ACCOUNTING ON BUSINESS COMBINATION

ACQUISITION OF STOCKS – DATE OF ACQUISITION

CONSOLIDATED FINANCIAL STATEMENTS

Problem A. On January 2, 2019, MAMSHIE CORPORATION purchased 70% of the outstanding ordinary
shares of ANAKIZ COMPANY for P4,200,000 in cash. The non-controlling interest is measured at fair
value. Statement of financial position of the companies on January 2, 2019 are as follows:

MAMSHIE CORPORATION ANAKIZ COMPANY

Book Value Fair Value Book Value Fair Value
Cash P 600,000 P 600,000 P 600,000 P 600,000
Receivables 1,200,000 1,120,000 900,000 900,000
Inventories 900,000 890,000 780,000 880,000
Land 300,000 320,000 480,000 640,000
Building, net 1,800,000 1,800,000 1,200,000 1,160,000
Long-investment 600,000 600,000 720,000 840,000
Investment in ANAKIZ CO. 4,200,000 4,200,000
TOTAL ASSETS P 9,600,000 P4,680,000

Accounts payable P 1,160,000 P1,000,000 P 300,000 P 300,000

Ordinary shares 2,400,000 1,200,000
Additional paid-in capital 1,240,000 360,000
Retained earnings 4,800,000 2,820,000
TOTAL LIABILITIES & SHE P 9,600,000 P 4,680,000

1. Required: As a result of business combination, compute for the following:

a. Consolidated assets
b. Consolidated liabilities
c. Consolidated shareholder’s equity
d. Non-controlling interest in assets

2. Same requirement for each of the following cases:

Price paid Interest Liabilities of Fair Value of NCI
MAMSHIE
A. P4,800,000 80% P1,760,000 Use relevant share
B. 4,320,000 90% 1,280,000 P 540,000
C. 5,400,000 75% 2,360,000 900,000
D. 3,400,000 80% 360,000 720,000
E. 3,050,000 80% 10,000 955,000
F. 3,500,000 65% 460,000 1,700,000