Additional Information

ACAFA 3358 – Separate and Consolidated Financial Statements: Date of Acquisition.
I – Wholly and Partially-owned Subsidiary:

Determination of Goodwill/Bargain Purchase Gain and Working Paper Eliminating Entries
Assume the following independent cases:

Fair Value of Subsidiary / P5 par Paid-in capital Retained
Consideration Transferred plus % of Common in excess of par earnings/
Case Contingent Performance Stock Stock / or Share Accumulated
Obligation Owned Ordinary Share Premium Profit & Loss
1 P300,000 cash + P15,000* 100 P90,000 P80,000 P20,000
2 P237,500 cash 80 FV of NCI Not Given
3 P239,400 cash ** 60 FV of NCI with Control Premium
4 P322,525 cash *** 75 FV of Subsidiary Given
5 P205,200 cash **** 60 Step Acquisition:
Fair value of Non-controlling Interest of the
acquiree/subsidiary
Fair value of any previously held equity
interest in the acquiree/subsidiary
6 P205,000 cash ***** 80 Bargain Purchase Gain / Gain on Acquisition
*In connection with the acquisition, PP paid P10,000 in indirect combination costs and agreed to pay
P50,000 to the former owners of SS contingent on meeting certain revenue goals during 20x4. PP
estimated the present value of its probability adjusted expected payment for the contingency at
P15,000.
**SS Company has 40% of its share publicly traded on an exchange. PP Company purchases the 60% non-
publicly traded shares in one transaction, paying P239,400. Based on the trading price of the shares of
SS Company at the date of gaining control a value of P152,000 assigned to the 40% non-controlling
interest (or fair value of non-controlling interest), indicating that Smart Company has paid a control
premium of P11,400.
***PP Company acquires 75% (13,500 ordinary shares) of SS Company for P229,500 (P17 per share). In the
period around the acquisition date, SS Company’s shares are trading at about P13.60 per share. PP
Company pays a premium over market because of the synergies it believes it will get. It its therefore
reasonable to conclude that the fair value of SS’s as a whole may not be P332,500. In fact, an
independent valuation shows that the value of SS Company is P322,525 (fair value of SS Company).
****PP Company acquires 15 percent of SS Company’s common stock for P47,500 cash and carries the
investment using the cost model. A few months later, PP purchases another 60 percent of SS Company’s
stock for P205,200. At that date, SS Company reports identifiable assets with a book value of P370,500
and a fair value of P484,500, and it has liabilities with a book value and fair value of P180,500. The fair
value of the 25% non-controlling interest in SS Company is P85,500.
*****PP Company acquires 75 percent of SS Company’s common stock for P205,000 cash. At that date, the
non-controlling interest in SS has a book value of P47,500 and a fair value of P74,200. Also on that date,
SS reports identifiable assets with a book value of P362,000 and a fair value of P462,000, and it has
liabilities with a book value and fair value of P172,000.
Additional information:
All other assets and liabilities of SS Company had book value approximated their fair
market value except the following:
Book value Fair value

Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 30,000 P 20,000
Buildings and equipment . . . . . . . . . . . . . . . . . . . . . . . . 50,000 76,000
• It has developed a customer list appraised at P5,000, although it is not recorded in its
financial records.
• Favorable lease agreements, valued at P3,000
• Signed customer contracts for product development, valued at P2,000
• It has research and development activity in process with an appraised fair value of P5,000.
However, the project has not yet reached technological feasibility and the assets used in
the activity have no alternative future use.
Required:
1. Under each of the above assumptions, prepare the entry to record the investment
in subsidiary in books of the Porter Company (the parent) on the date of
acquisition.
2. Under each of the above assumptions, prepare schedule for determination (of
goodwill and gain) and allocated excess , using
a. Partial Goodwill (Proportionate Basis) Approach
b. Full-Goodwill (Fair Value Basis) Approach
3. Under each of the above assumptions, prepare working paper eliminating entry to
eliminate the investment in Sewell Company in preparation of a consolidated
balance sheet at date of acquisition, using:
Answer - Problem I (Correction: Research and development should be P5,000 not P50,000)
1. Case 1: Date of Acquisition -

Investment in SS Company 315,000
Cash 300,000
Estimated Liability on Contingent Consideration 15,000
Acquisition Expense (or Retained earnings) 10,000

Cash 10,000
Case 2: Date of Acquisition -

Cash 237,500

Cash 239,400

Cash 229,500

Cash 205,200
Cash 205,000
2. Schedule of Determination and Allocated Excess: (Correction: Research and development

should be P5,000 not P50,000)

Fair value of Subsidiary:
Consideration transferred:
Cash P300,000
Contingent performance obligation __15,000
Fair value of Subsidiary P315,000
Less: BV of SHE of SS: (P90,000 + P80,000 + P20,000) x 100% _190,000
Allocated excess P125,000
Less: Over/under valuation of A and L: Inc. (Dec.)
Decrease in Inventory (P20,000 – P30,000) x 100% (P10,000)
Increase in Bldgs & Eqpt. (P76,000 – P50,000) x 100% 26,000
Increase in Customer list (P5,000 x 100%) 5,000
Increase in Favorable lease agreement (P3,000 x 100%) 3,000
Increase in Customer contract (P2,000 x 100%) 2,000
Increase in Purchased IPRD (P5,000 x 100%) 5,000 __31,000
Goodwill P 94,000
a. Proportionate Basis (Partial-goodwill Approach)
Consideration transferred – cash P 237,500 (80%)
Less: BV of SHE of SS: (P90,000 + P80,000 + P20,000) x 80% _152,000 (80%)
Allocated excess P 85,500 (80%)
Decrease in Inventory (P20,000 – P30,000) x 80% (P 8,000)
Increase in Purchased IPRD (P5,000 x 80%) _4,000 24,800 (80%)
Goodwill – partial P 60,700 (80%)
b. Fair Value Basis (Full-goodwill Approach)

Consideration transferred – cash (P237,500 / 80%) P 296,875 (100%)
Increase in Purchased IPRD (P5,000 x 100%) _5,000 __31,000 (100%)
Goodwill – full P 75,875 (100%)
Case 3: Date of Acquisition –

Consideration transferred - cash P 239,400 (60%)
Increase in Purchased IPRD (P5,000 x 60%) __3,000 __18,600 (60%)

Consideration transferred – cash P 239,400 ( 60%)
Fair value of NCI (given)** _152,000 ( 40%)
Fair value of Subsidiary P 391,400 (100%)
Goodwill – full P 170,400 100%)
* the P11,400 control premium is computed as follows: P152,000/40% = P380,000 x 60% =
P228,000; P239,400 – P228,000 = P11,400.
**FV of NCI given or NCI on FV of SHE-S, whichever is HIGHER rule.
NCI on FV-SHE of Subsidiary:
Book value of stockholders’ equity of subsidiary…………………… P 190,000

Adjustments to reflect fair value (over/ undervaluation of assets and liabilities)…. 31,000
Fair value of stockholders’ equity of subsidiary…………………………………………. P 221,000
Multiplied by: Non-controlling Interest percentage..................................................... 40%
P 88,400
Therefore, the given amount of P152,000 is higher compared to P88,400. In the event that
the amount assumed to be P79,000, therefore the higher amount of P88,400 (compared to
P79,000) should be used to determine the FV of Subsidiary.

