ac11 - chapter 3 subsequent to date of acquisition.pptx

7/25/2019 AC11 - CHAPTER 3 Subsequent to Date of Acquisition.pptx

http://slidepdf.com/reader/full/ac11-chapter-3-subsequent-to-date-of-acquisitionpptx 1/76

Arañador, Christine Joy O. Arcega, Cristina S.

Intalan, Jasmine A.Peñaranda, Rose Marie E.Urrea, Christine Joyce A.

CBET-01-601E

CHAPER !

Consolidated and SeparateFinancial Statements:

Subsequent to Date of Acquisition



Peñaranda, Rose Marie E.

E"ercise !#$ Cost Method Entries and Book Value ofInterest Acquired !n "ul# 1$ %01&$ 'ar( Corporation acquired 1$&00 s)ares of t)eoutstandin* s)are capital of Star( Co+ for '%,0$000+ T)e

Statement of Financial 'osition of Star( Co+ as of December 1$%01, .as as follo.s: Assets '/0$000iabilities '100$000

!rdinar# S)are Capital$ '100 par %00$000Additional 'aid-in Capital &0$000etained Earnin*s %0$000 Total Equities '/0$000



Instructions:1+2a(e t)e entries to record t)e follo.in*:

3a4 T)e acquisition of t)e in5estment

3b4 Star( Compan# reported a net

income of '0$000 for %01&+

3c4 At t)e be*innin* of %016$ Star( Co+

paid di5idends of '0$000+

3d4 T)e operations of Star( Co+ in %016resulted in a net loss of '10$000



E"ercise !# $

Cost Method

(A) The acquisition of the investment

n5estment in Star( Co+ %,0$000 Cas) %,0$000

(B) Stark Coman! reorted a net income of"#$%$$$ for &$'

no entr#

(C) At the +e,innin, of &$'-% Stark Co aiddividends of "#$%$$$

Cas) %%$&00 Di5idend e5enue 11$%&0

n5estment in Star( Compan# 11$%&0

(.) The oerations of Stark Co in &$'- resulted in



'p+ 1667 summar# illustration of parent compan#entries usin* t)e cost met)od

ransactions

Entries

1. Acquisition of share capital Investment

Cash/Other Assets/Capital Stock

2. Net income reported b the

subsidiar No !ntr

". Net loss reported b the subsidiar No !ntr

#. $e%ular dividends paid b the

subsidiar Cash/Other Assets

&ividend $evenue



P%. &'( )ey *eat+res o the Cost Method

Items Cost Methodecorded amount of in5estment atdate of acquisition

!ri*inal cost

8sual carr#in* amount of

in5estment subsequent toacquisition

!ri*inal cost

Di9erential o ad;ustment

ncome reco*nition b# in5estor Di5idends distributed b# t)ein5estee from earnin*s sinceacquisition

-iidends declared on earningsrom date o ac/+isition

Income

-iidends declared in e"cess oearnings rom date oac/+isition

Red+ction in Inestment



Computation:

/utstandin, shares of Stark Co

'%00$000<100par = %$000 s)ares

"ercenta,e of Interest Acquired +! "ark Co

1$&00 s)ares<%$000 s)ares = /&>

Di5idends declared on earnin*s from date of

acquisition '1&$000

'ercenta*e of nterest acquired b# 'ar( Co+? /&>

.ividend revenue of "ark CoP&&,$(0



Di5idends declared in e?cess'1&$000

of earnin*s from date of acquisition

3'0$000 @ 1&$0004'ercenta*e of nterest acquired b# 'ar( Co+

/&>

0eduction of Investment in Stark Coman! P&&,$(0



$. Compute for the book value of theinterest acquired on date of acquisition.

Com%+tation1

!rdinar# S)are Capital '%00$000 Additional 'aid-in Capital &0$000

etained Earnin*s '%0$000 3'0$000 ? 1<%4&$000

Total s)are)olders equit# on date of acquisition'%&$000

'ercenta*e nterest acquired ? /&>

Boo( 5alue of interest acquired P$&!,2(0



Equit# met)od

To con5ert cost met)od in5estment to equit# met)odad;usted as of December 1$%01&:

n5estment in Star( Compan# '11$%&0

etained Earnin*s$ 'ar( Co+ '11$%&0

Com%+tation1

ncome earned b# Star( Compan# 3'0$000 G4

'1&$000'ercenta*e of interest acquired b# 'ar( Co+

/&>

ncrease of n5estment in Star( Compan# '11$%&0



Equit# 2et)od

c+ Cas) %%$&00

n5estment in Star( Co+ %%$&00

3 '0$000 ? /&> = '%%$&004

d+ Equit# in Subsidiar# ncome /$&00

n5estment in Star( Co+ /$&00

3'10$000 /&> = '/$&004



E"ercise !#4 5COS MEHO-E6RIES7

'repare t)e entries for 'latoon Corp+usin* t)e cost met)od:a+ 'latoon Corp+ acquired /&0 of t)e

