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1
1. Papilon Corporation acquired 90,000 shares of the 100,000 outstanding no-par ordinary share capital of Silicon Company for a price of P1,200,000 on January 1, 2011 at the time when Silicon Company had book and fair values as shown below. Papilon Corporation also paid P96,000 direct acquisition costs in the form of legal fees to outside consultants.
|
Ordinary Share Capital |
P480,000 |
|
Accumulated Profits |
600,000 |
|
Total net assets at book value |
P1,080,000 |
|
Add: Differences between current fair value and book value |
|
|
Inventories (FIFO) |
36,000 |
|
Property and Equipment |
72,000 |
|
Total current fair value of identifiable net assets |
P1,188,000 |
Required:
- Prepare journal entries for Papilon Corporation on January 1, 2011 to record the acquisition of share from Silicon Company.
- Prepare the required elimination entries in general journal form that are needed for a consolidated statements worksheet for a consolidated statement of financial position for Papilon Corporation and subsidiary on January 1, 2011
2. The following are selected account balances from Cheela Company and Jarjar Corporation as of December 31, 2018:
|
Cheela |
Jarjar |
|
|
Revenues |
P 980,000 |
P 560,000 |
|
Expenses |
560,000 |
420,000 |
|
Dividend Income |
84,000 |
|
|
Dividends Paid |
112,000 |
84,000 |
|
Accumulated profits, 1/1/18 |
840,000 |
280,000 |
|
Current Assets |
560,000 |
700,000 |
|
Building (net) |
1,260,000 |
560,000 |
|
Equipment (net) |
840,000 |
1,400,000 |
|
Investment in Jarjar Corp. |
? |
|
|
Liabilities |
700,000 |
1,932,000 |
|
Ordinary Shares |
840,000 (P20 par) |
280,000 (P10 par) |
|
Share Premium |
210,000 |
112,000 |
On January 1, 2018, Cheela acquired all of the outstanding shares of Jarjar for P298,000 in cash and ordinary shares. Cheela also pays P24,000 in lawyers’ fees and other combination costs as well as P14,000 in share issuance costs. At the date of acquisition, Jarjar’s buildings (with a six-year remaining life) have a P616,000 book value and a fair market value of P784,000.
Required:
Prepare the consolidated statements worksheet and present all elimination entries that would have been included in the consolidated statements worksheet to prepare a full set of consolidated financial statements for the year 2018.
3. The Nathan Company acquired all of the outstanding stock of Caleb Company on January 1, 2014 for P267,800 cash. Caleb had a book value of only P182,000 on that date. However, equipment (having an eight-year life) is undervalued by P52,000 on Caleb’s financial records. A building with a 20-year life was overvalued by P13,000. Subsequent to the acquisition, Caleb reported the following:
|
Net Income |
Dividends Paid |
|
|
2014 |
P 65,000 |
P 13,000 |
|
2015 |
78,000 |
52,000 |
|
2016 |
39,000 |
26,000 |
In accounting for this investment, Nathan has used the cost method. Selected accounts taken from the financial records of these two companies as of December 31, 2016, are as follows:
|
Nathan Company |
Caleb Company |
|
|
Revenues – Operating |
P403,000 |
P135,200 |
|
Expenses |
257,400 |
96,200 |
|
Equipment (net) |
416,000 |
65,000 |
|
Building (net) |
286,000 |
88,400 |
|
Ordinary share |
377,000 |
65,000 |
|
Accumulated profits |
533,000 |
208,000 |
Required:
Determine the following account balances as of December 31, 2016.
- Net Income Attributable to Equity Holders of the Parent
- Non-controlling Interest in Net Income of Subsidiary
- Consolidated Net Income
- Consolidated Equipment (net)
- Consolidated Buildings (net)
- Consolidated Goodwill (net)
- Consolidated Ordinary Shares
- Consolidated Accumulated Profits
Expert Solution
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2. a) Value of the shares of Jarjar Corporation as on date of acquisition:
| Current Assets | 700000 |
| Buildings | 784000 |
| Equipment | 1400000 |
| Total Assets | 2884000 |
| Less: Liabilities | 1932000 |
| Net Asset value of the company | 952000 |
Amount paid by Cheela Company to acquire the shares
| Payment in cash | 298000 |
| Lawyer cost | 24000 |
| Share issuance cost | 14000 |
| Total cost of acquisition(A) | 336000 |
| Net asset value of the company(B) | 952000 |
| Capital Reserve(B)-(A) | 616000 |
b) Elimination entries
1.
Dividends paid (Jarjar Corporation) Dr 84000
To DIvidend Income 84000
2.Share Capital (Jarjar Corporation) Dr 280000
Share premium (jarjar Corporation) Dr 112000
To Investments in Jarjar Corporation 336000
To Capital Reserve 56000.
3. 1. Net income attributable to equity shareholders of parenf are:
Revenues - Operating expenses
P4,03,000 - P2,57,400= P1,45,600
Net Income attributable to equity shareholdera is P1,45,600
2. Non- Controlling interest would be 0 since Nathan has acquired all the outstanding shares of Caleb Company.
3. Considated net income = Net income of Caleb company + Net income of Nathan company
Consolidate net income= P39,000 i.e. ( P1,35,200 - P96,200) + P1,45,600 i.e. (P4,03,000 - P2,57,400)
=P1,84,600
4. Consildated equipment (net) = P4,16,000 + P65,000
= P4,81,000
5. Consolidated Buildings (net) = P2,86,000 + P88,400
= P3,74,400
6. Consolidated Goodwill (net)= Consideration paid by parent + Non controlling interest - fair value of subsidiary net identifiable assets
=P2,67,800 + 0 - P1,53,400
=P1,14,400
7. Consildated ordinary shares = P4,42,000
8. Consolidated accumulated profits= P5,33000 + P2,08000
= P7,41,000
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