19. On January 5, 2020, Purpose Corporation purchased 70% of Showtime Company's P10 par ordinary shares for P900,000. On this date, the carrying amount of Showtime's net assets was P1,000,000. The fair value of identifiable net assets and liabilities of Showtime were the same as the carrying amount except for equipment, which is P200,000 in excess of carrying amount. For the year ended December 31, 2020, Showtime had a net income of P150,000 and paid cash dividend of P63,000 to Purpose. Excess attributable to equipment is amortized over 10 years.

19. On January 5, 2020, Purpose Corporation purchased 70% of Showtime Company's P10 par ordinary shares for P900,000. On this date, the carrying amount of Showtime's net assets was P1,000,000. The fair value of identifiable net assets and liabilities of Showtime were the same as the carrying amount except for equipment, which is P200,000 in excess of carrying amount. For the year ended December 31, 2020, Showtime had a net income of P150,000 and paid cash dividend of P63,000 to Purpose. Excess attributable to equipment is amortized over 10 years.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 8MC

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On July 1, 2019, GAR Company acquired 800,000 shares of FAR Company at a price of P13 per share. GAR estimated that the price paid include P1.50 premium in order to gain control over FAR Company. On this date, the fair values of FAR Company’s identifiable assets and liabilities and their carrying values are given below: Book Value Fair ValueCurrent assets P2,000,000 P2,000,000Property, plant and equipment 9,000,000 11,000,000Liabilities P3,000,000 Ordinary shares, P5 par 5,000,000 Retained earnings 3,000,000 Determine the amount of goodwill assuming the non-controlling interest is measured at the proportionate share in the net assets:
On 1 July 2019, Brad Ltd acquired all assets and liabilities of Pitt Ltd. In exchange for these assets and liabilities, Brad Ltd issued 100,000 shares that at date of issue had a fair value of $5.20 per share. Costs of issuing these shares amounted to $1,000. Legal cost associated with the acquisition of Pitt Ltd amounted to $1,200.The assets and liabilities of Pitt Ltd at 1 July 2019 were as follows:Carrying Amount ($) Fair Value ($)AssetsCash 2,000 2,000Accounts receivable 10,000 10,000Inventory 64,000 68,000Equipment 320,000 232,000Accumulated depn - Equipment (96,000) -Patents 280,000 280,000LiabilitiesAccounts payable (16,000) (16,000)Debentures (64,000) (64,000)Required:a) Prepare the acquisition analysis at 1 July 2019 for the acquisition of Pitt Ltd by Brad Ltd.b) Prepare the journal entries in the records of Brad Ltd at 1 July 2019.
On 1 July 2019, BPL Ltd acquired all of the assets and liabilities of HTC Ltd. In exchange for these assets and liabilities, BPL Ltd issued 100 000 shares that at date of issue had a fair value of $4.95 per share. Costs of issuing these shares amounted to $1050. Legal costs associated with the acquisition of HTC Ltd amounted to $1520. The asset and liabilities of HTC Ltd at 1 July 2019 were as follows: Carrying amountFair value Assets: Cash$12 000$20 000 Accounts receivable10 50012 000 Inventory64 00071 000 Equipment 320 000239 000 Accumulated depreciation – equipment(96 000)— Patents240 000270 000 Liabilities: Accounts payable(16 000)(20 000) Debentures(64 000)(69 000) REQUIRED: a. Prepare the acquisition analysis at 1 July 2019 for the acquisition of HTC Ltd by BPL Ltd.
On May 1, 2021. P Corp. purchased 75% of S Cos P10 par ordinary shares for P990,000. On this date, the carrying amount of S's net assets was P1,000,000. The fair values of S Co.'s identifiable assets and liabilities were the same as their carrying amounts except for plant assets (net), which were P150,000 in excess of the carrying amount. The estimated remaining life of the asset is 5 years. For the year ended December 31, 2021, S had net income of P320,000 and paid cash dividends to P Corp. of P115.000 (all coming from post-acquisition Retained Earnings). Loss on impairment of goodwill in 2021 amounted to P20,000. P Corp. uses the fair value method in measuring non-controlling Interest. Revenues were earned evenly throughout the year. Determine the goodwill on the December 31, 2021 consolidated balance sheet.
7. On January 1, 2021, April Company purchased 40% of the outstanding shares of another entity for P5,000,000 when the net assets of the investee amounted to P10,000,000. At acquisition date, the carrying amount of the identifiable assets and liabilities of the investee were equal to their fair values, except for equipment for which the fair value was P2,000,000 greater than its carrying amount and inventory whose fair value was P1,000,000 greater than its cost. The equipment has a remaining life of 4 years and the inventory was all sod during 2021. The investee reported net income of P6,000,000 for 2021 and paid no dividends during 2021. What is the maximum amount which could be included in April Company’s income before tax to reflect April’s equity in earnings of the investee
On January 1, 2022, P Corp. purchased 80% of S Co.'s P10 par ordinary shares for P986,000. On this date, the carrying amount of S's net assets was P1,000,000. The fair values of S Co.'s identifiable assets and liabilities were the same as their carrying amounts except for plant assets (net), which were P120,000 in excess of the carrying amount. The estimated remaining life of the asset is 5 years. For the year ended December 31, 2022, S had net income of P290,000 and paid cash dividends totaling P125,000. Loss on impairment of goodwill in 2022 amounted to P20,000. P Corp. uses the proportionate method in measuring non-controlling interest. Determine the non-controlling interest in consolidated net income on December 31, 2022.
