Chapter-2.doc

AA2 - CHAPTER 2 SUGGESTED ANSWERS EXERCISES Exercise 2 - 1 a. Ordinary Share Capital, Sing Co. Additional Paid-in Capital, Sing Co. Retained Earnings, Sing Co. Goodwill Investment Consideration transferred 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 Bargain Purchase Retained Earnings, Sing Co. Consideration transferred Book value of interest acquired (P100,000 + P80,000 - P30,000) x 100% Negative Goodwill

c.

Ordinary Share Capital, Sing Co. Additional Paid-in Capital, Sing Co. Goodwill Investment Retained Earnings, Sing Co. Non-controlling Interest Consideration transferred Non-controlling interest (135,000 x 25%) Total FV of net assets (P100,000 + P40,000 – P5,000) Goodwill

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 10,000 100,000 40,000 18,750 120,000 5,000 33,750 P120,000 33,750 P153,750 135,000 P 18,750

Exercise 2 – 2 1. Case A Ordinary Share Capital, Soya Co. Additional Paid-in Capital, Soya Co. Retained Earnings, Soya Co. Goodwill Investment Non-controlling Interest (P150,000 x 20%) Consideration transferred Book value of interest acquired 800/1,000 = 80% (P100,000 + P30,000 + P20,000) x 80%

100,000 30,000 20,000 5,000 125,000 30,000 P125,000 120,000

Chapter 2 – AA2 (2014 edition)

Goodwill Case B Ordinary Share Capital, Soya Co. Additional Paid-in Capital, Soya Co. Retained Earnings, Soya Co. Investment Profit or Loss / Gain on Bargain Purchase Non-controlling Interest (80,000 x 25%) Consideration transferred Book value of interest acquired 375/500 = 75% (P50,000 + P20,000 + P10,000) x 75% Negative Goodwill Case C Ordinary Share Capital, Soya Co. Additional Paid-in Capital, Soya Co. Investment Profit or Loss /Gain on Bargain Purchase Retained Earnings, Soya Co. Non-controlling Interest (110,000 x 40%) Consideration transferred Book value of interest acquired 480/800 = 60% (P80,000 + P40,000 – P10,000) x 60% Negative Goodwill 2. Case A Ordinary Share Capital, Soya Co. Additional Paid-in Capital, Soya Co. Retained Earnings, Soya Co. Goodwill Investment Non-controlling Interest Consideration transferred Non-controlling interest 125,000-5,000/80% x 20% Total FV of net assets Goodwill Case B Ordinary Share Capital, Soya Co. Additional Paid-in Capital, Soya Co. Retained Earnings, Soya Co. Investment Profit or Loss / Gain on Bargain Purchase Non-controlling Interest Consideration transferred Non-controlling interest (58,000-4,000/75% x 25%) Total FV of net assets Negative Goodwill

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P 5,000 50,000 20,000 10,000 58,000 2,000 20,000 P58,000 60,000 P 2,000 80,000 40,000 63,000 3,000 10,000 44,000 P63,000 66,000 P 3,000 100,000 30,000 20,000 5,000 125,000 30,000 P125,000 30,000 P155,000 150,000 P 5,000 50,000 20,000 10,000 58,000 4,000 18,000 P58,000 18,000 P76,000 80,000 P 4,000

Chapter 2 – AA2 (2014 edition)

Case C Ordinary Share Capital, Soya Co. Additional Paid-in Capital, Soya Co. Investment Profit or Loss /Gain on Bargain Purchase Retained Earnings, Soya Co. Non-controlling Interest Consideration transferred Non-controlling interest (63,000 – 3,000/60% x 40%) Total FV of net assets Negative Goodwill Exercise 2 - 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. Non-controlling Interest (160,000 x 10%) Consideration transferred Book value of interest acquired (P100,000 + P50,000 - P10,000) x 90% Excess of cost over book value Increase in plant and equipment ((P18,000/90%) Case C Ordinary Share Capital, Say Co. Additional Paid-in Capital, Say Co. Investment Inventories Retained Earnings, Say Co. Non-controlling Interest (130,000 x 20%) Consideration transferred Book value of interest acquired (P100,000 +P50,000 – P10,000) 80% Excess of cost over book value Decrease in inventory (P8,000/80%) Case D Ordinary Share Capital, Say Co. Additional Paid-in Capital, Say Co. Goodwill Investment Retained Earnings, Say Co. Non-controlling Interest (140,000 x 52%)

