Chapter 14

CHAPTER 14
1. a)Outstanding shares (P1,000,000/P100)= 10,000 shares. % of ownership=10,000/10,000=100%
Investment Cost P1,500,000

Subsidiary Interest (1,550,000)
Gain from Bargain Purchase P( 50,000)
Investment Entry in Textbook Books:

Investment in Viewpoint 1,500,000
Cash 1,500,000
Adjustment and Elimination Entry:

Share Capital, Viewpoint 1,000,000
Share Premium, Viewpoint 250,000
Retained Earnings, Viewpoint 300,000
Gain on Bargain Purchase 50,000
b) % of Interest: 9,000 / 12,000 = 75%
Table for Det and Alloc of Excess: 100% 75% 25%

Investment Cost/Implied Value P1,600,000 P1,200,000 400,000
Subsidiary Interest 1,425,000 (1,068,750) 356,250
Goodwill P 175,000 P 131,250 P43,750

Cash 1,200,000
Goodwill 175,000
Share Capital, Viewpoint 900,000
Retained Earnings 75,000
Share of NCI in Goodwill 43,750

Non Controlling Interest 400,000
c) % of Interest: 9,000 / 10,000 = 90%
Table for Det and Alloc of Excess: 100% 90% 10%

Investment Cost/Implied Value P1,000,000 P900,000
Subsidiary Interest 1,320,000 (1,068,750) 132,000
Goodwill P 320,000 P 288,000
Investment in Viewpoint 900,000

Cash 900,000

Investment in Viewpoint 900,000
Gain on bargain purchase 288,000
2. a) Percent of ownership 8,000/10,000= 80%

Total 80% 20%
Consideration & Implied Value 162,500 130,000 32,500
Subsidiary Interest 150,000 120,000 30,000
Excess as asset revaluation 12,500 10,000 2,500
Investment Entry:
Investment in Sol 130,000
Business Combination Expenses 30,000
Cash 160,000
Working Paper Entries:
22
Share Capital, Sol 40,000
Plant & Equipment 12,500
Investment in Stocks 130,000
Share of NCI in Asset Rev 2,500
Share Capital, Sol 10,000

NCI 32,500
Consolidated Statement:
Plant and Equipment P562,500
Shareholders Equity: Share Capital 500,000
Share Premium 170,000
Retained Earnings (-30,000) 170,000
Non-Controlling Interest 32,500
b) % of interest= 9,000/10,000= 90%
Investment Entry:
Investment in S Co. 130,000
Share Capital 100,000

Cash 20,000
100% 90% 10%

Table: Investment Cost and Implied Value 144,444 P130,000 14.444
Reduce Plant and Equipment 5,556 P 5,000 556
Working Paper entries:

Share of NCI in Asset Revaluation 556
Consolidated:
Plant & Equipment P544,445
Shareholders Equity: Share Capital 600,000
NCI 14,444 994,444
3. Table for determination and allocation of excess.
Case A B
100% 100% 80% * 20%
Investment In Stocks 100,000 125,000 100,000 P 25,000
Equity over SHE of S Co. 80,000 80,000 64,000 16,000
Excess of Cost 20,000 45,000 36,000 9,000
Adjustment 30,000 30,000 24,000 6,000
Goodwill (Gain) (10,000) 15,000 12,000 3,000
*2,400/3,000= 80%
FMV Cost Difference
Inventory P40,000 P30,000 P10,000
Long Term 15,000 12,000 3,000
Plant & Equipment 20,000 11,000 9,000
Patents 12,000 4,000 8,000
Goodwill 30,000
a) Investment Entry:
Investment in S Co. 100,000
Cash 120,000
Adjustment and Elimination Entry:

23
Inventory 10,000
Long Term 3,000
Plant & Equipt 9,000
Patents 8,000
Gain from Bargain Purchase 10,000
b) Investment Entry:
Investment In Stocks 100,000
Cash 35,000
Adjustment & Elimination Entries:

Retained Earnings (63) 80% 40,000
Inventory 10,000
Long Term Investment 3,000
Patents 8,000
Goodwill 15,000
Share of NCI in Asset Rev and GW 9,000
Share Capital 6,000
Non Controlling Interest 25.000
4. Adjustment & Elimination Entries:
a) Accounts Payable 4,000
Accounts Receivable 4,000
b) Accrued Interest Payable 750

Accrued Interest Receivable 750
c) Bonds Payable 50,000

Investment in Bonds 50,000
d) Share Capital , King 120,000

Share Premium, King 40,000
Retained Earnings, King 24,000
Goodwill 50,000
Treasury Shares, King 24,000
Investment in King 200,000
Share of NCI in GW (20%) 10,000
e) Share Capital , King 30,000

Share Premium, King 6,000
Retained Earnings, King 10,000
Treasury Shares, King 6,000
Duncan Co. & Subsidiary King
Consolidated Statement of Financial Position
Oct. 1, 2010
Assets Equities
Cash P 29,250 Accounts Payable P77,500
Inventory 220,000 Accrued Interest Payable 750
Accounts Receivable 126,000 Accrued Expenses 57,000
Long Lived Assets 260,000 Bonds Payable 50,000
Other Assets 30,000 Total Liabilities P185,250
Goodwill 50,000 Shareholders Equity
Controlling Interest: Share Capital P300,000
RetainedEarnings 80,000
_______ Non Controlling Interest 50,000 530,000
P715,250 P715,250
5. a) Entries in Page Books:

24
Cash 90,000
b) Investment 600,000 540,000 60,000

SHE of Shake (436,000) 392,400 43,600
Excess 164,000 142,350 16,400
Net Asset Rev (200,000) 180,000 20,000
Further revaluation of Plant Assets 36,000 32,400 3,600
Revaluation: FMV BV Diff

Inventories 620,000 600,000 20,000
Plant Assets 1,650,000 1,500,000 150,000
Patent 95,000 80,000 15,000
Long Term Debt 1,225,000 1,240,000 15,000
200,000
c) Share Capital, Shake 90,000

Retained Earnings, Shake 302,400
Inventory 20,000
Plant Assets 114,000
Patents 15,000
Long Term Debts 15,000
Investment in Shake 540,000
Share of NCI in Asset Revaluation 16,400
Share Capital, Shake 10,000

Retained Earnings, Shake 33,600
Consolidated Financial Position

Cash P 310,000 Liabilities P 1.344,000
Inventories 1,480,000 Long Term Debt 2.175.000
Other Current Assets 760,000 Common Stock 1,600,000
Plant Assets 5,014,000 APIC 1,884.750
Patent 95,000 Retained Earnings 595,250
_____ ________
Total Assets P7,659,000 Total Equities P 7,659,000
6.
a) Entry in the books of Shake:
Inventories 20,000
Plant Assets 150,000
Revaluation Capital 170,000
Entries in Page Books:


Cash 90,000
b) Investment Cost P720,000 *P540,000 P180,000

Goodwill P114,000 P 85,500 P 28,500
c) Share Capital 75,000

Goodwill 114,000
Investment 540,000


Cash P 310,000 Liabilities P 3.534,000
Inventories 1,480,000 Common Stock 1,600,000
Other Current Assets 760,000 APIC 1,884.750
25
Plant Assets 5,050,000 Retained Earnings 630,000
Patent 80,000 Non Controlling Interest 180,000
Goodwill 114,000 ________
7.
a) Investment in Queen 350,000
Cash 380,000
Investment in Prince 250,000
Notes Payable 250,000
Queen-90% NCI-10% Prince -75% NCI- 25%

Investment Cost 350,000 38,889 250,000 83,333
Subsidiary interest (360,000) 40,000 240,000 80,000
Goodwill Write Off 45,000 ( 5,000)
Goodwill 35,000 3,889 10,000 3,333

Common Stock, Queen 90,000
APIC, Queen 90,000
Retained Earnings, Queen 180,000
Share of NCI In Write Off 1,111
Goodwill, Queen 11,111
Investment in Queen 350,000
Common Stock, Prince 112,500

