – P30,000) x 100% (P10,000)
Increase in Bldgs & Eqpt. (P76,000 – P50,000) x 100% 26,000
Increase in Customer list (P5,000 x 100%) 5,000
Increase in Favorable lease agreement (P3,000 x 100%) 3,000
Increase in Customer contract (P2,000 x 100%) 2,000
Increase in Purchased IPRD (P5,000 x 100%) _5,000 __31,000 (100%)
Goodwill – full P 101,525 100%)

Case 5: Date of Acquisition – Step-Acquisition

a. Proportionate Basis (Partial-goodwill Approach)
Fair value of Subsidiary:
Consideration transferred – cash P 205,200 (60%)
Fair value of previously held equity interest in
Subsidiary (P205,200/60% = P342,000 x 15% ___51,300 (15%)
Fair value of Subsidiary P 256,500 (75%)
Less: BV of SHE of SS:(P90,000+P80,000+P20,000) x 75% _142,500 (75%)
Allocated excess P 114,000 (75%)
Less: Over/under valuation of A and L: Inc. (Dec.)
BV FV
Identifiable Assets P370,500 P484,500 P114,000
Liabilities 180,500 180,500 P -0-
Increase in Net Assets (P190,000 - P304,000) x 75% P 85,500 ___85,500 (75%)
Goodwill – partial P 28,500 (75%)

b. Fair Value Basis (Full-goodwill Approach)

Fair value of Subsidiary:
Consideration transferred – cash P 205,200 (
Fair value of previously held equity interest in Subsidiary 60%)
(P205,200/60% = P342,000 x 15%
Fair value of NCI (given)* 51,300 ( 15%)
__85,500 ( 25%)
Fair value of Subsidiary P 342,000
(100%)
Less: BV of SHE of SS: (P90,000 + P80,000 + P20,000) x 100% _190,000 (100%)
Allocated excess P 152,000
(100%)
Less: Over/under valuation of A and L: Inc. (Dec.)
BV FV
Identifiable Assets P370,500 P484,500 P114,000
Liabilities 180,500 180,500 P -0-
Increase in Net Assets (P190,000 - P304,000) x 100% **P114,000 _114,000 (100%)
Goodwill – full P 38,000
(100%)
*FV of NCI given or NCI on FV of SHE-S, whichever is HIGHER rule.
NCI on FV-SHE of Subsidiary:
Book value of stockholders’ equity of subsidiary…………. ……………………………………P 190,000
Adjustments to reflect fair value (over/ undervaluation of assets and liabilities)……….. 114,000**
Fair value of stockholders’ equity of subsidiary………………………………………………….P 304,000
Multiplied by: Non-controlling Interest percentage............................................................... 25%
P 76,000
Therefore, the given amount of P85,500 is higher compared to P76,000. In the event that the assumed
amount to be P70,000, therefore the higher amount of P76,000 (compared to P70,000) should be used to
determine the FV of Subsidiary.

Case 6: Date of Acquisition – Bargain Purchase Gain

 a. Proportionate Basis (Partial-goodwill Approach)
Fair value of Subsidiary:
Consideration transferred – cash P 205,000 (75%)
Less: BV of SHE of SS:(P90,000+P80,000+P20,000) x 75% _142,500 (75%)
Allocated excess P 62,500 (75%)
Less: Over/under valuation of A and L: Inc. (Dec.)
BV FV
Identifiable Assets P362,000 P462,000 P100,000
Liabilities 172,000 172,000 P - 0-
Increase in Net Assets (P190,000 - P290,000) x 75% P 75,000 ___75,000 (75%)
Bargain purchase gain – partial (P 12,500) (75%)

b. Fair Value Basis (Full-goodwill Approach)

Fair value of Subsidiary:
Consideration transferred – cash P 205,000 (
Fair value of NCI (given)* 75%)
__74,200 ( 25%)
Fair value of Subsidiary P 279,200
(100%)
Less: BV of SHE of SS: (P90,000 + P80,000 + P20,000) x 100% _190,000 (100%)
Allocated excess P 89,200
(100%)
Less: Over/under valuation of A and L: Inc. (Dec.)
BV FV
Identifiable Assets P362,000 P462,000 P100,000
Liabilities 172,000 172,000 P - 0-
Increase in Net Assets (P190,000 – P290,000 x 100% **P100,000 _100,000 (100%)
Bargain purchase gain – full (P 10,800)(100%)
*FV of NCI given or NCI on FV of SHE-S, whichever is HIGHER rule.
NCI on FV-SHE of Subsidiary:
Book value of stockholders’ equity of subsidiary…………. ……………………………………P 190,000
Adjustments to reflect fair value (over/ undervaluation of assets and liabilities)……….. 100,000**
Fair value of stockholders’ equity of subsidiary………………………………………………….P 290,000
Multiplied by: Non-controlling Interest percentage............................................................... 25%
P 72,500
Therefore, the given amount of P74,200 is higher compared to P72,500. In the event that the assumed
amount is P71,000, therefore the higher amount of P72,500 (compared to P71,000) should be used to
determine the FV of Subsidiary.

3. Working Paper Eliminating Entries

Case 1: Date of Acquisition -
Common stock – SS Co . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,000
Additional paid-in capital – SS Co . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000
Retained earnings – SS Co . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Investment in SS Co . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190,000
Eliminate investment against book value stockholders’ equity of SS Co.
Buildings and Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,000
Customer list. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Lease agree0ments….………………………………………………………. 3,000
Customer contract…………………………………………………………… 2,000
Capitalized R&D ....................................……………………………………. 5,000
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,000
Inventory…………………………………………………………………….. 10,000
Investment in SS Co . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125,000
Eliminate investment against allocated excess
Schedule of Determination and Allocated Excess: (Correction: Research and development
should be P5,000 not P50,000)
Fair value of Subsidiary:
Consideration transferred:
Cash P300,000
Contingent performance obligation __15,000
Fair value of Subsidiary P315,000
Less: BV of SHE of SS: (P90,000 + P80,000 + P20,000) x 100% _190,000
Allocated excess P125,000
Less: Over/under valuation of A and L: Inc. (Dec.)
Decrease in Inventory (P20,000 – P30,000) x 100% (P10,000)
Increase in Bldgs & Eqpt. (P76,000 – P50,000) x 100% 26,000
Increase in Customer list (P5,000 x 100%) 5,000
Increase in Favorable lease agreement (P3,000 x 100%) 3,000
Increase in Customer contract (P2,000 x 100%) 2,000
 Increase in Purchased IPRD (P5,000 x 100%) 5,000 __31,000
Goodwill P 94,000

Case 2: Date of Acquisition –

a. Proportionate Basis (Partial-goodwill Approach)
Common stock – SS Co ............................ . . . . . . . . . . . . . . . . . . . . . . 90,000
Additional paid-in capital – SS Co . ……………………. . . . . . . . . . . . 80,000
Retained earnings – SS Co …………………... . . . . . . . . . . . . . . . . . . . . 20,000
NCI/NCINAS (NCI in Net Assets) – (190,000 x 20%)…………………. 38,000
Investment in SS Co . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152,000
Eliminate investment against book value stockholders’ equity of SS Co.
Buildings and Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,000
Customer list. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Lease agreements….………………………………………………………. 3,000
Customer contract…………………………………………………………… 2,000
Capitalized R&D ....................................……………………………………. 5,000
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,700
NCI/NCINAS (NCI in Net Assets): P31,000 x 20%.............................. 6,200
Inventory…………………………………………………………………….. 10,000
Investment in SS Co . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,500
Eliminate investment against allocated excess
NCI:
Book value of stockholders’ equity of subsidiary…………. ……………………………………P 190,000
Adjustments to reflect fair value (over/ undervaluation of assets and liabilities)……….. 31,000
Fair value of stockholders’ equity of subsidiary………………………………………………….P 221,000
Multiplied by: Non-controlling Interest percentage............................................................... 20%
FV-NCI Partial GW (or P38,000 + P6,200)...………………………………………………………..P 44,200

