Exercise # 2 Part 1

Problem 1: Consolidated at acquisition Date

The financial statements of PACERS Co. And SPURS Inc. As of December 31, 2018 are shown below:

PACERSFair valueSPURSFair valueUseful life

Cash8,0006,0001,0001,000

Receivables4,0004,0003,0003,000

Inventory3,0003,5002,0002,500

Land8,00010,0006,0008,000

Building, net10,00010,0005,0006,00010 years

Equipment, net6,0007,0003,0002,0004 years

Total assets39,00020,000-

Payable20,00020,0005,0005,000

Ordinary shares15,00010,000

Share premium2,0003,000

Retained Earnings2,0002,000-

Total liabilities and

Equity39,00020,000-

On January 1, 2019, PACER Co. Purchased 80% of SPURS Inc. By issuing of P10,000 par value shares with P15,000 fair value. Stock issue cost on the issuance were 500. direct acquisition costs were P1,000 while indirect acquisition cost were P500. Both PACERS and SPURS uses FIFO method for inventories. The non-controlling interest has fair value of P3,200.

Required: Prepare Journal Entries and Prepared a consolidated statements of financial position as of the date of acquisition.

Problem #2: Consolidation Subsequent to Date of Acquisition (no inter-company transaction)

During 2019, there is no inter company transaction between the two companies except for dividends declared by the SPURS. As of December 31, 2019, the financial statements of the two companies are shown below:

Balances Sheet as of 12/31/2019

PACERSSPURS

CashP 2,000P 3,500

Receivables7,5006,500

Investment in subsidiary15,000-

Inventory4,5006,000

Land8,0006,000

Building, net10,8004,500

Equipment, net4,8002,500

Total assets52,60029,000

Payable P16,100P14,000

Ordinary Shares25,00010,000

Share Premium6,5003,000

Retained Earnings5,0002,000

Total Liabilities and equityP52,600P29,000

2019 Income Statement

PACERSSPURS

SalesP50,000P20,000

Less: Cost of sales30,00014,000

Gross Profit20,0006,000

Dividend Income2,000-

Less: Expense15,0005,000

Profit P 7,000P1,000

Required: Prepared Consolidated Financial Statements on December 31, 2019.