Fair value of Subsidiary

Fair value of Subsidiary – given P 322,525 (100%)
Case 5: Date of Acquisition – Step-Acquisition

Fair value of previously held equity interest in
Subsidiary (P205,200/60% = P342,000 x 15% ___51,300 (15%)
Less: BV of SHE of SS:(P90,000+P80,000+P20,000) x 75% _142,500 (75%)
BV FV
Identifiable Assets P370,500 P484,500 P114,000
Liabilities 180,500 180,500 P -0-
Increase in Net Assets (P190,000 - P304,000) x 75% P 85,500 ___85,500 (75%)
Fair value of previously held equity interest in Subsidiary
(P205,200/60% = P342,000 x 15% 51,300 ( 15%)
Fair value of NCI (given)* __85,500 ( 25%)
BV FV
Liabilities 180,500 180,500 P -0-
Increase in Net Assets (P190,000 - P304,000) x 100% **P114,000 _114,000 (100%)
*FV of NCI given or NCI on FV of SHE-S, whichever is HIGHER rule.

Book value of stockholders’ equity of subsidiary…………. ……………………………………P 190,000

Adjustments to reflect fair value (over/ undervaluation of assets and liabilities)……….. 114,000**
Fair value of stockholders’ equity of subsidiary………………………………………………….P 304,000
Multiplied by: Non-controlling Interest percentage............................................................... 25%
P 76,000
Therefore, the given amount of P85,500 is higher compared to P76,000. In the event that the assumed amount to be
P70,000, therefore the higher amount of P76,000 (compared to P70,000) should be used to determine the FV of
Subsidiary.
Case 6: Date of Acquisition – Bargain Purchase Gain

BV FV
Liabilities 172,000 172,000 P - 0-
Bargain purchase gain – partial (P 12,500) (75%)

BV FV
Liabilities 172,000 172,000 P - 0-
Increase in Net Assets (P190,000 – P290,000 x 100% **P100,000 _100,000 (100%)
Bargain purchase gain – full (P 10,800)(100%)

P 72,500
Therefore, the given amount of P74,200 is higher compared to P72,500. In the event that the
assumed amount is P71,000, therefore the higher amount of P72,500 (compared to P71,000) should
be used to determine the FV of Subsidiary.
3. Working Paper Eliminating Entries
Common stock – SS Co . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,000
Additional paid-in capital – SS Co . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000
Retained earnings – SS Co . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Investment in SS Co . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190,000
Eliminate investment against book value stockholders’ equity of SS Co.
Buildings and Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,000

Customer list. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Lease agree0ments….………………………………………………………. 3,000
Customer contract…………………………………………………………… 2,000
Capitalized R&D ....................................……………………………………. 5,000
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,000
Inventory…………………………………………………………………….. 10,000
Eliminate investment against allocated excess
Schedule of Determination and Allocated Excess: (Correction: Research and development


Cash P300,000
Contingent performance obligation __15,000
Fair value of Subsidiary P315,000
Less: BV of SHE of SS: (P90,000 + P80,000 + P20,000) x 100% _190,000
Increase in Purchased IPRD (P5,000 x 100%) 5,000 __31,000
Goodwill P 94,000
Case 2: Date of Acquisition –

Common stock – SS Co ............................ . . . . . . . . . . . . . . . . . . . . . . 90,000
Additional paid-in capital – SS Co . ……………………. . . . . . . . . . . . 80,000
Retained earnings – SS Co …………………... . . . . . . . . . . . . . . . . . . . . 20,000
NCI/NCINAS (NCI in Net Assets) – (190,000 x 20%)…………………. 38,000

Customer list. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Lease agreements….………………………………………………………. 3,000
Capitalized R&D ....................................……………………………………. 5,000
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,700
NCI/NCINAS (NCI in Net Assets): P31,000 x 20%.............................. 6,200
Inventory…………………………………………………………………….. 10,000
NCI:
Adjustments to reflect fair value (over/ undervaluation of assets and liabilities)……….. 31,000
FV-NCI Partial GW (or P38,000 + P6,200)...………………………………………………………..P 44,200
Proportionate Basis (Partial-goodwill Approach)
Increase in Purchased IPRD (P5,000 x 80%) _4,000 24,800 (80%)


Customer list. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Capitalized R&D ....................................……………………………………. 5,000
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,875
NCI: (P31,000 x 20%) + (P75,875 – P60,700)…………………………... 21,375
Inventory…………………………………………………………………….. 10,000
NCI:
Add: NCI on Full-GW (P75,875 – P60,700)………………………………………………………… 15,175
FV-NCI - Full GW………………………………………………………………………………………..P 59,375

Fair Value Basis (Full-goodwill Approach)

Consideration transferred – cash (P237,500 / 80%) P 296,875 (100%)

Customer list. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Capitalized R&D ....................................……………………………………. 5,000
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,800
Inventory…………………………………………………………………….. 10,000
NCI:
FV-NCI Partial GW (or P76,000 + P12,400)...………………………………………………………P 88,400



Eliminate investment against book value stockholders’ equity of SS
Co.
Customer list. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Capitalized R&D ....................................……………………………………. 5,000
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170,400
NCI: (P31,000 x 40%) + (P170,400 – P106,800)………….……………... 76,000
Inventory…………………………………………………………………….. 10,000
NCI:
Add: NCI on Full-GW (P170,400 – P106,800)…………………………………………………….. 63,600
FV-NCI - Full GW………………………………………………………………………………………..P 152,000


Fair value of NCI (given)** _152,000 ( 40%)
* the P11,400 control premium is computed as follows: P152,000/40% = P380,000 x 60% =

P228,000; P239,400 – P228,000 = P11,400.
**FV of NCI given or NCI on FV of SHE-S, whichever is HIGHER rule.

P 88,400
amount assumed to be P79,000, therefore the higher amount of P88,400 (compared to P79,000)
should be used to determine the FV of Subsidiary.

