AA2 - CHAPTER 2

SUGGESTED ANSWERS

EXERCISES
Exercise 2 - 1
a. Ordinary Share Capital, Sing Co. 100,000
Additional Paid-in Capital, Sing Co. 20,000
Retained Earnings, Sing Co. 25,000
Goodwill 15,000
Investment 160,000

Consideration transferred P160,000

Book value of interest acquired
(P100,000 + P20,000 + P25,000) x 100% 145,000
Goodwill P 15,000

b. Ordinary Share Capital, Sing Co. 100,000

Additional Paid-in Capital, Sing Co. 80,000
Investment 140,000
Profit or Loss /Gain on Bargain Purchase 10,000
Retained Earnings, Sing Co. 30,000

Consideration transferred P140,000

Book value of interest acquired
(P100,000 + P80,000 - P30,000) x 100% 150,000
Negative Goodwill P 10,000

c. Ordinary Share Capital, Sing Co. 100,000

Additional Paid-in Capital, Sing Co. 40,000
Goodwill 18,750
Investment 120,000
Retained Earnings, Sing Co. 5,000
Non-controlling Interest 33,750

Consideration transferred P120,000

Non-controlling interest (135,000 x 25%) 33,750
Total P153,750
FV of net assets (P100,000 + P40,000 P5,000) 135,000
Goodwill P 18,750

Exercise 2 2

1. Case A
Ordinary Share Capital, Soya Co. 100,000
Additional Paid-in Capital, Soya Co. 30,000
Retained Earnings, Soya Co. 20,000
Goodwill 5,000
Investment 125,000
Non-controlling Interest (P150,000 x 20%) 30,000
Consideration transferred P125,000
Book value of interest acquired 800/1,000 = 80%
(P100,000 + P30,000 + P20,000) x 80% 120,000
Chapter 2 AA2 (2014 edition) page 2

Goodwill P 5,000
Case B
Ordinary Share Capital, Soya Co. 50,000
Additional Paid-in Capital, Soya Co. 20,000
Retained Earnings, Soya Co. 10,000
Investment 58,000
Profit or Loss / Gain on Bargain Purchase 2,000
Non-controlling Interest (80,000 x 25%) 20,000

Consideration transferred P58,000

Book value of interest acquired 375/500 = 75%
(P50,000 + P20,000 + P10,000) x 75% 60,000
Negative Goodwill P 2,000
Case C
Ordinary Share Capital, Soya Co. 80,000
Additional Paid-in Capital, Soya Co. 40,000
Investment 63,000
Profit or Loss /Gain on Bargain Purchase 3,000
Retained Earnings, Soya Co. 10,000
Non-controlling Interest (110,000 x 40%) 44,000

Consideration transferred P63,000

Book value of interest acquired 480/800 = 60%
(P80,000 + P40,000 P10,000) x 60% 66,000
Negative Goodwill P 3,000

2. Case A
Ordinary Share Capital, Soya Co. 100,000
Additional Paid-in Capital, Soya Co. 30,000
Retained Earnings, Soya Co. 20,000
Goodwill 5,000
Investment 125,000
Non-controlling Interest 30,000

Consideration transferred P125,000

Non-controlling interest 125,000-5,000/80% x 20% 30,000
Total P155,000
FV of net assets 150,000
Goodwill P 5,000

Case B
Ordinary Share Capital, Soya Co. 50,000
Additional Paid-in Capital, Soya Co. 20,000
Retained Earnings, Soya Co. 10,000
Investment 58,000
Profit or Loss / Gain on Bargain Purchase 4,000
Non-controlling Interest 18,000
Consideration transferred P58,000
Non-controlling interest (58,000-4,000/75% x 25%) 18,000
Total P76,000
FV of net assets 80,000
Negative Goodwill P 4,000
Chapter 2 AA2 (2014 edition) page 3

Case C
Ordinary Share Capital, Soya Co. 80,000
Additional Paid-in Capital, Soya Co. 40,000
Investment 63,000
Profit or Loss /Gain on Bargain Purchase 7,000
Retained Earnings, Soya Co. 10,000
Non-controlling Interest 40,000

