Problem 1: Calculation of consideration transferred

James has acquired 100% of the equity of Bang on December 31, 2011. There are three elements to the purchase
consideration. An immediate payment of P100,000,000 and two further payments of P2,000,000 if the return on capital
employed (ROCE) exceeds 10% in each of the subsequent financial years ending December 31. James uses a discount
rate of 7% in any present value calculations.
Required:
Value the total consideration at the acquisition date.

Problem 2: Calculation of goodwill

Mark has acquired a subsidiary on January 1, 2011. The fair value of the net assets of the subsidiary was P434,000,000.
Mark acquired 70% of the shares of the subsidiary for P429,000,000. The noncontrolling interest was fair valued at
P136,000,000.

Required:
Calculate goodwill using both methods allowed in PFRS 3.

Problem 3: Calculation of gain on the bargain purchase

On January 1, 2011, an entity, Y, acquires 85% of the equity interests of X, a private entity, in exchange for cash of
P45,000,000. The owners of X wish to sell the entity quickly. Y measures the separately recognizable identifiable assets
acquired and the liabilities assumed as of the acquisition date in accordance with the requirements of PFRS 3. The
identifiable assets are measured at P75,000,000 and the liabilities are measured at P15,000,000. The fair value of the
15% noncontrolling interest in X is P12,000,000.

Required
Calculate the gain on the bargain purchase.

Problem 4: Step acquisition

On January 1, 2011, Angel acquired a 50% interest in Gabriel for P120 million. Angel already held a 20% interest which
had been acquired for P40 million but which was valued at P48 million at January 1, 2011. The fair value of the
noncontrolling interest at January 1, 2011 was P80 million and the fair value of the identifiable net assets of Gabriel was
P220 million.

Required:
Calculate goodwill on January 1, 2011 using full goodwill method.

Problem 5 chapter 3 baker

On January 3, 2012, Sheila Company acquired 80 percent of Frazer Corporation's ordinary share for P344,000 in cash. At
the acquisition date, the book values and fair values of Frazer's assets and liabilities were equal, and the fair value of the
noncontrolling interest was equal to 20 percent of the total book value of Frazer. The stockholders' equity accounts of the
two companies at the acquisition date are:
Sheila Frazer
Ordinary shares (P5 par value) P500,000 P200,000
Share premium 300,000 80,000
Retained earnings 350,000 150,000
Total shareholders’ equity P1,150,000 P430,000

Noncontrolling interest was assigned income of P11,000 in Sheila's consolidated income statement for 2012.

1. Based on the preceding information, what amount will be assigned to the noncontrolling interest on January 3, 2012,
in the consolidated balance sheet?

2. Based on the preceding information, what will be the total stockholders' equity in the consolidated balance sheet as
of January 3, 2012?

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 3. Based on the preceding information, what will be the amount of net income reported by Frazer Corporation in
2012?

Problem 6 chapter 7 baker

Sub Company sells all its output at 20 percent above cost to Par Corporation. Par purchases its entire inventory from Sub.
The incomes reported by the companies over the past three years are as follows:

Sub Par
Year Company’s Corporation’s
Net Operating
Income Income
2011 P150,000 P225,000
2012 135,000 360,000
2013 240,000 450,000

Sub Company sold inventory for P300,000, P262,500 and P337,500 in the years 2011, 2012, and 2013 respectively. Par
Company reported ending inventory of P105,000, P157,500 and P180,000 for 2011, 2012, and 2013 respectively. Par
acquired 70 percent of the ownership of Sub on January 1, 2011, at underlying book value. The fair value of the
noncontrolling interest at the date of acquisition was equal to 30 percent of the book value of Sub Company.

3. Based on the information given above, what will be the consolidated net income for 2011?

4. Based on the information given above, what will be the consolidated net income for 2012?

5. Based on the information given above, what will be the income assigned to controlling interest for 2012?

6. Based on the information given above, what will be the income to noncontrolling interest for 2013?

7. Based on the information given above, what will be the income to controlling interest for 2013?

Problem 7
Choi Corporation owns 90 percent of Zhaik Company's share. At the end of 2013, Choi and Zhaik reported the following
partial operating results and inventory balances:
Choi Zhaik
Corporation Company
Total sales P500,000 P350,000
Sales to Zhaik Company 100,000
Sales to Choi Corporation 150,000
Net income 15,000
Operating income (excluding investment income from 56,000
Zhaik)
Inventory on hand, December 31, 2013, purchased from:
Zhaik Company 36,000
Choi Corporation 31,000

Choi regularly prices its products at cost plus a 30 percent markup for profit. Zhaik prices its sales at cost plus a 10
percent markup. The total sales reported by Choi and Zhaik include both intercompany sales and sales to nonaffiliates.

1. Based on the information given above, what amount of sales will be reported in the consolidated income statement
for 2013?

2. Based on the information given above, what balance will be reported for inventory in the consolidated balance sheet
for December 31, 2013?

Problem 8
Income statement information for the year 2013 for Aga Corporation and its 60% owned subsidiary, Jimmy Corporation is
as follows:
Aga Jimmy
Sales P900,000 P350,000

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 Cost of sales 400,000 250,000
Gross profit P500,000 P100,000
Operation expenses 250,000 50,000
Jimmy’s net income P 50,000
Aga’s separate income P250,000

Intercompany sales for 2013 are upstream (from Jimmy to Aga) a total P100,000. Aga’s December 31, 2013 inventories
contained unrealized profits of P 5,000 and P10,000, respectively.

1. The non-controlling interest in net income for 2013:

2. The consolidated/group net income for 2013:

3. The consolidated sales for 2013:

4. The consolidated cost of sales for 2013:

Problem 9
Income information for the year 2013 taken from the separate company financial statements of Peras Corporation and its
75% owned subsidiary, Sky Corporation is presented as follows:
Peras Sky
Sales P1,000,000 P460,000
Gain on sale 20,000
Divide income 75,000
Cost of goods sold (500,000) (260,000)
Depreciation Expenses (100,000) (60,000)
Net income P295,000 P100,000

Peras gain on sale of building relates to a building with a book value of P40,000 a 10-year remaining useful life that was
sold to Sky for P60,000 on January 1, 2013.

1. At what amount will the gain on sale o building appear on the consolidated income statement of Peras and Sky for
the year 2013?

2. The consolidate depreciation expenses for 2013:

3. The non-controlling interest in net income for 2013:

4. The consolidated / group net income for 2013:

Problem 10
DG Corporation acquired 80 percent of Ann Corporation's voting ordinary share on January 1, 2012. On December 31,
2013, DG received P390,000 from Ann for an equipment DG had purchased on January 1, 2005, for P400,000. The
equipment is expected to have a 10-year useful life and no salvage value. Both companies depreciate equipments on a
straight-line basis.

1. Based on the preceding information, in the preparation of the 2013 consolidated financial statements, equipment will
be:

2. Based on the preceding information, the gain on sale of the equipment recorded by DG for 2013 is:

3. Based on the preceding information, in the preparation of the 2012 consolidated financial statements, equipment will
be:

4. Based on the preceding information, in the preparation of the 2012 consolidated income statement, depreciation
expense will be:
A. debited for P25,000 in the eliminating entries.
B. credited for P15,000 in the eliminating entries.
C. debited for P15,000 in the eliminating entries.
D. credited for P25,000 in the eliminating entries.

5. Based on the preceding information, in the preparation of the 2012 consolidated balance sheet, accumulated
depreciation will be:
A. debited for P160,000 in the eliminating entries.
B. credited for P160,000 in the eliminating entries.
C. credited for P135,000 in the eliminating entries.
D. debited for P135,000 in the eliminating entries.

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Problem 11
On 1/1/12 Jason sells a machine with a P20,000 book value to its subsidiary Nicole for P30,000. Nicole intends to use the
machine for 4 years. On 12/31/13 Nicole sells the machine to an outside party for P14,000. What amount of gain or (loss)
for the sale of assets is reported on the consolidated financial statements?

Problem 12
Mark Corporation is an 80%-owned subsidiary of Kristine, Inc., acquired by Kristine several years ago. On January 1,
2011, Kristine sold land with a book value of P60,000 to Mark for P90,000. Mark resold the land to an unrelated party for
P100,000 on September 26, 2012. The land will be included in the December 31, 2011 consolidated balance sheet of
Kristine, Inc. and Subsidiary at _______.