1. An 80% interest was acquired by the Betson Corp. in the Lakers Company on July 1, 2014. The consideration transferred was P50,000,000. Lakers Company net assets were P42,500,000 at acquisition date.
1. An 80% interest was acquired by the Betson Corp. in the Lakers Company on July 1, 2014. The consideration transferred was P50,000,000. Lakers Company net assets were P42,500,000 at acquisition date.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:1. An 80% interest was acquired by the Betson Corp. in the Lakers Company on July 1, 2014. The
consideration transferred was P50,000.000. Lakers Company net assets were P42,500,000 at acquisition
date.
Requirement: Compute the amount of goodwill assuming Betson Corp. elects to measure the non-
controlling interest.
a.proportionate to its share on the net assets; and
b. at fair value
2. Condensed statements of financial position of Pete Company and Sally Company on July 31, 2014
were as follows:
Sally Co.
P670,000
Pete Co.
Total Assets
P700,000
Total Liabilities
P300,000
P300,000
250,000
Ordinary Share Capital
Paid-in capital in excess of par
Retained Earnings(deficit)
Total Liabilities and Equity
200,000
80,000
130,000
(10,000)
P670,000
120,000
P700,000
On July 31, 2014, Pete and Sally entered into a combination. The new company, Person Corp. issued
75,000 shares of P10 par value ordinary share capital for all the outstanding share capital of Pete and
Sally.
Requirement:
a. Prepare the journal entry to record the combination and compute for goodwill or gain on bargain
purchase. Assume that the fair market value of the identifiable assets are P800,000 for Pete and
P700,000 for Sally, that each company's liabilities are fairly stated at P300,000; and that the fair market
value of Person Co., share capital is P14 per share.
b. Assume that Person Corp. issued 40,000 shares of its P10 par share capital for all the outstanding
share capital of Pete and Sally, and the market value of share is P15 per share. Book value of assets and
liabilities are the same with their fair values. Compute for the goodwill or gain on bargain purchase and
journalize the entries of Person Corp.
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