On January 1, 2021, Entity F acquired 25% of the shares of Pot, Inc. for P425,000. At this date all identifiable assets and liabilities of Pot, Inc. were recorded at amounts equal to fair value, and the equality of Pot consisted of the following: Share capital P1,000,000 General reserve P300,000 Asset revaluation surplus P200,000 Retained earnings P200,000 In 2021, Pot reported profit of P250,000. P50,000 of the asset revaluation surplus was realized in 2021. Pot paid P40,000 divedend and transferred P30,000 to general reserve. What is the carrying amount of the investment in Pot, Inc. as of December 31,2021? a. P465,000 b. P477,000 c. P482,500 d. P490,000
On January 1, 2021, Jimin Co. acquired 30,000 ordinary shares out of the 100,000 outstanding shares of HYBE incorp. for P5,000,000. HYBE's asset and liabilities approximate their fair values except for inventories with carrying amount of P800,000 and fair value of P900,000 and machinery with carrying amount of P2,500,000 and fair value of P2,200,000. The remaining useful life of the machinery is 5 years. HYBE's net asset has a book value of P10,000,000. On December 31, 2021, HYBE reported net income of P2,000,000 and declared paid dividends of P800,000. On December 31, 2022, HYBE reported an income of P4,500,000 and declared and paid dividends of P1,600,000. How much is the net share in the profit or loss of the associate (investment income) in 2022 1,342,0001,350,0001,368,0001,380,000not in the choice
On January 1, 2021, Jimin Co. acquired 30,000 ordinary shares out of the 100,000 outstanding shares of HYBE incorp. for P5,000,000. HYBE's asset and liabilities approximate their fair values except for inventories with carrying amount of P800,000 and fair value of P900,000 and machinery with carrying amount of P2,500,000 and fair value of P2,200,000. The remaining useful life of the machinery is 5 years. HYBE's net asset has a book value of P10,000,000. On December 31, 2021, HYBE reported net income of P2,000,000 and declared paid dividends of P800,000. On December 31, 2022, HYBE reported an income of P4,500,000 and declared and paid dividends of P1,600,000. How much is the implied goodwill from the acquisition?1,970,0002,000,0002,060,0002,600,000not in the choices
On January 1, 2019, ALUCARD Co. acquired 80% interest in BERTHOLD, Inc. by issuing 5,000 shares with fair value of P15 per share. On this date, BERTHOLD's equity comprised of P50,000 share capital and P24,000 retained earnings. NCI was measured at its proportionate share in BERTHOLD's net identifiable assets. BERTHOLD's assets and liabilities on January 1, 2019 approximate their fair values except for the following: Fair value Carrying Fair adjustments (FVA) 8,000 BERTHOLD, Inc. атоunts values Inventory 23,000 31,000 Equipment (4 yrs. remaining life) Accumulated depreciation Totals 50,000 60,000 10,000 (10,000) (12,000) 63,000 (2,000) 16,000 79,000 BERTHOLD, Inc. declared and paid dividends of P6,000 during 2019. There was no impairment in goodwill. The year-end individual statements of profit or loss are shown below: Statements of profit or loss For the year ended December 31, 2019 ALUCARD Co. BERTHOLD, Inc. Sales 300,000 (165,000) 120,000 Cost of goods sold (72,000) Gross profit…
On January 1, 2021, Jimin Co. acquired 30,000 ordinary shares out of the 100,000 outstanding shares of HYBE incorp. for P5,000,000. HYBE's asset and liabilities approximate their fair values except for inventories with carrying amount of P800,000 and fair value of P900,000 and machinery with carrying amount of P2,500,000 and fair value of P2,200,000. The remaining useful life of the machinery is 5 years. HYBE's net asset has a book value of P10,000,000. On December 31, 2021, HYBE reported net income of P2,000,000 and declared paid dividends of P800,000. On December 31, 2022, HYBE reported an income of P4,500,000 and declared and paid dividends of P1,600,000. How much is the carrying value of the investment as of December 31, 20215,348,0005,350,0005,360,0005,618,000not in the choices
On January 1, 2021, Jimin Co. acquired 30,000 ordinary shares out of the 100,000 outstanding shares of HYBE incorp. for P5,000,000. HYBE's asset and liabilities approximate their fair values except for inventories with carrying amount of P800,000 and fair value of P900,000 and machinery with carrying amount of P2,500,000 and fair value of P2,200,000. The remaining useful life of the machinery is 5 years. HYBE's net asset has a book value of P10,000,000. On December 31, 2021, HYBE reported net income of P2,000,000 and declared paid dividends of P800,000. On December 31, 2022, HYBE reported an income of P4,500,000 and declared and paid dividends of P1,600,000. How much is the carrying amount of the investment as of December 31, 2022?