Quiz in Business CombinationSubsequent to Date of Acquisition

Name: _________________________
Date:__________
Score:__________
Problem I. On January 1, 2014, Dad Company which have an outstanding common stock of
2,400,000 and retained earnings of 1,205,000 prior to combination, purchased 75% of Baby
Company for P1,500,000 cash. On the date of acquisition, Baby Company reported common
stock outstanding of 1,300,000 and retained earnings of 200,000. The book value reflects the
fair value of assets and liabilities except for a patent of Baby with an economic life of five years
is understated by 150,000 and an equipment with remaining useful life of ten years, is
overstated by 50,000.
The following data summarized the results of their financial operation for 2014 and 2015:
2014
2015
Dad Co.
Baby Co.
Dad Co.
Baby Co.
1,250,00
Sales
550,000
1,300,000
450,000
0
Dividend Income from
50,000
40,000
Baby
1,300,00
Total Income
550,000
1,340,000
450,000
0
Cost of Sales
-850,000
-310,000
-915,000
-325,000
Gross Profit
450,000
240,000
425,000
125,000
Operating Expenses
-215,000
-150,000
-180,000
-60,000
Net Income
235,000
90,000
245,000
65,000
Compute the following:
1. The amount of consolidated CI attributable to parent for 2014?
2. NCI in CI of Subsidiary 2015?
3. The Consolidated CI for 2014?
4. The Non-controlling interest in Baby Company for 2014?
5. The Non-controlling interest in Baby Company for 2015?
6. On December 31, 2015, Consolidated retained earnings should be?
Problem II. On June 1, 2014, M Company acquired 80% of the outstanding voting stock of B
Company for 2,250,000. B Company has total shareholders equity of 1,800,000. The book value
reflects the fair market value of assets and liabilities except for land with book value of 600,000
and fair value of 700,000, equipment with remaining useful life of 8 years, with the fair value
exceeding the book value by 96,000. From the date of acquisition to year ended December 31,
2014, the following is the result of operation:
Comprehensive Dividends
Income
declared
M Company

250,000

150,000

B Company

120,000

50,000

Compute the following:

1. Consolidated Income
2. Balance of NCI at December 31, 2014
3. Increase in Consolidated Retained Earnings, December 31, 2014
4. Consolidated Income attributable to parent