AA2 Chapter 11 Sol
-
Upload
joan-romero -
Category
Documents
-
view
195 -
download
2
Transcript of AA2 Chapter 11 Sol
CHAPTER 11SUGGESTED ANSWERS
EXERCISES
Exercise 11 - 11. a. Ordinary Share Capital, Sing Co. 100,000
Additional Paid-in Capital, Sing Co. 20,000Retained Earnings, Sing Co. 25,000Goodwill 15,000 Investment 160,000
Cost of interest acquired P160,000 Book value of interest acquired (P100,000 + P20,000 + P25,000) x 100% 145,000 Goodwill P 15,000
b. Ordinary Share Capital, Sing Co. 100,000Additional Paid-in Capital, Sing Co. 80,000 Investment 140,000 Profit or Loss /Gain on Business Combination 10,000 Retained Earnings, Sing Co. 30,000
Cost of interest acquired P140,000 Book value of interest acquired (P100,000 + P80,000 - P30,000) x 100% 150,000 Negative Goodwill P 10,000
c.1 Ordinary Share Capital, Sing Co. 75,000Additional Paid-in Capital, Sing Co. 30,000Goodwill 25,000 Investment 120,000
Retained Earnings, Sing Co. 3,750 Minority Interest 6,250
Cost of interest acquired P120,000 Book value of interest acquired (100,000 + 40,000 – 5,000) x 75% 101,250 Goodwill P 18,750 Grossed-up Goodwill (P18,750/75%) P 25,000
c.2 Ordinary Share Capital, Sing Co. 75,000Additional Paid-in Capital, Sing Co. 30,000Goodwill 18,750 Investment 120,000
Retained Earnings, Sing Co. 3,750
2.
Chapter 11 – Suggested Answers (AA2.2006) page2
c.1 Ordinary Share Capital, Sing Co. 100,000Additional Paid-in Capital, Sing Co. 40,000Goodwill 25,000 Investment 120,000 Retained Earnings 5,000 Minority Interest 40,000
c.1 Ordinary Share Capital, Sing Co. 100,000Additional Paid-in Capital, Sing Co. 40,000Goodwill 18,750 Investment 120,000 Retained Earnings 5,000 Minority Interest 33,750
Minority interest:: Ordinary Share Capital P25,000 APIC 10,000 RE (1,250) Share in goodwill (P25,000 x 25%) 6,250 P 40,000
Exercise 11 – 2Case AOrdinary Share Capital, Soya Co. 80,000Additional Paid-in Capital, Soya Co. 24,000Retained Earnings, Soya Co. 16,000Goodwill 6,250 Investment 125,000 Minority Interest 1,250
Cost P125,000 Book value of interest acquired (P100,000 + P30,000 + P20,000) x 80% 120,000 Goodwill P 5,000 Grossed-up Goodwill (P5,000/80%) P 6,250
Ordinary Share Capital, Soya Co. 80,000Additional Paid-in Capital, Soya Co. 24,000Retained Earnings, Soya Co. 16,000Goodwill 5,000 Investment 125,000
Case BOrdinary Share Capital, Soya Co. 37,500Additional Paid-in Capital, Soya Co. 15,000Retained Earnings, Soya Co. 7,500Minority Interest 667 Investment 58,000 Profit or Loss / Gain on Business Combination 2,667
Cost P58,000
Chapter 11 – Suggested Answers (AA2.2006) page3
Book value of interest acquired (P50,000 + P20,000 + P10,000) x 75% 60,000Negative Goodwill P 2,000Grossed-up Negative goodwill (P2,000/75%) P 2,667
Ordinary Share Capital, Soya Co. 37,500Additional Paid-in Capital, Soya Co. 15,000Retained Earnings, Soya Co. 7,500 Investment 58,000 Profit or Loss / Gain on Business Combination 2,000
Case COrdinary Share Capital, Soya Co. 48,000Additional Paid-in Capital, Soya Co. 24,000Minority Interest 2,000 Investment 63,000 Profit or Loss (Gain on Bus Com) 5,000 Retained Earnings, Soya Co. 6,000
Cost P63,000 Book value of interest acquired (P80,000 + P40,000 - P10,000) x 60% 66,000 Negative Goodwill P 3,000 Grossed-up Negative goodwill (P3,000 / 60%) P 5,000
Ordinary Share Capital, Soya Co. 48,000Additional Paid-in Capital, Soya Co. 24,000 Investment 63,000 Profit or Loss (Gain on Bus Com) 3,000 Retained Earnings, Soya Co. 6,000
Exercise 11 - 3Case A
