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Business Combination

1) Polo Corporation acquired 90% of Solo Company's stock on May 1, 2017. Journal entries were made to record the acquisition including recording goodwill. 2) A working elimination entry was made on May 1, 2017 to eliminate the investment account and allocate capital balances between the parent and noncontrolling interest. 3) Pedro's Company acquired 80% of Sotto Company's stock. Journal entries were made to record the acquisition including allocating excess to assets and liabilities and recording goodwill. 4) Working elimination entries were made to eliminate the investment account and allocate capital balances between the parent and noncontrolling interest.

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311 views10 pages

Business Combination

1) Polo Corporation acquired 90% of Solo Company's stock on May 1, 2017. Journal entries were made to record the acquisition including recording goodwill. 2) A working elimination entry was made on May 1, 2017 to eliminate the investment account and allocate capital balances between the parent and noncontrolling interest. 3) Pedro's Company acquired 80% of Sotto Company's stock. Journal entries were made to record the acquisition including allocating excess to assets and liabilities and recording goodwill. 4) Working elimination entries were made to eliminate the investment account and allocate capital balances between the parent and noncontrolling interest.

Uploaded by

Jaira Clavo
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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PROBLEM 14-1

a) Prepare journal entries of Polo Corporation on May 1, 2017 to record acquisition of stock from So

1.00 0.90
Fair Value of Consideration 1,200,000.00 1,080,000.00
Less: Book Value of net assets acquired -900,000.00 -810,000.00
Total 300,000.00 270,000.00
Adjustments
Inventories -30,000.00 -27,000.00
PPE -60,000.00 -54,000.00
Goodwill (Bargain Purchase Gain) 210,000.00 189,000.00

Investment in Solo Company 1,080,000.00


Cash 1,080,000.00

Retained Earnings 50,000.00


Cash 50,000.00

b) Prepare working elimination entry for Polo Corporationand subsidiary on May 1, 2017.

Common Stock 400,000.00


Retained Earnings 500,000.00
Investment in Solo Company 810,000.00
Noncontrolling Interest 90,000.00

Inventories 30,000.00
PPE 60,000.00
Investment in Solo Company 81,000.00
Noncontrolling Interest 9,000.00

Goodwill
Investment in Solo Company 210,000.00
Noncontrolling Interest 189,000.00
21,000.00

PROBLEM 14-3

a) Prepare journal entries on the books of Pedro's Company to record the stock acquisition.

b) Determination & allocation of excess


1.00 0.80
Fair Value of Consideration 1,180,000.00 950,000.00
Less: Book Value of net assets acquired -900,000.00 -720,000.00
Total 280,000.00 230,000.00
Adjustments
Current Assets 50,000.00 40,000.00
Property and Equipment -100,000.00 -80,000.00
Long term liabilities -40,000.00 -32,000.00
Goodwill (Bargain Purchase Gain) 190,000.00 158,000.00

Investment in Sotto Company 950,000.00


Cash 950,000.00

Retained Earnings 80,000.00


Cash 80,000.00

c) Working paper elimination entries

Common Stock 100,000.00


Additional Paid-in Capital 200,000.00
Retained Earnings 600,000.00
Goodwill 190,000.00
Long term liabilities 40,000.00
Property and Equipment 100,000.00
Currrent Assets 50,000.00
Investment in Sotto 950,000.00
Noncontrolling Interest 230,000.00
1,230,000.00 1,230,000.00

Problem 14-4

Prepare a consolidated SFP immediately after acquisition

PRE-ACQUISITION
PACO sucat
Current assets 375,000.00 100,000.00
Property and Equipment 270,000.00 75,000.00
Other assets 30,000.00 40,000.00
Accumulated Depreciation -70,000.00 -15,000.00
Investment in Sucat Company
Goodwill
TOTAL ASSETS 605,000.00 200,000.00

Current liabilities 220,000.00 60,000.00


Mortgage payable 60,000.00 25,000.00
Common Stock 100,000.00 35,000.00
Additional Paid-in capital 45,000.00
Retained Earnings 180,000.00 80,000.00
TOTAL LIABILITIES AND EQUITY 605,000.00 200,000.00

PROBLEM 14-8
Cash Consideration 500,000.00
Less: Net assets at book value
Common Stock 100,000.00
Additional Paid-in Capital 200,000.00
Retained Earnings 230,000.00 530,000.00
Total -30,000.00
Allocation of excess:
Inventory -20,000.00
Land -10,000.00
Building 50,000.00
Equipment 60,000.00
Bonds Payable -50,000.00
Goodwill (Bargain Purchase Gain) 0.00