1$000 outstandin* s)are of Saloon

Corp+ at 'H0 per s)are at t)e be*innin*of %01,+b+ T)e subsidiar# reported a net income

of '1&$000 for %01,+

c+ Saloon Corp+ issued a 10> s)arecapital di5idends on "une 1$ %01&+d+ Cas) di5idend of '& per s)are .as

paid b# Saloon Corp+ on Dec+ 1$ %01&e+ A net loss of '6$000 .as incurred b#

t)e subsidiar# in %01&+

Arcega, CristinaS.



E"ercise !#4 5A6S8ER7

a+ n5estment in Saloon Corp+ 6/$&00

Cas)+6/$&00

750 shares @ P90 = P67500

b+ o Entr#

c. !eceived 75 shares from "aloon Corp. as

stock dividend. "hares no# o#ned and held are$%5 shares.

d+ Cas)+ ,$1%&

n5estment in Saloon Corp++



'ar(er Compan# o.ns &> interest in Starter Compan#+Durin* t)e calendar #ear %01,$ 'ar(er Co+ )ad net income

of '100$000 and Starter Co+ of ',0$000+ ntra*roupinterest on bonds .as '/00+ Starter Co+ declared andpaid a '10$000 di5idend durin* t)e #ear+

1+ T)e consolidated net income for t)e #ear %01, amounts

to

a+ '11$&00 c+'1,0$/00

b+ '1,0$000 d+ '1&0$000

M+lti%le Choice !#C

Peñaranda, RoseMarie E.



Com%+tation1'ar(er Co+ net income '100$000

ess Di5idends from Starter Co+310$000 ? &>4 $&00'ar(er Co+ net income from o.n operation 'H1$&00

Add: Starter Co+ net income ,0$000

Consolidated net income for &$'1

P&!&,(00

Ans2er 1 a. P&!&,(00



'p+ 1/ IDi5idends re5enue from subsidiar# is eliminatedto a5oid double reco*nition of income+J

'p+ 10

Intra*roup balances resultin* fromtransactions amon* entities in t)e *roup )a5e

to be eliminated in full upon t)e preparation ofconsolidated statements+J



nterest ncome '/00

nterest E?pense '/00

(liminate intercompan) interest * income statement

K ote t)at t)ese entries )a5e no e9ect onconsolidated net income because t)e# reduce

interest income and interest e?pense b# t)esame amount+



T)e di9erence of cost and boo( 5alue is allocatedto an asset of S#stems Co+ and is bein*

depreciated o5er a period of ten #ears+ 'entiummeasures non-controllin* interest at itsproportionate s)are of t)e identiMable net assets+ T)e consolidated net income of 'entium Corp+and S#stems Co+ for t)e #ear ended December

1$ %01, is

a+ '%&/$ ,00

b+ '%/6$,00

c+

'%H$,00d+ '1$000



CO6SO9I-AE- 6E I6COMEs t)e combined net income oft)e parent and all t)e

subsidiaries after ta(in* intoconsideration t)e 5ariousad;ustments for intra*roup

balances and transactions$intra*roup proMt and t)eimpairment< amortiNation<

depreciation of t)e di9erential+



Pa+e '75A pro-forma sc)edules)o.in* t)ecomputation of

consolidated net income



et income from o.n operations of'entium Corp+Sales '1$000$000

Cost of Sales 3 600$0004

Oross 'roMt ' ,00$000!peratin* E?penses 3 10$0004 '%%0$000

ess Di5idends fromSubsidiar#

3 0 4Add: Ad;usted subsidiar# net income:

et ncome of S#stemSales '600$000

Cost of Sales 3 ,00$0004Oross 'roMt '%00$000!peratin* E?penses 3 100$0004 '100$000

ess Di9erential depreciation%$000P H$000

CO6SO9I-AE- 6EI6COME

P!&:,000



ets *et t)e 6E

I6COMEARI=UA=9E O

PARE6

-asis Pa+e '76/llustration 5



et income from o.n operations of 'entium Corp+ Sales '1$000$000 Cost of Sales 3 600$0004

Oross 'roMt ' ,00$000 !peratin* E?penses 3 10$0004 '%%0$000Add: et ncome of S#stem