Schedule of Determination and Allocated Excess: (Correction: Research and development

should be P5,000 not P50,000)
Proportionate Basis (Partial-goodwill Approach)
Fair value of Subsidiary:
Consideration transferred – cash P 237,500 (80%)
Less: BV of SHE of SS: (P90,000 + P80,000 + P20,000) x 80% _152,000 (80%)
Allocated excess P 85,500 (80%)
Less: Over/under valuation of A and L: Inc. (Dec.)
Decrease in Inventory (P20,000 – P30,000) x 80% (P 8,000)
Increase in Bldgs & Eqpt. (P76,000 – P50,000) x 80% 20,800
Increase in Customer list (P5,000 x 80%) 4,000
Increase in Favorable lease agreement (P3,000 x 80%) 2,400
Increase in Customer contract (P2,000 x 80%) 1,600
Increase in Purchased IPRD (P5,000 x 80%) _4,000 24,800 (80%)
Goodwill – partial P 60,700 (80%)

b. Fair Value Basis (Full-goodwill Approach)

Common stock – SS Co ............................ . . . . . . . . . . . . . . . . . . . . . . 90,000
Additional paid-in capital – SS Co . ……………………. . . . . . . . . . . . 80,000
Retained earnings – SS Co …………………... . . . . . . . . . . . . . . . . . . . . 20,000
NCI/NCINAS (NCI in Net Assets) – (190,000 x 20%)…………………. 38,000
Investment in SS Co . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152,000
Eliminate investment against book value stockholders’ equity of SS Co.

Buildings and Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,000

Customer list. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Lease agreements….………………………………………………………. 3,000
Customer contract…………………………………………………………… 2,000
Capitalized R&D ....................................……………………………………. 5,000
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,875
NCI: (P31,000 x 20%) + (P75,875 – P60,700)…………………………... 21,375
Inventory…………………………………………………………………….. 10,000
Investment in SS Co . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,500
Eliminate investment against allocated excess
NCI:
Book value of stockholders’ equity of subsidiary…………. ……………………………………P 190,000
Adjustments to reflect fair value (over/ undervaluation of assets and liabilities)……….. 31,000
Fair value of stockholders’ equity of subsidiary………………………………………………….P 221,000
Multiplied by: Non-controlling Interest percentage............................................................... 20%
FV-NCI Partial GW (or P38,000 + P6,200)...………………………………………………………..P 44,200
Add: NCI on Full-GW (P75,875 – P60,700)………………………………………………………… 15,175
FV-NCI - Full GW………………………………………………………………………………………..P 59,375

Schedule of Determination and Allocated Excess: (Correction: Research and development

should be P5,000 not P50,000)
 Fair Value Basis (Full-goodwill Approach)
Fair value of Subsidiary:
Consideration transferred – cash (P237,500 / 80%) P 296,875
(100%)
Less: BV of SHE of SS: (P90,000 + P80,000 + P20,000) x 100% _190,000 (100%)
Allocated excess P 106,875
(100%)
Less: Over/under valuation of A and L: Inc. (Dec.)
Decrease in Inventory (P20,000 – P30,000) x 100% (P10,000)
Increase in Bldgs & Eqpt. (P76,000 – P50,000) x 100% 26,000
Increase in Customer list (P5,000 x 100%) 5,000
Increase in Favorable lease agreement (P3,000 x 100%) 3,000
Increase in Customer contract (P2,000 x 100%) 2,000
Increase in Purchased IPRD (P5,000 x 100%) _5,000 __31,000 (100%)
Goodwill – full P 75,875
(100%)

Case 3: Date of Acquisition -

a. Proportionate Basis (Partial-goodwill Approach)
Common stock – SS Co ............................ . . . . . . . . . . . . . . . . . . . . . . 90,000
Additional paid-in capital – SS Co . ……………………. . . . . . . . . . . . 80,000
Retained earnings – SS Co …………………... . . . . . . . . . . . . . . . . . . . . 20,000
NCI/NCINAS (NCI in Net Assets) – (190,000 x 40%)…………………. 76,000
Investment in SS Co . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,000
Eliminate investment against book value stockholders’ equity of SS Co.
Buildings and Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,000
Customer list. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Lease agreements….………………………………………………………. 3,000
Customer contract…………………………………………………………… 2,000
Capitalized R&D ....................................……………………………………. 5,000
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,800
NCI/NCINAS (NCI in Net Assets): P31,000 x 40%.............................. 12,400
Inventory…………………………………………………………………….. 10,000
Investment in SS Co . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125,400
Eliminate investment against allocated excess
NCI:
Book value of stockholders’ equity of subsidiary…………. ……………………………………P 190,000
Adjustments to reflect fair value (over/ undervaluation of assets and liabilities)……….. 31,000
Fair value of stockholders’ equity of subsidiary………………………………………………….P 221,000
Multiplied by: Non-controlling Interest percentage............................................................... 40%
FV-NCI Partial GW (or P76,000 + P12,400)...………………………………………………………P 88,400

Schedule of Determination and Allocated Excess: (Correction: Research and development

should be P5,000 not P50,000)
Proportionate Basis (Partial-goodwill Approach)
Fair value of Subsidiary:
Consideration transferred – cash P 239,400 (60%)
Less: BV of SHE of SS: (P90,000 + P80,000 + P20,000) x 60% _114,000 (60%)
Allocated excess P 125,400 (60%)
Less: Over/under valuation of A and L: Inc. (Dec.)
Decrease in Inventory (P20,000 – P30,000) x 60% (P 6,000)
Increase in Bldgs & Eqpt. (P76,000 – P50,000) x 60% 15,600
Increase in Customer list (P5,000 x 60%) 3,000
Increase in Favorable lease agreement (P3,000 x 60%) 1,800
Increase in Customer contract (P2,000 x 60%) 1,200
Increase in Purchased IPRD (P5,000 x 60%) __3,000 __18,600 (60%)
Goodwill – partial P 106,800 (60%)

b. Fair Value Basis (Full-goodwill Approach)

Common stock – SS Co ............................ . . . . . . . . . . . . . . . . . . . . . . 90,000
Additional paid-in capital – SS Co . ……………………. . . . . . . . . . . . 80,000
Retained earnings – SS Co …………………... . . . . . . . . . . . . . . . . . . . . 20,000
NCI/NCINAS (NCI in Net Assets) – (190,000 x 40%)…………………. 76,000
Investment in SS Co . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,000
Eliminate investment against book value stockholders’ equity of SS Co.
Buildings and Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,000
Customer list. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Lease agreements….………………………………………………………. 3,000
Customer contract…………………………………………………………… 2,000
Capitalized R&D ....................................……………………………………. 5,000
 Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170,400
NCI: (P31,000 x 40%) + (P170,400 – 76,000
P106,800)………….……………...
Inventory…………………………………………………………………….. 10,000
Investment in SS Co . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125,400
Eliminate investment against allocated excess
NCI:
Book value of stockholders’ equity of subsidiary…………. ……………………………………P 190,000
Adjustments to reflect fair value (over/ undervaluation of assets and liabilities)……….. 31,000
Fair value of stockholders’ equity of subsidiary………………………………………………….P 221,000
Multiplied by: Non-controlling Interest percentage............................................................... 40%
FV-NCI Partial GW (or P38,000 + P6,200)...………………………………………………………..P 88,400
Add: NCI on Full-GW (P170,400 – P106,800)…………………………………………………….. 63,600
FV-NCI - Full GW………………………………………………………………………………………..P 152,000

