Question 1

a. Under the economic entity concept, the net assets of the subsidiary will be recorded at
their fair value that is implied by the price paid by the parent company in their
consolidated financial statements. What will the conceptual problems be if those
valuation approaches are implemented :
Based on the parent organization idea, discount or debilitation of net resources of
auxiliaries in the solidified fiscal reports is finite to the sum where the venture costs are
pretty much than the book worth of the net resources obtained. The non-controlling
interest in net resources isn't impacted by these reviews or compose downs.
The monetary unit thought upholds the discount or debilitation of the net resources of
an auxiliary by a sum equivalent to the whole distinction between the reasonable worth
and the book worth of net resources at the procurement date. For this situation, the non-
controlling interest in the solidified net resources is adapted to its portion in the discount
or debilitation of the net resources of the auxiliary.

b. Since its enactment, PSAK 22: Business Combinations must be applied to all
acquisitions. Explain how the treatment for goodwill should be based on PSAK 22. :
Goodwill can be perceived when there is an essential exchange, like a securing or
consolidation with another organization. Since Goodwill is an immaterial resource, it is
hard to gauge it with conviction
c. From a consolidated point of view, when should the profit be recognized on
intercompany sales of depreciable assets and non-depreciable assets:
Inter-company profits exist as long as the parent or auxiliary claims resources got
from between organization purchasing and selling exchanges.
Question 2

Pipe Corporation issued 23,000 shares of its own $2 par value common stock for
40,000 shares of the outstanding stock of Sector Inc. in an acquisition. Pipe common
stock at July 1, 2014 was selling at $16 per share. Just before the business
combination, balance sheet information of the two corporations was as follows:
Book Value Book Value Fair Value

Cash $25,0 $17,000 $17,000

00
Inventories 55,00 42,000 47,000
0
Other current assets 110,0 40,000 30,000
00
Land 100,0 45,000 35,000
00
Plant and 660,0 220,000 280,000
equipment-net 00
$950,000 $364,000 $409,000

Liabilities $220, $70,000 $75,000

000
Capital stock, $2 500,0 100,000
par value 00
Additional paid-in 170,0 90,000
capital 00
Retained earnings 60,00 104,000
0
$950, $364,000
000
Required:
1. Prepare the journal entry on Pipe Corporation's books to account for the
investment in Sector Inc. (6 marks)
2. Prepare a consolidated balance sheet for Pipe Corporation and Subsidiary
immediately after the business combination. (28 marks)
Investment in Sector Inc. 368,000
Capital stock 46,000
Additional paid-in capital 322,000
Preliminary computations
Sector stock outstanding $100,000 $100,000 / $2 par value = 50,000
shares o/s40,000 purchased / 50,000 = 80%
Fair value (purchase price) of 80% interest acquired $368,000
Implied fair value of Sector ($368,000 / 80%) 460,000 Book value of Sector's net
assets (294,000)
Excess fair value over book value acquired = $166,000
Allocation of excess of fair value over book value:
Inventory $5,000
Other current assets (10,000)
Land (10,000)
Plant and Equipment 60,000
Liabilities (5,000)
Remainder to goodwill 126,000
Excess of fair value over book value $166,000
Piper Corporation and Subsidiary
Consolidated Balance Sheet Working Papers
Juli 1, 2014

Consolodated
Piper Sector Eliminations Balance Sheet
  Debit Credit    
Assets Cash 25.000 17.000     42.000  
Inventories 55.000 42.000 5.000   102.000  
Other Current Assets 110.000 40.000   10.000 140.000  
Land 100.000 45.000   10.000 135.000  
Plant and Equipment 660.000 220.000 60.000   940.000  
126.00
Goodwill     0   126.000  
Investment in Sector 368.000     368.000    
166.00
Unamortized Excess     0 166.000    
1.318.00 1.485.00
Total Assets 0 364.000     0  
Equipt Liabilities 220.000 70.000     5.000 295.000
Capital Stock 546.000 100.000       546.000
Additional paid in
capital 492.000 90.000       492.000
Retained Earning 60.000 104.000 104.00     60.000
 0
Noncontrolling
Interest         92.000 92.000
1.318.00
Total Equilites 0 364.000       1.485.000
651.00
      0 651.000    

Question 3
Peter Corporation acquired an 80% interest in Stern Corporation several years ago
when the book values and fair values of Stern's assets and liabilities were equal. At the
time of acquisition, the cost of the 80% interest was equal to 80% of the book value of
Stern's net assets. Separate company income statements for Peter and Stern for the
year ended December 31, 2014 are summarized as follows:

Peter Stern
Sales Revenue $1,000,000 $600,000
Investment income from Stern 85,000
Cost of Goods Sold (600,000) (300,000)
Expenses (200,000) (200,000)
Net Income $285,000 $100,000

During 2013, Peter sold merchandise that cost $120,000 to Stern for $180,000. Half
of this merchandise remained in Stern's inventory at December 31, 2013. During
2014, Peter sold merchandise that cost $150,000 to Stern for $225,000. One-third of
this merchandise remained in Stern's December 31, 2014 inventory.

Required:
Prepare a consolidated income statement for Peter Corporation and Subsidiary for 2014.
Combined cost of sales 900.000

Less : Intercompany cost of sales (225.000)

Plus Unrealized profit (80% x 600.000) 480.000

Consolidated cost of sales $ 1.155.000

Question 4
Paka Corporation owns an 80% interest in Sandra Company. Paka acquired Sandra's
bonds on January 2, 2014. The following information is from the adjusted trial balances
at December 31, 2014, at which time the bonds have three years to maturity. The bonds
have interest payment dates of January 1 and July 1. Straight-line amortization is used
by both companies.

Paka Sandra
Investment in Sandra Bonds, $100,000 98,500
par
7% Bonds payable, $200,000 200,000
Bond premium 6,000
Interest expense 12,000
Interest receivable 7,000
Interest income 7,500
Interest payable 7,000

Required:
Prepare the necessary consolidation working paper entries on December 31,
2014 with respect to the intercompany bonds.

Tangga
l Keterangan Debit Kredit
12/31 Bond Interest Payable   7.000  
Bond Interest
    Receivable   7.000
12/31 Bond Payable   100.000  
  Interest Income   7.500  
  Bond Premium   3.000  
Interest Expense (50%
    owned)   6.000
Investment In Sandra's
    Bond   98.500
Gain on retirement of
    Bonds   6.000
  Supporting Compulations
Cost of bonds to Paka
  ($98.500-$500)     $98.000
  Book value acquired '1/1/2014      
 where
  $2.000 per year is amortized      
  ($200.000 + $8.000)x50% =     104.000
Gain on constructive bond
  retirement     $6.000

Question 5

In 1 January 2016, PT ABC paid Rp 2 million for 30% shares of PT Willow. Accumulated
loss of PT Willow for 3 years ended 31 Dec 2018 is Rp 10 million.
Based on PSAK 15, Explain how these transactions will be recorded in the book of PT
ABC.
In the PSAK arrangement, the transaction will be recorded on the accounting
exchange of PT. ABC with an investment of 2 million, that way, the accumulated loss is 10
million