Example 1:

BV=FMV=Cost

Cost
Sh. In FVNA
NGW

1,262,500
1,285,000
22,500

7/1/2004
5050000 FV, 1/1/2004
90000 NI
5140000 FV, 7/31/2004
25%
1285000

IF ACQUIRED ON JULY 1, 2004 instead of jan 2, 2004

2004
1-Jul IIA
1,262,500
Cash
1,262,500
IIA
SANI

22,500
22,500

IIA=

1,285,000

SHE

5,230,000
25%
1,307,500

2005 IIA
SANI
Cash
IIA

1,307,500

62,500
62,500
5,000
5,000

IIA

1,365,000

SHE

5,460,000
0
1,365,000

Example 2:

BV<FMV=Cost

Cost
Sh. In FVNA
NGW

1,887,500
1,910,000
22,500

7/1/2004
7,550,000 FV, 1/1/2004
90,000 NI
7,640,000 FV, 7/31/2004
25%
1,910,000

IF ACQUIRED ON JULY 1, 2004 instead of jan 2, 2004

2004
1-Jul IIA
1,887,500
Cash
1,887,500
IIA

22,500
SANI

625000 SANI
IIA

22,500
15,625
15,625

IIA=

1,894,375

1,916,875

SHE

5,230,000
25%
1,307,500

1,916,875

2005 IIA
SANI
Cash
IIA
SANI
IIA

62,500
62,500
5,000
5,000
31,250
31,250

IIA

1,943,125

SHE

5,460,000
25%
1,365,000

1,943,125

FV, 1/1/2004

Example 3:

BV>FMV=Cost

Cost
Sh. In FVNA
NGW

1,181,391
1,203,891
22,500

4,725,564 1/1/2004
90,000 NI
4,815,564
25%
1,203,891

FV, 7/31/2004

IF ACQUIRED ON JULY 1, 2004 instead of jan 2, 2004

2004
1-Jul IIA
1,181,391
Cash
1,181,391
IIA
SANI

22,500

31-Dec IIA
SANI

7,072

22,500
81109
7,072

IIA

1,210,963

1,233,463

SHE

5,230,000
25%
1,307,500

1,233,463

2005 IIA
SANI
Cash
IIA

62,500

IIA
SANI

14,905

62,500
5,000
5,000

14,905

IIA

1,305,868

SHE

5,460,000
25%
1,365,000

1,305,868

semi-annual, 5 years
if bonds were issued at a premium
coupon rate = 10%
market yield = 9%

8000000
400,000

ASSOCIATE'S BOOKS:
9%
int pay
int exp
amort
PV
1-Jul-04
31-Dec-04
400,000
374,243
25,757
1-Jul-05
400,000
373,084
26,916
31-Dec-05
400,000
371,873
28,127
1-Jul-06
400,000
370,607
29,393
31-Dec-06
400,000
369,284
30,716
1-Jul-07
400,000
367,902
32,098
31-Dec-07
400,000
366,458
33,542
1-Jul-08
400,000
364,948
35,052
31-Dec-08
400,000
363,371
36,629
1-Jul-09
400,000
361,722
38,278

8,316,509
8,290,752
8,263,835
8,235,708
8,206,315
8,175,599
8,143,501
8,109,959
8,074,907
8,038,278
8,000,000

INVESTOR'S BOOKS:
int pay
1-Jul-04
31-Dec-04
400,000
1-Jul-05
400,000
31-Dec-05
400,000
1-Jul-06
400,000
31-Dec-06
400,000
1-Jul-07
400,000
31-Dec-07
400,000
1-Jul-08
400,000
31-Dec-08
400,000
1-Jul-09
400,000

8%
int exp
345,955
343,793
341,545
339,207
336,775
334,246
331,616
328,880
326,036
323,077

amort
54,045
56,207
58,455
60,793
63,225
65,754
68,384
71,120
73,964
76,923

PV
8,648,872
8,594,827
8,538,620
8,480,164
8,419,371
8,356,146
8,290,392
8,222,007
8,150,888
8,076,923
8,000,000

Cost
Sh. In FVNA
Goodwill

120,000
120,000
-

BVNA
Share

280,000
30%
84,000
120,000
36,000
7,200

Cost
Excess of eqpt

Net income
Share
USANI
Excess:
36000 Equipment
Invty - X8
Invty - X9

20X8
75,000
30%
22,500

20X9
80,000
30%
24,000

(7,200)
(900)

