Advanced Accounting Part2 Dayag 2015 Chapter 15 PDF

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Chapter 15Problem I Investment in Shy Inc. [P2,500,000 + (15,000  P40)] 3,100, Cash 2,500, Common Stock 30, Paid in capital in excess of par (P40 - P2)  15,000 570,Paid in capital in excess of par 30, Acquisition Expense 67, Deferred Acquisition Charges 90, Acquisition Costs Payable 7,Problem IICa...

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Chapter 15 Problem I Investment in Shy Inc. [P2,500,000 + (15,000  P40)] Cash Common Stock Paid in capital in excess of par (P40 - P2)  15,000 Paid in capital in excess of par Acquisition Expense Deferred Acquisition Charges Acquisition Costs Payable

3,100,000 2,500,000 30,000 570,000 30,000 67,000 90,000 7,000

Problem II Cash consideration transferred Contingent performance obligation Fair value of Subsidiary Less: Book value of SS Company (P90,000 + P100,000) Allocated excess Less: Over/under valuation of assets and liabilities: Increase in building: P40,000 x 100% Increase in customer list: P22,000 x 100% Increase in R&D: P30,000 x 100% Goodwill Investment in SS Company Cash Estimated Liability on Contingent Consideration Acquisition Expense (or Retained earnings) Cash

P 300,000 __15,000 P 315,000 190,000 P125,000 P 40,000 22,000 30,000__92,000 P 33,000 315,000 300,000 15,000 10,000 10,000

Not Required: The working paper eliminating entry on the date of acquisition, 6/30/20x4 would be: Receivables Inventory Buildings Equipment Customer list Capitalized R&D Goodwill

80,000 70,000 115,000 25,000 22,000 30,000 33,000 Current liabilities

10,000 Long-term liabilities 50,000 Investment in SS Company

315,000

Problem III Case 1: Proportionate Basis (Partial-goodwill Approach)  Partial-goodwill Fair value of subsidiary (80%): Consideration transferred: Cash……………………….......P12,000,000 (80%) Less: Book value of stockholders’ equity (net assets) – S Company: P7,200,000 x 80%...................................... 5,760,000 (80%) Allocated excess.……………………………………………….......P 6,240,000 (80%) Less: Over/undervaluation of assets and liabilities: (P9,600,000 – P7,200,000) x 80%........................................... 1,920,000 (80%) Positive excess: Goodwill (partial)…………………………….... P 4,320,000 (80%) 

Non-controlling interest Book Value of stockholders’ equity of subsidiary…………. P 7,200,000 Adjustments to reflect fair value (over/ undervaluation of assets and liabilities): (P9,600,000 – P7,200,000)….. 2,400,000 Fair value of stockholders’ equity of subsidiary…………… P 9,600,000 Multiplied by: Non-controlling interest percentage............ 20% Non-controlling Interest (partial)……………………………….. P1,920,000

Fair Value Basis (Full-goodwill Approach)  Full-goodwill Fair value of subsidiary (100%): Consideration transferred: Cash (P12,000,000 / 80%).. P 15,000,000 (100%) Less: Book value of stockholders’ equity (net assets) – S Company: P7,200,000 x 100%.............................. 7,200,000 (100%) Allocated excess.……………………………………………….. P 7,800,000 (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 5,400,000 (100%) The full – goodwill of P5,400,000 consists of two parts: Full-goodwill……………………………………………....... P 5,400,000 Less: Controlling interest on full-goodwill or partial-goodwill…………………………….…. 4,320,000 NCI on full-goodwill…………………………………….......P 1,080,000 

Non-controlling interest Non-controlling interest (partial)……………………………….......P1,920,000 Add: Non-controlling interest on full -goodwill (P5,400,000 – P4,320,000 partial-goodwill) or (P5,400,000 x 20%)*…………………………………...... 1,080,000 Non-controlling interest (full)…………………………………........ P3,000,000 * applicable only when the fair value of the non-controlling interest of subsidiary is not given.