Ordinary Share Capital, Say Co. 100,000Additional Paid-in Capital, Say Co. 50,000 Investment 140,000 Retained Earnings, Say Co. 10,000
Case BOrdinary Share Capital, Say Co. 90,000Additional Paid-in Capital, Say Co. 45,000Plant and Equipment 20,000 Investment 144,000 Retained Earnings, Say Co. 9,000 Minority Interest 2,000
Cost P144,000Book value of interest acquired (P100,000 + P50,000 - P10,000) x 90% 126,000
Chapter 11 – Suggested Answers (AA2.2006) page4
Increase in P&E P 18,000Total increase in plant and equipment ((P18,000/90%) P 20,000
Ordinary Share Capital, Say Co. 90,000Additional Paid-in Capital, Say Co. 45,000Plant and Equipment 18,000 Investment 144,000 Retained Earnings, Say Co. 9,000
Case COrdinary Share Capital, Say Co. 80,000Additional Paid-in Capital, Say Co. 40,000Minority Interest 2,000 Investment 104,000 Inventories 10,000 Retained Earnings, Say Co. 8,000
Cost P104,000Book value of interest acquired (P100,000 +P50,000 - P10,000) 80% 112,000Decrease in Inventory P 8,000Total decrease in inventory (P8,000/80%) P 10,000
Ordinary Share Capital, Say Co. 80,000Additional Paid-in Capital, Say Co. 40,000 Investment 104,000 Inventories 8,000 Retained Earnings, Say Co. 8,000
Exercise 11 - 4 a. Investment in Sax Co. P480,000
Ordinary Share Capital 400,000 Additional Paid-in Capital 80,000
Ordinary Share Capital, Sax Co. 90,000Additional Paid-in Capital, Sox Co. 225,000Retained Earnings, Sax Co. 90,000Equipment 83,333 Investment in Sax Co. 480,000 Minority Interest 8,333
Cost (4,000 x P120) P480,000Book value of interest acquired (P450,000 x 90%) 405,000Increase in Equipment P 75,000Total increase in equipment (P75,000/90%) P 83,333
Ordinary Share Capital, Sax Co. 90,000Additional Paid-in Capital, Sox Co. 225,000Retained Earnings, Sax Co. 90,000Equipment 75,000
Chapter 11 – Suggested Answers (AA2.2006) page5
Investment in Sax Co. 480,000
b. Investment in Sax Co. 420,000 Ordinary Share Capital 350,000 Additional Paid-in Capital 70,000
Ordinary Share Capital, Sax Co. 90,000Additional Paid-in Capital, Sax Co. 225,000Retained Earnings, Sax Co. 90,000Goodwill 16,667 Investment in Sax Co. 420,000 Minority Interest 1,667
Cost (3,500 x P120) P420,000Book value of interest acquired (P450,000 x 90%) 405,000Goodwill P 15,000Grossed-up Goodwill (P15,000/90%) P 16,667
Ordinary Share Capital, Sax Co. 90,000Additional Paid-in Capital, Sax Co. 225,000Retained Earnings, Sax Co. 90,000Goodwill 15,000 Investment in Sax Co. 420,000
c. Investment in Sax Co. 360,000 Ordinary Share Capital 300,000 Additional Paid-in Capital 60,000
Ordinary Share Capital, Sax Co. 90,000Additional Paid-in Capital, Sax Co. 225,000Retained Earnings, Sax Co. 90,000Minority Interest 5,000 Inventory 25,000 Investment in Sax Co. 360,000 Profit or Loss / Gain on Business Combination 25,000
Cost (3,000 x P120) P360,000Book value of interest acquired (P450,000 x 90%) 405,000Difference P 45,000Total adjustment (P45,000/90%) P 50,000Decrease in inventory 25,000Negative goodwill P 25,000
Ordinary Share Capital, Sax Co. 90,000Additional Paid-in Capital, Sax Co. 225,000Retained Earnings, Sax Co. 90,000 Inventory 25,000
Chapter 11 – Suggested Answers (AA2.2006) page6
Investment in Sax Co. 360,000 Profit or Loss / Gain on Business Combination 25,000
Exercise 11 – 51. Minority interest (P90,000 – P15,000*) P 75,000
Percentage of minority interest ÷ 10% Total Shareholders’ Equity of Sand P 750,000Less Ordinary Share Capital and APIC (P800,000 + P400,000) 1,200,000Deficit of Sand P( 450,000) *Adjustment in assets: (Land – P50,000 + Goodwill – P100,000) x 10% = P150,000 x 10% = P15,000