Consideration transferred P63,000

Non-controlling interest (63,000 3,000/60% x 40%) 40,000
Total P103,000
FV of net assets 110,000
Negative Goodwill P 7,000

Exercise 2 - 3
Case A
Ordinary Share Capital, Say Co. 100,000
Additional Paid-in Capital, Say Co. 50,000
Investment 140,000
Retained Earnings, Say Co. 10,000
Case B
Ordinary Share Capital, Say Co. 100,000
Additional Paid-in Capital, Say Co. 50,000
Plant and Equipment 20,000
Investment 144,000
Retained Earnings, Say Co. 10,000
Non-controlling Interest (160,000 x 10%) 16,000

Consideration transferred P144,000

Book value of interest acquired
(P100,000 + P50,000 - P10,000) x 90% 126,000
Excess of cost over book value P 18,000
Increase in plant and equipment ((P18,000/90%) P 20,000
Case C
Ordinary Share Capital, Say Co. 100,000
Additional Paid-in Capital, Say Co. 50,000
Investment 104,000
Inventories 10,000
Retained Earnings, Say Co. 10,000
Non-controlling Interest (130,000 x 20%) 26,000
Consideration transferred P104,000
Book value of interest acquired
(P100,000 +P50,000 P10,000) 80% 112,000
Excess of cost over book value P 8,000
Decrease in inventory (P8,000/80%) P 10,000
Case D
Ordinary Share Capital, Say Co. 100,000
Additional Paid-in Capital, Say Co. 50,000
Goodwill 10,800
Investment 78,000
Retained Earnings, Say Co. 10,000
Non-controlling Interest (140,000 x 52%) 72,800
Chapter 2 AA2 (2014 edition) page 4

Consideration transferred P78,000

Book value of interest acquired
(P100,000 + P50,000 - P10,000) x 48% 67,200
Goodwill P 10,800

Exercise 2 - 4
a. Investment in Sax Co. (4,000 @ P120) 480,000
Ordinary Share Capital 400,000
Additional Paid-in Capital 80,000

Ordinary Share Capital, Sax Co. 100,000

Additional Paid-in Capital, Sox Co. 250,000
Retained Earnings, Sax Co. 100,000
Equipment 83,333
Investment in Sax Co. 480,000
Non-controlling Interest (450,000 + 83,333 x 10%) 53,333

Consideration transferred (4,000 x P120) P480,000

Book value of interest acquired
(P450,000 x 90%) 405,000
Excess of cost over book value P 75,000
Increase in equipment (P75,000/90%) P 83,333

b. Investment in Sax Co. (3,500 @ P120) 420,000

Ordinary Share Capital 350,000
Additional Paid-in Capital 70,000

Ordinary Share Capital, Sax Co. 100,000

Additional Paid-in Capital, Sax Co. 250,000
Retained Earnings, Sax Co. 100,000
Goodwill 15,000
Investment in Sax Co. 420,000
Non-controlling Interest (450,000 x 10%) 45,000

Consideration transferred (3,500 x P120) P420,000

Book value of interest acquired
(P450,000 x 90%) 405,000
Goodwill P 15,000

c. Investment in Sax Co. 360,000

Ordinary Share Capital 300,000
Additional Paid-in Capital 60,000
Ordinary Share Capital, Sax Co. 100,000
Additional Paid-in Capital, Sax Co. 250,000
Retained Earnings, Sax Co. 100,000
Inventory 25,000
Investment in Sax Co. 360,000
Profit or Loss / Gain on Bargain Purchase 22,500
Non-controlling Interest (450,000 -25,000 x 10% 42,500
Consideration transferred (3,000 x P120) P360,000
Book value of interest acquired
(P450,000 x 90%) 405,000
Chapter 2 AA2 (2014 edition) page 5