Case 2: 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%) 

Non-controlling interest 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

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……………………………. 2,520,000 NCI on full-goodwill……………………………………..P 1,440,000 

Non-controlling interest Non-controlling interest (partial)………………………………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 Case 3; 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%) 

Non-controlling interest Book value of stockholders’ equity of subsidiary…………..P 7,200,000 Adjustments to reflect fair value (over/ undervaluation of assets and liabilities): (P9,600,000 – P7,200,000)…. 2,400,000 Fair value of stockholders’ equity of subsidiary……………P 9,600,000 Multiplied by: Non-controlling Interest percentage.............. 25% Non-controlling interest (partial)……………………………….P 2,400,000

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%) The full – goodwill of P2,040,000 consists of two parts: Full-goodwill……………………………………………...P 2,040,000 Less: Controlling interest on full-goodwill or partial-goodwill…………………………….... 1,800,000 NCI on full-goodwill……………………………………. .P 240,000 

Non-controlling interest Non-controlling interest (partial)………………………………P 2,400,000 Add: Non-controlling interest on full -goodwill (P2,040,000 – P1,800,000 partial-goodwill)…..…….... . 240,000 Non-controlling Interest (full)…………………………………..P 2,640,000

Case 4: Proportionate Basis (Partial-goodwill Approach)  Partial-goodwill Fair value of subsidiary (75%): Consideration transferred: Cash………………………..P 2,592,000 (60%) Fair value of previously held equity interest in acquiree P2,592,000/60% = P4,320,000 x 15%......... 648,000 . (15%) Fair value of Subsidiary ..………………………………………. P 3,240,000 (75%) Less: Book value of stockholders’ equity (net assets) – S Company: (P4,680,000 – P2,280,000) x 75%.......... 1,800,000 .(75%) Allocated Excess.………………………………………………....P 1,440,000 (75%) Less: Over/undervaluation of assets and liabilities: [(P6,120,000 – P2,280,000) – (P4,680,000 – P2,280,000)] x 75%..................................... 1,080,000 (75%) Positive excess: Goodwill (partial)……………………………...P 360,000 (75%) 

Non-controlling interest Book value of stockholders’ equity of subsidiary…………..P 2,400,000 Adjustments to reflect fair value (over/ undervaluation of assets and liabilities): (P3,840,000 – P2,400,000)…. 1,440,000 Fair value of stockholders’ equity of subsidiary……………P 3,840,000 Multiplied by: Non-controlling Interest percentage............ 25% Non-controlling interest (partial)………………………………P 960,000

Fair Value Basis (Full-goodwill Approach)  Full-goodwill Fair value of subsidiary (100%): Consideration transferred: Cash………………………..P 2,592,000 (60%) Fair value of previously held equity interest in acquiree P2,592,000/60% = P4,320,000 x 15%...... 648,000 (15%) Fair value of NCI (given)…………………………………. 1,080,000 (25%) Fair value of subsidiary………………………………………….P 4,320,000 (100%) Less: Book value of stockholders’ equity (net assets) – S Company: P2,400,000 x 100%.................................... 2,400,000 (100%) Allocated Excess.…………………………………………………P 1,920,000 (100%) Less: Over/undervaluation of assets and liabilities: (P3,840,000 – P2,400,000) x 100%................................ …..1,440,000 (100%) Positive excess: Goodwill (full)…………………………………..P 480,000 (100%) The full – goodwill of P480,000 consists of two parts: Full-goodwill……………………………………………...P 480,000 Less: Controlling interest on full-goodwill or partial-goodwill…………………………….…... 360,000 NCI on full-goodwill……………………………………..P. 120,000 

Non-controlling interest Non-controlling interest (partial)………………………………P 960,000 Add: Non-controlling interest on full -goodwill (P480,000 – P360,000 partial-goodwill)…..…………....... 120,000 Non-controlling Interest (full)……………………………………P 1,080,000

Problem IV  Partial-goodwill (Proportionate Basis) Fair value of subsidiary (75%): Consideration transferred: Cash……………………….. Less: Book value of stockholders’ equity (net assets) – S Company: (P480,000 – P228,000) x 75%....................................... Allocated excess………………………………………………... Less: Over/undervaluation of assets and liabilities: [(P612,000 – P228,000) – (P480,000 – P228,000) x 75% Negative excess: Bargain purchase gain (to controlling interest or attributable to parent only) ………………. 

Full-goodwill (Fair Value Basis) Fair value of subsidiary (100%): Consideration transferred: Cash……………………….. Fair value of non-controlling interest (given) ………… Fair value of subsidiary ………………………………………… Less: Book value of stockholders’ equity (net assets) – S Company: (P480,000 – P228,000) x 100%..................................... Allocated excess………………………………………………... Less: Over/undervaluation of assets and liabilities: [(P612,000 – P228,000) – (P480,000 – P228,000) x 100% Negative excess: Bargain purchase gain (to controlling interest or attributable to parent only)

P270,000 (75%)

189,000 (75%) P 81,000 (75%) 99,000 (75%) (P18,000) (75%)

P270,000 ( 75%) 98,400 ( 25%) P368,400 (100%)

252,000 (100%) P116,400 (100%) 132,000 (100%) (P15,600) (100%)

……………….

Problem V 1. A. Investment in Sewell 675,000 Cash 675,000 B. Investment in Sewell 675,000 Cash 675,000 C. Investment in Sewell 318,000 Cash 318,000 2. A. Fair value of Subsidiary: Consideration transferred P675,000 Less: BV of SHE of S (P450,000 + P180,000 + 705,000 P75,000)x100% Allocated excess P( 30,000) Less: Over/under valuation of A and L: Inc. (Dec.) Inventory (P30,000 – P20,000) x 100% (P10,000) Land (P50,000 – P70,000) x 100% __20,000 __10,000 Bargain Purchase Gain – full (P 40,000) B. Partial Goodwill Fair value of Subsidiary: Consideration transferred Less: BV of SHE of S (P450,000 + P180,000 + P75,000) x 90% Allocated excess Less: Over/under valuation of A and L: Inc. (Dec.) Inventory (P30,000 – P20,000) x 90% Land (P50,000 – P70,000) x 90% Goodwill – partial Full-Goodwill Fair value of Subsidiary: Consideration transferred (P675,000/90%) Less: BV of SHE of S (P450,000 + P180,000 + P75,000)x100% Allocated excess Less: Over/under valuation of A and L: Inc. (Dec.) Inventory (P30,000 – P20,000) x 100% Land (P50,000 – P70,000) x 100% Goodwill – full

P675,000 634,500 P 40,500 (P9,000) __18,000

__9,000 P 31,500

P750,000 705,000 P 45,000 (P10,000) __20,000

__10,000 P 35,000

C. Partial Goodwill Fair value of Subsidiary: Consideration transferred Less: BV of SHE of S (P620,000 + P140,000 + P20,000) x 80% Allocated excess Less: Over/under valuation of A and L: Inc. (Dec.) Inventory (P30,000 – P20,000) x 80% Land (P50,000 – P70,000) x 80% Bargain Purchase Gain – partial (parent only)

P318,000 624,000 (P306,000) (P 8,000) __16,000

Full-Goodwill Fair value of Subsidiary: Consideration transferred FV of NCI* Less: BV of SHE of S (P620,000 + P140,000 + P20,000) x 100% Allocated excess Less: Over/under valuation of A and L: Inc. (Dec.) Inventory (P30,000 – P20,000) x 100%

__8,000 (P314,000)

P 318,000 _158,000 P 476,000 780,000 (P304,000) (P10,000)

Land (P50,000 – P70,000) x 100% Bargain Purchase Gain – full (parent only) *BV of SHE of S Adjustments to reflect fair value FV of SHE of S x: NCI% FV of NCI

__20,000

_10,000 (P314,000)

P780,000 10,000 P790,000 20% P158,000

3. A. Common Stock – Sewell Paid in capital in excess of par – Sewell Retained Earnings – Sewell Land Inventory Investment in Sewell Retained earnings (gain) – Parent (since balance sheet accounts are being examined)

450,000 180,000 75,000 20,000 10,000 675,000

40,000

B. Partial-Goodwill (Proportionate Basis) Common Stock – Sewell 450,000 Paid in capital in excess of par – Sewell 180,000 Retained Earnings – Sewell 75,000 Land 20,000 Goodwill 31,500 Inventory Investment in Sewell Non-controlling Interest BV – SHE of Sewell (P450,000 + P180,000 + P75,000) P705,000 Adjustments to reflect fair value 10,000 FV of SHE of Sewell P715,000 x: NCI% 10% FV of NCI (partial) P 71,500 Full-Goodwill (Fair Value Basis) Common Stock – Sewell 450,000 Paid in capital in excess of par – Sewell 180,000 Retained Earnings – Sewell 75,000 Land 20,000 Goodwill 35,000 Inventory Investment in Sewell Non-controlling Interest BV – SHE of Sewell (P450,000 + P180,000 + P75,000) P705,000 Adjustments to reflect fair value 10,000 FV of SHE of Sewell P715,000 x: NCI% 10% FV of NCI (partial) P 71,500 NCI on Full-Goodwill (P35,000 – P31,500) 3,500 FV of NCI (full) P 75,000

10,000 675,000 71,500

10,000 675,000 75,000

C. Partial-Goodwill (Proportionate Basis) Common Stock – Sewell 620,000 Paid in capital in excess of par – Sewell 140,000 Retained Earnings – Sewell 20,000 Land 20,000 Inventory Investment in Sewell Retained earnings (gain)–Parent (refer to 3A) Non-controlling Interest BV – SHE of Sewell (P620,000 + P140,000 + P20,000) P780,000 Adjustments to reflect fair value 10,000