(7,200)
900
(4,500)
900
(4,500)
750
10,350

PPE - X9
ASANI

BV<Cost=FV

14,400

IIA, beg.
ASANI
Dividends
SOCI
IIA, end.
SOCI
Beg
MTM
Disposal
SOCI,end

20X8
20X9
120,000
133,119
14,400
10,350
(1,281)
320
2,210
133,119
145,999

0
-1281
0
-1281

-1281
2210
320
1249

AFS
Cost
Disposal
MV
UGL, end
Sale

20X8
20X9
200000
200000
0
-50000
195729
154163
-4271
4163
1067
-3204

7367
2210.1

Comprehensive Example. Goodwill

Ina acquired 25% of Anak Company.
BV
CA
PA
Total assets

2,000,000
12,500,000
14,500,000

CL
BP
Net assets

1,450,000
8,000,000
5,050,000

FMV, 1/1/04
2,000,000
15,000,000

1,450,000
7,116,790
8,433,210

Bonds of Anak were issued at par.

Coupon rate =9%, payable semiannually
Market yield = 12%
bonds mature in 5 years
2004
180000
25%
45000

2005
250000
25%
62500

(208,333)
(34,509)
(197,842)

(166,667)
(38,774)
(142,941)

IIA, beg
ASANI
Dividends
IIA, end.

2,500,000
(197,842)
2,302,158

2,302,158
(142,941)
(5,000)
2,154,217

BVNA
Sh.
Sh. In BVNA
Excess:
PA
BP
Goodwill
IIA, end.

5,230,000
25%
1,307,500

5,460,000
25%
1,365,000

416,667
186,294
391,698
2,302,158

250,000
147,520
391,698
2,154,217

NI
Sh.
USANI
Excess:
625,000 PA
220,803 BP
ASANI

2,500,000

883,210

360,000

4.50%
int pay
1/1/2004
6/31/2004
12/31/2004
6/31/2005
12/31/2005
6/31/2006
12/31/2006
6/31/2007
12/31/2007
6/31/2008
12/31/2008

Cost
Sh. In FVNA
GW

625000
12/31/2004
12/31/2005
12/31/2006
12/31/2007
12/31/2008

6%
int exp

360,000
360,000
360,000
360,000
360,000
360,000
360,000
360,000
360,000
360,000

2,500,000
2,108,303
391,698

15
208,333
166,667
125,000
83,333
41,667

427,007
431,028
435,290
439,807
444,595
449,671
455,051
460,754
466,800
473,208

amort
67,007
71,028
75,290
79,807
84,595
89,671
95,051
100,754
106,800
113,208

pv
7,116,790
7,183,797
7,254,825
7,330,115
7,409,922
7,494,517
7,584,188
7,679,239
7,779,994
7,886,793
8,000,001

Comprehensive Example. Goodwill

Ina acquired 25% of Anak Company.
BV
CA
PA
Total assets

2,000,000
12,500,000
14,500,000

CL
BP
Net assets

1,450,000
8,000,000
5,050,000

FMV, 1/1/04
2,000,000
15,000,000

1,450,000
7,116,790
8,433,210

Bonds of Anak were issued at par.

Coupon rate =9%, payable semiannually
Market yield = 12%
bonds mature in 5 years

NI
Sh.
USANI
Excess:
625,000 PA
220,803 BP
NGW
ASANI

2004
180000
25%
45000

2005
250000
25%
62500

(208,333)
(34,509)
608,303
410,460

(166,667)
(38,774)
(142,941)

IIA, beg
ASANI
Dividends
IIA, end.

1,500,000
410,460
1,910,460

1,910,460
(142,941)
(5,000)
1,762,520

BVNA
Sh.
Sh. In BVNA
Excess:
PA
BP
IIA, end.

