20 of post acquisition subsidiary income less excess fair value amortization 20

20 of post acquisition subsidiary income less excess

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20% of post-acquisition subsidiary income less excess fair value amortization [20% × (120,000 – 30,000) × ½ year] = P9,000 Retained Earnings, 1/1 = P1,400,000 (the parent’s balance because the subsidiary was acquired during the current year) Trademark = P935,000 (add the two book values and the excess fair value allocation after taking one-half year excess amortization) Goodwill (full)= P80,000 (the original allocation) Goodwill (partial) = P80,000 (the original allocation) Problem IX: Consolidated balances after a mid-year acquisition) Note: Investment account balance indicates the initial value method. Consideration transferred .................... P526,000 Non-controlling interest fair value ...... 300 ,000 FV of SHE - subsiary ........................... P826,000 Less: Book value of DD (below) ......... (765 ,000) Fair value in excess of book value (positive) P 61,000 Excess assigned Annual Excess based on fair value: Life Amortizations Equipment .................................. (30 ,000 ) 5 years .................................... P(6,000)
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Goodwill (full) ............................ P 91 ,000 indefinite ....................................... -0- Total ............................................... P(6 ,000 ) Amortization for 9 months ............. P(4 ,500 ) Acquisition-Date Subsidiary Book Value Book value of Duncan, 1/1/x4 (CS + 1/1 RE) ... P740,000 Increase in book value-net income (dividends were paid after acquisition) .......................... P100,000 Time prior to purchase (3 months) .................... × ¼ 25 ,000 Book value of DD, 4/1/x4 (acquisition date) ..... P765 ,000 * The fair value of NCI amounting to P300,000 is higher compared to the FV of the NCI based on FV of SHE of Subsidiary (RR), computed as follows: BV of SHE of Subsidiary (DD)…………………… P765,000 .............................................. Adjustments to reflect fair value (undervaluation) ( 30,000) FV of SHE of Subsidiary (DD) ....... P735,000 Multiplied by: NCI% ...................... _______40 % FV of NCI……………………………………………. P294,000 (Partial-Goodwill) Consideration transferred ............... P 526,000 Less: Book value of SHE – DD (P765,000 x 60%) 459,000 Allocated excess………………………………… P 67,000 Less: Over/under valuation of A and L: (P30,000 x 60%) ........................................... ... ( 18 ,000) Goodwill - partial ............................ P 85,000 1. Consolidated Income Statement: Revenues (1) P825,000
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Cost of goods sold (2) P405,000 Operating expenses (3) 214 ,500 619 ,500 Consolidated net income P 205,500 Noncontrolling interest in CNI (4) 28 ,200 Controlling interest in CNI P 177 ,300 (1) P900,000 combined revenues less P75,000 (preacquisition subsidiary revenue) (2) P440,000 combined COGS less P35,000 (preacquisition subsidiary COGS) (3) P234,000 combined operating expenses less P15,000 (preacquisition subsidiary operating expenses) less nine month excess overvalued equipment depreciation reduction of P4,500 (4) 40% of post-acquisition subsidiary income less excess amortization 2. Goodwill, full = P91,000 (original allocation); Goodwill , partial = P85,000 Equipment = P774,500 (add the two book values less P30,000 reduction to fair value plus P4,500 nine months excess amortization) Common Stock = P630,000 (P company balance only) Buildings = P1,124,000 (add the two book values) Dividends Paid = P80,000 (P company balance only) Problem X 1. AA should report income from its subsidiary of P15,000 (P20,000 x .75) rather than dividend income of P9,000. 2. A total of P5,000 (P20,000 x .25) should be assigned to the non- controlling interest in the 20x4 consolidated income statement.
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