Schedule of Determination and Allocated Excess: (Correction: Research and development

should be P5,000 not P50,000)
Fair Value Basis (Full-goodwill Approach)
Fair value of Subsidiary:
Consideration transferred – cash P 239,400 (
Fair value of NCI (given)** 60%)
_152,000 ( 40%)
Fair value of Subsidiary P 391,400
(100%)
Less: BV of SHE of SS: (P90,000 + P80,000 + P20,000) x 100% _190,000 (100%)
Allocated excess P 201,400
(100%)
Decrease in Inventory (P20,000 – P30,000) x 100% (P10,000)
Increase in Bldgs & Eqpt. (P76,000 – P50,000) x 100% 26,000
Increase in Customer list (P5,000 x 100%) 5,000
Increase in Favorable lease agreement (P3,000 x 100%) 3,000
Increase in Customer contract (P2,000 x 100%) 2,000
Increase in Purchased IPRD (P5,000 x 100%) _5,000 __31,000 (100%)
Goodwill – full P 170,400
100%)
* the P11,400 control premium is computed as follows: P152,000/40% = P380,000 x 60% =
P228,000; P239,400 – P228,000 = P11,400.
**FV of NCI given or NCI on FV of SHE-S, whichever is HIGHER rule.
NCI on FV-SHE of Subsidiary:
Book value of stockholders’ equity of subsidiary…………. ……………………………………P 190,000
Adjustments to reflect fair value (over/ undervaluation of assets and liabilities)……….. 31,000
Fair value of stockholders’ equity of subsidiary………………………………………………….P 221,000
Multiplied by: Non-controlling Interest percentage............................................................... 40%
P 88,400
Therefore, the given amount of P152,000 is higher compared to P88,400. In the event that the amount
assumed to be P79,000, therefore the higher amount of P88,400 (compared to P79,000) should be used
to determine the FV of Subsidiary.

Case 4: Date of Acquisition -

a. Proportionate Basis (Partial-goodwill Approach)
Common stock – SS Co ............................ . . . . . . . . . . . . . . . . . . . . . . 90,000
Additional paid-in capital – SS Co . ……………………. . . . . . . . . . . . 80,000
Retained earnings – SS Co …………………... . . . . . . . . . . . . . . . . . . . . 20,000
NCI/NCINAS (NCI in Net Assets) – (190,000 x 25%)…………………. 47,500
Investment in SS Co . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142,500
Eliminate investment against book value stockholders’ equity of SS Co.
Buildings and Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,000
Customer list. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Lease agreements….………………………………………………………. 3,000
Customer contract…………………………………………………………… 2,000
Capitalized R&D ....................................……………………………………. 5,000
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,750
NCI/NCINAS (NCI in Net Assets): P31,000 x 25%.............................. 7,750
Inventory…………………………………………………………………….. 10,000
Investment in SS Co . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,000
Eliminate investment against allocated excess
NCI:
Book value of stockholders’ equity of subsidiary…………. ……………………………………P 190,000
Adjustments to reflect fair value (over/ undervaluation of assets and liabilities)……….. 31,000
Fair value of stockholders’ equity of subsidiary………………………………………………….P 221,000
Multiplied by: Non-controlling Interest percentage............................................................... 25%
FV-NCI Partial GW (or P47,500 + P7,750)...………………………………………………………..P 55,250
 Schedule of Determination and Allocated Excess: (Correction: Research and development
should be P5,000 not P50,000)
Proportionate Basis (Partial-goodwill Approach)
Fair value of Subsidiary
Consideration transferred – cash P 229,500 (75%)
Less: BV of SHE of SS: (P90,000 + P80,000 + P20,000) x 75% _142,500 (75%)
Allocated excess P 87,000 (75%)
Less: Over/under valuation of A and L: Inc. (Dec.)
Decrease in Inventory (P20,000 – P30,000) x 75% (P 7,500)
Increase in Bldgs & Eqpt. (P76,000 – P50,000) x 75% 19,500
Increase in Customer list (P5,000 x 75%) 3,750
Increase in Favorable lease agreement (P3,000 x 75%) 2,250
Increase in Customer contract (P2,000 x 75%) 1,500
Increase in Purchased IPRD (P5,000 x 75%) __3,750 __23,250 (75%)
Goodwill – partial P 63,750 (75%)

b. Fair Value Basis (Full-goodwill Approach)

Common stock – SS Co ............................ . . . . . . . . . . . . . . . . . . . . . . 90,000
Additional paid-in capital – SS Co . ……………………. . . . . . . . . . . . 80,000
Retained earnings – SS Co …………………... . . . . . . . . . . . . . . . . . . . . 20,000
NCI/NCINAS (NCI in Net Assets) – (190,000 x 25%)…………………. 47,500
Investment in SS Co . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142,500
Eliminate investment against book value stockholders’ equity of SS Co.
Buildings and Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,000
Customer list. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Lease agreements….………………………………………………………. 3,000
Customer contract…………………………………………………………… 2,000
Capitalized R&D ....................................……………………………………. 5,000
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101,525
NCI: (P31,000 x 25%) + (P101,525 – P63,750)………….……………... 45,525
Inventory…………………………………………………………………….. 10,000
Investment in SS Co . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,000
Eliminate investment against allocated excess
NCI:
Book value of stockholders’ equity of subsidiary…………. ……………………………………P 190,000
Adjustments to reflect fair value (over/ undervaluation of assets and liabilities)……….. 31,000
Fair value of stockholders’ equity of subsidiary………………………………………………….P 221,000
Multiplied by: Non-controlling Interest percentage............................................................... 25%
FV-NCI Partial GW…………………………...………………………………………………………..P 55,250
Add: NCI on Full-GW (P101,525 – P63,750)………………………………………………………. 37,775
FV-NCI - Full GW (P47,500 + P45,525)……………………………………………………………….P 93,025

Schedule of Determination and Allocated Excess: (Correction: Research and development

should be P5,000 not P50,000)
Fair Value Basis (Full-goodwill Approach)
Fair value of Subsidiary - given P 322,525
(100%)
Less: BV of SHE of SS: (P90,000 + P80,000 + P20,000) x 100% _190,000 (100%)
Allocated excess P 132,525
(100%)
Less: Over/under valuation of A and L: Inc. (Dec.)
Decrease in Inventory (P20,000 – P30,000) x 100% (P10,000)
Increase in Bldgs & Eqpt. (P76,000 – P50,000) x 100% 26,000
Increase in Customer list (P5,000 x 100%) 5,000
Increase in Favorable lease agreement (P3,000 x 100%) 3,000
Increase in Customer contract (P2,000 x 100%) 2,000
Increase in Purchased IPRD (P5,000 x 100%) _5,000 __31,000 (100%)
Goodwill – full P 101,525 100%)

Case 5: Date of Acquisition – Step-Acquisition

a. Proportionate Basis (Partial-goodwill Approach)
Common stock – SS Co ............................ . . . . . . . . . . . . . . . . . . . . . . 90,000
Additional paid-in capital – SS Co . ……………………. . . . . . . . . . . . 80,000
Retained earnings – SS Co …………………... . . . . . . . . . . . . . . . . . . . . 20,000
NCI/NCINAS (NCI in Net Assets) – (190,000 x 25%)…………………. 47,500
Investment in SS Co . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142,500
Eliminate investment against book value stockholders’ equity of SS Co.
Identifiable assets (itemized)….. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,000
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,500
NCI/NCINAS (NCI in Net Assets): (P304,000-P190,000) x 25%......... 28,500
Investment in SS Co . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,000
 Eliminate investment against allocated excess
NCI:
Book value of stockholders’ equity of subsidiary…………. ……………………………………P 190,000
Adjustments to reflect fair value (over/ undervaluation of assets and liabilities)……….. 114,000
Fair value of stockholders’ equity of subsidiary………………………………………………….P 304,000
Multiplied by: Non-controlling Interest percentage............................................................... 25%
FV-NCI Partial GW (P47,500 + P28,500)….....……………………………………………………..P 76,000

