Problem A.

POUIE Corporation acquired 65% of SARASIGAN Corporation’s common stocks on

December 31, 2019. The statement of financial position of SARASIGAN immediately before the
combination showed the following balances.

Cash 120,000 Accounts payable 90,000

Inventory 210,000 Income tax payable 120,000

Land 270,000 Bonds payable 300,000

Building, net 750,000 Ordinary shares 300,000

Retained earnings 540,000

Cash 120,000 Accounts Payable 90,000

Inventory 210,000 Income Tax Payable 120,000

Land 270,000 Bonds Payable 300,000

Building (Net) 750,000 Ordinary Shares 300,000

Retained Earnings 540,000

A review of the fair value of SARASIGAN’s assets and liabilities indicated that inventory, land, and
building had fair values of P195,000, P300,000, and P900,000 respectively. All other assets and
liabilities have book values equal to their fair values.

CASE A: Assume POUIE paid P800,000 for the 65% of SARASIGAN’s outstanding common stock,
and the fair value of the NCI at the date of acquisition was P400,000.

CASE B: Assume POUIE paid P600,000 for the 65% of SARASIGAN’s outstanding common stock,
and the fair value of the NCI at the date of acquisition was P320,000.

CASE C: Assume POUIE paid P715,000 for the 65% of SARASIGAN’s outstanding common stock.

CASE D: Assume POUIE paid P650,000 for 65% of SARASIGAN’s outstanding common stock.

Problem B: PADVANCED Corporation has gained control over the operations of SACCOUNTING
Corporation by acquiring 85% of its outstanding voting shares for P2,850,000 on December 31,
2019. This amount includes a control premium of P30,000. Direct and indirect expenses paid
amounted to P83,000 and P42,000, respectively. Book values immediately before the business
combination are as follows:

PADVANCED SACCOUNTING
Cash 3,541,500 128,000
Accounts Receivable 300,000 325,000
Inventory 550,000 360,000
Prepaid expenses 148,500 125,000
Land 2,350,000 879,000
Building 1,560,000 558,000
Equipment 300,000 185,000
Goodwill 0 300,000
 Accounts payable 675,000 253,000
Notes payable 1,400,000 730,000
Capital stock, P50 par 3,400,000 800,000
APIC 1,575,000 600,000
Retained earnings 1,700,000 477,000

The following additional information were ascertained on the date of acquisition:

The value of receivables and equipment has decreased by P25,000 and P14,000, respectively

The fair value of inventories is now P436,000 whereas the value of land and building has
increased by P471,000 and P107,000, respectively.

There was an unrecorded accounts payable amounting to P27,000 and the carrying
value of notes is P738,000
All other assets not mentioned above are worthless