AA2 Chapter 11 Sol

CHAPTER 11 SUGGESTED ANSWERS EXERCISES Exercise 11 - 1 1. a. Ordinary Share Capital, Sing Co. Additional Paid-in Capital, Sing Co. Retained Earnings, Sing Co. Goodwill Investment Cost of interest acquired Book value of interest acquired (P100,000 + P20,000 + P25,000) x 100% Goodwill b.

Ordinary Share Capital, Sing Co. Additional Paid-in Capital, Sing Co. Investment Profit or Loss /Gain on Business Combination Retained Earnings, Sing Co. Cost of interest acquired Book value of interest acquired (P100,000 + P80,000 - P30,000) x 100% Negative Goodwill

c.1

Ordinary Share Capital, Sing Co. Additional Paid-in Capital, Sing Co. Goodwill Investment Retained Earnings, Sing Co. Minority Interest Cost of interest acquired Book value of interest acquired (100,000 + 40,000 – 5,000) x 75% Goodwill Grossed-up Goodwill (P18,750/75%)

c.2

Ordinary Share Capital, Sing Co. Additional Paid-in Capital, Sing Co. Goodwill Investment Retained Earnings, Sing Co.

100,000 20,000 25,000 15,000 160,000 P160,000 145,000 P 15,000 100,000 80,000 140,000 10,000 30,000 P140,000 150,000 P 10,000 75,000 30,000 25,000 120,000 3,750 6,250 P120,000 101,250 P 18,750 P 25,000 75,000 30,000 18,750 120,000 3,750

2. c.1

Ordinary Share Capital, Sing Co.

100,000

Chapter 11 – Suggested Answers (AA2.2006)

c.1

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Additional Paid-in Capital, Sing Co. Goodwill Investment Retained Earnings Minority Interest

40,000 25,000

Ordinary Share Capital, Sing Co. Additional Paid-in Capital, Sing Co. Goodwill Investment Retained Earnings Minority Interest

100,000 40,000 18,750

Minority interest:: Ordinary Share Capital APIC RE Share in goodwill (P25,000 x 25%) Exercise 11 – 2 Case A Ordinary Share Capital, Soya Co. Additional Paid-in Capital, Soya Co. Retained Earnings, Soya Co. Goodwill Investment Minority Interest Cost Book value of interest acquired (P100,000 + P30,000 + P20,000) x 80% Goodwill Grossed-up Goodwill (P5,000/80%) Ordinary Share Capital, Soya Co. Additional Paid-in Capital, Soya Co. Retained Earnings, Soya Co. Goodwill Investment Case B Ordinary Share Capital, Soya Co. Additional Paid-in Capital, Soya Co. Retained Earnings, Soya Co. Minority Interest Investment Profit or Loss / Gain on Business Combination Cost Book value of interest acquired (P50,000 + P20,000 + P10,000) x 75% Negative Goodwill

120,000 5,000 40,000

120,000 5,000 33,750 P25,000 10,000 (1,250) 6,250 P 40,000

80,000 24,000 16,000 6,250 125,000 1,250 P125,000 120,000 P 5,000 P 6,250 80,000 24,000 16,000 5,000 125,000 37,500 15,000 7,500 667 58,000 2,667 P58,000 60,000 P 2,000

Chapter 11 – Suggested Answers (AA2.2006)

Grossed-up Negative goodwill (P2,000/75%) Ordinary Share Capital, Soya Co. Additional Paid-in Capital, Soya Co. Retained Earnings, Soya Co. Investment Profit or Loss / Gain on Business Combination Case C Ordinary Share Capital, Soya Co. Additional Paid-in Capital, Soya Co. Minority Interest Investment Profit or Loss (Gain on Bus Com) Retained Earnings, Soya Co. Cost Book value of interest acquired (P80,000 + P40,000 - P10,000) x 60% Negative Goodwill Grossed-up Negative goodwill (P3,000 / 60%) Ordinary Share Capital, Soya Co. Additional Paid-in Capital, Soya Co. Investment Profit or Loss (Gain on Bus Com) Retained Earnings, Soya Co. Exercise 11 - 3 Case A Ordinary Share Capital, Say Co. Additional Paid-in Capital, Say Co. Investment Retained Earnings, Say Co. Case B Ordinary Share Capital, Say Co. Additional Paid-in Capital, Say Co. Plant and Equipment Investment Retained Earnings, Say Co. Minority Interest

