Problem 1 AK BK 2,625,000.00 2,056,250.00 - 87,500.00 131,250.00 - 297,500.00 - 196,875.00 - 21,875.00 - 15,312.50 2,218,125.00 1,975,312.50 4,193,437.50

2,935,406.25 1,258,031.25 70% 30%

Problem 2 AB QR Total

Cash 136,000.00 76,000.00 274,400 486,400.00 A/R 88,000.00 48,000.00 Inv 304,000.00 364,000.00 Machinery 480,000.00 440,000.00 A/P (216,000.00) (144,000.00) N/P (60,000.00) Capital 792,000 724,000 Adj.: Dep 20,000 Adj.: Inventory (24,000.00) Adj. Cap 812,000 700,000 Cash Investment 274,400

812,000 974,400

Problem 3 CD Adj. CD

A/R 400,000.00 (32,000.00) 368,000.00 Inv. 1,120,000.00 (80,000.00) 1,040,000.00 Machinery 2,240,000.00 (48,000.00) 2,192,000.00 Intangibles 920,000.00 (56,000.00) 864,000.00 Net Investment 4,464,000.00

MJ Cash 3,120,000.00 Equipment 1,344,000.00 (Squeezed) Net Investment 4,464,000.00

Problem 4

Capital Beg 695,000.00 CD 605,000.00 55% Capital End 605,000.00 MV 495,000.00 45% Total Decrease 90,000.00 1,100,000.00 Decrease (exp) 50,000.00 Acc. Dep (40,000.00)

495,000.00

Net Effect 455,000.00

Problem 5 MG AN TOTAL

MZ's Investment of Equipment

A/R 262,500.00 195,000.00 457,500 Inv 450,000.00 207,500.00 657,500 PPE 912,500.00 822,500.00 1,735,000 A/P (150,000.0000) (112,500.0000) (262,500.00) Net Assets 1,475,000.00 1,112,500.00 2,587,500 Cash invested 2,512,500.00 2,512,500.00 5,025,000

3,987,500.00 3,625,000.00 7,612,500

1475000 + x = (1112500 + x) 1.1 1475000 + x = 1223750 + 1.1x

1475000-1223750 = 0.1x 251250 = 0.1x x = 2512500

Problem 6 CY CR 175,000.00 240,000.00

Investment 150,000.00 120,000.00 Withdrawal (40,000.00) Capital B4 Sharing 285,000.00 360,000.00

Total Bonus (7 months) 16,625.00 21,000.00 37,625.00 Salary (7 Months) 35,000.00 43,750.00 78,750.00

90,000.00 60,000.00 150,000.00 Profit Share 141,625.00 124,750.00 266,375.00 Capital B4 Sharing 285,000.00 360,000.00 Capital end 426,625.00 484,750.00

Problem 7 AY AN TOTAL

Salary 261,000.00 259,000.00 520,000.00 Interest 27,500.00 27,500.00 55,000.00 Bonus - - Residual Income - - Profit Share 288,500.00 286,500.00 575,000.00

Problem 8

PR Months Outstanding Jan-01 400,000.00 12 4,800,000.00

Mar-01 150,000.00 10 1,500,000.00 Apr-01 (50,000.00) 9 (450,000.00)Jul-01 -

Oct-01 110,000.00 3 330,000.00 6,180,000.00 515,000.00

SB Months Outstanding Jan-01 500,000.00 12 6,000,000.00

Mar-01 - Apr-01 (200,000.00) 9 (1,800,000.00)Jul-01 -

Oct-01 100,000.00 3 300,000.00

4,500,000.00 375,000.00

LM Months Outstanding Jan-01 300,000.00 12 3,600,000.00

Mar-01 375,000.00 10 3,750,000.00 Apr-01 - Jul-01 (125,000.00) 6 (750,000.00)

Oct-01 180,000.00 3 540,000.00 7,140,000.00 595,000.00

PR SB LM TOTAL Interest 51,500.00 37,500.00 59,500.00 148,500.00 Salary 75,000.00 125,000.00 50,000.00 250,000.00

118,750.00 118,750.00 131,900.00 131,900.00 65,950.00 329,750.00 258,400.00 413,150.00 175,450.00 847,000.00

Problem 9 CD NH GV TOTAL

Salary 1,250.00 1,250.00 2,500.00 Interest 1,500.00 1,187.50 1,062.50 3,750.00 Bonus 8,250.00 8,250.00 Residual 13,750.00 19,250.00 22,000.00 55,000.00

24,750.00 21,687.50 23,062.50 69,500.00

Problem 10 EZ Months Outstanding

Jan-01 250,000.00 12 3,000,000.00 Apr-01 150,000.00 9 1,350,000.00 Jul-01 (125,000.00) 6 (750,000.00)

Sep-01 (225,000.00) 4 (900,000.00)Oct-01 350,000.00 3 1,050,000.00

Ending 400,000.00 3,750,000.00 312,500.00

VX Months Outstanding Jan-01 350,000.00 12 4,200,000.00 Apr-01 (100,000.00) 9 (900,000.00)Jul-01 250,000.00 6 1,500,000.00

Sep-01 300,000.00 4 1,200,000.00 Oct-01 (200,000.00) 3 (600,000.00)

Ending 600,000.00 5,400,000.00 450,000.00

EZ VX TOTAL Interest 25,000.00 36,000.00 61,000.00 Salary 125,000.00 175,000.00 300,000.00 Bonus - - Residual (293,000.00) (293,000.00) (586,000.00)