5,230,000
25%
1,307,500

5,460,000
25%
1,365,000

416,667
186,294
1,910,460

250,000
147,520
1,762,520

2,500,000

883,210

360,000

4.50%
int pay

int exp

1/1/2004
6/31/2004
12/31/2004
6/31/2005
12/31/2005
6/31/2006
12/31/2006
6/31/2007
12/31/2007
6/31/2008
12/31/2008

360,000
360,000
360,000
360,000
360,000
360,000
360,000
360,000
360,000
360,000

Cost
Sh. In FVNA
GW

1,500,000
2,108,303
(608,303)

625000
12/31/2004
12/31/2005
12/31/2006
12/31/2007
12/31/2008

6%

15
208,333
166,667
125,000
83,333
41,667

427,007
431,028
435,290
439,807
444,595
449,671
455,051
460,754
466,800
473,208

amort
67,007
71,028
75,290
79,807
84,595
89,671
95,051
100,754
106,800
113,208

pv
7,116,790
7,183,797
7,254,825
7,330,115
7,409,922
7,494,517
7,584,188
7,679,239
7,779,994
7,886,793
8,000,001

35%

1,300,000

BV=FV
Cost
Sh. In FVNA
Goodwill

NI
Sh.
USANI
Interco:
Land-01
Land-02
PPE

1,300,000
1,400,000
(100,000)
2001
500,000
35%
175,000

2002
750,000
35%
262,500

(350,000)

350,000
(52,500)

Eqpt 1
Eqpt 2

2003
1,000,000
35%
350,000

2004
1,000,000
35%
350,000

70,000
(7,000)

(7,000)

(35,000)
7,000

Invty-04
NGW
SANI
IIA, beg
SANI
Dividends
IIA, end
Reconciliation:
BVNA
Share
Share in BVNA
Interco:
Land-01
Land-02
PPE
Eqpt 1
Eqpt 2
Invty
IIA, end.

100,000
(75,000)

7,000
(87,500)
78,750

560,000

385,000

341,250

1,300,000
(75,000)
(35,000)
1,190,000

1,190,000
560,000
(26,250)
1,723,750

1,723,750
385,000
(24,500)
2,084,250

2,084,250
341,250
(35,000)
2,390,500

4,400,000
35%
1,540,000

5,075,000
35%
1,776,250

6,005,000
35%
2,101,750

6,905,000
35%
2,416,750

(350,000)

(52,500)

(52,500)
63,000
(28,000)

(52,500)
56,000
(21,000)
(8,750)
2,390,500

1,190,000

1,723,750

2,084,250

Pitron, Shill and Caltix

JOINT OPERATION:
1-Jan-10 no entry
2-Jan-10 Cash-JO
Cash
3-Jan-10 Cash-JO
Loans Payable - JO
30-Jun-10 PPE - JO
Cash - JO
31-Dec-10 Inventory - JO
Acc. Dep - JO
depn
extracted tons
cost/ton
invty given to venturers

Problem 1:
JOINT OPERATION:
1-Jan-09 Cash - JO
50,000,000
50,000,000
50,000,000
50,000,000
100,000,000
100,000,000
2,500,000
2,500,000
7,500,000
1,200,000
6.25
350,000
2,187,500

Invty
Invty - JO

2,187,500

Interest Expense - JO
Interest Payable - JO

2,500,000

JOINT VENTURE:
2-Jan-10 Investment in JV
Cash
Share in JV's NI
Investment in JV
Inventory
Investment in JV

Raw Materials - JO
Work in Process - JO
Inventory
Inventory - JO
Equipment - JO

2,187,500

2,500,000

50,000,000

Wages
RM, used
OH expenses
Depreciation
Manufacturing Costs
WIP,12.31.09
FG, 12.31.09
FG, 12.31.09 - per JO books
FG distributed to operators

50,000,000
2,500,000
2,500,000
2,187,500

Cash-JO, 1.1.09
Cash-JO, 12.31.09
Decrease in cash

2,187,500
JOINT VENTURE:
1-Jan-09 Investment in JV
Inventory

T OPERATION:
Cash - JO
Cash
Raw Materials - JO
Work in Process - JO
Inventory
Inventory - JO
Equipment - JO
Acc. Dep. - JO
Accounts Payable - JO
Accrued Expenses - JO
Bank Loan - JO
Cash - JO