Sales '600$000Cost of Sales 3 ,00$0004

Oross 'roMt '%00$000!peratin* E?penses 3 100$0004et ncome '100$000

0> ' 0$000 ess Di9erential depreciation

3'%$000 P 0>4 1$600

6et Income Attri;+ta;le to Parent P$>:,400

S)are in S#stem Co+ netincome

2ultipl# b# Controllin* nterest

/$,00



Consolidated 6et Income 6on#controlling

6et IncomeAttri;+ta;le Interest o Parent 6et Income

et income reported b#

Penti+m '%%0$000 '%%0$000

System 100$000 0$000 ' %0$000

Depreciation e?cess of cost o5erBoo( 5alue of acquired in5estment 3 %$ 0004 3 1$6004 3,004otal P!&:,000 P$>:, 400 P &>,'00



E9IMI6AIO6 E6RIES1

'12o record net increase in !etained (arnin+s

n5estment in S#stems Co+ Stoc( %$ 000 etained Earnin*s$ 'entium Co+%$ 000

3',0$000 P 0>4

Pa+e '6$$ under PREPARAIO6 O*8OR)I6? PAPER *ORCO6SO9I-AE- *I6A6CIA9SAEME6S

3ote that the ad4ustin+ andelimination entries are made in the#orkin+ paper onl).



%12o eliminate ")stems Co. shareholders equit)increase in assets and establishin+ of noncontrollin+ interest

!rdinar# S)are Capital$ S#stems Co+,00$000etained Earnin*s$ S#stem Co+ 1,0$000!t)er Assets %0$000

n5estment in S#stem Co+$ Stoc( ,,$000 3',16$000 '%$0004

on-controllin* interest 11%$000



34 2o record depreciation

etained Earnin*s$ 'entium Corp+ ,$000E?penses %$000

!t)er Assets 6$000 %$000 P #ears



MU9IP9E CHOICE

!#E

Intalan, Jasmine A.



!n April 1$ $0&4$ Panel Compan# paid'/&6$ 000 for 16$ 000 s)ares of Standel

Compan#Q s %0$ 000 outstandin* ordinar#s)ares+ Standel reported net income of '60$000 for $0&4$ and declared di5idends of '&0$000+ n $0&($ Standel Compan# reported net

income of '6$ 000$ and declared and paiddi5idends of '&0$ 000+

Pro;lem@ ransaction



1+ Ro. muc) is t)e -iidend

Reen+e at December 1$ %01&?

+estion



a+ '11$ %00

Choices

b+ '%$ 00

c+ '6$ 00

d+ ',0$000

1+ Ro. muc) is t)e -iidendReen+e at December 1$ %01&?

+estion



AnsBer

P !',

:00C



Percentage o interest ac/+ired:0

Com%+tation

o com%+te or the interest ac/+ired1

S)ares t)at t)e 'anelCompan# paid 16$ 000

diided ;yStandel Compan#Q soutstandin* ordinar# s)ares %0$ 000



*ig+re &$.$ 5Page &'(7

IEM COS MEHO-

Di5idends declared

on earnin*s fromdate of acquisition+

ncome

Di5idends declared ine?cess of earnin*sfrom date ofacquisition+

eduction inn5estment



e*ular di5idends ',6$ 000'ercenta*e of interestacquired 0>-iidend Reen+e P!', :00

eturn O6n5estment

Page &'(,third ;+llet1

• T)e parent merel# reco*niNes di5idendsfrom t)e subsidiar# t)rou*) t)e -IDI-E6-REDE6UE.



iquidatin* di5idends ',$ 000'ercenta*e of interestacquired 0>Red+ction in inestment P!, $00

eturn O*n5estment

Page &'2 +nder ey %oints, third ;+llet1

• !nl# a liquidatin* di5idends can reduce t)ein5estment balance account+



Jo+rnal Entry1Cas) ',0$ 000

Di5idend ncome '6$ 00n5estment in Standel Co+ $ %00

Page &'2 +nder ey %oints, second;+llet1

• T)e di5idends recei5ed from subsidiar# istreated as an I6COME.



%+ )at s)ould be t)e ;alance o its

Inestment in Standel Compan#account at December 1$ %01&?

+estion



a+ '/&%$ 000

Choices

b+ '/&%$ 00

c+ '/&6$000

d+ '/6$00

%+ )at s)ould be t)e ;alance o itsInestment in Standel Compan# account

at December 1$ %01&?

+estion



AnsBer

P 2($,:00=



Inestment ;alance, -ecem;er !&, $0&('/&%$ 00

Com%+tation

Consideration transferred '/&6$ 000Di5idends declared in e?cess of earnin*s et income$ Standel 3%01,4 '60$ 000

et income$ Standel 3%01&4 6$ 000

Declared di5idends 3%01,4 3&0$ 0004Declared and paiddi5idends 3%01&4 3&0$ 0004 3,$ 0004

2ultipl# b# interest acquired 0>3$

%004



IEM COS MEHO-Di5idends declaredon earnin*s fromdate of acquisition+

ncome

Di5idends declared ine?cess of earnin*sfrom date of

acquisition+

eduction inn5estment

*ig+re &$.$ 5Page&'(7



Jo+rnal entries1

o record ac/+isition in $0&41

n5estment in Standel compan# '/&6$ 000

Cas) '/&6$ 000

o record li/+idating diidends1

Cas) '$ %00n5estment in Standel compan# '$ %00

Arañador, Christine Joy



• MC !#*1

'arson Compan# acquired H0>interest in Stoc(ton Compan# onDec+1$%01, for &,0$000+ Durin*

%01&$ Stoc(ton Compan# )ad anet income of '60$000 and paida cas) di5idend of '0$000+

T)e non-controllin* interest netincome in %01& is

a+ '$000 c+ 'H$000

Arañador, Christine JoyO .



AnsBer1 =. P',000

et ncome reported b# Stoc(ton Co+'60$000

2ultipl# b# > of interest10>

6O6#CO6RO99I6? I6ERES I6

$0&( P',000



o record the ac/+isition o

Inestment1

n5estment in Stoc(ton Co+

&,0$000 Cas) &,0$000

o record the recei%t o -iidends1 Cas) %/$000

Di5idends ncome %/$000

30$000 ? H0>4

Urrea, Christine



M+lti%le Choice ! #

SPort Cor%. and Sort Co. are sister

companies+ 'ort Corp+ o.ns 1,0$000 s)ares ofSort Co+s outstandin* s)are capital of %00$000s)ares7 on t)e ot)er )and$ Sort Co+ o.ns1%0$000 of 'ort Corp+s outstandin* s)arecapital of 600$000 s)ares+

'ort Corp+ announced a net income of P:4,0:0

for t)e #ear %01, .)ile Sort Co+ sustained a net

loss of P&$,000 for t)e same #ear+ T)e

operatin* results .ere arri5ed .it)outconsiderin* t)e earnin*s of t)e entities in t)erou +

Parent1 "ubsidiar)1

, Joyce A.



Port Cor%.3et /ncome ',$ 00

Sort Co.

3et oss 3'1%$ 0004



T)e net income 3loss4 attributable to'ort Corp+ for %01, .as:

a+3' ,&$6004 c+'$600

b+ '6$%00

d+ '$000



For reference

please loo( for

%age &2'



et income from o.n operationsof 'ort Corp+ ',$ 00Add "hare in "ort Co. net income

et loss of Sort 3' 1%$0004

Add S)are in net incomeattributable to 'ort 3%0>4

Total et ncome 2ultipl# b# controllin* interest /0>

6et income attri;+ta;le to Port.



ets do t)ehoriFontal

equation

ets Mnd

G



6et income attri;+ta;le to Port

Cor%. = et income from o.n operations S)are in Sort net income

=

',$00 P 3'1%$0004 +

%0

/0>

=',$00

-'$,00

+1,

= ',$00 @ '$,00 - +1,

+6

= '/&$601

+6






Total et ncome 2ultipl# b# controllin* interest /0>


SU=SIUI

O6



et income attributable to 'ort ' $0

2ultipl# b# interest acquired b# Sort %0>S)are of Sort in net income of 'ort '

1/$600

Computation for the "hare in net incomeattributable to Port






Total et ncome2ultipl# b# controllin* interest /0>


1/$600

' &$600

SU=SIUI

O6

$H%0

P::,000

Arcega, Cristina



Arcega MU9IP9E CHOICE !#

0> of t)e outstandin* s)ares of Bri?Co+ .ere acquired b# C)ad# Corp+ .)ent)e equit# of Bri? Co+ comprised of

s)are capital of '&00$000 and retainedearnin*s of '00$000+

T)e current statement of Mnancial

position of Bri? Co+ s)o.s s)are capitalof '&00$000$ a re5aluation reser5e of'H00$000 and retained earnin*s of'%$000$000+

Arcega, CristinaS.

