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155 views8 pagesGoodwill
goodwill computations
Uploaded by
Miru YuCopyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Problem 56-16 (IAA)
On January 1, 2021, Aim Company showed patent of P1,920,009
with elated accumuiated amortization of P240 000 The patent wag
Purchased on January 1, 2019 at which date the legal lifeis 16 years,
(On January 1,2021, the useful life ofthe patent was determined tobe
‘only 8 years from the date of acquisition.
(On January 1, 2021, in connection with the purchase ofa trademark
from Cat Company, the paris entered nto anoncompettion agreement
and aconsulting contract.
‘Aim Company paid Cat Company P800,000, of which three-fourths
‘was for the trademark, and one-fourth was for Cat Company's
‘agreement hot to compet fora five-year period in the line of
covered by the trademark. Aim Company considered the life ofthe
‘trademark tobe indefinite.
Moreover, Aim Company agreed to pay Cat Company P50,000
annually on January 1 ofeach year for5 years as consulting fee.
1, Whatis he carrying amountofintangibleasoets on January 1,20217
a. 2,280,000
b. 2/480,000
«1,880,000
1,680,000
2. What amount should be recorded as total amortization for 20217
a. 280,000
b. 440,000
¢. 320,000
4. 160,000
‘Solution 56-16 Question 1 Answer b Question 2 Answer ¢
Patent (1,920,000- 240,000) 1,689,000
‘Trademark 800,000 x 3/4) 000
Noncompetition agreement ( 800,000 x 1/4) 000
Total intangible assets — January 1, 2021 2,480,000
Amortization of patent 1,680,000 /6) 280,000
‘Amortization of noncompetition agreement (200,000 /5) 40,000
Total amortization for 2021 320,000
The annual payment of P50.000 is expensed immediately.
778
CHAPTER 57
GooDWILL
problem S7-1(AICPA Adapteay
ite beginning of current
‘Year, Pay
ay at a cost that resulted jn2% Company
oro 000. Hed in recogniigy, Tce
‘
poring te the year, Paye Company se
ixpenditures designed to An aitnal
Ssingand hiring new employe?! Man gest
puto these expendi
endituresPaye
feid of goodwill was indefinite PY Me at be bey
Wiat amount should be reported as goodl etyeaend
«1,800,000
* 1'900,000
& 2,000,000
d 2,660,000
Solution 57-1 Answer ¢
Cost of goodwill 2000
The cost of developing and maintaining goodwill of PEDDIGOs
‘epensed outright.
AS 38, paragraph 107, provides that goodwill or anintnible
‘Set with an indefinite useful life shall tbe amor bast
‘orimpairment annually and whenever there isanindiation
'aangible asset may be impaired.
nm Problem $7-2 (IAA)
Mayer Company purchased Tara Company for P8,000,000-cash,
Tara Company had total liabilities of P3,000,000,
Mayer Company provided the following assessment ofthe fit value
itobtained when it purchased Tara Company:
cash 1,000,000,
ve 00,000
Invent
Inprocesreearch and development s.a.p00
‘Assembled workforce 1'200,000
‘What amount should be recognized as goodwill arising from the
acquisition?
a 4,500,000
b. 3,300,000
1,500,000
4. 300,000
Solution 57-2 Answer a
Cash
Inventory
In-process R and D
‘Total assets at fair value
Total liabilities
[Net assets acquired at fair value
Acquisition cost
Net assets acquired at fair value
Goodwill
‘The goodwill includes the fair value of the assembled workforce of
1,200,000.
The assembled workforce is not accounted for separately
asset.
780
problem 57-3 (IAA)
casanova Company purchase,
a nother
following carrying amount ang far fr Ps cop,
Peters acquired ints bangs qgey 4 ee 000 cash,
on EL ih
acount receivable — ee
smverprent contact ‘munya
Baul loan payable osm, or
wet assets stag
‘The fair value associated withthe acquired enty'sg9..
contract is not based on any
Inaddition, for obvious reaso
Vealorcontactal isa
Dn, there i
ination fo ovo ‘sno open market trading for
‘What amount should be recognized ‘ill ariets
business combination? 5 Boodwil arising fom he
a. 3,000,000
b. 3,600,000
c. 4,000,000
a 0
Solution 57-3 Answer e
Accounts receivable 2oxno0n
inventory ‘st
uipment simon
Sontern payable (2.00000)
Net assets at fair value Log.g00
Acquisition cost
Net assets at fair value coma
Goodwill Ag00.o00
The; contract is not recognized separately because it's 0%
tecod onan legal or contac enone HE
The fair value ofP1,000,000is imbedded inthe aunt of roi
‘fP4,000,000.
