CPA Corporation purchased a 10% interest in Sticky Company on January 1, 2010 as an available-for-sale investment for a price of P120,000. On January 1, 2015, CPA Corporation purchases 7,000 additional shares of Sticky Company from existing stockholders for P945,000. The purchase increased CPA's interest to 70%. Sticky Company Had the following statement of financial position just prior to CPA's second purchase: Assets Liabilities and Equity Current assets Liabilities Buildings (net) Equipment (net) Total assets P495,000 420,000 300,000 P1,215,000 Common stock, P30 par Retained earnings Total liabilities and equity P195,000 300,000 720,000 P1,215,000

CPA Corporation purchased a 10% interest in Sticky Company on January 1, 2010 as an available-for-sale investment for a price of P120,000. On January 1, 2015, CPA Corporation purchases 7,000 additional shares of Sticky Company from existing stockholders for P945,000. The purchase increased CPA's interest to 70%. Sticky Company Had the following statement of financial position just prior to CPA's second purchase: Assets Liabilities and Equity Current assets Liabilities Buildings (net) Equipment (net) Total assets P495,000 420,000 300,000 P1,215,000 Common stock, P30 par Retained earnings Total liabilities and equity P195,000 300,000 720,000 P1,215,000

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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Question

On the date of the second purchase. CPA determines that the equipment of Sticky was understated by P150,000 and had a 5-year remaining life. All other book values approximate fair values. Any remaining excess is attributed to goodwill.

On January 1, 2015 consolidated statement of financial position, what is the amount of goodwill to be reported?

CPA Corporation purchased a 10% interest in Sticky Company on January 1, 2010 as an available-for-sale
investment for a price of P120,000. On January 1, 2015, CPA Corporation purchases 7,000 additional shares
of Sticky Company from existing stockholders for P945,000. The purchase increased CPA's interest to 70%.
Sticky Company Had the following statement of financial position just prior to CPA's second purchase:
Assets
Liabilities and Equity
Current assets
Liabilities
Buildings (net)
Common stock, P30 par
Equipment (net)
Retained earnings
Total assets
Total liabilities and equity
P495,000
420,000
300,000
P1,215,000
P195,000
300,000
720,000
P1,215,000

Definition Definition Intangible asset that includes proprietary or intellectual property and brand value of a firm. Goodwill is recorded in the books when a firm purchases another firm and the purchase price is more than the fair value of net identifiable assets of the acquired business. The amount of goodwill is recorded on the asset side of the balance sheet (statement of financial position).

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