Answered: On January 1, ABC Acquired 60 percent…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

On January 1, ABC Acquired 60 percent of the outstanding voting stock of XYZ for P301,500 cash consideration. The remaining 40 percent of XYZ had an acquisition date fair value of P138,500. On January 1, XYZ possessed equipment (5-year life) that was undervalued on its books P25,000. XYZ also had developed several secret formulas that ABC assessed at P50,000. Theses formulas, although not recorded on XYZ's financial records, were estimated to have a 20-year future life. ABC also determined that the inventory of XYZ is overvalued by P10,000. 80% of these inventories remain unsold by the end of the year. As of December 31, the financial statements appeared as follows:

DETERMINE THE CONSOLIDATED EXPENSES TO BE REPORTED FOR THE YEAR.

АВС
XYZ
Revenues (from sales and
dividends)
Cost of goods sold
Expenses
Net Income
P (300, 000)
P (200, 000)
140, 000
20, 000
P (140, 000)
80, 000
10, 000
P (110, 000)
Retained eamings 1/1
P (300, 000)
(140, 000)
P (150, 000)
(110, 000)
10,000
P (250, 000)
Net Income
Dividends paid
Retained eamings 12/31
-0-
P (440, 000)
P 210, 000
150, 000
301,500
Cash and Receivables
P90, 000
110, 000
Inventory
Investment in SS
-0-
Equipment (net)
Total Assets
398,500
P 1,060, 000
300, 000
P500, 000
P (420, 000)
(200, 000)
(440, 000)
P (1,060,000)
Liabilities
P (150, 000)
(100, 000)
(250, 000)
P (500, 000)
Common stock
Retained earmings 12/31
Total Liabilities and Equities

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