Cost Book value of interest acquired (P100,000 + P50,000 - P10,000) x 90% Increase in P&E Total increase in plant and equipment ((P18,000/90%) Ordinary Share Capital, Say Co. Additional Paid-in Capital, Say Co.

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P 2,667 37,500 15,000 7,500 58,000 2,000 48,000 24,000 2,000 63,000 5,000 6,000 P63,000 66,000 P 3,000 P 5,000 48,000 24,000 63,000 3,000 6,000

100,000 50,000 140,000 10,000 90,000 45,000 20,000 144,000 9,000 2,000

P144,000 126,000 P 18,000 P 20,000 90,000 45,000

Chapter 11 – Suggested Answers (AA2.2006)

Plant and Equipment Investment Retained Earnings, Say Co. Case C Ordinary Share Capital, Say Co. Additional Paid-in Capital, Say Co. Minority Interest Investment Inventories Retained Earnings, Say Co. Cost Book value of interest acquired (P100,000 +P50,000 - P10,000) 80% Decrease in Inventory Total decrease in inventory (P8,000/80%) Ordinary Share Capital, Say Co. Additional Paid-in Capital, Say Co. Investment Inventories Retained Earnings, Say Co. Exercise 11 - 4 a. Investment in Sax Co. Ordinary Share Capital Additional Paid-in Capital Ordinary Share Capital, Sax Co. Additional Paid-in Capital, Sox Co. Retained Earnings, Sax Co. Equipment Investment in Sax Co. Minority Interest Cost (4,000 x P120) Book value of interest acquired (P450,000 x 90%) Increase in Equipment Total increase in equipment (P75,000/90%) Ordinary Share Capital, Sax Co. Additional Paid-in Capital, Sox Co. Retained Earnings, Sax Co. Equipment Investment in Sax Co. b.

Investment in Sax Co. Ordinary Share Capital Additional Paid-in Capital Ordinary Share Capital, Sax Co.

page4

18,000 144,000 9,000 80,000 40,000 2,000 104,000 10,000 8,000 P104,000 112,000 P 8,000 P 10,000 80,000 40,000 104,000 8,000 8,000 P480,000 400,000 80,000 90,000 225,000 90,000 83,333 480,000 8,333 P480,000 405,000 P 75,000 P 83,333 90,000 225,000 90,000 75,000 480,000 420,000 350,000 70,000 90,000

Chapter 11 – Suggested Answers (AA2.2006)

Additional Paid-in Capital, Sax Co. Retained Earnings, Sax Co. Goodwill Investment in Sax Co. Minority Interest Cost (3,500 x P120) Book value of interest acquired (P450,000 x 90%) Goodwill Grossed-up Goodwill (P15,000/90%)

c.

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225,000 90,000 16,667 420,000 1,667 P420,000 405,000 P 15,000 P 16,667

Ordinary Share Capital, Sax Co. Additional Paid-in Capital, Sax Co. Retained Earnings, Sax Co. Goodwill Investment in Sax Co.

