1. On January 1, 20x1 ABC acquired 80% of the voting shares of XYZ, Inc.

On this date XYZ’s

identifiable assets and liabilities have fair values of Php1,200,000 and Php400,000, respectively.

ABC Co elects the option to measure non-controlling interest at fair value. The independent
consultant engaged by ABC Co. determined the fair value of the 20% NCI in XYZ is
Php155,000. ABC paid Php1,000,0000 for the 80% interest in XYZ. How much is the goodwill/
gain on the business combination? Prepare the entry.

SOLUTION:

Consideration transferred 1,000,000

Non - controlling Interest in the acquiree 155,000
Previously held equity interest in the acquiree -
Total 1,155,000
Less: Fair value of net identifiable asset acquired (800,000)
Goodwill 355,000

ENTRIES:

O1/1/20x1 Investment in Subsidiary 1,000,000

Cash 1,000,000
To record the acquisition in ABC’s separate book of accounts.

Identifiable assets acquired 1,200,000

Goodwill 355,000
Liabilities assumed 400,000
Investment in subsidiary 1,000,000
Non – controlling interest in XYZ., Inc. 155,000

2. ABC Co. elects to measure the NCI at proportionate share of XYZ Inc. ABC paid
Php1,000,000 for the interest acquired in XYZ. Compute for the Goodwill.

SOLUTION:

Consideration transferred 1,000,000

Non – controlling interest in the acquiree 250,000
Previously held equity interest in the acquiree -
Total 1,250,000
Less: Fair value of net identifiable assets acquired (800,000)
Goodwill 450,000

Non-controlling interest computation:

(1,000,000/80%)x20% = 250,000
3.ABC Co. elects to measure non-controlling interest at fair value. A value of Php250,000 is
assigned to the NCI in XYZ Inc. Compute for the Goodwill

Consideration transferred 1,000,000

Non – controlling interest in the acquiree 160,000
Previously held equity interest in the acquiree -
Total 1,160,000
Less: Fair value of net identifiable assets acquired (800,000)
Goodwill 360,000

Non-controlling interest computation:

Fair value of net identifiable assets acquired 800,000

Non – controlling interest x 20%
Total 160,000