On January 1, 2019, Petrol Co. Acquired 80% interest in Shell Inc, by issuing 5,000 shares with the fair value of P60 per share and par value of P40 per share. The financial statements of Petrol Co. And Shell Inc. Immediately before the acquisition are shown below:

PETROL CO. SHELL INC.

Cash 40,000 20,000

Accounts Receivable 120,000 48,000

Inventory 160,000 92,000

Equipment 800,000 200,000

Accumulated depreciation (80,000) (40,000)

Total assets 1,040,000 320,000

Accounts payable 80,000 24,000

Bonds payable 120,000 -

Share Capital 480,000 200,000

Share premium 160,000 -

Retained earnings 200,000 96,000

Total liabilities and equity 1,040,000 320,000

On January 1, 2019 the fair value of the assets and liabilities of Shell Inc. Were determined by appraisal, as follows

Carrying amount Fair Value

Cash 20,000 20,000

Accounts receivable 48,000 48,000

Inventory 92,000 124,000

Equipment 200,000 240,000

Accumulated depreciation (40,000) (48,000)

Account Payable (24,000) (24,000)

Total net assets 296,000 360,000

The equipment has a remaining useful life as of 4 years from January 1, 2019.

Case #1. NCI measured at proportionate share of parent

Petrol Co. Elects to measure non-controlling interest as its proportionate share in Shell Inc. Net identifiable net assets.

1.How much is the consolidated total assets as of January 1, 2019?

a. 1,436,000 b. 1,439,000 c. 1,736,000 d. 1,376,000

2.How much is the consolidated total equity as of January 1, 2019?

a. 1,200,000 b. 1,215,000 c. 1,212,000 d. 1,364,000

Case#2. NCI measured at fair value.

Petrol Co. Elects the option to measure non-controlling interest at fair value and a value of P75,000 is assigned to the 20% non-controlling interest [(P300,000 / 80% ) x 20% = 75,000].

3.How much is the consolidated total assets as of January 1, 2019?

a. 1,436,000 b. 1,439,000 c. 1,736,000 d. 1,376,000

4.How much is the consolidated total equity as of January 1, 2019?

a. 1,200,000 b. 1,215,000 c. 1,212,000 d. 1,364,000

Consolidation subsequent to date of acquisition (Proportionate Share)

Problem #2

On January 1, 2019 Petrol Co. Acquired 80% interest in Shell Inc. By issuing 5,000 shares with fair value of P60 per share and par value of P40 per share. On acquisition date, Petrol Co. Elected to measure non-controlling interest as its proportionate share in Shell Inc, net identifiable assets.

Shell`s shareholder`s equity as of January 1, 2019 comprises the following;

(at carrying amount)

Share Capital 200,000

Retained Earnings 96,000

On January 1, 2019 the fair value of the assets and liabilities of Shell Inc. Were determined by appraisal, as follows

Carrying amount Fair Value Fair Value

Cash 20,000 20,000 -

Accounts receivable 48,000 48,000 -

Inventory 92,000 124,000 32,000

Equipment 200,000 240,000 40,000

Accumulated depreciation (40,000) (48,000) (8,000)

Account Payable (24,000) (24,000) -

Total net assets 296,000 360,000 64,000

The equipment has a remaining useful life as of 4 years from January 1, 2019.

During 2019 no dividends were declared by either Petrol or Shell, there were also no inter-company transactions. The group determined that there is no goodwill impairment.

Petrol`s and Shell individual financial statements at year end are shown below:

Statement of financial position

As of December 31, 2019

PETROL Co. SHELL Inc.

Cash 92,000 228,000

Accounts receivable 300,000 88,000

Inventory 420,000 60,000

Investment in subsidiary 300,000

Equipment 800,000 200,000

Accumulated depreciation (240,000) (80,000)

Total assets 1,672,000 496,000

Accounts payable 172,000 120,000

Bonds payable 120,000 -

Share Capital 680,000 200,000

Share premium 260,000 -

Retained Earnings 440,000 176,000

Total liabilities and equity 1,672,000 496,000

Statement of profit or loss

For the year ended December 31, 2019

PETROL Co. SHELL Inc.