90,000 225,000 90,000 15,000

Investment in Sax Co. Ordinary Share Capital Additional Paid-in Capital

360,000

Ordinary Share Capital, Sax Co. Additional Paid-in Capital, Sax Co. Retained Earnings, Sax Co. Minority Interest Inventory Investment in Sax Co. Profit or Loss / Gain on Business Combination

90,000 225,000 90,000 5,000

Cost (3,000 x P120) Book value of interest acquired (P450,000 x 90%) Difference Total adjustment (P45,000/90%) Decrease in inventory Negative goodwill Ordinary Share Capital, Sax Co. Additional Paid-in Capital, Sax Co. Retained Earnings, Sax Co. Inventory Investment in Sax Co. Profit or Loss / Gain on Business Combination

420,000 300,000 60,000

25,000 360,000 25,000 P360,000 405,000 P 45,000 P 50,000 25,000 P 25,000 90,000 225,000 90,000

Exercise 11 – 5 1. Minority interest (P90,000 – P15,000*) Percentage of minority interest Total Shareholders’ Equity of Sand Less Ordinary Share Capital and APIC (P800,000 + P400,000) Deficit of Sand *Adjustment in assets: (Land – P50,000 + Goodwill – P100,000) x 10%

25,000 360,000 25,000 P

75,000 ÷ 10% P 750,000 1,200,000 P( 450,000)

Chapter 11 – Suggested Answers (AA2.2006)

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= P150,000 x 10% = P15,000 2.

Consolidated balance of land Less Book value of land of Pond Co. FMV of Sand’s land Less Excess of FMV over BV BV of Sand’s land

P1,145,000 850,000 P 295,000 50,000 P 245,000

3.

Consolidated balance of liabilities Less Liabilities of Pond Liabilities of Sand

P440,000 340,000 P100,000

4.

Excess of cost over BV Land Goodwill Book value (P750,000 x 90%) Cost of investment

P 50,000 100,000

P150,000x90%

5.

Ordinary Share Capital (P800,000 x 10%) APIC (P400,000 x 10%) RE (P450,000 x 10%) Adjustment in land and goodwill Minority interest Exercise 11 - 6 a. Total stockholders’ equity + asset adjustment, including goodwill Less Minority interest (in TSE and asset adjustment) Controlling interest Percentage of ownership acquired (P159,375/P187,500) b. Total stockholders' equity of Sill Increase in fair value of assets: Inventories P 3,900 Plant assets 28,500 Patents 4,500 Current fair value of net identifiable assets c.

P5,250 x 15%

d.

OS = P60,000 x 15% APIC = P35,250 x 15% RE = P50,100 x 15% Share in asset adjustment (P3,900 + P28,500 + P4,500 + P5,250) x 15% Total

Exercise 11 - 7 a. Total current assets of Seeda = (P146,000 + P2,000) - P106,000 b.

P135,000 675,000 P810,000 P 80,000 40,000 ( 45,000) 15,000 P 90,000 P187,500 28,125 P159,375 85% P145,350

36,900 P182,250 P787.50 P 9,000.00 5,287.50 7,515.00 6,322.50 P28.125.00 P 42,000

Minority interest Less Share in asset adjustment (P10,000 + P8,100) x 30% Minority interest in subsidiary stockholders’ equity

P35,100 5,430 P29,670

Total stockholders’ equity of subsidiary (P29,670 / 30%)

P98,900

Chapter 11 – Suggested Answers (AA2.2006)

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Exercise 11 – 8 1. Palomar Inventory Samar Inventory at FMV Consolidated inventory

P1,100,000 1,700,000 P2,800,000

2.

Palomar Buildings and equipment Samar Buildings and equipment at FMV Consolidated buildings and equipment

3.

ZERO. It is eliminated in the consolidated balance sheet.

4.

Cost Book value of acquired interest (P1,000,000 + P2,000,000 – P400,000 – P300,000) Excess of cost over BV Allocation of excess: Decrease in inventory Increase in buildings and equipment Goodwill

5.

P4,000,000. company.