2. Consolidated balance of land P1,145,000Less Book value of land of Pond Co. 850,000FMV of Sand’s land P 295,000Less Excess of FMV over BV 50,000BV of Sand’s land P 245,000
3. Consolidated balance of liabilities P440,000Less Liabilities of Pond 340,000Liabilities of Sand P100,000
4. Excess of cost over BV Land P 50,000 Goodwill 100,000 P150,000x90% P135,000Book value (P750,000 x 90%) 675,000Cost of investment P810,000
5. Ordinary Share Capital (P800,000 x 10%) P 80,000APIC (P400,000 x 10%) 40,000RE (P450,000 x 10%) ( 45,000)Adjustment in land and goodwill 15,000Minority interest P 90,000
Exercise 11 - 6a. Total stockholders’ equity + asset adjustment, including goodwill P187,500
Less Minority interest (in TSE and asset adjustment) 28,125Controlling interest P159,375Percentage of ownership acquired (P159,375/P187,500) 85%
b. Total stockholders' equity of Sill P145,350Increase in fair value of assets: Inventories P 3,900 Plant assets 28,500 Patents 4,500 36,900Current fair value of net identifiable assets P182,250
c. P5,250 x 15% P787.50
d. OS = P60,000 x 15% P 9,000.00APIC = P35,250 x 15% 5,287.50RE = P50,100 x 15% 7,515.00
Chapter 11 – Suggested Answers (AA2.2006) page7
Share in asset adjustment (P3,900 + P28,500 + P4,500 + P5,250) x 15% 6,322.50
Total P28.125.00
Exercise 11 - 7a. Total current assets of Seeda = (P146,000 + P2,000) - P106,000 P 42,000
b. Minority interest P35,100Less Share in asset adjustment (P10,000 + P8,100) x 30% 5,430Minority interest in subsidiary stockholders’ equity P29,670
Total stockholders’ equity of subsidiary (P29,670 / 30%) P98,900
Exercise 11 – 81. Palomar Inventory P1,100,000
Samar Inventory at FMV 1,700,000Consolidated inventory P2,800,000
2. Palomar Buildings and equipment P3,500,000Samar Buildings and equipment at FMV 3,750,000Consolidated buildings and equipment P7,250,000
3. ZERO. It is eliminated in the consolidated balance sheet.
4. Cost P2,800,000Book value of acquired interest (P1,000,000 + P2,000,000 – P400,000 – P300,000) 2,300,000Excess of cost over BV P 500,000Allocation of excess: Decrease in inventory (P100,000) Increase in buildings and equipment 250,000 150,000Goodwill P 350,000
5. P4,000,000. The Ordinary Share Capital of Palomar, the acquiring company.
6. P1,050,000. The Retained Earnings of Palomar, the acquiring company.Exercise 11 - 9Inventories 20,000Plant Assets 80,000Ordinary Share Capital, Santa Co. 200,000Paid-In Capital in Excess of Par - Santa Co. 210,000 Investment in Subsidiary 420,000 Retained Earnings, Santa Co. 90,000
PROBLEMSProblem 11 - 1
Prime Inc. and Subsidiary Slime Corp.Working Paper for Consolidated Statement of Financial Position
January 1, 2008
Chapter 11 – Suggested Answers (AA2.2006) page8
ConsolidatedPrime Slime Eliminations Statement ofInc. Corp. Dr. Cr. Finl Position
DebitsCash and Other Current Assets 400,000 300,000 700,000Plant, Property, and Equipment 200,000 250,000 450,000Investment in Slime Corp. 380,000 a 380,000 ------Other Assets 30,000 20,000 50,000Goodwill a. 110,000 110,000
1,010,000 570,000 1,310.000Credits
Accumulated Depreciation 60,000 50,000 110,000Liabilities 300,000 250,000 550,000Ordinary Share Capital, Prime Inc.
400,000 400,000
Add’l Paid-In Capital, Prime, Inc 180,000 180,000Retained Earnings, Prime, Inc. 70,000 70,000Ordinary Share Capital, Slime Corp
200,000 a.200,000
Add’l Paid-In Capital, Slime Corp.