1,500,000
1,500,000
50,000
400,000
700,000
100,000
750,000
75,000
60,000
75,000
500,000
1,290,000

Problem 2:
JOINT OPERATION:
ABS:
1-Jan-09 Cash - JO
Equipment - JO
Cash
GMA:
1-Jan-09 Cash-JO
Equipment - JO
Equipment
Gain
Gain
Equipment - JO
EOP - ABS:

Wages
RM, used
OH expenses
Depreciation
Manufacturing Costs
WIP,12.31.09
FG, 12.31.09
FG, 12.31.09 - per JO books
FG distributed to operators

650,000
400,000
1,200,000
150,000
2,400,000
800,000
1,600,000
200,000
1,400,000

Cash-JO, 1.1.09
Cash-JO, 12.31.09
Decrease in cash

1,500,000
210,000
1,290,000

T VENTURE:
Investment in JV
Cash
Inventory
Investment in JV

Raw Materials - JO
Work in Process - JO
Inventory
Inventory - JO
Acc. Dep. - JO
Accounts Payable - JO
Accrued Expenses - JO
Bank Loan - JO
Cash - JO

1,500,000
1,500,000
700,000
700,000

Wages
RM, used
OH expenses
Depreciation
Manufacturing Costs
WIP,12.31.09
FG, 12.31.09
FG, 12.31.09 - per JO books
FG distributed to operators
Cash-JO, 1.1.09
Cash-JO, 12.31.09
Decrease in cash

JOINT VENTURE:
ABS:
1-Jan-09 Investment in JV
Cash

Inventory
Share in JV's NI

750,000
750,000
1,500,000

750,000
750,000
1,000,000
500,000
250,000
250,000
EOP - GMA:
50,000
400,000
700,000
100,000
75,000
60,000
75,000
500,000
540,000

650,000
400,000
1,200,000
150,000
2,400,000
800,000
1,600,000
200,000
1,400,000

per GMA's books

650,000
400,000
1,200,000
100,000
2,350,000
800,000
1,550,000
200,000
1,350,000

750,000
210,000
540,000

Acc. Dep - JO
75,000
50,000 --> should be

Raw Materials - JO
Work in Process - JO
Inventory
Inventory - JO
Acc. Dep. - JO
Accounts Payable - JO
Accrued Expenses - JO
Bank Loan - JO
Cash - JO
additional adjustment:
Acc. Dep - JO
400,000
WIP - JO
100,000
Invty - JO
700,000
Invty
1,200,000

overstated by 25,000 from POV of GMA

1,500,000
1,500,000

GMA:
1-Jan-09 Investment in JV
Equipment
Gain
Share in JV's NI
Investment in JV

700,000
700,000

Inventory
Investment in JV

50,000
400,000
700,000
100,000
75,000
60,000
75,000
500,000
540,000
25,000
8,333
2,083
14,583

1,500,000
1,000,000
500,000
250,000
250,000
685,417
685,417

NI
Share
USANI
Excess:
120000 Inventory
-200000 Eqpt
Interco:
Eqpt

2001
100,000
40%
40,000

20,000
(30,000)
3,000

IIA,beg.
ASANI
Dividends
SAOCI
IIA, end.
Recon:
BVNA
Sh
Excess:
Inventory
Eqpt
Interco:
Eqpt
Inventory
Goodwill

2003
700,000
33%
233,333

20,000

(120,000)
20,000

33,000

6,000
(55,556)
16,667
170,444

2,000,000
33,000
2,033,000

2,033,000
170,444
(58,333)
43,333
2,188,444

4,850,000
40%
1,940,000

6,325,000
33%
2,108,333

120,000
(180,000)

120,000
(160,000)

(27,000)

(21,000)

Inventory
ASANI

2002
550,000
33%
183,333

180,000
2,033,000

(38,889)
180,000
2,188,444

Cost
Sh. In FVNA
GW

6,000

X
cost

38,889
178,223

178,223

180,000

2000000
1820000
180000

500000
25%x