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BUSCOM Problem 3-9

Character Corporation and Honesty Corporation combine businesses. The net income, dividends, equipment values, and shares for each company pre-combination are provided. Post-combination, the consolidated net income for 2023 and non-controlling interest in net assets for 2023 are calculated.

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58 views3 pages

BUSCOM Problem 3-9

Character Corporation and Honesty Corporation combine businesses. The net income, dividends, equipment values, and shares for each company pre-combination are provided. Post-combination, the consolidated net income for 2023 and non-controlling interest in net assets for 2023 are calculated.

Uploaded by

Maria Licuanan
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 XLSX, PDF, TXT or read online on Scribd

Problem 3 - 9

Character Corporation Honesty Corporation


2022 2023 2022
Net income 1,360,000 2,040,000 3,600,000
Dividends declared 280,000 520,000 880,000

BV FV
Equipment 9,000,000 10,520,000
Ordinary shares 16,000,000
Retained earnings 6,400,000

1.) Result of Business Combination

Consideration tranferred
NCI
Fair value (19M-500K/80%*20%) 4,625,000
PSB (23,920,000*20%) 4,784,000
Higher amount
FVINAS-S
BVINAS-S
Ordinary shares 16,000,000
Retained earnings 6,400,000
Equipment - undervalued (10,520,000-9M) 1,520,000
FVNAA
Gain on bargain purchase
Honesty Corporation
2023
4,400,000
1,560,000

* Fair value 10,520,000


Book value 9,000,000
increase 1,520,000
/5 yrs 304000

1.1) Consolidated net income in 2023 Conso


Separate income from parent 4,400,000
19,000,000 Subsidiary's net income 2,040,000
Dividend received (520K*80%) -416,000
* Depreciation of undervalued equipment -304,000
G & B purchase at the yr of buscom 136,000
4,784,000 Net income 5,856,000

2.) Non-controlling interest in net assets in 2023 (NCINAS)

NCI, beg
NCI - NI
-23,920,000 Dividends declared by subsidiary (520K*20%)
-136,000 NCI, end
Parent (80%) NCI (20%)
4,400,000
1632000 408000
-416,000
-243200 -60800
136,000
5,508,800 347,200

4,784,000
347,200
-104,000
5,027,200

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