Assets Liabilities and Equity

On June 10, 2016 FoxLe Company purchases 8,000 shares of Marmen Inc. for P37 per share.
Just prior to the purchase, Marmen Inc. has the following statement of financial position:
Assets Liabilities and Equity

Cash 20,000 Current Liabilities 250,000
Inventory 280,000 Common Stock, P5 par 50,000
Equipment 400,000 APIC 130,000
Goodwill 100,000 Retained Earnings 370,000
Total Assets 800,000 Total Liabilities and Equity 800,000
On June 10, 2016, Marmen Inc. has a total fair value of net assets of P400,000 and it has been
determined that the equipment is worth P500,000.
What is the amount of goodwill (gain on acquisition) to be reported in consolidated

statement of financial position on the date of acquisition?
30,000
Statement of Financial Position reflecting the fair values that are to be used as basis of the
combination are prepared on November 27, 2019 as follows:
A Company L Company P Company

Assets 5,250,000 6,800,000 900,000
Liabilities 3,950,000 2,650,000 530,000

Capital Stock, all P10 1,700,000 1,200,000 275,000
par
Share Premium - 500,000 140,000
Retained Earnings (400,000) 2,450,000 (45,000)
(Deficit)
Total Liabilities and 5,250,000 6,800,000 900,000
Equity
‘A’ Company shares have a market value of P22 per share. Market values are not available for
shares of L Company and P Company.
On November 27, 2019, A Company acquires all of the assets and assumes the liabilities of L
Company and P Company by issuing 200,000 shares to L Company and 29,000 shares to P
Company, respectively.
In addition, A Company pays P10,000 for registering and issuing securities and P20,000 for
other acquisition related costs.
What is the goodwill to be recorded by A Company on November 27, 2019?
518,000
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:
Statements 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
How much is the consolidated profit in 20x1?
310,000
On January 1, 20x1, CHIDE Co. acquired 90% of the identifiable assets and assumed all of the
liabilities of SCOLD, Inc. by paying cash of ₱4,000,000. On this date, SCOLD’s identifiable
assets and liabilities have fair values of ₱6,400,000 and ₱3,600,000, respectively. Non-
controlling interest has a fair value of ₱320,000.
As of January 1, 20x1, SCOLD had the following which were not included in
the acquisition-date fair value measurement of liabilities:
 SCOLD has an existing contract with a customer to deliver products at a
specified future date. In accordance with the agreement, SCOLD shall pay
a penalty for failure to deliver the said goods. CHIDE determined that the
fair value of the penalty is ₱40,000. However, because CHIDE expects to
comply with the agreement, it was assessed that payment of penalty is
improbable.
 SCOLD has guaranteed a bank loan of a third party. CHIDE shall replace
SCOLD as the guarantor. If the third party defaults on the loan, CHIDE will
be held liable for the guarantee. CHIDE determined that the fair value of
the guarantee is ₱120,000. However, both SCOLD and CHIDE believe
that the third party will not default on its loan from the bank.
 There is a pending unresolved litigation filed by a third party against
SCOLD. CHIDE determined that the fair value of settling the litigation is
₱200,000. However, because the legal counsels of both CHIDE and
SCOLD strongly believe that they will win the case, it was assessed that
payment for the settlement of the litigation is improbable.
How much is the goodwill (gain on bargain purchase)?
1,880,000
David Co. plans to acquire all the assets and liabilities of Saul Co. David expects that it will need
to pay a premium equal to the discounted amount of Saul’s excess average annual earnings in
order to effect the transaction. The appropriate discount rate is 10%. Below are Saul’s earnings
in the past 5 years:
Year Earnings
2011 120,000
2012 130,000
2013 135,000
20x4 125,000
20x5 140,000
Total 650,000
 The 2014 earnings include an expropriation loss of P40,000

 Saul’s net assets have a current fair value of P590,000
 The industry average rate of return on assets is 12%
 The probable duration of “excess earnings” is 5 years
How much is the estimated purchase price?
844,741
On January 1, 20x1, Bass Co. issued equity instruments in exchange for 75% interest in Guitar
Co. On acquisition date, Bass Co. elected to measure non-controlling interest at fair value. Bass
Co.’s management believes that the fair value of the consideration transferred correlates to the
fair value of the controlling interest acquired and that the fair value of the controlling interest is
proportionate to the fair value of the remaining interest.
Guitar 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 financial position of Bass Co. and Guitar Co. are
summarized below:
Bass Co. Guitar Co.

