Techniques of consolidation the basic procedure to

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Chapter 14 / Exercise 01
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Camm/Cochran
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Techniques of Consolidation The basic procedure to consolidate the statement of financial position is to eliminate the Investment account on the parent company’s statement of financial position against the stockholder’s equity accounts in the statement of financial position of the subsidiary company. After this, the remaining assets and liabilities of the parent company are then combined with the specific assets and liabilities of the subsidiary company. Consideration Paid (Purchase Price) xxx + Non-Controlling Interest* xxx Total Consideration Given xxx -Book Value of Net Assets** (xxx) Excess xxx -Allocation and Determination (diff bet. FMV vs. BV) Assets (if increase) reverse effect (decrease) (if decrease) reverse effect (increase) Liabilities direct effect (e.g. increase increase) (xxx) Goodwill or (Gain on Acquisition) xxx Measurement of Non-controlling Interest IFRS 3 provides two options of measuring non-controlling interest in an acquire: 1. At fair value, or 2. At the non-controlling interest’s proportionate share of the acquiree’s identifiable net assetsUnder option 1, any goodwill that arises at the time of acquisition is allocated between the parent and the non-controlling interest (NCI) Under option 2, any goodwill that arises at the time of acquisition is assigned only to the parent. *NCI if PROBLEM is silent, - use whichever is HIGHER bet. FV vs. Proportionate ILLUSTRATIVE PROBLEM On January 2, 2019, AB Co purchased 100% of the outstanding ordinary shares of XY Co for P813, 000 payable in cash. On that date, the assets and liabilities of XY Co had fair market values as indicated below. Statements of Financial Position of the companies on January 2, 2019 are also indicated below. The non controlling is measured at fair value. AB XY Assets Carrying amount Fair Value Cash P150, 000 P150, 000 P150, 000 Receivables 300, 000 225, 000 225, 000 Inventories 225, 000 195, 000 210, 000 Land 75, 000 120, 000 180, 000 Building net 450, 000 300, 000 270, 000 Long-term investment in MS 150, 000 187, 500 210, 000 Investment in XY Co 813, 000 Total P 2, 163, 000 P 1, 177, 500 Liabilities and Shareholders’ EquityAccounts Payable 262, 500 172, 500 172, 500 Ordinary Shares AB Co 600, 000
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Chapter 14 / Exercise 01
Business Analytics
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CABRIA CPA REVIEW CENTER Ordinary Shares XY Co 300, 000 Share Premium AB 300, 000 R/E AB Co 1, 000, 500 R/E XY Co 705, 000 Total P 2, 163, 000 P 1, 177, 500 Required: Prepare journal entries on the books of AB Co. Prepare the determination and allocation of excess schedule to compute for goodwill/ gain on acquisition. Prepare working paper entries. Assuming the following independent information: Price Paid Interest (control) Liabilities of AB FMV of NCI/Proportionate a. P1, 200, 000 80% P649, 500 b. 1, 200, 000 80% P649, 500 use proportionate share basis c. 1, 080, 000 90% P529, 500 135, 000 d. 1, 350, 000 75% P799, 500 225, 000 e. 750, 000 80% P199, 500 180, 000 MULTIPLE CHOICE PROBLEMS On January 2, 2020, the Statement of Financial Position of Body and Shop Company prior to the combination are: Body Co. Shop Co. Cash P 675, 000 P 22, 500 Inventories 450, 000 45, 000 PPE (net) 1, 125, 000 157, 500 Total Assets P 2, 250, 000 P 225, 000 Current liabilities P 135, 000 P 22, 500 Ordinary shares P100 par 225, 000 22, 500 Share Premium 675, 000 45, 000 Retained Earnings 1, 215, 000 135, 000 Total Equity P 2, 250, 000 P Page | 7 BUSINESS COMBINATION_LECTURE -

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