Excess of book value over cost P 45,000

Decrease in Inventory (P25,000 x 90%) 22,500
Negative goodwill P 25,000

Exercise 2 5
1. Non-controlling interest (P90,000 (P50,000 x 10%=P5,000) P 85,000
Percentage of non-controlling interest 10%
Total Shareholders Equity of Sand P 850,000
Less Ordinary Share Capital and APIC (P800,000 + P400,000) 1,200,000
Deficit of Sand P( 350,000)

2. Consolidated balance of land P1,145,000

Less Book value of land of Pond Co. 850,000
FMV of Sands land P 295,000
Less Excess of FMV over BV 50,000
BV of Sands land P 245,000

3. Consolidated balance of liabilities P440,000

Less Liabilities of Pond 340,000
Liabilities of Sand P100,000

4. Excess of cost over BV

Land (50,000 x 90%) P 45,000
Goodwill 100,000 P145,000
Book value (P850,000 x 90%) 765,000
Consideration transferred (Cost of investment) P910,000

5. Total shareholders equity of Sand P850,000

Increase in fair value of Land 50,000
Fair value of identifiable net assets P900,000
x 10%
Non-controlling interest P 90,000

Exercise 2 - 6
a. Total shareholders equity + asset adjustment, excluding goodwill P182,500
Less Non-controlling interest (in TSE and asset adjustment) 27,375
Controlling interest P155,125
Percentage of ownership acquired (P155,125/P182,500) 85%

b. Total shareholders' equity of Sill (P60,000 + P35,000 + P50,100) P145,600

Increase in fair value of assets:
Inventories P 3,900
Plant assets 28,500
Patents 4,500 36,900
Current fair value of net identifiable assets P182,500

c. Zero. Non-controlling interest is measured at the proportionate share in the

fair value of the identifiable net assets

d. P182,500 x 15% = P27,375

Chapter 2 AA2 (2014 edition) page 6

Exercise 2 - 7
1. Total current assets of Seeda = (P146,000 + P2,000) - P106,000 P 42,000

2. Non-controlling interest P35,100

Less Share in asset adjustment (P10,000 x 30%) 3,000
Non-controlling interest in subsidiary shareholders equity P32,100/
30%
Total shareholders equity of subsidiary (P32,100 / 30%) P107,000

Exercise 2 8
1. Palomar Inventory P1,100,000
Samar Inventory at FMV 1,700,000
Consolidated inventory P2,800,000

2. Palomar Buildings and equipment P3,500,000

Samar Buildings and equipment at FMV 3,750,000
Consolidated buildings and equipment P7,250,000

3. ZERO. It is eliminated in the consolidated statement of financial position.

4. Consideration transferred P2,800,000

Book value of acquired interest
(P1,000,000 + P2,000,000 P400,000 P300,000 goodwill of Samar) 2,300,000
Excess of cost over BV P 500,000
Allocation of excess:
Decrease in inventory (P100,000)
Increase in buildings and equipment 250,000 150,000
Goodwill P 350,000

5. P4,000,000. The Ordinary Share Capital of Palomar, the acquiring

company.

6. P1,050,000. The Retained Earnings of Palomar, the acquiring company.

Exercise 2 - 9
Inventories 20,000
Plant Assets 80,000
Ordinary Share Capital, Santa Co. 200,000
Paid-In Capital in Excess of Par - Santa Co. 210,000
Investment in Subsidiary 420,000
Retained Earnings, Santa Co. 90,000

Exercise 2 10 Market value of Planet Corp share is P50 per share

1.
Solar Planet
Currently issued shares 300,000 60% 100,000
Additional shares issued 200,000 40% 66,667
Total shares 500,000 100% 166,667
Chapter 2 AA2 (2014 edition) page 7

Fair value of consideration transferred 66,667 sh @ P50 = P3,333,350

2. Consideration transferred 66,667 x P50 P3,333,350

Book value of Solar shareholders equity 2,000,000
Excess of book value over cost P1,333,350
Increase in plant assets 1,000,000
Goodwill P 333,350