(143,000.00) (82,000.00) (225,000.00)

250,000.00 (82,000.00)

168,000.00

Problem 11.1 RV MC GR 525,000.00 262,500.00 787,500.00

20% Purchase - 105,000.00 - 52,500.00 - 157,500.00 Capital Balance 420,000.00 210,000.00 157,500.00

Problem 11.2 Purchase Price 315,000.00 RV (75%) MC (25%) GR Divide: 20% 420,000.00 210,000.00 Total Part. Capital 1,575,000.00 472,500.00 157,500.00 Multiply 80% 892,500.00 367,500.00 315,000.00 End Capital of RV & MC 1,260,000.00 RV Capital After Purchase - 420,000.00 MC Capital After Purchase - 210,000.00 Bonus to Old Partners 630,000.00

Problem 12 AC CC

Old Partners (75%) 3,969,000.00 4,704,000.00 (735,000.00) DJ (25%) 1,323,000.00 588,000.00 735,000.00

5,292,000.00 5,292,000.00 -

Problem 13 Capital Transfer: SR to AX 126,000.00 AC CC Cash Contribution 840,000.00

PJ 997,500.00 388,500.00

966,000.00 SR 714,000.00 MJ 630,000.00 AX 735,000.00 966,000.00 - 231,000.00 Bonus

3,465,000.00 3,307,500.00 157,500.00 Revaluation

Problem 14 PV,BK, TF 1,575,000.00 Income 210,000.00 Adj.: Overvalued Inv. - 35,000.00 Capital Before JP 1,750,000.00

AC CC PV,BK,TF 1,470,000.00 1,750,000.00 JP 367,500.00 87,500.00

1,837,500.00 1,837,500.00

PV 588,000.00 40% BK 588,000.00 40% TF 294,000.00 20%

1,470,000.00

Problem 15 AC CC

JM 293,562.50 245,000.00 48,562.50

PK 147,437.50 131,250.00 16,187.50 CY 147,000.00 211,750.00 - 64,750.00

588,000.00 588,000.00 -

Problem 16.1 Retirement: Interest Sold to a Partner (similar to purchase la)

NP 280,000.00 Interest from RT 245,000.00 end Capital 525,000.00

Problem 16.2 RT, Cap 245,000.00 273,000.00 HK, Cap 11,200.00 - 245,000.00 NP, Cap 16,800.00 28,000.00 Cash 273,000.00

Problem 17 25% 25% 50% VL MD LV TOTAL

Beg Cap 643,750.00 481,250.00 1,125,000.00 2,250,000.00 Revaluation (300000) 75,000.00 75,000.00 150,000.00 300,000.00 Net Loss - 187,500.00 - 187,500.00 - 375,000.00 (750,000.00) Capital b4 Retirement 531,250.00 368,750.00 900,000.00

- 531,250.00 - 3,750.00 - 7,500.00 end Cap - 365,000.00 892,500.00

Remember: VL, Capital 531,250.00 MD, Capital 3,750.00 11,250.00 LV, Capital 7,500.00 Cash 542,500.00

Problem 18.

770000 + x - 196000 = 630000 + 0.8x 0.2x = 56000 x = 280000

Problem 19 Partnership Capital 348,250.00 Adj. - 26,250.00 Cap before retirement 322,000.00 Cash Payment - 93,100.00 Capital After Retirement 228,900.00

Problem 20 Partnership Capital 340,000.00 10,000.00 Adj. 40,000.00 25% Cap before retirement 380,000.00 40,000.00 Cash Payment - 95,000.00 Capital After Retirement 285,000.00

Critical Points to Remember:

2. Retirement: Interest Sold to a Partner (similar to purchase la)

3. Retirement of Partners: Interest sold to the PARTNERSHIP RetiringPartner VL, Capital xx

Old/Remaining Partners MD, Capital xx LV, Capital xx Cash xx

1. During the distribution of profit (bonus calculation, interest on capital balance, Salaries) ALWAYS CHECK the period covered by the profit (1 year, 6 months, etc)

The Difference Between the Cash Paid and the Capital Balance of the partner prior to retirement charged/added to the remaining partners. Addition or Charging will depend upon the Cash consideration given

by the partnership.

Problem 1: Long Method 3/5 1/5 1/5 Cash NCA Liab A B C

22,000.00 264,000.00 173,250.00 129,250.00 (24,750.00) 8,250.00 55,000.00 (82,500.00) (16,500.00) (5,500.00) (5,500.00) (27,500.00)

(77,000.00) (77,000.00)- 181,500.00 96,250.00 112,750.00 (30,250.00) 2,750.00

24,750.00 24,750.00 24,750.00 181,500.00 96,250.00 112,750.00 (5,500.00) 2,750.00

(55,000.00) (63,250.00) (8,250.00)4,950.00 1,650.00 1,650.00

24,750.00 126,500.00 96,250.00 54,450.00 (3,850.00) 4,400.00 148,500.00 (110,000.00) 23,100.00 7,700.00 7,700.00 38,500.00 173,250.00 16,500.00 96,250.00 77,550.00 3,850.00 12,100.00

- 96,250.00 - 96,250.00 77,000.00 16,500.00 - 77,550.00 3,850.00 12,100.00

Safe Payments 77,550.00 3,850.00 12,100.00

Max. Possible Loss 16,500.00 - 9,900.00 - 3,300.00 - 3,300.00 67,650.00 550.00 8,800.00

Short Method: Cash Priority Program A B C A B C Total

129,250.00 (24,750.00) 8,250.00 divide 3/5 1/5 1/5

215,416.67 - 41,250.00 - 174,166.67 P1 104,500.00 104,500.00 41,250.00 - 41,250.00 - 41,250.00 - 41,250.00 P2 24,750.00 8,250.00 33,000.00 - - 137,500.00 Total Cash Available

Beg 22,000.00 A B C Asset Sold 55,000.00 P1 104,500.00 104,500.00 B's defecit removal 24,750.00 P2 24,750.00 8,250.00 33,000.00 Asset Sold 148,500.00 P3 1,650.00 550.00 550.00 2,750.00

Assets Distributed 63,250.00 130,900.00 550.00 8,800.00 140,250.00 Liabilities Paid - 173,250.00 Cash to be distibuted 140,250.00

*Critical Point To Remember: NonCash Assets Distributed to Partners during the liquidation are considered as cash payments to them.

Problem 2 Cash NCA Liab D,Capital L, Capital A, Capital

1,950,000.00 5,500,000.00 1,550,000.00 2,375,000.00 1,625,000.00 1,900,000.00 (1,300,000.00) 81,250.00 (1,625,000.00) 243,750.00

650,000.00 5,500,000.00 1,550,000.00 2,456,250.00 - 2,143,750.00 6,150,000.00 6,150,000.00 420,000.00 (840,000.00) 200,000.00 (155,000.00) (465,000.00) (620,000.00)

1,070,000.00 4,660,000.00 1,750,000.00 2,301,250.00 - 1,678,750.00 5,730,000.00 5,730,000.00 1,730,000.00 (2,330,000.00) (150,000.00) (450,000.00) (600,000.00)2,800,000.00 2,330,000.00 1,750,000.00 2,151,250.00 - 1,228,750.00 5,130,000.00 5,130,000.00

(1,750,000.00) (1,750,000.00)1,050,000.00 2,330,000.00 - 2,151,250.00 - 1,228,750.00 3,380,000.00 3,380,000.00

875,000.00 (875,000.00) 175,000.00 2,330,000.00 - 1,276,250.00 - 1,228,750.00

SAFE PAYMENTS 2,151,250.00 1,228,750.00

Maximum Possible Loss 2,505,000.00 - 626,250.00 - 1,878,750.00 1,525,000.00 - 650,000.00 - 650,000.00 650,000.00 875,000.00 -

Critical Points to remember 1. Cash Witheld are added to NCA to compute for the Maximum Possible Loss 2. Even if the problem expressly said that it would only a part of the Liabilities yet there is enough cash to pay it all.. YOU SHOULD PAY ALL THE LIABILITIES 3. If there are not enough information given in the problem and the A=L+C is not balance, The NonCash Assets account is the most logical account to be credited to balance the accounting equation

Problem 3 Cash NCA Liab J A C

875,000.00 1,375,000.00 1,260,000.00 1,940,000.00 1,525,000.00 1,740,000.00 NI 280,000.00 330,000.00 240,000.00 850,000.00 Salary 222,500.00 222,500.00 445,000.00 890,000.00 Residual

1,250,000.00 6,750,000.00 1,535,000.00 1,762,500.00 2,492,500.00 2,210,000.00 2,700,000.00 (squeezed) 25% 25% 50% J A C

(1,535,000.00) (1,535,000.00) 7,050,000.00 9,970,000.00 4,420,000.00 (220,000.00) 2,920,000.00 730,000.00

7,050,000.00 7,050,000.00 4,420,000.00 2,630,000.00 2,630,000.00 657,500.00 657,500.00

2,195,000.00 4,420,000.00 4,420,000.00 4,420,000.00 657,500.00 1,387,500.00 37,500.00 37,500.00 75,000.00

Cash Liab J A C 695,000.00 1,425,000.00 75,000.00 1,250,000.00 6,750,000.00 1,535,000.00 1,762,500.00 2,492,500.00 2,210,000.00 2,700,000.00 (2,000,000.00) 175,000.00 175,000.00 350,000.00 700,000.00 (220,000.00) (55,000.00) (55,000.00) (110,000.00)

(1,535,000.00) (1,535,000.00)2,195,000.00 4,750,000.00 - 1,882,500.00 2,612,500.00 2,450,000.00

(2,195,000.00) (695,000.00) (1,425,000.00) (75,000.00)- 4,750,000.00 - 1,187,500.00 1,187,500.00 2,375,000.00

2,160,000.00 (2,250,000.00) (22,500.00) (22,500.00) (45,000.00) - 90,000.00 (25,000.00) (6,250.00) (6,250.00) (12,500.00)

2,135,000.00 2,500,000.00 - 1,158,750.00 1,158,750.00 2,317,500.00 (2,125,000.00) (531,250.00) (531,250.00) (1,062,500.00)

10,000.00 627,500.00 627,500.00 1,255,000.00

Safe Payments 1,158,750.00 1,158,750.00 2,317,500.00

Max. Possible Loss 2,510,000.00 627,500.00 627,500.00 1,255,000.00 531,250.00 531,250.00 1,062,500.00

Critical Points to Remember: 1. Cash Priority Program: After all Priorities have been satisfied during Cash Payments to partners, any remaining cash will be

shared by ALL of the partners using P/L sharing ratio

Problem 4 20% 20% 60% Cash NCA Liabilities J C A

775,000.00 6,750,000.00 1,100,000.00 1,275,000.00 1,625,000.00 3,525,000.00 1,600,000.00 (1,875,000.00) (55,000.00) (55,000.00) (165,000.00) (275,000.00)(175,000.00) (35,000.00) (35,000.00) (105,000.00)

(150,000.00) 30,000.00 30,000.00 90,000.00 150,000.00 2,200,000.00 4,875,000.00 950,000.00 1,215,000.00 1,565,000.00 3,345,000.00 (950,000.00) (950,000.00)

1,250,000.00 4,875,000.00 - 1,215,000.00 1,565,000.00 3,345,000.00 1,200,000.00 230,000.00 580,000.00 390,000.00

50,000.00 4,875,000.00 985,000.00 985,000.00 2,955,000.00

Max. Possible loss 4,925,000.00

Critical Point to Remember:

Problem 5 40% 40% 20% Cash NCA Liab S C A Income 2,570,000.00

350,000.00 7,375,000.00 1,125,000.00 2,258,000.00 2,778,000.00 1,564,000.00 2,083,875.00 2,130,000.00 0.40 0.40 0.20 - 175,000.00 5,645,000.00 6,945,000.00 7,820,000.00 - 1,125,000.00 875,000.00 175,000.00

5,645,000.00 6,945,000.00 6,945,000.00 1,300,000.00 1,300,000.00 520,000.00 260,000.00

1,133,875.00 5,645,000.00 5,645,000.00 5,645,000.00 520,000.00 435,000.00 (1,043,875.00) 35,550.00

90,000.00 Witheld for future expense 555,550.00

1. Cash Priority Program: After all Priorities have been satisfied during Cash Payments to partners, any remaining cash will be shared by ALL of the partners using P/L sharing ratio

2. The Maximum Possible Loss that a partner can absorbed (schedule of safe payments) and his Ending Capital Balance during that period are THE SAME

1. Always be cautios and be careful for cashwithelds (often time, natatago ini ha problem). Cashwithelds are critical in computing for the MAXIMUM POSSIBLE LOSS.

420,000.00 200,000.00 620,000.00 420,000.00

TOTAL

730,000.00 P1

1,315,000.00 P2

150,000.00 All 2,195,000.00

955,000.00 88,875.00 1,043,875.00

Problem 1 Total Consideration Stock Issued at FV 750,000.00 Additional Cash 125,000.00 Contingent Consideration 15,000.00 890,000.00

Net Assets: FMV 660,000.00 Goodwill 230,000.00

Net Identifiable Assets 660,000.00 Goodwill 230,000.00

Common Stock 690,000.00 APIC 60,000.00 Cash 125,000.00 Contingent Consideration Payable 15,000.00

Retained Earninggs 14,000.00 APIC 60,000.00

Cash 74,000.00

Other Acquisition Expense or RE 19,000.00 A/P 19,000.00

Retained Earnings Beg: 250,000.00 Excess of Stock Issue Cost 14,000.00 Other Expenses 19,000.00 Retained Earnings End: 217,000.00

Liabilites - Parent 65,000.00 Liabilites - Added Due to Acquisition 35,000.00 Contingent Consideration 15,000.00 Other Acquisition Cost Incurred (NOT YET PAID) 19,000.00 Total Liabilities 134,000.00

Problem 2

JKL Assets: BV 998,400.00 Acquisition Price JKL Liab: BV - 569,600.00 Net Assets FMV Net Assets 428,800.00 Gain on Acquisition Obsolete Inventory - 64,000.00 Delivery Van 192,000.00 NA: BV b4 FMV adj of Machinery 556,800.00 FMV Adjustment of Machinery - 80,800.00 SQUEEZED Net Assets: FMV 476,000.00

Book Value Of Machinery 345,600.00

Stock issuance Costs are Charged to APIC (issuance of share during acquisition, diri upod an APIC an Parent)… If exhausted na an APIC, charge the excess to Retained

Earnings..

Other Expenses related to Acquisition except for Stock Issuance Costs are closed to Retained Earnings at Year End

FMV Adjustment - 80,800.00 FMV of Machinery 264,800.00

JKL Assets: BV 998,400.00 Acquisition Price JKL Liab: BV - 569,600.00 Net Assets FMV Net Assets 428,800.00 Goodwill Obsolete Inventory - 64,000.00 Delivery Van 192,000.00 NA: BV b4 FMV adj of Machinery 556,800.00 FMV Adjustment of Machinery 78,200.00 SQUEEZED Net Assets: FMV 635,000.00

Book Value Of Machinery 516,500.00 FMV Adjustment 78,200.00 FMV of Machinery 594,700.00

Problem 3

Total Acquisition Price: Total Assets Acquired @ FMV Stock Issuance 1,715,000.00 Liabilities Additional Cash Payment 375,000.00 Net Assets FMV Contingent Payment 148,000.00 Total Acquisition Price: 2,238,000.00 Net Assets FMV 1,591,000.00 SQUEEZED Total Asset Acquired Goodwill (Given) 647,000.00 Total Asset Parent

Cash Payment Goodwill TOTAL ASSETS

Increase in Liabilities (Liabilities Added) 1.) Liabilities of Acquiree 530,000.00 2.) Contingent Payment 148,000.00 3.) Other Expensed INCURRED 28,000.00

706,000.00

Problem 5: Measurement Period - 1 Year from the Date of Acquisition

Total Acquisition Price: Total Acquisition Price: Cash 17,450,000.00 Cash Contingent Payment 1,015,000.00 18,465,000.00 Contingent Payment

Total Acquisition Price: Net Assets: Temporary Appraisal 12,385,000.00 GOODWILL 6,080,000.00 Net Assets: FMV Decrease in Contingent Payment - 547,000.00 Goodwill: FINAL Decrease in Contingent Payment - 72,000.00

Critical: INCURRED Expenses not CASH Paid Expenses

Increase in Fair Value - 4,430,000.00 Decrease in Contingent Payment - 112,000.00 Decrease in Fair Value 940,000.00 GOODWILL Adjusted 1,859,000.00

Problem 6 1.) Price Paid 319,500.00 SQUEEZED Contingent Payment 54,000.00 Total Acquisition Cost 373,500.00 Net Assets FMV 274,500.00 Goodwill 99,000.00

2.) Parent (70%) NCI-NI (30%) Total Price 157,500.00 91,500.00 249,000.00 NA-FMV 192,150.00 82,350.00 274,500.00 GAIN - 34,650.00 9,150.00 - 25,500.00

3.) Parent (80%) NCI-NI (20%) Total Price 205,200.00 54,900.00 260,100.00 NA-FMV 219,600.00 54,900.00 274,500.00 GAIN - 14,400.00 - - 14,400.00

SHE - Parent Before Adj. 2,115,000.00 NCI-NAS 54,900.00 Gain on Acquisition 14,400.00 SHE - Parent Adjusted 2,184,300.00

4.) Parent (90%) NCI-NI (10%) Total Price 364,500.00 40,500.00 405,000.00 NA-FMV 247,050.00 27,450.00 274,500.00 Goodwill 117,450.00 13,050.00 130,500.00

Body Co. Assets 2,250,000.00 Cash Paid - 364,500.00 Body Co. Assets Adj. 1,885,500.00 Shop Co Assets 297,000.00 Goodwill 130,500.00

2,313,000.00

Problem 7

Stockholder's Equity - Espirirt 2,437,500.00 Investment in Espirit 1,584,375.00 65% NCI 853,125.00 35%

Adjustments to Contingent Payment are allowed only in the MEASUREMENT PERIOD.. Changes in Contingent Payment beyond the Measurement Period are

not considered

Adjustments to Fair Value (due to temporary appraisal at Acquisition period) are allowed only up to the MEASUREMENT PERIOD.. Changes in Contingent

Payment beyond the Measurement Period are not considered

Identifiable Assets (FV adustments) 436,250.00 Goodwill Investment in Espirit 468,750.00 NCI

Total Purchase Price / Total Investment in Espirit 2,053,125.00

SHE - Espirit 2,437,500.00 Identifiable Assets 436,250.00 Net Assets FMV 2,873,750.00

Assumption 1: NCI measured at Fair Value (Ngadi la na Assumption ma.apply an Control Premium Adjustment) Parent (65%) NCI (35%) Total Price

Price 2,053,125.00 1,068,509.62 3,121,634.62 Control Premium NA-FMV 1,867,937.50 1,005,812.50 2,873,750.00 Implied Price Goodwill 185,187.50 62,697.12 247,884.62 Divide: % - Acquired

Implied Value multiply: % - NCI NCI of 35%

Assumption 2: NCI measured at proportionate relevant share Parent (65%) NCI (35%) Total

Price 2,053,125.00 1,005,812.50 3,058,937.50 NA-FMV 1,867,937.50 1,005,812.50 2,873,750.00 Goodwill 185,187.50 - 185,187.50

Assumption 3: NCI measured at FV of 1150000 Parent (65%) NCI (35%) Total

Price 2,053,125.00 1,150,000.00 3,203,125.00 NA-FMV 1,867,937.50 1,005,812.50 2,873,750.00 Goodwill 185,187.50 144,187.50 329,375.00

ALWAYS TAKE NOTE that the Value of NCI should not be LESSER than the NCI - Net Identifiable Assets

AP < NA = Gain Acquisition Price 327,200.00 Net Assets FMV 476,000.00 Gain on Acquisition 148,800.00

****Treatment: Income Statement Item.. Added to Other Income

Stock issuance Costs are Charged to APIC (issuance of share during acquisition, diri upod an APIC an Parent)… If exhausted na an APIC, charge the excess to Retained

Earnings..

Other Expenses related to Acquisition except for Stock Issuance Costs are closed to Retained Earnings at Year End

Acquisition Price LOWER than Net Assets Acquired @ FMV results to GAIN ON

ACQUISITION

AP > NA = Goodwill Acquisition Price 1,037,000.00 Net Assets FMV 635,000.00

402,000.00

****Treatment: Balance Sheet Item… ASSET

Total Assets Acquired @ FMV 2,121,000.00 SQUEEZED - 530,000.00 1,591,000.00

2,121,000.00 4,890,000.00 - 375,000.00 647,000.00 7,283,000.00

Total Acquisition Price: 17,450,000.00

Contingent Payment 284,000.00 Total Acquisition Price: 17,734,000.00

15,875,000.00 1,859,000.00

Acquisition Price HIGHER than Net Assets Acquired @ FMV results to GOODWILL

Remember: Goodwill will be part of the Acquirer's Total Asset… AYAW

KANGALIMOT… GOODWILL.. GOODWILL

Adjustments to Contingent Payment are allowed only in the MEASUREMENT PERIOD.. Changes in Contingent Payment beyond the Measurement Period are

not considered

Adjustments to Fair Value (due to temporary appraisal at Acquisition period) are allowed only up to the MEASUREMENT PERIOD.. Changes in Contingent

Payment beyond the Measurement Period are not considered

Assumption 1: NCI measured at Fair Value (Ngadi la na Assumption ma.apply an Control Premium Adjustment) 2,053,125.00

Control Premium 68,750.00 Implied Price 1,984,375.00 Control Premium 68,750.00 Divide: % - Acquired 0.65 Implied Value 3,052,884.62 multiply: % - NCI 0.35 NCI of 35% 1,068,509.62

Control Premium - Deducted ha Purchase Price in Computing for the Total Implied Value of the Acquiree used in computing the NCI

ALWAYS TAKE NOTE that the Value of NCI should not be LESSER than the NCI - Net Identifiable Assets

Control Premium - Deducted ha Purchase Price in Computing for the Total Implied Value of the Acquiree used in computing the NCI

Problem 3: Critical: Acquisition Date * Goal Compute for the NA(FMV) at Acquisition Date…. Cost of Investment Net Assets (FMV)

Purchase Price 2,345,000.00 2,340,000.00 Net Assets @ Year End: Book Value NCI -Given FV 470,000.00 - 170,000.00 Net Income from the Date of Acquisition to Year End Total 2,815,000.00 60,000.00 Dividends Declared after the Acquisiton Date FV of NA Acquired 2,246,000.00 2,230,000.00 Net Assets @ Acquisition Date: Book Value Goodwill 569,000.00 - 44,000.00 Overstated Inventories

60,000.00 Understated Equipment 2,246,000.00 Net Assets @ Acquisition Date: Fair Market Value

80% 20% 1,796,800.00 449,200.00 NCI

470,000.00 NCI -Given FV

Computing for Non-Controlling Interest - Net Assets (NCI-NAS) W/P Adjustments: 4 items para ha SHE adjustments

Shareholder's Equity @ Acquisition Date: BV 2,230,000.00 Excess: Net Income from the Date of Acquisition to Year End 170,000.00 Dividends Declared after the Acquisiton Date - 60,000.00 Shareholder's Equity @ Year End: BV 2,340,000.00

Excess of FMV to Cost of Assets 16,000.00 Ammortization 35,250.00 2,391,250.00 Ammortization of Excess:

478,250.00 20% Goodwill 20,800.00 Impairement of Goodwill 56,900.00 - 2,080.00

NCI-Net Assets @ Year End (NCI-NAS) 496,970.00 Goodwill:

Computing for Non-Controlling Interet - Net Income (NCI-NI)

Net Income from the Date of Acquisition to Year End (Subsidiary): Whole 170,000.00 Amortization of Excess: Whole 35,250.00 Impairement: Total 205,250.00 Ratio-P

*If expressly stated na gamiton it FV hit NCI… axa it gamita.. Basta diri hiya LESSER an NCI of Net Identifiable Assets (Net Asset @ FMV Acquisition Date)

Choose whichever is HIGHER

Non-Controlling Interest Percentage 20.00% Ratio-NCI 41,050.00

Impairment of Goodwill: Relating to NCI - 2,080.00

Non-Controlling Interest Net Income (NCI-NI) 38,970.00

Alternative Computation: Net Income Relating to Non-Controlling Interest 20% 34,000.00 Amortization of Excess Relating to NCI 20% 7,050.00 Impairment: Relating to NCI - 2,080.00

NCI-NI 38,970.00

Alternative Computation of NCI-Net Assets (NCI-NAS)

60,000.00 NCI-Net Assets Recognized at the date of Acquisition 470,000.00 NCI-Net Income 38,970.00 NCI-Dividends - 12,000.00

NCI-NAS @ Year End 496,970.00

Computing for Consolidated Net Income (CNI)

Net Income Parent (Whole Year ini Pirmi) 300,000.00 Net Income of Subsidiary (From Date Acq. To Year End) 170,000.00 Working Paper Adjustments: 4 la ini hira

1.) Amortization 35,250.00 2.) Total Impairment Loss - 56,900.00 Remember: Total Impairment Loss it gagamiton ngadi… kay Consolidated Net Income na 3.) Dividend Income (don't deduct if Income from OWN Operations it GIVEN - 48,000.00 4.) Gain on Acquisition -

Total Consolidated Net Income (CNI) 400,350.00 Net Income Attributable to NCI (NCI-NI) - 38,970.00 IATTP NCI-NI Total

Net Income Attributable to Parent 361,380.00 Income-P 300,000.00 300,000.00 Income-S 136,000.00 34,000.00 170,000.00 Amort. 28,200.00 7,050.00 35,250.00

Computing Consolidated Retained Earnings (CRE) IL - 54,820.00 - 2,080.00 - 56,900.00 Div. - S - 48,000.00 - 48,000.00

Dividends Declared by Subsidiary:

If the Year in question is the Next Year after the date of Acquistion.. An full na Net Income an Subsidiary and irerecognize ha pag.compute an CNI

Retained Earnings Parent Beg 2,100,000.00 361,380.00 38,970.00 400,350.00 Consolidated Net Income Attributable to Parent (CNI-P) 361,380.00 Divedends declared - Parent - 80,000.00 Consolidated Retained Earnings (CRE) 2,381,380.00

Computing Consolidated Shareholder's Equity (C-SHE) Computing Consolidated Shareholder's Equity (C-SHE) ShareHolder's Equity Parent: Beg 5,800,000.00

Common Stock 3,000,000.00 Working Paper Adj: APIC 700,000.00 Net Income-Parent 300,000.00 Consolidated Retained Earnings 2,381,380.00 Dividends-Parent - 80,000.00 NCI-NAS 496,970.00 Net Income - Subsidiary (80%) 136,000.00

C-SHE 6,578,350.00 Dividends - Subsidiary (80%) - 48,000.00 Ammort (80%) 28,200.00 Impairment - Parent - 54,820.00 NCI-NAS 496,970.00

ShareHolder's Equity Parent: End 6,578,350.00

Problem 4 SB Corporation Parent (80%) NCI (20%) Total 3,250,000.00 Net Assets @ Year End: Book Value

Price 2,500,000.00 685,000.00 3,185,000.00 - 485,000.00 Net Income from the Date of Acquisition NA (FMV) 2,308,000.00 577,000.00 2,885,000.00 35,000.00 Dividend Declared after Date of Acquisition Goodwill 192,000.00 108,000.00 300,000.00 2,800,000.00 Net Assets @ Date of Acquisition: Book Value Ammortization Impairment 0.64 0.36 - 90,000.00 Inventories: Overstated 90,000.00

14,400.00 8,100.00 22,500.00 50,000.00 Land: Understated 125,000.00 Patent: Understated - 18,750.00 2,885,000.00 Net Assets @ Date of Acquisition: FMV 71,250.00

NCI-Net Income (20%): Net Income - Subsidiary 97,000.00 Ammortization - NCI 14,250.00 Impairment - NCI - 8,100.00 NCI-Net Income (20%) 103,150.00

NCI-NAS @ Year End: NCI-NAS @ Date of Acquisition 685,000.00 NCI-NI 103,150.00 Dividends (20%) - 7,000.00 NCI-NAS @ Year End 781,150.00

Retained Earnings Beg 2,685,000.00 Consolidated SHE: RE End: 2,460,000.00 Net Income - Parent 525,000.00 Common Stock 3,500,000.00 Net Income -P - 525,000.00 Dividends - Parent - 750,000.00 APIC 750,000.00 Dividends-P 50,000.00 Retained Earnings End: 2,460,000.00 Consolidated RE: Div. Income-S - 28,000.00

RE @ Year End 2,460,000.00 RE Beg: 1,957,000.00 IAATP NCI-NI Net Income - Subsidiary 388,000.00 P-Income 525,000.00 525,000.00 Dividends - Subsidiary - 28,000.00 CRE S-Income 388,000.00 97,000.00 485,000.00 Amortization (80%) 57,000.00 RE Beg: 1,957,000.00 Amort. 57,000.00 14,250.00 71,250.00 Impairment -Parent - 14,400.00 2,862,600.00 IATTP 955,600.00 IL - 14,400.00 - 8,100.00 - 22,500.00

Dividends-P - 50,000.00 955,600.00 103,150.00 1,058,750.00 NCI-NAS 781,150.00 CRE 2,862,600.00 Consolidated SHE 7,893,750.00

Problem 1 P (80%) NCI (20%) Total 3,300,000.00 Net Assets @ Date of Acquisition: BV Ammortization

3,240,000.00 810,000.00 4,050,000.00 600,000.00 Understated: Depreciable Asset - 60,000.00 3,120,000.00 780,000.00 3,900,000.00 3,900,000.00 Net Assets @ Date of Acquisition: FMV

Goodwill 120,000.00 30,000.00 150,000.00 0.80 0.20

IL 96,000.00 24,000.00 120,000.00

NCI-NI NCI-NAS Net Income - NCI 105,000.00 NCI-NAS beg 810,000.00 Amortization - NCI - 12,000.00 NCI-NI 69,000.00 Impairment - NCI - 24,000.00 Dividends - 45,000.00 NCI-NI 69,000.00 NCI-NAS end 834,000.00

Since RE Ending an Given han Problem.. Kelengan mo igadjust to RE Beg para ka maka.compute han CRE.. It is assumed na ha RE End included an Dividend Income from

Subsidiary so kelangan mo hiya ig deduct para ma.adjust ha RE Beg

IATTP NCI-NI Total NI - Parent 1,425,000.00 1,425,000.00

NI Sub 420,000.00 105,000.00 525,000.00 Amortization - 48,000.00 - 12,000.00 - 60,000.00 Impairment Loss - 96,000.00 - 24,000.00 - 120,000.00 Issue: Api ba pag.compute hit CNI it Dividend Income from Subsidiary? Conso. Net Income 1,701,000.00 69,000.00 1,770,000.00

Common Stock 5,250,000.00 APIC - Consolidated RE CRE

RE Beg 7,800,000.00 RE Beginning 7,800,000.00 NI-P 1,425,000.00 IATTP 1,701,000.00 Div-P - 690,000.00 Dividends-P - 690,000.00 NI-S 420,000.00 CRE 8,811,000.00 Div-S - Ammort - 48,000.00 IL - 96,000.00 8,811,000.00

NCI-NAS 834,000.00 Consolidated SHE 14,895,000.00

Consolidated RE: RE Beg: 7,800,000.00 IAATP 1,701,000.00 Div-P - 690,000.00

CRE 8,811,000.00

Answer: Basta Income from Own Operations it given ha problem, it is assumed that it DOES NOT INCLUDE dividends from subsidiary, so no need to deduct it from the in Computing for

IATTP and CNI.

Net Income from the Date of Acquisition to Year End

Net Assets @ Acquisition Date: Fair Market Value

W/P Adjustments: 4 items para ha SHE adjustments

Overstated Inventories - 44,000.00 Understated Equipment 60,000.00 Excess of FMV to Cost 16,000.00

Ammortization of Excess: Inventory 44,000.00 Equipment - 8,750.00 Ammortization 35,250.00 PPE's are ammortized using their useful life

Parent Price NCI Value TOTAL Cost 2,345,000.00 470,000.00 2,815,000.00

NA (FMV) 1,796,800.00 449,200.00 2,246,000.00 Goodwill 548,200.00 20,800.00 569,000.00

Parent NCI TOTAL 0.96 54,820.00 2,080.00 56,900.00

Basta BookValue of NA @ Year End it Given… ig.adjust anay ha NA @ Acquisition Date by Adding Back Dividends Declared and Deducting Net Income from Acq. Date to Year End.

BE CAREFUL HIT DATE OF ACQUISITION.. DIRI PIRMI JANUARY 1… Kay ma.affect ini tim pagammortize han mga PPE… Pati Net Income and Dividends for the Whole Year

(igaallocate mo pa)

Choose whichever is HIGHER

Excess and Ammortization of Excess… Opposite it Treatment.. Kun gin.add mo ha Excess… it Minus ha

Ammortization.. :-)

All are Amortized @ Year End: If Silent.. The Inventory are assumed to be sold @ Year End. If given kun pira la an nabaligya..

Axa la adto nim ig.aamortize…

0.04

Relating to Parent (80%) 48,000.00

Relating to NCI (20%) 12,000.00

Remember: Total Impairment Loss it gagamiton ngadi… kay Consolidated Net Income na

If the Year in question is the Next Year after the date of Acquistion.. An full na Net Income an Subsidiary and irerecognize

Since Net Income from Parent an gin.hatag na GIVEN.. It is assumed na upod na an DIVIDEND Income from Subsidiary ngada.. So kelangan mo hiya ig.iban ha NET INCOME ha Parent to arrive ha Income Attributable to Parent (IATTP)

Percentage Ownership 80% 20%

IATTP NCI-NI Total Net Income - Parent xx xx Net Income - Subsidiary x x xx Amortization x x xx Impairment Loss (x) (x) (xx) Dividend Income From S (xx) (xx)

XX XX XX Consolidated Net Income

Retained Earnings End xx NCI Beg (@ Date of Acquisition) xx Net Income - Parent (xx) NCI-NI xx

Dividends - Parent xx NCI - Dividend (xx) Dividend Income from S (xx) NCI -Net Assets (NCI-NAS) XX Retained Earning Beg XX

Retained Earning Beg XX IATTP XX Dividend - Parent (XX) Consolidated RE XX

Since Net Income from Parent an gin.hatag na GIVEN.. It is assumed na upod na an DIVIDEND Income from Subsidiary ngada.. So kelangan mo hiya ig.iban ha NET INCOME ha Parent to arrive ha Income Attributable to Parent (IATTP)

Ignore This Line if Income From Own Operations it Given

P(80%) NCI (20%) Total2345000 470000 28150001796800 449200 2246000

548200 20800 569000 GoodWill0.963445 0.036555

Impairment 54820 2080 5690056900

NCI-NANCI-NAS Beg 470000 SHE End. 2340000NCI-NI 38970 Excess 16000NCI-Div -12000 Ammort 35250 2391250NCI-NAS End 496970 0.2

478250Goodwill 20800Impairment -2080NCI-NAS End 496970

810000 202500 1012500 825000780000 195000 975000 150000

30000 7500 37500 9750000.8 0.2

Problem IIIMethod 1

NCI-Net Assets 1,826,250.00 SHE: BV @ Acq. Date(SQUEEZED) 2,362,500.00

Dividends 682,500.00 Net Income 290,625.00 Goodwill 234,375.00 Excess

Amortizati 93,750.00 3,937,500.00

25.00% 984,375.00

SHE: BV 1,826,250.00 Excess: 234,375.00 SHE: FMV 2,060,625.00 GoodWill 290,625.00 Total FV 2,351,250.00

Parent (75%) NCI (25%) Total

Price 1,763,437.50 587,812.50 2,351,250.00 NA (FMV) 1,545,468.75 515,156.25 2,060,625.00 Goodwill 217,968.75 72,656.25 290,625.00

Method 2NCI-NAS Beg (Squeezed) 587,812.50

SHE: BV @ Acq. Date(SQUEEZED) NCI-NI 567,187.50 NCI-Div 170,625.00 NCI - NAS End (Given) 984,375.00

NCI-NI (25%)Net Income - S 590,625.00 AmortizationAmmort - 23,437.50 23,437.50 AnnualIL - 4 yearsNCI - NI 567,187.50 93,750.00

Parent (75%) NCI (25%) Total Price 1,763,437.50 587,812.50 2,351,250.00 NA (FMV) 1,545,468.75 515,156.25 2,060,625.00 Goodwill 217,968.75 72,656.25 290,625.00

Liabilities With Priority1.) Salaries2.) Tax3.) Trust/Liquidating/Administration Expense4.) Customer's Deposit