Problem 1. Giordano Inc.

Giordano's interest in Esprit

Investment in Esprit 1,638,350.00
Divided by: Stockholders' Equity - Esprit 2,642,500.00
Interest purchased by Giordano from Esprit 62.00%

FMV of Net Assets Acquired

Book value of Esprit's net assets 2,642,500.00
Add/Less: Fair Value Adjustments
Inventories 62,500.00
Equipment 312,500.00
Patent 61,250.00
Brand Name (47,300.00)
Total fair value adjustments 388,950.00
Fair Market Value of Esprit's net assets 3,031,450.00

Purchase Price
Investment in Esprit (purchase of net assets) 1,638,350.00
Investment in Esprit (fair value adjustments) 468,750.00
Total purchase price, inclusive of control premium 2,107,100.00

A. Amount of Goodwill B. CNI-P and NCI, end

a. NCI is at Fair Value
Assumed amount of NCI
Purchase Price, ex-control premium 2,038,350.00
Divided by: 62%
Multiplied by: 38%
Assumed amount of NCI 1,249,311.29

NCI value based on proportionate share

FMV of Net Assets acquired 3,031,450.00
Multiplied by: NCI Share 38%
NCI value based on proportionate share 1,151,951.00

Higher amount of NCI 1,249,311.29

Purchase Price 2,107,100.00
Total Consideration 3,356,411.29
Less: FMV of Net Assets acquired (3,031,450.00)
Goodwill 324,961.29

b. NCI is at proportionate share

NCI value based on proportionate share 1,151,951.00
Purchase Price 2,107,100.00
Total Consideration 3,259,051.00
Less: FMV of Net Assets acquired (3,031,450.00)
Goodwill 227,601.00

c. NCI is at Fair Value, Fair value if P1,325,000

Assumed amount 1,249,311.29
Proportionate share 1,151,951.00
Fair value 1,325,000.00

Highest amount 1,325,000.00

Purchase Price 2,107,100.00
Total Consideration 3,432,100.00
Less: FMV of Net Assets acquired (3,031,450.00)
Goodwill 400,650.00
B. CNI-P and NCI, end
62% 38%
CNI-P NCI-NI
Net income of parent 3,501,800.00 -
Net income of subsidiary 1,585,200.00 982,824.00 602,376.00
Amortization of excess
Inventory (62,500.00) (38,750.00) (23,750.00)
Equipment (19,531.25) (12,109.38) (7,421.88)
Patent (7,656.25) (4,746.88) (2,909.38)
Brand name 11,825.00 7,331.50 4,493.50
Intercompany Dividends - -
Gain on acquisition - -
Unrealized Profit on Sale of Machinery - Upstream
Sales Price 820,000.00
Book Value (640,000.00)
Unrealized Profit 180,000.00 (111,600.00) (68,400.00)
Realized Profit through depreciation 10,000.00 6,200.00 3,800.00
Unrealized Profit on Sale of Inventories - Downstream
Sales Price 135,000.00
Gross Profit rate 35%
Unrealized Profit 47,250.00 (29,295.00)
Realized Profit through sale of inventories 90,000.00 55,800.00
Consolidated Net Income attributable to… 4,357,454.25 508,188.25

NCI, beginning 1,249,311.29

NCI-NI 508,188.25
NCI, end 1,757,499.54
Problem 2. Kenshin Company

1. Consolidated APIC
APIC of acquirer 20,000.00
Resulting share premium from issuance of shares
Shares issued 8,000.00
Excess over par 4.00
Resulting APIC 32,000.00
Share issuance costs (Priority 1)
Audit fee for SEC registration of stock issue (17,000.00)
Printing of stock certificates (16,500.00)
Total (33,500.00)
Consolidated APIC 18,500.00