)at amount in respect of Bri



)at amount in respect of Bri?Co+ retained earnin*s s)ould

be included in t)e consolidatedstatement of Mnancial position

under 'FS 10 ConsolidatedMnancial statements

A+ '&00$000B+ 'H60$000C+ '1$,00$000



/<1<16

etained Earnin*s$ current '%$000$000etained Earnin*s$ acquisition date300$0004ncreased in etained Earnin*s

'1$%00$0002ultipl# b# Controllin* nterest 0>Consolidated etained Earnin*s'H60$000

6S8ER1 -

5idends ecei5ed from subsidiar#

are in t)e ad;usted subsidiar# incomeP&,$00,00

Intalan, Jasmine A.



MU9IP9E CHOICE

!#U



Du)at Corp+ purc)ased 2( equit#interest in 2an*a Co+ .)en 2an*aQ s equit#composed of s)are capital of '00$ 000 andretained earnin*s of '1$ 1&0$ 000+

2an*aQs c+rrent statement o nancial%osition s)o.s s)are capital of '00$ 000$

re5aluation reser5e of '%00$ 000 andretained earnin*s of '%$ 600$ 000+

Pro;lem@ ransaction



)at amount in respect of non#controlling interest s)ould be

included in Du)atQs consolidatedstatement of Mnancial position under

'FS 10 Consolidated Mnancial

statements

+estion



a+ 'H00$ 000

Choices

b+ '%$ 600$000

c+ '%$ /00$ 000

d+ '$ 600$000

+estion

)at amount in respect of non- controllin*interest s)ould be included in Du)atQs

consolidated statement of Mnancial position under'FS 10 Consolidated Mnancial statements



AnsBer

P

>00,000A



6et Assets P !, '00, 000

Com%+tation

S)are capital ' 00$ 000

e5aluation reser5e %00$ 000

etained earnin*s %$ 600$ 000

Page &$1

'FS deMnes non# controlling interest ast)e equit# in a subsidiar# 6O attributable$directl# or indirectl#$ to a parent+



S)are capital '00$ 000e5aluation reser5e %00$ 000etained earnin*s %$ 600$ 0006et Assets P!, '00, 000

on- controllin* interest rate %&>6on# controlling interest P>00, 000

Arañdor, Christine JoyO.



• MC !#D1

'eter Corp+ purc)ased /0> equit# interestin Seller Co+ on September 1$ %01, .)enSeller Co+ s)are capital is ',00$000+ Anadditional 10> interest .as on April 1$%01&+

Total annual amortiNation relatin* to t)e/0> interest is '1%$000+ For t)e #ear %01&$Seller Co+ reports t)e follo.in*: e5enues$'1$000$0007 E?penses$ '00$0007 etained

Earnin*s as of "an+1$%01&$ '600$0007di5idends paid$ '100$000+ 'eter Corp+ earns'600$000 net income in %01& .it)outre*ard to t)e in5estment in Seller Co+

O.

1+ T)e controllin* interest in t)e



*consolidated net for %01& assumin* t)enet income is e5enl# earned t)rou*)out

t)e #eara+ '/,$000 c+ '/,6$600

b+ '/,&$/00 d+ '/$000

%+ T)e %01& consolidated net income andt)e non-controllin* interest in net income

a+ '/,&$/00 and ',%$00

b+ '/,6$600 and '/$600

c+ '/$000 and '/$600

d+ '/$000 and ',%$00

1 Ans.er: B P24(,200



1+ Ans.er: B P24(,200

'eter Corp+ et income P'00,000

Add: S)are in Seller Co+ et income:

e5enues 1$000$000

less: E?penses 00$000

AmortiNation 1%$000

et ncome ' 1$000 2ultipl# b# > interest:

"an+1-2arc)1 3<1%4 /0> !$,>00

Apr+1-Dec+1 3H<1%4 0>&&$,:00

CO6RO99I6? I6ERES in P24(,200

Consolidated net income

%+ Ans.er: - P2::,000 and P4$,!00



%+ Ans.er: - P2::,000 and P4$,!00

'eter Corp+ et income '600$000

Add: Seller Co+ et income 1$000CO6SO9I-AE- 6E I6COME P2::,000

Jan.&#March!&1

et ncome 1$000

2ultipl# b# 0>

Total &6$,00

"an+-2ar+1 3<1%4

Allocated C P&4,&00

A%ril &# -ec !&1



A%ril &# -ec.!&1

et ncome '1$000

2ultipl# b# %0> Total '/$600

Apr+1-Dec+1 3H<1%4

Allocated C P $:,$00

o get the 6CI1

Allocated C "an+1-2ar+1 '1,$100

Add1 Allocated C Apr+1-Dec+1 %$%006O6#CO6RO99I6? I6ERES P

4$,!00

ac11 - chapter 3 subsequent to date of acquisition.pptx

Documents