Schedule of Determination and Allocated Excess:

Proportionate Basis (Partial-goodwill Approach)
Fair value of Subsidiary:
Consideration transferred – cash P 205,200 (60%)
Fair value of previously held equity interest in
Subsidiary (P205,200/60% = P342,000 x 15% ___51,300 (15%)
Fair value of Subsidiary P 256,500 (75%)
Less: BV of SHE of SS:(P90,000+P80,000+P20,000) x 75% _142,500 (75%)
Allocated excess P 114,000 (75%)
Less: Over/under valuation of A and L: Inc. (Dec.)
BV FV
Identifiable Assets P370,500 P484,500 P114,000
Liabilities 180,500 180,500 P -0-
Increase in Net Assets (P190,000 - P304,000) x 75% P 85,500 ___85,500 (75%)
Goodwill – partial P 28,500 (75%)

b. Fair Value Basis (Full-goodwill Approach)

Common stock – SS Co ............................ . . . . . . . . . . . . . . . . . . . . . . 90,000
Additional paid-in capital – SS Co . ……………………. . . . . . . . . . . . 80,000
Retained earnings – SS Co …………………... . . . . . . . . . . . . . . . . . . . . 20,000
NCI/NCINAS (NCI in Net Assets) – (190,000 x 25%)…………………. 47,500
Investment in SS Co . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142,500
Eliminate investment against book value stockholders’ equity of SS Co.
Identifiable assets (itemized)….. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,000
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,000
NCI [(P304,000-P190,000) x 25%] + (P38,000 – P28,500)…………….. 38,000
Investment in SS Co . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,000
Eliminate investment against allocated excess
NCI:
Book value of stockholders’ equity of subsidiary…………. ……………………………………P 190,000
Adjustments to reflect fair value (over/ undervaluation of assets and liabilities)……….. 114,000
Fair value of stockholders’ equity of subsidiary………………………………………………….P 304,000
Multiplied by: Non-controlling Interest percentage............................................................... 25%
FV-NCI Partial GW………………………….. ...………………………………………………………P 76,000
Add: NCI on Full-GW (P38,000 – P28,500)………………………………………………………... 9,500
FV-NCI - Full GW (P47,500 + P38,000) - t he NCI given per problem is the same………P 85,500

Schedule of Determination and Allocated Excess:

Fair Value Basis (Full-goodwill Approach)
Fair value of Subsidiary:
Consideration transferred – cash P 205,200 (
Fair value of previously held equity interest in Subsidiary 60%)
(P205,200/60% = P342,000 x 15%
Fair value of NCI (given)* 51,300 ( 15%)
__85,500 ( 25%)
Fair value of Subsidiary P 342,000
(100%)
Less: BV of SHE of SS: (P90,000 + P80,000 + P20,000) x 100% _190,000 (100%)
Allocated excess P 152,000
(100%)
Less: Over/under valuation of A and L: Inc. (Dec.)
BV FV
Identifiable Assets P370,500 P484,500 P114,000
Liabilities 180,500 180,500 P -0-
Increase in Net Assets (P190,000 - P304,000) x 100% **P114,000 _114,000 (100%)
Goodwill – full P 38,000
(100%)
*FV of NCI given or NCI on FV of SHE-S, whichever is HIGHER rule.
NCI on FV-SHE of Subsidiary:
Book value of stockholders’ equity of subsidiary…………. ……………………………………P 190,000
Adjustments to reflect fair value (over/ undervaluation of assets and liabilities)……….. 114,000**
Fair value of stockholders’ equity of subsidiary………………………………………………….P 304,000
Multiplied by: Non-controlling Interest percentage............................................................... 25%
P 76,000
 Therefore, the given amount of P85,500 is higher compared to P76,000. In the event that the assumed
amount to be P70,000, therefore the higher amount of P76,000 (compared to P70,000) should be used to
determine the FV of Subsidiary.

Case 6: Date of Acquisition - – Bargain Purchase Gain

a. Proportionate Basis (Partial-goodwill Approach) refer to Page 169 for reference
Common stock – SS Co ............................ . . . . . . . . . . . . . . . . . . . . . . 90,000
Additional paid-in capital – SS Co . ……………………. . . . . . . . . . . . 80,000
Retained earnings – SS Co …………………... . . . . . . . . . . . . . . . . . . . . 20,000
NCI/NCINAS (NCI in Net Assets) – (190,000 x 25%)…………………. 47,500
Investment in SS Co . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142,500
Eliminate investment against book value stockholders’ equity of SS Co.
Identifiable assets (itemized)….. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Retained earnings (bargain purchase gain –closed to RE since
only BS or real accounts are being examined)………………… 12,500
NCI (P290,000-P190,000) x 25,000
25%...........................................................
Investment in SS Co . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,500
Eliminate investment against allocated excess
NCI:
Book value of stockholders’ equity of subsidiary…………. ……………………………………P 190,000
Adjustments to reflect fair value (over/ undervaluation of assets and liabilities)……….. 100,000
Fair value of stockholders’ equity of subsidiary………………………………………………….P 290,000
Multiplied by: Non-controlling Interest percentage............................................................... 25%
FV-NCI-Partial Gain (P47,500 + P25,000).....………………………………………………………P 72,500

Schedule of Determination and Allocated Excess:

Proportionate Basis (Partial-goodwill Approach)
Fair value of Subsidiary:
Consideration transferred – cash P 205,000 (75%)
Less: BV of SHE of SS:(P90,000+P80,000+P20,000) x 75% _142,500 (75%)
Allocated excess P 62,500 (75%)
Less: Over/under valuation of A and L: Inc. (Dec.)
BV FV
Identifiable Assets P362,000 P462,000 P100,000
Liabilities 172,000 172,000 P - 0-
Increase in Net Assets (P190,000 - P290,000) x 75% P 75,000 ___75,000 (75%)
Bargain purchase gain – partial (P 12,500) (75%)

b. Fair Value Basis (Full-goodwill Approach) – refer to Page 169 for reference
Common stock – SS Co ............................ . . . . . . . . . . . . . . . . . . . . . . 90,000
Additional paid-in capital – SS Co . ……………………. . . . . . . . . . . . 80,000
Retained earnings – SS Co …………………... . . . . . . . . . . . . . . . . . . . . 20,000
NCI/NCINAS (NCI in Net Assets) – (190,000 x 25%)…………………. 47,500
Investment in SS Co . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142,500
Eliminate investment against book value stockholders’ equity of SS Co.
Identifiable assets (itemized)….. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Retained earnings (bargain purchase gain –closed to RE since
only BS or real accounts are being examined)………………… 10,800
NCI (P74,200, given – P47,500).......................................................... 26,700
Investment in SS Co . . . . . . . . . . . . 62,500
Eliminate investment against allocated excess
NCI:
Book value of stockholders’ equity of subsidiary…………. ……………………………………P 190,000
Adjustments to reflect fair value (over/ undervaluation of assets and liabilities)……….. 100,000
Fair value of stockholders’ equity of subsidiary………………………………………………….P 290,000
Multiplied by: Non-controlling Interest percentage............................................................... 25%
FV-NCI Partial Gain……………………….......………………………………………………………P 72,500
Add: NCI on Full-Gain)- P12,500 – P10,800……………………………………………………….. 1,700
FV-NCI-Full, Gain (P47,500 + P62,500) – given …………………………………………………...P 74,200