Co.
Customer list. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Capitalized R&D ....................................……………………………………. 5,000
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,750
Inventory…………………………………………………………………….. 10,000
NCI:
Fair value of Subsidiary

Co.
Customer list. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Capitalized R&D ....................................……………………………………. 5,000
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101,525
NCI: (P31,000 x 25%) + (P101,525 – P63,750)………….……………... 45,525
Inventory…………………………………………………………………….. 10,000
NCI:
FV-NCI Partial GW…………………………...………………………………………………………..P 55,250
Add: NCI on Full-GW (P101,525 – P63,750)………………………………………………………. 37,775
FV-NCI - Full GW (P47,500 + P45,525)……………………………………………………………….P 93,025

Fair value of Subsidiary - given P 322,525 (100%)

Case 5: Date of Acquisition – Step-Acquisition
Co.
Identifiable assets (itemized)….. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,000
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,500
NCI/NCINAS (NCI in Net Assets): (P304,000-P190,000) x 25%......... 28,500
NCI:
FV-NCI Partial GW (P47,500 + P28,500)….....……………………………………………………..P 76,000
Schedule of Determination and Allocated Excess:


Fair value of previously held equity interest in
Subsidiary (P205,200/60% = P342,000 x 15% ___51,300 (15%)
BV FV
Liabilities 180,500 180,500 P -0-

Identifiable assets (itemized)….. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,000

Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,000
NCI [(P304,000-P190,000) x 25%] + (P38,000 – P28,500)…………….. 38,000
NCI:
FV-NCI Partial GW………………………….. ...………………………………………………………P 76,000
Add: NCI on Full-GW (P38,000 – P28,500)………………………………………………………... 9,500
FV-NCI - Full GW (P47,500 + P38,000) – the NCI given per problem is the same………. P 85,500
Fair value of previously held equity interest in Subsidiary
(P205,200/60% = P342,000 x 15% 51,300 ( 15%)
BV FV
Liabilities 180,500 180,500 P -0-
Increase in Net Assets (P190,000 - P304,000) x 100% **P114,000 _114,000 (100%)

P 76,000
assumed amount to be P70,000, therefore the higher amount of P76,000 (compared to P70,000)
should be used to determine the FV of Subsidiary.
Case 6: Date of Acquisition - – Bargain Purchase Gain

a. Proportionate Basis (Partial-goodwill Approach) refer to Page 169 for reference

Co.
Identifiable assets (itemized)….. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Retained earnings (bargain purchase gain –closed to RE since
only BS or real accounts are being examined)………………… 12,500
NCI (P290,000-P190,000) x 25%........................................................... 25,000
NCI:
FV-NCI-Partial Gain (P47,500 + P25,000).....………………………………………………………P 72,500


BV FV
Liabilities 172,000 172,000 P - 0-
Bargain purchase gain – partial (P 12,500) (75%)
b. Fair Value Basis (Full-goodwill Approach) – refer to Page 169 for reference
Co.
Identifiable assets (itemized)….. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Retained earnings (bargain purchase gain –closed to RE since
only BS or real accounts are being examined)………………… 10,800
NCI (P74,200, given – P47,500).......................................................... 26,700
Investment in SS Co . . . . . . . . . . . . 62,500
NCI:
FV-NCI Partial Gain……………………….......………………………………………………………P 72,500
Add: NCI on Full-Gain)- P12,500 – P10,800……………………………………………………….. 1,700
FV-NCI-Full, Gain (P47,500 + P62,500) – given …………………………………………………...P 74,200


BV FV
Liabilities 172,000 172,000 P - 0-
Increase in Net Assets (P190,000 – P290,000 x 100% **P100,000 _100,000 (100%)
Bargain purchase gain – full (P 10,800)(100%)

P 72,500
assumed amount is P71,000, therefore the higher amount of P72,500 (compared to P71,000) should
be used to determine the FV of Subsidiary.
II – Wholly and Partially-owned Subsidiary: Goodwill - Date of Acquisition
Assume the following independent cases for Per Company acquires Sia Company’s outstanding
stock on January 1, 20x4 and immediately prepares a consolidated balance sheet:
Consideration Interest Additional Information,
Case Transferred Acquired January 1, 20x4
1 P 408,000 cash 100%
2 100%
P288,000 cash plus 12,000 common shares with
a fair value of P12 per share. The following costs
were incurred: indirect costs, P12,000 and costs
to issue and register stocks amounted to P8,400.
3 P360,000 (also pays P14,400 indirect costs) 80% FV of NCI – none.
A. Partial Goodwill (Proportionate Basis)
Approach
B. Full-goodwill (Fair Value Basis) Approach
4 100% Subsidiary (Sia) has recorded
P288,000 cash plus 12,000 common shares with (Subsidiary goodwill of P6,000 and the
a fair value of P12 per share. The following costs has Cash amounted to P54,000
were incurred: indirect costs, P12,000 and costs Recorded (at book and fair value) and
to issue and register stocks amounted to P8,400. Goodwill total assets at fair value is
at Date of P672,000.
Acquisition
5 P 408,000 cash on a cum-dividend or dividends- 100% Subsidiary (Sia) has recorded
on basis (Subsidiary (at book and fair value)
has Accounts payable of
Recorded P114,000 and Dividends
Dividends payable amounted P6,000
at Date of
Acquisition
The separate balance sheets of the two companies immediately before the consolidation with
acquiree’s fair value were presented as follows:
Per Co. Book Sia Co. Sia Co.

Assets value Book value Fair value
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 420,000 P 60,000 P 60,000
Accounts receivable . . . . . . . . . . . . . . . . . . 90,000 60,000 60,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . 120,000 72,000 90,000
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210,000 48,000 120,000
Buildings and equipment (net) . . . . . . . . . . 480,000 360,000 348,000
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . P 1,320,000 P 600,000 P 678,000
Liabilities and Stockholders’ Equity
Accounts payable . . . . . . . . . . . . . . . . . . . . . . P 120,000 P 120,000 P 120,000
Bonds payable . . . . . . . . . . . . . . . . . . . . . . . . 240,000 120,000 162,000
Common stock, P10 par . . . . . . . . . . . . . . . . . . . . . 600,000 240,000
Paid in capital in excess of par . . . . . . . . . . 60,000 24,000
Retained earnings . . . . . . . . . . . . . . . . . . . . 300,000 96,000
Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . P 1,320,000 P 600,000
Required:
1. Prepare schedule for determination and allocated excess.
2. Determine the following:
a. Consolidated total assets
b. Consolidated total liabilities
c. Ordinary share/Common stock
d. Share premium/additional paid-in capital
e. Accumulated profit/loss (Retained earnings).
f. Consolidated stockholders’ equity
g. Non-controlling interests (if any)
For Case 1 and 2:
3. Prepare journal entry to record investment in the books of the acquirer company.
4. Prepare the working paper eliminating entries for purposes of preparing consolidated
balance sheet.
5. Prepare a consolidated workpaper on January 1, 20x4.
6. Prepare the consolidated balance sheet immediately after acquisition.
For Case 3:
7. Prepare journal entry to record investment in the books of the acquirer company.
8. Prepare schedule for determination and allocated excess (Requirement 2 above)
9. Prepare the working paper eliminating entries for purposes of preparing consolidated
balance sheet.
10. Prepare a consolidated workpaper on January 1, 20x4.
11. Prepare the consolidated balance sheet immediately after acquisition.
Answer - Problem II
1. Schedule of Determination and Allocation of Excess
Case 1: Date of Acquisition – January 1, 20x4
Fair value of Subsidiary (100%)
Consideration transferred P 408,000
Less: Book value of stockholders’ equity of Sia:
Common stock (P240,000 x 100%) P 240,000
Paid-in capital in excess of par (P24,000 x 100%) 24,000
Retained earnings (P96,000 x 100%) 96,000 360,000
Allocated excess (excess of cost over book value) P 48,000
Less: Over/under valuation of assets and liabilities:
Increase in inventory (P18,000 x 100%) P 18,000
Increase in land (P72,000 x 100%) 72,000
Decrease in buildings and equipment (P12,000 x 100%) ( 12,000)
Increase in bonds payable (P42,000 x 100%) ( 42,000) 36,000
Positive excess: Goodwill (excess of cost over fair value) P 12,000
Case 2: Date of Acquisition - January 1, 20x4

