ADVAC 2 Assign 7

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Case 1: Fair value of Non-controlling interest in the Acquiree (Subsidiary) is not given. 1
COMPANY Z acquires 80% of COMPANY Y for P 10,000,000, carrying value of Company Y net assets at time of acquisition
being P 6,000,000 and fair value of these net identifiable assets being P 8,000,000

1. Goodwill arising on consolidation is to be valued on the proportionate basis of "Partial" Goodwill:

A. P 1,600,000 B. P 2,000,000 C. P 3,600,000 D. P 4,500,000

2. Using the same information in Case. 1, the amount of non-controlling interest arising on consolidation is to be valued
on the proportionate basis or "Partial" Goodwill:
A. P 1,600,000 B. P 2,000,000 C. P 3,600,000 D. P 4,500,000
3

3. Using the same information in Case 1, the amount of goodwill arising on consolidation is to be valued on the full (fair
value) basis or "Full/Gross-up" Goodwill: 4
A. P 1,600,000 B. P 2,000,000 C. P 3,600,000 D. P 4,500,000

4. Using the same information in Case 1, the amount of non-controlling interest arising on consolidation is to be valued on
the full (fair value) basis or "Full/Gross-up" Goodwill:
A. P 1,200,000 B. P 1,600,000 C. P 2,500,000 D. P 3,000,000

7
Case 2: Fair value of Non-controlling interest in the Acquiree (Subsidiary) is given.

ENTITY SUBSIDIARY has 40% of its share publicly traded on an exchange. ENTITY PARENT purchases the 60% non
publicly traded shares in one transacton, paying P 6,300,000. Based on the trading price of the shares of Entity
Subsidiary at the date of gaining control a value of P 4,000,000 assigned to the 40% non-controlling interest
(or fair value of non-controlling interest), indicating that Entity Subsidiary has paid a control premium of P 300,000.
The fair value of Entity Subsidiary's identifiable net assets is P 7,000,000 and a carrying value of P 5,000,000.

5. Goodwill arising on consolidation is to be valued on the proportionate basis or "Partial" Goodwill:

A. P 1,200,000 B. P 2,100,000 C. P 3,300,000 D. P 4,120,000 8

6. Using the same information in Case 2, the amount of non-controlling interest arising on consolidation is to be valued
on the proportionate basis or "Partial Goodwill":
A. P 2,000,000 B. P 2,800,000 C. P 4,000,000 D. P 4,120,000
 10

7. Using the same information in Case 2, the amount of goodwillarising on consolidation is to bevalued on the full (fair
value) basis or "Full/Gross-up" Goodwill:
A. P 1,200,000 B. P 2,100,000 C. P 3,300,000 D. P 4,120,000

11

8. Using the same information in Case 2, the amount of non-controlling interest arising on consolidation is to be valued
on the full (fair value) bais or "Full/Gros-up" Goodwill:
A. P 2,000,000 B. P 2,800,000 C. P 4,000,000 D. P 4,120,000

12

Case 3: Step-Acquisition: Consideration transferred fair value of Non-Controlling interest of the acquiree/subsidiary) 13
and Fair value of anypreviously held equity interest in the acquiree/subsidiary (step-acquisition) is given

PARES Company acquires 15 percent of SERAP Company's common stock for P 500,000 cash and carries the investment
using the COST METHOD. A few months later, PARES purchases another 60% of Serap Company's stock for P 2,160,000.
At that date, Serap Company reports identifiable assets with a book value of P 3,900,000 and a fair value of
P 5,100,000, and it has liabilities with a book value and fair value of P 1,900,000. The fair value of the 25% non- 14
controlling interest in Serap Company is P 900,000.

9. Goodwill arising on consolidation is to be valued on the proportionate basis or 'Partial" Goodwill:

A. P 84,000 B. P 100,000 C. P 300,000 D. P 400,000

15

10. Using the same information in Case 3, the amount of non-controlling interest arising on consolidation is to be valued
on the proportionate basis of "Partial" Goodwill:
A. P 300,000 B. P 500,000 C. P 800,000 D. P 900,000

16

11. Using the same information in Case 3, the amount of goodwill arising on consolidation is to be valued on the full
(fair value) basis or "Full/Gross-up" Goodwill:
A. P 84,000 B. P 100,000 C. P 300,000 D. P 400,000 17

12. Using the same information in Case 3, the amount of non-controlling interest arising on consolidation is to be valued
on the full (fair value) basis or "Full/Gross-up Goodwill:
A. P 300,000 B. P 500,000 C. P 800,000 D. P 900,000
13. Using the same information in Case 3, the amount of gain or loss should be recognized when the additional shares are acquired:
A. Zero B. P 40,000 gain C. P 40,000 loss D. P 68,000 loss

Case 4: FAIR VALUE OF SUBSIDIARY IS GIVEN.