P3,500,000 3,750,000 P7,250,000

P2,800,000 2,300,000 P 500,000 (P100,000) 250,000

150,000 P 350,000

The Ordinary Share Capital of Palomar, the acquiring

6. P1,050,000. The Retained Earnings of Palomar, the acquiring company. Exercise 11 - 9 Inventories 20,000 Plant Assets 80,000 Ordinary Share Capital, Santa Co. 200,000 Paid-In Capital in Excess of Par - Santa Co. 210,000 Investment in Subsidiary Retained Earnings, Santa Co. PROBLEMS Problem 11 - 1 Prime Inc. and Subsidiary Slime Corp. Working Paper for Consolidated Statement of Financial Position January 1, 2008

Debits Cash and Other Current Assets Plant, Property, and Equipment Investment in Slime Corp. Other Assets Goodwill Credits Accumulated Depreciation Liabilities Ordinary Share Capital, Prime

Prime Inc.

Slime Corp.

400,000 200,000 380,000 30,000

300,000 250,000

1,010,000

570,000

60,000 300,000 400,000

50,000 250,000

Eliminations Dr. Cr.

a 380,000 20,000 a. 110,000

420,000 90,000

Consolidated Statement of Finl Position 700,000 450,000 -----50,000 110,000 1,310.000 110,000 550,000 400,000

Chapter 11 – Suggested Answers (AA2.2006)

Inc. Add’l Paid-In Capital, Prime, Inc Retained Earnings, Prime, Inc. Ordinary Share Capital, Slime Corp Add’l Paid-In Capital, Slime Corp. Retained Earnings, Slime Corp.

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180,000

180,000

70,000

70,000

1,010,000

200,000

a.200,000

40,000

a. 40,000

30,000 570,000

a. 30,000 380,000

380,000

1,310,000

Problem 11 - 2 Requirement 1 Cost Book value of interest acquired: Ordinary Share Capital Additional paid-in capital Retained earnings Excess of cost over book value Allocation of excess: Inventory Land Equipment Goodwill

P950,000 P200,000 100,000 400,000 P 30,000 50,000 130,000

700,000 P250,000

210,000 P 40,000

Requirement 2 Pole Co. and Subsidiary Sole Co. Working Paper for Consolidated Statement of Financial Position January 2, 2008 Pole Co.

Sole Co.

Eliminations Dr. Cr.

Consolidated St. of Fin Pos.

300,00 0 200,00 0 150,00 0

50,000

350,000

100,000

300,000

Debits Cash Accounts Receivable Inventory Land Equipment Investment in Sole Co. Goodwill

60,000 a

600,00 0 950,000

240,000

70,000 a. 50,000 470,000 a. 130,000

120,000 1,200,000 a.

a. 40,000 2,200,000

750,00 0

Credits

30,000

950,000 40,000 2,250,000

Chapter 11 – Suggested Answers (AA2.2006)

Accounts Payable

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100,00 0 600,00 0 1,500.000

Ord. Share Capital, Pole Co. Retained Earnings, Pole Co. Ord. Share Capital, Sole Co. APIC, Sole Co.. Retained Earnings, Sole Co.

50,000

150,000 600,000 1,500,000

200,000 a. 200,000 100,000 a. 100,000 400,00 a. 400.000 0 2,200.000

750,00 0

Requirement 2a Cost Book value of interest acquired: Ordinary Share Capital Additional paid-in capital Retained earnings Excess of cost over book value Allocation of excess: Inventory Land Equipment Negative Goodwill

950,00 0

950,000

2,250,000 P810,000

P200,000 100,000 400,000

P700,000 x 90%

630,000 P180,000

P 30,000 50,000 130,000

210,000 P 30,000

Pole Co. and Subsidiary Sole Co. Working Paper for Consolidated Statement of Financial Position January 2, 2008 Debits Cash Accounts Receivable Inventory Land Equipment Investment in Sole Co. Credits Accounts Payable Ord. Share Capital, Pole Co. Retained Earnings, Pole Co.

Pole Co.

Sole Co.