781 a ! share all 150,000,
i cash at P50 pers 009
igh Company paces Soin Ce sen ahowed
pedinany ar jom ofthe acquiee OURS 6, faction howe
‘cet eavegunt of P6,0004 a
setae with cary ren on the dale of aegusition was
FI MMSsofearvingameunt:
‘What amount shoud be reared apo on purchase?
ee
: a8
Pas
Eee
vei
scant 9
seers atl ies
on ao
open sa
Fein ete of propery plant and equipment, — $0,000
Problem 7-5 (IAA)
“At yearend, Sky Company reported assets of 5,000,000 and Liabilities
3000, fir vale,
Thee irae,
oa ed wii vc o500 00 peat tn caring amour.
et eid Po Soma Sk Company
‘What amount of goodwill should be recorded by the acquirer as a
realtofthspurchse?
a 1,000,000
b. 3,300,000
¢. 2,700,000
d 3,000,000
Sueati7S dice
Acquisition cost 6,000,000
patna cas eae
ta Sale
Sc sae rletcenthatiet ngse
Lemar agagreeomone-20mono) gn
Net assets at fair value
le
782
¢. 375,000
4. 625,000
Solution 57-7 Answer ¢
Patent
Developed technoloogy
Imangible assets subject to amortization
Amortization (9,000,000 /6 years 3/12)
The goodwill is not subject o amortization.
‘are development cannot as yet be:
73 Problem 57-8 (IAA)
all of the outstanding
‘Clever Company parchasd for é,000,000 cash
cy antes of Sun Company when Sun's staternentof Financia]
position showed net assets of 3,200,000.
nthe date of acquisition, Sun's assets and liabilities had fui value
different from the carrying amount a follows:
Carryingamount Fair value
Properyplantandequipment,net 5,000,000 5,750,000,
0
Other assets '00,000
Long-term debt 3,000,000 2,800,000
‘What amouint should be reported as goodwill in the consolidated
statement of financial position of Clever Company and its
‘wholly-owned subsidiary?
350,000
. 250,000
©. 750,000
4. 800,000
Solution 57-8. Answer a
Carrying amount of net assets 3,200,000
Undervaluation of property, plant and equipment, 750,000
COvervaluation of other assets (500,000)
(Overvaluation of long-term debt 200,000
Fair value of net assets acquired 3,650,000
‘Acquisition cost 4,000,000
Fair value of net assets acquired (3,650,000)
Goodwill 350,000
784
We oe
dasaning ofthe cumentyey,” SY P6099
arrying amount and fa 1900 ash at
ees
folowg: te
ate
cs
“ATYing amount
to rae oe
ory Sogn 3200
rat im ae
Froperty plant and equipment saat 0
MeO
joal sare ae
jnoddition, the acquiree had ibility ea
acquisition. Theacquretad nce nt 2 000 ne
assets eta nang
What amount should be
scquisition? ognized as goodwill asng fom te
a. 2,700,000
. 2,450,000
. 4,450,000
4 700,000
Solution 57-9 Answer a
Acquisition cost
Net assets acquired at fair value 300000)
Goodwill 270.000
Total assets at fair value soap
‘Total liabilities omen
Net assets acquired at fair value 330000
ns Problem 57-10 (IAA)
Wella Company scquredallofth oustanding ota shares of an
oquiree paying P7.400,000 sb.
“The camying amount and fir value ofthe assets and liabilities ofthe
scqulee were:
Carryngamount Fair value
count rei 1080000 975,000
iret tem 24s
Property, plant and equipment 5,400,000 6,975,000
‘Accounts payable 1300000 1,800,000
‘Bonds payable 2,700,000 475,000
‘What amount of goodwill should be reported at year-end?