Sales 1,200,000 480,000

Cost of goods sold (660,000) (288,000)

Gross Profit 540,000 192,000

Depreciation expenses (160,000) (40,000)

Distribution costs (128,000) (72,000)

Interest expense (12,000) -

Profit for the year 240,000 80,0000

5.How much is the consolidated profit for 2019?

a. 208,000 b. 280,000 c. 240,000 d. 296,000

6.How much is the consolidated total assets as of December 31, 2019?

a. 1,867,000 b. 1,907,000 c. 1,894,000 d. 1,904,000

7.How much is the consolidated total equity as of December 31, 2019?

a. 1,492,000 b. 1,415,000 c. 1,412,000 d.1.495,000

Consolidation subsequent to date of acquisition -NCI at fair value

Problem #3

On January 1, 2019 Petrol Co. Acquired 80% interest in Shell Inc. By issuing 5,000 shares with fair value of P60 per share and par value of P40 per share. On acquisition date, Petrol Co. Elected to measure non-controlling interest at fair value. A value of P75,000 is assigned to the 20% non-controlling interest [(P300,000/80%)x20% = P75,000].

Shell`s shareholder`s equity as of January 1, 2019 comprises the following;

(at carrying amount)

Share Capital 200,000

Retained Earnings 96,000

On January 1, 2019 the fair value of the assets and liabilities of Shell Inc. Were determined by appraisal, as follows

Carrying amount Fair Value Fair Value

Cash 20,000 20,000 -

Accounts receivable 48,000 48,000 -

Inventory 92,000 124,000 32,000

Equipment 200,000 240,000 40,000

Accumulated depreciation (40,000) (48,000) (8,000)

Account Payable (24,000) (24,000) -

Total net assets 296,000 360,000 64,000

The equipment has a remaining useful life as of 4 years from January 1, 2019.

During 2019 no dividends were declared by either Petrol or Shell, there were also no inter-company transactions. The group determined that there is no goodwill impairment.

Petrol`s and Shell individual financial statements at year end are shown below:

Statement of financial position

As of December 31, 2019

PETROL Co. SHELL Inc.

Cash 92,000 228,000

Accounts receivable 300,000 88,000

Inventory 420,000 60,000

Investment in subsidiary 300,000

Equipment 800,000 200,000

Accumulated depreciation (240,000) (80,000)

Total assets 1,672,000 496,000

Accounts payable 172,000 120,000

Bonds payable 120,000 -

Share Capital 680,000 200,000

Share premium 260,000 -

Retained Earnings 440,000 176,000

Total liabilities and equity 1,672,000 496,000

Statement of profit or loss

For the year ended December 31, 2019

PETROL Co. SHELL Inc.

Sales 1,200,000 480,000

Cost of goods sold (660,000) (288,000)

Gross Profit 540,000 192,000

Depreciation expenses (160,000) (40,000)

Distribution costs (128,000) (72,000)

Interest expense (12,000) -

Profit for the year 240,000 80,0000

8.How much is the consolidated profit for 2019?

a. 208,000 b. 280,000 c. 240,000 d. 296,000

9.How much is the consolidated total assets as of December 31, 2019?

a. 1,867,000 b. 1,907,000 c. 1,894,000 d. 1,904,000

10.How much is the consolidated total equity as of December 31, 2019?

a. 1,492,000 b. 1,415,000 c. 1,412,000 d.1.495,000

On January 1, 2019, R corporation purchased 80 percent of S corporation`s P10 par common stock for P975,000. On this date, the carrying amount of S`s net assets was P1,000,000. the fair values of S`s identifiable assets and liabilities were the same as their carrying amounts except for plant assets (net), which were P100,000 in excess of the carrying amount and with a remaining life of S years, For the year ended December 31, 2019, S had net income of P190,000 and paid cash dividends totaling P125,000.

11.In the January 1, 2019, consolidated balance sheet, goodwill should be reported at:

1. P0 b. P75,000 c. P95,000 d. P175,000

12.In the December 31, 2019, consolidated balance sheet, non-controlling interest should be reported at:

1. P200,000 b. P213,000 c. P229,000 d. P233,000

Minor Corporation reports net assets of P300,000 at book value. These assets have an estimated market value of P350,000. if Major corporation buys 80 percent ownership of Minor for P275,000.

13.Goodwill will be reported in the consolidated balance sheet in the amount of:

1. P0 b. P25,000 c. P35,000 d. P40,000

14.The non-controlling interest will be reported in the amount of:

1. P55,000 b. P60,000 c. P70,000 d. P71,250

15.C corporation recently purchased 80% of the stock of T Decks, Inc, for P232,000. at the date of purchased the consolidated balance sheet showed P40,000 of goodwill from the acquisition. The book value of T deck`s net assets at the time of acquisition was:

1. P192,000 b. P232,000 c. P240,000 d. P290,000

Apex Company acquired 70% of the outstanding stock of Nadir corporation on January 2, 2019. The consolidated balance sheet prepared immediately after the business combination contained the following:

Current assets 146,000 Current Liabilities 28,000

Fixed assets-net 370,000 Capital stock 350,000

Goodwill 8,100 Retained earnings 111,000

Minority interest 35,100

Total P524,000 Total 524,100

Of the excess payment for the investment in Nadir, P10,000 was ascribed to undervaluation of its fixed assets; the balance of the excess payment was ascribed to goodwill.

16.How much is the cost of investment paid by APEX in acquiring the 70% interest in Nadir?

1. P117,000 b. P90,000 c. P100,000 d. P135,100

17.How much is the underlying equity of APEX in the net assets of Nadir corporation?

1. P71,900 b. P90,000 c. P63,800 d. P81,900

Mountain Breeze Corporation acquired 70% of the outstanding common stock of Sea Breeze corporation

Mountain Breeze Sea Breeze

Book Value Book value Fair value

Assets

Cash 32,000 20,000 20,000

Receivables-net 80,000 30,000 30,000

Inventories 70,000 30,000 50,000

Land 100,000 50,000 60,000

Building-net 110,000 70,000 90,000

Equipment-net 80,000 40,000 30,000

Investment in Sea Breeze 178,000 - -

Total 650,00 240,000 280,00

Liabilities and Stockholders Equity

Accounts payable 90,000 80,000 80,000

Other liabilities 10,000 50,000 40,000

Capital stock, P10 par 500,000 100,000

Retained earnings 50,000 10,000

Total 650,000 240,000

18.Compute the consolidated Total assets on January 1, 2019

1. P712,000 b. P813,000 c. P818,000 d. P930,000

19.Compute the Minority interests on the date of acquisition;

1. P33,000 b. P45,000 c. P48,000 d. P72,000

20.The consolidated income statement of PP company and its 80% owned subsidiary follows:

Sales 402,000

Cost of sales 246,000

Gross profit 156,000

Operating expenses 81,000

Consolidated net income 75,000

Less: minority interest net income 6,000

Profit attributable to equity Holders of parent 69,000

Compute the Net income from operations of the subsidiary, and PP company, respectively.

1. P30,000; P39,000 b. P30,000;45,000
2. P6,000;P75,000 d. P45,000; P30,000

21. Anders acquired a manufacturing facility from Bane for a total consideration of P 6,000,000. The facility contains 4 equipment with fair value of P1,500,000, a building with appraisal value of P2,500,000 and land with appraised value of P4,000,000.

Compute the goodwill or gain from bargain purchase.

