On January 1, 2020, Entity A acquires 30,000 out of 100,000 outstanding ordinary shares of

Entity B for P90,000. For the six months ended June 30, 2020, Entity B reported net income of

P40,000.

On July 1, 2020, Entity A acquires additional 60,000 ordinary shares of Entity B at a price of

P240,000. Entity A paid P20,000 acquisition related costs and P10,000 indirect costs of business

combination.

The acquisition price of per share of the additional shares clearly reflects the fair value of the

existing interest of Entity A on Entity B. It is the policy of Entity A to initially measure the

noncontrolling interest in net assets of the acquiree at fair value. The fair value of the

noncontrolling interest in net assets of the acquire is appraised at P50,000.

At the acquisition date, the net assets of Entity B are reported at P400,000. An asset of Entity B

is overvalued by P50,000 while one of its liability is overvalued by P30,000.

Question #1

What is the gain on remeasurement of existing Investment in Entity B as a result of step

acquisition?

Question #2

What is the goodwill or (gain on bargain purchase) as a result of business combination?