Since FV of Subsidiary is given, it already includes all items such as CONSIDERATION TRANSFERRED, FV of NCI any any
previusly held equity interest in the acquiree.

On September 1, 2011, Company P acquires 75% (750,000 ordinary shares) of Company S for P 7,500,000. (P 10 per share)
In the period around the acquisition date, Company S's shares are trading at about P 8 per share. Company pays a
premium over market because of the synergies it believes it will get. If its therefore reasonable to conclude that
the fair value of Company S's as a whole may not be P 10,000,000. In fact, an independent valuation shows that the
value of Company S is P 9,700,000 (fair value of Company S).

14. Assuming that the FV of the net identifiable assets is P 8,000,000 (carrying value is P 6,000,000)
Goodwill arising on consolidation is to be valued on the proportionate basis or "Partial" Goodwill:
A. P 200,000 B. P 1,500,000 C. P 1,700,000 D. P 2,000,000

15. Using the same information in No. 14, the amount of non-controlling interest arising on consolidation is to be valued on the
proportionate basis of "Partial" Goodwill:
A. P 1,500,000 B. P 1,875,000 C. P 2,000,000 D. P 2,200,000

16. Using the same information in No. 14, the amount of goodwill arising on consolidation is to be valued on the full (fair value) basis or
"Full/Gross-up" Goodwill:
A. P 200,000 B. P 1,500,000 C. P 1,700,000 D. P 2,000,000

17. Using the same infformation in No. 14, the amount of Non-controlling Interest (NCI) arising on consolidation is to be valued on the
full (fair value) basis or "Full/Gross-up" Goodwill:
Non - controlling interest (full) 2,200,000
COMPUTATION:
Partial - goodwill
Fair value of subsidiary (80%):
Consideration transferred: Cash 10,000,000 (80%)
Less: Book value of stockholders' equity (net assets)
Y Company: P6,000,000 * 80% 4,800,000 (80%)
Allocated excess 5,200,000 (80%)
Less: Over/undervaluation of assets and liabilities:
(P8,000,000 - P6,000,000) * 80% 1,600,000 (80%)
Positive excess: Goodwill (partial) 3,600,000 (80%)

Non - controlling interest

Bookvalue of stockholders' equity of subsidiary 6,000,000
Adjustments to reflect fair value
(8,000,000 - 6,000,000) 2,000,000
Fair value of stockholders' equity of subsidiary 8,000,000
Multiplied by: Non-controlling interest percentage 20%
Non-controlling interest (partial) 1,600,000

Full-goodwill
Fair value of subsidiary (100%)
Consideration transfereed: Cash (10,000,000 / 80%) 12,500,000 (100%)
Less: Book value of stockholders' equity (net assets)
Y Company: P6,000,000 * 100% 6,000,000 (100%)
Allocated excess 6,500,000 (100%)
Less: Over/undervaluation of assets and liabilities:
(P8,000,000 - P6,000,000) * 100% 2,000,000 (100%)
Positive excess: Goodwill (full) 4,500,000 (100%)

Non - controlling interest

Fair value of subsidiary (100%) 12,500,000
Muiltiplied by: Non-controlling interest percentage 20%
Non - controlling interest 2,500,000

Partial - goodwill
Fair value of subsidiary (60%):
Consideration transferred: Cash 6,300,000 (60%)
Less: Book value of stockholders' equity (net assets)
Entity Subsidiary: P5,000,000 * 60% 3,000,000 (60%)
Allocated excess 3,300,000 (60%)
Less: Over/undervaluation of assets and liabilities:
(P7,000,000 - P5,000,000) * 60% 1,200,000 (60%)
Positive excess: Goodwill (partial) 2,100,000 (60%)

Non - controlling interest

Bookvalue of stockholders' equity of subsidiary 5,000,000
Adjustments to reflect fair value
(7,000,000 - 5,000,000) 2,000,000
Fair value of stockholders' equity of subsidiary 7,000,000
Multiplied by: Non-controlling interest percentage 40%
Non-controlling interest (partial) 2,800,000