300,000 200,000 150,000

50,000 100,000 60,000 70,000 470,000

600,000 950,000

Minority Interest

Consolidated St. of Fin Pos 490,000 300,000 240,000 120,000 1,200,000

a 30,000 a. 50,000 a. 130,000 a. 810,000

2,200,000

750,000

2,250,000

100,000 600,000 1,500.000

50,000

150,000 600,000 1,530,000

Ord. Share Capital, Sole Co. APIC, Sole Co.. Retained Earnings, Sole Co. Minority interest 2,200.000

Problem 11 - 3 1. Inventory Plant and Equipment Patents

Eliminations Dr.

a. 30,000 200,000 100,000 400,000

a. 180,000 a. 90,000 a. 360.000

750,000

840,00 0

20,000 10,000 40,000 70,000 840,000

30,000 100,000 50,000

70,000 2,350,000

Chapter 11 – Suggested Answers (AA2.2006)

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Goodwill Ordinary Share Capital, Stork Retained Earnings, Stork Investment Minority Interest

50,000 80,000 200,000 464,000 46,000

Cost Book value of int. acquired Ordinary Share Capital Retained earnings Total Interest acquired Excess of cost over book value Gross up excess (P184,000 / 80%) Allocation of excess; Inventory Plant and equipment Patents Goodwill

P464,000 P100,000 250,000 P350,000 80%

280,000 P184,000 P230,000

P 30,000 100,000 50,000 P

180,000 50,000

Inventory Plant and Equipment Patents Goodwill Ordinary Share Capital, Stork Retained Earnings, Stork Investment 2.

30,000 100,000 50,000 4,000 80,000 200,000 464,000

Inventory Plant and Equipment Patents Ordinary Share Capital, Stork Co. Retained Earnings, Stork Co. Minority Interest Profit or Loss / Gain on Business Combination Investment Cost Book value of interest acquired Excess of book value over cost Gross up excess (P6,000 / 80%) Allocation of excess: Increase in inventory Increase in plant & equipment Increase in patents Negative Goodwill Inventory Plant and Equipment Patents Ordinary Share Capital, Stork Co. Retained Earnings, Stork Co.

30,000 100,000 50,000 80,000 200,000 1,500 187,500 274,000 P274,000 280,000 P 6,000 P

P 30,000 100,000 50,000

7,500

180,000 P187,500 30,000 100,000 50,000 80,000 200,000

Chapter 11 – Suggested Answers (AA2.2006)

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Profit or Loss / Gain on Business Combination Investment

186,000 274,000

Problem 11 - 4 1. Investment in Stride Co. (20,000 sh @ P10) Ordinary Share Capital (20,000 sh @ P2) Paid-In Capital in Excess of Par

2.

200,000 40,000 160,000

Investment in Stride Co. Cash

30,000

Retained Earnings, Stride Co. Goodwill

20,000

Ordinary Share Capital, Stride Co. Paid-In Capital in Excess of Par, Stride Co. Retained Earnings, Stride Co. Current Assets Plant Assets Long-Term Debt Goodwill Investment in Stride Co.

25,000 50,000 55,000 5,000 40,000 10,000 45,000

30,000 20,000

230,000

Cost [(P20,000 x P10) + P30,000] Book value of int. acquired (P25,000 + P50,000 + P55,000) x 100% Excess of cost over book value Allocation of excess; Inventories P 5,000 Plant assets 40,000 Long-term debt 10,000 Goodwill

P230,000 130,000 P 100,000

55,000 P 45,000

Problem 11 - 5 Plow Corp. and Subsidiary Slow Co. Working Paper for Consolidated Financial Statements July 1, 2008 Plow Corp. Debits Cash Accounts Receivable Notes Receivable NR Discounted Inventories Prepaid Expenses Advances to Slow Co. Investment in Slow Co. Property and Equipment,

Slow Co.

15,000 25,000 70,000

10,000 20,000 45,000

(25,000)

(30,000)

50,000 15,000 25,000

60,000 8,000

93,400 85,000

Eliminations Dr. Cr. (f) (b) (e) (d) 10,000 (e) 20,000

Consolidated Statement of Fin’l Position 25,000 37,000 85,000 (25,000) 110,000 23,000

(g) (a) 100,000

8,000 10,000 20,000

Minority Interest

10,000 15,000 93,400 185,000

Chapter 11 – Suggested Answers (AA2.2006)

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net Goodwill

(a) 31,000

Credits Current Liabilities

353,400

213,000

80,000

40,000

Advances from Plow Corp. Loans Payable Ordinary Share Capital , Plow Corp. RE, Plow Corp. Ordinary Share Capital, Slow Co. RE, Slow Co. Minority Interest

25,000 193,400 100,000

(b) 10,000 (f) 8,000 (c ) 10,000 (g) 15,000

31,000 471,000 (d)

10,000

112,000

70,000

263,400 100,000

(20,000)

53,400

50,000

(a) 40,000

10,000

28,000

(a) 22,400

5,600 15,600

213,000

174,150

Cost Book value of int. acquired (P50,000 + P28,000) x 80% Excess of cost over book value

174,150

P93,400 62,400 P31,000

MULTIPLE CHOICE 11-A

1. 2. 3. 4. 5. 6. 7. 8.

B D B A C A D D

11-B

1.

C

Cost of investment Book value of interest acquired: P200,000 + P400,000 +P800,000 x 100% Excess of cost over book value Increase in FV P150,000 – P50,000 Goodwill

11-C

1.

C

Cost of investment FMV of net assets acquired (P815,000 – P150,000) Goodwill

11-D

1.

B

Cost of investment Book value of interest acquired (P7,560,000 – P560,000 – P3,360,000) Negative Goodwill

11-E

1.

B

Number of shares issued to Roscoe Excess of MV over par value of stock

P2,000,000 1,400,000 P 600,000 100,000 P 500,000 P765,000 665,000 P100,000 P2,968,000 3,640,000 P 672,000 100,000 x P8.00

(20,000) 10,000 15,600 471,000

Chapter 11 – Suggested Answers (AA2.2006)

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APIC recognized upon merger APIC of Tanner APIC reflected in the Consolidated Statement of Fin’l Pos 11-F 11-G

11-H

11-I

1.

C

Investment (P 26,000 @ 100) Ordinary Share Capital

P800,000 650,000 P1,450,000

2,600,000 2,600,000

1.

B

1,080 ÷ (P180,000/P100)

2.

A

Cost of investment Book value of int. acquired [(P180,000 + P50,000 + P30,0000) x 60%] Excess of cost over book value Gross up excess (P5,200 / 60%)

P 161,200

P 104,000 2.080 P106,080

3.

D

(P180,000 + P50,000 + P30,000) x 40% (P5,200 x 40%) Total

1.

A

(P120,000 ÷ P120) ÷ (P125,000 ÷ P100)

2.

B

(P125,000 + P50,000) x 20%

3.

A

Cost Book value of interest acquired (P175,000 x 80%) Excess of book value over cost

4.

C

1.

C

Cost Book value of interest acquired (P10,000 + P32,350) x 80% Goodwill

60%

P P

80% P35,000 P120,000 140,000 ( P20,000)

P

40,000

P

33,880 6,120

Gross up excess (P6,120 / 80%) Controlling interest (P7,650 x 80%) Minority interest (P7,650 x 20%)

11-J

2.

D

Ordinary Share Capital (P10,000 x 80%) Retained earnings (P32,350 x 80%)

3.

C

(P10,000 + P32,350) x 20% Add Share in goodwill Total

4.

D

1.

D

Cost (P100,000 x P10) FMV of net tangible assets Negative Goodwill – reported in the consolidated statement of financial position as part of Parent Company Retained Earnings

156,000 5,200 8,667

P7,650 P6,120 P1,530 P 8,000 P 25,880 P

8,470 1,530 P 10,000

P1,000,000 1,400,000 P 400,000

Chapter 11 – Suggested Answers (AA2.2006)

11-K

1.

