Consolidated Financial Statements on the Date of Acquisition

On January 2, 2020, the Statement of Financial Position of JKL Company and STU
Company immediately before the combination are:

JKL Co. STU Co.

Cash P 1,350,000 P 75,000
Inventories 900,000 90,000
Property and equipment (net) 2,250,000 315,000
Goodwill 400,000 70,000
Total Assets P 4,900,000 P 550,000

Current Liabilities P 270,000 P 60,000

Ordinary shares, P100 par 650,000 145,000
Share premium 1,350,000 90,000
Retained Earnings 2,630,000 255,000
Total Liabilities and Stockholders’ Equity P 4,500,000 P 550,000

The fair value of STU Company’s property & equipment is P440,000.

Required:

1. Compute for the Consolidated Total Assets, Consolidated Total Liabilities and
Consolidated SHE on the date of acquisition
2. Prepare the necessary working paper entries

Assume the following independent cases:

1. Assuming JKL Company acquired 80% of the outstanding shares of STU Company for
P520,000 and non-controlling interest is measured at the proportionate share of STU
Company’s identifiable net assets.

Aggregate amount of:

Price paid P520,000 (80%)

Recognized amount of NCI 109,000 (20%) P629,000

SHE of STU Co./BV of Identifiable Net Assets:

Ordinary shares P145,000
Share premium 90,000
Retained earnings 255,000 P490,000
Less: pre-existing Goodwill of STU (70,000)
Add: Undervalued excess of property & equip 125,000
Identifiable NA at FV 545,000
Goodwill 84,000

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Consolidated Assets:

Total Assets of Acquirer at BV P4,900,000

Total Assets of Acquired at FV 605,000
Add: Resulting GW 84,000
Less: Cash Payment ( 520,000) P 5,069,000

Consolidated Liabilities:

Total Liabilities of Acquirer at BV P270,000

Total Liabilities of Acquired at FV 60,000 P 330,000

Consolidated SHE:

SHE of Acquirer P4,630,000

Add: NCI 109,000 P 4,739,000

Entry in the Books of JKL:

Investment in STU 520,000

Cash 520,000

Working Paper Entries:

a. To eliminate the SHE of the acquired company:

Ordinary Shares 145,000

Share Premium 90,000
Retained Earnings 255,000
Investment in STU 392,000
NCI 98,000

b. To recognize FV differentials

Property and Equipment 125,000

Investment in STU 100,000
NCI 25,000

c. To eliminate the pre-existing goodwill of STU

Investment in STU 56,000

NCI 14,000
Goodwill 70,000

d. To recognize the resulting goodwill

Goodwill 84,000
Investment in STU 84,000

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2. Assuming JKL Company acquired 90% of the outstanding shares of STU Company for
P630,000 and non-controlling interest is measured at fair value.

Aggregate amount of:

Price paid P630,000 (90%)

Recognized amount of NCI 70,000 (10%) P700,000

SHE of STU Co./BV of Identifiable Net Assets:

Ordinary shares P145,000
Share premium 90,000
Retained earnings 255,000 P490,000
Less: pre-existing Goodwill of STU (70,000)
Add: Undervalued excess of property & equip 125,000
Identifiable NA at FV 545,000
Goodwill 155,000

Consolidated Assets:

Total Assets of Acquirer at BV P4,900,000

Total Assets of Acquired at FV 605,000
Add: Resulting GW 155,000
Less: Cash Payment ( 630,000) P 5,030,000

Consolidated Liabilities:

Total Liabilities of Acquirer at BV P270,000

Total Liabilities of Acquired at FV 60,000 P 330,000

Consolidated SHE:

SHE of Acquirer P4,630,000

Add: NCI 70,000 P 4,700,000

Entry in the Books of JKL:

Investment in STU 630,000

Cash 630,000

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Working Paper Entries:

a. To eliminate the SHE of the acquired company:

Ordinary Shares 145,000

Share Premium 90,000
Retained Earnings 255,000
Investment in STU 441,000
NCI 49,000

b. To recognize FV differentials

Property and Equipment 125,000

Investment in STU 112,500
NCI 12,500

c. To eliminate the pre-existing goodwill of STU

Investment in STU 63,000

NCI 7,000
Goodwill 70,000

d. To recognize the resulting goodwill

Goodwill 155,000
Investment in STU 139,500
NCI 15,500

3. Assuming JKL Company acquired 60% of the outstanding shares of STU Company for
P300,000 and non-controlling interest is measured at the proportionate share of STU
Company’s identifiable net assets.

Aggregate amount of:

Price paid P300,000 (60%)

Recognized amount of NCI 218,000 (40%) P518,000

SHE of STU Co./BV of Identifiable Net Assets:

Ordinary shares P145,000
Share premium 90,000
Retained earnings 255,000 P490,000
Less: pre-existing Goodwill of STU (70,000)
Add: Undervalued excess of property & equip 125,000
Identifiable NA at FV 545,000
Gain from Bargain Purchase 27,000

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Consolidated Assets:

Total Assets of Acquirer at BV P4,900,000

Total Assets of Acquired at FV 605,000
Add: Resulting GW -
Less: Cash Payment ( 300,000) P 5,205,000

Consolidated Liabilities:

Total Liabilities of Acquirer at BV P270,000

Total Liabilities of Acquired at FV 60,000 P 330,000

Consolidated SHE:

SHE of Acquirer P4,630,000

Add: Gain from Bargain Purchase 27,000
Add: NCI 218,000 P 4,875,000

Entry in the Books of JKL:

Investment in STU 300,000

Cash 300,000

Working Paper Entries:

a. To eliminate the SHE of the acquired company:

Ordinary Shares 145,000

Share Premium 90,000
Retained Earnings 255,000
Investment in STU 294,000
NCI 196,000

b. To recognize FV differentials

Property and Equipment 125,000

Investment in STU 75,000
NCI 50,000

c. To eliminate the pre-existing goodwill of STU

Investment in STU 42,000

NCI 28,000
Goodwill 70,000

d. To recognize the resulting gain from bargain purchase

Investment in STU 27,000

Gain from Bargain Purchase 27,000

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4. Assuming JKL Company acquired 75% of the outstanding shares of STU Company for
P450,000 and non-controlling interest is measured at fair value in the amount of
P140,000.

Aggregate amount of:

Price paid P450,000 (75%)

Recognized amount of NCI 140,000 (25%) P590,000

SHE of STU Co./BV of Identifiable Net Assets:

Ordinary shares P145,000
Share premium 90,000
Retained earnings 255,000 P490,000
Less: pre-existing Goodwill of STU (70,000)
Add: Undervalued excess of property & equip 125,000
Identifiable NA at FV 545,000
Goodwill 45,000

Consolidated Assets:

Total Assets of Acquirer at BV P4,900,000

Total Assets of Acquired at FV 605,000
Add: Resulting GW 45,000
Less: Cash Payment ( 450,000) P 5,100,000

Consolidated Liabilities:

Total Liabilities of Acquirer at BV P270,000

Total Liabilities of Acquired at FV 60,000 P 330,000

Consolidated SHE:

SHE of Acquirer P4,630,000

Add: NCI 140,000 P 4,770,000

Entry in the Books of JKL:

Investment in STU 450,000

Cash 450,000

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Working Paper Entries:

a. To eliminate the SHE of the acquired company:

Ordinary Shares 145,000

Share Premium 90,000
Retained Earnings 255,000
Investment in STU 367,500
NCI 122,500

b. To recognize FV differentials

Property and Equipment 125,000

Investment in STU 93,750
NCI 31,250

c. To eliminate the pre-existing goodwill of STU

Investment in STU 52,500

NCI 17,500
Goodwill 70,000

d. To recognize the resulting goodwill

Goodwill 45,000
Investment in STU 41,250
NCI 3,750

Determination and Allocation of Excess:

Controlling Non-Controlling
Aggregate amount: P450,000 P140,000
Identifiable NA at FV (408,750) (136,250)
Goodwill P 41,250 P 3,750

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5. Assuming JKL Company acquired 85% of the outstanding shares of STU Company for
P720,000 and non-controlling interest is measured at fair value in the amount of
P68,000.

Aggregate amount of:

Price paid P720,000 (85%)

Recognized amount of NCI 81,750 (15%) P801,750

SHE of STU Co./BV of Identifiable Net Assets:

Ordinary shares P145,000
Share premium 90,000
Retained earnings 255,000 P490,000
Less: pre-existing Goodwill of STU (70,000)
Add: Undervalued excess of property & equip 125,000
Identifiable NA at FV 545,000
Goodwill 256,750

Consolidated Assets:

Total Assets of Acquirer at BV P4,900,000

Total Assets of Acquired at FV 605,000
Add: Resulting GW 256,750
Less: Cash Payment ( 720,000) P 5,041,750

Consolidated Liabilities:

Total Liabilities of Acquirer at BV P270,000

Total Liabilities of Acquired at FV 60,000 P 330,000

Consolidated SHE:

SHE of Acquirer P4,630,000

Add: NCI 81,750 P 4,711,750

Entry in the Books of JKL:

Investment in STU 720,000

Cash 720,000

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Working Paper Entries:

a. To eliminate the SHE of the acquired company:

Ordinary Shares 145,000

Share Premium 90,000
Retained Earnings 255,000
Investment in STU 416,500
NCI 73,500

b. To recognize FV differentials

Property and Equipment 125,000

Investment in STU 106,250
NCI 18,750

c. To eliminate the pre-existing goodwill of STU

Investment in STU 59,500

NCI 10,500
Goodwill 70,000

d. To recognize the resulting goodwill

Goodwill 256,750
Investment in STU 256,750

Determination and Allocation of Excess:

Controlling Non-Controlling
Aggregate amount: P720,000 P81,750
Identifiable NA at FV (463,250) (81,750)
Goodwill P256,750 P -

Use the proportionate share in recognizing the NCI if the given or assumed fair value is lower
than the relevant or minimum share. This is to avoid a negative share in the NCI

-end of handouts-

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