Module 3 – ACCT602 Quiz 03.06.2024 Problem 3.

5 points
Earth Inc. Consolidated
Problem 1. 15 points Current assets 106,000 146,000
On January 1, 2023, Polka Corp. and Strasse Corp. had condensed Plant assets (net) 270,000 370,000
balance sheets as follows: Investment in A Co. (cost) 100,000 -
Goodwill - 8,100
Polka Strasse
Current assets 70,000 20,000 476,000 524,100
Noncurrent assets 90,000 40,000 Current liabilities 15,000 28,000
Total assets 160,000 60,000 Minority interest 35,100
Capital stock 350,000 350,000
Current liabilities 30,000 10,000
Retained earnings 111,000 111,000
Long-term debt 50,000 -
476,000 524,100
Stockholders’ equity 80,000 50,000
Total liabilities & stockholders’ equity 160,000 60,000
Earth Inc. acquired 70% of the outstanding stock of Air Co. The
separate balance sheet of Earth Inc. immediately after the business
On January 2, 2023, Polka borrowed P60,000 and used the proceeds
combination and the consolidated balance sheet are shown above.
to purchase 90% of the outstanding common shares of Strasse. This
P10,000 of the excess payment for the investment in Air Co. was
debt is payable in 10 equal annual principal payments, plus interest,
ascribed to undervaluation of the plant assets, excess payment
beginning December 31, 2023. The excess of the cost of the
ascribed to goodwill. The current assets of Air Co., which included
investment over Strasse’s book value of acquired net assets should be
P2,000 receivable from Earth Inc., arose before the business
allocated 60% to inventory and 40% to goodwill.
combination. What is the total current asset of Air Co.’s separate
On Polka’s January 2, 2023, consolidated balance sheet:
balance sheet at the time of Earth Inc.’s acquisition of 70% interest?
a. Currents assets should be:
b. Noncurrent assets should be:
Problem 4. 3 points
c. Current liabilities should be:
Pearson Co. acquired 80% of the outstanding common stock of Smithy
d. Noncurrent liabilities should be:
Co. for P1,500,000 cash on January 2, 2023, when the stockholders’
e. Stockholders’ equity should be:
equity of Smithy Co. totaled P1,400,000 (common stock P500,000;
additional paid in capital P600,000; retained earnings P300,000). The
Problem 2. 9 points
book values of assets and liabilities approximate with its market
On October 1, 2023, separate statements of Golden Co. and Bar Co.
values, except building that was undervalued by P400,000, and
appear below:
equipment that was overvalued by P120,000. The building has an
Golden Bar
estimated useful life of 20 years, and the equipment is expected to be
Cash 59,700 7,500
Accounts receivable 136,000 23,900 useful for 5 years. Prior to acquisition, Smithy Co. had unimpaired
Inventories 57,300 9,250 goodwill in the amount of P10,000.
Plant & equipment 286,300 13,600 Assuming the non-controlling interest is measured at its share of the
539,300 54,250 subsidiary’s net assets, what is the amount of goodwill to be reported
Liabilities 123,800 11,900 in the consolidated balance sheet at the date of acquisition?
Capital stock 100,000 10,000
Additional paid in capital 25,000 - Problem 5. 3 points
Retained earnings 290,500 32,350 The Passers Co. acquired 70% of the net assets of Failures Co. for
539,300 54,250 P1,100,000. The assets of Failures Co. have a book value of
P1,200,000 and a fair market value of P1,300,000; its liabilities are
Golden Co. acquired 80% interest in Bata Co. On acquisition date, P200,000. What is the amount of minority interest in the stockholders’
October 1, 2023, the fair market value of Bar Co.’s assets were equity section of the consolidated balance sheet?
properly reflected in its accounts. P40,000 was paid for this acquisition
and the transaction was treated as a purchase. Golden recognized the Problem 6. 9 points
non-controlling interest in Bar Co. at its proportionate share of Bar’s On January 1, 2015, Twilight Corporation purchased 75% of the
identifiable net assets. common stock of Lunar Company. Separate balance sheets for the
1. In preparation of a consolidated balance sheet, the companies at the date of acquisition are given below:
elimination entry as to goodwill in the consolidated working
paper will be: Twilight Lunar
a. A credit to the investment account by P6,120. Cash 12,000 103,000
b. A credit to the investment account of P7,670. Accounts receivable 72,000 13,000
c. A debit to the investment account of P3,178.
Inventory 66,000 19,000
d. A credit to the plant and equipment account by
Land 39,000 16,000
P61,20.
Plant assets 350,000 150,000
2. To complete the eliminating entries, the other accounts
affected were capital stock and retained earnings accounts Accumulated depreciation (120,000) (30,000)
of Bar Co. in these amounts: Investment in Lunar 196,000 -
a. Capital stock P8,265; Retained earnings P28,558 Total assets 615,000 271,000
b. Capital stock P6,470; Retained earnings P28,558 Accounts payable 103,000 71,000
c. Capital stock P6,470; Retained earnings P25,880 Ordinary share 400,000 150,000
d. Capital stock P10,000; Retained earnings P32,350 Retained earnings 112,000 50,000
Total liabilities and stockholders’ equity 615,000 271,000
3. The minority interest in the consolidated balance sheet will
be:
At the date of combination, the book values of Lunar’s net assets were
equal to the fair value except for Lunar’s inventory which has a fair
value of P30,000. Full goodwill method is to be used.
a. What amount of goodwill is associated to the noncontrolling
interest?
b. What amount of total liability will be reported?
c. What is the amount of total assets? 751333
Problem 7. 18 points
On December 31, 2013, Amber Corporation acquired 80 percent of
Garnet Company's common stock for Php104,000 cash. Amber
elected to measure NCI using fair value method. The fair value of the
non-controlling interest at that date was determined to be Php20,000.
Data from the balance sheets of the two companies included the
following amounts as of the date of acquisition:
Amber Garnet
Cash 90,000 20,000
Accounts receivable 80,000 35,000
Inventory 100,000 40,000
Land 40,000 60,000
Building and equipment 200,000 60,000
Investment in Garnet 104,000 -
Total assets 614,000 215,000
Accounts payable 120,000 30,000
Mortgage payable 200,000 100,000
Ordinary share 50,000 25,000
Retained earnings 244,000 60,000
Total liabilities and stockholders’ equity 614,000 215,000

