Problem 6

PARENT acquires 100% of the outstanding shares of SON on December 31, 2020 when the fair values assets and liabilities of
100,000 of its P100 par unissued shares with fair values of P120 per share. In addition, the combining companies agreed on th
I. PARENT will pay an additional P2M in cash if the combined income of PARENT and SON IN 2020 exceeds P8M.
II. PARENT guarantees the fair value of its shares by committing to pay the peso decline in the value within one year.

Information as of the date of acquisition indicates that it is probable that the combined income will be over P8M and it can be m
valued at P1,800,000 on acquisition date.

A) Determine the Cost of Acquisition and Goodwill on December 31, 2020.

B) What is the entry needed if the net income of the combined companies for 2021 is over P8M and the fair value of the shares
A.
FV of assets 17,000,000 FVNA
Less: FV of liabilities 4,000,000 goodwill
FV of net assets 13,000,000 common stocks
APIC
cost of acquisition 12,000,000 Contingent consideration
Contingent consideratin 1,800,000
Less: Fv of net assets 13,000,000
Goodwill 800,000

B.
common stocks 10,000,000 100,000*100 APIC
APIC 1,000,000 100,000*10 Goodwill

cost 12,800,000 FV at acquisition date

Less: Fv of net assets 13,000,000 FV 2021
Gain on bargain purchase -200,000

Problem 7
The statement of Financial Position of BRANDY Corporation on June 30, 2020 is presented
below:
Current assets 195,000 Liabilities 525,000
Land 1,320,000 Capital stock P5par 900,000
Building 660,000 APIC 825,000
Equipment 525,000 Retained earnings 450,000
Total 2,700,000
land has a fair value of P2,100,000 and 2,700,000
the fair value of the building increased by P480,000. RHUM Corporation acquired 80%
BRANDY’s Capital stock for P3,000,000. The non-controlling interest is measured at fair value.

A. Assuming the consideration paid includes control premium of P250,000, how much is
the goodwill/(gain
B. Assuming on acquisition)
the consideration on excludes
paid the consolidated
a controlfinancial
premiumstatement?
of P138,000 and the fair value of the non-controlling interest is
P736,500, how much is the goodwill/(gain on acquisition) on the consolidated financial statement?
A.
Current assets 195,000
Land 2,100,000
Building 1,140,000
Equipment 525,000 3,960,000

Liabilities 525,000 525,000

FVNA 3,435,000

FV of total consideration 3,750,000 cost (consideration paid) 3,000,000

FVNA 3,435,000 Non controlling interest 750,000
goodwill 315,000 FV of total consideration 3750000
B.
FV of total consideration 3,874,500 Control premium 138,000
FVNA 3,435,000 cost (consideration paid) 3,000,000
goodwill 439,500 Non controlling interest 736,500
FV of total consideration 3,874,500

Problem 8
On January 2, 2020, the Statement of Financial Position of HANDYMAN CO. and ACE
HARDWARE CO. immediately before the combination are:
Handyman co. ACE hardware co.
Cash 2,700,000 90,000
Inventories 1,800,000 180,000
PPE 4,500,000 630,000
Total 9,000,000 900,000

Current Liabilities 540,000 90,000

Ordinary shares 900,000 90,000
APIC 2,700,000 180,000
Retained earnings 4,860,000 540,000
Total 9,000,000 900,000
The FV is
interest of measured
ACE hardware's equipment is 918,000
at the proportionate share of ACE HARDWARE’s identifiable net assets, how much is the consolidated sto
equity on the date of acquisition?
interest is measured at fair value, how much is the consolidated assets on the date of acquisition?
Cash 90,000 Ordinary shares
Inventories 180,000 APIC
PPE 918,000 1,188,000 Retained earnings
Non controlling interest
Current Liabilities 90,000 90,000 gain
Consolidated SHE
FVNA 1,098,000

FV of total consideration 1,040,400 cost (consideration paid) 820,800

FVNA 1,098,000 Non controlling interest 219,600
gain -57,600 FV of total consideration 1,040,400

FV of total consideration 1,620,000 cost (consideration paid) 1,458,000

FVNA 1,098,000 Non controlling interest 162,000
goodwill 522,000 FV of total consideration 1,620,000

Parent 9,000,000
Sub 900,000
Goodwill 810,000
Cash payment -1,458,000
consolidated assets 9,252,000
air values assets and liabilities of SON are P17M and P4M respectively. PARENT issues
mbining companies agreed on the following:
N 2020 exceeds P8M.
e value within one year.

will be over P8M and it can be measured reliably. And as such, the contingent consideration is

M and the fair value of the shares of PARENT at the end of 2021 is P110 per share?

13,000,000 13,800,000
800,000
10,000,000 13,800,000
2,000,000 common stocks
1,800,000 APIC

1,000,000
1,000,000

12,000,000
11,000,000
1,000,000

RHUM Corporation acquired 80% of

.

e of the non-controlling interest is

ent?
Current assets 195,000 4,275,000
Land 2,100,000
Building 1,140,000
Equipment 525,000
goodwill 315,000
Liabilities 525,000 4,275,000
Consideration paid 3,000,000
NCI 750,000

3,000,000/.80 * .20

Current assets 195,000 4,399,500

Land 2,100,000
Building 1,140,000
Equipment 525,000
goodwill 439,500
Liabilities 525,000 4,399,500
Consideration paid 3,000,000
NCI 736,500
Control premium 138,000

how much is the consolidated stockholder’s

on?
900,000
2,700,000
4,860,000
219,600
57,600
8,737,200

1098000*.20

1,458,000/.9*.1

172,800
10,000,000 100,000*100
2,000,000 100,000*20