PROBLEM IL.On January 1, 2019, William Corp. (qualifies as SME) paid cash of P600,000 for the 80% of the outstanding shares of KateCompany. The carrying value of the assets and liabilities of Kate on January 1, 2019 follow:Accounts ReceivableP90,000Inventory180,000Plant & Equipment (net of AccumulatedDepreciation of P220,000)320,000Goodwill100,000Liabilities120,000On January 1, 2019, Kate inventory had a fair value of P150,000 and plant & equipment (net) had a fair value of P380,000.Cost of arranging the combination are as follows: legal fees for combination, P30,000; finder's fee, P50,000; othermiscellaneous direct costs, P20,000.Net income of William and Kate for 2019 amounts to P158,000 and P60,000, respectively. William received dividend ofP18,000 from Kate during 2019. The PPE has original useful life of 10 years and was already held for 4 years as of date ofacquisition.1. On December 31, 2019, what is the consolidated net income?2. How much is the carrying value of goodwill as of December 31, 2019?

William Corp has acquired 80% shares of Kate company and hence is the holding company of Kate…

Answered: 1. On December 31, 2019, what is the…

1. On December 31, 2019, what is the consolidated net income? 2. How much is the carrying value of goodwill as of December 31, 2019?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Question

PROBLEM IL.
On January 1, 2019, William Corp. (qualifies as SME) paid cash of P600,000 for the 80% of the outstanding shares of Kate
Company. The carrying value of the assets and liabilities of Kate on January 1, 2019 follow:
Accounts Receivable
P90,000
Inventory
180,000
Plant & Equipment (net of Accumulated
Depreciation of P220,000)
320,000
Goodwill
100,000
Liabilities
120,000
On January 1, 2019, Kate inventory had a fair value of P150,000 and plant & equipment (net) had a fair value of P380,000.
Cost of arranging the combination are as follows: legal fees for combination, P30,000; finder's fee, P50,000; other
miscellaneous direct costs, P20,000.
Net income of William and Kate for 2019 amounts to P158,000 and P60,000, respectively. William received dividend of
P18,000 from Kate during 2019. The PPE has original useful life of 10 years and was already held for 4 years as of date of
acquisition.
1. On December 31, 2019, what is the consolidated net income?
2. How much is the carrying value of goodwill as of December 31, 2019?

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