Problem 1

AK
BK
2,625,000.00
2,056,250.00
87,500.00
131,250.00
297,500.00 196,875.00
21,875.00 15,312.50
2,218,125.00
1,975,312.50
2,935,406.25
70%

4,193,437.50

1,258,031.25
30%

Problem 2
Cash
A/R
Inv
Machinery
A/P
N/P
Capital
Adj.: Dep
Adj.: Inventory
Adj. Cap
Cash Investment

AB
136,000.00
88,000.00
304,000.00
480,000.00
(216,000.00)
792,000
20,000
812,000
812,000

QR
76,000.00
48,000.00
364,000.00
440,000.00
(144,000.00)
(60,000.00)
724,000

274,400

Total
486,400.00

(24,000.00)
700,000
274,400
974,400

Problem 3
A/R
Inv.
Machinery
Intangibles
Net Investment
Cash
Equipment
Net Investment

CD
Adj.
400,000.00
(32,000.00)
1,120,000.00
(80,000.00)
2,240,000.00
(48,000.00)
920,000.00
(56,000.00)

CD
368,000.00
1,040,000.00
2,192,000.00
864,000.00
4,464,000.00

MJ
3,120,000.00
1,344,000.00 (Squeezed)
4,464,000.00

Problem 4
Capital Beg
Capital End
Total Decrease
Decrease (exp)
Acc. Dep
MZ's Investment of
Equipment
Net Effect

695,000.00
605,000.00
90,000.00
50,000.00
(40,000.00)

CD
MV

495,000.00
455,000.00

Problem 5
A/R

MG
262,500.00

AN
TOTAL
195,000.00
457,500

605,000.00
495,000.00
1,100,000.00

55%
45%

Inv
PPE
A/P
Net Assets
Cash invested

450,000.00
912,500.00
(150,000.0000)
1,475,000.00
2,512,500.00
3,987,500.00

207,500.00
822,500.00
(112,500.0000)
1,112,500.00
2,512,500.00
3,625,000.00

657,500
1,735,000
(262,500.00)
2,587,500
5,025,000
7,612,500

1475000 + x = (1112500 + x) 1.1

1475000 + x = 1223750 + 1.1x
1475000-1223750 = 0.1x
251250 = 0.1x
x = 2512500
Problem 6
CY
Investment
Withdrawal
Capital B4 Sharing
Bonus (7 months)
Salary (7 Months)
Profit Share
Capital B4 Sharing
Capital end

CR
175,000.00
150,000.00
(40,000.00)
285,000.00

240,000.00
120,000.00

16,625.00
35,000.00
90,000.00
141,625.00
285,000.00
426,625.00

21,000.00
43,750.00
60,000.00
124,750.00
360,000.00
484,750.00

AY
261,000.00
27,500.00
288,500.00

AN
TOTAL
259,000.00
520,000.00
27,500.00
55,000.00
286,500.00
575,000.00

360,000.00
Total
37,625.00
78,750.00
150,000.00
266,375.00

Problem 7
Salary
Interest
Bonus
Residual Income
Profit Share
Problem 8
PR
Jan-01
Mar-01
Apr-01
Jul-01
Oct-01

SB
Jan-01
Mar-01
Apr-01
Jul-01
Oct-01

Months Outstanding
12 4,800,000.00
10 1,500,000.00
9
(450,000.00)
110,000.00
3
330,000.00
6,180,000.00

515,000.00

Months Outstanding
12 6,000,000.00
(200,000.00)
9 (1,800,000.00)
100,000.00
3
300,000.00
4,500,000.00

375,000.00

400,000.00
150,000.00
(50,000.00)

500,000.00

LM
Jan-01
Mar-01
Apr-01
Jul-01
Oct-01

Months Outstanding
12 3,600,000.00
10 3,750,000.00
(125,000.00)
6
(750,000.00)
180,000.00
3
540,000.00
7,140,000.00
300,000.00
375,000.00

PR
51,500.00
75,000.00

Interest
Salary

SB
37,500.00
125,000.00
118,750.00
131,900.00
413,150.00

131,900.00
258,400.00

595,000.00

LM
TOTAL
59,500.00
148,500.00
50,000.00
250,000.00
118,750.00
65,950.00
329,750.00
175,450.00
847,000.00

Problem 9
CD
Salary
Interest
Bonus
Residual

NH
1,250.00
1,500.00
8,250.00
13,750.00
24,750.00

GV
1,250.00
1,187.50
19,250.00
21,687.50

TOTAL
2,500.00
1,062.50
3,750.00
8,250.00
22,000.00
55,000.00
23,062.50
69,500.00

Problem 10
EZ
Jan-01
Apr-01
Jul-01
Sep-01
Oct-01
Ending

250,000.00
150,000.00
(125,000.00)
(225,000.00)
350,000.00
400,000.00

Months Outstanding
12 3,000,000.00
9 1,350,000.00
6
(750,000.00)
4
(900,000.00)
3 1,050,000.00
3,750,000.00

312,500.00

350,000.00
(100,000.00)
250,000.00
300,000.00
(200,000.00)
600,000.00

Months Outstanding
12 4,200,000.00
9
(900,000.00)
6 1,500,000.00
4 1,200,000.00
3
(600,000.00)
5,400,000.00

450,000.00

VX
Jan-01
Apr-01
Jul-01
Sep-01
Oct-01
Ending
EZ
Interest
Salary
Bonus
Residual

VX
25,000.00
125,000.00
(293,000.00)
(143,000.00)

