On January 1, 2021, Bhote acquired 80% of the equity interests of Gharapa, Inc. in exchange for cash. Because the former owners of Gharapa needed to dispose of their investments in Gharapa by a specified date, they did not have sufficient time to market Gharapa to multiple potential buyers. 

 

As January 1, 2021, Gharapa's identifiable assets and liabilities have fair values of ₱2,400,000 and ₱800,000, respectively. 

 

Option #1: 

Bhote Co. elects the option to measure non-controlling interest at fair value. An independent consultant was engaged who determined that the fair value of the 20% non-controlling interest in Gharapa, Inc. is ₱310,000.

 

4. If Bhote Co. paid ₱2,000,000 cash as consideration for the 80% interest in Gharapa, Inc., how much is the goodwill (gain on bargain purchase) on the business combination? 

 

Option #2: 

Bhote Co. elects the option to measure non-controlling interest at fair value. An independent consultant was engaged who determined that the fair value of the 20% non-controlling interest in Gharapa, Inc. is ₱310,000.

 

5. If Bhote Co. paid ₱1,200,000 cash as consideration for the 80% interest in Gharapa, Inc., how much is the goodwill (gain on bargain purchase) on the business combination? 

 

Option #3: 

Bhote Co. elects the option to measure non-controlling interest at fair value. A value of ₱250,000 is assigned to the 20% non-controlling interest in Gharapa, Inc.

 

6. If Bhote Co. paid ₱2,000,000 cash as consideration for the 80% interest in Gharapa, Inc., how much is the goodwill (gain on bargain purchase) on the business combination? 

 

Option #4: 

Bhote Co. elects the option to measure the non-controlling interest at the non-controlling interest's proportionate share of Gharapa, Inc.'s net identifiable assets

 

7. If Bhote Co. paid ₱2,000,000 cash as consideration for the 80% interest in Gharapa, Inc. and, how much is the goodwill (gain on bargain purchase) on the business combination? 

 

Problem 4

On January 1, 2020, Summer Company and Vacation Corporation and their condensed statement of financial position are as follows:

 

    

  Summer Co.Vacation Corp

   Current Assets 70,00020,000

   Non-current Assets 90,00040,000

   Total Assets 160,00060,000

  

 Current Liabilities 30,00010,000

   Long-term Debt 50,000----

   Stockholders' Equity 80,00050,000

   Total Liabilities & Equities 160,00060,000

  

   

On January 2, 2020, Summer Co, borrowed P60,000 and used the proceeds to obtain 80% of the outstanding ordinary shares of Vacation Corp. The P60,000debt is payable in 10 equal annual principal payments, plus interest beginning December 31, 2020. The excess fair value of the investment over the underlying book value of the acquired net assets is allocated to inventory (60%) and to goodwill (40%).

On a consolidated balance sheet as of January 2, 20X0, calculate the amount of each of the following?

8. The amount of goodwill using proportionate basis (partial) __________.

9. The amount of goodwill using full fair value basis __________.

10. Current assets should be __________.

11. Non-current asset using proportionate basis (partial) in computing goodwill should be _________. 

12. Non-current asset using full fair value basis in computing goodwill should be _________. 

13. Current liabilities should be __________. 

14. Non-current liabilities should be __________. 

15. Stockholders' equity using proportionate basis (partial) of determining non-controlling interest should be _________. 

16. Stockholders' equity using full fair value basis of determining non-controlling interest should be _________.