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80,000 40,000 63,000 7,000 10,000 40,000 P63,000 40,000 P103,000 110,000 P 7,000

100,000 50,000 140,000 10,000 100,000 50,000 20,000 144,000 10,000 16,000 P144,000 126,000 P 18,000 P 20,000 100,000 50,000 104,000 10,000 10,000 26,000 P104,000 112,000 P 8,000 P 10,000 100,000 50,000 10,800 78,000 10,000 72,800

Chapter 2 – AA2 (2014 edition)

Consideration transferred Book value of interest acquired (P100,000 + P50,000 - P10,000) x 48% Goodwill Exercise 2 - 4 a. Investment in Sax Co. (4,000 @ P120) 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. Non-controlling Interest (450,000 + 83,333 x 10%) Consideration transferred (4,000 x P120) Book value of interest acquired (P450,000 x 90%) Excess of cost over book value Increase in equipment (P75,000/90%) b.

P78,000 67,200 P 10,800 480,000 400,000 80,000 100,000 250,000 100,000 83,333 480,000 53,333 P480,000 405,000 P 75,000 P 83,333

Investment in Sax Co. (3,500 @ P120) Ordinary Share Capital Additional Paid-in Capital

420,000

Ordinary Share Capital, Sax Co. Additional Paid-in Capital, Sax Co. Retained Earnings, Sax Co. Goodwill Investment in Sax Co. Non-controlling Interest (450,000 x 10%)

100,000 250,000 100,000 15,000

Consideration transferred (3,500 x P120) Book value of interest acquired (P450,000 x 90%) Goodwill c.

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Investment in Sax Co. Ordinary Share Capital Additional Paid-in Capital 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 Bargain Purchase Non-controlling Interest (450,000 -25,000 x 10% Consideration transferred (3,000 x P120) Book value of interest acquired (P450,000 x 90%)

350,000 70,000

420,000 45,000 P420,000 405,000 P 15,000 360,000 300,000 60,000 100,000 250,000 100,000 25,000 360,000 22,500 42,500 P360,000 405,000

Chapter 2 – AA2 (2014 edition)

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Excess of book value over cost Decrease in Inventory (P25,000 x 90%) Negative goodwill

P 45,000 22,500 P 25,000

Exercise 2 – 5 1. Non-controlling interest (P90,000 – (P50,000 x 10%=P5,000) Percentage of non-controlling interest Total Shareholders’ Equity of Sand Less Ordinary Share Capital and APIC (P800,000 + P400,000) Deficit of Sand

P

85,000 ÷ 10% P 850,000 1,200,000 P( 350,000)

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.

5.

Excess of cost over BV Land (50,000 x 90%) Goodwill Book value (P850,000 x 90%) Consideration transferred (Cost of investment)

P 45,000 100,000

Total shareholders’ equity of Sand Increase in fair value of Land Fair value of identifiable net assets Non-controlling interest

P145,000 765,000 P910,000 P850,000 50,000 P900,000 x 10% P 90,000

Exercise 2 - 6 a. Total shareholders’ equity + asset adjustment, excluding goodwill Less Non-controlling interest (in TSE and asset adjustment) Controlling interest Percentage of ownership acquired (P155,125/P182,500)

P182,500 27,375 P155,125 85%

b.

P145,600

Total shareholders' equity of Sill (P60,000 + P35,000 + P50,100) 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.

