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Assignment Advanced Nugusu

The document provides three examples of the accounting entries related to the acquisition of a subsidiary. It shows the journal entries to record the initial investment, issuance of shares, and calculation of goodwill. Adjustments are made to certain financial statement line items as part of the business combination.

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32 views5 pages

Assignment Advanced Nugusu

The document provides three examples of the accounting entries related to the acquisition of a subsidiary. It shows the journal entries to record the initial investment, issuance of shares, and calculation of goodwill. Adjustments are made to certain financial statement line items as part of the business combination.

Uploaded by

Dùķe HP
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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PRACTICAL EXAMPLE 1

Costs related to Acquisition of Subsidiary

Investment in S Com…...160,000
Cash…………………………………....160,000
Goodwill Calculation
 Goodwill = Acquisition Cost – Fair Value of Net Identifiable Asset(FVNIA)
FVNIA= Fair Value of Assets – Fair Value of Liabilities
FVNIA = (40,000 + 100,000 + 80,000 + 40,000) - (100, 000) =
Br 260,000 – Br 100,000 = Br 160,000
 Goodwill = $ 160,000 – $ 160,000 = $ 0.00
Elimination and Adjustment
Common stock (S).........................................................…...100,000
Additional Paid in capital (S)……………………………………………20,000
Retained earnings (S)……………………………………………………...40,000
Investment in S Company…………………………………………….160,000
PRACTICAL EXAMPLE 2

Solution
Costs related to Acquisition of Subsidiary

 Investment in Starr Com…(10,000shares*Br. 50/share)……...500,000


Common Stock……… (10,000shares*Br. 10/share)……………..………100,000
Additional paid in capital in Excess of Par…………………………………….400,000
Costs related to Issuance of Shares
 Additional paid in capital in Excess of Par…………………………35,000
Cash……………………………………………………………………………35,000

Since the Financial Statements are Given Prior to combination, we should adjust some items that are
affected by Business Combination.

Investment in Starr COMMON STOCK


EB……Br 500,000
BB…300,000
Additional Paid in capital in excess of Par
100,000

BB…50,000 EB….BR 400,000

400,000 Cash

BB …100,000 35,000
35,000
EB ….Br 65,000
EB… Br 415,000
PRACTICAL EXAMPLE 3
SOLUTION
Costs related to Acquisition of Subsidiary
 Investment in Starr Com…(66,500shares*Br. 20/share)……...1,330,000
Common Stock………(66,500shares*Br. 1/share)….………….66,500
Additional paid in capital in Excess of Par…………………………1,263,500
Costs related to Issuance of Shares
 Additional paid in capital in Excess of Par…………………………72,750
Cash……………………………………………………………………………72,750

Investment in Starr Common Stock

EB…Br 1,330,000 BB….1,000,000

66,500
Additional Paid in capital in excess of Par

EB….Br 1,066,500
BB…550,000
Cash
1,263,500
BB …200,000 72,750
72,750
EB …Br 127,250

EB… Br 1,740,750
Goodwill Calculation
 Goodwill = Implied Value – Fair Value of Net Identifiable Asset(FVNIA)
 Implied Value = Acquisition Cost + Fair Value of Non-Controlling Interest
Implied Value = Br 1,330,000 + Br 70,000 = Br 1,400,000 Or
Implied Value = Acquisition Cost/ % of Controlling Interest
Br 1,330,000/0.95 = Br 1,400,000
FVNIA= Fair Value of Assets – Fair Value of Liabilities
FVNIA =(Br 100,000 + 526,000 + 215,000 + 1,290,000 + 30,000) -
(Br 16,000 + 930, 000) = Br 2,161,000 – Br 946,000 = Br 1,215,000
Goodwill = Br 1,400,000 – Br 1,215,000 = Br 185,000

Elimination and Adjustment


Common Stock…………………………………………………………..400,000
Additional Paid in Capital in Excess of Par………………..235,000
Retained Earning………………………………………………………..334,000
Inventory……………………………………………………………………..26,000
Plant Asset………………………………………………………………….190,000
Leasehold Land……………………………………………………………30,000
Goodwill……………………………………………………………………...185,000
Investment in Starr………………………………………………….1,330,000
Non Controlling Interest…………………………………………..…70,000

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