SAMPLE ILLUSTRATION 1: Expecto and Patronum Corporation

1) Consideration transferred 3,000,000

NCI
Fair value 537,000
Proportionate share basis 687,000
Higher amount 687,000
Fair value of net assets acquired - 3,435,000
Goodwill 252,000

Journal Entries: DR CR
Investment in subsidiary 3,000,000
Cash 3,000,000
To record purchase of investment in subsidiary.

Ordinary shares 900,000

Share premium 825,000
Retained earnings 450,000
Investment in subsidiary 1,740,000
NCI 435,000
To eliminate the book values of subsidiary's net assets.

Land 780,000
Building 480,000
Investment in subsidiary 1,008,000
NCI 252,000
To tak e account the adjustments of assets to their fair values.

Goodwill 252,000
Investment in subsidiary 252,000
To recognize the result of business combination.
6,687,000 6,687,000

Allocation of Goodwill:
Expecto (80%) Patronum (20%) TOTAL
Consideration transferred 3,000,000 687,000 3,687,000
Fair value of net assets - 2,748,000 - 687,000 - 3,435,000
Goodwill 252,000 - 252,000
2) Consideration transferred 3,138,000
NCI
Fair value 736,500
Proportionate share basis 687,000
Higher amount 736,500
Fair value of net assets acquired - 3,435,000
Goodwill 439,500

Journal Entries: DR CR
Investment in subsidiary 3,138,000
Cash 3,138,000
To record purchase of investment in subsidiary.

Ordinary shares 900,000

Share premium 825,000
Retained earnings 450,000
Investment in subsidiary 1,740,000
NCI 435,000
To eliminate the book values of subsidiary's net assets.

Land 780,000
Building 480,000
Investment in subsidiary 1,008,000
NCI 252,000
To tak e account the adjustments of assets to their fair values.

Goodwill 439,500
NCI 49,500
Investment in subsidiary 390,000
To recognize the result of business combination.
7,012,500 7,012,500

Allocation of Goodwill:
Expecto (80%) Patronum (20%) TOTAL
Consideration transferred 3,138,000 736,500 3,874,500
Fair value of net assets - 2,748,000 - 687,000 - 3,435,000
Goodwill 390,000 49,500 439,500
3) Consideration transferred 3,000,000
NCI
Fair value 694,500
Proportionate share basis 687,000
Higher amount 694,500
Fair value of net assets acquired - 3,435,000
Goodwill 259,500

Journal Entries: DR CR
Investment in subsidiary 3,000,000
Cash 3,000,000
To record purchase of investment in subsidiary.

Ordinary shares 900,000

Share premium 825,000
Retained earnings 450,000
Investment in subsidiary 1,740,000
NCI 435,000
To eliminate the book values of subsidiary's net assets.

Land 780,000
Building 480,000
Investment in subsidiary 1,008,000
NCI 252,000
To tak e account the adjustments of assets to their fair values.

Goodwill 259,500
NCI 7,500
Investment in subsidiary 252,000
To recognize the result of business combination.
6,694,500 6,694,500

Allocation of Goodwill:
Expecto (80%) Patronum (20%) TOTAL
Consideration transferred 3,000,000 694,500 3,694,500
Fair value of net assets - 2,748,000 - 687,000 - 3,435,000
Goodwill 252,000 7,500 259,500
SAMPLE ILLUSTRATION 2: Tata Lino and Balitang Ina Company

1) Consideration transferred 225,000

NCI
Fair value -
Proportionate share basis 80,000
Fair value of net assets acquired - 320,000
Gain on bargain purchase - 15,000

Journal Entries: DR CR
Investment in subsidiary 225,000
Cash 225,000
To record purchase of investment in subsidiary.

Net assets 210,000

Investment in subsidiary 157,500
NCI 52,500
To eliminate the book values of subsidiary's net assets.

Assets 110,000
Investment in subsidiary 82,500
NCI 27,500
To tak e account the adjustments of assets to their fair values.

Investment in subsidiary 15,000

Gain on bargain purchase 15,000
To recognize the result of business combination.
560,000 560,000

Allocation of Goodwill:
Tata Lino (75%) Balitang Ina (25%) TOTAL
Consideration transferred 225,000 80,000 305,000
Fair value of net assets - 240,000 - 80,000 - 320,000
Gain on bargain purchase - 15,000 - - 15,000
 2) Consideration transferred 225,000
NCI
Fair value 82,000
Proportionate share basis -
Fair value of net assets acquired - 320,000
Gain on bargain purchase - 13,000

Journal Entries: DR CR
Investment in subsidiary 225,000
Cash 225,000
To record purchase of investment in subsidiary.

Net assets 210,000

Investment in subsidiary 157,500
NCI 52,500
To eliminate the book values of subsidiary's net assets.

Assets 110,000
Investment in subsidiary 82,500
NCI 27,500
To tak e account the adjustments of assets to their fair values.

Investment in subsidiary 13,000

Gain on bargain purchase 13,000
To recognize the result of business combination.
558,000 558,000

SAMPLE ILLUSTRATION 3: Flattening Company and The Curve Corporation

The Curve's net assets before adjustments 11,262,000

Adjustments to fair value:
Decrease in A/R - 150,000
Decrease in equipment - 84,000
Increase in inventories 456,000
Increase in land 2,826,000
Increase in building 642,000
Unrecorded A/P - 162,000
Increase in N/P - 48,000
Existing goodwill - 1,800,000 1,680,000
The Curve's fair value of net assets acquired, after adjustments 12,942,000

Consideration transferred 15,480,000

NCI
Fair value 2,700,000
Proportionate share basis 1,941,300
Higher amount 2,700,000
Fair value of net assets acquired, after adjustments - 12,942,000
Goodwill 5,238,000
 Flattening The Curve
(@ BV) (@ FV) TOTAL
1) Cash 21,249,000 768,000 22,017,000
Accounts receivable 1,800,000 1,800,000 3,600,000
Inventories 3,300,000 2,616,000 5,916,000
Prepaid expenses 891,000 750,000 1,641,000
Land 14,100,000 8,100,000 22,200,000
Building 9,360,000 3,990,000 13,350,000
Equipment 1,800,000 1,026,000 2,826,000
Goodwill 5,238,000
Consideration transferred - 15,480,000
Acquisition expenses paid - 750,000
Consolidated total assets 60,558,000

Flattening The Curve

(@ BV) (@ FV) TOTAL
2) Accounts payable 4,050,000 1,680,000 5,730,000
Notes payable 8,400,000 4,428,000 12,828,000
Consolidated total liabilities 18,558,000

3) Consolidated total shareholders' equity* 42,000,000

Consolidated total liabilities and shareholders' equity 60,558,000

Flattening The Curve

*Another computation: (@ BV) (@ FV) TOTAL
Ordinary shares 20,400,000 - 20,400,000
Share premium 9,450,000 - 9,450,000
Retained earnings 10,200,000 - 10,200,000
NCI 2,700,000
Acquisition expenses paid - 750,000
Consolidated total shareholders' equity 42,000,000