Zero. Non-controlling interest is measured at the proportionate share in the fair value of the identifiable net assets

d.

P182,500 x 15% = P27,375

36,900 P182,500

Chapter 2 – AA2 (2014 edition)

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Exercise 2 - 7 1. Total current assets of Seeda = (P146,000 + P2,000) - P106,000 2.

P 42,000

Non-controlling interest Less Share in asset adjustment (P10,000 x 30%) Non-controlling interest in subsidiary shareholders’ equity

P35,100 3,000 P32,100/ 30% P107,000

Total shareholders’ equity of subsidiary (P32,100 / 30%) Exercise 2 – 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

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

3.

ZERO. It is eliminated in the consolidated statement of financial position.

4.

Consideration transferred Book value of acquired interest (P1,000,000 + P2,000,000 – P400,000 – P300,000 goodwill of Samar) Excess of cost over BV Allocation of excess: Decrease in inventory (P100,000) Increase in buildings and equipment 250,000 Goodwill

5.

P4,000,000. company.

6.

P1,050,000. The Retained Earnings of Palomar, the acquiring company.

P2,800,000 2,300,000 P 500,000 150,000 P 350,000

The Ordinary Share Capital of Palomar, the acquiring

Exercise 2 - 9 Inventories Plant Assets Ordinary Share Capital, Santa Co. Paid-In Capital in Excess of Par - Santa Co. Investment in Subsidiary Retained Earnings, Santa Co.

20,000 80,000 200,000 210,000 420,000 90,000

Exercise 2 – 10 Market value of Planet Corp share is P50 per share 1.

Currently issued shares Additional shares issued Total shares

Solar 300,000 200,000 500,000

60% 40% 100%

Planet 100,000 66,667 166,667

Chapter 2 – AA2 (2014 edition)

page 7

Fair value of consideration transferred 66,667 sh @ P50 = P3,333,350 2.

Consideration transferred 66,667 x P50 Book value of Solar shareholders’ equity Excess of book value over cost Increase in plant assets Goodwill

P3,333,350 2,000,000 P1,333,350 1,000,000 P 333,350

3.

P6,000,000 + P4,000,000 = P10,000,000

4.

P1,000,000 of Solar + P1,000,000 increase in plant assets = P2,000,000

5.

500,000shares. P100,000 of Planet + (66,667sh @ P50 = P3,333,350 =

P3,433,350

PROBLEMS Problem 2 - 1 Prime Inc. and Subsidiary Slime Corp. Working Paper for Consolidated Statement of Financial Position January 1, 2014

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 Inc.

Add’l Paid-In Capital, Prime, Inc

Retained Earnings, Prime, Inc.

Prime Inc.

Slime Corp.

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

300,000 250,000

1,010,000

570,000

60,000 300,000 400,000 180,000 70,000

50,000 250,000

Eliminations Dr. Cr.

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

Ordinary Share Capital, Slime Corp Add’l Paid-In Capital, Slime Corp.

Retained Earnings, Slime Corp. 1,010,000

200,000 40,000 30,000 570,000

Consolidated Statement of Finl Position

700,000 450,000 -----50,000 110,000 1,310.000 110,000 550,000 400,000 180,000 70,000

a.200,000 a. 40,000 a. 30,000 380,000

380,000

1,310,000

Problem 2 - 2 Requirement 1 Consideration transferred Book value of interest acquired: Ordinary Share Capital Additional paid-in capital Retained earnings Excess of cost over book value Allocation of excess:

P950,000 P200,000 100,000 400,000

700,000 P250,000

Chapter 2 – AA2 (2014 edition)

page 8

Inventory Land Equipment Goodwill

P 30,000 50,000 130,000

210,000 P 40,000

Requirement 2 Pole Co. and Subsidiary Sole Co. Working Paper for Consolidated Statement of Financial Position January 2, 2014 Pole Sole Eliminations Co. Co. Dr. Cr. Debits Cash Accounts Receivable Inventory Land Equipment Investment in Sole Co. Goodwill

300,000 200,000 150,000 600,000 950,000

50,000 100,000 60,000 a. 30,000 70,000 a. 50,000 470,000 a. 130,000

Consolidated St. of Fin Pos.