40,000 a. 40,000
Retained Earnings, Slime Corp. 30,000 a. 30,000 1,010,000 570,000 380,000 380,000 1,310,000
Problem 11 - 2
Requirement 1Cost P950,000Book value of interest acquired: Ordinary Share Capital P200,000 Additional paid-in capital 100,000 Retained earnings 400,000 700,000Excess of cost over book value P250,000Allocation of excess: Inventory P 30,000 Land 50,000 Equipment 130,000 210,000Goodwill P 40,000
Requirement 2Pole Co. and Subsidiary Sole Co.
Working Paper for Consolidated Statement of Financial PositionJanuary 2, 2008
Pole Sole Eliminations Consolidated Co. Co. Dr. Cr. St. of Fin
Chapter 11 – Suggested Answers (AA2.2006) page9
Pos.Debits
Cash 300,000
50,000 350,000
Accounts Receivable 200,000
100,000 300,000
Inventory 150,000
60,000 a 30,000 240,000
Land 70,000 a. 50,000 120,000Equipment 600,00
0 470,000 a. 130,000 1,200,000
Investment in Sole Co. 950,000 a. 950,000Goodwill a. 40,000 40,000
2,200,000 750,000
2,250,000
CreditsAccounts Payable 100,00
0 50,000 150,000
Ord. Share Capital, Pole Co. 600,000
600,000
Retained Earnings, Pole Co. 1,500.000 1,500,000Ord. Share Capital, Sole Co. 200,000 a. 200,000APIC, Sole Co.. 100,000 a. 100,000Retained Earnings, Sole Co.
400,000a. 400.000
2,200.000 750,000
950,000
950,000 2,250,000
Requirement 2aCost P810,000Book value of interest acquired: Ordinary Share Capital P200,000 Additional paid-in capital 100,000 Retained earnings 400,000 P700,000 x 90% 630,000Excess of cost over book value P180,000Allocation of excess: Inventory P 30,000 Land 50,000 Equipment 130,000 210,000Negative Goodwill P 30,000
Pole Co. and Subsidiary Sole Co.Working Paper for Consolidated Statement of Financial Position
January 2, 2008Pole Sole Eliminations Minority Consolidated Co. Co. Dr. Interest St. of Fin Pos
DebitsCash 300,000 50,000 490,000Accounts Receivable 200,000 100,000 300,000Inventory 150,000 60,000 a 30,000 240,000Land 70,000 a. 50,000 120,000Equipment 600,000 470,000 a. 130,000 1,200,000
Chapter 11 – Suggested Answers (AA2.2006) page10
Investment in Sole Co. 950,000 a. 810,000
2,200,000 750,000 2,250,000Credits
Accounts Payable 100,000 50,000 150,000Ord. Share Capital, Pole Co. 600,000 600,000Retained Earnings, Pole Co. 1,500.000 a.
30,000 1,530,000
Ord. Share Capital, Sole Co. 200,000 a. 180,000 20,000APIC, Sole Co.. 100,000 a. 90,000 10,000Retained Earnings, Sole Co. 400,000 a. 360.000 40,000Minority interest 70,000 70,00
0 2,200.000 750,000 840,00
0840,000 2,350,000
Problem 11 - 31. Inventory 30,000
Plant and Equipment 100,000Patents 50,000Goodwill 50,000Ordinary Share Capital, Stork 80,000Retained Earnings, Stork 200,000 Investment 464,000 Minority Interest 46,000
Cost P464,000Book value of int. acquired Ordinary Share Capital P100,000 Retained earnings 250,000 Total P350,000 Interest acquired 80% 280,000Excess of cost over book value P184,000Gross up excess (P184,000 / 80%) P230,000Allocation of excess; Inventory P 30,000 Plant and equipment 100,000 Patents 50,000 180,000Goodwill P 50,000
Inventory 30,000Plant and Equipment 100,000Patents 50,000Goodwill 4,000Ordinary Share Capital, Stork 80,000Retained Earnings, Stork 200,000 Investment 464,000
2. Inventory 30,000Plant and Equipment 100,000Patents 50,000
Chapter 11 – Suggested Answers (AA2.2006) page11
Ordinary Share Capital, Stork Co. 80,000Retained Earnings, Stork Co. 200,000Minority Interest 1,500 Profit or Loss / Gain on Business Combination 187,500 Investment 274,000
Cost P274,000Book value of interest acquired 280,000Excess of book value over cost P 6,000
Gross up excess (P6,000 / 80%) P 7,500Allocation of excess: Increase in inventory P 30,000 Increase in plant & equipment 100,000 Increase in patents 50,000 180,000Negative Goodwill P187,500
Inventory 30,000Plant and Equipment 100,000Patents 50,000Ordinary Share Capital, Stork Co. 80,000Retained Earnings, Stork Co. 200,000 Profit or Loss / Gain on Business Combination 186,000 Investment 274,000
Problem 11 - 41. Investment in Stride Co. (20,000 sh @ P10) 200,000
Ordinary Share Capital (20,000 sh @ P2) 40,000 Paid-In Capital in Excess of Par 160,000
Investment in Stride Co. 30,000 Cash 30,000
2. Retained Earnings, Stride Co. 20,000 Goodwill 20,000
Ordinary Share Capital, Stride Co. 25,000Paid-In Capital in Excess of Par, Stride Co. 50,000Retained Earnings, Stride Co. 55,000Current Assets 5,000Plant Assets 40,000Long-Term Debt 10,000Goodwill 45,000 Investment in Stride Co. 230,000
Cost [(P20,000 x P10) + P30,000] P230,000Book value of int. acquired (P25,000 + P50,000 + P55,000) x 100% 130,000Excess of cost over book value P 100,000Allocation of excess; Inventories P 5,000
Chapter 11 – Suggested Answers (AA2.2006) page12
Plant assets 40,000 Long-term debt 10,000 55,000Goodwill P 45,000
Problem 11 - 5Plow Corp. and Subsidiary Slow Co.
Working Paper for Consolidated Financial StatementsJuly 1, 2008
Minority ConsolidatedPlow Slow Eliminations Interest Statement ofCorp. Co. Dr. Cr. Fin’l Position
DebitsCash 15,000 10,000 25,000Accounts Receivable 25,000 20,000 (f) 8,000 37,000Notes Receivable 70,000 45,000 (b) 10,000 85,000
(e) 20,000
NR Discounted (25,000) (30,000) (d) 10,000 (25,000)(e) 20,000
Inventories 50,000 60,000 110,000Prepaid Expenses 15,000 8,000 23,000Advances to Slow Co. 25,000 10,000
(g) 15,000Investment in Slow Co. 93,400 (a) 93,400Property and Equipment, net
85,000 100,000 185,000
Goodwill (a) 31,000 31,000353,400 213,000 471,000
CreditsCurrent Liabilities 80,000 40,000 (b) 10,000 (d) 10,000 112,000
(f) 8,000Advances from Plow Corp. 25,000 (c ) 10,000
(g) 15,000Loans Payable 193,400 70,000 263,400Ordinary Share Capital , Plow Corp.
100,000 100,000
RE, Plow Corp. (20,000) (20,000)Ordinary Share Capital, Slow Co.
50,000 (a) 40,000 10,000 10,000
RE, Slow Co. 28,000 (a) 22,400 5,600Minority Interest 15,600 15,600
53,400 213,000 174,150 174,150 471,000
Cost P93,400Book value of int. acquired (P50,000 + P28,000) x 80% 62,400Excess of cost over book value P31,000
MULTIPLE CHOICE
11-A 1. B
Chapter 11 – Suggested Answers (AA2.2006) page13
2. D3. B4. A5. C6. A7. D8. D
11-B 1. C Cost of investment P2,000,000Book value of interest acquired:P200,000 + P400,000 +P800,000 x 100% 1,400,000Excess of cost over book value P 600,000Increase in FV P150,000 – P50,000 100,000Goodwill P 500,000
11-C 1. C Cost of investment P765,000FMV of net assets acquired (P815,000 – P150,000) 665,000Goodwill P100,000
11-D 1. B Cost of investment P2,968,000Book value of interest acquired (P7,560,000 – P560,000 – P3,360,000) 3,640,000Negative Goodwill P 672,000
11-E 1. B Number of shares issued to Roscoe 100,000Excess of MV over par value of stock x P8.00APIC recognized upon merger P800,000APIC of Tanner 650,000APIC reflected in the Consolidated Statement of Fin’l Pos P1,450,000
11-F 1. C Investment (P 26,000 @ 100) 2,600,000 Ordinary Share Capital 2,600,000
11-G 1. B 1,080 (P180,000/P100) 60%
2. A Cost of investment P 161,200Book value of int. acquired [(P180,000 + P50,000 + P30,0000) x 60%] 156,000Excess of cost over book value P 5,200Gross up excess (P5,200 / 60%) P 8,667
3. D (P180,000 + P50,000 + P30,000) x 40% P 104,000(P5,200 x 40%) 2.080Total P106,080
11-H 1. A (P120,000 ÷ P120) ÷ (P125,000 ÷ P100) 80%
2. B (P125,000 + P50,000) x 20% P35,000
3. A Cost P120,000Book value of interest acquired (P175,000 x 80%) 140,000
Chapter 11 – Suggested Answers (AA2.2006) page14
Excess of book value over cost ( P20,000)
4. C
11-I 1. C Cost P 40,000Book value of interest acquired (P10,000 + P32,350) x 80% 33,880Goodwill P 6,120
Gross up excess (P6,120 / 80%) P7,650Controlling interest (P7,650 x 80%) P6,120Minority interest (P7,650 x 20%) P1,530
2. D Ordinary Share Capital (P10,000 x 80%) P 8,000 Retained earnings (P32,350 x 80%) P 25,880
3. C (P10,000 + P32,350) x 20% P 8,470Add Share in goodwill 1,530Total P 10,000
4. D
