PROBLEM 2-3

COMBINED
LOVE YOU BALANCES
Current Assets 131,000 65,000 196,000
Non-current Assets 725,000 425,000 1,150,000
Goodwill
Investment in You Company 890,000
Total Assets 1,746,000 490,000 2,236,000

Liabilities 80,000 35,000 115,000

Ordinary Shares, 20 par 1,250,000 300,000 1,550,000
Share Premium 176,000 25,000 201,000
Retained Earnings 240,000 130,000 370,000
Total Liabilities & SHE 1,746,000 490,000 2,236,000

Cost of Shares Issued 875,000

Contingent Consideration 15,000
Total Consideration 890,000
FMV of Net Assets -660,000
GOODWILL 230,000

ENTRIES IN THE BOOKS OF ACQUIRER:

Investment in You Company 890,000

Liabilitiy for Contingent Consideration 15,000
Share Capital 700,000
Share Premium 175,000

Share Premium 34,000

Retained Earnings 10,000
Cash 44,000

WORKING PAPER ELIMINATION ENTRIES:

Ordinary Share Capital, You Co. 300,000

Ordinary Share Premium, You Co. 25,000
Retained Earnings 130,000
Investment in You Co. 455,000

Non-current Assets 205,000

Goodwill 230,000
Investment in You Co. 435,000
ELIMINATION CONSOLIDATED
ENTRIES BALANCES
196,000
205,000 1,355,000
230,000 230,000
-890,000
-455,000 1,781,000 #1 Consolidated Assets 1,781,000
#2 Consolidated Equity:
115,000 Ordinary Shares 1,250,000
-300,000 1,250,000 Share Premium 176,000
-25,000 176,000 Retained Earnings 240,000
-130,000 240,000 TOTAL SHE 1,666,000
-455,000 1,781,000
Requirement #1 (acquired all outstanding shares)
Cash
Cash Paid (1,065 shares) 106,500 Inventories
Contingent Consideration 18,000 PPE (net)
Total Consideration 124,500 Investment in Hope
FMV of Net Assets -91,500 Goodwill
GOODWILL 33,000 TOTAL ASSETS

Entries on Acquirer's Books: Current Liabilities

Liability for Contingent Consi
Investment in Hope Co. 124,500 Ordinary Share Capital
Liability for Contingent Consi 18,000 Share Premium
Cash 106,500 Retained Earnings
TOTAL LIAB & SHE
Working Paper Elimination Entries:
1. Consolidated Assets
PPE 24,000 2. Consolidated Liabilities
Goodwill 33,000 3. Consolidated SHE
Investment in Hope Co. 57,000

Ordinary Share Capital 7,500

Share Premium 15,000
Retained Earnings 45,000
Investment in Hope Co. 67,500

Requirement #2 (acquired 90% of the outstanding shares)

Cash 121,500 Cash

Non-controlling Interest 13,500 Inventories
Total Consideration 135,000 PPE (net)
FMV of Net Assets -91,500 Investment in Hope
GOODWILL 43,500 Goodwill
TOTAL ASSETS
Entries on Acquirer's Books:
Investment in Hope Co. 121,500 Current Liabilities
Cash 121,500 Ordinary Share Capital
Share Premium
Retained Earnings
Non-controlling Interest
Working Paper Elimination Entries: TOTAL LIAB & SHE

PPE 24,000 1. Consolidated Assets

Goodwill 43,500 2. Consolidated Liabilities
Investment in Hope Co. 60,750 3. Consolidated SHE
Non-controlling Interest 6,750

Ordinary Share Capital 7,500

Share Premium 15,000
Retained Earnings 45,000
Investment in Hope Co. 60,750
Non-controlling Interest 6,750
 ELIMINATION CONSOLIDATED
LOVE CO HOPE CO COMBINED BALANCES ENTRIES BALANCES
118,500 7,500 126,000 126,000
150,000 15,000 165,000 165,000
375,000 52,500 427,500 24,000 451,500
124,500 124,500 -124,500 0
33,000 33,000
768,000 75,000 843,000 -67,500 775,500

45,000 7,500 52,500 52,500

18,000 18,000 18,000
75,000 7,500 82,500 -7,500 75,000
225,000 15,000 240,000 -15,000 225,000
405,000 45,000 450,000 -45,000 405,000
768,000 75,000 843,000 -67,500 775,500

775,500
70,500
705,000

ELIMINATION CONSOLIDATED
LOVE CO HOPE CO COMBINED BALANCES ENTRIES BALANCES
103,500 7,500 111,000 111,000
150,000 15,000 165,000 165,000
375,000 52,500 427,500 24,000 451,500
121,500 121,500 -121,500 0
43,500 43,500
750,000 75,000 825,000 -54,000 771,000

45,000 7,500 52,500 52,500

75,000 7,500 82,500 -7,500 75,000
225,000 15,000 240,000 -15,000 225,000
405,000 45,000 450,000 -45,000 405,000
13,500 13,500
750,000 75,000 825,000 -54,000 771,000