TOTAL
36,000.00
61,000.00
175,000.00
300,000.00
(293,000.00)
(586,000.00)
(82,000.00)
(225,000.00)
250,000.00
(82,000.00)
168,000.00

Problem 11.1

RV
20% Purchase
Capital Balance
Problem 11.2
Purchase Price
Divide:
Total Part. Capital
Multiply
End Capital of RV & MC
RV Capital After Purchase
MC Capital After Purchase
Bonus to Old Partners

MC
525,000.00
105,000.00 420,000.00

GR
262,500.00
52,500.00 210,000.00

315,000.00
20%
1,575,000.00
80%
1,260,000.00
420,000.00
210,000.00
630,000.00

787,500.00
157,500.00
157,500.00

RV (75%)
MC (25%)
GR
420,000.00
210,000.00
472,500.00
157,500.00
892,500.00
367,500.00 315,000.00

Problem 12
AC
3,969,000.00
1,323,000.00
5,292,000.00

Old Partners (75%)

DJ (25%)

CC
4,704,000.00
(735,000.00)
588,000.00
735,000.00
5,292,000.00 -

Problem 13
AC
PJ
SR
MJ
AX

Problem 14
PV,BK, TF
Income
Adj.: Overvalued Inv.
Capital Before JP

PV,BK,TF
JP

PV
BK
TF

735,000.00
3,465,000.00

CC
997,500.00
714,000.00
630,000.00
966,000.00 3,307,500.00

Capital Transfer: SR to AX
Cash Contribution
388,500.00
231,000.00 Bonus
157,500.00 Revaluation

1,575,000.00
210,000.00
35,000.00
1,750,000.00
AC
1,470,000.00
367,500.00
1,837,500.00
588,000.00
588,000.00
294,000.00
1,470,000.00

CC
1,750,000.00
87,500.00
1,837,500.00
40%
40%
20%

Problem 15
JM
PK
CY

AC
293,562.50
147,437.50
147,000.00
588,000.00

CC
245,000.00
131,250.00
211,750.00 588,000.00

48,562.50
16,187.50
64,750.00
-

126,000.00
840,000.00
966,000.00

Problem 16.1
Retirement: Interest Sold to a Partner (similar to purchase la)
NP
280,000.00
Interest from RT
245,000.00
end Capital
525,000.00
Problem 16.2
RT, Cap
245,000.00
HK, Cap
11,200.00
NP, Cap
16,800.00
Cash
Problem 17

25%
VL

Beg Cap
Revaluation (300000)
Net Loss
Capital b4 Retirement

end Cap
Remember:

25%
MD

643,750.00
75,000.00
187,500.00 531,250.00
531,250.00 VL, Capital
MD, Capital
LV, Capital
Cash

481,250.00
75,000.00
187,500.00
368,750.00
3,750.00
365,000.00

273,000.00
- 245,000.00
28,000.00
273,000.00
50%
LV
TOTAL
1,125,000.00 2,250,000.00
150,000.00
300,000.00
- 375,000.00
(750,000.00)
900,000.00
7,500.00
892,500.00

531,250.00
3,750.00
7,500.00

11,250.00
542,500.00

Problem 18.
770000 + x - 196000 = 630000 + 0.8x
0.2x = 56000
x = 280000
Problem 19
Partnership Capital
Adj.
Cap before retirement
Cash Payment
Capital After Retirement
Problem 20
Partnership Capital
Adj.
Cap before retirement
Cash Payment
Capital After Retirement

348,250.00
26,250.00
322,000.00
93,100.00
228,900.00

340,000.00
40,000.00
380,000.00
95,000.00
285,000.00

10,000.00
25%
40,000.00

Critical Points to Remember:

1. During the distribution of profit (bonus calculation, interest on capital balance, Salaries) ALWAYS CHECK the
period covered by the profit (1 year, 6 months, etc)
2. Retirement: Interest Sold to a Partner (similar to purchase la)
3. Retirement of Partners: Interest sold to the PARTNERSHIP

RetiringPartner
Old/Remaining Partners

VL, Capital
MD, Capital
LV, Capital
Cash

xx
xx
xx
xx

The Difference Between the Cash Paid and the Capital Balance of the partner prior to retirement
charged/added to the remaining partners. Addition or Charging will depend upon the Cash consideration given
by the partnership.

Problem 1: Long Method

Cash
22,000.00
55,000.00
(77,000.00)
24,750.00
24,750.00

NCA
264,000.00
(82,500.00)

(77,000.00)
96,250.00

181,500.00
181,500.00
(55,000.00)

24,750.00
148,500.00
173,250.00
96,250.00
77,000.00

Liab
173,250.00

96,250.00

126,500.00
(110,000.00)
16,500.00

Max. Possible Loss

1/5
B
(24,750.00)
(5,500.00)

1/5
C
8,250.00
(5,500.00)

112,750.00

(30,250.00)
24,750.00
(5,500.00)

2,750.00

1,650.00
(3,850.00)
7,700.00
3,850.00

1,650.00
4,400.00
7,700.00
12,100.00

3,850.00

12,100.00

112,750.00
(63,250.00)
4,950.00
54,450.00
23,100.00
77,550.00

96,250.00

16,500.00

3/5
A
129,250.00
(16,500.00)

96,250.00
96,250.00
-

16,500.00 -

B
(24,750.00)
1/5
-

C
8,250.00
1/5
41,250.00

2,750.00
(8,250.00)

77,550.00

77,550.00
9,900.00 67,650.00

(27,500.00)