10,000 318,000 314,000 158,000

FV of SHE of Sewell x: NCI% FV of NCI (partial)

P790,000 20% P158,000

Full-Goodwill (Fair Value Basis) Common Stock – Sewell 620,000 Paid in capital in excess of par – Sewell 140,000 Retained Earnings – Sewell 20,000 Land 20,000 Inventory Investment in Sewell Retained earnings (gain)–Parent (refer to 3A) Non-controlling Interest

10,000 318,000 314,000 158,000

BV – SHE of Sewell (P620,000 + P140,000 + P20,000) P780,000 Adjustments to reflect fair value 10,000 FV of SHE of Sewell P790,000 x: NCI% 20% FV of NCI (full) P158,000 Problem VI 1. January 1, 20x4 Investment in S Company……………………………………………

408,000 408,000

Cash……………………………………………………………………..

2. Schedule of Determination and Allocation of Excess Date of Acquisition – January 1, 20x4 Fair value of Subsidiary (100%) Consideration transferred……………………………….. Less: Book value of stockholders’ equity of S: Common stock (P240,000 x 100%) ………………….. Paid-in capital in excess of par (P24,000 x 100%)... Retained earnings (P96,000 x 100%) ………………... Allocated excess (excess of cost over book value) …… Less: Over/under valuation of assets and liabilities: Increase in inventory (P18,000 x 100%) …………….. Increase in land (P72,000 x 100%) …………………… Decrease in buildings and equipment (P12,000 x 100%) ……………………………………... Increase in bonds payable (P42,000 x 100%) …….. Positive excess: Goodwill (excess of cost over fair value) ……………………………………………………..

P 408,000 P 240,000 24,000 96,000

360,000 P

48,000

P 18,000 72,000

( 12,000) ( 42,000)

36,000

P 12,000

(E1) Common stock – S Co………………………………………… Additional paid-in capital – S Co…………………………… Retained earnings – S Co…………………………………… Investment in S Co……………………………………… Eliminate investment against stockholders’ equity of S Co.

240,000 24,000 96.000

(E2) Inventory…………………………………………………………. Land……………………………………………………………… Goodwill…………………………………………………………. Buildings and equipment……………………………… Premium on bonds payable………………………………

18,000

360,000

72,000 12,000 12,000 42,000

Investment in S Co…………………………………………

48,000

Eliminate investment against allocated excess. 4. Eliminations Assets Cash*………………………….

P Co. P 12,000

S Co. P 60,000

Accounts receivable……..

90,000

60,000

Inventory………………….

120,000

72,000

(2) 18,000

Land…………………………….

210,000

48,000

(2) 72,000

Buildings and equipment (net) Goodwill…………………… Investment in S Co………….

Total Assets Liabilities and Stockholders’ Equity Accounts payable…………… Bonds payable…………………

480,000

Dr.

210,000 330,000 (2) 12,000

360,000

408,000

828,000 12,000

(1) 360,000 (2) 48,000

-

P1,320,00 0

P600,00 0

P1,602,000

P 120,000

P120,00 0

P 240,000

240,000

120,000

360,000 (3)

42,000

42,000

600,000

600,000 240,000

(1) 240,000

60,000

Paid in capital in excess of par. Retained earnings……………

72,000 150,000

(2) 12,000

Common stock, P10 par……… Paid in capital in excess of par.

Consolidated P

Premium on bonds payable Common stock, P10 par………

Cr.

60,000 24,000

(1) 24,000

300,000

96,00 Retained earnings…………… _________ 0 Total Liabilities and Stockholders’ P1,320,00 P600,00 Equity 0 0 (1) Eliminate investment against stockholders’ equity of S Co. (2) Eliminate investment against allocated excess. * P420,000 – P408,000 = P12,000.

300,000 (1) 96,000 P 462,000

__________ P 462,000

_________ P1,602,000

5. Assets Cash Accounts receivables Inventories Land Buildings and equipment (net) Goodwill Total Assets Liabilities and Stockholders’ Equity Liabilities Accounts payable Bonds payable Premium on bonds payable Total Liabilities Stockholders’ Equity Common stock, P10 par Paid-in capital in excess of par Retained earnings Total Stockholders’ Equity Total Liabilities and Stockholders’ Equity

P

72,000 150,000 210,000 330,000 828,000 12,000 P1,602,000

P 240,000 P 360,000 42,000

402,000 P 642,000 P 600,000 60,000 300,000 P 960,000 P1,602,000

Problem VII Partial-goodwill Approach Sch...