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Discussion Problems - Consolidation Subsequent To Date of Acquisition
Discussion Problems - Consolidation Subsequent To Date of Acquisition
PROBLEM 1:
Hogwarts Corporation acquired 80% of the outstanding shares of Durmstrang Company on January 2, 2023 for
P675,000 cash.
Hogwarts Corporation Durmstrang Company
December 31, 2023 December 31, 2023
Cash 580,000 180,000
Accounts Receivable 90,000 50,000
Invnetories 85,500 95,000
Equipment, net 326,000 250,000
Land 898,000 530,000
Investment in Durmstrang 675,000
TOTAL ASSETS 2,654,500 1,105,000
Additional information:
The retained earnings of Hogwarts and Durmstrang on January 2, 2023 amounted to P680,000 and
P110,000, respectively. No additional issuances of stocks happened during the year for both entities.
Dividends declared in 2023 by Hogwarts and Durmstrang amounted to P50,000 and P30,000,
respectively.
All fair values of Durmstrang are equal to their book values except equipment which was overvalued by
P210,000 and land which was undervalued by P15,000.
Any remaining excess was attributable to goodwill.
The remaining useful life of equipment on the date of acquisition was 5 years.
Goodwill, if any, was impaired by P2,000 in 2023.
CASE 1:
1. Goodwill arising from business combination on January 2, 2023, is…
2. How much of the goodwill is attributable to the parent and non-controlling interest, respectively?
3. How much is the consolidated net income for the year 2023?
4. How much of the 2023 consolidated net income is attributable to the parent and non-controlling
interest, respectively?
5. What amount of retained earnings shall be presented on the consolidated statement of financial
position on December 31, 2023?
6. What amount of non-controlling interest shall be presented on the (1) separate statement of
financial position and (2) consolidated statement of financial position on December 31, 2023?
1
ACCPr 121
ACCOUNTING FOR BUSINESS COMBINATIONS
Subsequent to Date of Acquisition
PROBLEM 2:
Karasuno Corp. acquired an interest in Nekoma Corp. for P200,000 on January 1, 2021, when the stockholders’
equity of Nekoma consisted of P200,000 ordinary share and P25,000 retained earnings. The excess of cost over
book value acquired was allocated to machinery that was undervalued by P50,000 and to goodwill. The
undervalued machinery is being depreciated over 4 years. Karasuno’s accounts receivable includes P5,000 due
from Nekoma. During 2023, it was determined that a goodwill impairment loss is P5,000. Financial statements
for Karasuno and Nekoma Corp. for 2023 are summarized as follows: