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Accounting for Business Acquisitions

Pluto acquired inventory worth P400,000 and property and equipment worth P500,000. To calculate goodwill, subtract the fair values of assets from the total price paid. Goodwill of P30,000 would be reported on the consolidated statement of financial position.

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34 views2 pages

Accounting for Business Acquisitions

Pluto acquired inventory worth P400,000 and property and equipment worth P500,000. To calculate goodwill, subtract the fair values of assets from the total price paid. Goodwill of P30,000 would be reported on the consolidated statement of financial position.

Uploaded by

Wawex Davis
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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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On the date of acquisition, Pluto believes that the inventory has a fair value of P400,000 and

that the property and equipment is worth P500,000.

26. On the date of acquisition, what is the goodwill (gain on acquisition) to be reported on the

consolidated statement of financial position?

a. P(30,000)

b. P 30,000

c. P(24,000)

d. P24,000

27. The allocation ofgoodwill (gain on acquisition) is:

Parent NCI
a. P(24,000) P(6,000

)
b. P24,000 P6,000
c. P(24,000) -
d. P30,000 -
Use the following information in answering questions Nos. 28 and 29

PP Corporation purchased a 10% interest in SS Company on January 1, 2008 as an available-for-

sale investment for a price of P40,000.

On January 1, 2013, PP Corporation purchases 7,000 additional shares of SS Company from

existing stockholders for P315,000. This purchase increased PP's interest to 80%. SS Company

had the following statement of financial position just prior to PP's second purchase:

Assets Liabilities and Equity


Assets Liabilities and Equity

Current assets P165,000 Liabilities P65,000


Buildings (net) 140,000 Common stock, P10 100,000

par
Equipment (net) 100,000 Retained earnings
240,000
Total assets P405,000 Total Liabilities and P405,000

equity

On the date of the second purchase, PP determines that the equipment of SS was understated

by P50,000 and had a 5-year remaining life. All other book values approximate fair values. Any

remaining excess is attributed to goodwill.

28. What is the implied fair value of NCI to be reported on January 1, 2013?

a. P90,000

b. P42,000

c. P88, 750

d. P83,500

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