BM2010

PROBLEM SOLVING: (30 points: 6 items x 5 points)

Direction: Read the problems below and give what is being asked. Write your answer on another sheet of
paper.

1. On January 1, 20X1, Sit Co. acquired 75% controlling interest in Stand Co. for P1,000,000. On the said
date, the fair value of Stand’s identifiable net assets is P800,000. Sit Co. incurred transaction costs of
P100,000 on the acquisition.

Required: Determine the following:

a. The goodwill if Sit Co. uses the full IFRS and the measure non-controlling interest shall be measured
on a proportionate basis.
FULL IFRS
Costs ₱ 900,000.00
Non-Controlling Interest (NCI) (900,000/75%x25%) 300,000.00
Total 1,200,000.00
Less: Net Identifiable Assets 800,000.00
Goodwill ₱ 400,000.00

b. The goodwill if Sit Co uses the IFRS for SMEs.

IFRS FOR SMEs
Cost (900,000 + 100,000) ₱ 1,000,000.00
Less: Net Identifiable Assets 600,000.00
Goodwill ₱ 400,000.00

c. The goodwill on December 31, 20X1 under full IFRS and IFRS for SMEs.
IFRS FOR SMEs FULL IFRS
Costs ₱ 1,000,000.00 ₱ 900,000.00
Non-Controlling Interest (NCI) - 300,000.00
Total 1,000,000.00 1,200,000.00
Less: Net Identifiable Assets - 600,000.00 - 800,000.00
Goodwill 400,000.00 400,000.00
Less: Amortization (400,000/10yrs) 40,000.00 -
Carrying Value of Goodwill, Dec. 31,20X1 ₱ 360,000.00 ₱ 400,000.00

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 BM2010

2. Papa Corporation, a publicly-listed company, acquired Sansa Company, a privately-owned company, on

September 30, 20X1. Given below are their statement of financial position (SFP) as of the date of
acquisition:

Papa Corporation
Statement of Financial Position
September 30, 20X1

Current Assets P800 Current Liabilities 230

Non-Current Assets 1,200 Non-Current Liabilities 420
Common Stock, 100 Shares 200
Additional Paid-In Capital 350
Retained Earnings 800
Total Assets P2,000 Total Liabilities and Equity P2,000

Sansa Company
Statement of Financial Position
September 30, 20X1

Current Assets P600 Current Liabilities 200

Non-Current Assets 1,300 Non-Current Liabilities 500
Common Stock, 50 Shares 150
Additional Paid-In Capital 250
Retained Earnings 800
Total Assets P1,900 Total Liabilities and Equity P1,900

Additional information about the acquisition are as follows:

 Papa Corporation issues three (3) shares in exchange for each ordinary share of Sansa Company. All
of Sansa Company’s shareholders exchange their shares. Thus, Papa Corporation issues 150 shares in
exchange for all 50 shares of S Company.

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 BM2010

 The fair value of each share of Sansa Company is P30. The quoted market price of Papa
Corporation’s shares on the said date is P22.50 per share.
 The fair value of Papa Corporation’s identifiable assets and liabilities are the same as their book
values, except for its non-current assets which have a fair value of P1,500.

Required:

1. Solve for the fair value of consideration transferred.

Fair value of consideration transferred=200 shares x P 22.50=P 4,500

2. Determine the amount of goodwill.

Consideration Transferred 4,500.00

Less: Fair value of Net Identifiable Assets 1,650.00
Goodwill ₱ 2,850.00

3. Prepare the consolidated statement of financial position.

Papa Corporation and Sansa Company

Consolidated Statement of Financial Position
September 30, 20X1

Current Assets ₱ 1,400.00

Non-Current Assets 2,800.00
Goodwill 2,850.00
Total Assets ₱ 7,050.00

Current Liabilities ₱ 430.00

Non-Current Liabilities 920.00
Common Stock, 150 shares, P1 par 150.00
Additional-Paid-in Capital 250.00
Retained Earnings 800.00
Non-Controlling Interest (NCI) 4,500.00
Total Liabilities and Equity ₱ 7,050.00

07 Task Performance 1 *Property of STI

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