ABC Company acquired 100% ownership of XYZ Company for P500,000 on January 1, 2021.

The statement of
financial position of ABC and XYZ are presented below:
ABC Company XYZ Company
Book Value Book Value Fair Value
800,00 100,00 100,00
Cash 0 0 0
200,00 100,00 100,00
Accounts Receivable 0 0 0
800,00 400,00 440,00
Inventory 0 0 0
2,750,00 500,00
Equipment 0 0 -
2,200,00 100,00 400,00 320,00
Less: Accumulated Depreciation 550,000 0 0 0 0
4,000,00 1,000,00
Total Assets 0 0

200,00 50,00 50,00

Accounts Payable 0 0 0
600,00 550,00 577,50
Bonds Payable 0 0 0
1,600,00 300,00
Ordinary Share Capital 0 0
400,00 50,00
Share Premium 0 0
50,00
Retained Earnings 1,200,000 0
4,000,00 1,000,00
Total Liabilities and Equity 0 0

Additional information
1. XYZ Company is using FIFO inventory system. All beginning inventory is sold during the period.
2. The Equipment of XYZ Company has 8 years remaining useful life on January 1, 2021
3. The Bonds payable has 5 years to mature starting on January 1, 2021. XYZ Company is using straight line
method for amortization.
4. The goodwill, if any, is impaired by P17,500.
5. XYZ Company declared and paid dividends on December 31, 2021

The Statement of Financial Position of ABC and XYZ on December 31, 2021 are presented below.
ABC Company XYZ Company
Book Value Book Value
Cash 1,000,000 200,000
Accounts Receivable 300,000 200,000
Inventory 900,000 500,000
Investment in XYZ Company 500,000 -
Equipment 2,750,000 500,000 -
2,062,50 350,00
Less: Accumulated Depreciation 687,500 0 150,000 0
4,762,50 1,250,00
Total Assets 0 0

Accounts Payable 371,875 187,500

Bonds Payable 600,000 550,000
Ordinary Share Capital 1,600,000 300,000
Share Premium 400,000 50,000
1,790,62 162,50
Retained Earnings 5 0

Total Liabilities and Equity 4,762,500 1,250,000

The Statement of Retained Earnings of ABC and XYZ on December 31, 2021 are presented below.
ABC Company XYZ Company
1,200,00
Beginning Retained Earnings 0 50,000
787,50 15
Add: Net Income 0 0,000
196,87
Less: Dividends 5 37,500
1,790,62 162,50
Ending Retained Earnings 5 0
The Income Statement of ABC and XYZ on December 31, 2021 are presented below.
ABC Company XYZ Company
Sales 10,000,000 2,000,000
Less: Cost of Sales 6,500,000 1,300,000
3,500,00 700,00
Gross profit 0 0
Less: Operating Expense 2,750,000 550,000
750,00 150,00
Operating Income 0 0
Add: Dividend Income 37,500 -
787,50 150,00
Net Income 0 0