3,800,000
. 1,325,000
2,300,000
é 0
Solution 57-10 Answer b
‘Acquisition cos 7,400,000
[Net assets acquired at fair v 075,000
Goodwill 1,325,000
‘Accounts receivable 975,000
Inventory 2,400,000
Proper, plant and equipment 975,000
‘Accounts payable (41,800,000)
Bonds payable
[Net assets at fair value
7186
problem 57-11 (AA)
jet COMPANY Acquired al of
Breawiree paying PZ cay
poe carrying AOU and fir valy,
: ofthe
sequiree Were: Sed ast
accounts receivable
frventory
property, Plant and equipment
pevounts payable
Bonds payable
‘What amount shouldbe recognized as ainon|
2,500,000
8,000,000
«. 1,500,000
4 0
ve
Solution 57-11 Answer
Accounts receivable 2o0n900
Inventory Sonao10
Property, plant and equipment ‘oman
Accounts payable (390.000)
Bonds payable (G10)
Net assets at fair value 1330000
Acquisition cost Te
Net assets at fair value Bm
Gain on bargain purchase pe
‘The excess fair value of net asets acquired over the acquisition
0st is accounted for as goin on bargaimpwrchate.
17 Problem 7-12 (IAA)
of another entity
‘At year-end, Bliss Company purchased the net asses of anothe
for 6,000,000. On the date ofthe transaction, the acquires had
2,000,000 of liabilities.
‘The asses of the acquiree at fair value were P3,000,000 for current
assets and P6,000,000 for noneurrent asses.
How should the purchase be accounted for?
1, Retained eamings should be credited for 1,000,000,
'. Gainon bargain purchase should be credited for P1,000,000.
The current assets should be reported at P3,000,000 and the
roncurrent assets at P5,000,000.
4. Negative goodwill shouldbe credited for P1,000,000.
Solution 57-12 Answer b
Current assets 3,000,000
Noncurrent assets ‘6.900000
Total assets 9,000,000
Libilties (2,000,000)
Net assets at fae value 7,000,000
Acquisition cost 6,000,000
Excess net fair value 1,000,900
‘Since the net assets acquired at fair value exceeded acquisition cost,
the difference is accounted foras gain from bargain purchase,
Journal entry
Current assets imoane
[Noneurrent assets 00,000
Lishities Sea
= £6,00,000
Gain on bargain purchase "000,000
788
7-13 (IFRS)
ones
Company has: :
ei Caan asso ty '
roars 1000 fat
seiner ea Mi, Se pean
spans develore y Danish et
om ‘Company sine ca
isDeewie Sark ha gg ey
result ofthe takeover, Brisbane mate
ssosat air value: Comey ite
and building ~
poduction machinery ning
inventory 2n09
Mounts receivable ion
i 700,000
addition, Darwin Company
ey Owed, bt hadnt iz te
+ Trademark ~“Superswie” with cago nono
+ Pent Formula forte speci og wt i eaten
What amount of goodwill shouldbe recopize on the dat of
2 2,300,000
6 1300,000
1,800,000
@ "800,000
Solution 57-13 Answer d
Acquisition cost op00000
Assets acquired:
Land and building s20nom
Production machinery 200000
Inventory goon
Accounts receivable. 700,000
Trademark 1,900,000
Patent 08
Gooetwitt
al
1 Problem 57-14 (IAA)
Easter Company is panni psinessto new interests. The
Base Company pani eters P16 50.00)
{nchading expropriation oss oP,
‘The nomal ate oftetum is 20%, The firyalue ofnet asset ofthe
cenity at current year-end was P10,0004
‘What amount shouldbe recognized as gpodilif:
1, Excess eamings are purchased for 5 year
8,000,000
& 4.000.000
«5,000
& 4'500,000
2, Excess eamings ae capitalized t 25%?
a. 7,200,000
. 6,400,000
‘e. 8,000,000
4. 3,600,000
3. Annual average earings are purchased for3 years?
‘& 10,800,000
18000000
4,800
.5;400,000
4. Annual average earings ae capitalized at 25%?
1,600,000
'. 3,600,000
©. 4,400,000
d. 2,000,000
camings are discounted at 12% for 5 years?
(The PV ofan ordinary annuity of | for 5 years at 12% is 3.60)
a
b
& 5,760,000
a
790
solution 57-14
ion! Answer q
ues
mutative earings
Cagback XPTOPFAion oy
pajusted COUR earings
erage anna earings (i
oa eines OR ggg Say
ess eins