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a. Prepare the entry in the books of P Company to record the stock acquisition on January 1, 2016. b. Compute the goodwill or gain on the bargain purchase. c. Prepare a schedule to determine the fair value and book value differential and allocation of differential. d. Prepare a working paper elimination entry for P Company as of January 1, 2016.

a. Prepare the entry in the books of P Company to record the stock acquisition on January 1, 2016. b. Compute the goodwill or gain on the bargain purchase. c. Prepare a schedule to determine the fair value and book value differential and allocation of differential. d. Prepare a working paper elimination entry for P Company as of January 1, 2016.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 2016, P Company purchased 90% of S Company for P620,000. At the time of the investment, the book values of all S Company's assets and liabilities were equal to their fair values except for plant and equipment, land, and notes payable which were fair- valued at P280,000, P350,000, and P105,000, respectively. S Company's balance sheet on January 1, 2016 was as follows: Assets Cash Accounts receivable Inventory Financial assets Plant and equipment (net) Land Total Liabilities and equity Accounts payable Notes payable Capital stock Retained earnings Total P 50,000 25,000 250,000 75,000 250,000 300,000 P950,000 P 75,000 125,000 250,000 500,000 P950,000 The non-controlling interest is to be measured at proportionate fair value of the acquiree's net assets. Required: a. Prepare the entry in the books of P Company to record the stock acquisition on January 1, 2016. b. Compute the goodwill or gain on the bargain purchase. c. Prepare a schedule to determine the fair value and book value differential and allocation of differential. d. Prepare a working paper elimination entry for P Company as of January 1, 2016.
Transcribed Image Text:On January 1, 2016, P Company purchased 90% of S Company for P620,000. At the time of the investment, the book values of all S Company's assets and liabilities were equal to their fair values except for plant and equipment, land, and notes payable which were fair- valued at P280,000, P350,000, and P105,000, respectively. S Company's balance sheet on January 1, 2016 was as follows: Assets Cash Accounts receivable Inventory Financial assets Plant and equipment (net) Land Total Liabilities and equity Accounts payable Notes payable Capital stock Retained earnings Total P 50,000 25,000 250,000 75,000 250,000 300,000 P950,000 P 75,000 125,000 250,000 500,000 P950,000 The non-controlling interest is to be measured at proportionate fair value of the acquiree's net assets. Required: a. Prepare the entry in the books of P Company to record the stock acquisition on January 1, 2016. b. Compute the goodwill or gain on the bargain purchase. c. Prepare a schedule to determine the fair value and book value differential and allocation of differential. d. Prepare a working paper elimination entry for P Company as of January 1, 2016.
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