A.P 0 b. P1,500,000 c. P2,000,000 d. 3,000,000

Use the following to answer the next two questions:

BC acquired an 80% interest in DEF for P900,000. The carrying amounts and fair values of DEF`s identifiable assets and liabilities at the acquisition date were as follows

Carrying Amounts Fair Value

Tangible non-current assets 375,000 350,000

Intangible non-current assets 0 200,000

Current Assets 400,000 350,000

Liabilities 300,000 300,000

Contingent liabilities 0 30,000 475,000 570,000

22.) The goodwill assuming the acquirer recognize the non-controlling interest at fair value (NCI was valued at P 120,000)

a. P 450,000 b. P444,000 c. P440,000 d. P350,000

23.) The goodwill assuming the acquirer recognize the non-controlling interest on the basis of proportionate interest in the identifiable net assets of the acquiree

a. P 450,000 b. P444,000 c. P440,000 d. P350,000

Use the following to answer the next two questions:

Company acquires 75 percent of Saloon Company`s common stock for P 225,000 cash. At the date, the non-controlling interest in Saloon has a book value of P52,500 and fair value of P82,000. Also on that date, Saloon reports identifiable assets with book value of 400,000 and fair value of P510,000, and it has liabilities with a book value and fair value of P190,000

24.) Gain on bargain purchase arising on consolidation if fair value of net identifiable assets is to be valued on the proportionate basis:

a. Zero b. P 15,000 c. P13,000 d. P17,333

25.) Compute the gain on bargain arising in consolidation if fair value of net identifiable is to be valued on the full(fair value) basis:

a. Zero b. P 15,000 c. P13,000 d. P17,333

26.) Alexander acquires all of the net assets of Albert Company by transferring P1,000,000 cash and a 10-hectare tract land with carrying amount of P3,000,000 and appraised value of P4,000,000. The fair value of Albert Company`s net asset is P4,500,000

Compute the gain on exchange and the amount of goodwill (gain on bargain purchase) to be reported in the consolidated financial statements after the combination.

a. P1,000,000 : P500,000 c. P0 : (500,000 0

b. P0 : P 500,000 d. P 1,000,000 ; P(500,000)

27.) Elixir Corporation paid P4,500,000 for 60% of the outstanding shares of stock of Wan, Inc. The book value and fair value of Wan`s net assets was determined to be, P8,500,00 and P 9,000,000, respectively. What is the balance of goodwill in the books of Elixir Corporation upon combination?

a. P 0 b. (500,000) c. P900,000 d. P500,000

28.) AIG Company acquired a 70% interest in East West Company for P1,960,000 when the fair value of East west identifiable assets and liabilities was P700,000 and elected to measure the non-controlling interest at its share of the identifiable net assets. Annual impairment reviews of goodwill have not resulted in any impairment loss being recognized. East West`s current statement of financial position shows share capital of P100,000 a revaluation reverse of P300,000 and retained earnings of P1,400,000.

Under IFRS 3, Business Combinations, what figure in respect of goodwill should now be carried in AIG`s consolidated of Financial Statements?

a. P 1,470,000 b. P 160,000 c. P 1,260,000 d. 700,000

29) Mango Inc. acquired on January 1, 2018 all the issued and outstanding common shares of Celine Inc. for 310,000 and celine Inc. is dissolved. Onthis day the assets and liabilities of Celine. Show:

Cash 30,000

Merchandise Inventory 90,000

Plant and Equipment 160,000

Goodwill 50,000

Liabilities 60,000

Per appraisal plant and equipment and merchandise inventory were valued at 190,000 and 75,000 respectively.

What is the amount of goodwill resulting from the transaction____________________________?

30) The Grand Company will issue share at 10 par value common stock for all the net assets of the Nuts Company. Grand common has current market value of 40 per share. Nuts balance sheet accounts are shown below;

Current assets 320,000

Property and Equipment 880,000 Liabilities 400,000

Common stock 4 par 80,000 APIC 320,000

Retained Earnings 400,000

the fair value of the currents assets is 400,000 while that of property and equipment is 1,600,000. All the liabilities are correctly stated.

Grand issued sufficient shares so that the fair value of the stock equals the fair market value of Nuts net assets plus goodwill of 200,000

How much must be the cost of investment if goodwill of 200,000 must be recognized__________________?

with solutions all please