Cash P 288,000
Common stock: 12,000 shares x P12 _ 144,000
Fair value of Subsidiary P 432,000
Common stock (P240,000 x 100%) P 240,000
Paid-in capital in excess of par (P24,000 x 100%)... 24,000
Schedule of Determination and Allocation of Excess (Partial-goodwill)
Consideration transferred……………………………….. P 360,000
Common stock (P240,000 x 80%) P 192,000
Positive excess: Partial-goodwill (excess of cost over fair value) P 43,200
Full-goodwill Approach
Schedule of Determination and Allocation of Excess (Full-goodwill)
Consideration transferred (P360,000 / 80%) P 450,000
Common stock (P240,000 x 100%) P 240,000
Decrease in buildings and equipment
(P12,000 x 100%) ( 12,000)
Positive excess: Full -goodwill (excess of cost over fair value) P 54,000

Consideration transferred
Cash………………………………………………………. P 288,000
Common stock: 12,000 shares x P12 per share….. 144,000 P 432,000
Common stock (P240,000 x 100%)………………….. P 240,000
Paid-in capital in excess of par (P96,000 x 100%).. 96,000
Retained earnings (P24,000 x 100%)………………... 24,000 360,000
Allocated excess (excess of cost over book value)…… P 72,000
Add: Existing Goodwill of SS Co. (P6,000 x 100%)……… 6,000
Adjusted allocated excess P 78,000
Alternatively, the unrecorded goodwill may also be computed by ignoring the existing
goodwill in the books of the subsidiary, thus:
Date of Acquisition – January 1, 20x4 (refer to previous table for details of computation)
Consideration transferred……………………………………………………… P 432,000
Less: Book value of stockholders’ equity of S……………………………….. 360,000
Allocated excess (excess of cost over book value)…………………………. P 72,000
Less: Over/under valuation of assets and liabilities…………………………… 36,000
Positive excess: Goodwill (excess of cost over fair value)…………………... P 36,000
Add: Existing Goodwill……………………………………………………………… 6,000

Consideration transferred (P408,000 – P6,000)…….. P 402,000
Common stock (P240,000 x 100%) P 240,000
2. Consolidated Balance Sheet – Date of Acquisition, January 1, 20x4

Case 1
a. P1,602,000
b. P642,000
c. P600,000
d. P60,000
e. P300,000
f. P960,000
g. None, since it is wholly-owned
Assets
Cash (P420.000 – P408,000 + P60,000) P72,000
Accounts receivables (P90,000 + P60,000) 150,000
Inventories (P120,000 + P72,000 + P18,000) 210,000
Land (P210,000 + P48,000 + P72,000) 330,000
Buildings and equipment (net) – P480,000 + P360,000 – P12,000) 828,000
Goodwill (refer to Requirement 1- Case1) 12,000
Total Assets (a) P1,602,000
Liabilities
Accounts payable (P120,000 + P120,000) P 240,000
Bonds payable (P240,000 + P210,000) P 360,000
Premium on bonds payable (P162,000 - P120,000) 42,000 402,000
Total Liabilities (b) P 642,000
Stockholders’ Equity
Common stock, P10 par – Parent/Acquirer only P 600,000
Paid-in capital in excess of par – Parent/Acquirer only 60,000
Retained earnings – Parent/Acquirer only 300,000
Total Stockholders’ Equity P 960,000
Total Liabilities and Stockholders’ Equity P1,602,000
Case 2
a. P1,725,600
b. P642,000
c. P720,000
d. P75,600
e. P288,000
f. P1,083,600
Assets
Cash (P420.000 – P288,000 – P12,000 – P8,400) + P60,000 P 171,600
Inventories (P120,000 + P72,000 + P18,000) 210,000
Land (P210,000 + P48,000 + P72,000) 330,000
Goodwill (refer to Requirement 1- Case 2) 36,000
Liabilities
Common stock, P10 par – Parent/Acquirer only* P 720,000
Paid-in capital in excess of par – Parent/Acquirer only** 75,600
Retained earnings – Parent/Acquirer only*** 288,000
Total Stockholders’ Equity P1,083,600
*P600,000 + P120,000 (12,000 shares x P10 par) = P720,000.
**P60,000 + P24,000 (12,000 shares x [P12-P10] – P8,400 = P75,600.
***P300,000 – P12,000 = P288,000.
Case 3
A. Proportionate Basis (Partial-goodwill Approach)
a. P1,666,800
b. P642,000
c. P600,000
d. P60,000
e. P285,600
f. P1,024,800
g. P79,200
Assets
Cash (P420,000 – P360,000 – P14,400 = P45,600) + P60,000 P 105,600
Inventories (P120,000 + P72,000 + P18,000) 210,000
Land (P210,000 + P48,000 + P72,000) 330,000
Buildings and equipment (P480,000 + P360,000 – P12,000) 828,000
Goodwill – partial 43,200
Total Assets P1,666,800
Liabilities
Premium on bonds payable 42,000 402,000
Total Liabilities P 642,000
Common stock, P10 par P 600,000
Paid-in capital in excess of par 60,000
Retained earnings (P300,000 – P14,400 ) 285,600
Parent’s Stockholders’ Equity/Equity Attributable to the Owners of the Parent P 945,600
Non-controlling interest* 79,200
Total Stockholders’ Equity (Total Equity) P 1,024,800
*Incidentally, the non-controlling interest on the date of acquisition is computed as follows:
Common stock – Sky company…………………………………… P 240,000
Paid-in capital in excess of par – Sky co………………………… 24,000
Retained earnings – Sky Co..………………………………………. 80,000
Book value of stockholders’ equity – Sky Co………..………….. P 360,000
Adjustments to reflect fair value (over/ undervaluation
of assets and liabilities)…………………………………………. 36,000
Fair value of stockholders’ equity of subsidiary………………… P 396,000
Multiplied by: Non-controlling Interest percentage…………... 20
Non-controlling interest (partial)………………………………….. P 79,200
B. Fair Value Basis (Full-goodwill Approach)

