Parent Corporation issued on March 31, 2021 500,000 shares of its P10 par ordinary shares, P40 market value per share, to acquire all of the outstanding P25 par value ordinary share of Subsidiary A Company and 100,000 shares of the same P10 par ordinary shares of all the outstanding P55 par value ordinary shares of Subsidiary B Company. On this date the fair values of Subsidiary A Company's assets and liabilities equaled their book values, except for its long-term investment in marketable equity securities for which the aggregate market value exceeded cost by P500,000. The fair values of Subsidiary B Company's assets and liabilities equaled their book values except for the property plant and equipment which is P800,000 less than the carrying values and inventories which is P100,000 more than the carrying value. On March 31, 2021, immediately before the combination, the stockholders' equities were: Subsidiary A Company Subsidiary B Company Ordinary Shares 5,500,000 2,500,000 Additional Paid in 4,200,000 470,000 Capital Retained Earnings 7,360,000 2,430,000 Total 17,060,000 5,400,000 The total goodwill to be recognized by Parent Corporation as a result of the business combination is:

Parent Corporation issued on March 31, 2021 500,000 shares of its P10 par ordinary shares, P40 market value per share, to acquire all of the outstanding P25 par value ordinary share of Subsidiary A Company and 100,000 shares of the same P10 par ordinary shares of all the outstanding P55 par value ordinary shares of Subsidiary B Company. On this date the fair values of Subsidiary A Company's assets and liabilities equaled their book values, except for its long-term investment in marketable equity securities for which the aggregate market value exceeded cost by P500,000. The fair values of Subsidiary B Company's assets and liabilities equaled their book values except for the property plant and equipment which is P800,000 less than the carrying values and inventories which is P100,000 more than the carrying value. On March 31, 2021, immediately before the combination, the stockholders' equities were: Subsidiary A Company Subsidiary B Company Ordinary Shares 5,500,000 2,500,000 Additional Paid in 4,200,000 470,000 Capital Retained Earnings 7,360,000 2,430,000 Total 17,060,000 5,400,000 The total goodwill to be recognized by Parent Corporation as a result of the business combination is:

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter20: Corporations: Distributions In Complete Liquidation And An Overview Of Reorganizations

Section: Chapter Questions

Problem 38P

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arent Corporation issued on March 31, 2021 500,000 shares of its P10 par ordinary shares, P40 market value per share, to acquire all of the outstanding P25 par value ordinary share of Subsidiary A Company and 100,000 shares of the same P10 par ordinary shares of all the outstanding P55 par value ordinary shares of Subsidiary B Company. On this date the fair values of Subsidiary A Company’s assets and liabilities equaled their book values, except for its long-term investment in marketable equity securities for which the aggregate market value exceeded cost by P500,000. The fair values of Subsidiary B Company’s assets and liabilities equaled their book values except for the property plant and equipment which is P800,000 less than the carrying values and inventories which is P100,000 more than the carrying value. On March 31, 2021, immediately before the combination, the stockholders’ equities were: Subsidiary A Company Subsidiary B Company Ordinary Shares 5,500,000…
Parent Corporation acquired 80% of the outstanding shares of Subsidiary Company on June 1, 2021 for P3,517,500. Subsidiary Company’s stockholder’s equity components at the end of this year are as follows: Ordinary shares, P100 par, P1,500,000, Share premium P675,000 and Retained Earnings P1,335,000. Non-controlling interest is measured at fair value and the fair value is P705,000. The assets of Subsidiary Company were fairly valued, except for inventories, which are overstated by P66,000, and equipment, which was understated by P90,000. Remaining useful life of equipment is 4 years. Stockholder’s equity of Parent Corporation on January 1, 2021 is composed of Ordinary shares P4,500,000, Share premium P1,050,000, Retained Earnings P3,150,000. Goodwill, if any, should be written down by P85,350 at year end. Net Income for the first year of parent is P450,000 and the net income of Subsidiary Company from the date of acquisition is P255,000. Dividends declared at the end of the year…
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