Safe Payments
3,850.00
3,300.00 550.00

38,500.00

12,100.00
3,300.00
8,800.00

Short Method: Cash Priority Program

divide

Beg
Asset Sold
B's defecit removal
Asset Sold
Assets Distributed

A
129,250.00
3/5
215,416.67
174,166.67
41,250.00
41,250.00
Total Cash Available
22,000.00
55,000.00
24,750.00
148,500.00
63,250.00

P1
41,250.00
41,250.00 P2
-

P1
P2
P3

104,500.00

104,500.00

24,750.00

A
104,500.00
24,750.00
1,650.00
130,900.00

550.00
550.00

Total

8,250.00

C
8,250.00
550.00
8,800.00

104,500.00
33,000.00
2,750.00
140,250.00

33,000.00
137,500.00

Liabilities Paid
Cash to be distibuted

173,250.00
140,250.00

*Critical Point To Remember: NonCash Assets Distributed to Partners during the liquidation are considered as cash payments to them.
Problem 2
Cash
1,950,000.00
(1,300,000.00)
650,000.00
420,000.00
1,070,000.00
1,730,000.00
2,800,000.00
(1,750,000.00)
1,050,000.00
875,000.00
175,000.00

NCA
5,500,000.00

Liab
1,550,000.00

5,500,000.00
(840,000.00)
4,660,000.00
(2,330,000.00)
2,330,000.00

1,550,000.00
200,000.00
1,750,000.00

2,330,000.00

1,750,000.00
(1,750,000.00)
-

2,330,000.00

D,Capital
2,375,000.00
81,250.00
2,456,250.00
(155,000.00)
2,301,250.00
(150,000.00)
2,151,250.00

L, Capital
1,625,000.00
(1,625,000.00)
-

A, Capital
1,900,000.00
243,750.00
2,143,750.00
(465,000.00)
1,678,750.00
(450,000.00)
1,228,750.00

2,151,250.00
(875,000.00)
1,276,250.00

1,228,750.00

SAFE PAYMENTS
2,151,250.00
2,505,000.00 - 626,250.00
1,525,000.00
- 650,000.00
875,000.00

Maximum Possible Loss

NCA

Liab

1,228,750.00

5,730,000.00

5,730,000.00

5,130,000.00

5,130,000.00

3,380,000.00

3,380,000.00

(600,000.00)

1,228,750.00
- 1,878,750.00
- 650,000.00
650,000.00
-

6,150,000.00

(620,000.00)

Critical Points to remember

1. Cash Witheld are added to NCA to compute for the Maximum Possible Loss
2. Even if the problem expressly said that it would only a part of the Liabilities yet there is enough cash to pay it all.. YOU SHOULD
PAY ALL THE LIABILITIES
3. If there are not enough information given in the problem and the A=L+C is not balance, The NonCash Assets account is the most
logical account to be credited to balance the accounting equation
Problem 3
Cash

6,150,000.00

875,000.00

1,375,000.00

1,250,000.00
6,750,000.00
2,700,000.00 (squeezed)
(1,535,000.00)
(220,000.00)

1,535,000.00
(1,535,000.00)

7,050,000.00
2,630,000.00
4,420,000.00

2,195,000.00
Cash
1,250,000.00
2,700,000.00
(220,000.00)
(1,535,000.00)
2,195,000.00
(2,195,000.00)
2,160,000.00
(25,000.00)
2,135,000.00
(2,125,000.00)
10,000.00

1,260,000.00
280,000.00
222,500.00
1,762,500.00
25%
7,050,000.00

1,940,000.00
330,000.00
222,500.00
2,492,500.00
25%
9,970,000.00
2,920,000.00
7,050,000.00
2,630,000.00
4,420,000.00

1,525,000.00
240,000.00
445,000.00
2,210,000.00
50%
4,420,000.00

Max. Possible Loss

2,510,000.00

Safe Payments
1,158,750.00
627,500.00
531,250.00

730,000.00
4,420,000.00
4,420,000.00

Liab
J
A
C
6,750,000.00 1,535,000.00 1,762,500.00
2,492,500.00 2,210,000.00
(2,000,000.00)
175,000.00
175,000.00
350,000.00
(55,000.00)
(55,000.00)
(110,000.00)
(1,535,000.00)
4,750,000.00
- 1,882,500.00
2,612,500.00 2,450,000.00
(695,000.00) (1,425,000.00)
(75,000.00)
4,750,000.00
- 1,187,500.00
1,187,500.00 2,375,000.00
(2,250,000.00)
(22,500.00)
(22,500.00)
(45,000.00) (6,250.00)
(6,250.00)
(12,500.00)
2,500,000.00
- 1,158,750.00
1,158,750.00 2,317,500.00
(531,250.00)
(531,250.00) (1,062,500.00)
627,500.00
627,500.00 1,255,000.00

1,158,750.00
627,500.00
531,250.00

1,740,000.00 NI
850,000.00 Salary
890,000.00 Residual

657,500.00
657,500.00
37,500.00
695,000.00
700,000.00

90,000.00

2,317,500.00
1,255,000.00
1,062,500.00

Critical Points to Remember:

1. Cash Priority Program: After all Priorities have been satisfied during Cash Payments to partners, any remaining cash will be shared
by ALL of the partners using P/L sharing ratio
2. The Maximum Possible Loss that a partner can absorbed (schedule of safe payments) and his Ending Capital Balance during that
period are THE SAME

657,500.00
1,387,500.00
37,500.00
1,425,000.00

75,000.00
75,000.00

Problem 4
Cash
775,000.00
1,600,000.00
(175,000.00)
2,200,000.00
(950,000.00)
1,250,000.00
1,200,000.00
50,000.00
Max. Possible loss

NCA
6,750,000.00
(1,875,000.00)