3. P6,000,000 + P4,000,000 = P10,000,000

4. P1,000,000 of Solar + P1,000,000 increase in plant assets = P2,000,000

5. 500,000shares. P100,000 of Planet + (66,667sh @ P50 = P3,333,350 = P3,433,350

PROBLEMS
Problem 2 - 1
Prime Inc. and Subsidiary Slime Corp.
Working Paper for Consolidated Statement of Financial Position
January 1, 2014

Consolidated
Prime Slime Eliminations Statement of
Inc. Corp. Dr. Cr. Finl Position
Debits
Cash and Other Current Assets 400,000 300,000 700,000
Plant, Property, and Equipment 200,000 250,000 450,000
Investment in Slime Corp. 380,000 a 380,000 ------
Other Assets 30,000 20,000 50,000
Goodwill a. 110,000 110,000
1,010,000 570,000 1,310.000
Credits
Accumulated Depreciation 60,000 50,000 110,000
Liabilities 300,000 250,000 550,000
Ordinary Share Capital, Prime Inc. 400,000 400,000
Addl Paid-In Capital, Prime, Inc 180,000 180,000
Retained Earnings, Prime, Inc. 70,000 70,000
Ordinary Share Capital, Slime Corp 200,000 a.200,000
Addl Paid-In Capital, Slime Corp. 40,000 a. 40,000
Retained Earnings, Slime Corp. 30,000 a. 30,000
1,010,000 570,000 380,000 380,000 1,310,000

Problem 2 - 2
Requirement 1
Consideration transferred P950,000
Book value of interest acquired:
Ordinary Share Capital P200,000
Additional paid-in capital 100,000
Retained earnings 400,000 700,000
Excess of cost over book value P250,000
Allocation of excess:
Chapter 2 AA2 (2014 edition) page 8

Inventory P 30,000
Land 50,000
Equipment 130,000 210,000
Goodwill P 40,000

Requirement 2
Pole Co. and Subsidiary Sole Co.
Working Paper for Consolidated Statement of Financial Position
January 2, 2014
Pole Sole Eliminations Consolidated
Co. Co. Dr. Cr. St. of Fin Pos.
Debits
Cash 300,000 50,000 350,000
Accounts Receivable 200,000 100,000 300,000
Inventory 150,000 60,000 a. 30,000 240,000
Land 70,000 a. 50,000 120,000
Equipment 600,000 470,000 a. 130,000 1,200,000
Investment in Sole Co. 950,000 a. 950,000
Goodwill a. 40,000 40,000
2,200,000 2,250,000
750,000
Credits
Accounts Payable 100,000 50,000 150,000
Ordinary Share Capital, Pole Co. 600,000 600,000
Retained Earnings, Pole Co. 1,500.000 1,500,000
Ordinary Share Capital, Sole Co. 200,000 a. 200,000
APIC, Sole Co.. 100,000 a. 100,000
Retained Earnings, Sole Co. 400,000 a. 400.000
2,200.000 750,00 950,00 950,000 2,250,000
0 0

Requirement 3a
Consideration transferred P810,000
Book value of interest acquired:
Ordinary Share Capital P200,000
Additional paid-in capital 100,000
Retained earnings 400,000 P700,000 x90% 630,000
Excess of cost over book value P180,000
Allocation of excess:
Inventory P 30,000
Land 50,000
Equipment 130,000 P210,000x90% 189,000
Negative Goodwill P 9,000

Requirement 3b
Non controlling interest P700,000 + P210,000 P910,000 x 10% = P91,000

Pole Co. and Subsidiary Sole Co.

Working Paper for Consolidated Statement of Financial Position
January 2, 2014
Pole Sole Eliminations Consolidated
Chapter 2 AA2 (2014 edition) page 9

Debits Co. Co. Dr. St. of Fin Pos

Cash 440,000 50,000 490,000
Accounts Receivable 200,000 100,000 300,000
Inventory 150,000 60,000 a 30,000 240,000
Land 70,000 a. 50,000 120,000
Equipment 600,000 470,000 a. 130,000 1,200,000
Investment in Sole Co. 810,000 a. 810,000
2,200,000 750,000 2,350,000
Credits
Accounts Payable 100,000 50,000 150,000
Ord. Share Capital, Pole Co. 600,000 600,000
Retained Earnings, Pole Co. 1,500.000 a. 9,000 1,509,000
Ord. Share Capital, Sole Co. 200,000 a. 200,000
APIC, Sole Co.. 100,000 a. 100,000
Retained Earnings, Sole Co. 400,000 a. 400,000
Non-controlling interest a. 91,000 91,000
2,200.000 750,000 910,000 910,000 2,350,000

Consideration transferred P400,000

Book value of interest acquired:
Ordinary Share Capital P200,000
Additional paid-in capital 100,000
Retained earnings 400,000 P700,000 x40% 280,000
Excess of cost over book value P120,000
Allocation of excess:
Inventory P 30,000
Land 50,000
Equipment 130,000 P210,000x40% 84,000
Negative Goodwill P 36,000

Pole Co. and Subsidiary Sole Co.

Working Paper for Consolidated Statement of Financial Position
January 2, 2014
Pole Sole Eliminations Consolidated
Debits Co. Co. Dr. St. of Fin Pos
Cash 850,000 50,000 900,000
Accounts Receivable 200,000 100,000 300,000
Inventory 150,000 60,000 a 30,000 240,000
Land 70,000 a. 50,000 120,000
Equipment 600,000 470,000 a. 130,000 1,200,000
Investment in Sole Co. 400,000 a. 400,000
Goodwill a. 36,000 36,000
2,200,000 750,000 2,796,000
Credits
Accounts Payable 100,000 50,000 150,000
Ord. Share Capital, Pole Co. 600,000 600,000
Retained Earnings, Pole Co. 1,500.000 1,500,000
Ord. Share Capital, Sole Co. 200,000 a. 200,000
APIC, Sole Co.. 100,000 a. 100,000
Retained Earnings, Sole Co. 400,000 a. 400,000
Non-controlling interest a. 546,000
546,000
2,200.000 750,000 946,000 946,000 2,796,000
Non controlling interest (P700,000 + P 210,000) x 60% = P546,000
Chapter 2 AA2 (2014 edition) page
10

Problem 2 - 3
1. Inventory 30,000
Plant and Equipment 100,000
Patents 50,000
Goodwill 50,000
Ordinary Share Capital, Stork 100,000
Retained Earnings, Stork 250,000
Investment 464,000
Non-controlling Interest (P464,000/80% x 20% = P116,000) 116,000

Consideration transferred P464,000

Non controlling Interest 116,000
Total P580,000
Fair value of net assets
P50,000 + P30,000 + P50,000 + P400,000 + P50,000 - 50,000 530,000
Goodwill P 50,000

2. Inventory 30,000
Plant and Equipment 100,000
Patents 50,000
Ordinary Share Capital, Stork Co. 100,000
Retained Earnings, Stork Co. 250,000
Profit or Loss / Gain on Bargain Purchase 187,500
Investment 274,000
Non-controlling Interest (P274,000/80% x 20% ) 68,500
Consideration transferred P274,000
Non controlling Interest 68,500
Total P342,500
Fair value of net assets 530,000
Gain on bargain purchase P187,500

Problem 2 - 4
1. Investment in Stride Co. (20,000 sh @ P10) 200,000
Ordinary Share Capital (20,000 sh @ P2) 40,000
Paid-In Capital in Excess of Par 160,000
Paid in Capital in Excess of Par 10,000
Expenses of Business Combination 20,000
Cash 30,000

2. Retained Earnings, Stride Co. 20,000

Goodwill 20,000

Ordinary Share Capital, Stride Co. 25,000

Paid-In Capital in Excess of Par, Stride Co. 50,000
Retained Earnings, Stride Co. 55,000
Current Assets 5,000
Plant Assets 40,000
Long-Term Debt 10,000
Goodwill 15,000
Chapter 2 AA2 (2014 edition) page
11

Investment in Stride Co. 200,000

Consideration transferred (P20,000 x P10) P200,000
Book value of int. acquired
(P25,000 + P50,000 + P55,000) 130,000
Excess of cost over book value P 70,000
Allocation of excess;
Inventories P 5,000
Plant assets 40,000
Long-term debt 10,000 55,000
Goodwill P 15,000

Problem 2 5 Plow Corp. and Subsidiary Slow Co.

