Advanced accounting by guerrero peralta CHAPTER 15

Working paper elimination entries: Minority interest in net assets of subsidiary 90,000 To eliminate Solo’s equity accounts at date of acquisition... Problem 15-2To record acquisition of

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CHAPTER 15

MULTIPLE CHOICE

15-1: a

Less: Book value of interest acquired (100%) 3,200,000

Allocation:

-0-15-2: c

Less: Book value of interest acquired (P280,000 x 90%) 252,000

Allocation to plant assets (P40,000 x 90%) (36,000)

15-3: c

15-4: a

Less: Book value of interest acquired (P560,000 – P70,000) 490,000

Allocation:

Property and equipment ( 35,000) (10,000)

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15-5: b

Allocation:

Inventory (P20,000 x 80%) P(16,000)

Mortgage payable (P5,000 x 80%) ( 4,000) ( 12,000)

15-6: a

Plant and equipment (P500,000 + P420,000) P920,000

15-7: a

15-8: d

Minority interest in net assets of subsidiary P 80,000

15-9: d

Allocation to accounts payable (P5,000 x 75%) 3,750

Therefore:

Total assets (P800,000 + P300,000 + P55,000) P1,155,000

Total liabilities (P250,000 + P15,000 + P160,000 + P5,000) 570,000

15-10: b (P900,000 x 1%)

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15-11: a

Controlling (Parent) interest:

Divided shares outstanding (P125,000 /P100) ÷1,250

Minority interest in net assets of subsidiary (P200,000 x 20%) P40,000

15-12: a

Book value of interest acquired (P100,000 / 20%) x 80% 400,000

15-13: b

Net assets on the date of acquisition (P247,095 + P43,605) P290,700

Adjustments of assets excluding goodwill:

15-14: d (P500,000 + P300,000)

15-15: b

Allocated to plant and equipment (P50,000 x 80%) (40,000)

15-16: a (The retained earnings of the parent only).

15-17: a (The stockholders’ equity of the parent only).

15-18: b (P50,000 + P10,000)

15-19: d (P380,000 + P150,000)

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15-20: d

Cash and cash equivalent (P70,000 + P90,000) P 160,000

Property and equipment (P500,000 + P300,000) 800,000

15-21: d

Fair value of net assets (excluding goodwill) 440,000

Carrying value of goodwill (P450,000 – P390,000) 60,000

15-22: b

Fair value of the net assets (P590,000 – P100,000) 490,000

Implied goodwill to be recorded 50,000

15-23: a The amount reported is equal to Primo’s retained earnings of P567,000

15-24: a 100% – [P138, 000 ÷ (P320, 000 ÷ P140, 000)]

15-25: a (340,000- 200,000)

15-26: b

15-27: a

Differential allocated to inventory 40,000

Differential allocated to equipment 100,000

Differential allocation to goodwill 10,000

Minority interest (140,000 x30%) (42,000)

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PROBLEMS Problem 15-1

To record acquisition of 90% (90,000 / 100,000)

of the outstanding shares of Solo.

b Working paper elimination entries:

Minority interest in net assets of subsidiary 90,000

To eliminate Solo’s equity accounts at date of acquisition.

To allocate difference

Computation and allocation of difference:

Less: Book value of interest acquired

Common stock (P400,000 x90%) P360,000 Retained earnings (P500,000 x 90%) 450,000 810,000

Allocation:

Minority interest (P90,000 x10%) 9,000 ( 81,000)

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Problem 15-2

To record acquisition of 100% of Straw stock.

Less: Book value of interest acquired (100%) 420,000

Allocation (100%:

c. Working paper elimination entries:

To eliminate equity accounts of Straw at date of acquisition.

To allocate difference.

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Problem 15-3

To record acquisition of 90% stock of Sotto.

Allocation:

Property and equipment (100,000)

Minority interest (10% thereof) 9,000 (81,000)

c. Working paper elimination entries:

To eliminate equity accounts of Sotto at date of acquisition.

To allocate difference.

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Problem 15-4

Paco Company and Subsidiary

Consolidated Balance Sheet

January 2, 2008

Retained earnings (including income from subsidiary of P20,000) 200,000

Computation of income from acquisition:

Problem 15-5

Under the purchase method, the investment cost is equal to the fair value of stock issued by Palo (P250,000) plus direct acquisition cost (P10,000) or a total of P260,000 The P20,000 stock issue cost is treated as a reduction from the additional paid-in capital The entry to record the acquisition of stock is as follows:

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Palo Company and Subsidiary

Consolidated Balance Sheet

December 31, 2008

Computation of goodwill:

Less: Book value of interest acquired (P90,000 + P100,000) 190,000

Problem 15-6

To record acquisition of 100% of Seed company stock.

Allocation schedule:

Allocation:

b. Working paper elimination entries

Additional paid-in capital – Seed 40,000

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Pill Corporation and Subsidiary

Consolidated Working Paper

May 31, 2008 – Date of Acquisition

Pill Seed Eliminations & adjustment

Assets

-(2) 30,000

Liabilities & Stockholders’

Equity

Common stock:

Additional paid-in capital

Retained earnings

Problem 15-7

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Pop Corporation and Subsidiary

Working Paper for Consolidated Balance Sheet

April 30, 2008 – Date of acquisition

Assets

-(2)312,000

Liabilities & Stockholders’

Equity

Common stock

Retained earnings

Minority interest in net assets

Of subsidiary

(1) 82,000 (2) 58,000 920,000

140,000 3,560,000

(1) To eliminate equity accounts of Sea Company on the date of acquisition

(2) To allocate difference, computed as follows:

Allocation:

(3) To eliminate intercompany receivables and payables.

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Problem 15-8

Allocation:

2 P Company and Subsidiary

January 1, 2008 – Date of acquisition

P S Adjustments & Eliminations

Debits

Credits

Retained earnings – P Co 1,050,000

(1) To eliminate equity accounts of S Company.

(2) To allocate difference.

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Problem 15-9

Allocation

Debits

-(2) 76,000

Credits

Minority interest in net

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Problem 15-10

Less: Book value of interest acquired (100%) 670,000

Allocation

Long-term investment in MS (15,000) ( 45,000)

Assets

Liabilities & Stockholders’

Equity

(1) To eliminate equity accounts of S Company.

(2) To allocate difference

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