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Consolidation Sample Problem

Health Co acquired 70% interest in Wealth Co on January 1, 20x1. The financial statements of the combining entities show Wealth Co's accounts receivable and building were recorded at carrying amounts that differ from their fair values on acquisition date. The document requests preparation of the consolidated statement of financial position.

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Leila Nicole Fulgencio
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357 views3 pages

Consolidation Sample Problem

Health Co acquired 70% interest in Wealth Co on January 1, 20x1. The financial statements of the combining entities show Wealth Co's accounts receivable and building were recorded at carrying amounts that differ from their fair values on acquisition date. The document requests preparation of the consolidated statement of financial position.

Uploaded by

Leila Nicole Fulgencio
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Please refer to the video discussion for the solution.

Consolidation at acquisition date

On January 1, 20x1, Health Co. acquired 70% interest in Wealth Co. The financial statements of the
combining entities right after business combination are as follows:

Health Co. Wealth Co.

Cash 100,000.00 20,000.00

Accounts Receivable 120,000.00 40,000.00

Inventory 400,000.00 100,000.00

Investment in subsidiary 560,000.00 -

Prepaid assets 30,000.00 10,000.00

Building, net 1,200,000.00 400,000.00

Total Assets 2,410,000.00 570,000.00

Accounts payable 70,000.00 90,000.00

Share capital 1,000,000.00 200,000.00

Share premium 350,000.00 50,000.00

Retained earnings 990,000.00 230,000.00


Total liabilities and
equity 2,410,000.00 570,000.00

The carrying amounts of Wealth’s assets and liabilities approximate the acquisition-date fair values,
except as follows:

Carrying amount Fair value

Accounts receivable 40,000.00 20,000.00

Building, net 400,000.00 540,000.00

Requirement: Prepare the consolidated statement of financial position.


Consolidation subsequent to acquisition date – NCI at proportionate share

Pink co. acquired 90% interest in Floyd, Inc. on January 1, 20x1

Information on Jan. 1, 20x1

 Floyd’s net identifiable assets have a carrying amount of P480,000 and fair value of P600,000.
The difference is due to the following:

Carrying amount Fair value

Inventory 100,000.00 110,000.00

Building, net 400,000.00 510,000.00

 The remaining useful life of the building is 5 years


 Pink measured the NCI at proportionate share

Information on Dec. 31, 20x1:

Statement of financial position

As at December 31, 20x1

Pink Co. Floyd Co.

Cash 620,000.00 120,000.00

Accounts receivable 170,000.00 100,000.00

Inventory 200,000.00 80,000.00

Investment in subsidiary 560,000.00 -

Prepaid assets 10,000.00 8,000.00

Building, net 1,100,000.00 350,000.00

Total assets 2,660,000.00 658,000.00

Accounts payable 50,000.00 90,000.00

Share capital 1,000,000.00 200,000.00


Share premium
350,000.00 50,000.00

Retained earnings 1,260,000.00 318,000.00


Total liabilities and
equity 2,660,000.00 658,000.00

Statement of profit or loss

For the year ended December 31, 20x1

Pink Co. Floyd Co.

Sales 600,000.00 200,000.00


- -
Cost of goods sold 200,000.00 60,000.00

Gross profit 400,000.00 140,000.00


- -
Depreciation expense 100,000.00 50,000.00
- -
Distribution Cost 30,000.00 2,000.00

Profit for the year 270,000.00 88,000.00

 There were no dividends declared, no intercompany transactions and no impairment of goodwill


in 20x1.

Requirement: Prepare the December 31, 20x1 consolidated financial statements

Consolidation subsequent to acquisition date – NCI at fair value

Use the information in the preceding problem except that Pink measured NCI at a fair value of P65,000

Requirement: Prepare the December 31, 20x1 consolidated financial statements

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