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Acquisition Accounting and Consolidation Analysis

The document provides financial information for Parpan Company and Sombilon Company. It asks to record the acquisition of Sombilon by Parpan in an entry, prepare elimination entries, and consolidate the financial statements. It then provides year-end balance sheets for Palisade Company and Salisbury Corporation and asks to prepare Palisade's balance sheet after acquiring Salisbury. Finally, it provides partial financial information for Salisbury and asks to prepare an allocation schedule assuming Parpan acquired 80% of Salisbury and the non-controlling interest is measured at fair value.

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820 views4 pages

Acquisition Accounting and Consolidation Analysis

The document provides financial information for Parpan Company and Sombilon Company. It asks to record the acquisition of Sombilon by Parpan in an entry, prepare elimination entries, and consolidate the financial statements. It then provides year-end balance sheets for Palisade Company and Salisbury Corporation and asks to prepare Palisade's balance sheet after acquiring Salisbury. Finally, it provides partial financial information for Salisbury and asks to prepare an allocation schedule assuming Parpan acquired 80% of Salisbury and the non-controlling interest is measured at fair value.

Uploaded by

zee abadilla
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

WEEK 6-7

ULO A, B, C
Let’s Check
PARPAN Company acquires 100% of SOMBILON Company’s common stock for P165,000 in
cash on December 1, 2020. The net asset of SOMBILON Company is as follows:
Common Stock P75,000
Share Premium 45,000
Retained Earnings 30,000
Net Asset/Equity P150,000

CONDENSED FINANCIAL STATEMENT

Parent Subsidiary
Cash 180,000 0
Accounts Rec. 60,000 48,000
Inventory 75,000 30,000
PPE 270,000 237,000
Goodwill
Investment in
165,000
Subsidiary
Total Assets 750,000 315,000

Accounts Pay. 420,000 165,000


Common stock
Parent 150,000
Subsidiary 75,000
Share premium
Parent 120,000
Subsidiary 45,000
Retained earnings
Parent 60,000
Subsidiary 30,000
Total L & Equity 750,000 315,000

Prepare the following:


1. Entry to record the acquisition.
2. Working paper elimination entries
3. Consolidated working paper

ANSWER:

The entry to record the acquisition of stock on its books is:

Investment in Subsidiary Company 165,000


Cash 165,000

The computation for goodwill is as follows:

Consideration 165,000
Net Asset 150,000
Goodwill 15,000

Working Paper Elimination Entries

Common stock-Subsidiary Co. 75,000


Share premium- Subsidiary Co. 45,000
Retained earnings- Subsidiary Co. 30,000
Goodwill 15,000
Investment in Subsidiary Co. 165,000

Consolidation Working Paper

Subsidiar Eliminations
Parent Consolidated
y Debit Credit
Cash 180,000 0 180,000
Accounts Rec. 60,000 48,000 108,000
Inventory 75,000 30,000 105,000
PPE 270,000 237,000 507,000
Goodwill 15,000 15,000
Investment in
165,000 165,000
Subsidiary
Total Assets 750,000 315,000 915,000

Accounts Pay. 420,000 165,000 585,000


Common stock
Parent 150,000 150,000
Subsidiary 75,000 75,000
Share premium
Parent 120,000 120,000
Subsidiary 45,000 45,000
Retained earnings
Parent 60,000 60,000
Subsidiary 30,000 30,000
Total L & Equity 750,000 315,000 915,000

Let’s Analyze
The balance sheets of Palisade Company and Salisbury Corporation were as follows on
December 31, 2010:

Palisade Salisbury
Current Assets P260,000 P120,000
Equipment-net 440,000 480,000
Buildings-net 600,000 200,000
Land 100,000 200,000
Total Assets P1,400,000 P1,000,000

Current Liabilities 100,000 120,000


Common Stock, P5 par 1,000,000 400,000
Additional paid-in Capital 100,000 280,000
Retained Earnings 200,000 200,000
Total Liabilities and
Stockholders' equity P1,400,000 P1,000,000

On January 1, 2011 Palisade issued 30,000 of its shares with a market value of P40 per share
in exchange for all of Salisbury's shares, and Salisbury was dissolved. Palisade paid P20,000 to
register and issue the new common shares. It cost Palisade P50,000 in direct combination
costs. Book values equal market values except that Salisbury's land is worth P250,000.

Required:
Prepare a Palisade balance sheet after the business combination on January 1, 2011.

ANSWER

Current Assets P310,000


Equipment-net 920,000
Buildings-net 800,000
Land 350,000
Goodwill 270,000
Total Assets P2,650,000
Current Liabilities 220,000
Common Stock, P5 par 1,150,000
Additional paid-in Capital 1,130,000
Retained Earnings 150,000
Total Liabilities and P2,650,000
Stockholders' equity

In a Nutshell
Using the statement of financial position that appear in “Let’s Analyze”, assume that only 80
percent of the outstanding stock of Salisbury was acquired.

Required: Prepare allocation schedule assuming that the NCI is measured at fair value of
P480,000.

ANSWER

ALLOCATION SCHEDULE

Parent
Fair value NCI (20%)
(80%)
Fair value of subsidiary 1,680,000 1,200,000 480,000
Less: Book value of interest acquired 880,000 704,000 176,000
Excess 800,000 640,000 160,000
Less: Adjustments to fair value
Land (50,000)
Goodwill 750,000

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