P S
Cash 300,000.00 50,000.00
Accounts Receivable 200,000.00 100,000.00
Inventory 200,000.00 80,000.00
Land 100,000.00 50,000.00
Building (net of depreciation) 600,000.00 400,000.00
Equipment (net of depreciation) 800,000.00 200,000.00
Investment in S Company 500,000.00
Totals 2,700,000.00 880,000.00

Accounts Payable 150,000.00 60,000.00


Bonds Payable (8%, 300000 FV) 290,000.00
Common Stock - P 1,500,000.00
Common Stock - S 100,000.00
Additional Paid-in Capital 200,000.00
Retained Earnings - P 1,050,000.00
Retained Earnings - S 230,000.00
Totals 2,700,000.00 880,000.00

PROBLEM 14-9

1.00
Cash Consideration 580,000.00
Less: Net assets at book value
Common Stock 100,000.00
Additional Paid-in Capital 200,000.00
Retained Earnings 230,000.00 530,000.00
Total 50,000.00
Allocation of excess:
Inventory -20,000.00
Land -10,000.00
Building 50,000.00
Equipment 60,000.00
Bonds Payable -50,000.00
Goodwill (Bargain Purchase Gain) 80,000.00

P S
Cash 300,000.00 50,000.00
Accounts Receivable 200,000.00 100,000.00
Inventory 200,000.00 80,000.00
Land 100,000.00 50,000.00
Building (net of depreciation) 600,000.00 400,000.00
Equipment (net of depreciation) 800,000.00 200,000.00
Goodwill
Investment in S Company 500,000.00
Totals 2,700,000.00 880,000.00

Accounts Payable 150,000.00 60,000.00


Bonds Payable (8%, 300000 FV) 290,000.00
Common Stock - P 1,500,000.00
Common Stock - S 100,000.00
Additional Paid-in Capital 200,000.00
Retained Earnings - P 1,050,000.00
Retained Earnings - S 230,000.00
Noncontrolling Interest
Totals 2,700,000.00 880,000.00
cord acquisition of stock from Solo Company.

0.10
120,000.00
-90,000.00
30,000.00

-3,000.00
-6,000.00
21,000.00

diary on May 1, 2017.

rd the stock acquisition.

0.20
230,000.00
-180,000.00
50,000.00

10,000.00
-20,000.00
-8,000.00
32,000.00

720,000.00 158,000.00 72,000.00


180,000.00 32,000.00 18,000.00

PACO'S ACQUISITION POST-ACQUISITION


DEBIT CREDIT PACO
100,000.00 475,000.00
85,000.00 355,000.00
40,000.00 70,000.00
-70,000.00
0.00
0.00
830,000.00

60,000.00 280,000.00
25,000.00 85,000.00
100,000.00 200,000.00
45,000.00
40,000.00 220,000.00
225,000.00 225,000.00 830,000.00
Adjustments and Elimination
Debit Credit CONSOLIDATED FS
350,000.00
300,000.00
20,000.00 300,000.00
10,000.00 160,000.00
50,000.00 950,000.00
60,000.00 940,000.00
30,000.00 530,000.00 0.00
3,000,000.00

210,000.00
50,000.00 240,000.00
1,500,000.00
100,000.00 0.00
200,000.00 0.00
1,050,000.00
230,000.00 0.00
640,000.00 640,000.00 3,000,000.00

0.80 0.20
500,000.00 80,000.00 Investment in S
Cash

Eliminating entries
424,000.00 106,000.00
76,000.00 -26,000.00 Common Stock
Additional Paid-in Capital
-16,000.00 -4,000.00 Retained Earnings
-8,000.00 -2,000.00 Investment in S
40,000.00 10,000.00 Noncontrolling Interest
48,000.00 12,000.00
-40,000.00 -10,000.00 Inventory
100,000.00 -20,000.00 Land
Bonds Payable
Investment in S
Adjustments and Elimination Noncontrolling Interest
Debit Credit CONSOLIDATED FS Building
350,000.00 Equipment
300,000.00
20,000.00 300,000.00 Goodwill
10,000.00 160,000.00 Investment in S
50,000.00 950,000.00
60,000.00 940,000.00
100,000.00 100,000.00
500,000.00 0.00
3,100,000.00

210,000.00
50,000.00 240,000.00
1,500,000.00
100,000.00 0.00
200,000.00 0.00
1,050,000.00
230,000.00 0.00
6,000.00 106,000.00 100,000.00
716,000.00 716,000.00 3,100,000.00
500,000.00
500,000.00

100,000.00
200,000.00
230,000.00
424,000.00
106,000.00
20,000.00
10,000.00
50,000.00
24,000.00
6,000.00
50,000.00
60,000.00

100,000.00
100,000.00

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