4,875,000.00
4,875,000.00

Liabilities
1,100,000.00

(150,000.00)
950,000.00
(950,000.00)
-

4,875,000.00

20%
J
1,275,000.00
(55,000.00)
(35,000.00)
30,000.00
1,215,000.00

20%
C
1,625,000.00
(55,000.00)
(35,000.00)
30,000.00
1,565,000.00

60%
A
3,525,000.00
(165,000.00)
(105,000.00)
90,000.00
3,345,000.00

1,215,000.00
230,000.00
985,000.00

1,565,000.00
580,000.00
985,000.00

3,345,000.00
390,000.00
2,955,000.00

(275,000.00)
150,000.00

4,925,000.00

Critical Point to Remember:

1. Always be cautios and be careful for cashwithelds (often time, natatago ini ha problem). Cashwithelds are critical in computing for
the MAXIMUM POSSIBLE LOSS.
Problem 5
Cash
350,000.00
2,083,875.00
175,000.00
1,125,000.00

NCA
7,375,000.00
2,130,000.00

1,133,875.00
(1,043,875.00)
90,000.00 Witheld for future expense

Liab
1,125,000.00

40%
S
2,258,000.00
0.40
5,645,000.00

40%
C
2,778,000.00
0.40
6,945,000.00

5,645,000.00

6,945,000.00
1,300,000.00
5,645,000.00

5,645,000.00

20%
A
1,564,000.00
0.20
7,820,000.00
875,000.00
6,945,000.00
1,300,000.00
5,645,000.00

Income

2,570,000.00

175,000.00
520,000.00
520,000.00
35,550.00
555,550.00

260,000.00
435,000.00

420,000.00

200,000.00
620,000.00
420,000.00

TOTAL

730,000.00 P1
1,315,000.00 P2
150,000.00 All
2,195,000.00

955,000.00
88,875.00
1,043,875.00

Problem 1
Total Consideration
Stock Issued at FV
Additional Cash
Contingent Consideration

750,000.00
125,000.00
15,000.00

Net Assets: FMV

Goodwill

890,000.00
660,000.00
230,000.00

Net Identifiable Assets

Goodwill
Common Stock
APIC
Cash
Contingent Consideration Payable

660,000.00
230,000.00
690,000.00
60,000.00
125,000.00
15,000.00

Retained Earninggs
APIC
Cash

14,000.00
60,000.00

Other Acquisition Expense or RE

A/P

19,000.00

Stock issuance Costs are Charge

upod an APIC an Parent) If ex
74,000.00

19,000.00

Retained Earnings Beg:

Excess of Stock Issue Cost
Other Expenses
Retained Earnings End:

Other Expenses related to Acquis

closed to Retain

250,000.00
14,000.00
19,000.00
217,000.00

Liabilites - Parent
Liabilites - Added Due to Acquisition
Contingent Consideration
Other Acquisition Cost Incurred (NOT YET PAID)
Total Liabilities

65,000.00
35,000.00
15,000.00
19,000.00
134,000.00

Problem 2
JKL Assets: BV
JKL Liab: BV
Net Assets
Obsolete Inventory
Delivery Van
NA: BV b4 FMV adj of Machinery
FMV Adjustment of Machinery
Net Assets: FMV

998,400.00
569,600.00
428,800.00
64,000.00
192,000.00
556,800.00
80,800.00 SQUEEZED
476,000.00

Acquisition Price
Net Assets FMV
Gain on Acquisition

Book Value Of Machinery

FMV Adjustment
FMV of Machinery

JKL Assets: BV
JKL Liab: BV
Net Assets
Obsolete Inventory
Delivery Van
NA: BV b4 FMV adj of Machinery
FMV Adjustment of Machinery
Net Assets: FMV
Book Value Of Machinery
FMV Adjustment
FMV of Machinery

345,600.00
80,800.00
264,800.00

998,400.00
569,600.00
428,800.00
64,000.00
192,000.00
556,800.00
78,200.00 SQUEEZED
635,000.00

Acquisition Price
Net Assets FMV
Goodwill

516,500.00
78,200.00
594,700.00

Problem 3
Total Acquisition Price:
Stock Issuance
Additional Cash Payment
Contingent Payment
Total Acquisition Price:
Net Assets FMV
Goodwill (Given)

1,715,000.00
375,000.00
148,000.00
2,238,000.00
1,591,000.00 SQUEEZED
647,000.00

Increase in Liabilities (Liabilities Added)

1.) Liabilities of Acquiree
2.) Contingent Payment
3.) Other Expensed INCURRED

530,000.00
148,000.00
28,000.00
706,000.00

Total Assets Acquired @ FMV

Liabilities
Net Assets FMV

Total Asset Acquired

Total Asset Parent
Cash Payment
Goodwill
TOTAL ASSETS

Critical: INCURRED
Expenses not CASH Paid
Expenses

Problem 5:
Measurement Period - 1 Year from the Date of Acquisition
Total Acquisition Price:
Cash
Contingent Payment

17,450,000.00
1,015,000.00

Net Assets: Temporary Appraisal

GOODWILL

18,465,000.00
12,385,000.00
6,080,000.00

Total Acquisition Price:

Cash
Contingent Payment
Total Acquisition Price:
Net Assets: FMV

Decrease in Contingent Payment

Decrease in Contingent Payment
Increase in Fair Value
Decrease in Contingent Payment
Decrease in Fair Value
GOODWILL Adjusted
Problem 6
1.)
Price Paid
Contingent Payment
Total Acquisition Cost
Net Assets FMV
Goodwill

547,000.00
72,000.00
- 4,430,000.00
112,000.00
940,000.00
1,859,000.00

319,500.00 SQUEEZED
54,000.00
373,500.00
274,500.00
99,000.00

2.)
Price
NA-FMV
GAIN

Parent (70%)
NCI-NI (30%)
Total
157,500.00
91,500.00
249,000.00
192,150.00
82,350.00
274,500.00
34,650.00
9,150.00 25,500.00

3.)
Price
NA-FMV
GAIN

Parent (80%)
NCI-NI (20%)
Total
205,200.00
54,900.00
260,100.00
219,600.00
54,900.00
274,500.00
14,400.00
14,400.00

SHE - Parent Before Adj.

