JMV IN-HOUSE ACCOUNTING TUTORIAL

ADVANCED ACCOUNTING PART II

CONSOLIDATED STATEMENT OF FS-DATE OF ACQUISITION Page 1 of 4

STRAIGHT PROBLEMS

PROBLEM 1
On May 1, 2013, Polo Corporation paid P 1,080,000 to stockholders of Solo Company
for 90% of Solos 100,000 outstanding shares of no-par common stock but with a
fair value of 12% per share; in addition Polo paid acquisition-related costs of the
combination totaling P 50,000 on that date. Book Values and current values of
Solos identifiable net assets on May 1, 2013, were as follows:

Common Stock 400,000

Retained Earnings 500,000
Total Net assets at book value 900,000
Add: Difference between current FV and BV
Inventories 30,000
Property, plant and equipment 60,000
Total current fair value of net assets 990,000

Required:
1. Prepare the journal entries for Polo Corporation on May 1, 2013, to record the
acquisition of stock from Solo Company.
2. Prepare a working elimination entry for Polo Corporation and subsidiary on
May 1, 2013.

PROBLEM 2
The June 1, 2013 statement of financial position of Straw Company at book value
and fair market values are as follows.

Book Value Fair Value

Current Assets 240,000 280,000
Land 20,000
100,000
Building and equipment, net 400,000 270,000
Patents 10,000
30,000
Total Assets 670,000 680,000

Liabilities 250,000 250,000

Common Stock 100,000
Retained Earnings 320,000 430,000
Total Liabilities and Equity 670,000 680,000

On June 1, 2013, Pepsi. Inc. purchased all of Straw Companys stock for P 600,000.

Required:
1. Prepare the journal entry on the books of Pepsi. Inc. to record the stock
acquisition.
2. Prepare a schedule showing the determination and allocation of the excess.
3. Prepare the working paper elimination entries.

PROBLEM 3

PREPARED BY: JOMAR V. VILLENA, CPA,

CONTACT NO: 0975-8855-400
FACEBOOK ACCOUNT: JM VALONDA VILLENA
JMV IN-HOUSE ACCOUNTING TUTORIAL
ADVANCED ACCOUNTING PART II
CONSOLIDATED STATEMENT OF FS-DATE OF ACQUISITION Page 2 of 4

The January 1, 2013 statement of financial position of Sotto Company at book value
and fair market values are as follows.
Book Value Fair Value
Current Assets 800,000 750,000
Property and equipment, net 900,000 1,000,000
Total Assets 1,700,000

Current Liabilities 300,000 300,000

Long Term Liabilities 500,000
460,000
Common Stock, par P1 100,000
Additional paid-in capital 200,000
Retained Earnings 600,000
Total Liabilities and Equity 1,700,000

Pedro Company paid P 950,000 in cash for 80% of Sotto Companys common stock.
Pedro Company also pays P 80,000 of professional fees to effect the combination.
The fair value of the NCI is assessed to be P 230,000.

Required:
1. Prepare journal entry on Pedros books to record the acquisition of the Sotto
stock.
2. Prepare a determination and allocation of excess schedule.
3. Prepare the working paper elimination entries.

PROBLEM 4
Paco Company purchased 100% of the common stock of Sucat Company by issuing
20,000 shares of Paco P5 par value common stock. The market value of the stock
issued on the date of combination, January 1, 2013 was P6 per share. Summarized
statement of financial position data at December 31, 2013 are as follows:

Book Value Fair Value

Current Assets 375,000 100,000
Property and equipment, net 270,000 75,000
Other Assets 30,000
40,000
Total Debits 675,000 215,000

Current Liabilities 220,000 60,000

Mortgage Payable 60,000
25,000
Accumulated Depreciation 70,000
15,000
Common Stock, par P1 100,000 35,000

Additional paid-in capital 45,000

Retained Earnings 180,000 80,000

Total Credits 675,000 215,000

On the date of combination, Sucats property and equipment had a fair value
of P 85,000. The book value of all other assets approximated fair value.

Required:

PREPARED BY: JOMAR V. VILLENA, CPA,

CONTACT NO: 0975-8855-400
FACEBOOK ACCOUNT: JM VALONDA VILLENA
JMV IN-HOUSE ACCOUNTING TUTORIAL
ADVANCED ACCOUNTING PART II
CONSOLIDATED STATEMENT OF FS-DATE OF ACQUISITION Page 3 of 4

Prepare a consolidated statement of financial position immediately following

the acquisition.

PROBLEM 5
On April 30, 2013, Pop Corporation issued 30,000 shares of its no par value
common shares having a fair market value of P20 a share for 8,000 shares of
Sea Companys P10 par common stock. Acquisition related costs of the
business combination, paid by Sea on behalf of Pop on April 30, 2013, were
as follows:

Professional fee relating to business combination

40,000
SEC Registration costs
30,000

Separate statement of financial position of the two companies on April 30,

2013, prior to the business combination, were as follows:

Pop Corporation Sea Company

Assets
Cash 50,000 150,000
Accounts Receivable, net 230,000 200,000
Inventories 400,000 350,000
Plant Assets, net 1,300,000 560,000
Total 1,980,000 1,260,000

Equities
Current Liabilities 310,000 250,000
Long Term debt 800,000 600,000
Common Stock 500,000 100,000
Additional paid in capital 360,000
Retained Earnings (deficit) 370,000 (50,000)
Total 1,980,000 1,260,000

Current fair values of Seas identifiable net assets were the same as their
book values, except for the following:

Inventories 440,000
Plants Asset, net 780,000
Long term debt 620,000

NCI is measured at estimated fair value.

Required:
1. Prepare journal entry for Sea on April 30, 2013, to record its payment of
out of pocket cost of the business combination on behalf of Pop
Corporation.
2. Prepare journal entry for Pop Corporation to record the business
combination with Sea Company on April 30, 2013.
3. Prepare consolidation working paper for consolidated statement of
financial position of Pop Corporation and subsidiary on April 30, 2013.

PREPARED BY: JOMAR V. VILLENA, CPA,

CONTACT NO: 0975-8855-400
FACEBOOK ACCOUNT: JM VALONDA VILLENA
JMV IN-HOUSE ACCOUNTING TUTORIAL
ADVANCED ACCOUNTING PART II
CONSOLIDATED STATEMENT OF FS-DATE OF ACQUISITION Page 4 of 4

END

PREPARED BY: JOMAR V. VILLENA, CPA,

CONTACT NO: 0975-8855-400
FACEBOOK ACCOUNT: JM VALONDA VILLENA