Question
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
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:
- 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:
- 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:
- P0 b. P25,000 c. P35,000 d. P40,000
14.The non-controlling interest will be reported in the amount of:
- 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:
- 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?
- 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?
- 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
- P712,000 b. P813,000 c. P818,000 d. P930,000
19.Compute the Minority interests on the date of acquisition;
- 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.
- P30,000; P39,000 b. P30,000;45,000
- 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
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Statistical Techniques In Business And Economics
Authors: Douglas Lind, William Marchal
16th Edition
78020522, 978-0078020520