Schedule of Determination and Allocated Excess:

Fair Value Basis (Full-goodwill Approach)
Fair value of Subsidiary:
Consideration transferred – cash P 205,000 (
Fair value of NCI (given)* 75%)
__74,200 ( 25%)
Fair value of Subsidiary P 279,200
(100%)
Less: BV of SHE of SS: (P90,000 + P80,000 + P20,000) x 100% _190,000 (100%)
Allocated excess P 89,200
(100%)
 Less: Over/under valuation of A and L: Inc. (Dec.)
BV FV
Identifiable Assets P362,000 P462,000 P100,000
Liabilities 172,000 172,000 P - 0-
Increase in Net Assets (P190,000 – P290,000 x 100% **P100,000 _100,000 (100%)
Bargain purchase gain – full (P 10,800)(100%)
*FV of NCI given or NCI on FV of SHE-S, whichever is HIGHER rule.
NCI on FV-SHE of Subsidiary:
Book value of stockholders’ equity of subsidiary…………. ……………………………………P 190,000
Adjustments to reflect fair value (over/ undervaluation of assets and liabilities)……….. 100,000**
Fair value of stockholders’ equity of subsidiary………………………………………………….P 290,000
Multiplied by: Non-controlling Interest percentage............................................................... 25%
P 72,500
Therefore, the given amount of P74,200 is higher compared to P72,500. In the event that the assumed
amount is P71,000, therefore the higher amount of P72,500 (compared to P71,000) should be used to
determine the FV of Subsidiary.

Problem II
1. Schedule of Determination and Allocation of Excess
Case 1: Date of Acquisition – January 1, 20x4
Fair value of Subsidiary (100%)
Consideration transferred P 408,000
Less: Book value of stockholders’ equity of Sia:
Common stock (P240,000 x 100%) P 240,000
Paid-in capital in excess of par (P24,000 x 100%) 24,000
Retained earnings (P96,000 x 100%) 96,000 360,000
Allocated excess (excess of cost over book value) P 48,000
Less: Over/under valuation of assets and liabilities:
Increase in inventory (P18,000 x 100%) P 18,000
Increase in land (P72,000 x 100%) 72,000
Decrease in buildings and equipment (P12,000 x 100%) ( 12,000)
Increase in bonds payable (P42,000 x 100%) ( 42,000) 36,000
Positive excess: Goodwill (excess of cost over fair value) P 12,000

Case 2: Date of Acquisition - January 1, 20x4

Fair value of Subsidiary:
Consideration transferred:
Cash P 288,000
Common stock: 12,000 shares x P12 _ 144,000
Fair value of Subsidiary P 432,000
Less: Book value of stockholders’ equity of Sia:
Common stock (P240,000 x 100%) P 240,000
Paid-in capital in excess of par (P24,000 x 100%)... 24,000
Retained earnings (P96,000 x 100%) 96,000 360,000
Allocated excess (excess of cost over book value) P 72,000
Less: Over/under valuation of assets and liabilities:
Increase in inventory (P18,000 x 100%) P 18,000
Increase in land (P72,000 x 100%) 72,000
Decrease in buildings and equipment (P12,000 x 100%) ( 12,000)
Increase in bonds payable (P42,000 x 100%) ( 42,000) 36,000
Positive excess: Goodwill (excess of cost over fair value) P 36,000

Case 3: Date of Acquisition - January 1, 20x4

Proportionate Basis (Partial-goodwill Approach)
Schedule of Determination and Allocation of Excess (Partial-goodwill)
Fair value of Subsidiary (80%)
Consideration transferred……………………………….. P 360,000
Less: Book value of stockholders’ equity of Sia:
Common stock (P240,000 x 80%) P 192,000
Paid-in capital in excess of par (P96,000 x 80%) 76,800
Retained earnings (P24,000 x 80%) 19,200 288,000
Allocated excess (excess of cost over book value) P 72,000
 The balance sheet: Fulll-Goodwill
Peer Company and Subsidiary
Consolidated Balance Sheet
January 1, 20x4
Assets
Cash P 105,600
Accounts receivables 150,000
Inventories 210,000
Land 330,000
Buildings and equipment 828,000
Goodwill 54,000
Total Assets P1,677,600
Liabilities and Stockholders’ Equity
Liabilities
Accounts payable P 240,000
Bonds payable P 360,000
Premium on bonds payable 42,000 402,000
Total Liabilities P 642,000
Stockholders’ Equity
Common stock, P10 par P 600,000
Paid-in capital in excess of par 60,000
Retained earnings 285,600
Parent’s Stockholders’ Equity/Equity Attributable to the P 945,600
Owners of the Parent
Non-controlling interest 90,000
Total Stockholders’ Equity (Total Equity) P 1,035,600
Total Liabilities and Stockholders’ Equity P1,677,600

Problem III
1. The following entry on the date of acquisition in the books of Parent Company
January 1, 20x4
Investment in S Company…...…………………………………… 300,000
Common stock, P1 par…………………………………… 12,000
Paid-in capital in excess of par (P300,000 – P12,000 par).. 288,000
Acquisition of S Company.

2. Schedule of Determination and Allocation of Excess

a. Partial-goodwill Approach (Proportionate Basis)
Date of Acquisition – January 1, 20x4
Fair value of Subsidiary (80%)
Consideration transferred: P 300,000
Common stock: 12,000 shares x P25 per share…...
Less: Book value of stockholders’ equity of S:
Common stock (P12,000 x 80%)……………………. P 9,600
Paid-in capital in excess of par (P108,000 x 80%)... 86,400
Retained earnings (P72,000 x 80%)……………….... 57,600 153,600
Allocated excess (excess of cost over book value)…… P 146,400
Less: Over/under valuation of assets and liabilities:
Increase in inventory (P6,000 x 80%)……………… P 4,800
Increase in land (P36,000 x 80%)……………………. 28,800
Increase in buildings and equipment 120,000
(P150,000 x 80%)…………………………………......
Increase in copyrights (P60,000 x 80%)…………….. 48,000
Increase in contingent liabilities – estimated ( 4,800) 196,800
liability for contingencies (P6,000 x 80%)…….....
Negative excess: Bargain purchase gain to controlling (P 50,400)
interest or attributable to parent only)……………..
The over/under valuation of assets and liabilities are summarized as follows:
S Co. S Co. Over/Under
Book value Fair value Valuation
Inventory………………….……………... P 60,000 P 66,000 P 6,000
Land………………………………………. 48,000 84,000 36,000
Buildings and equipment (net)......... 222,000 372,000 150,000
Copyright……………………………….. -0- 60,000 60,000
Estimated liability for contingencies.. 0 ( 6,000) ( 6,000)
Net undervaluation……………………. P 330,000 P 576,000 P246,000

b. Full-goodwill Approach (Fair Value Basis)