350,000 300,000 240,000 120,000 1,200,000 a. 950,000

a. 40,000

40,000 2,250,000

2,200,000 750,000 Credits Accounts Payable Ordinary Share Capital, Pole Co.

Retained Earnings, Pole Co.

100,000 600,000 1,500.000

Ordinary Share Capital, Sole Co.

APIC, Sole Co.. Retained Earnings, Sole Co. 2,200.000

50,000

150,000 600,000 1,500,000

200,000 a. 200,000 100,000 a. 100,000 400,000 a. 400.000 750,00 950,00 0 0

Requirement 3a Consideration transferred 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

950,000

2,250,000

P810,000 P200,000 100,000 400,000 P700,000 x90%

Requirement 3b Non controlling interest P700,000 + P210,000

630,000 P180,000

P 30,000 50,000 130,000

P210,000x90%

189,000 P 9,000

P910,000

x 10% =

P91,000

Pole Co. and Subsidiary Sole Co. Working Paper for Consolidated Statement of Financial Position January 2, 2014 Pole

Sole

Eliminations

Consolidated

Chapter 2 – AA2 (2014 edition)

page 9

Debits Cash Accounts Receivable Inventory Land Equipment Investment in Sole Co. Credits Accounts Payable Ord. Share Capital, Pole Co. Retained Earnings, Pole Co. Ord. Share Capital, Sole Co.

Co. 440,000 200,000 150,000 600,000 810,000 2,200,000 100,000 600,000 1,500.000

APIC, Sole Co.. Retained Earnings, Sole Co.

Co. 50,000 100,000 60,000 70,000 470,000

Dr.

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

750,000

2,350,000

50,000

150,000 600,000 1,509,000

a. 200,000 100,000 400,000

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

750,000

910,000

Non-controlling interest

a. 2,200.000

Consideration transferred 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

9,000

91,000 910,000

91,000 2,350,000

P400,000 P200,000 100,000 400,000 P700,000 x40% P 30,000 50,000 130,000

280,000 P120,000

P210,000x40%

84,000 P 36,000

Pole Co. and Subsidiary Sole Co. Working Paper for Consolidated Statement of Financial Position January 2, 2014 Debits Cash Accounts Receivable Inventory Land Equipment Investment in Sole Co. Goodwill Credits Accounts Payable Ord. Share Capital, Pole Co. Retained Earnings, Pole Co. Ord. Share Capital, Sole Co.

Pole Co. 850,000 200,000 150,000 600,000 400,000

Sole Co. 50,000 100,000 60,000 70,000 470,000

Eliminations Dr. a 30,000 a. 50,000 a. 130,000 a. 400,000 a. 36,000

2,200,000

750,000

100,000 600,000 1,500.000

50,000 200,000 100,000 400,000

APIC, Sole Co.. Retained Earnings, Sole Co.

750,000

36,000 2,796,000 150,000 600,000 1,500,000

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

Non-controlling interest 2,200.000

Consolidated St. of Fin Pos 900,000 300,000 240,000 120,000 1,200,000

946,000

Non controlling interest (P700,000 + P 210,000) x 60% = P546,000

a. 546,000 946,000

546,000 2,796,000

Chapter 2 – AA2 (2014 edition) 10

page

Problem 2 - 3 1. Inventory Plant and Equipment Patents Goodwill Ordinary Share Capital, Stork Retained Earnings, Stork Investment Non-controlling Interest (P464,000/80% x 20% = P116,000) Consideration transferred Non controlling Interest Total Fair value of net assets P50,000 + P30,000 + P50,000 + P400,000 + P50,000 Goodwill 2.

