DE LA SALLE LIPA

College of Business, Economics, Accountancy and Management

Accountancy Department
2nd Semester A.Y. 2012-2013
Accounting Review
CONSOLIDATION

I. Consolidated Financial Statements at the Date of Acquisition (Acquisition of Net Assets)

Problem 1. The following data refers to the Statement of Financial Position as of January 1,2012 of GLOBE Inc. whose
net assets is acquired by PLDT Inc. on the said date:
GLOBE Inc.
Statement of Financial Position
January 1,2012
Cash P 2,000,000 Accounts payable P 1,000,000
Financial assets 1,000,000 Notes payable 2,000,000
Accounts receivable (net) 500,000 Bonds payable 3,000,000
Inventory 2,500,000 Ordinary share (P10 par) 1,000,000
PPE, net 2,000,000 Share premium 2,000,000
Intangible asset, net 2,000,000 Retained earnings 1,000,000
Total assets P10,000,000 Total liabilities and equity P10,000,000
The following additional data are provided on January 1,2012 regarding the financial position of GLOBE Inc.:
1) The following are the fair values of the assets on January 1,2012:
Assets Fair values
Cash P2,000,000
Financial assets P1,500,000
Accounts receivable(net) 500,000
Inventory 2,300,000
PPE, net 2,200,000
Intangible asset, net 1,900,000
2) As of January 1,2012, the balance of unamortized premium on bonds payable is P200,000 and the balance of
unamortized bond issue cost is P100,000. The following items are not recorded.
3) Provision for lawsuit in the amount of P100,000 is omitted in the statement of financial position.

The Statement of Financial Position of PLDT Inc. as of January 1,2012 is presented below:
PLDT Inc.
Statement of Financial Position
January 1,2012
Cash P10,000,000 Accounts Payable P 2,000,000
Financial Assets 4,000,000 Accrued Expenses 3,000,000
Accounts Receivable (net) 5,000,000 Notes Payable 4,000,000
Inventory 3,000,000 Preference Shares (P70 par) 7,000,000
Prepaid Assets 2,000,000 Ordinary Share (P30 par) 6,000,000
PPE, net 20,000,000 Share Premium 8,000,000
Intangible asset, net 1,000,000 Retained Earnings 15,000,000
Total Assets P45,000,000 Total Liability and SHE P45,000,000

The following additional data are provided concerning the difference in fair values and book values of the assets of PLDT:
1) The fair value of Inventory is P5,000,000 while the fair value of PPE is P23,000,000.

Required: Determine the total assets and total shareholder’s equity to be presented in the Consolidated Statement of
Financial Position of PLDT Inc. as of January 1,2012 under the following considerations:
_________&________1. PLDT issued 100,000 of its ordinary shares with par value of P30/share. On January 1,2012, the
ordinary share of PLDT is traded at P50 per share. PLDT incurred P200,000 as stock issuance costs. PLDT also incurred
direct costs of business combination consisting of accounting, legal, and other professional fees totaling P100,000. In
addition to that, PLDT also incurred indirect costs consisting of general and administrative costs in the amount of P50,000.
_________&________2. PLDT issued 50,000 of its preference shares with par value of P50/share. On January 1,2012,
the preference share of PLDT is traded at P70 per share. PLDT incurred P150,000 as stock issuance costs. PLDT also
incurred direct costs of business combination consisting of accounting, legal, and other professional fees totaling
P200,000. In addition to that, PLDT also incurred indirect costs consisting of general and administrative costs in the
amount of P150,000.

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_________&________3. The following are the consideration for the purchase of net assets of GLOBE Inc. by PLDT Inc.
Consideration Book value/Par value Fair value
Cash P1,000,000 P1,000,000
10,000 Ordinary shares P100/share P120/share
5,000 Preference shares P50/share P80/share
Land P500,000 P1,000,000
Inventory P100,000 P 200,000
Machinery P2,000,000 P3,000,000
PLDT incurred P100,000 as stock issuance costs for ordinary shares and P50,000 for preference shares. PLDT also
incurred direct costs of business combination consisting of accounting, legal, and other professional fees totaling P70,000.
In addition to that, PLDT also incurred indirect costs consisting of general and administrative costs in the amount of
P30,000.
_________&________4. The following are the consideration for the purchase of net assets of GLOBE Inc. by PLDT Inc.
Consideration Book value/Par value Fair value
Cash P 500,000 P 500,000
5,000 Ordinary shares P100/share P150/share
10,000 Preference shares P10/share P25/share
Land P 100,000 P 300,000
Inventory P 100,000 P 200,000
Machinery P 800,000 P1,000,000
PLDT incurred P50,000 as stock issuance costs for ordinary shares and P30,000 for preference shares. PLDT also
incurred direct costs of business combination consisting of accounting, legal, and other professional fees totaling P30,000.
In addition to that, PLDT also incurred indirect costs consisting of general and administrative costs in the amount of
P20,000.