On that date, the book values of Garnet's assets and liabilities

approximated fair value except for inventory, which had a fair value of
Php45,000, and buildings and equipment, which had a fair value of
Php100,000. The mortgage payable of Garnet is also determined to
have a fair value of Php120,000. At December 31, 2013, Amber
reported accounts payable of Php15,000 to Garnet, which reported an
equal amount in its accounts receivable.
Required: Compute for the following in the consolidated financial
statements:
a. Goodwill
b. Total Current Assets
c. Total Assets
d. Total Liabilities
e. Non-controlling interest
f. Total Shareholders’ Equity

Problem 8. 6 points
Balance sheet data for X Corporation and Z Company on December
31, 2015 are given below:

X Corp. Z. Co.
Cash 70,000 90,000
Accounts receivable 100,000 60,000
PPE 500,000 250,000
Investment in Garnet 260,000 -
Total assets 930,000 400,000
Current liabilities 180,000 60,000
Long term liabilities 200,000 90,000
Ordinary share 300,000 100,000
Retained earnings 250,000 150,000
Total liabilities and stockholders’ equity 930,000 400,000

X Corporation purchased 80% interest in Z Company on December 31,

2015 for P260,000. Z Company’s property and equipment had a fair
value of P50,000 more than the book value shown above. All other
book values approximated fair value. Fair value method was elected to
be used in measuring the non-controlling interest. Fair value of non-
controlling interest on acquisition date was P58,000. In the
consolidated balance sheet on December 31, 2015:
a. The amount of total stockholders’ equity to be reported will
be?
b. The amount of non-controlling interest will be?