Inventory Plant and Equipment Patents Ordinary Share Capital, Stork Co. Retained Earnings, Stork Co. Profit or Loss / Gain on Bargain Purchase Investment Non-controlling Interest (P274,000/80% x 20% ) Consideration transferred Non controlling Interest Total Fair value of net assets Gain on bargain purchase

Problem 2 - 4 1. Investment in Stride Co. (20,000 sh @ P10) Ordinary Share Capital (20,000 sh @ P2) Paid-In Capital in Excess of Par

Paid in Capital in Excess of Par Expenses of Business Combination Cash 2.

30,000 100,000 50,000 50,000 100,000 250,000 464,000 116,000 P464,000 116,000 P580,000 50,000 P

530,000 50,000

30,000 100,000 50,000 100,000 250,000 187,500 274,000 68,500 P274,000 68,500 P342,500 530,000 P187,500

200,000 40,000 160,000 10,000 20,000 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

25,000 50,000 55,000 5,000 40,000 10,000 15,000

20,000

Chapter 2 – AA2 (2014 edition) 11

page

Investment in Stride Co.

200,000

Consideration transferred (P20,000 x P10)

P200,000

Book value of int. acquired (P25,000 + P50,000 + P55,000) Excess of cost over book value Allocation of excess; Inventories Plant assets Long-term debt Goodwill Problem 2 – 5

P 5,000 40,000 10,000

55,000 P 15,000

Plow Corp. and Subsidiary Slow Co. Working Paper for Consolidated Financial Statements July 1, 2014

Debits Cash Accounts Receivable Notes Receivable

Plow Corp. 15,000 25,000 70,000

Slow Co. 10,000 20,000 45,000

NR Discounted

(25,000)

(30,000)

Inventories Prepaid Expenses Advances to Slow Co.

50,000 15,000 25,000

60,000 8,000

Investment in Slow Co.

93,400 85,000

Property and Equipment, net

130,000 P 70,000

Eliminations Dr. Cr. (f) (b) (e)

8,000 10,000 20,000

Consolidated Statement of Fin’l Position 25,000 37,000 85,000

(d) 10,000 (e) 20,000

(25,000) 110,000 23,000 © (g) (a)

10,000 15,000 93,400

100,000

Goodwill

185,000 31,000 471,000

(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.

25,000 193,400 100,000 (20,000)

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

(d)

10,000

70,000

Ordinary Share Capital, Slow Co.

RE, Slow Co. Non-controlling Interest

263,400 100,000 (20,000)

50,000 28,000

(a) 50,000 (a) 28,000

213,000

174,150

(a) 353,400

112,000

Consideration transferred Book value of int. acquired (P50,000 + P28,000) x 80% Goodwill Non controlling Interest (P50,000 + P28,000) x 20% = P15,600 MULTIPLE CHOICE

15,600 174,150

P93,400 62,400 P31,000

15,600 471,000

Chapter 2 – AA2 (2014 edition) 12

2-A

1. 2. 3. 4. 5.

2-B

B D B D A C

6. 7. 8. 9. 10.

C A C D B

page

11. 12. 13. 14. 15.

D D D A B

16. 17. 18. 19. 20.

B D A D C

Consideration transferred 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

P2,000,000 1,400,000 P 600,000 100,000 P 500,000

2-C

C

Consideration transferred FMV of net assets acquired (P815,000 – P150,000) Goodwill

2-D

B

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

P2,968,000

100,000 x P8.00 P800,000 650,000 P1,450,000

3,640,000 P 672,000

2-E

D

Number of shares issued to Roces Excess of MV over par value of share capital APIC recognized upon merger APIC of Tante APIC reflected in the Consolidated Statement of Fin’l Pos

2-F

C

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

2-G

2-H

2-I

P765,000 665,000 P100,000

2,600,000 2,600,000

1.

B

1,080  (P180,000/P100)

2.

A

Consideration transferred Book value of int. acquired [(P180,000 + P50,000 + P30,0000) x 60%] Excess of cost over book value

P 161,200

P 104,000

3.