APIC, Prince 75,000
Retained Earnings, Prince 52,500
Goodwill 13,333

Cash P 730,000 Liabilities P 760,000
Receivables 480,000 Common Stock 200,000
Inventories 480,000 APIC 100,000
Land 230,000 Retained Earnings 1,210,000
Equipment 420,000 NCI 122,222
Goodwill 52,222 ________
Total Assets P2,392,222 Total Equities P2,392,222
b. Entry in the book of Queen: Entry in the book of Prince:

Land 38,889 Land 13,333
Retained Earnings 11,111 Revaluation Surplus 13,333
Goodwill 50,000
Working Paper entries:

Common Stock, Queen 90,000
APIC, Queen 90,000
Retained Earnings, Queen 170,000
Investment in Queen 350,000
Common Stock, Prince 112,500

APIC, Prince 75,000
Retained Earnings, Prince 52,500
Revaluation Surplus 10,000
Consolidated Balance Sheet the same as in A.

Cash P 730,000 Liabilities P 760,000
Receivables 480,000 Common Stock 200,000
Inventories 480,000 APIC 100,000
Land 302,222 Retained Earnings 1,210,000
Equipment 400,000 Minority Interest 122,222
________
Case A: Entries in the books of Sure:

Cash 1,080,000
26
Land 100,000
Entry in the books of Pure:

Investment in Sure 960,000
960,000
100%
80% 20%
Consideration and Implied Value 1,200,000 960,000
Subsidiary Interest 1,140,000 912,000 240,000
Gain on Bargain Purchase 60,000 48,000 12,000
Share Capital, Sure 800,000

Share Premium, Sure 144,000
Goodwill 60,000
Investment in Sure 960,000
Retained Earnings, Sure 32,000
Share of NCI from Goodwill 12,000

b) Entry of Sure Co:
Cash (9,000 x 140) 1,260,000
Capital Stock (9,000 x 100) 900,000
APIC (9,000 x 40) 360,000
Entry in the book of Pure Co:

Investment in Sure Co. 1,120,000
Cash (8,000 x 140) 1,120,000
100% 80% 20%

Consideration and Implied Value 1,400,000 1,120,000 280,000
Subsidiary Interest 1,320,000 1,056,000 264,000
Goodwill 80,000 64,000 16,000
Working Paper entry:

Goodwill 80,000
Investment in Sure 1,120,000
Share of NCI in GW 16,000

9. Books of Pie
Investment in Stocks of Shago 200,000
Cash (4,000 x P50) 200,000
Books of Shago
Cash 150,000
Treasury Shares 131,250
Share Premium-TS 18,750
% of Interest: 4,000/7,000= 57%
Table:
100% (57%) (43%)
Consideration and Implied Value P350,877 P200,000 P150,877
Subsidiary Interest:
Share Capital P200,000
Treasury Shares ( 43,750) (285,000) (162,450) 122,550
Goodwill P 65,877 P37,550 P 28,327
27
Adjustment and Elimination Entries:
Goodwill 65,877
Investment in Shago 200,000
Share of NCI in GW 28,327

Share of NCI in GWNon 28,327
150,877
10.
a) Investment in Sear 450,000
Cash 480,000
Table for determination and allocation: 100% 80% 20%

Investment/Implied Value 562,500 450,000 112,500
SHE of Sear (500,000) (400,000) (100,000)
Asset Rev. (50,000) (40,000) (10,000)
GW 12,500 10,000 2,000

Share Capital, Sear 80,000
Share Premium, Sear 272,000
Retained Earnings, Sear 48,000
Inventories 20,000
Machinery And Equipment 30,000
Goodwill 12,500
Investment in Sears 450,000

b. Investment in Sears 240,000


Cash 70,000
100% 60% 40%

Investment 480,000 240,000 240,000
SHE of Sear 500,000 300,000 200,000
Excess 20,000 ( 60,000) 40,000
Revaluation of Assets 100,000 ( 60,000) 40,000
Gain from Bargain Purchase (120,000) ( 120,000) 0