ASSETS
Investment in subsidiary (at cost) 300,000 -
Other assets 1,372,000 496,000
TOTAL ASSETS 1,672,000 496,000
LIABILITIES AND EQUITY
Trade and other payables 292,000 120,000
Share capital 940,000 200,000
Retained earnings 440,000 176,000
Total equity 1,380,000 376,000
TOTAL LIABILITIES AND
1,672,000 496,000
EQUITY
No dividends were declared by either entity during year. There were also no inter-company
transactions and impairment in goodwill.
How much is the consolidated retained earnings on December 31, 20x1?
489,500
6 years.
summarized below:
Bass Co. Guitar Co.

ASSETS
Other assets 1,372,000 496,000
TOTAL ASSETS 1,672,000 496,000
Total equity 1,380,000 376,000
1,672,000 496,000
EQUITY
How much is the consolidated total equity on December 31, 20x1?
1,546,000
Paul Corp acquired 80% of Silas Corp. Outstanding shares. The statement of Financial
position of both entities right after the acquisition are shown below:
Paul Co. Silas Co.

Investment in Subsidiary (at 430,000 0
cost)
Other Assets 1,570,000 750,000
Total Assets 2,000,000 750,000
Liabilities 750,000 400,000

Ordinary Share Capital 1,000,000 310,000
Retained Earnings 250,000 40,000
Total Liabilities and Equity 2,000,000 750,000
At the date of purchase, the fair value of Silas' assets was P50,000 more than the aggregate
carrying amounts. Non-controlling interest is measured under the proportionate share method.
In the consolidated balance sheet prepared immediately after the date of acquisition, the
equity attributable to the owners of the parent is:
1,250,000
Paul Co. Silas Co.

cost)
Other Assets 1,570,000 750,000
Total Assets 2,000,000 750,000

consolidated total assets should amount to?
2,480,000
On January 1, 20x1, KNAVE acquired 80% of the equity interests of RASCAL, Inc. in exchange
for cash. Because the former owners of RASCAL needed to dispose of their investments in
RASCAL by a specified date, they did not have sufficient time to market RASCAL to multiple
potential buyers.
As January 1, 20x1, RASCAL’s identifiable assets and liabilities have fair values of ₱4,800,000
and ₱1,600,000, respectively.
KNAVE Co. elects the option to measure non-controlling interest at fair value. A value of
₱1,000,000 is assigned to the 20% non-controlling interest in RASCAL, Inc. [(₱4M ÷ 80%) x
20% = 1,000,000].
If KNAVE Co. paid ₱4,000,000 cash as consideration for the 80% interest in RASCAL, Inc., how
much is the goodwill (gain on bargain purchase) on the business combination?
800,000
6 years.
summarized below:
Bass Co. Guitar Co.

ASSETS
Other assets 1,372,000 496,000
TOTAL ASSETS 1,672,000 496,000
Total equity 1,380,000 376,000
1,672,000 496,000
EQUITY
How much is the consolidated total assets as of December 31, 20x1?
1,958,000
On January 1, 20x1, CONJUNCTION Co., and UNION, Inc. entered into a business
combination effected through exchange of equity instruments. The combination resulted to
CONJUNCTION obtaining 100% interest in UNION. Both of the combining entities are publicly
listed. As of this date, CONJUNCTION’s shares have a quoted price of ₱400 per share.
CONJUNCTION Co. recognized goodwill of ₱300,000 on the business combination. No
acquisition-related costs were incurred. Additional selected information at acquisition date is
shown below:
CONJUNCTION Co. Combined entity
(before acquisition) (after acquisition)
Share capital 2,400,000 2,800,000
Share premium 1,200,000 4,800,000
Totals 3,600,000 7,600,000
40
Paul Co. Silas Co.

cost)
Other Assets 1,570,000 750,000
Total Assets 2,000,000 750,000

How much is the goodwill at the consolidated balance sheet prepared immediately after
the acquisition?
110,000
Assets 5,250,000 6,800,000 900,000
Liabilities 3,950,000 2,650,000 530,000

par
Share Premium - 500,000 140,000
(Deficit)
Equity
How much is the total asset under ALP Company consolidated balance sheet?
13,438,000
shown below:
Share capital 2,400,000 2,800,000
Share premium 1,200,000 4,800,000
Totals 3,600,000 7,600,000
What is the acquisition-date fair value of the net identifiable assets of UNION?
3,700,000
shown below:
Share capital 2,400,000 2,800,000
Share premium 1,200,000 4,800,000
Totals 3,600,000 7,600,000
How many shares were issued by CONJUNCTION Co. in the business combination?
10,000
life of 6 years.
summarized below:


Revenues 1,200,000 480,000
How much is the consolidated profit attributable to non-controlling interest in 20x1?
17,500
potential buyers.
KNAVE 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 RASCAL, Inc. is ₱620,000.
If KNAVE Co. paid ₱2,400,000 cash as consideration for the 80% interest in RASCAL, Inc., how
much is the goodwill (gain on bargain purchase) on the business combination?
(180,000)
On January 1, 20x1, FORTITUDE Co. acquired 15% ownership interest in ENDURANCE, Inc.
for ₱400,000. The investment was accounted for under PFRS 9. From 20x1 to the end of 20x3,
FORTITUDE recognized net fair value gains of ₱200,000.
On January 1, 20x4, FORTITUDE acquired additional 60% ownership interest in ENDURANCE,

Inc. for ₱3,200,000. As of this date, FORTITUDE has identified the following:
a. The previously held 15% interest has a fair value of ₱720,000.
b. ENDURANCE’s net identifiable assets have a fair value of ₱4,000,000.
c. FORTITUDE elected to measure non-controlling interests at the non-controlling
interest’s proportionate share of ENDURANCE’s identifiable net assets.
The previously held interest was initially classified as FVOCI. How much is the goodwill
( gain on bargain purchase)?
920,000
Abraham Co., a publicly listed entity, and Isaac Co., a private company, exchange equity
interests in a business combination.
 Abraham Co. issues 12 shares for all the outstanding shares of

Isaac
 Abraham’s shares are quoted at P60 per share, while Isaac’s
shares have a fair value of P200 per shares
 The net assets of the entities immediately before the combination
are shown below: (The amounts approximate the acquisition-date
fair value)
Equity Abraham Co. Isaac Co.

Share capital:
12,000 ordinary shares P10 par 120,000
9,000 ordinary shares, P100 par 900,000
Total equity 130,000 1,700,000
How much is the goodwill?
70,000
When David Company acquired Goliath Corporation’s net assets by issuing its own capital
stock, the following acquisition related costs were incurred:
Brokers’ fees 50,000

Underwriters’ fees for the sale of stocks 25,000
Pre-acquisition audit fee 40,000
General administrative costs 15,000
Legal fees for the combination 32,000
Audit fee for SEC registration of stock issue 46,000
SEC registration fee of stock issue 5,000
Other acquisition costs 6,000
How much of the cost above should be debited to Additional Paid in Capital?
76,000
On January 1, 20x1, ABC Co. acquired 75% interest in XYZ, Inc. for ₱2,500,000 cash. ABC Co.
incurred transaction costs of ₱250,000 for legal, accounting and consultancy fees in negotiating
the business combination. ABC Co. elected to measure NCI at the NCI’s proportionate
share in XYZ, Inc.’s identifiable net assets. The carrying amounts and fair values of XYZ’s
assets and liabilities at the acquisition date were as follows:
Assets Carrying amounts Fair values

Cash in bank 25,000 25,000
Accounts receivable 425,000 300,000
Inventory 1,300,000 875,000
Equipment – net 2,500,000 2,750,000
Goodwill 250,000 50,000
Total assets 4,500,000 4,000,000
Liabilities
Payables 1,000,000 1,000,000
How much is the goodwill (gain on a bargain purchase)?
287,500
6 years.
summarized below:
Bass Co. Guitar Co.

ASSETS
Other assets 1,372,000 496,000
TOTAL ASSETS 1,672,000 496,000
Total equity 1,380,000 376,000
1,672,000 496,000
EQUITY
What amount of goodwill is presented in the consolidated statement of financial position

on December 31, 20x1?
40,000
potential buyers.
KNAVE Co. elects the option to measure the non-controlling interest at the non-controlling
interest’s proportionate share of RASCAL, Inc.’s net identifiable assets
If KNAVE Co. paid ₱4,000,000 cash as consideration for the 80% interest in RASCAL, Inc. and,
how much is the goodwill (gain on bargain purchase) on the business combination?
1,440,000
On January 1, 20x1, SUBTERFUGE Co. acquired all of the identifiable assets and assumed all
of the liabilities of DECEPTION, Inc. by paying cash of ₱4,000,000. On this date, the identifiable
assets acquired and liabilities assumed have fair values of ₱6,400,000 and ₱3,600,000,
respectively.
Additional information:
 SUBTERFUGE intends to sell immediately a factory plant included in the
identifiable assets of DECEPTION. All of the “held for sale” classification
criteria under PFRS 5 are met. As of January 1, 20x1, the factory plant
has a fair value of ₱1,200,000 and a carrying amount of ₱1,000,000 in the
books of DECEPTION. Costs to sell the factory plant is ₱80,000.
 Not included in the identifiable asset of DECEPTION is a research and
development intangible asset that SUBTERFUGE does not intend to use.
The fair value of this asset is ₱200,000.
 Also, not included in the identifiable asset of DECEPTION is a customer list, with an
estimated value of ₱40,000, in the form of a database where the nature of the
information is subject to national laws regarding confidentiality.
How much is the goodwill (gain on bargain purchase)?
1,080,000
6 years.
summarized below:
Bass Co. Guitar Co.