a. P1,677,600
b. P642,000
c. P600,000
d. P60,000
e. P285,600
f. P1,035,600
g. P90,000
Assets
Cash (P420,000 – P360,000 – P14,400 = P45,600) + P60,000 P 105,600
Inventories (P120,000 + P72,000 + P18,000) 210,000
Land (P210,000 + P48,000 + P72,000) 330,000
Buildings and equipment (P480,000 + P360,000 – P12,000) 828,000
Goodwill – full 54,000
Liabilities
Retained earnings (P300,000 – P14,400) 285,600
Parent’s Stockholders’ Equity/Equity Attributable to the Owners of the Parent P 945,600
Non-controlling interest 90,000
*Incidentally, the non-controlling interest on the date of acquisition is computed as follows:
Non-controlling interest (partial) – refer to Case 3A……………….. P 79,200
Add: Non-controlling interest (P54,000, full – P43,200, partial). 10,800
Non-controlling interest (full)………………………………………. P 90,000
Case 4
a. P1,725,600
b. P642,000
c. P720,000
d. P75,600
e. P288,000
f. P1,083,600
Assets
Cash (P420,000 – P288,000 – P12,000 – P8,400 = P111,600 + P54,000) P 165,600
Accounts receivables 150,000
Inventories (P120,000 + P72,000 + P18,000) 210,000
Land (P210,000 + P48,000 + P72,000) 330,000
Buildings and equipment (net) – P480,000 + P360,000 – P12,000 828,000
Goodwill (P6,000 + P36,000) 42,000
Liabilities
Accounts payable P 240,000
Bonds payable P 360,000
Common stock, P10 par (P600,000 + P120,000 (12,000 shares x P10 par) P 720,000
Paid-in capital in in excess of par {P60,000 + 12,000 x [P12-P10] – P8,400} 75,600
Retained earnings (P300,000 – P12,000) 288,000
Case 5
a. P1,596,000
b. P636,000
c. P600,000
d. P60,000
e. P300,000
f. P960,000
Assets
Cash (P420,000 – P408,000 + P60,000) P 72,000
Inventories (P120,000 + P72,000 + P18,000) 210,000
Land (P210,000 + P48,000 + P72,000) 330,000
Buildings and equipment (net) – P480,000 + P360,000 – P12,000 828,000
Goodwill 6,000
Liabilities
Dividends payable (P6,000 – P6,000) -0-
Paid-in capital in in excess of par 60,000
Retained earnings 300,000
For Case 1
3.
January 1, 20x4
Investment in S Company…………………………………………… 408,000
Cash…………………………………………………………………….. 408,000
Schedule of Determination and Allocation of Excess (refer to Requirement 1 Case 1)
Date of Acquisition – January 1, 20x4
Less: Book value of stockholders’ equity of S:
Common stock (P240,000 x 100%)………………….. P 240,000
Paid-in capital in excess of par (P24,000 x 100%)... 24,000
Increase in inventory (P18,000 x 100%)…………….. P 18,000
Increase in land (P72,000 x 100%)…………………… 72,000
(P12,000 x 100%)……………………………………... ( 12,000)
Increase in bonds payable (P42,000 x 100%)…….. ( 42,000) 36,000
Positive excess: Goodwill (excess of cost over fair
value)…………………………………………………….. P 12,000
4. WPEN
(E1) Common stock – S Co………………………………………… 240,000
Additional paid-in capital – S Co…………………………… 24,000
Retained earnings – S Co…………………………………… 96.000
Investment in S Co……………………………………… 360,000
Eliminate investment against stockholders’ equity-S Co
(E2)
Inventory…………………………………………………………. 18,000
Land……………………………………………………………… 72,000
Goodwill…………………………………………………………. 12,000
Buildings and equipment……………………………… 12,000
Premium on bonds payable……………………………… 42,000
Investment in S Co………………………………………… 48,000
Eliminate investment against allocated excess.
5.
Eliminations
Assets P Co. S Co. Dr. Cr. Consolidated
Cash*…………………………. P 12,000 P 60,000 P 72,000
Accounts receivable…….. 90,000 60,000 150,000
Inventory…………………. 120,000 72,000 (2) 18,000 210,000
Land……………………………. 210,000 48,000 (2) 72,000 330,000
Buildings and equipment (net) 480,000 360,000 (2) 12,000 828,000
Goodwill…………………… (2) 12,000 12,000
Investment in S Co…………. 408,000 (1) 360,000
(2) 48,000 -
Total Assets P1,320,000 P600,000 P1,602,000
Accounts payable…………… P 120,000 P120,000 P 240,000
Bonds payable………………… 240,000 120,000 360,000
Premium on bonds payable (3) 42,000 42,000
Common stock, P10 par……… 600,000 600,000
Common stock, P10 par……… 240,000 (1) 240,000
Paid in capital in excess of par. 60,000 60,000
Paid in capital in excess of par. 24,000 (1) 24,000
Retained earnings…………… 300,000 300,000
Retained earnings…………… _________ 96,000 (1) 96,000 __________ _________
Total Liabilities and Stockholders’
Equity P1,320,000 P600,000 P 462,000 P 462,000 P1,602,000
(1) Eliminate investment against stockholders’ equity of S Co.

(2) Eliminate investment against allocated excess.
* P420,000 – P408,000 = P12,000.
6.
Assets
Cash (P420.000 – P408,000 + P60,000) P 72,000
Inventories (P120,000 + P72,000 + P18,000) 210,000
Land (P210,000 + P48,000 + P72,000) 330,000
Goodwill (refer to Requirement 1- Case1) 12,000
Liabilities
Common stock, P10 par – Parent/Acquirer only P 600,000
Paid-in capital in excess of par – Parent/Acquirer only 60,000
Retained earnings – Parent/Acquirer only 300,000
For Case 2
3.
January 1, 20x4
(1) Investment in S Company…………………………………………… 432,000
Cash…………………………………………………………………….. 288,000
Common stock, P10 par…………………………………………….. 120,000
Paid-in capital in excess of par……………………………………. 24,000
(2) Retained earnings (acquisition-related expense - close to
retained earnings since only balance sheets are being
examined)…………………………………………………………… 12,000
Cash……………………………………………………………………. 12,000
Acquisition- related costs.
(3) Paid-in capital in excess of par……………………………………….. 8,400
Cash……………………………………………………………………. 8,400
Costs to issue and register stocks.
Schedule of Determination and Allocation of Excess (refer to Requirement 1 Case 2)

Consideration transferred
Cash………………………………………………………. P 288,000
Common stock: 12,000 shares x P12 per share….. 144,000 P 432,000
Less: Book value of stockholders’ equity of S:
Common stock (P240,000 x 100%)………………….. P 240,000
Add: Existing Goodwill of Sky Co. (P6,000 x 100%)……… 6,000
Adjusted allocated excess…………………………………. P 78,000
Increase in inventory (P18,000 x 100%)…………….. P 18,000
Increase in land (P72,000 x 100%)…………………… 72,000
(P12,000 x 100%)……………………………………... ( 12,000)
Increase in bonds payable (P42,000 x 100%)…….. ( 42,000) 36,000
value)…………………………………………………….. P 42,000
Alternatively, the unrecorded goodwill may also be computed by ignoring the existing goodwill in the
books of the subsidiary, thus:
Date of Acquisition – January 1, 20x4 (refer to previous table for details of computation)
Consideration transferred……………………………………………………… P 432,000
Less: Book value of stockholders’ equity of S……………………………….. 360,000
Allocated excess (excess of cost over book value)…………………………. P 72,000
Less: Over/under valuation of assets and liabilities…………………………… 36,000
Positive excess: Goodwill (excess of cost over fair value)…………………... P 36,000
Add: Existing Goodwill……………………………………………………………… 6,000
value)…………………………………………………………………………… P 42,000
4.
(E1) Common stock – S Co………………………………………… 240,000
Additional paid-in capital – S Co…………………………… 24,000
Retained earnings – S Co…………………………………… 96.000
Investment in S Co……………………………………… 360,000
Eliminate investment against stockholders’
equity of S Co.
(E2) Inventory…………………………………………………………. 18,000

