Question
ABC PARENT acquired 85% of the outstanding common stock of XYZ Subsidiary on January 1, 2015 for P1,357,150. On this date, Subsidiary's common stock and
ABC PARENT acquired 85% of the outstanding common stock of XYZ Subsidiary on January 1, 2015 for P1,357,150. On this date, Subsidiary's common stock and retained earnings balances were P1,000,000 and P300,000, respectively. The fair values of Subsidiary's net assets were equal to their values except for a patent, which had a book value of P63,000, a fair value of P42,000, and a remaining life of 7 years and goodwill uniformly impaired for 12 years.
Financial statements for both companies as of December 31, 2018, are presented below: (non-controlling interest is measured as a direct percentage of the fair value of Subsidiary's net assets)
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