SUBSEQUENT TO DATE OF ACQUISITION

King Philip David

Problem 1: On January 1, 2030, A Corp acquired 80% interest in X Corp by issuing 16,000 shares
with bfair value of P60 per share and par value of P40 per share. The financial statements of A Corp
and X Corp on the acquisition date are shown below:

A X

Book Values Book Values Fair Values

Cash 128,000 64,000 64,000

Accounts Receivable 384,000 153,600 153,000

Inventory 512,000 294,400 396,800

Equipment 2,560,000 640,000 768,000

Accumulated Depreciation (256,000) (128,000) (153,600)

Total Assets 3,328,000 1,024,000 1,228,800

Accounts Payable 256,000 76,800 76,800

Bonds Payable 384,000

Ordinary share 1,536,000 640,000

Share Premium 512,000

Retained Earnings 640,000 307,200

Total Liabilities and 3,328,000 1,024,000

Equipment

A Corp elects to measure NCI as its proportionate share in X net identifiable assets. The equipment
has a remaining useful life of 4 years from January 1, 2030.

The separate statement of financial position on December 31, 2030 of A and X is presented as
follows:

A X

Cash 294,400 729,600

Accounts Receivable 960,000 281,600

Inventory 1,344,000 192,000

 SUBSEQUENT TO DATE OF ACQUISITION
King Philip David
Investment in X 960,000

Equipment 2,560,000 640,000

Accumulated Depreciation (768,000) (256,000)

Total Assets 5,250,400 1,587,200

Accounts Payable 550,400 384,000

Bonds Payable 384,000

Ordinary Share 2,176,000 640,000

Share Premium 832,000

Retained Earnings 1,408,000 563,200

Total Liabilities and Equity 5,350,400 1,587,200

The statement of profit or loss of A and X Corp for year 2030 is shown below:

A X

Sales 3,840,000 1,536,000

COGS (2,112,000) (92,600)

Gross Profit 1,728,000 614,400

Depreciation Expense (512,000) (128,000)

Distribution costs (409,600) (230,000)

Interest expense (38,400)

Profit 768,000 256,000

A Corp and X Corp did not declare any dividends in 2030. There were also no intercompany
transactions. The group determined that there is no goodwill impairment.

Req 1: How much is the consolidated total assets as of January 1, 2030?

Req 2: The total consolidates shareholder’s equity as of January 1, 2030?
Req 3: How much is the consolidated net income for 2030?
Req 4: How much is the consolidated total assets as of December 31, 2030?
Req 5: How much is the total consolidated shareholder’s equity as of December 31,
2030?
 SUBSEQUENT TO DATE OF ACQUISITION
King Philip David

Problem 2: On April 1, 2022, POL Corp acquired 80% of the outstanding stocks of SOL Corp for
P2,500,000.

o SOL Corp’s stockholder’s equity at the end of 2022 were as follows: Common stock, P80 par
P2,000,000, Additional paid in capital P500,000, and retained Earnings P750,000.
o The fair value of non-controlling interest is P685,000.
o All the assets of SOL were fairly valued except for its inventories which are overvalued by
P90,000, Land which is undervalued by P50,000, and Patent which is undervalued by
P125,000. The said patent has a remaining useful life of five years.
o Both companies use the straight line method for depreciation and amortization.
o Shareholder’s equity of POL Corp on December 31, 2022 is composed of: Common stock,
P50 par P3,500,000, APIC P750,000, and Retained Earnings P2,460,000.
o Goodwill, if any should be decreased by P22,500 at year end.
o No additional issuance of Capital sticks occurred.

For the two years ended, December 31, 2022 and 2023, POL Corp, and SOL Corp reported the
following:

POL CORP SOL CORP

2022 2023 2022 2023

Net income from 525,000 550,000 485,000 (from 520,000

own operations date of
acquisition)

Dividends 50,000 35,000 35,000 50,000

declared at year-
end

On December 31, 2022, compute for:

Req. 1: Non-controlling interest in net assets of subsidiary
Req 2: Using the information in number 1, what is the amount of consolidated
shareholder’s equity?
 SUBSEQUENT TO DATE OF ACQUISITION
King Philip David
Problem 3: PAPA Corporation acquired 80% of the outstanding common stock of Mama Company
on June 1, 2022 for P2,345,000/
o Mama Company’s stockholder’s equity components at the end of this year are as follows:
Ordinary share 100 par, P1,000,000. Share Premium P450,000, Retained Earnings P890,000
o Non-controlling interest is measured at fair value.
o All the assets of Mama were fairly valued, except for inventories, which are overstated by
P44,000, and equipment, which was understated by P60,000. Remaining useful life of
equipment is 4 years.
o Both companies use the straight line method for depreciation and amortization.
Stockholder’s equity of PAPA on June 1, 2022 is composed of ordinary Share P3,000,000,
share premium P700,000, Retained earnings P2,100,000.
o Fair value of non-controlling interest on the date of acquisition is P470,000.
o Goodwill, if any should be written down by 56,900 at year-end
o Net income for the first year of parent and subsidiary are P300,000 and P170,000 from date
of acquisition respectively.
o Dividends declared amounted to P80,000 and P60,000. During the year, there was no
issuance of new ordinary shares.
Req 1: What is the balance of the non-controlling interest in net assets of subsidiary on
December 31, 2022?
Req 2: Using the information in number 2, what is the amount of consolidated shareholder’s
equity?
 SUBSEQUENT TO DATE OF ACQUISITION
King Philip David
Problem 4: On January 2, 2030, Panaad Company acquired 80% interest in Sarabia Company for
P4,125,000 cash. On this date the outstanding capital stock and retained earnings of Panaad Company
and Sarabia Company are as follows:

Panaad Sarabia
Common shares P2,250,000 P1,312,000

Share premium 1,500,000 -

Retained earnings 5,250,000 3,187,500

There was no issuance of capital stock during the year. Non – controlling interest is initially measured
at fair value. Fair values of the following assets of Sarabia exceeded their book values as follows:
Inventories, P210,000; Property and equipment (useful life, 10 years), P127,500. All other assets and
liabilities are fairly valued. Goodwill if any is not impaired. On December 31, 2030 the two companies
reported the following operating results:

Panaad Sarabia

Net income P1,785,000 P975,000

Dividends paid 525,000 262,500

What is the consolidated stockholder’s equity to be reported in the consolidated statement of

financial position on December 31, 2030?