NCI-NAS
Gain on Acquisition
SHE - Parent Adjusted
4.)
Price
NA-FMV
Goodwill

2,115,000.00
54,900.00
14,400.00
2,184,300.00

Parent (90%)
NCI-NI (10%)
Total
364,500.00
40,500.00
405,000.00
247,050.00
27,450.00
274,500.00
117,450.00
13,050.00
130,500.00

Body Co. Assets

Cash Paid
Body Co. Assets Adj.
Shop Co Assets
Goodwill

2,250,000.00
364,500.00
1,885,500.00
297,000.00
130,500.00
2,313,000.00

Problem 7
Stockholder's Equity - Espirirt

2,437,500.00

Goodwill: FINAL

Adjustments to Contingent Payme

PERIOD.. Changes in Contingent Pay
not

Adjustments to Fair Value (due to te

allowed only up to the MEASUREME
beyond the Measurem

Investment in Espirit
NCI
Identifiable Assets (FV adustments)
Goodwill
Investment in Espirit
NCI

1,584,375.00 65%
853,125.00 35%
436,250.00
468,750.00

Total Purchase Price / Total Investment in Espirit

SHE - Espirit
Identifiable Assets
Net Assets FMV

2,053,125.00
2,437,500.00
436,250.00
2,873,750.00

Assumption 1: NCI measured at Fair Value (Ngadi la na Assumption ma.apply an Control Premium Adjustment)
Parent (65%)
NCI (35%)
Total
Price
Price
2,053,125.00
1,068,509.62
3,121,634.62
Control Premium
NA-FMV
1,867,937.50
1,005,812.50
2,873,750.00
Implied Price
Goodwill
185,187.50
62,697.12
247,884.62
Divide: % - Acquired
Implied Value
multiply: % - NCI
NCI of 35%
Assumption 2: NCI measured at proportionate relevant share
Parent (65%)
NCI (35%)
Total
Price
2,053,125.00
1,005,812.50
3,058,937.50
NA-FMV
1,867,937.50
1,005,812.50
2,873,750.00
Goodwill
185,187.50
185,187.50

Assumption 3: NCI measured at FV of 1150000

Parent (65%)
NCI (35%)
Total
Price
2,053,125.00
1,150,000.00
3,203,125.00
NA-FMV
1,867,937.50
1,005,812.50
2,873,750.00
Goodwill
185,187.50
144,187.50
329,375.00

ALWAYS TAKE NOTE tha

of NCI should not be LE
the NCI - Net Identifiab

suance Costs are Charged to APIC (issuance of share during acquisition, diri
n APIC an Parent) If exhausted na an APIC, charge the excess to Retained
Earnings..

penses related to Acquisition except for Stock Issuance Costs are

closed to Retained Earnings at Year End

Acquisition Price
Net Assets FMV
Gain on Acquisition

327,200.00
476,000.00
148,800.00

AP < NA = Gain
Acquisition Price LOWER than Net Assets
Acquired @ FMV results to GAIN ON
ACQUISITION

****Treatment: Income Statement Item.. Added to Other Income

AP > NA = Goodwill
Acquisition Price
Net Assets FMV

1,037,000.00
635,000.00
402,000.00

****Treatment: Balance Sheet Item ASSET

ts Acquired @ FMV
-

2,121,000.00 SQUEEZED
530,000.00
1,591,000.00

2,121,000.00
4,890,000.00
375,000.00
647,000.00
7,283,000.00

uisition Price:

ent Payment
uisition Price:

Acquisition Price HIGHER than Net Assets

Acquired @ FMV results to GOODWILL

17,450,000.00
284,000.00
17,734,000.00
15,875,000.00

Remember: Goodwill will be part of the

Acquirer's Total Asset AYAW
KANGALIMOT GOODWILL.. GOODWILL

1,859,000.00

ments to Contingent Payment are allowed only in the MEASUREMENT

Changes in Contingent Payment beyond the Measurement Period are
not considered

nts to Fair Value (due to temporary appraisal at Acquisition period) are

nly up to the MEASUREMENT PERIOD.. Changes in Contingent Payment
beyond the Measurement Period are not considered

Adjustment)
Control Premium
Implied Price
Divide: % - Acquired
Implied Value
multiply: % - NCI
NCI of 35%

2,053,125.00
68,750.00
1,984,375.00 Control Premium
68,750.00
0.65
Control Premium - Deducted ha Purchase Price in Computing for the Total Implied
3,052,884.62
Value of the Acquiree used in computing the NCI
0.35
1,068,509.62

YS TAKE NOTE that the Value

I should not be LESSER than
NCI - Net Identifiable Assets

for the Total Implied

NCI

Problem 3: Critical: Acquisition Date

Purchase Price
NCI -Given FV
Total
FV of NA Acquired
Goodwill

* Goal Compute for the NA(FMV) at Acquisition Date.