Date of Acquisition – January 1, 20x4
 Fair value of Subsidiary (100%)
Consideration transferred: P 300,000
Common stock: 12,000 x P25 (80%)………………
Fair value of NCI (given) (20%)………………………. 90,000
Fair value of subsidiary (100%)………………………. P 390,000
Less: Book value of stockholders’ equity of S:
Common stock (P12,000 x 100%)……………………. P 12,000
Paid-in capital in excess of par (P108,000 x 100%). 108,000
Retained earnings (P72,000 x 100%)………………... 72,000 192,000
Allocated excess (excess of cost over book value)…… P 198,000
Less: Over/under valuation of assets and liabilities:
Increase in inventory (P6,000 x 100%)……………… P 6,000
Increase in land (P36,000 x 100%)…………………… 36,000
Increase in buildings and equipment 150,000
(P150,000 x 100%)…………………………………....
Increase in copyrights (P60,000 x 100%)…………… 6,000
Increase in contingent liabilities – estimated ( 6,000) 246,000
liability for contingencies (P6,000 x 100%)……..
Negative excess: Bargain purchase gain to controlling (P 48,000)
interest or attributable to parent only)……………..
4. Working Paper Eliminating Entries
a. Partial-goodwill Approach (Proportionate Basis)
The schedule of determination and allocation of excess provides complete guidance for the
worksheet eliminating entries on January 1, 20x4:
(E1) Common stock – S Co……………………………………………. 12,000
Additional paid-in capital – S Co………………………………. 108,000
Retained earnings – S Co………………………………………… 72,000
Investment in S Co……………………………………………… 153,600
Non-controlling interest (P192,000 x 20%)……………………….. 38,400
Eliminate investment against stockholders’ equity of S Co

(E2) Inventory………………………………………………………………….. 6,000

Land……………………………………………………………………….. 36,000
Buildings and equipment……………………………………………… 150,000
Copyright……………………………………………………………….... 60,000
Estimated liability for contingencies…………………………….. 6,000
Investment in S Co……………………………………………... 146,400
Non-controlling interest (P246,000 x 20%)………………………. 49,200
Retained earnings (bargain purchase gain - closed to
retained earnings since only balance sheets are being
examined)............................................................................. 50,400
Eliminate investment against allocated excess.

b. Full-goodwill Approach (Fair Value Basis)

The schedule of determination and allocation of excess provides complete guidance for the
worksheet eliminating entries on January 1, 20x4:
(E1) Common stock – S Co……………………………………………. 12,000
Additional paid-in capital – S Co………………………………. 108,000
Retained earnings – S Co………………………………………… 72,000
Investment in S Co……………………………………………… 153,600
Non-controlling interest (P192,000 x 20%)……………………….. 38,400
Eliminate investment against stockholders’ equity of S Co

(E2) Inventory………………………………………………………………….. 6,000

Land……………………………………………………………………….. 36,000
Buildings and equipment……………………………………………… 150,000
Copyright……………………………………………………………….... 60,000
Estimated liability for contingencies…………………………….. 6,000
Investment in S Co……………………………………………... 146,400
Non-controlling interest (P90,000 given – P38,400)…………… 51,600
Retained earnings (bargain purchase gain - closed to
retained earnings since only balance sheets are being
examined)............................................................................. 48,000
Eliminate investment against allocated excess.

5. Consolidated Workpaper
Worksheet for Consolidated balance Sheet, January 1, 20x4. Date of Acquisition: 80%-Owned
Subsidiary (Proportionate Basis)
Eliminations
Assets P Co. S Co. Dr. Cr. Consolidated
Cash………………… P 334,800 P 334,800
Accounts receivable…….. 86,400 P 110,400
24,000
 Inventory…………………. 96,000 60,000 (2) 6,000 162,000
Land………………………… 120,000 48,000 (2) 36,000 204,000
Buildings and equipment (net). 744,000 222,000 (2) 150,000 1,116,000

Copyright……………………... (2) 60,000 60,000

Investment in S Co…….. 300,000 (1) 153,600 -
__________ _________ (2) 146,400
Total Assets P1,681,200 354,000 P1,987,200
Liabilities and Stockholders’ Equity
Accounts payable……… P 96,000 42,000 P 138,000
Estimated liability for contingencies (2) 6,000 6,000
Bonds payable……… 240,000 120,000 360,000
Common stock, P1 par*…..… 44,160 44,160
Common stock, P1 par……… 12,000 (1) 12,000
Paid-in capital in excess of 723,840 723,840
par**
Paid-in capital in excess of par 108,000(1) (1)
108,000
Retained earnings 577,200 (2) 50,400 627,600
Retained earnings…………… 72,000 (1) 72,000
Non-controlling interest………… _________ _______ _________ (1 ) 38,400 _87,600
(2) 49,200
Total Liabilities and Stockholders’ Equity P1,681,200 P354,00 P 444,000 P 444,000 P1,987,200
0
(1) Eliminate investment against stockholders’ equity of Scud Co.
(2) Eliminate investment against allocated excess.
* P32,160 + (12,000 shares xP1 par) = P44,160.
**P435,840 + [12,000 shares x (P25 – P1)] = P723,840.
· Incidentally, the non-controlling interest on the date of acquisition is computed as follows:
Common stock – S Co……….………………………………… P 12,000
Paid-in capital in excess of par – S Co…………………….. 108,000
Retained earnings – S Co……………………………………… 72,000
Book value of stockholders’ equity – S Co…………………. P 192,000
Adjustments to reflect fair value (over/ undervaluation
of assets and liabilities)…………………………………………. 246,000
Fair value of stockholders’ equity of subsidiary………………… P 438,000
Multiplied by: Non-controlling Interest percentage…………... 20
Non-controlling interest (partial)………………………………….. P 87,600

Worksheet for Consolidated balance Sheet, January 1, 20x4. Date of Acquisition: 80%-Owned
Subsidiary (Fair Value Basis)
Eliminations
Assets P Co. S Co. Dr. Cr. Consolidated
Cash………………… P 334,800 P 334,800
Accounts receivable…….. 86,400 P 110,400
24,000
Inventory…………………. 96,000 60,000 (2) 6,000 162,000
Land………………………… 120,000 48,000 (2) 36,000 204,000
Buildings and equipment (net). 744,000 222,000 (2) 150,000 1,116,000

Copyright……………………... (2) 60,000 60,000

Investment in S Co…….. 300,000 (1) 153,600 -
__________ _________ (2) 146,400
Total Assets P1,681,200 P354,00 P1,987,200
0
Liabilities and Stockholders’ Equity
Accounts payable……… P 96,000 42,000 P 138,000
Estimated liability for (2) 6,000 6,000
contingencies…
Bonds payable……… 240,000 120,000 360,000
Common stock, P1 par*…..… 44,160 44,160
Common stock, P1 par……… 12,000 (2) 12,000
Paid-in capital in excess of par** 723,840 723,840
Paid-in capital in excess of par 108,000(2) (1)
108,000
Retained earnings 577,200 (2) 48,000 625,200
Retained earnings…………… 72,000 (1) 72,000
Non-controlling interest………… _________ _______ _________ (1 ) 38,400 _90,000
(2) 51,600
Total Liabilities and Stockholders’ P1,681,200 P354,00 P 444,000 P 444,000 P1,987,200
Equity 0
(1) Eliminate investment against stockholders’ equity of Scud Co.
(2) Eliminate investment against allocated excess.
* P32,160 + (12,000 shares xP1 par) = P44,160.
**P435,840 + [12,000 shares x (P25 – P1)] = P723,840.

