Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
.38
Transcribed Image Text:Parent Company's stockholders' equity as of December 31, 2020 is P7,308,00O. On January 1, 2021,
Parent acquires 30% of Subsidiary Company's ordinary shares for P540,000 cash and by issuing its own
shares with a fair value of P1,350,000. Parent acquired significant influence over Subsidiary as a result
of stock acquisition. After four months, Parent purchases another 60% of Subsidiary's ordinary shares
for a cash payment of P3,942,000. On this date, Subsidiary reports identifiable net assets with carrying
value of P6,480,000 and fair value of P11,520,000 and it has liabilities with a book value and fair value
of P3,240,000.
At the acquisition date, net loss reported by Subsidiary for the four-month ended amounted to
P900,000. The fair value of the 10% non-controlling interest is P1,296,000. Non-controlling interest is
valued using the proportionate basis. Parent also paid the following: P90,000 for legal fees, P72,000 for
finder's fees, P77,400 for accountant's fees, P64,800 for audit fee and P19,800 for printing of stock
certificates.
Immediately after the business combination, how much is the consolidated total equity?
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