ASSETS
Other assets 1,372,000 496,000
TOTAL ASSETS 1,672,000 496,000
Total equity 1,380,000 376,000
1,672,000 496,000
EQUITY
How much is the non-controlling interest in the net assets of the subsidiary on December
31, 20x1?
116,500
Paul Co. Silas Co.

cost)
Other Assets 1,570,000 750,000
Total Assets 2,000,000 750,000

consolidated stockholders equity should amount to?
1,330,000

Assets 5,250,000 6,800,000 900,000
Liabilities 3,950,000 2,650,000 530,000

par
Share Premium - 500,000 140,000
(Deficit)
Equity
What is the total stockholder’s equity in the combined statement of financial position
after combination on November 27, 2019?
6,308,000
life of 6 years.
summarized below:


Revenues 1,200,000 480,000
How much is the consolidated profit attributable to owners of the parent in 20x1?
292,500
On June 10, 2016 FoxLe Company purchases 8,000 shares of Marmen Inc. for P37 per share.
Just prior to the purchase, Marmen Inc. has the following statement of financial position:
Assets Liabilities and Equity

Cash 20,000 Current Liabilities 250,000
Inventory 280,000 Common Stock, P5 par 50,000
Equipment 400,000 APIC 130,000
Goodwill 100,000 Retained Earnings 370,000
Total Assets 800,000 Total Liabilities and Equity 800,000
On June 10, 2016, Marmen Inc. has a total fair value of net assets of P400,000 and it has been
determined that the equipment is worth P500,000.
What is the amount of the non-controlling interest in the consolidated statement of
financial position on the date of acquisition?
74,000

Assets Liabilities and Equity

Uploaded by

Copyright:

Available Formats

Assets Liabilities and Equity

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Assets Liabilities and Equity

Uploaded by

Copyright:

Available Formats

On June 10, 2016 FoxLe Company purchases 8,000 shares of Marmen Inc. for P37 per share.

Assets Liabilities and Equity

What is the amount of goodwill (gain on acquisition) to be reported in consolidated

A Company L Company P Company

Liabilities 3,950,000 2,650,000 530,000

What is the goodwill to be recorded by A Company on November 27, 2019?

Statements of profit or loss

Laughter Co. Tears Co.

How much is the consolidated profit in 20x1?

 The 2014 earnings include an expropriation loss of P40,000

How much is the estimated purchase price?

Bass Co. Guitar Co.

How much is the consolidated retained earnings on December 31, 20x1?

Bass Co. Guitar Co.

Paul Co. Silas Co.

Liabilities 750,000 400,000

Paul Co. Silas Co.

Liabilities 750,000 400,000

Bass Co. Guitar Co.

How much is the consolidated total assets as of December 31, 20x1?

Paul Co. Silas Co.

Liabilities 750,000 400,000

Liabilities 3,950,000 2,650,000 530,000

Statements of profit or loss

Laughter Co. Tears Co.

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

On January 1, 20x4, FORTITUDE acquired additional 60% ownership interest in ENDURANCE,

 Abraham Co. issues 12 shares for all the outstanding shares of

Equity Abraham Co. Isaac Co.

How much is the goodwill?

Brokers’ fees 50,000

Other acquisition costs 6,000

Assets Carrying amounts Fair values

How much is the goodwill (gain on a bargain purchase)?

Bass Co. Guitar Co.

What amount of goodwill is presented in the consolidated statement of financial position

How much is the goodwill (gain on bargain purchase)?

Bass Co. Guitar Co.

Paul Co. Silas Co.

Liabilities 750,000 400,000

A Company L Company P Company

Liabilities 3,950,000 2,650,000 530,000

Statements of profit or loss

Laughter Co. Tears Co.

Assets Liabilities and Equity

You might also like