2.

A

C

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Minority interest in subsidiary TSE (P550,000 x 20%) Add Adjustment of assets (P120,000 + P100,000 + P130,000) 20% Total

P110,000

Minority interest Add adjustment of assets Total

P110,000 44,000 P154,000

Cost of investment Book value of investment (P550,000 x 80%) Excess of cost over book value Allocation of excess: Inventory PPE Goodwill

P720,000 440,000 P280,000

70,000 P180,000

P120,000 100,000

220,000 P60,000

1.

C

P100,000 ÷ 20%

P 500,000

2.

B

P500,000 x 80%

P 400,000

11-M

1. 2.

A A

P500,000 + P45,000 (P500,000 x 90%) + P45,000

P 545,000 P 495,000

11-N

1.

A

Cost (4,500 @ P140) Book value of interest acquired (P500,000 + P125,000) x 90% Excess of cost over book value treated as goodwill Assets of Panda and Selina [(P3.125,000 – P630,000) + P875,000)] Combined assets

11-L

11-O

11-P

1.

A

2.

B

P 630,000 P

562,500 67,500

3,370,000 P3,437,500

Excess of cost over book value Gross up excess (P36,000 / 60%) Allocation of excess: Land (P150,000 – P100,000 ) Goodwill

P 36,000 P60,000 50,000 P 10,000 P 80,000 24,000 P104,000

3.

C

Minority interest in subsidiary TSE (P200,000 x 40%) Add Share in adjustment of assets (P50,000 + P 10,000) 40% Total

1.

D

Total assets of Plant and Slant Less: Amount paid for investments Total assets to be reported in the consolidated balance sheet

P5,250,000 1,425,000 P3,600,000

2.

B

P3,000,000 + P600,000

P3,600,000

Chapter 11 – Suggested Answers (AA2.2006)

3.

C

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Cost BV of interest acquired (P750,000 +P900,000) x 80% Excess of cost over book value

P1,710,000 1,320,000 P 390,000

Gross up excess (P390,000 / 80%) Minority interest % Share of minority interest in the adjustment Minority interest in subsidiary TSE Total 11-Q 1.

11-R

Cost Book value of interest acquired (P200,000 + P400,000 + P1,200,000) x 100% Excess of cost over book value Allocation of excess: Decrease in inventories (P100,000) Increase in PPE 200,000 Goodwill

2.

A

The retained earnings of the parent company, Plumber.

1.

B

Total current assets of Polka and Stress Excess of investment cost over its book value allocated to inventory Cost Book value (P50,000 x 90%) Excess of cost over book value

2.

3.

4.

11-S

B

P487,500 20% P 97,000 330,000 P427,500

D

B

A

P3,000,000 1,800,000 P1,200,000 100,000 P1,100,000

P

90,000

P60,000 45,000 P15,000

Portion allocated to inventory Current assets in the consolidated balance sheet

10,000 P100,000

Noncurrent assets of Polka and Stress Excess of investment cost over its book value allocated to goodwill (P15,000 – P10,000) Noncurrent assets in the consolidated balance sheet

P 130,000

Minority interest (P50,000 x 10%) Share in assets adjustments (P10,000 x 10%) Total

P

5,000 P 135,000

P

5,000 1,000 6,000

Long-term debt of Polka, Jan. 1, 2008 Long-term borrowings made on Jan. 2, 2008 (P60,000 x 9/10) Total

P 50,000

P420,000

1.

C

(P1,460,000 + P20,000) – P1,060,000

2.

B

Minority interest Parent shareholders’ equity

54,000 P104,000

P

351,000 4,610,000

Chapter 11 – Suggested Answers (AA2.2006)

Total

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P4,961,000