Pagador, Janelyne C.

BSMA 3 – 5

Problem 2-1
1. Entry in the books of Moses. Corp
Investment in Jacob Corp. 600 000
Cash 600 000

Professional fees expense 50 000

Cash 50 000

Share premium 10 000

Cash 10 000

2. Working paper elimination entries

Ordinary share capital, Jacob Corp. 250 000
Retained earnings, Jacob Corp. 150 000
Goodwill 200 000
Investment in Subsidiary 400 000

Consideration (20 000*P30) 600 000

Non-controlling interest -
Total 600 000
Less: Fair value of net assets acquired 400 000
GOODWILL 200 000

Problem 2-2
1. Allocation schedule
Contingent consideration (.60 * 75K) 45 000
Cash paid – 60% 405 000
Non-controlling interest – 40% 220 000
Total 620 000
Less: Fair value of net assets acquired 550 000
GOODWILL 120 000

2. Entry in the books of Moses. Corp

Investment in Jacob Corp. 600 000
Cash 600 000

3. Working paper elimination entries

Ordinary share capital, Jacob Corp. 300 000
Retained earnings, Jacob Corp. 200 000
Machinery 70 000
Goodwill 120 000
Investment in Subsidiary 405 000
Contingent loss 45 000
Non-controlling interest 220 000
Inventory 20 000
Pagador, Janelyne C.
BSMA 3 – 5
4. Assets of the acquirer 1 300 000
Assets of the acquire 750 000
Goodwill 120 000
Cash paid (405 000)
Consolidated assets 1 765 000

Liabilities of RER 300 000

Liabilities of REE 200 000
Contingent liability 45 000
Cost incurred 50 000
Consolidated liability 595 000

SHE of the acquirer (less overstated 1 000 000

asset)
Consideration 220 000
Less: Cost incurred (50 000)
Consolidated equity 1 170 000

Problem 2-3
1. Assets of the acquirer 870 000
Assets of the acquire 695 000
Goodwill 230 000
Less: Cost incurred 44 000
Consolidated assets 1 751 000

2. SHE of the acquirer (less overstated asset) 805 000

Consideration 875 000
Less: Cost incurred 44 000
Consolidated equity 1 636 000

Contingent consideration 15 000

Issued shares (35 000*25) 875 000
Non-controlling interest -
Total 890 000
Less: Fair value of net assets acquired 660 000
GOODWILL 230 000
Pagador, Janelyne C.
BSMA 3 – 5

Problem 2-4
1. a. Cash paid 106 500
Contingent consideration 18 000
Total 124 500
FVNAA 91 500
Goodwill 33 000

Assets of RER 750 000

Assets of REE 99 000
Goodwill 33 000
Consideration (106 500)
Consolidated assets 775 500

b. Liabilities of RER 45 000

Liabilities of REE 7 500
Contingent consideration 18 000
Consolidated liabilities 70 500

c. SHE of RER 705 000

Consolidated shareholders’ equity 705 000

2. a. Cash paid – 90% 121 500

NCI – 10% 13 500
Total 135 000
Less: FVNAA 91 500
GOODWILL 43 500

Assets of RER 750 000

Assets of REE 99 000
Goodwill 43 500
Consideration (121 500)
Consolidated assets 771 000

b. Liabilities of RER 45 000

Liabilities of REE 7 500
Consolidated liabilities 52 500

c. SHE of RER 705 000

NCI 13 500
Consolidated shareholders’ equity 718 500
Pagador, Janelyne C.
BSMA 3 – 5

Problem 2-5
1. S Company
Share Capital, P100 par 300 000 Outstanding shares (300K/100) 3 000 shares
Retained earnings 150 000 Controlling interest 90 %
(2700/3000)
Non-controlling interest 10 %
SHE of S at CV on 1/1/20 450 000
Undervalued equipment 50 000
SHE of S at FV on 1/1/20 500 000

Cash paid – 90% 540 000

NCI – 10% 60 000
Total 600 000
Less: FVNAA 500 00
GOODWILL 100 000

2. Entry in the books of P Company

Investment in S Company 540 000
Cash 540 000

3. Working paper elimination entries

Ordinary share capital, S Company 300 000
Retained earnings, S Company 150 000
Equipment 50 000
Goodwill 100 000
Investment in Subsidiary 540 000
Non-controlling interest 60 000

Problem 2-6
1. Retained earnings, Romeo 1 000 000
Cost of printing and issuing new stock
certificates (3 000)
Retained earnings after business
combination 997 000

2. Issued shares 3 600 000

Cost incurred (90 000)
Net increase in the SHE of acquirer 3 510 000
Pagador, Janelyne C.
BSMA 3 – 5

Problem 2-7
1. Cash paid 1 800 000
Contingent consideration 50 000
Total 1 850 000
Less: FVNAA 1 500 000
GOODWILL 350 000

2. Assets of REE 2 200 000

Goodwill 350 000
Consideration (1 800 000)
Cost incurred (20 000)
Consolidated assets 730 000

Problem 2-8
1. SHE of the Acquirer 13 840 000
NCI - 20% 488 000
Consideration /Purchase price 1 952 000
Direct cost (33 000)
Consolidated shareholders’ equity 16 247 000

Problem 2-9
1. Ordinary share 700 000
Retained earnings 980 000
Consideration 1 190 000
Total shareholders’ equity 2 870 000

Problem 2-10
1. At acquisition date
Consolidated 146 600
Less: Pit Corp. current asset 106 000
Current Asset, Sam Corp 40 600
Add: receivable 2 000
Current Asset of Pit. Corp at acquisition date 42 600

2. Before acquisition
Current asset 42 600
PPE (89 400 – 5000) 84 900
Less: current liabilities 13 000
Shareholders’ equity 114 500
Pagador, Janelyne C.
BSMA 3 – 5