Land……………………………………………………………… 72,000
Goodwill…………………………………………………………. 42,000
Buildings and equipment……………………………… 12,000
Premium on bonds payable……………………………… 42,000
Investment in S Co………………………………………… 78,000
5.
Eliminations
Assets P Co. S Co. Dr. Cr. Consolidated
Cash*………………………….. P 111,600 P 54,000 P 165,600
Inventory…………………. 120,000 72,000 (2) 18,000 210,000
Land……………………………. 210,000 48,000 (2) 72,000 330,000
Buildings and equipment (net) 480,000 360,000 (2) 12,000 828,000
Goodwill…………………… 6,000 (2) 36,000 42,000
Investment in S Co…………. 432,000 (1) 360,000
(2) 72,000 -
Total Assets P1,443,600 P600,000 P1,725,600
Accounts payable…………… P 120,000 P120,000 P 240,000
Bonds payable………………… 240,000 120,000 360,000
Common stock, P10 par**…..… 720,000 720,000
Additional paid in capital*** 75,600 75,600
Additional paid in capital…… 24,000 (1) 24,000
Retained earnings**** 288,000 288,000
Retained earnings…………… _________ 96,000 (1) 96,000 __________ _________
Equity P1,443,600 P600,000 P 486,000 P 486,000 P1,725,600
(1) Eliminate investment against stockholders’ equity of Sky Co.

* P420,000 – P288,000 – P12,000 – P8,400 = P111,600.
**P600,000 + P120,000 (12,000 shares x P10 par) = P720,000.
***P60,000 + P24,000 (12,000 shares x [P12-P10] – P8,400 = P75,600.
****P300,000 – P12,000 = P288,000.
6.
Assets
Cash (P420.000 – P288,000 – P12,000 – P8,400) + P60,000 P 171,600
Inventories (P120,000 + P72,000 + P18,000) 210,000
Land (P210,000 + P48,000 + P72,000) 330,000
Goodwill (refer to Requirement 1- Case 2) 36,000
Liabilities
Common stock, P10 par – Parent/Acquirer only* P 720,000
Paid-in capital in excess of par – Parent/Acquirer only** 75,600
Retained earnings – Parent/Acquirer only*** 288,000
Total Stockholders’ Equity P1,083,600
*P600,000 + P120,000 (12,000 shares x P10 par) = P720,000.

**P60,000 + P24,000 (12,000 shares x [P12-P10] – P8,400 = P75,600.
***P300,000 – P12,000 = P288,000.
For Case 3
7. The following entry on the date of acquisition in the books of Parent Company:
January 1, 20x4
(1) Investment in Sky Company………………………………………… 360,000
Cash……………………………………………………………….. 360,000
Acquisition of Sia Company.
(2) Retained earnings (acquisition-related expense - close to

retained earnings since only balance sheets are being
examined)…………………………………………………………… 14,400
Cash……………………………………………………………………. 14,400
Acquisition- related costs.
8. Schedule of Determination and Allocation of Excess

Partial-goodwill Approach
Common stock (P240,000 x 80%)……………………. P 192,000
Paid-in capital in excess of par (P96,000 x 80%).... 76,800
Retained earnings (P24,000 x 80%)……………….... 19,200 288,000
Allocated excess (excess of cost over book value)….. P 72,000
Increase in inventory (P18,000 x 80%)……………… P 14,400
Increase in land (P72,000 x 80%)……………………. 57,600
(P12,000 x 80%)……………………………………..... ( 9,600)
Increase in bonds payable (P42,000 x 80%)………. ( 33,600) 28,800
Positive excess: Partial-goodwill (excess of cost over
fair value)………………………………………………... P 43,200
The over/under valuation of assets and liabilities are summarized as follows:
Sia Co. Sia Co. Over/ Under

Book value Fair value Valuation
Inventory………………….…………….. 72,000 90,000 18,000
Land……………………………………… 48,000 120,000 72,000
Buildings and equipment (net)......... 360,000 348,000 ( 12,000)
Bonds payable………………………… (120,000) (162,000) 42,000
Net……………………………………….. 360,000 396,000 36,000
The buildings and equipment will be further analyzed for consolidation purposes as follows:
Sia Co. Sia Co.
Book value Fair value (Decrease)
Buildings and equipment .................. 720,000 348,000 ( 372,000)
Less: Accumulated depreciation….. 360,000 - ( 360,000)
Net book value………………………... 360,000 348,000 ( 12,000)
Full-goodwill Approach
Consideration transferred (P360,000 / 80%)………….. P 450,000
Less: Book value of stockholders’ equity of Sky:
Common stock (P240,000 x 100%)…………………. P 240,000
Retained earnings (P24,000 x 100%)…………….... 24,000 360,000
Allocated excess (excess of cost over book value)….. P 90,000
Increase in inventory (P18,000 x 100%)…………… P 18,000
Increase in land (P72,000 x 100%)…………………. 72,000
(P12,000 x 100%)…………………………………..... ( 12,000)
Increase in bonds payable (P42,000 x 100%)……. ( 42,000) 36,000
Positive excess: Full -goodwill (excess of cost over
fair value)………………………………………………... P 54,000
9. Working Paper Eliminating Entries
Partial Goodwill
The schedule of determination and allocation of excess provides complete guidance for the worksheet
eliminating entries on January 1, 20x4:
(E1) Common stock – Sky Co……..………………………………………. 240,000
Additional paid-in capital – Sky Co…………………………………. 24,000
Retained earnings – Sky Co…………………………………………... 96,000
Investment in Sky Co………………………………………………… 288,000
Non-controlling interest (P300,000 x 20%)……………………….. 72,000
Eliminate investment against stockholders’ equity of Sky Co.
(E2) Inventory…..……………………………………………………………. 18,000

Land………………………………………………………………………. 72,000
Goodwill…………………………………………………………………. 43,200
Buildings and equipment………………………………………….. 12,000
Premium on bonds payable……………………………………… 42,000
Non-controlling interest (P30,000 x 20%)……………………….. 7,200
Investment in Sky Co……………………………………………….. 72,000
Full-Goodwill
The schedule of determination and allocation of excess provides complete guidance for the worksheet
eliminating entries on January 1, 20x4:
(E1) Common stock – Sky Co……………………………………………. 240,000
Additional paid-in capital – Sky Co……………………………. 24,000
Retained earnings – Sky Co……………………………………... 96,000
Investment in Sky Co…………………………………… 288,000
Non-controlling interest (P300,000 x 20%)………………….. 72,000
Eliminate investment against stockholders’ equity of
Sky Co.
(E2) Inventory……………………………………………………………. 18,000