Inventories 20,000
Machinery and Equipment 30,000
Long Term Debt 50,000
Investment in Sear 240,000

28
c) Powells Book:
Cash 540,000
Sears Book:
Cash 108,889
75% 25% 100%

Consideration and Implied Value 490,000 653,333
Subsidiary Interest (456,667) 152,222 (608,889)
Asset Revaluation ( 37,500) 12,500 ( 50,000)
Gain from Bargain Purchase ( 4,167) ( 5,556)

Inventories 20,000
Machinery and Equipment 30,000

d.
Investment Entry:
Investment In Sear 450,000
Cash 480,000
Table for Determination & Allocation: 100% 80% 20%

Consideration Paid 562,500 450,000 112,500
Subsidiary Interest (500,00) (400,000) (100,000)
Revaluation of Assets (50,000)
Goodwill write off 60,000 10,000 8,000 2,000
Goodwill for consolidation P 72,500 58,000 14,500
Working paper entries:

Common Shares 80,000
APIC 272,000
Goodwill 12,500
Inventory 20,000
Machinery & Equipt 30,000
Investment In Sear 450,000
Share of NCI in AR and GW 12,500
Common Shares 20,000

APIC 30,000
Share of NCI 12,500
Consolidated Financial Position: Case A Case B Case C

Cash (900,000-480,000) P420,000 P830,000 P468,889
Accounts Receivable 430,000 430,000 430,000
Inventories 770,000 770,000 770,000
Land 960,000 960,000 960,000
Machinery 930,000 930,000 930,000
Goodwill 12,500
Total P3,522,500 P3,920,000 P3,658,889
Current Liabilities P 470,000 P 470,000 P 470,000

Long Term Debt 1,400,000 1,350,000 1,400,000
Share Capital 600,000 760,000 600,000
29
Share Premium 600,000 650,000 600,000
Retained Earnings 340,000 450,000 324,167
Non-Controlling Interest 112,500 240,000 164,722
Total P3.522.500 P3,920,000 P3,658,889
MULTIPLE CHOICE:
1. 1) D 2) C 3) C 4) D
2. 1) Controlling Interest (1,476/1,845) = 80% Answer: A
2) Revaluation of other CA, Machinery & Patents 120,000

Book Value of net tangible assets represented by SHE1,450,000
Total fair value of net tangible assets 1,570,000
Answer: E
3. 1) Acquisition Cost P6,000

Book Value of Interest acquired of S Co. 2,700
Adjustment 2,400 5,100
Goodwill P 900
Answer: B
2) Acquisition Cost P 4,500

Book Value of Interest acquired + Asset Rev. (5,100x90%) 4,590
Excess of Cost 90
Neg. GW
S Co. non-cash (600+4,500) = P5,1000 Answer: B

3) Investment Cost 5,000
SHE (2,700 x 90%) (2,430)
Asset Rev (2,400 x 90%) (2,160)
GW 410 Answer: D
4. Par value of P Co. stock issued P 600

Par value of P Co. stock replaced 300
Decrease in APIC of S Co 300
APIC of S Co 600
APIC to be recognized by the P 300
APIC of P Co. 9,000
APIC for Consolidation 9,300 Answer: C
1) % of Ownership = 100%
Investment Cost 545,000 Answer: A
Book Value 500,000 x 90% (500,000)
Goodwill P 45,000
2) % of ownership = 90%
Investment Cost P490,500 Answer: C
Book Value 500,000 x 90% (450,000)
Goodwill (45,000 x 90%) P 40,500
5. Outstanding Bravo shares (125,000 /100) 1,250

Acquired shares (120,000 /120) 1,000 Answer: C
Controlling Interest (1,000 /1,250) 80%
Acquisition Cost P120,000

Equity over Bravo (175,000 x 80%) 140,000
Excess of book value P 20,000
Answer: C
6. Investment Cost (4,500 x 140) P 630,000