6. Consolidated Balance Sheet

Partial-goodwill Approach (Proportionate Basis)
Assets
Cash P 334,800
Accounts receivables 110,400
Inventories 162,000
Land 204,000
Buildings and equipment (net) 1,116,000
Copyright 60,000
Total Assets P1,987,200
Liabilities and Stockholders’ Equity
Liabilities
Accounts payable P 138,000
Estimated liability for contingencies 6,000
Bonds payable 360,000
Total Liabilities P 504,000
Stockholders’ Equity
Common stock, P1 par P 44,160
Paid-in capital in excess of par 723,840
Retained earnings 627,600
Parent’s Stockholders’ Equity/Equity Attributable to the
Owners of the Parent P1,395,600
Non-controlling interest 87,600
Total Stockholders’ Equity (Total Equity) P1,483,200
Total Liabilities and Stockholders’ Equity P1,987,200

Fair Value Basis

Assets
Cash P 334,800
Accounts receivables 110,400
Inventories 162,000
Land 204,000
Buildings and equipment (net) 1,116,000
Copyright 60,000
Total Assets P1,987,200
Liabilities and Stockholders’ Equity
Liabilities
Accounts payable P 138,000
Estimated liability for contingencies 6,000
Bonds payable 360,000
Total Liabilities P 504,000
Stockholders’ Equity
Common stock, P1 par P 44,160
Paid-in capital in excess of par 723,840
Retained earnings 652,200
Parent’s Stockholders’ Equity/Equity Attributable to the
Owners of the Parent P1,393,200
Non-controlling interest 90,000
Total Stockholders’ Equity (Total Equity) P1,483,200
Total Liabilities and Stockholders’ Equity P1,987,200

Problem IV
1. P297,462 (Full-goodwill approach)
Fair value of subsidiary (100%):
Consideration transferred: Cash (P1,901,250 + P562,500) P2,463,750
Less: Control premium…………………………………………. ( 82,500)
P2,381,250/65% P3,663,462
Add: Control premium…………………………………………. ____82,500
Fair value of subsidiary ………………………………………… P3,745,962
Less: Book value of stockholders’ equity
(net assets) – Guidance Company – given per problem 2,925,000
Allocated excess………………………………………………... P 820,962
Less: Over/undervaluation of assets and liabilities:
(P75,000 + P375,000 + P73,500) 523,500
Positive excess: Goodwill P 297,462
2. P222,225 (Partial/Proportionate goodwill approach)
Fair value of subsidiary (100%):
Consideration transferred: Cash (P1,901,250 + P562,500) P2,463,750
Less: Book value of stockholders’ equity
(net assets) – Guidance Company
(P2,925,000 x 65%)…………………………………………… 1,901,250
Allocated excess………………………………………………... P 562,500
Less: Over/undervaluation of assets and liabilities:
(P75,000 + P375,000 + P73,500) x 65% 340,275
Positive excess: Goodwill P 222,225

3. P395,250 (Full-goodwill approach)

Fair value of subsidiary (100%):
Consideration transferred: Cash (P1,901,250 + P562,500) P2,463,750
FV of NCI…………………….……………………………………. _1,380,000
Fair value of subsidiary ………………………………………… P3,843,750
Less: Book value of stockholders’ equity
(net assets) – Guidance Company – given per problem 2,925,000
Allocated excess………………………………………………... P 918,750
Less: Over/undervaluation of assets and liabilities:
(P75,000 + P375,000 + P73,500) 523,500
Positive excess: Goodwill P 395,250

Problem V - None

Problem VI
1. Inventory P 140,000
2. Land P 60,000
3. Buildings and Equipment P 550,000
4. Goodwill

Fair value of consideration given P 576,000

Less; Book value of SHE 450,000
Allocated excess: P126,000
Increase / decrease in fair value (Fair value increment) for:
Inventory P 20,000
Land (10,000)
Buildings and equipment 70,000 80,000
Goodwill P 46,000

5. Investment in AA Corporation: Nothing would be reported; the balance in the

investment account is eliminated.

Problem VII
In acquisitions, the fair values of the subsidiary's assets and liabilities are consolidated (there are a limited
number of exceptions). Goodwill is reported as P80,000, the amount that the P760,000 consideration
transferred exceeds the P680,000 fair value of SS’s net assets acquired.

1. Inventory = P670,000 (P's book value plus SS fair value)

2. Land = P710,000 (P's book value plus Sun's fair value)
3. Buildings and equipment = P930,000 (P's book value plus S's fair value)
4. Franchise agreements = P440,000 P's book value plus S's fair value)
5. Goodwill = P80,000 (calculated above)
6. Revenues = P960,000 (only parent company operational figures are reported at date of acquisition)
7. Additional Paidin Capital = P65,000 (P's book value less stock issue costs)
8. Expenses = P940,000 (only parent company operational figures plus acquisition-related costs are
reported at date of acquisition)
9. Retained Earnings, 1/1 = P390,000 (P's book value)

Problem VIII
1. Inventory (P120,000 + P20,000) P140,000
2. Land (P70,000 – P10,000) P 60,000
3. Buildings and Equipment (P480,000 + P70,000) 550,000
4. Full-Goodwill, P57,500
Fair value of Subsidiary:
Consideration transferred P470,000
Add: FV of NCI 117,500 P587,500
Less: BV of SHE of Slim (P250,000 + P200,000) 450,000
 P1,500,000 – (1,700,000 – 50,000 decrease in inventories) + (P100,000 increase in PPE –
P300,000 – P500,000) = P550,000
23. a
24. d (P1,000,000 + P250,000) = P1,250,000 P only.
25. d - A total of P210,000 (P120,000 + P90,000) should be reported.
26. a - As shown in the investment account balance, Beryl paid P110,000 for the ownership of SS. The
amount paid was P30,000 greater than the book value of the net assets of SS and is reported as
goodwill in the consolidated balance sheet at January 1, 20X5.
27. c - In determining the amount to be reported for land in the consolidated balance sheet, P15,000
(P70,000 + P50,000 - P105,000) was eliminated. BB apparently sold the land to SS for P25,000
(P10,000 + P15,000).
28. d - Accounts payable of P120,000 (P75,000 + P55,000 - P10,000) will be reported in the consolidated
balance sheet. A total of P10,000 was deducted in determining the balance reported for accounts
receivable (P90,000 + P50,000 - P130,000). The elimination of an intercompany receivable must be
offset by the elimination of an intercompany payable.
29. c- P100,000, the par value of B's stock outstanding is P100,000
30. a
Fair value of subsidiary (100%):
Consideration transferred P 600,000
Less: Book value of stockholders’ equity
(net assets) – Son Company
(P180,000 + P165,000 + P90,000) x 80% __348,000
Allocated excess P 252,000
Less: Over/undervaluation of assets and liabilities:
Increase in land (P420,000 – P264,000) x 80% P124,800
Increase in building: P96,000 x 80% __76,800 __201,600
Positive excess: Goodwill P 50,400

31. b
Fair value of subsidiary (100%):
Consideration transferred P 600,000
FV of NCI 147,300
Control premium 27,600
P 774,900
Less: Book value of stockholders’ equity
(net assets) – Son Company
(P180,000 + P165,000 + P90,000) x 100% __435,000
Allocated excess P 339,900
Less: Over/undervaluation of assets and liabilities:
Increase in land (P420,000 – P264,000) x 100% P156,000
Increase in building: P96,000 x 100% __96,000 __252,000
Positive excess: Goodwill P 87,900

32. c
Fair value of subsidiary (100%):
Consideration transferred P 600,000
Less: Control premium 44,400
P555,600/80 P 694,500
%
Add: Control premium __44,400
P 738,900
Less: Book value of stockholders’ equity
(net assets) – Son Company
(P180,000 + P165,000 + P90,000) x 100% __435,000
Allocated excess P 303,900
Less: Over/undervaluation of assets and liabilities:
Increase in land (P420,000 – P264,000) x 100% P156,000
Increase in building: P96,000 x 100% __96,000 __252,000
Positive excess: Goodwill P 51,900

33. b
FV of S: CT - Acquisition cost P 13,000,000
Less: Book value (P20,000,000 + P36,000,000) 56,000,000
Allocated Excess of book value over cost P(43,000,000)
Add: Existing goodwill 40,000,000
Adjusted Allocated excess P( 3,000,000)
Less: Over/undervaluation of A & L __________-0-
 Bargain purchase gain/Gain on acquisition P( 3,000,000)

34. b - Proportionate Basis (Partial-goodwill Approach)

