Shortproblem

Problem 1
Primo Corporation acquired majority of the stock of Sonia Company on January 2, 2021 and a consolidated
balance was prepared. Partial balance sheet for Primo, Sonia, and the consolidated entity follow: (The non-
controlling interest is measure at NCI’s proportionate share in the acquiree’s net identifiable assets)
Primo Corporation and Sonia Company
Partial Balance Sheet Data
January 2, 2021
Primo Sonia Consolidated
Accounts Corporation Company Entity
Cash and cash equivalents P100,000 P40,000 P140,000
Accounts receivable 80,000 20,000 100,000
Inventory 200,000 100,000 340,000
Equipment 500,000 200,000 800,000
Investment in Sonia Company 470,000
Goodwill 10,000
Total P ? P360,000 P1,390,000
Accounts payable P 70,000 P 40,000 P 110,000

Bonds payable 300,000 300,000
Common stock ? 150,000 250,000
Retained earnings 567,000 170,000 ?
Non-controlling interest 163,000
Total P ? P360,000 P1,390,000
1. What percentage ownership of Sonia does Primo hold? (round-off)
Goodwill ₱ 10,000
Fair Value of Net Assets of Sonia:
Cash and Cash Equivalents ₱ 40,000
Accounts Receivable 20,000
Inventory 140,000
Equipment 300,000
Accounts Payable (40,000) ₱ 460,000
Consideration Given (Amount of Investment) ₱ 470,000
Less: NCI 163,000
Consideration Given (Price Paid) ₱ 307,000
Percentage of Ownership = Price Paid / Amount of Investment

= 307,000 / 470,000
Percentage of Ownership = 65.32 % OR 65%
2. What amount of retained earnings is reported in the consolidated balance sheet?

The amount to be recorded in the consolidated balance sheet is 567,000, the amount of Primo’s Retained
Earnigns, since Primo is the acquirer, and also because there were no additional fees paid mentioned in
the problem.
3. What is the fair value of Sonia’s net assets at January 2, 2021?
Sonia Common Stock ₱ 150,000
Sonia Retained Earnings 170,000
Book Value of Sonia’s Net Asset 320,000
Add: Increase in fair value of Sonia’s Inventory 40,000
Increase in Fair value of Sonia’s Equipment 100,000
Fair Value of Sonia’s Net Asset ₱ 460,000
4. What amount did Primo pay to acquire the stock of Sonia on January 2, 2021?
Goodwill ₱ 10,000
Fair Value of Net Assets of Sonia:
Cash and Cash Equivalents ₱ 40,000
Accounts Receivable 20,000
Inventory 140,000
Equipment 300,000
Accounts Payable (40,000) ₱ 460,000
Consideration Given (Amount of Investment) ₱ 470,000
Less: NCI 163,000
Consideration Given (Price Paid) ₱ 307,000
Problem 2
Statement of Financial position for Puro Corp. and Sato Company on December 31, 2021, are given below:
Puro Corporation Sato Company Consolidated
Cash and cash equivalents P 70,000 P 90,000 160,000
Inventory 100,000 60,000 160,000
Property & Equipment (net) 500,000 250,000 800,000
Investment in Sato Company 260,000
Goodwill 20,000
Total Assets P930,000 P400,000 1,140,000
Current liabilities P 180,000 P60,000 240,000

Long-term liabilities 200,000 90,000 290,000
Common stock, P2 par 300,000 100,000 300,000
Retained earnings 250,000 150,000 250,000
NCI 60,000
Total liabilities & and equities P930,000 P400,000 1,140,000
Puro Corp. purchased 80% ownership of Sato Company on December 31, 2021 for P260,000. On that date,
Sato Company’s property and equipment had a fair value of P50,000 more than the book value shown. All
other book values approximated fair value. In the consolidated statement of financial position on December
31, 2021. (The non-controlling interest is measure at NCI’s proportionate share in the acquiree’s net
identifiable assets)
5. What amount of goodwill will be reported?
Controlling Interest (80%) ₱ 260,000
NCI (300,000 x 20%) 60,000
TOTAL ₱ 320,000
Book Value of Assets (Common Stocks + Retained Earnings) (300,000)
Goodwill ₱ 20,000
6. What amount of consolidated retained earnings will be reported?

250,000
7. What amount of non-controlling interest will be reported?
Fair Value of Assets ₱ 300,000
Multiply by 20%
Non-controlling interest ₱ 60,000
8. What amount of total liabilities will be reported?
9. Condensed Statement of Financial Position of Dolce Inc. and Gab Inc. as of 12/31/2021 were as follows:
Dolce Gab
Current assets P 275,000 P 65,000
Noncurrent assets 625,000 425,000
Total assets 900,000 490,000
Liabilities 65,000 35,000
Ordinary shares, P23 Par 549,700 296,700
Share Premium 35,300 28,300
Accumulated Profits (losses) 250,000 130,000
On January 1, 2021, Dolce Inc. issued 30,000 shares with market value of P25/share for the assets and
liabilities of Gab Inc. Dolce Inc. also paid P125,000 cash. The book value reflects the fair value of the
assets and liabilities, except that the non-current assets of Gab Inc. have fair value of P630,000 and the
noncurrent assets of Dolce Inc. are overstated by P30,000. Contingent consideration, which is
determinable, is equal to P15,000. Dolce paid for the share issuance costs only amounting to P74,000
and incurred other acquisition costs amounting to P19,000. As a result of acquiring the net assets of Gab
Inc., compute for the total liabilities in the books of Dolce.

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Problem 1

Accounts payable P 70,000 P 40,000 P 110,000

Percentage of Ownership = Price Paid / Amount of Investment

2. What amount of retained earnings is reported in the consolidated balance sheet?

Current liabilities P 180,000 P60,000 240,000

6. What amount of consolidated retained earnings will be reported?

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