Equity over subsidiary Co. (90% x 625,000) 562,500
Goodwill 67,500
Ms Assets 3,125,000
Ns Assets 875,000
Consolidated Assets Answer A 4,067,500
30
7. Net assets at fair market value P475,000
Investment Cost 450,000
Gain P 25,000
SHE P450,000
Revaluation of Assets 25,000
Subsidiary Int. FV 475,000
X 20%
Answer E P 95,000
8.
1) Consolidated current assets P146,000
Add Recble from Apex which was eliminated 2.000
Combined current assets 148,000
Less Apex current assets 106,000
Nadics Current Assets P 42,000 Answer: C
2) NCI divide by 30% equals total SHE of Nadic P117,000 Answer: D
3) Excess payment of P10,000/70%=total revaluation 14,286
Consolidated Plant Assets 370,000
Combined Plant Assets 355,714
Plant Assets of Apex 270,000
Plant Assets of Nadine 85,714 Answer: E
100% 90%
9. 1) Investment Cost P600,000
Equity over Strass 450,000
Excess P150,000 x
4
0
%
6
0
,
0
0
0
G
W
Revalue Inventory & GW 166,667
Allocated to inventory 60% x 166,667 P100,000

Current assets of Polk 700,000
Current assets of Strass 200,000
Total P1,000,000 A
n
s
w
e
r
:
A
2) Excess allocated to Goodwill 40% P 60,000
Non-current assets of Polk 900,000
Non-current assets of Strass 400,000
Total non-current assets 1,860,000 A
n
s
w
e
r
:
C
3) Current Liabilities of Polk P300,000
Current Liabilities of Strass 100,000
Current portion of new liabilities (60,000 / 10) 60,000
Total P460,000 Answer: B
4) Answer: C P500,000
5) 800,000 + 66,667 = 866,667 Answer: B
31

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CHAPTER 14

1. a)Outstanding shares (P1,000,000/P100)= 10,000 shares. % of ownership=10,000/10,000=100%

Investment Cost P1,500,000

Investment Entry in Textbook Books:

Adjustment and Elimination Entry:

b) % of Interest: 9,000 / 12,000 = 75%

Table for Det and Alloc of Excess: 100% 75% 25%

Investment in Viewpoint 1,200,000

Share Capital, Viewpoint 300,000

c) % of Interest: 9,000 / 10,000 = 90%

Table for Det and Alloc of Excess: 100% 90% 10%

Investment in Viewpoint 900,000

Share Capital, Viewpoint 900,000

2. a) Percent of ownership 8,000/10,000= 80%

Share Capital, Sol 10,000

b) % of interest= 9,000/10,000= 90%

Share Premium 20,000

100% 90% 10%

Working Paper entries:

3. Table for determination and allocation of excess.

Adjustment and Elimination Entry:

Adjustment & Elimination Entries:

b) Accrued Interest Payable 750

c) Bonds Payable 50,000

d) Share Capital , King 120,000

e) Share Capital , King 30,000

5. a) Entries in Page Books:

b) Investment 600,000 540,000 60,000

Revaluation: FMV BV Diff

c) Share Capital, Shake 90,000

Share Capital, Shake 10,000

Consolidated Financial Position

Entries in Page Books:

Business Combination Expenses 34,750

b) Investment Cost P720,000 *P540,000 P180,000

c) Share Capital 75,000

Share Capital 25,000

Consolidated Financial Position

Queen-90% NCI-10% Prince -75% NCI- 25%

Working Paper Entries:

Common Stock, Prince 112,500

Consolidated Financial Position

b. Entry in the book of Queen: Entry in the book of Prince:

Working Paper entries:

Common Stock, Prince 112,500

Consolidated Balance Sheet the same as in A.

Case A: Entries in the books of Sure:

Entry in the books of Pure:

Share Capital, Sure 800,000

Share Capital, Sure 200,000

Entry in the book of Pure Co:

100% 80% 20%

Working Paper entry:

Share Capital, Sure 200,000

% of Interest: 4,000/7,000= 57%

Share Capital 86,000

Table for determination and allocation: 100% 80% 20%

Working Paper Entries:

Share Capital, Sear 20,000

b. Investment in Sears 240,000

Business Combination Expenses 40,000

100% 60% 40%

Working Paper Entries: