GUILARAN, KERR JOHN B.

BSA51KB1
Problem 14-2

1. Computation of Goodwill/Gain on Acquisition:

Acquisition Cost P 565,000

Less: Fair Value of Net Assets 670,000

Gain on Acquisition P (105,000)

2. Journal Entries:

Cash & Receivables (CAT Corp.) P 50,000

Inventory 150,000
Buildings & Equipment 300,000
Patent 200,000
Accounts Payable 30,000
Gain on Acquisition 105,000
Cash (DOG Company) 565,000
To record the acquisition of the net assets of CAT Corporation

Acquisition Expense P 5,000

Cash 5,000
To record acquisition-related costs

Problem 14-4

1. Computation of Goodwill/Gain on Acquisition:

Acquisition Cost P 600,000

Less: Fair Value of Net Assets 505,000

Goodwill P 95,000

2. Journal Entries:

Cash P 60,000
Accounts Receivable 100,000
Inventory 115,000
Land 70,000
Buildings & Equipment 350,000
Goodwill 95,000
Accounts Payable 10,000
Bonds Payable 180,000
Common Stock (P10 par) 120,000
Additional Paid-in Capital 480,000
To record the acquisition of the net assets of Tan Company

Acquisition Expense P 10,000

Additional Paid-in Capital 18,000
Cash 28,000
To record acquisition-related costs

Problem 14-6

1. Computation of Goodwill/Gain on Acquisition:

Acquisition Cost (P40) P 600,000

Less: Fair Value of Net Assets 420,000

Goodwill P 180,000

Acquisition Cost (P20) P 300,000

Less: Fair Value of Net Assets 420,000

Gain on Acquisition P (120,000)

2. Combined Balance Sheet After Acquisition

P40/share P20/share
Cash and receivables P 350,000 P 350,000
Inventory 645,000 645,000
Building and equipment 1,050,000 1,050,000
Accumulated depreciation (200,000) (200,000)
Goodwill 180,000 -

TOTAL ASSETS P 2,025,000 P 1,845,000

Accounts payable P 140,000 P 140,000

Bonds payable 485,000 485,000
Common stock P10 Par value 450,000 450,000
Additional paid-in capital 550,000 250,000
Retained Earnings (including gain from 400,000 520,000
acquisition)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY P 2,025,000 P 1,845,000
Problem 14-8
1. Computation of Goodwill/Gain on Acquisition:

Acquisition Cost P 2,400,000

Less: Fair Value of Net Assets 2,200,000

Goodwill P 200,000

2. Dollar’s Transport Comparative Statement of Comprehensive Income:

2011 2012 2013

Revenue P 1,400,000 P 1,800,000 P 2,100,000
Net Income 500,000 565,000 700,000
Earnings per share P 5.00 P 4.52 P 5.60

Revenue for 2012:

P 2,000,000
(200,000)

P 1,800,000

Net Income 2012:

P 620,000
(55,000)

P 565,000

Earnings per share 2012:

P 565,000 / 125,000 shares = P 4.52

Earnings per share 2013:

P 700,000 / 125,000 shares = P 5.60

Problem 14-10

a. Increase in common stock (P240,000 – P200,000) P 40,000

Increase in APIC (P420,000 – P60,000) 360,000

Value of shares issued P 400,000

b. Total assets of Subic after acquisition P1,130,000

Total assets of Subic before acquisition 650,000

Total fair value of assets of Clark before combination P 480,000

c. Par value of common stock after acquisition P 240,000

Par value of common stock before acquisition 200,000

Par value of common stock issued P 40,000

Divided by par value per share ÷ P5

Number of shares issued 8,000 shares

d. Value of shares computed in P 400,000

Number of shares issued ÷ 8,000

Market price per share P 50

Problem 14-12

1) Liability from contingent consideration 80,000

Loss on contingent payment 40,000
Cash 120,000
To record the payment of the Contingent Liability

Average
2011 Income 100,000.00 Income 110,000.00
2012 Income 120,000.00 Less 50,000.00
Total Income 220,000.00 Total 60,000.00
Divide 2.00 Multiply 2.00
Average
Income 110,000.00 Cash Payment 120,000.00

(2) Additional paid in capital 6,000

Common stock, P1 par 6,000
To record issuance for additional stocks issued

Average Income 110,000.00

Less 50,000.00
Total 60,000.00
Divide 10
Shares to be
Issued 6,000

(3) Additional paid in capital 100,000

 Common stock, P1 par 100,000
To record the issuance for additional stocks issued

Deficiency (P12 – P8) x 200,000 shares P800,000

Divided by fair value per share 8.00
Additional shares to be issued 100,000

Problem 14-14

1. Computation of Goodwill/Gain on Acquisition:

Acquisition Cost P 500,000

Less: Fair Value of Net Assets 400,000
Estimated Recoverable Amount 400,000
Carrying Amount 340000
Fair Value Of Goodwill 60,000
Goodwill Carying Amount 100000
Impairment Loss on Goodwill ( 40,000 )

Goodwill P 100,000

2.

a.) The goodwill is not impaired. As a rule, Goodwill is considered to be impaired

only if carrying amount of the unit’s net assets (including goodwill) exceeds the
recoverable amount of the unit.

b.)

Journal Entry:

Goodwill Impairment Loss 40,000

Goodwill 40,000
To record the impairment of Goodwill