· Partial-goodwill
Fair value of subsidiary (60%):
Consideration transferred: Cash……………………….....P 7,560,000 (60%)
Less: Book value of stockholders’ equity (net assets)
– S Company: P6,000,000 x 60%................................ 3,600,000 (60%)
Allocated Excess.……………………………………………….... P 3,960,000 (60%)
Less: Over/undervaluation of assets and liabilities:
(P8,400,000 – P6,000,000) x 60%................................... 1,440,000 (60%)
Positive excess: Goodwill (partial)……………………………....P 2,520,000 (60%)

35. c - Fair Value Basis (Full-goodwill Approach)

· Full-goodwill
Fair value of subsidiary (100%):
Consideration transferred: Cash ………………………...P 7,560,000 ( 60%)
Fair value of NCI (given)………………………………….. 4,800,000 ( 40%)
Fair value of subsidiary…………………………………………...P12,360,000 (100%)
Less: Book value of stockholders’ equity (net assets)
– S Company: P6,000,000 x 100%........................... 6,000,000 (100%)
Allocated Excess.…………………………………………………..P 6,360,000 (100%)
Less: Over/undervaluation of assets and liabilities:
(P8,400,000 – P6,000,000) x 100%................................ 2,400,000 (100%)
Positive excess: Goodwill (full)……………………………….....P 3,960,000 (100%)

The full – goodwill of P3,960,000 consists of two parts:

Full-goodwill……………………………………………...P 3,960,000
Less: Controlling interest on full-goodwill
or partial-goodwill (No. 34)………………. 2,520,000
NCI on full-goodwill……………………………………..P 1,440,000

36. b
· Non-controlling interest (refer to No. 34)
Book value of stockholders’ equity of subsidiary…………. P 6,000,000
Adjustments to reflect fair value (over/ undervaluation
of assets and liabilities): (P8,400,000 – P6,000,000)…. 2,400,000
Fair value of stockholders’ equity of subsidiary…………….P 8,400,000
Multiplied by: Non-controlling Interest percentage........... 40%
Non-controlling interest (partial)………………………………..P 3,360,000

37. c -
· Non-controlling interest
Non-controlling interest (partial) – refer to No. 36…………P 3,360,000
Add: Non-controlling interest on full -goodwill
(P3,960,000 – P2,520,000 partial-goodwill)………….. 1,440,000
Non-controlling Interest (full)…………………………………..P 4,800,000

38. d - Proportionate Basis (Partial-goodwill Approach)

· Partial-goodwill
Fair value of subsidiary (75%):
Consideration transferred: Cash………………………..P 9,000,000 (75%)
Less: Book value of stockholders’ equity (net assets)
– S Company: P7,200,000 x 75%............................... 5,400,000 (75%)
Allocated Excess.………………………………………………....P 3,600,000 (75%)
Less: Over/undervaluation of assets and liabilities:
(P9,600,000 – P7,200,000) x 75%................................. 1,800,000 (75%)
Positive excess: Goodwill (partial)…………………………….P 1,800,000 (75%)

39. c - Fair Value Basis (Full-goodwill Approach)

· Full-goodwill
Fair value of subsidiary…………………………………………. P 11,640,000 (100%)
Less: Book value of stockholders’ equity (net assets)
– S Company: P7,200,000 x 100%............................. 7,200,000 (100%)
Allocated Excess.………………………………………………….P 4,440,000 (100%)
Less: Over/undervaluation of assets and liabilities:
(P9,600,000 – P7,200,000) x 100%.............................. 2,400,000 (100%)
Positive excess: Goodwill (full)……………………………….....P 2,040,000 (100%)
 PP - building
P510,000
TT building acquisition-date fair valueP300,000
Amortization for 3 years (10-year life) (90,000) 210,000
Consolidated buildings
P720,000
-OR-
PP - building
510,000
TT building 12/31/x4 P182,000
Excess acquisition-date fair value allocation 40,000
Excess amortization for (P40,000/ 10 x 3 years) (12,000) 210,000
Consolidated buildings
P720,000
104. b
Target not met: 100,000 shares x .75 share x P10 = P750,000
Target met: 100,000 shares x .8 x P10 = P800,000
105. c
Target not met: 250,000 shares x 1.50 share x P30 = P11,250,000
Target met: 250,000 shares x 1.8 x P30 = P13,500,000
106. c
500,000 shares x 1.7 exchange ratio x P25 = P21,250,000
The investment value does not change as a result of a change in the share prices.
107. d
Cost of Investment (40 shares* x P40)………………………………………………………P 1,600
Less: Book value of SHE – Pedro Ltd (P300 + P800) x 100%...................................... 1,100
Allocated excess………………………………………………………………………………P 500
Less: Over/Under valuation of Assets and Liabilities:
Increase in Non-current assets: [(P1,500 – P1,300) x 100% x 70%..................... 140
Goodwill………………………………………………………………………………………….P 360

100%
* Pedro Ltd Santi Ltd
Currently issued…………………… 100 40% 40 40%
Additional shares issued……….. 150 60%** 60 / 60%
Total shares………………………… 250 100

**150/250
FV of net assets [P.5M + P1.5M – P.7M)] P1.3M P ?
BV of net assets (same with FV)……….. 1.1 M ?
Fv per share of stock……………………… P 16 P 40

Pedro ltd issues 2 ½ shares in exchange for each ordinary share of Santi Ltd. All of Santi Ltd’s
shareholders exchange their shares for Pedro Ltd. Pedro Ltd therefore issues 150 shares (60 x 2 ½)
for the 60 shares in Santi Ltd.

Pedro Ltd is now the legal parent of the subsidiary Santi Ltd. However, analyzing the shareholding in
Pedro Ltd shows that it consists of the 100 shares existing prior to the merger and 150 new shares
held by former shareholders in Santi Ltd. In essence, the former shareholders of Santi Ltd now
control both entities Pedro Ltd and Santi Ltd. The former Santi Ltd shareholders have a 60% interest
in Pedro Ltd [150/(100+150]. The IASB argues that there has been a reverse acquisition, and that
Santi Ltd is effectively the acquirer of Pedro Ltd.

Reverse acquisition occurs when the legal subsidiary has this form of control over the legal parent.
The usual circumstance creating a reverse acquisition is where an entity (the legal parent) obtains
ownership of the equity of another entity (the legal subsidiary) but, as part of the exchange
transaction, it issues enough voting equity as consideration for control of the combined entity to pass
to the owners of the legal subsidiary.

The key accounting effect of deciding that Santi Ltd is the acquirer is that the assets and liabilities of
Pedro ltd are to be valued at fair value. This is contrary to normal acquisition accounting, based on
Pedro Ltd being the legal parent of Santi Ltd, which would require the assets and liabilities of Santi
Ltd to be valued at fair value.

108. b – building account in the books of subsidiary at fair value

109. e – building account in the books of subsidiary at book value
110. d – push-down accounting: equipment account in the books of subsidiary is at fair value
111. c
 P60,000 allocation to equipment is "pusheddown" to subsidiary and increases balance from
P330,000 to P390,000. Consolidated balance is P420,000 plus P390,000.

Theories
1. c 6. B 11. c 16. d 21. b 26. D 31 c 36. d
2. a 7. b 12. c 17. c 22. a 27. C 32. d 37. d
3. e 8. A 13. d 18. b 23. a 28. C 33. b 38. c
4. e 9. D 14. d 19. c 24. b 29. D 34. d 39. b
5. b 10, a 15, b 20. c 25. c 30. B 35. d 40. c

41. c 46. b 51. c 56. c

42. c 47. a 52. b 57. d
43. c 48. c 53. a
44. c 49. d 54. a
45. c 50, b 55, b