Problem 1

Parlor Company acquires 75% of Saloon Company's common stock for P225,000 cash. At the date, the non-controlling interest in Saloon has a book value of P52,500 and a fair value of P82,000. Also, on that date, Saloon reports identifiable assets with a book value of P400,000 and a fair value of P510,000 and it has liabilities with a book value and fair value of P190,000.

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

2. Compute the gain on bargain purchase arising on consolidation if fair value of net identifiable assets is to be valued on the full (fair value) basis.

Problem 2

On January 1, 20x1, Laughter Co. issued equity instruments in exchange for 75% interest in Tears Co. Tears Co.'s net identifiable assets have carrying amount and fair value of 300,000 and 360,000, respectively. The difference is attributable to a building with a remaining useful life of 6 years.

The December 31, 20x1 statements of profit or loss of Laughter Co. and Tears Co. are summarized below:

Statement of Profit or Loss

For the year ended

December 31, 20x1

Laughter Co. Tears Co.

Revenues 1,200,000 480,000

Operating expenses (960,000) (400,000)

Profit for the year 240,000 80,000

1. How much is the consolidated profit in 20x1?

2. How much is the consolidated profit attributable to owners of the parent in 20x1?

3. How much is the consolidated profit attributable to non-controlling interest in 20x1?