CASE 1: P Corporation paid P420,000 for 70% of S Corporation's P10 par common stock on December 31, 2017, when S Corporation's stockholders' equity was made up of P300,000 of Common Stock, P90,000 of Share Premium and P60,000 of Retained Earnings. S's identifiable assets and liabilities reflected their fair values on December 31, 2017, except for S's inventory which was overvalued by P65,000 and their land which was undervalued by P30,000. Balance sheets for P and Simmediately after the business combination are presented below.
CASE 1: P Corporation paid P420,000 for 70% of S Corporation's P10 par common stock on December 31, 2017, when S Corporation's stockholders' equity was made up of P300,000 of Common Stock, P90,000 of Share Premium and P60,000 of Retained Earnings. S's identifiable assets and liabilities reflected their fair values on December 31, 2017, except for S's inventory which was overvalued by P65,000 and their land which was undervalued by P30,000. Balance sheets for P and Simmediately after the business combination are presented below.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Read and understand each case carefully and answer the requirements of each case.
CASE 1: P Corporation paid P420,000 for 70% of S Corporation's P10 par common stock on December 31, 2017, when S Corporation's stockholders' equity was
made up of P300,000 of Common Stock, P90,000 of Share Premium and P60,000 of Retained Earnings. S's identifiable assets and liabilities reflected their fair
values on December 31, 2017, except for S's inventory which was overvalued by P65,000 and their land which was undervalued by P30,000. Balance sheets for P
and S immediately after the business combination are presented below.
ASSETS
Cash
Accounts receivable-net
Inventories
Land
Plant assets-net
Investment in S Corp.
Total Assets
LIABILITIES and EQUITY
Current liabilities
Common stock
Share Premium
Retained earnings
Total Equities
P Corporation
P40,000
30,000
185,000
45,000
480,000
420,000
P1,200,000
P170,000
600,000
150,000
280,000
S Corporation
P1,200,000
Required: Use the proportionate share method in the valuation of NCI and prepare the following:
1. Compute for the Goodwill/Gain on Purchase
2. Prepare the entries made in the books of P Corporation as a result of the business combination
P30,000
45,000
165,000
120,000
240,000
P600,000
P150,000
300,000
90,000
60,000
P600,000
Transcribed Image Text:FORMAT:
Recognizing and measuring goodwill
Consideration transferred
Non-controlling interest in the acquiree (NCI)
Previously held equity interest in the acquiree
Total
Less: Fair value of net identifiable assets acquired
Goodwill/(Gain on a bargain purchase)
On acquisition date, the acquirer recognizes a resulting:
Goodwill as an asset.
a.
b. Gain on a bargain purchase as gain in profit or loss.
AFAR PART 2: Zeus Vernon B. Millan
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