Net Assets (FMV)
2,340,000.00 Net Assets @ Year End: Book Val
170,000.00 Net Income from the Date of Acq
60,000.00 Dividends Declared after the Acq
2,230,000.00 Net Assets @ Acquisition Date: B
44,000.00 Overstated Inventories
60,000.00 Understated Equipment
2,246,000.00 Net Assets @ Acquisition Date: Fa

Cost of Investment
2,345,000.00
470,000.00
2,815,000.00
2,246,000.00
569,000.00

*If expressly stated na gamiton it FV hit NCI axa it gamita.. Basta diri hiya LESSER an
NCI of Net Identifiable Assets (Net Asset @ FMV Acquisition Date)
80%
1,796,800.00

20%
449,200.00
470,000.00

Computing for Non-Controlling Interest - Net Assets (NCI-NAS)

Shareholder's Equity @ Acquisition Date: BV
Net Income from the Date of Acquisition to Year End
Dividends Declared after the Acquisiton Date
Shareholder's Equity @ Year End: BV
Excess of FMV to Cost of Assets
Ammortization
Goodwill
Impairement of Goodwill

56,900.00

NCI-Net Assets @ Year End (NCI-NAS)

2,230,000.00
170,000.00
60,000.00
2,340,000.00
16,000.00
35,250.00

2,391,250.00
478,250.00
20,800.00
2,080.00

496,970.00

Computing for Non-Controlling Interet - Net Income (NCI-NI)

Net Income from the Date of Acquisition to Year End (Subsidiary): Whole
Amortization of Excess: Whole
Total
Non-Controlling Interest Percentage

170,000.00
35,250.00
205,250.00
20.00%

Impairment of Goodwill: Relating to NCI

41,050.00
2,080.00

Non-Controlling Interest Net Income (NCI-NI)

38,970.00

Alternative Computation:
Net Income Relating to Non-Controlling Interest
Amortization of Excess Relating to NCI
Impairment: Relating to NCI

20%
20%

34,000.00
7,050.00
2,080.00

NCI-NI

38,970.00
Alternative Computation of NCI-Net Assets (NCI-NAS)

NCI-Net Assets Recognized at the date of Acquisition

NCI-Net Income
NCI-Dividends

NCI-NAS @ Year End

Dividends Declared by
Subsidiary:

470,000.00
38,970.00
12,000.00

496,970.00

Computing for Consolidated Net Income (CNI)

Net Income Parent (Whole Year ini Pirmi)
Net Income of Subsidiary (From Date Acq. To Year End)
Working Paper Adjustments: 4 la ini hira
1.) Amortization
2.) Total Impairment Loss
3.) Dividend Income (don't deduct if Income from OWN Operations it GIVEN

300,000.00
170,000.00

4.) Gain on Acquisition

Total Consolidated Net Income (CNI)

Net Income Attributable to NCI (NCI-NI)

Net Income Attributable to Parent

35,250.00
56,900.00 Remember: Total Impairment Loss it gagamiton ngadi kay C
48,000.00
-

400,350.00
-

38,970.00

361,380.00

Computing Consolidated Retained Earnings (CRE)

Retained Earnings Parent Beg
Consolidated Net Income Attributable to Parent (CNI-P)

If the Year in question is the Next Year after the date of Acqu
pag.comp

IATTP
Income-P
Income-S
Amort.
IL
Div. - S

2,100,000.00
361,380.00

300,000.00
136,000.00
28,200.00
- 54,820.00
- 48,000.00
361,380.00

Divedends declared - Parent

Consolidated Retained Earnings (CRE)

80,000.00
2,381,380.00

Computing Consolidated Shareholder's Equity (C-SHE)

Common Stock
APIC
Consolidated Retained Earnings
NCI-NAS

Computing Consolidated Shareholder's E

ShareHolder's Equity Parent: Beg
Working Paper Adj:
Net Income-Parent
Dividends-Parent
Net Income - Subsidiary (80%)

3,000,000.00
700,000.00
2,381,380.00
496,970.00

C-SHE

6,578,350.00

Dividends - Subsidiary (80%)

Ammort (80%)
Impairment - Parent
NCI-NAS

ShareHolder's Equity Parent: End

Problem 4
Price
NA (FMV)
Goodwill
Impairment

Parent (80%)
NCI (20%)
Total
2,500,000.00
685,000.00
3,185,000.00
2,308,000.00
577,000.00
2,885,000.00
192,000.00
108,000.00
300,000.00
0.64
0.36
14,400.00
8,100.00
22,500.00

NCI-Net Income (20%):

Net Income - Subsidiary
Ammortization - NCI
Impairment - NCI
NCI-Net Income (20%)
NCI-NAS @ Year End:
NCI-NAS @ Date of Acquisition
NCI-NI

3,250,000.00
485,000.00
35,000.00
2,800,000.00
90,000.00
50,000.00
125,000.00
2,885,000.00

SB Corporation
Net Assets @ Year End: Book Value
Net Income from the Date of Acquisition
Dividend Declared after Date of Acquisition
Net Assets @ Date of Acquisition: Book Value
Inventories: Overstated
Land: Understated
Patent: Understated
Net Assets @ Date of Acquisition: FMV

97,000.00
14,250.00
8,100.00
103,150.00

685,000.00
103,150.00

Since RE Ending an Given han Problem.. Kelengan mo iga

maka.compute han CRE.. It is assumed na ha RE End included
Subsidiary so kelangan mo hiya ig deduct para ma.