Working Paper for Consolidated Financial Statements
July 1, 2014
Consolidated
Plow Slow Eliminations Statement of
Debits Corp. Co. Dr. Cr. Finl Position
Cash 15,000 10,000 25,000
Accounts Receivable 25,000 20,000 (f) 8,000 37,000
Notes Receivable 70,000 45,000 (b) 10,000 85,000
(e) 20,000
NR Discounted (25,000) (30,000) (d) 10,000 (25,000)
(e) 20,000
Inventories 50,000 60,000 110,000
Prepaid Expenses 15,000 8,000 23,000
Advances to Slow Co. 25,000 10,000
(g) 15,000
Investment in Slow Co. 93,400 (a) 93,400
Property and Equipment, net 85,000 100,000 185,000
Goodwill (a) 31,000 31,000
353,400 213,000 471,000
Credits
Current Liabilities 80,000 40,000 (b) 10,000 (d) 10,000 112,000
(f) 8,000
Advances from Plow Corp. 25,000 (c ) 10,000
(g) 15,000
Loans Payable 193,400 70,000 263,400
Ordinary Share Capital , Plow Corp. 100,000 100,000
RE, Plow Corp. (20,000) (20,000)
Ordinary Share Capital, Slow Co. 50,000 (a) 50,000
RE, Slow Co. 28,000 (a) 28,000
Non-controlling Interest (a) 15,600 15,600
353,400 213,000 174,150 174,150 471,000

Consideration transferred P93,400

Book value of int. acquired
(P50,000 + P28,000) x 80% 62,400
Goodwill P31,000

Non controlling Interest (P50,000 + P28,000) x 20% = P15,600

MULTIPLE CHOICE
 Chapter 2 AA2 (2014 edition) page
12

2-A 1. B 6. C 11. D 16. B

2. D 7. A 12. D 17. D
3. B 8. C 13. D 18. A
4. D 9. D 14. A 19. D
5. A 10. B 15. B 20. C

2-B C Consideration transferred P2,000,000

Book value of interest acquired:
P200,000 + P400,000 +P800,000 x 100% 1,400,000
Excess of cost over book value P 600,000
Increase in FV P150,000 P50,000 100,000
Goodwill P 500,000

2-C C Consideration transferred P765,000

FMV of net assets acquired (P815,000 P150,000) 665,000
Goodwill P100,000

2-D B Consideration transferred P2,968,000

Book value of interest acquired
(P7,560,000 P560,000 P3,360,000) 3,640,000
Negative Goodwill P 672,000

2-E D Number of shares issued to Roces 100,000

Excess of MV over par value of share capital x P8.00
APIC recognized upon merger P800,000
APIC of Tante 650,000
APIC reflected in the Consolidated Statement of Finl Pos P1,450,000

2-F C Investment (P 26,000 @ 100) 2,600,000

Ordinary Share Capital 2,600,000

2-G 1. B 1,080 (P180,000/P100) 60%

2. A Consideration transferred P 161,200

Book value of int. acquired
[(P180,000 + P50,000 + P30,0000) x 60%] 156,000
Excess of cost over book value P 5,200

3. B (P180,000 + P50,000 + P30,000) x 40% P 104,000

2-H 1. A (P120,000 P120) (P125,000 P100) 80%

2. C (P125,000 + P50,000) x 20% P35,000

3. A Consideration transferred P120,000

Book value of interest acquired (P175,000 x 80%) 140,000
Negative goodwill ( P20,000)
4. D

2-I 1. A Consideration transferred P 40,000

Fair value of interest acquired
(P10,000 + P32,350) x 80% 33,880
Goodwill P 6,120
 Chapter 2 AA2 (2014 edition) page
13

2. C Ordinary Share Capital P 10,000

Retained earnings P 32,350

3. C (P10,000 + P32,350) x 20% P 8,470

4. D

2-J D Consideration transferred (P100,000 x P10) P1,000,000

FMV of net tangible assets 1,400,000
Negative Goodwill reported in the consolidated statement of P 400,000
financial position as part of Parent Company Retained
Earnings

2-K 1. C Non-controlling interest in subsidiary TSE P134,000

(P450,000 + 120,000 + 100,000 x 20%)

2. C Consideration transferred P620,000

Book value of investment (P450,000 x 80%) 360,000
Excess of cost over book value P260,000
Allocation of excess:
Inventory 120,000
PPE 100,000 220,000 x80% 176,000
Goodwill P84,000

2-L 1. A P100,000 20% P 500,000

2. A P500,000 x 80% P 400,000

2-M 1. D P500,000 + P45,000 P 545,000

2. B (P500,000 x 90%) + P45,000 P 495,000

2-N C Consideration transferred (4,500 @ P140) P 630,000

Book value of interest acquired
(P500,000 + P125,000) x 90% 562,500
Excess of cost over book value treated as goodwill P 67,500
Assets of Panda and Selina [(P3,125,000 P630,000) +
P875,000)] 3,370,000
Combined assets P3,437,500

2-O 1. D

2. C Consideration transferred P 180,000

Non-controlling interest (P180,000 P24,000/60% x 40%) 104,000
Total P284,000
Fair value of identifiable net assets 250,000
Goodwill P 34,000

3. C Non-controlling interest (180,000-24,000/60% x 40%) P 104,000

 Chapter 2 AA2 (2014 edition) page
14

2-P 1. B Total assets of Plant and Slant (P3,000,000 + P2,250,000) P5,250,000

Less: Amount paid for investments 1,425,000
Total assets to be reported in the consolidated balance sheet P3,600,000

2. B P3,000,000 + P600,000 P3,600,000

3. C 60,000 @ 25/80% X 20% P375,000

2-Q 1. B Non-controlling interest 3,000,000 300,000/75% x 25% P 900,000

Consideration transferred 2,000,000
Total P2,900,000
Fair value of identifiable net assets 1,900,000
Goodwill P1,000,000

2. A The retained earnings of the parent company, Plumber.

3. C P200,000 + P400,000 + P1,200,000 P100,000 P200,000 x 52%

2-R 1. C Total current assets of Polka and Stress P 90,000
Excess of investment cost over its book value allocated to inventory
Consideration transferred P60,000
Book value (P50,000 x 90%) 45,000
Excess of cost over book value P15,000
15,000 x 60% = 9,000/ 90% 10,000
Current assets in the consolidated balance sheet P100,000
2. C Non-current assets of Polka and Stress P 130,000
Excess of investment cost over its book value
allocated to goodwill (P15,000 P9,000) 6,000
Non-current assets in the consolidated balance sheet P 136,000

3. C P50,000 + 10,000 x 10% P 6,000

4. C Long-term debt of Polka, Jan. 1, 2008 P 50,000

Long-term borrowings made on Jan. 2, 2008
(P60,000 x 9/10) 54,000
Total P104,000

2-S 1. C (P1,460,000 + P20,000) P1,060,000 P420,000

2. C Non-controlling interest P 229,750

Parent shareholders equity 4,610,000
Total P4,839,750

2-T B 920,000 50,000 + 190,000 12,000 P1,048,000

2U A Consideration transferred 400,000 x P6 P2,400,000

Book value of interest acquired 1,800,000
Goodwill P 600,000
Chapter 2 AA2 (2014 edition) page
15

July June
Currently issued shares 1,500,000 60% 600,000
Additional shares issued 1,000,000 40% 400,000
Total shares 2,500,000 100% 1,000,000
15/25 = 60%