2. Consolidated Retained Earnings

Retained earnings of acquirer 220,000.00
Acquisition expenses
Broker's fee (19,000.00)
Pre-acquisition audit fee (21,000.00)
Legal fees (20,500.00)
Total (60,500.00)
Gain on Acquisition* 12,500.00
Share Issuance Costs (Priority 2) -
Consolidated Retained Earnings 172,000.00

*
Purchase Price 112,000.00
Contingent consideration 12,000.00
FMV of NCI 58,500.00
Assumed value 48,000.00
Proportionate share 58,500.00
Fair value 50,000.00
Total consideration 182,500.00
FMV of Net Assets acquired
FMV of Assets 255,000.00
FMV of Liabilities (60,000.00)
FMV of Net Assets acquired 195,000.00
Gain on acquisition (12,500.00)

3. Consolidated Assets
Book Value of acquirer's assets 440,000.00
FMV of acquiree's assets 255,000.00
Goodwill -
Cash payments (94,000.00)
Consolidated Assets 601,000.00
Problem 3. Soda Corp.

Consolidated expenses
Legal fees for the contract of business combination 174,700.00
Broker's fee 135,000.00
Accountant's fee for pre-acquisition audit 161,000.00
Other direct cost of acquisition 90,400.00
General and allocated expenses 115,300.00
Acquisition expenses 676,400.00
Increase in contingent consideration payable
Amount upon initial recognition 74,000.00
Total cash consideration 163,000.00
Increase in contingent consideration payable 89,000.00
Total consolidated expenses 765,400.00

Journal entry

Resulting APIC
Issued shares 68,000.00
Excess over par 5.00
Resulting APIC 340,000.00

Stock Issuance Costs

Audit fee for SEC registration of stock issue 198,400.00
Printing costs of stock certificates 144,900.00
Listing fees in issuing new shares 172,300.00
Total SIC 515,600.00

Expenses 765,400.00
Share Premium - resulting 340,000.00
Share Premium - existing 175,600.00
Contingent Consideration Payable 89,000.00
Cash 1,192,000.00
1,281,000.00 1,281,000.00
Problem 4. Party Corporation

Purchase Price 810,000.00

FMV of NCI acquired 202,500.00
Assumed value 202,500.00
Proportionate value 165,000.00
Total consideration 1,012,500.00
Book Value of NA acquired (825,000.00)
Excess 187,500.00
Goodwill 37,500.00
Fair value adjustment to depreciable asset 150,000.00

Annual amortization of fair value adjustment 15,000.00

Allocation of goodwill
Parent Subsidiary
Purchase Price 810,000.00 202,500.00
FMV of NA acquired (780,000.00) (195,000.00)
Goodwill 30,000.00 7,500.00
Allocation of impairment loss 24,000.00 6,000.00

1. Consolidated Profit
80% 20%
CNI-P NCI-NI
Net income - Parent 356,250.00 -
Net income - Subsidiary 131,250.00 105,000.00 26,250.00
Amortization of excess (15,000.00) (12,000.00) (3,000.00)
Impairment loss (24,000.00) (6,000.00)
Consolidated net income attributable to… 425,250.00 17,250.00
Total 442,500.00

2. Consolidated retained earnings

Retained earnings, beginning 1,950,000.00
CNI-P 425,250.00
Dividends paid (172,500.00)
Retained earnings, consolidated 2,202,750.00

3. NCI-NI 17,250.00

4. NCI, ending
NCI, beginning 202,500.00
NCI-NI 17,250.00
Dividends paid (11,250.00)
NCI, ending 208,500.00

5. CNI-P 425,250.00
Problem 5. Bacolod Company

Net income - Subsidiary 495,000.00

Amortization of excess
Fair value adjustment (1,400,000.00)
Divided by remaining life 5.00
Annual amortization (280,000.00)
Prorated by: 42%
2013 amortization (116,666.67)
NCI share 45%
Amortization of excess to NCI (52,500.00)
NCI-NI 442,500.00
AMLA Law / Unclaimed Balances Law
1 C
2 B
3 A
4 C