1) A Ltd

1) A Ltd. and B Ltd. are two family owned ice cream producing companies in Canada. A Ltd. is owned by the Chui family, while the Chua family owns B Ltd. The Chui family has only one son. and he is engaged to be married to the daughter of Chua family. Because the son currently managing B Ltd., it is proposed that he be allowed to manage both companies after the wedding. As a result, it is agreed by the two families that A and Ltd. should take over the net assets of B Ltd.

The balance sheet at B Ltd. immediately prior to the takeover is as follows:

               Carrying Amount       Fair Value 

Accounts receivable        $20,000           $20,000

Inventory                 140,000            125,000

Land                     620,000            840,000 

Buildings (net)             530,000            550,000

Farm equipment (net)        360,000            364,000 

Irrigation equipment (net)     220,000           225,000 

Vehicles (net)              160,000           172,000

Total assets             $2,050,000

Accounts payable          $80,000           $80,000

Loan-Metrobank           480,000           480,000 

Share capital              670,000 

Retained earnings         820,000

Total                  $2,050,000 

The takeover agreement specified the following details: 

* A Ltd. is to acquire all the assets of B Ltd. and except one of the vehicles (having a carrying amount of 45,000 and of fair value of 48,000) and assume all the liabilities except for the loan from bank. B Ltd. is then to go, into liquidation.

* Cash at 20,000, half to be paid on date of exchange and half in one year's time. The incremental borrowing rate is 10% per annum (present value for $1 at 10% for 1 period is 0.909091). 

* Supply of a patent relating to the manufacture of ice cream. This has a fair value of P60,000 but has not been recognized in the records of B Ltd. because it resulted from an internally generated research project.

* A Ltd. is to supply sufficient cash to enable the debt to bank to be paid for and to cover the liquidation costs of 5,500. it will also give 150. 000 to be distributed to Mr. an Mrs. Chui to assists in paying the wedding costs. 

* A Ltd. is also to give a piece of its own prime land to B Ltd. to be distributed to Mr and Mrs. Chui, this eventually being available to be given to any offspring of the forthcoming marriage. The piece of land in question has a carrying amount of 80,000 and a fair value of 220,000. 

* A Ltd. is to issue 90,000 shares, these having a fair value of P14 per share, to be distributed via B Ltd. to the soon to-be-married-daughter of Mr. and Mrs. Chui who is currently a shareholder in BLtd.

The takeover proceeded as per the agreement with A Ltd. incurring incidental acquisition costs of 25,000, while there were 18,000 share issue costs. 

The amount of goodwill or (bargain purchase gain) is?

2. Companies A and B decide to consolidate. Asset and estimated annual earnings contributions are as follows:

                               Co.A             Co. B             Co.C

Net asset contribution $300,000 $400,000 $700,000

Estimated annual earnings contribution 50,000 80,000 130,000

Stockholders of the two companies agree that a single class of stock be issued, that their contributions be measured by net assets plus allowances for goodwill, and that 10% be considered as a normal rate of return. Earnings in excess of the normal rate of return shall be capitalized at 20% in calculating goodwill. It was also agreed that authorizes capital stock of the new company shall be 20,000 shares with a par value of P100 a share.

What is amount of goodwill credited to Co A, and the total contribution of Co.B (net assets plus goodwill)?

3. On January 1, 2009, Cham, Inc. purchased 75% of Chili Co. for $500,000. On that date the equity of Chili consisted of capital stock of $300,000 and retained earnings of $200,000. All assets and liabilities of Chili were fairly valued. Goodwill, if any, is not amortized.

By January 2,2012, the retained earnings of Chili had increased to $500,000. For 2012 Chili reported CI of $60,000 and paid dividends of $10,000. For 2013 Chili reported CI of $70,000 and paid dividends of 20,000.

     On April 1,2012, Cham, sold a land and an old office building on it. Cham's original cost for the land was $20,000; the office building had a book value of $50,000. Chili paid $35,000 for the land and $40,000 for the building. It estimates that the building has a remaining life of 5 years.

For 2013, what is the balance in Cham's equity method Investment in Chili account?