Dividends (20%)
NCI-NAS @ Year End

Consolidated SHE:
Common Stock
APIC
Consolidated RE:
RE @ Year End
Net Income - Subsidiary
Dividends - Subsidiary
Amortization (80%)
Impairment -Parent

Since RE Ending an Given han Problem.. Kelengan mo iga

maka.compute han CRE.. It is assumed na ha RE End included
Subsidiary so kelangan mo hiya ig deduct para ma.

7,000.00
781,150.00
RE End:
3,500,000.00 Net Income -P
750,000.00 Dividends-P
Div. Income-S
RE Beg:

2,460,000.00
388,000.00
28,000.00
57,000.00
14,400.00

CRE
RE Beg:
2,862,600.00 IATTP
Dividends-P
781,150.00 CRE
7,893,750.00

NCI-NAS
Consolidated SHE

2,460,000.00
- 525,000.00
50,000.00
28,000.00
1,957,000.00

1,957,000.00
955,600.00
50,000.00
2,862,600.00

Retained Earnings Beg

Net Income - Parent
Dividends - Parent
Retained Earnings End:

P-Income
S-Income
Amort.
IL

Problem 1

Goodwill
IL

P (80%)
3,240,000.00
3,120,000.00
120,000.00
0.80
96,000.00

NCI-NI
Net Income - NCI
Amortization - NCI
Impairment - NCI
NCI-NI

NCI (20%)
810,000.00
780,000.00
30,000.00
0.20
24,000.00

NI Sub
Amortization

420,000.00
48,000.00 -

3,300,000.00 Net Assets @ Date of Acquisition: BV

600,000.00 Understated: Depreciable Asset
3,900,000.00 Net Assets @ Date of Acquisition: FMV

120,000.00
NCI-NAS
NCI-NAS beg
NCI-NI
Dividends
NCI-NAS end

105,000.00
12,000.00
24,000.00
69,000.00

IATTP
1,425,000.00

NI - Parent

Total
4,050,000.00
3,900,000.00
150,000.00

NCI-NI

Total
1,425,000.00

105,000.00
12,000.00 -

525,000.00
60,000.00

810,000.00
69,000.00
45,000.00
834,000.00

Impairment Loss
Conso. Net Income

Common Stock
APIC
Consolidated RE
RE Beg
NI-P
Div-P
NI-S
Div-S
Ammort
IL

96,000.00 1,701,000.00

7,800,000.00
1,425,000.00
- 690,000.00
420,000.00
48,000.00
96,000.00

NCI-NAS
Consolidated SHE
Consolidated RE:
RE Beg:
IAATP
Div-P
CRE

24,000.00 - 120,000.00 Issue: Api ba pag.compute hit CNI it Dividend Income from Subsidiary?
Answer: Basta Income from Own Operations it given ha problem, it is assumed th
69,000.00
1,770,000.00
NOT INCLUDE dividends from subsidiary, so no need to deduct it from the in Com
IATTP and CNI.
5,250,000.00
CRE
RE Beginning
7,800,000.00
IATTP
1,701,000.00
Dividends-P
- 690,000.00
CRE
8,811,000.00

8,811,000.00
834,000.00
14,895,000.00

7,800,000.00
1,701,000.00
- 690,000.00
8,811,000.00

l Compute for the NA(FMV) at Acquisition Date.

Basta BookValue of NA @ Year End it Given ig.adjust anay ha NA @ Acquisition Date

Adding Back Dividends Declared and Deducting Net Income from Acq. Date to Year End

Net Assets @ Year End: Book Value

Net Income from the Date of Acquisition to Year End
Dividends Declared after the Acquisiton Date
Net Assets @ Acquisition Date: Book Value
Overstated Inventories
Understated Equipment
Net Assets @ Acquisition Date: Fair Market Value

NCI
NCI -Given FV

BE CAREFUL HIT DATE OF ACQUISITION.. DIRI PIRMI

JANUARY 1 Kay ma.affect ini tim pagammortize han mga
PPE Pati Net Income and Dividends for the Whole Year
(igaallocate mo pa)

Choose whichever is HIGHER

I-NAS)
W/P Adjustments: 4 items para ha SHE adjustments
Excess:
Overstated Inventories
Understated Equipment
Excess of FMV to Cost

2,391,250.00
478,250.00 20%
20,800.00
2,080.00

Ammortization of Excess:
Inventory
Equipment
Ammortization

44,000.00
60,000.00
16,000.00

44,000.00
8,750.00
35,250.00

496,970.00
Goodwill:

Parent Price
NCI Value
TOTAL
2,345,000.00
470,000.00 2,815,000.00

Cost

CI-NI)

NA (FMV)
Goodwill
170,000.00
35,250.00
205,250.00
20.00%

Impairement:
Ratio-P
Ratio-NCI

0.96
0.04

1,796,800.00
548,200.00

449,200.00
20,800.00

2,246,000.00
569,000.00

Parent
54,820.00

NCI
2,080.00

TOTAL
56,900.00

Excess and Ammortization of Excess

Treatment.. Kun gin.add mo ha Excess
Ammortization.. :-)

All are Amortized @ Year End: If Silent.. T

to be sold @ Year End. If given kun pira la
nim ig.aamortize

PPE's are ammortized using their useful li

41,050.00
2,080.00

38,970.00
34,000.00
7,050.00
2,080.00

38,970.00

Dividends Declared by
Subsidiary:

Relating to Parent (80%)

48,000.00

Relating to NCI (20%)