II. Consolidated Financial Statements at the Date of Acquisition (Acquisition of Stocks)

Problem 1. Use the data provided for PLDT Inc. and Globe Inc. as of January 1,2012.

Assumption 1: Determine the following assuming PLDT acquired 100% of all of the outstanding ordinary shares of Globe Co. by paying P6,000,000 cash. PLDT also
incurred direct costs of business combination consisting of accounting, legal, and other professional fees totaling P100,000. In addition to that, PLDT also incurred
indirect costs consisting of general and administrative costs in the amount of P50,000:
__________1. Total Assets of PLDT Inc. to be presented in the Consolidated Financial Statements as of January 1,2012.
__________2. Total Liabilities of PLDT Inc. to be presented in the Consolidated Financial Statements as of January 1,2012.
__________3. Total Shareholder’s PLDT Inc. to be presented in the Consolidated Financial Statements as of January 1,2012.
__________4. Goodwill to be recognized on January 1,2012
Assumption 2: Determine the following assuming PLDT acquired 100% of all of the outstanding ordinary shares of Globe Co. by paying P4,000,000 cash. PLDT also
incurred direct costs of business combination consisting of accounting, legal, and other professional fees totaling P100,000. In addition to that, PLDT also incurred
indirect costs consisting of general and administrative costs in the amount of P50,000:
__________1. Total Assets of PLDT Inc. to be presented in the Consolidated Financial Statements as of January 1,2012.
__________2. Total Liabilities of PLDT Inc. to be presented in the Consolidated Financial Statements as of January 1,2012.
__________3. Total Shareholder’s PLDT Inc. to be presented in the Consolidated Financial Statements as of January 1,2012.
__________4. Gain on bargain purchased to be recognized on January 1,2012
Assumption 3. Determine the following assuming PLDT acquired 60% of all of the outstanding ordinary shares of Globe Co. by paying P4,000,000 cash. PLDT also
incurred direct costs of business combination consisting of accounting, legal, and other professional fees totaling P100,000. In addition to that, PLDT also incurred
indirect costs consisting of general and administrative costs in the amount of P50,000:
__________1. Total Assets of PLDT Inc. to be presented in the Consolidated Financial Statements as of January 1,2012.
__________2. Total Liabilities of PLDT Inc. to be presented in the Consolidated Financial Statements as of January 1,2012.
__________3. Total Shareholder’s PLDT Inc. to be presented in the Consolidated Financial Statements as of January 1,2012.
__________4. Total Controlling Equity of PLDT Inc. to be presented in the Consolidated Financial Statements as of January 1,2012.
__________5. Non-controlling Interest of PLDT Inc. to be presented in the Consolidated Financial Statements as of January 1,2012
__________6. Goodwill to be recognized on January 1,2012
Assumption 4. Determine the following assuming PLDT acquired 80% of all of the outstanding ordinary shares of Globe Co. by paying P3,000,000 cash. PLDT also
incurred direct costs of business combination consisting of accounting, legal, and other professional fees totaling P100,000. In addition to that, PLDT also incurred
indirect costs consisting of general and administrative costs in the amount of P50,000:
__________1. Total Assets of PLDT Inc. to be presented in the Consolidated Financial Statements as of January 1,2012.
__________2. Total Liabilities of PLDT Inc. to be presented in the Consolidated Financial Statements as of January 1,2012.
__________3. Total Shareholder’s PLDT Inc. to be presented in the Consolidated Financial Statements as of January 1,2012.
__________4. Total Controlling Equity of PLDT Inc. to be presented in the Consolidated Financial Statements as of January 1,2012.
__________5. Non-controlling Interest of PLDT Inc. to be presented in the Consolidated Financial Statements as of January 1,2012
__________6. Gain on bargain purchased to be recognized on January 1,2012

Note: PFRS 3(2008) provides two options of measuring non-controlling interest in an acquiree:
1) At fair value which should not be less than number 2.

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2) At the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets
Note: Gain on bargain purchased shall be recognized only by controlling interest but noncontrolling interest may share on goodwill recognized.

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