Land……………………………………………………………………. 72,000
Goodwill……………………………………………………………. 54,000
Buildings and equipment………………………………….. 12,000
Premium on bonds payable…………………………… 42,000
Non-controlling interest [(P30,000 x 20%) +
(P45,000 – P36,000)]……………………………. 18,000
Investment in Sky Co……………………………………….. 72,000
10. Worksheet for Consolidated balance Sheet, January 1, 20x4. Date of Acquisition: 80%-Owned
Subsidiary (Partial-goodwill)
Eliminations
Assets Peer Co. Sky Co. Dr. Cr. Consolidated
Cash*…………………………. P 45,600 P 60,000 P 105,600
Inventory…………………. 120,000 72,000 (2) 18,000 210,000
Land……………………………. 210,000 48,000 (2) 72,000 330,000
Buildings and equipment 480,000 360,000 (2) 12,000 828,000

Goodwill…………………… (2) 43,200 43,200
Investment in Sky Co…………. 360,000 (1) 288,000
(2) 72,000 -
Total Assets P1,305,600 P600,000 P 1,666,800
Accounts payable…………… P 120,000 P120,000 240,000
Bonds payable………………… 240,000 120,000 360,000
Retained earnings**…………… 285,600 285,600
Retained earnings…………… 96,000 (1) 96,000
Non-controlling interest………… (1 ) 72,000
_________ _______ _________ (2) 7,200 _79,200
Equity P1,305,600 P600,000 P 493,200 P 493,200 P1,666,800

* P420,000 – P360,000 – P14,400 = P45,600.
**P300,000 – P14,400 = P285,600.
• Incidentally, the non-controlling interest on the date of acquisition is computed as follows:

Common stock – Sky company…………………………………… P 240,000
Paid-in capital in excess of par – Sky co………………………… 24,000
Retained earnings – Sky Co..………………………………………. 80,000
Book value of stockholders’ equity – Sky Co………..………….. P 360,000
Adjustments to reflect fair value (over/ undervaluation
of assets and liabilities)…………………………………………. 36,000
Fair value of stockholders’ equity of subsidiary………………… P 396,000
Multiplied by: Non-controlling Interest percentage…………... 20
Worksheet for Consolidated balance Sheet, January 1, 20x4. Date of Acquisition: 80%-Owned
Subsidiary (Full-goodwill)
Eliminations
Assets Per Co. Sia Co. Dr. Cr. Consolidated
Cash*…………………………. P 45,600 P 60,000 P 105,600
Inventory…………………. 120,000 72,000 (2) 18,000 210,000
Land……………………………. 210,000 48,000 (2) 72,000 330,000
Buildings and equipment 480,000 360,000 (2) 12,000 828,000
Goodwill…………………… (2) 54,000 54,000
Investment in Sky Co…………. 360,000 (1) 288,000
(2) 72,000 -
Total Assets P1,305,600 P600,000 P 1,677,600
Liabilities and Stockholders’
Equity
Accounts payable…………… P120,000 P120,000 P 240,000
Bonds payable………………… 240,000 120,000 360,000
(1)
Retained earnings**…………… 285,600 285,600
Retained earnings…………… 96,000 (1) 96,000
Non-controlling interest………… (1 ) 72,000
_________ _______ _________ (2) 18,000 _90,000
Total Liabilities and
Stockholders’
Equity P1,305,600 P600,000 P 504,000 P 504,000 P1,677,600

* P420,000 – P360,000 – P14,400 = P45,600.
**P300,000 – P14,400 = P285,600.
• Incidentally, the non-controlling interest on the date of acquisition is computed as follows:

Add: Non-controlling interest (P54,000, full – P43,200, partial). 10,800
Non-controlling interest (full)………………………………………. P 90,000
11. The balance sheet: Partial-Goodwill
Peer Company and Subsidiary
Consolidated Balance Sheet
January 1, 20x4
Assets
Cash P 105,600
Inventories 210,000
Land 330,000
Buildings and equipment 828,000
Goodwill 43,200
Liabilities
Parent’s Stockholders’ Equity/Equity Attributable to the
Owners of the Parent P 945,600
The balance sheet: Fulll-Goodwill

Peer Company and Subsidiary
Consolidated Balance Sheet
January 1, 20x4
Assets
Cash P 105,600
Inventories 210,000
Land 330,000
Buildings and equipment 828,000
Goodwill 54,000
Liabilities
Parent’s Stockholders’ Equity/Equity Attributable to the P 945,600
Owners of the Parent
IV - Fair Value of Non-controlling Interest in Subsidiary Given with Control Premium
On July 1, 20x5, Parental Inc. acquired most of the outstanding ordinary shares of Guidance
Company for cash. The incomplete working paper elimination entries on that date for the
consolidated statement of financial position of Parental Inc. and its subsidiary are shown below:
Shareholder’s equity – Guidance………………………………… 2,925,000
Investment in Guidance………………………………….. 1,901,250
Non-controlling interest…………………………………… 1,023,750
Inventories…………………………………………………………….. 75,000
Equipment…………………………………………………………….. 375,000
Patent………………………………………………………………….. 73,500
Goodwill……………………………………………………………….. ?
Investment in Guidance………………………………….. 562,500
Non-controlling interest…………………………………… ?
Included in the purchase price is a control premium of P82,500.

Required: Based on the above eliminating entries and data given:
1. The amount of goodwill to be reported in the consolidated balance sheet on July 1, 20x5,
assuming non-controlling interest is measured at fair value basis.
2. The amount of goodwill to be re
3. ported in the consolidated balance sheet on July 1, 20x5 assuming non-controlling interest
is measured at the proportionate share.
4. The amount of goodwill to be reported in the consolidated balance sheet on July 1, 20x5
assuming non-controlling interest is measured at full fair value. The fair value of the non-
controlling interest is P1,380,000.
Answer - Problem IV
1. P297,462 (Full-goodwill approach)
Fair value of subsidiary (100%):
Consideration transferred: Cash (P1,901,250 + P562,500) P2,463,750
Less: Control premium…………………………………………. ( 82,500)
P2,381,250/65% P3,663,462
Add: Control premium…………………………………………. ____82,500
Fair value of subsidiary ………………………………………… P3,745,962
Less: Book value of stockholders’ equity
(net assets) – Guidance Company – given per problem 2,925,000
Allocated excess………………………………………………... P 820,962
Less: Over/undervaluation of assets and liabilities:
(P75,000 + P375,000 + P73,500) 523,500
Positive excess: Goodwill P 297,462
2. P222,225 (Partial/Proportionate goodwill approach)

(net assets) – Guidance Company
(P2,925,000 x 65%)…………………………………………… 1,901,250
(P75,000 + P375,000 + P73,500) x 65% 340,275
3. P395,250 (Full-goodwill approach)
FV of NCI…………………….……………………………………. _1,380,000
Fair value of subsidiary ………………………………………… P3,843,750
(net assets) – Guidance Company – given per problem 2,925,000
(P75,000 + P375,000 + P73,500) 523,500
VIII – 80% Owned Subsidiary: Computation of Consolidated Balances

