On January 1, Parent Company acquired 90% of Subsidiary Company in exchange for 5,400 shares of P10 parcommon stock having a market value of P120,600. Parent and Subsidiary condensed balance sheet on January 1,were as follows:Using the proportionate basis or partial goodwill method, compute the following:1. The amount of goodwill on January 1:A. P 2,600 C. P 14,400B. P 3,800 D. P 25,2002. The equity holders of parent (or controlling interest) retained earnings on January 1:A. P 48,000 C. P 84,900B. P52,100 D. P 89,0003. The consolidated retained earnings on January 1:A. P 48,000 C. P 84,900B. P52,100 D. P 89,000 SubsidiaryCompanyP 37,4009,10016,10040,00010,000P 112,600AssetsParentCompanyP 30,90034,20022,900179,000CashAccounts receivable, netInventoriesEquipment, netPatentsP 267,000Total AssetsLiabilities and EquitiesAccounts PayableBonds PayableCommon stock, P10 parShare PremiumRetained earningsTotal Liabilities and EquitiesP 6,600P 4,000100,000100,00015,00048.000P 267,00050,00015,00041.000P 112,600At the date of acquisition, all assets and liabilities of Subsidiary Company have book value approximately equal totheir respective market values except the following as determined by appraisal as follows:P 17,100Inventories (FIFO method)Equipment (net-remaining life 4 years)Patents (remaining life 10 years)48,00013,000ADDITIONAL INFORMATION:For the year ended December 31, the following results were given:Parent CompanySubsidiary CompanyDividend PaidP15,0004,000Net IncomeP30,2009,400

What is goodwill? In the case of acquisition, when the payment of purchase consideration exceeds the…

Answered: On January 1, Parent Company acquired…

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, Parent Company acquired 90% of Subsidiary Company in exchange for 5,400 shares of P10 par
common stock having a market value of P120,600. Parent and Subsidiary condensed balance sheet on January 1,
were as follows:

Using the proportionate basis or partial goodwill method, compute the following:
1. The amount of goodwill on January 1:
A. P 2,600 C. P 14,400
B. P 3,800 D. P 25,200
2. The equity holders of parent (or controlling interest) retained earnings on January 1:
A. P 48,000 C. P 84,900
B. P52,100 D. P 89,000
3. The consolidated retained earnings on January 1:
A. P 48,000 C. P 84,900
B. P52,100 D. P 89,000

Subsidiary
Company
P 37,400
9,100
16,100
40,000
10,000
P 112,600
Assets
Parent
Company
P 30,900
34,200
22,900
179,000
Cash
Accounts receivable, net
Inventories
Equipment, net
Patents
P 267,000
Total Assets
Liabilities and Equities
Accounts Payable
Bonds Payable
Common stock, P10 par
Share Premium
Retained earnings
Total Liabilities and Equities
P 6,600
P 4,000
100,000
100,000
15,000
48.000
P 267,000
50,000
15,000
41.000
P 112,600
At the date of acquisition, all assets and liabilities of Subsidiary Company have book value approximately equal to
their respective market values except the following as determined by appraisal as follows:
P 17,100
Inventories (FIFO method)
Equipment (net-remaining life 4 years)
Patents (remaining life 10 years)
48,000
13,000
ADDITIONAL INFORMATION:
For the year ended December 31, the following results were given:
Parent Company
Subsidiary Company
Dividend Paid
P15,000
4,000
Net Income
P30,200
9,400

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