Scribd Logo
Upload

Welcome to Scribd!

  • 497 views

    Ulob Answer Key: Assets: Liabilities and Equity

    Uploaded by

    zee abadilla
    The document contains an answer key for an accounting problem set. It includes: 1) Financial statements for PGTG Company as of December 31, 2019 showing assets of ₱4.6 million and liabilities/equity of ₱4.6 million. 2) Updated fair values for PGTG's accounts as of December 31, 2019 totaling assets of ₱5.78 million and liabilities/equity of ₱5.78 million. 3) Details of Jenessa Jao Company acquiring 75% of PGTG on December 31, 2019, calculating non-controlling interest of ₱162,500.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    Ulob Answer Key: Assets: Liabilities and Equity

    Uploaded by

    zee abadilla
    497 views4 pages
    The document contains an answer key for an accounting problem set. It includes: 1) Financial statements for PGTG Company as of December 31, 2019 showing assets of ₱4.6 million and liabilities/equity of ₱4.6 million. 2) Updated fair values for PGTG's accounts as of December 31, 2019 totaling assets of ₱5.78 million and liabilities/equity of ₱5.78 million. 3) Details of Jenessa Jao Company acquiring 75% of PGTG on December 31, 2019, calculating non-controlling interest of ₱162,500.

    Original Description:

    ULOb ANSWER KEY

    Original Title

    ULOb ANSWER KEY

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document contains an answer key for an accounting problem set. It includes: 1) Financial statements for PGTG Company as of December 31, 2019 showing assets of ₱4.6 million and liabilities/equity of ₱4.6 million. 2) Updated fair values for PGTG's accounts as of December 31, 2019 totaling assets of ₱5.78 million and liabilities/equity of ₱5.78 million. 3) Details of Jenessa Jao Company acquiring 75% of PGTG on December 31, 2019, calculating non-controlling interest of ₱162,500.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    497 views4 pages

    Ulob Answer Key: Assets: Liabilities and Equity

    Uploaded by

    zee abadilla
    The document contains an answer key for an accounting problem set. It includes: 1) Financial statements for PGTG Company as of December 31, 2019 showing assets of ₱4.6 million and liabilities/equity of ₱4.6 million. 2) Updated fair values for PGTG's accounts as of December 31, 2019 totaling assets of ₱5.78 million and liabilities/equity of ₱5.78 million. 3) Details of Jenessa Jao Company acquiring 75% of PGTG on December 31, 2019, calculating non-controlling interest of ₱162,500.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 4

    ULOb ANSWER KEY

    Let’s Check
    Jenessa Jao Company acquired PGTG Company on December 31, 2019.

    The financial statement of PGTG Company as of December 31, 2019 is shown below:

    Assets: Liabilities and Equity:

    Cash ₱400,000 Current Liabilities ₱250,000


    Marketable
    Securities 600,000 Bonds Payable 1,000,000
    Inventory 1,000,000
    Land 300,000 Common Stock 100,000
    Building (net) 1,500,000 Addition Paid-in Capital 1,400,000
    Equipment 800,000 Retained Earnings 1,850,000
    ₱4,600,00 Total Liabilities and ₱4,600,00
    Total Assets 0 Equity 0

    Fair value for all accounts have been measured as of December 31, 2019 as follows:

    Assets: Liabilities and Equity:

    Cash ₱400,000 Current Liabilities ₱430,000


    Marketable
    Securities 660,000 Bonds Payable 2,000,000
    Inventory 1,100,000
    Land 420,000 Common Stock 100,000
    Building (net) 1,800,000 Addition Paid-in Capital 1,400,000
    Equipment 1,400,000 Retained Earnings 1,850,000
    ₱5,780,00 Total Liabilities and ₱5,780,00
    Total Assets 0 Equity 0
    On December 31, 2019, Jenessa Jao acquired 75% of PGTG Company issuing share
    capital of 100,000 shares with par value and market value of ₱25 and ₱30 per share,
    respectively. How much should be recognized as non-controlling interest as a result of
    the combination?

    ANSWER:

    Non-controlling

    Implied Parent* interest***


    Value** (75%) (25%)
    Company fair value ₱4,000,000 ₱3,000,000 ₱1,000,000
    Fair value of net assets
    excluding
    goodwill 3,350,000 2,512,500 837,500
    Goodwill ₱650,000 487,500 ₱162,500

    *Implied value is the grossed up amount of the consideration given by the acquirer
    ₱3,000,000/80% = ₱4,000,000
    **Non-controlling interest is the difference of the implied value and the consideration
    given ₱4,000,000 - ₱3,000,000 = ₱1,000,000

    Non-controlling interest is the excess of the implied value less the consideration given
    by the Parent (Acquirer).

    Let’s Analyze
    With reference to the problem above, how much should be recognized as non-
    controlling interest if Jenessa Jao issued 100,000 shares with par value and market
    value of ₱20 and ₱24 per share, respectively.

    ANSWER:

    Analysis:

    Non-controlling
    Implied Value Parent (75%) interest (25%)
    Company fair value ₱3,200,000 ₱2,400,000 ₱800,000
    Fair value of net assets
    excluding
    Goodwill (Gain on
    acquisition) 3,350,000 2,512,500 837,500
    Goodwill (Gain on
    acquisition) (₱150,000) (₱112,500) (₱37,500)

    With reference to the table above, the non-controlling interest amounted to ₱800,000.
    However, under PFRS 3, the fair value of the non-controlling interest as a result of the
    combination should not be valued lesser than the percentage of the fair value of the net
    assets prior to combination. Hence, the non-controlling interest should be at least
    ₱837,500.

    Non-
    controlling
    Implied Value Parent (75%) interest (25%)
    Company fair value ₱3,237,500 ₱2,400,000 837,500
    Fair value of net assets
    excluding
    Goodwill (Gain on
    acquisition) 3,350,000 2,512,500 837,500
    Goodwill (Gain on
    acquisition) (₱112,500) (₱112,500) ₱–

    The non-controlling interest, in any case cannot be valued less than 837,500.

    In a Nutshell

    On the day of acquisition, Glimada Company and GTG Company had the following
    assets and liabilities:

    Glimada
    Company GTG Company
    Book Fair Book
    Value Value Value Fair Value
    Current
    Assets 280,000 280,000 20,000 20,000
    Plant Assets
    (net) 440,000 680,000 260,000 360,000
    Liabilities (200,000) (200,000) (100,000) (100,000)
    Net Assets 520,000 760,000 180,000 280,000

    Glimada Company paid 280,000 in cash for 80% of the outstanding stock of GTG
    Company. At what amount should the non-controlling interest be recorded?

    ANSWER:

    Non-controlling

    Implied Value Parent (80%) interest (25%)


    Company fair value ₱350,000 ₱280,000 ₱70,000
    Fair value of net
    assets
    excluding Goodwill 280,000 224,000 56,000
    Goodwill ₱70,000 ₱56,000 ₱14,000

    You might also like