P3.

5 Different forms of business combination

P Co is keen to acquire the business of S Co on 1 January 20x1 and it can do so in one
of two ways. P Co will issue shares with fair value of $700,000 as settlement for the
acquisition under each alternative.
(a) Alternative 1: P Co acquires 100% of the net assets (including cash) of S Co through a
purchase agreement with S Co.
(b) Alternative 2: P Co acquires 100% of the ownership interest of S Co from the owners of S
Co.
Details of the net assets of P Co and S Co on 1 January 20xl are shown below. Tax
rate is 20%. Recognize the deferred tax effects, if any, on the difference between the fair
value and the book value of identifiable net assets.

P Co S Co S Co

Book Value Book Value Fair Value

Intangible assets from contracts $ 30,000

Investment in S Co $ 700,000

Fixed assets 420,000 $ 300,000 350,000

Inventory 130,000 40,000 60,000

Account receivable 200,000 100,000 90,000

Cash 100,000 20,000 20,000

Account payable (150,000) (80,000) (80,000)

Net assets 1,400,000 380,000 470,000

Share capital 700,000 200,000

Retained earnings 700,000 180,000

Equity 1,400,000 380,000 470,000

 1. Under Alternative I show the journal entry to record the purchase of net assets of S Co by
P Co in its separate financial statements on 1 January 20xl.
2. Under Alternative 2. show the journal entry to record the acquisition in P Cos separate
financial statements on 1 January 20x1.
3. Under Alternative 2, complete the consolidation worksheet below to show the group
statement financial position on 1 January 20xl.
P Co S Co

Book Value Book Value Dr Cr Total

Investment in S Co $ 700,000

Fixed assets 420,000 $ 300,000

Inventory 130,000 40,000

Account receivable 200,000 100,000

Cash 100,000 20,000

Account payable (150,000) (80,000)

Net assets 1,400,000 380,000

Share capital 700,000 200,000

Retained earnings 700,000 180,000

Equity 1,400,000 380,000

Alternative 1: P Co acquires 100% of the net assets (including cash) of S Co through a purchase agreement with S Co.
1. Menghitung goodwill
$
Investment/consideration transferred 700.000
$
FV NCI -
FV net asset identification $ 700.000
BV net asset identification
$
Share capital 200.000
$
Retained earnings 180.000
$ (380.000)
Differential $ 320.000
Dialokasikan
Selisih FV - BV - [(selisih FV-BV) X Tax rate] =
Fixed asset $ 50.000 - ($ 50.000 X 20%) = $ 40.000
Inventory $ 20.000 - ($ 20.000 X 20%) = $ 16.000
Account receivable $ (10.000) - ($ (10.000) X 20%) = $ (8.000)
Intangible asset $ 30.000 - ($ 30.000 X 20%) = $ 24.000
Total $ 90.000 ($ 72.000)
Goodwill = $ 248.000
 2. Jurnal pada saat mengambil alih aset dan liabilitas
(Dr) Intangible asset from contracts $30.000
(Dr) Fixed asset $350.000
(Dr) Inventory $60.000
(Dr) Account receivable $90.000
(Dr) Cash $20.000
(Dr) Goodwill $248.000
(Cr) Account payable $80.000
(Cr) Deferred tax liability $18.000
(Cr) Consideration transferred $700.000

3. Laporan posisi keuangan P Co sesaat setelah merger

P Co
Statement of Financial Position
1 January 20x1
Asset Liability and equity
Current asset Liability
Cash $ 120.000 Account payable $ 230.000
Account receivable $ 290.000 Deferred tax liability $ 18.000
Inventory $ 190.000 Total liability $ 248.000
Total current asset $ 600.000

Non current asset Equity

Fixed asset $ 770.000 Share capital $ 700.000
Intangible asset $ 30.000 Retained earnings $ 700.000
Goodwill $ 248.000 Total equity $ 1.400.000
Total non current asset $ 1.048.000 Total liability and equity $ 1.648.000
Total asset $ 1.648.000
Alternative 2: P Co acquires 100% of the ownership interest of S Co from the owners of S Co.
1. Menghitung goodwill
Investment/consideration transferred $ 700.000
FV NCI $ -
FV net asset identification $ 700.000
BV net asset identification
Share capital $ 200.000
Retained earnings $ 180.000
$ (380.000)
Differential $ 320.000
Dialokasikan
Selisih FV - BV - [(selisih FV-BV) X Tax rate] =
Fixed asset $ 50.000 - ($ 50.000 X 20%) = $ 40.000
Inventory $ 20.000 - ($ 20.000 X 20%) = $ 16.000
Account receivable $ (10.000) - ($ (10.000) X 20%) = $ (8.000)
Intangible asset $ 30.000 - ($ 30.000 X 20%) = $ 24.000
Total $ 90.000 ($ 72.000)
Goodwill = $ 248.000
2. Jurnal pada saat perolehan
(Dr) Investment in S Co $700.000
(Cr) Share Capital $700.000

3. Jurnal eliminasi
(Dr) Share capital $200.000
(Dr) Retained earnings $180.000
(Dr) Intangible assets $30.000
(Dr) Fixed assets $50.000
(Dr) Inventory $20.000
(Dr) Goodwill $248.000
(Cr) Account receivable $10.000
(Cr) Deferred tax liability $18.000
(Cr) Investment in S Co $700.000
 4. Complete the consolidation worksheet below to show the group statement financial
position on 1 January 20xl (assumed P Co acquires 100% of the ownership of
interest in S Co)

P Co & Subsidiary Co
Consolidation Statement of Financial Position Worksheet
1 January 20x1 (after acquisition)
P Co S Co Adjustment & Elimination Consolidation
Description
(Book Value) (Book Value) Dr Cr SFP
Assets
cash 100.000 20.000 120.000
account receivable 200.000 100.000 290.000
penyesuaian AR milik S Co yang dinilai terlalu tinggi 10.000
inventory 130.000 40.000 190.000
penyesuaian inventory S Co yang dinilai terlalu rendah 20.000
fixed assets 420.000 300.000 770.000
penyesuaian FA yang dinilai terlalu rendah 50.000
pengakuan intangile assets from contracts 30.000 30.000
Investment in S Co 700.000
penyesuaian dengan AR 10.000
penyesuaian ke inventory 20.000
penyesuaian FA 50.000
penyesuaian dengan intangible assets from contracts 30.000
eliminasi 100% share capital S Co 200.000
eliminasi 100% retained earnings S Co 180.000
eliminasi dengan deferred tax liability 18.000
Goodwill 248.000
Total Assets 1.550.000 460.000 1.648.000

Liability
Account Payable 150.000 80.000 230.000
Deferred tax liability - - 18.000 18.000
Total Liability 150.000 80.000 248.000

Equity
Share capital 700.000 700.000
Share Capital, S Co 200.000 -
Elimination with Investment in S Co 200.000
Retained earnings 700.000 700.000
Retained earnings, S Co 180.000 -
Elimination with Investment in S Co 180.000
Total Equity 1.400.000 380.000 1.400.000
Total Liability and Equity 1.550.000 460.000 508.000 508.000 1.648.000