B

(P180,000 + P50,000 + P30,000) x 40%

1.

A

(P120,000 ÷ P120) ÷ (P125,000 ÷ P100)

2.

C

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

3.

A

Consideration transferred Book value of interest acquired (P175,000 x 80%) Negative goodwill

4.

D

1.

A

Consideration transferred Fair value of interest acquired (P10,000 + P32,350) x 80% Goodwill

60%

P

156,000 5,200

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

40,000

P

33,880 6,120

Chapter 2 – AA2 (2014 edition) 13

2. 3.

C

4.

D

2-J

2-K

2-L

2-M

Ordinary Share Capital Retained earnings

P P

(P10,000 + P32,350) x 20%

10,000 32,350

P

8,470

D

Consideration transferred (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

1.

C

Non-controlling interest in subsidiary TSE (P450,000 + 120,000 + 100,000 x 20%)

P134,000

2.

C

Consideration transferred Book value of investment (P450,000 x 80%) Excess of cost over book value Allocation of excess: Inventory 120,000 PPE 100,000 Goodwill

P620,000 360,000 P260,000

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

176,000 P84,000

220,000 x80%

1.

A

P100,000  20%

P 500,000

2.

A

P500,000 x 80%

P 400,000

1. 2.

D B

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

P 545,000 P 495,000

C

Consideration transferred (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

P

2-N

2-O

C

page

P 630,000 562,500 67,500

3,370,000 P3,437,500

1.

D

2.

C

Consideration transferred Non-controlling interest (P180,000 – P24,000/60% x 40%) Total Fair value of identifiable net assets Goodwill

P 180,000 104,000 P284,000 250,000 P 34,000

3.

C

Non-controlling interest (180,000-24,000/60% x 40%)

P 104,000

Chapter 2 – AA2 (2014 edition) 14

2-P

1.

B

Total assets of Plant and Slant (P3,000,000 + P2,250,000) Less: Amount paid for investments Total assets to be reported in the consolidated balance sheet

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

2.

B

P3,000,000 + P600,000

3.

C

60,000 @ 25/80% X 20%

2-Q 1.

B

Non-controlling interest 3,000,000 – 300,000/75% x 25% Consideration transferred Total Fair value of identifiable net assets Goodwill

2.

A

The retained earnings of the parent company, Plumber.

3. 1.

C C

P200,000 + P400,000 + P1,200,000 – P100,000 – P200,000 Total current assets of Polka and Stress

2-R

page

P375,000 P 900,000 2,000,000 P2,900,000 1,900,000 P1,000,000

x 52% 90,000

P

Excess of investment cost over its book value allocated to inventory

2.

2-S

C

Consideration transferred P60,000 Book value (P50,000 x 90%) 45,000 Excess of cost over book value P15,000 15,000 x 60% = 9,000/ 90% Current assets in the consolidated balance sheet Non-current assets of Polka and Stress Excess of investment cost over its book value allocated to goodwill (P15,000 – P9,000) Non-current assets in the consolidated balance sheet

10,000 P100,000 P 130,000 6,000 P 136,000

3.

C

P50,000 + 10,000 x 10%

P

4.

C

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 54,000 P104,000 P420,000

1.

C

(P1,460,000 + P20,000) – P1,060,000

2.

C

Non-controlling interest Parent shareholders’ equity

2-T

B

2–U

A

P

6,000

229,750 4,610,000

Total

P4,839,750

920,000 – 50,000 + 190,000 – 12,000

P1,048,000

Consideration transferred 400,000 x P6 Book value of interest acquired Goodwill

P2,400,000 1,800,000 P 600,000

Chapter 2 – AA2 (2014 edition) 15

Currently issued shares Additional shares issued Total shares 15/25 = 60%

page

July 1,500,000 1,000,000 2,500,000

60% 40% 100%

June 600,000 400,000 1,000,000