771,000
 52,500
718,500
Requirement #1 (goodwill/ gain on bargain purchase)

Cash 540,000
Non-controlling Interest 60,000
Total Consideration 600,000
FMV of Net Assets -500,000
GOODWILL 100,000

Requirement #2 (entries in the book of acquirer)

Investment in Subsidiary 540,000

Cash 540,000

Requirement #3 (elimination entries)

Ordinary Share Premium 300,000

Retained Earnings 150,000
Investment in Subsidiary 405,000
Non-controlling Interest 45,000

Equipment 50,000
Investment in Subsidiary 45,000
Non-controlling Interest 5,000

Goodwill 100,000
Investment in Subsidiary 90,000
Non-controlling Interest 10,000
PROBLEM 2-6
#1 Retained Earnings after business combination?

Retained Earnings, beg 1,000,000

Less: Legal Fees -25,000
Consulting fees -12,000
Indirect Costs -20,000
Broker's Fees -30,000
RETAINED EARNINGS, end 913,000

#2 Net Increase in the shareholder's equity?

Shares Issued (120,000 x 30) 3,600,000

Less: Expenses
Legal Fees -25,000
Consulting Fees -12,000
Indirect Costs -20,000
Broker's fees -30,000
Share Issuance Cost -3,000
NET INCREASE IN SHE 3,510,000
PROBLEM 2-7

#1 Amount of goodwill recorded in the books of Faith Inc.

No goodwill will be recorded in the books of Faith.

#2 Purchased 75% interest

Cash (75%) 1,500,000

Non-controlling Interest (25%) 375,000
Contingent Consideration 50,000
Total Consideration 1,925,000
FMV of Net Assets -1,500,000
GOODWILL 425,000
PROBLEM 2-8

Papa Inc.:
Ordinary Share Capital 4,000,000 *Cash
Ordinary Share Premium 3,000,000 NCI
Retained Earnings 6,840,000 13,840,000 Total Consideration
Non-controlling Interest (20%) 500,000 FMV of Net Assets
Gain on Bargain Purchase 48,000 Gain
Expenses -33,000
CONSOLIDATED SHE 14,355,000

PROBLEM 2-9

#1 Consolidated Assets
Financial Co. Market Co.
Ordinary Share 350,000 700,000
Retained Earnings 490,000 980,000
Liabilities 120,000 360,000
TOTAL ASSETS 960,000 2,040,000

Financial Co. 960,000

Market Co. 2,040,000
Goodwill:
Shares Issued (34,000 x 35) 1,190,000
FMV of Net Assets -840,000 350,000
Less: Expenses -80,000

CONSOLIDATED ASSETS 3,270,000

#2 Consolidated Net Assets

Consolidated Assets 3,270,000

Less: Consolidated Liabilities - 480,000
CONSOLIDATED NET ASSETS 2,790,000
 1,952,000
500,000
2,452,000
-2,500,000
-48,000
PROBLEM 2-10

Consolidated Current Assets 146,600

Less: Pit Corp.'s Assets -106,000
Add: Receivable from Pit 2,000
SAM COMPANY - CURRENT ASSETS 42,600

Fair Value of Net Assets Acquired

(25,000 / 20%) 125000
Less: Adjustment in PPE -12,500
Goodwill -7,500
SHE BEFORE ACQUISITION 105,000

PROBLEM 2-11

Fair Value of Interest Retained 150,000

CV of non-controlling interest 300,000
FV of consideration 800,000
TOTAL 1,250,000
Less: Carrying Value of subsidiary -1,000,000
Carrying Value of Goodwill 0
GAIN ON DISPOSAL 250,000
PROBLEM 2-12

#1 Goodwill in the consolidated financial statement

FV of Shares Issued (80%) 300,000

Non-controlling Interest (20%) 75,000
Total Consideration 375,000
FMV of Net Assets -270,000
GOODWILL 105,000

#2 Amount of Building and Equipment on January 2, 2022

BV of P Corp, net 400,000
Fair Market of S Corp 170,000
CONSOLIDATED BLDG. & EQUIP 570,000

#3 Consolidated equity as of date of acquisition

P Corp's Equity 800,000

NCI 75,000
Shares Issued 300,000
CONSOLIDATED EQUITY 1,175,000

PROBLEM 2-13

Microsoft's Assets 10,000,000

Excel's Assets 2,700,000
Less: Investment in Subsidiary -1,400,000
CONSOLIDATED ASSETS 11,300,000

PROBLEM 2-14

Shares Issued (10,000 x 50) 500,000

Less: Share Issuance Cost -50,000
NET INCREASE IN SHE 450,000
PROBLEM 2-15

#1 Total Identifiable Assets after merger

Pragmatic:
Cash 160,000
Receivables 120,000
Inventory 200,000
PPE 400,000
Total Assets 880,000

