ADVANCED ACCOUNTING - PART 2

MIDTERM QUIZ

QUIZ 1
PROBLEM A
1.) Consideration transferred 37,500 P40 1,500,000
Contingent libilities 200,000
Total acquisition cost 1,700,000
Less: Acquiree net assets @ FMV 1,800,000
Income form acquisition (100,000)

2.) Consideration transferred 1,600,000

Contingent libilities 200,000
Total acquisition cost 1,800,000
Less: Acquiree net assets @ FMV 1,800,000
Goodwill -

Acquirer's total assets @ book value 3,000,000

Acquiree's total assets @ fair value 2,200,000
Goodwill -
Payments (650,000)
Total assets, after acquisition 4,550,000

3.) Consideration transferred 800,000

Contingent libilities 200,000
Total acquisition cost 1,000,000
Less: Acquiree net assets @ FMV 1,800,000
Income from acquisition (800,000)

Acquirer's net assets @ book value 2,400,000

New shares @ fair value 800,000
Income from acquisition 800,000
Decrease in additional paid in capital (75,000)
Decrease in retained earnings - acquisition expenses (575,000)
Total stockholders' equity, after acquisition 3,350,000

PROBLEM B
4.) Acquisition cost
Issued shares (20,000 shares * 2 * P1.10) 44,000
Cash (10,000 shares * P2.50 * 50%) 12,500
Liability - present value (12,500 * 0.90909) 11,364
Total 67,864
Less: FMV of Acquiree's net assets
Equipment - net 30,000
Inventory 20,000
Accounts receivable 10,000
Patent 15,000 75,000
5.) Gain from acquisition (7,136)

Note: Cash was used to settle accounts payable and payment of liquidation cost
PROBLEM C
6.) Previously held interest
Investment - January 1, 2010 100,000
Share in net income 90,000
Amortization of excess (16,000)
Dividends received (24,000) 50,000
Carrying value 150,000
Multiply by: 110% 165,000
Additional investment - consideration given 585,000
Noncontrolling interest 175,000
Acquisition cost 925,000

Computation of Amortization of excess

Acquisition cost 100,000
Less: Investee net assets acquired 84,000
Undervalued equipment (20% portion) 16,000

Computation of NCI - proportionate share on Subsidiary net asset measured at Fair value
Subsidiary net asset at Fair Value (165,000 / 20%) 825,000
Multiply by: Noncontrolling interest 20%
Proportionate share 165,000

NCI - given fair value 175,000

Parent NCI Total

Fair value of Business 750,000 175,000 925,000
Fair value of Subsidiary net assets 660,000 165,000 825,000
Goodwill 90,000 10,000 100,000

7.) Goodwill attributable to parent 90,000

8.) Goodwill attributable to NCI 10,000

QUIZ 2
Problem A

1.) How much is the price paid to Son Company?

Goodwill 24,800.00
Add: Subsidiary stockholders equity @ fair value 69,000.00
Consideration transferred 93,800.00

2.) Consideration transferred 77,500.00

NCI 4,078.95
Fair value of Business 81,578.95
Less: Subsidiary stockholders' equity @ fair value 69,000.00
Goodwill 12,578.95
 Parent total assets @ book vallue 500,000.00
Subsidiary total assets @ fair value 74,000.00
Goodwill 12,578.95
Payments that decrease Parent total assets -
Consolidated total assets 586,578.95

3.) Consideration transferred 45,600.00

NCI 17,250.00
Fair value of Business 62,850.00
Less: Subsidiary stockholders' equity @ fair value 69,000.00
Income from acquisition (6,150.00)

Parent stockholders' equity 470,000.00

Income from acquisition 6,150.00
Non-controlling interest 17,250.00
Consolidated total assets 493,400.00

4.) Consideration transferred 35,000.00

NCI 27,600.00
Fair value of Business 62,600.00
Less: Subsidiary stockholders' equity @ fair value 69,000.00
Gain from acquisition (6,400.00)

Subsidiary stockholders' equity 45,000.00

Add: Excess of fair value over book value of equipment 24,000.00
Subsidiary stockholders' equity @ fair value 69,000.00
Multiply by: Noncontrolling interest rate 40%
NCI-Proportionate share 27,600.00

PROBLEM B
Controlling interest (36,000 / 40,000) 90.00%

Result from acquisition

Consideration transferred 1,080,000

NCI 120,000
Fair value of business 1,200,000
Less: Subsidiary Stockholders' equity 969,000
Excess 231,000
Allocation of excess
Inventory (26,000)
Land (60,000)
Building (80,000)
Machinery 30,000
Leasehold (30,000)
Contingent liability 50,000 (116,000)
Goodwill 115,000

Subsidiary net assets at book value 969,000

Add: Excess difference between Fair value over Book value
 Inventory 26,000
Land 60,000
Building 80,000
Machinery (30,000)
Leasehold 30,000
Contingent liability (50,000) 116,000
Subsidiary net assets at fair value 1,085,000
Multiply by: Non-controlling interest 10%
Noncontrolling interest 108,500

Allocation of goodwill

Parent NCI Total

Fair value of Business 1,080,000 120,000 1,200,000
Fair value of Subsidiary 976,500 108,500 1,085,000
Goodwill 103,500 11,500 115,000

5.) Goodwill attributable to parent - P103,500

6.) Goodwill attributable to NCI - P11,500

Year 2014 TOTAL CNI-Parent CNI-NCI

Parent net income 458,000 458,000
Dividend income (36,000) (36,000)
Subsidiary net income 90,000 81,000 9,000
Amortization of excess (29,000) (26,100) (2,900)
Impairment of goodwill (10,000) (9,000) (1,000)
Consolidated balances 467,900 5,100

Schedule of amortization of excess

Total 2014 2015
Inventory 26,000 26,000 -
Building 80,000 4,000 4,000
Machinery (30,000) (6,000) (6,000)
Leasehold 30,000 5,000 5,000
Balances 29,000 3,000

7.) Consolidated net income attributable to parent for year 2014 - P467,900
8.) Consolidated net income attributable to NCI for year 2014 - P5,100

Year 2015
Total NCI
Parent retained earnings - 12/31/2013 1,050,000
Acquisition expense (50,000)
Accumulated net income 777,350
Accumulated dividends declared (300,800)
Parent retained earnings - 12/31/2015 1,476,550 -
Non-controlling interest - 12/31/2013 120,000
Undistributed net income for 2014 & 2015 130,000 13,000
Amortization of excess - cumulative (32,000) (3,200)
Impairment of goodwill - cumulative (35,000) (3,500)
Consolidated balance 126,300
9.) Consolidated retained earnings December 31, 2015 - P1,533,250
10.) Non-controlling interest December 31, 2015 - P126,300
ation cost
- higher
 CNI
458,000
(36,000)
90,000
(29,000)
(10,000)
473,000

Consolidated
Retained Earnings
1,050,000
(50,000)
777,350
(300,800)
1,476,550

117,000
(28,800)
(31,500)
1,533,250