11-J 1. D Cost (P100,000 x P10) P1,000,000FMV of net tangible assets 1,400,000Negative Goodwill – reported in the consolidated statement of financial position as part of Parent Company Retained Earnings
P 400,000
11-K 1. A Minority interest in subsidiary TSE (P550,000 x 20%) P110,000Add Adjustment of assets (P120,000 + P100,000 + P130,000) 20% 70,000Total P180,000
Minority interest P110,000Add adjustment of assets 44,000Total P154,000
2. C Cost of investment P720,000Book value of investment (P550,000 x 80%) 440,000Excess of cost over book value P280,000Allocation of excess: Inventory P120,000 PPE 100,000 220,000Goodwill P60,000
11-L 1. C P100,000 20% P 500,000
2. B P500,000 x 80% P 400,000
11-M 1. A P500,000 + P45,000 P 545,0002. A (P500,000 x 90%) + P45,000 P 495,000
Chapter 11 – Suggested Answers (AA2.2006) page15
11-N 1. A Cost (4,500 @ P140) P 630,000Book value of interest acquired (P500,000 + P125,000) x 90% 562,500Excess of cost over book value treated as goodwill P 67,500Assets of Panda and Selina [(P3.125,000 – P630,000) + P875,000)] 3,370,000Combined assets P3,437,500
11-O 1. A
2. B Excess of cost over book value P 36,000Gross up excess (P36,000 / 60%) P60,000Allocation of excess: Land (P150,000 – P100,000 ) 50,000Goodwill P 10,000
3. C Minority interest in subsidiary TSE (P200,000 x 40%) P 80,000Add Share in adjustment of assets (P50,000 + P 10,000) 40% 24,000Total P104,000
11-P 1. D Total assets of Plant and Slant P5,250,000Less: Amount paid for investments 1,425,000Total assets to be reported in the consolidated balance sheet P3,600,000
2. B P3,000,000 + P600,000 P3,600,000
3. C Cost P1,710,000BV of interest acquired (P750,000 +P900,000) x 80% 1,320,000Excess of cost over book value P 390,000
Gross up excess (P390,000 / 80%) P487,500Minority interest % 20%Share of minority interest in the adjustment P 97,000Minority interest in subsidiary TSE 330,000Total P427,500
11-Q 1. B Cost P3,000,000Book value of interest acquired (P200,000 + P400,000 + P1,200,000) x 100% 1,800,000Excess of cost over book value P1,200,000Allocation of excess: Decrease in inventories (P100,000) Increase in PPE 200,000 100,000Goodwill P1,100,000
2. A The retained earnings of the parent company, Plumber.
Chapter 11 – Suggested Answers (AA2.2006) page16
11-R 1. B Total current assets of Polka and Stress P 90,000Excess of investment cost over its book value allocated to inventory Cost P60,000 Book value (P50,000 x 90%) 45,000 Excess of cost over book value P15,000
Portion allocated to inventory 10,000Current assets in the consolidated balance sheet P100,000
2. D Noncurrent assets of Polka and Stress P 130,000Excess of investment cost over its book value allocated to goodwill (P15,000 – P10,000) 5,000Noncurrent assets in the consolidated balance sheet P 135,000
3. B Minority interest (P50,000 x 10%) P 5,000Share in assets adjustments (P10,000 x 10%) 1,000Total P 6,000
4. A Long-term debt of Polka, Jan. 1, 2008 P 50,000Long-term borrowings made on Jan. 2, 2008 (P60,000 x 9/10) 54,000Total P104,000
11-S 1. C (P1,460,000 + P20,000) – P1,060,000 P420,000
2. B Minority interest P 351,000
Parent shareholders’ equity 4,610,000
Total P4,961,000