4. The account balances shown below were taken from the trial balances submitted to Bon-Apetit Corporation by its A Branch:

                                        2015                   2016

Petty cash fund                           $1500                    $1500

Accounts receivable                        43, 800                  49,140

Inventory-                                37, 170

Sales                                   173, 180                 195, 120

Shipments from home (140% of cost)          107, 450                136, 080

Expenses                                51, 260                  57, 930

Accounts written off                         1, 220                    1, 920

All branch collections are remitted to the home office. All branch expenses are paid out of the petty cash fund. When the petty cash fund is replenished, the branch debits appropriate expense accounts and credits Home Office Current. The petty cash is counted every December 31, and its composition was as follows:

12/31/1512/31/16

Currency and coins$580$860

Expense vouchers$920$640

The branch inventory on December 31, 2016 was $41, 370. The correct branch net income for 2016 was?

5. DMCI Company acquired 80% capital interest of STONERICH Company. DMCI paid $1,240,000 for the 80% interest and paid $88,000 for legal assistance (related to the acquisition). STONERICH net assets valued at $1,200,000 composed of capital stock, $600,000; additional paid-in capital of $180,000, and retained earnings of $420,000. At the time of acquisition, STONERICH building is undervalued by P100,000 and has still a remaining life of 30 years. Any other excess is allocated to goodwill. STONERICH Company reported net income of $140,000 and paid dividends of $20,000 during the year. 

How much is the income from investment under the equity method?

6. Clever Co. acquired 60% of the common stock of Kailey Corp. on September 1, 20x4. For 20x4, Kailey reported revenues of $800,000 and expenses at $620,000. The annual amount of amortization related to this acquisition was $15,000. Clever Co. accounts for its consolidations according IFRS 3. 

In consolidation. the total amount of expenses related to Kailey and to Clever's acquisition at Kailey tor 20x4 is determined to be?

7. On January 1, 2009, Cham, Inc. purchased 75% of Chili Co. for $500,000. On that date the equity of Chili consisted of capital stock of $300,000 and retained earnings of $200,000. All assets and liabilities of Chili were fairly valued. Goodwill, if any, is not amortized.

By January 2,2012, the retained earnings of Chili had increased to $500,000. For 2012 Chili reported CI of $60,000 and paid dividends of $10,000. For 2013 Chili reported CI of $70,000 and paid dividends of 20,000.

     On April 1,2012, Cham, sold a land and an old office building on it. Cham's original cost for the land was $20,000; the office building had a book value of $50,000. Chili paid $35,000 for the land and $40,000 for the building. It estimates that the building has a remaining life of 5 years.

For 2013, what is the balance in Cham's equity method Investment in Chili account?

8. The account balances shown below were taken from the trial balances submitted to Bon-Apetit Corporation by its A Branch:

                                        2015                   2016

Petty cash fund                           $1500                    $1500

Accounts receivable                        43, 800                  49,140

Inventory-                                37, 170

Sales                                   173, 180                 195, 120

Shipments from home (140% of cost)          107, 450                136, 080

Expenses                                51, 260                  57, 930

Accounts written off                         1, 220                    1, 920

All branch collections are remitted to the home office. All branch expenses are paid out of the petty cash fund. When the petty cash fund is replenished, the branch debits appropriate expense accounts and credits Home Office Current. The petty cash is counted every December 31, and its composition was as follows:

12/31/1512/31/16

Currency and coins$580$860

Expense vouchers$920$640

The branch inventory on December 31, 2016 was $41, 370. The correct branch net income for 2016 was?

9. DMCI Company acquired 80% capital interest of STONERICH Company. DMCI paid $1,240,000 for the 80% interest and paid $88,000 for legal assistance (related to the acquisition). STONERICH net assets valued at $1,200,000 composed of capital stock, $600,000; additional paid-in capital of $180,000, and retained earnings of $420,000. At the time of acquisition, STONERICH building is undervalued by P100,000 and has still a remaining life of 30 years. Any other excess is allocated to goodwill. STONERICH Company reported net income of $140,000 and paid dividends of $20,000 during the year. 

How much is the income from investment under the equity method?

10. Clever Co. acquired 60% of the common stock of Kailey Corp. on September 1, 20x4. For 20x4, Kailey reported revenues of $800,000 and expenses at $620,000. The annual amount of amortization related to this acquisition was $15,000. Clever Co. accounts for its consolidations according IFRS 3. 

In consolidation. the total amount of expenses related to Kailey and to Clever's acquisition at Kailey tor 20x4 is determined to be?