12,000.00

60,000.00

Year in question is the Next Year after the date of Acquistion.. An full na Net Income an Subsidiary and irerecognize ha
pag.compute an CNI

mber: Total Impairment Loss it gagamiton ngadi kay Consolidated Net Income na

NCI-NI

Total

34,000.00
7,050.00

300,000.00
170,000.00
35,250.00

2,080.00 38,970.00

56,900.00
48,000.00
400,350.00

Since Net Income from Parent an gin.hatag na GIVEN.. It is assumed na upod

na an DIVIDEND Income from Subsidiary ngada.. So kelangan mo hiya ig.iban
ha NET INCOME ha Parent to arrive ha Income Attributable to Parent (IATTP)

Percentage Ownership

Computing Consolidated Shareholder's Equity (C-SHE)

5,800,000.00
300,000.00
80,000.00
136,000.00

Net Income - Subsidiary (80%)

Dividends - Subsidiary (80%)

eHolder's Equity Parent: End

nd Declared after Date of Acquisition

ssets @ Date of Acquisition: Book Value

48,000.00
28,200.00
54,820.00
496,970.00

6,578,350.00

Ammortization
90,000.00
-

18,750.00
71,250.00

ince RE Ending an Given han Problem.. Kelengan mo igadjust to RE Beg para ka

.compute han CRE.. It is assumed na ha RE End included an Dividend Income from
Subsidiary so kelangan mo hiya ig deduct para ma.adjust ha RE Beg

80%
IATTP

Net Income - Parent

Net Income - Subsidiary
Amortization
Impairment Loss
Dividend Income From S

20%
NCI-NI

xx
x
x
(x)
(xx)

x
x
(x)

XX

XX

Total
xx
xx
xx
(xx)
(xx)
XX

Consolidated Net Income

Retained Earnings End

Net Income - Parent

xx
(xx)

NCI Beg (@ Date of Acquisition)

NCI-NI

Dividends - Parent
Dividend Income from S
Retained Earning Beg

xx
(xx)
XX

NCI - Dividend
NCI -Net Assets (NCI-NAS)

Retained Earning Beg

IATTP
Dividend - Parent
Consolidated RE

XX
XX
(XX)
XX

ince RE Ending an Given han Problem.. Kelengan mo igadjust to RE Beg para ka

.compute han CRE.. It is assumed na ha RE End included an Dividend Income from
Subsidiary so kelangan mo hiya ig deduct para ma.adjust ha RE Beg
Retained Earnings Beg
Net Income - Parent
Dividends - Parent
Retained Earnings End:
IAATP
525,000.00
388,000.00
57,000.00
- 14,400.00 955,600.00

2,685,000.00
525,000.00
- 750,000.00
2,460,000.00
NCI-NI
525,000.00
97,000.00
485,000.00
14,250.00
71,250.00
8,100.00 22,500.00
103,150.00
1,058,750.00

Ammortization
60,000.00

e hit CNI it Dividend Income from Subsidiary?

om Own Operations it given ha problem, it is assumed that it DOES
rom subsidiary, so no need to deduct it from the in Computing for
IATTP and CNI.

r End it Given ig.adjust anay ha NA @ Acquisition Date by

d and Deducting Net Income from Acq. Date to Year End.

Excess and Ammortization of Excess Opposite it

Treatment.. Kun gin.add mo ha Excess it Minus ha
Ammortization.. :-)
All are Amortized @ Year End: If Silent.. The Inventory are assumed
to be sold @ Year End. If given kun pira la an nabaligya.. Axa la adto
nim ig.aamortize
PPE's are ammortized using their useful life

Ignore This Line if Income From Own

Operations it Given
Consolidated Net Income
NCI Beg (@ Date of Acquisition)

NCI -Net Assets (NCI-NAS)

xx
xx
(xx)
XX

Impairment
56900

P(80%) NCI (20%)

2345000
470000
1796800
449200
548200
20800
0.963445 0.036555
54820
2080

Total
2815000
2246000
569000 GoodWill
56900
NCI-NA

NCI-NAS Beg
NCI-NI
NCI-Div
NCI-NAS End

470000
38970
-12000
496970

SHE End.
Excess
Ammort

Goodwill
Impairment
NCI-NAS End

810000
780000
30000
0.8

202500
195000
7500
0.2

1012500
975000
37500

2340000
16000
35250

2391250
0.2
478250
20800
-2080
496970

825000
150000
975000

Problem III
Method 1
NCI-Net Assets

Dividends

1,826,250.00 SHE: BV @ Acq. Date(SQUEEZED)

2,362,500.00
Net Income
290,625.00 Goodwill
234,375.00 Excess

682,500.00

Amortization

93,750.00
3,937,500.00
25.00%
984,375.00
SHE: BV
Excess:
SHE: FMV
GoodWill
Total FV
Parent (75%)

Price
NA (FMV)
Goodwill

1,763,437.50
1,545,468.75
217,968.75

1,826,250.00
234,375.00
2,060,625.00
290,625.00
2,351,250.00
NCI (25%)
587,812.50
515,156.25
72,656.25

Total
2,351,250.00
2,060,625.00
290,625.00

Method 2
NCI-NAS Beg (Squeezed)
NCI-NI
NCI-Div
NCI - NAS End (Given)

587,812.50
567,187.50
170,625.00
984,375.00

NCI-NI (25%)
Net Income - S
Ammort
IL
NCI - NI

590,625.00
23,437.50
567,187.50

Parent (75%) NCI (25%)

Total
Price
1,763,437.50 587,812.50 2,351,250.00
NA (FMV) 1,545,468.75 515,156.25 2,060,625.00
Goodwill
217,968.75
72,656.25
290,625.00

Amortization
23,437.50 Annual
4 years
93,750.00

Liabilities With Priority

1.) Salaries
2.) Tax
3.) Trust/Liquidating/Administration Expense
4.) Customer's Deposit