On January 1

On January 1, 20x1, ABC Co. acquired 80% interest in XYZ, Inc.
by issuing 5,000 shares with fair

value of P30 per share and par value of P20 per share. The financial statements of ABC Co. and XYZ,
Inc. immediately after the acquisition are shown below:
Jan. 1, 20x1
ABC Co. XYZ, Inc.
Cash 20,000 10,000
Accounts receivable 60,000 24,000
Inventory 80,000 46,000
Investment in subsidiary 150,000
Equipment 400,000 100,000
Accumulated depreciation (40,000) (20,000)
Total assets 670,000 160,000
Accounts payable 40,000 12,000

Bonds payable 60,000 -
Share capital 340,000 100,000
Share premium 130,000 -
Retained earnings 100,000 48,000
Total liabilities and equity 670,000 160,000
On January 1, 20x1, the fair value of the assets and liabilities of XYZ, Inc. were determined by
appraisal, as follows:
Carryin
XYZ, Inc. g Fair Fair value
amounts values increment
Cash 10,000 10,000 -
Accounts receivable 24,000 24,000 -
Inventory 46,000 62,000 16,000
Equipment 100,000 120,000 20,000
Accumulated depreciation (20,000) (24,000) (4,000)
Accounts payable (12,000) (12,000) -
Net assets 148,000 180,000 32,000
The equipment has a remaining useful life as of 4 years from January 1, 20x1.
Requirement: Prepare the consolidated statement of financial position as at January 1, 20x1. ABC Co.
elects to measure non-controlling interest as its proportionate share in XYZ’s net identifiable assets.
1. Consideration transferred (5,000 X P30) 150,000

Non-controlling interest (180,000 X 20%) 36,000
Total 186,000
Fair value of net identifiable assets (180,000)
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Goodwill 6,000
ABC Co.
Consolidated Statement of Financial Position
As of January 1, 20X1
ASSETS
Cash (20,000 + 10,000) 30,000

Accounts Receivable (60,000 + 24,000) 84,000
Inventory (80,000 + 62,000) 142,000
Equipment (400,000 + 120,000) 520,000
Accumulated depreciation (40,000 + 24,000) (64,000)
Goodwill 6,000
TOTAL ASSETS 718,000
LIABILITIES AND EQUITY
Accounts payable (40,000 + 12,000) 52,000

Bonds payable 60,000
Total Liabilities 112,000
Share capital 340,000

Share premium 130,000
Retained earnings 100,000
Owners of parent 570,000
Non-controlling interest 36,000
Total Equity 606,000
TOTAL LIABILITIES AND EQUITY 718,000
“The roots of education are bitter, but the fruit is sweet.”– Aristotle
- end –
NAME: Jean Kathyrine C. Chiong Date: March 30, 2022

Professor: Ms. Norlyn Cinco, CPA Section: BSA 3 Score:
Part 2
Use the following information for the next five questions:

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 EQUITY 1,672,000 496,000
No dividends were declared by either entity during year. There were also no inter-company
transactions and impairment in goodwill.
1. What amount of goodwill is presented in the consolidated statement of financial position on

December 31, 20x1?
a. 40,000
b. 35,000
c. 20,000
d. 15,000
Solution:
Consideration transferred (at cost) 300,000
Non-controlling interest (300,000/75% X 25%) 100,000
Total 400,000
Fair value of net identifiable assets (360,000)
Goodwill, 12/31/X1 40,000
2. How much is the consolidated total assets as of December 31, 20x1?

a. 1,867,000
b. 1,907,000
c. 1,958,000
d. 1,974,000
Solution:
Other assets – Bass Co. 1,372,000
Other assets – Guitar Co. 496,000
Difference in FV of building, net 50,000*
Goodwill 40,000
Consolidated total assets, 12/31/X1 1,958,000
* Building (360,000 – 300,000) 60,000
Depreciation (60,000/6) (10,000)
Difference in FV of building, net 50,000
3. How much is the non-controlling interest in the net assets of the subsidiary on December 31,
20x1?
a. 106,500 c. 136,500
b. 116,500 d. 146,500
Solution:
NCI on acquisition 100,000
Net income of Guitar Co. (376,000 – 300,000) 76,000
Depreciation (10,000)
Total 66,000
NCI percentage 25% 16,500
Non-controlling interest in the net assets of subsidiary, 12/31/X1 116,500
4. How much is the consolidated retained earnings on December 31, 20x1?

a. 489,500 c. 534,500
b. 498,500 d. 543,500
Solution:
Retained earnings – Bass Co. 440,000
Share in the net income of Guitar Co. (66,000 X 75%) 49,500
Consolidated retained earnings, 12/31/X1 489,500
5. How much is the consolidated total equity on December 31, 20x1?

a. 1,546,000 c. 1,642,000
b. 1,564,000 d. 1,624,000
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On January 1, 20x1, ABC Co. acquired 80% interest in XYZ, Inc.

by issuing 5,000 shares with fair

Accounts payable 40,000 12,000

1. Consideration transferred (5,000 X P30) 150,000

Cash (20,000 + 10,000) 30,000

LIABILITIES AND EQUITY

Accounts payable (40,000 + 12,000) 52,000

Share capital 340,000

NAME: Jean Kathyrine C. Chiong Date: March 30, 2022

Use the following information for the next five questions:

Bass Co. Guitar Co.

LIABILITIES AND EQUITY

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

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

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

5. How much is the consolidated total equity on December 31, 20x1?

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