Systematic:
Cash 40,000
Receivables 120,000
Inventory 140,000
PPE 280,000
Total Assets 580,000
Combined Assets 1,460,000
Goodwill:
Shares Issued (10,000 x 34) 340,000
Debentures 200,000
Less: FMV of Net Assets -460,000 80,000
Less: Expenses(up to available cash) -160,000
TOTAL IDENTIFIABLE ASSETS 1,380,000

#2 Total liabilities after merger

Pragmatic Co.'s :
Current Liabilities 40,000
Long-term Liabilities 140,000
Business Combination Cost (remaining) 20,000
Debentures 200,000 400,000

Systematic Co.'s:
Current Liabilities 20,000
Long-term Liabilities 100,000 120,000
TOTAL LIABILITIES 520,000

PROBLEM 2-16
#1 Goodwill recognized

Cash (75% x 3,450,000) 2,887,500

NCI @ Fair Value (25%) 962,500
Total Consideration 3,850,000
Less: FMV of Net Assets -4,000,000
GAIN ON BARGAIN PURCHASE -150,000

No goodwill to be recognized.

#2 Consolidated Assets

Alpha Company 15,550,000

Beta Company 4,200,000
Less: cash transferred -2,887,500
expenses -150,000
CONSOLIDATED ASSETS 16,712,500
#1
Ordinary Shares 100,000
Share Premium 20,000
Retained Earnings 20,000 A
Investment in Subsidiary 75,000
Non-controlling Interest 25,000

#2
Machinery is measured at FV of 600,000 A

#3
Cash 900,000
Non-controlling Interest 200,000
Total Consideration 1,100,000
FMV of Assets -1,000,000
GOODWILL 100,000

*No goodwill will be recognized in

Malachi's separte books 0 D

#4

*Credit to goodwill of 100,000 to

eliminate the goodwill recorded in the
books of acquiree A

#5

Poe Company
Ordinary Share 3,000,000
Share Premium 1,300,000
Retained Earnings 2,500,000
TOTAL SHAREHOLDERS' EQUITY 6,800,000
Shares Issued (200,000 x 18) 3,600,000
Share Issuance Cost -25,000
Finder's Fees -20,000
CONSOLIDATED SHE 10,355,000 A

#6

Ordinary Share 1,500,000

Ordinary Share Premium 150,000
Retained Earnings 850,000
 Investment in Subsidiary 2,500,000

Goodwill 1,100,000
Investment in Subsidiary 1,100,000

Ordinary Share Premium 25,000

Finder's fees 20,000
Cash 45,000

*All of the above D

#7

Beta Company's Assets: 500,000

Investment in Subsidiary 150,000
TOTAL ASSETS OF BETA 650,000 B

#8

Beta Company's Assets 500,000

Standard Video's Assets 400,000
Less: Receivable from Standard -20,000
CONSOLIDATED ASSETS 880,000 B

#9

Cash 560,000
NCI 140,000
Total Consideration 700,000
FMV of Net Assets -600,000
Goodwill 100,000

PH Corp's assets 3,800,000

Scotland Co 850,000
Goodwill 100,000
Cash transferred -560,000
CONSOLIDATED ASSETS 4,190,000 B

#10

Philippine Corp's SHE 2,450,000

Non-controlling Interest 140,000
CONSOLIDATED SHE 2,590,000 C
#11
Peter's Assets 494,500
Simon's Assets 151,500
Less: Consideration -108,000
Expenses -32,000
CONSOLIDATED ASSETS 506,000 D

#12

Cash (90%) 108,000

NCI (10%) 15,150
Total Consideration 123,150
FMV of Net Assets -151,500
Gain on Bargain Purchase -28,350

Peter's Equity 384,100

NCI @ Proportionate 15,150

Gain on Bargain Purchase 28,350

Less: Consideration
Expenses -32,000
CONSOLIDATED EQUITY 395,600 ????

#13

Investment in Subsidiary 165,660

Less: Consideration without CP:
Non-controlling Interest 17,442
NCI percentage 12% 145350
CONTROL PREMIUM 20,310 C

#14

Goodwill 55,280
Multiply: NCI percentage 12%
ATTRIBUTABLE TO NCI 6,634 B

#15
Issued Shares (150 x 1,500) 225,000
Cost of Registering Shares -20,000
INCREASE IN FRANCIS' SHE 205,000 B

#16

Investment in Subsidiary 225,000

Less: share issuance cost -20,000
INCREASE IN ASSETS 205,000 D

#17

Issued Shares 225,000

Less: Share issuance cost -20,000
Add: Gain on Bargain Purchase
Issued Shares 225,000
FMV of Net Assets - 340,000 115,000
INCREASE IN SHE 320,000 A

#18

Zamora Company's Book Value 600,000

Less: overvaluation of equipment -20,000
expenses -20,000
INCREASE IN ASSET 560,000 B

#19

Cash 3,750,000
FMV of Net Assets -3,500,000
GOODWILL 250,000 D

#20

Alpha Company 15,550,000

Beta Company 3,700,000
Goodwill 250,000
Less: Consideration Transferred -3,750,000
Expenses -50,000
CONSOLIDATED ASSETS 15,700,000 D