Full-goodwill
Fair value of subsidiary (100%)
Consideration transfereed: Cash 6,300,000 (60%)
Fair value of NCI (given)* 4,000,000 (40%)
Fair value of subsidiary 10,300,000 (100%)
Less: Book value of stockholders' equity (net assets)
Entity Subsidiary: P5,000,000 * 100% 5,000,000 (100%)
Allocated excess 5,300,000 (100%)
Less: Over/undervaluation of assets and liabilities:
(P7,000,000 - P5,000,000) * 100% 2,000,000 (100%)
Positive excess: Goodwill (full) 3,300,000 (100%)

Non - controlling interest

Fair value of subsidiary (100%) 2,800,000
Add: Non-controlling interest on full-goodwill
(3,300,000 - 2,100,000 partial goodwill) 1,200,000
Non - controlling interest (full) 4,000,000

Partial - goodwill
Fair value of subsidiary (75%)
Consideration transfereed: Cash 2,160,000 (60%)
Fair value of previously held equity interest in acquire
(2,160,000 / 60% = 3,600,000 * 15% 540,000 (15%)
Fair value of subsidiary 2,700,000 (75%)
Less: Book value of stockholders' equity (net assets)
Serap Company: (3,900,000 - 1,900,000) * 75% 1,500,000 (75%)
Allocated excess 1,200,000 (75%)
Less: Over/undervaluation of assets and liabilities:
 [(5,100,000 - 1,900,000) - (3,900,000 - 1,900,000)] * 75% 900,000 (75%)
Positive excess: Goodwill (full) 300,000 (75%)

Bookvalue of stockholders' equity of subsidiary 2,000,000

Adjustments to reflect fair value
(7,000,000 - 5,000,000) 1,200,000
Fair value of stockholders' equity of subsidiary 3,200,000
Multiplied by: Non-controlling interest percentage 25%
Non-controlling interest (partial) 800,000

Full-goodwill
Fair value of subsidiary (100%)
Consideration transfereed: Cash 2,160,000 (60%)
Fair value ofpreviously held equity interest in Acquire
(2,160,000 / 60% = 3,600,000 * 15% 540,000 (15%)
Fair value of NCI (given)* 900,000 (25%)
Fair value of subsidiary 3,600,000 (100%)
Less: Book value of stockholders' equity (net assets)
Serap Company: P2,000,000 * 100% 2,000,000 (100%)
Allocated excess 1,600,000 (100%)
Less: Over/undervaluation of assets and liabilities:
(P3,200,000 - P2,000,000) * 100% 1,200,000 (100%)
Positive excess: Goodwill (full) 400,000 (100%)

Non - controlling interest

Fair value of subsidiary (100%) 800,000
Add: Non-controlling interest on full-goodwill
(400,000 - 300,000 partial goodwill) 100,000
Non - controlling interest (full) 900,000

Fair value on previously held equity interest in acquiree

(2,160,000 / 60% = 3,600,000 * 15% 540,000
Less: Carrying / book value at the point control is achieved 500,000
OCI - Gain on measurement to fair value ( gain on deemed sale) 40,000

Partial - goodwill
Fair value of subsidiary (75%):
Consideration transferred: Cash 7,500,000 (75%)
Less: Book value of stockholders' equity (net assets)
P Company: P6,000,000 * 75% 4,500,000 (75%)
Allocated excess 3,000,000 (75%)
Less: Over/undervaluation of assets and liabilities:
(P8,000,000 - P6,000,000) * 75% 1,500,000 (75%)
Positive excess: Goodwill (partial) 1,500,000 (75%)

Non - controlling interest

Bookvalue of stockholders' equity of subsidiary 6,000,000
Adjustments to reflect fair value
(8,000,000 - 6,000,000) 2,000,000
Fair value of stockholders' equity of subsidiary 8,000,000
Multiplied by: Non-controlling interest percentage 25%
Non-controlling interest (partial) 2,000,000

Full-goodwill
Fair value of subsidiary (100%) 9,700,000
Less: Book value of stockholders' equity (net assets)
S Company: P6,000,000 * 100% 6,000,000 (100%)
Allocated excess 3,700,000 (100%)
Less: Over/undervaluation of assets and liabilities:
(P8,000,000 - P6,000,000) * 100% 2,000,000 (100%)
Positive excess: Goodwill (full) 1,700,000 (100%)

Non - controlling interest

Fair value of subsidiary (100%) 2,000,000
Add: Non-controlling interest on full-goodwill
(1,700,000 - 1,500,000 partial goodwill) 200,000
Non - controlling interest (full) 2,200,000