Slim Corporation’s balance sheet at January 1, 20x4, reflected the following balances:
Cash and Receivables . . . . . . . . . .P 80,000 Accounts Payable . . . . . . . . . . . . . . . . . . . . P 40,000
Inventory . . . . . . . . . . . . . . . . . . . . . . 120,000 Income Taxes Payable . . . . . . . . . . . . . . . . 60,000
Land . . . . . . . . . . . . . . . . . . . . . . . . 70,000 Bonds Payable . . . . . . . . . . . . . . . . . . . . . . . . 200,000
Buildings and Equipment (net) . . 480,000 Common Stock . . . . . . . . . . . . . . . . . . . . . . 250,000
________ Retained Earnings . . . . . . . . . . . . . . . . . . . . 200,000
Total Assets . . . . . . . . . . . . . . . . . . P750,000 Total Liabilities and Stockholders' Equity P750,000
Ford Corporation entered into an acquisition program and acquired 80 percent of Slim’s common
stock on January 2, 20x4, for P470,000. The fair value of the non-controlling interest at the date was
determined to be at P117,500. A careful review of the fair value of AA’s assets and liabilities
indicated the following:
Book Value Fair Value
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P120,000 P140,000
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,000 60,000
Buildings and equipment (net) . . . . . . . . . . . . . . . . . . . . 480,000 550,000
Goodwill is assigned proportionately to Ford and the non-controlling stockholders.
Required: Compute the appropriate amount to be included in the consolidated balance sheet
immediately following the acquisition for each of the following items:
1. Inventory
2. Land
3. Buildings and Equipment (net)
4. Goodwill
5. Investment in Slim Corporation

6. Total assets
7. Total liabilities
8. Controlling Interest or Parent Stockholders’ Equity
9. Non-controlling interest
10. Consolidated Stockholders’ Equity
Answer - Problem VIII
1. Inventory (P120,000 + P20,000) P140,000

2. Land (P70,000 – P10,000) P 60,000
3. Buildings and Equipment (P480,000 + P70,000) 550,000
4. Full-Goodwill, P57,500
Consideration transferred P470,000
Add: FV of NCI 117,500 P587,500
Less: BV of SHE of Slim (P250,000 + P200,000) 450,000
Inventory P 20,000
Land (10,000)
Buildings and equipment (net) 70,000 80,000
Goodwill – full P 57,500
or,
Fair value of consideration given by Ford P470,000

Fair value of noncontrolling interest 117,500
Total fair value P587,500
Book value of Slim’s net assets P450,000
Fair value increment for:
Inventory 20,000
Land (10,000)
Buildings and equipment (net) 70,000
Fair value of identifiable net assets (530,000)
Goodwill – full P 57,500
Partial Goodwill, P46,000

Consideration transferred P470,000
Less: BV of SHE of Slim (P250,000 + P200,000) x 80% 360,000
Inventory (P20,000 x 80%) P 16,000
Land (P10,000 x 80%) ( 8,000)
Buildings and equipment (net) (P70,000 x 80%) 56,000 64,000
Goodwill – partial P 46,000
5. Investment in Slim Corporation: None would be reported;

the balance in the investment account is eliminated.
6. P830,000
Total assets:
Unadjusted total assets P750,000
Add (deduct): adjustments
Increase in inventory 20,000
Decrease in land ( 10,000)
Increase in buildings and equipment 70,000
Adjusted assets P830,000
7. P300,000 (no adjustments)

8. No available data
9. Noncontrolling Interest (P587,500 x .20) P117,500

or,
BV – SHE of SS P450,000
Adjustments to reflect fair value (P20,000 – P10,000 +P 70,000) 80,000
FV of SHE of SS P530,000
Multiplied by: NCI % 20%
NCI – partial goodwill P106,000
Add: NCI on full-goodwill (P57,500 – P46,000) 11,500
NCI – full goodwill P117,500
10. Incomplete data

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ACAFA 3358 – Separate and Consolidated Financial Statements: Date of Acquisition.

I – Wholly and Partially-owned Subsidiary:

Assume the following independent cases:

Book value Fair value

1. Case 1: Date of Acquisition -

Acquisition Expense (or Retained earnings) 10,000

Case 2: Date of Acquisition -

Case 3: Date of Acquisition -

Case 4: Date of Acquisition -

Case 5: Date of Acquisition -

2. Schedule of Determination and Allocated Excess: (Correction: Research and development

Case 1: Date of Acquisition -

b. Fair Value Basis (Full-goodwill Approach)

Case 3: Date of Acquisition –

a. Proportionate Basis (Partial-goodwill Approach)

b. Fair Value Basis (Full-goodwill Approach)

Book value of stockholders’ equity of subsidiary…………………… P 190,000

Case 4: Date of Acquisition -

b. Fair Value Basis (Full-goodwill Approach)

Case 5: Date of Acquisition – Step-Acquisition

*FV of NCI given or NCI on FV of SHE-S, whichever is HIGHER rule.

Book value of stockholders’ equity of subsidiary…………. ……………………………………P 190,000

Case 6: Date of Acquisition – Bargain Purchase Gain

b. Fair Value Basis (Full-goodwill Approach)

*FV of NCI given or NCI on FV of SHE-S, whichever is HIGHER rule.

Buildings and Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,000

Schedule of Determination and Allocated Excess: (Correction: Research and development

Fair value of Subsidiary:

Case 2: Date of Acquisition –

Buildings and Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,000

b. Fair Value Basis (Full-goodwill Approach)

Buildings and Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,000

Schedule of Determination and Allocated Excess: (Correction: Research and development

Fair value of Subsidiary:

Buildings and Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,000

Schedule of Determination and Allocated Excess: (Correction: Research and development

Fair value of Subsidiary:

b. Fair Value Basis (Full-goodwill Approach)

Schedule of Determination and Allocated Excess: (Correction: Research and development

Fair value of Subsidiary:

* the P11,400 control premium is computed as follows: P152,000/40% = P380,000 x 60% =

NCI on FV-SHE of Subsidiary:

Case 4: Date of Acquisition -

b. Fair Value Basis (Full-goodwill Approach)

Schedule of Determination and Allocated Excess: (Correction: Research and development

Fair value of Subsidiary - given P 322,525 (100%)

Schedule of Determination and Allocated Excess:

Fair value of Subsidiary:

b. Fair Value Basis (Full-goodwill Approach)

Identifiable assets (itemized)….. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,000

*FV of NCI given or NCI on FV of SHE-S, whichever is HIGHER rule.

Case 6: Date of Acquisition - – Bargain Purchase Gain

Common stock – SS Co ............................ . . . . . . . . . . . . . . . . . . . . . . 90,000

Schedule of Determination and Allocated Excess:

Fair value of Subsidiary:

Schedule of Determination and Allocated Excess:

Fair value of Subsidiary:

*FV of NCI given or NCI on FV of SHE-S, whichever is HIGHER rule.

Per Co. Book Sia Co. Sia Co.