Accounting: Business Combination, Fair Value, Consolidated Income

This article covers various topics related to accounting such as business combination, fair value, and consolidated income. It provides detailed calculations for non-controlling interest, goodwill, and consolidated net income. The article also includes a consolidated worksheet and a statement showing fair value in excess of book value.

Running head: ACCOUNTING
Accounting
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1ACCOUNTING
Table of Contents
Problem 1.........................................................................................................................................2
a....................................................................................................................................................2
b...................................................................................................................................................2
C...................................................................................................................................................2
d...................................................................................................................................................3
e....................................................................................................................................................3
f....................................................................................................................................................4
Problem 2.........................................................................................................................................5
Reference and Bibliography............................................................................................................7

2ACCOUNTING
Problem 1
a.
In case of business combination, the company peter pan should include the summation of
the price of acquisition and the Non-controlling interest. This total amount should be reported in
the consolidated balance sheet. Therefore, it can be seen that both the price of acquisition and the
non-controlling interest is required to be calculated. The calculation is provided below:
Value assigned to the Acquisition
Particulars Amount
Share price on acquisition 31
Shares outstanding $100,000.00
Percentage Acquisition 80%
Peter Pans Consideration Transferred $2,480,000.00
Fair Value of NCI $600,000.00
Simee total fair value on 1 January $3,080,000.00
b.
In case of business combination, the assets that are identifiable and the liabilities that are
assumed should be initially reported at the fair value at the date of acquisition.
C.
In case of period subsequent to the date of acquisition the assets and liabilities of the
subsidiary are reported at the fair value that are prevailing at the acquisition date adjusted by the
depreciation and amortization (Scott 2015). In case of certain financial items the change in the
fair value are not continuously adjusted.

3ACCOUNTING
d.
Statement showing calculation of Goodwill
Particulars Amount Amount
Simee total fair value on 1 January $3,080,000.00
Book of Total Assets $2,970,000.00
Less:
BV of Liability $1,680,000.00
Net Book Value $1,290,000.00
Excess of FV over BV $1,790,000.00
Adjustment of Book to Fair value
Building and Equipment -$250,000.00
Trade Mark $200,000.00
Patent technology $1,060,000.00
Unpatented Technology $600,000.00
Total $1,610,000.00
Goodwill $180,000.00
e
Statement showing calculation of Consolidated Income
Particulars Amount
Combined Revenue $4,400,000.00
Combined expenses -$2,350,000.00
Building and equipment excess depreciation $50,000.00
Trademark excess amortization -$20,000.00
Patented Technology -$265,000.00
Unpatented technology -$200,000.00
Consolidated Net income $1,615,000.00
Statement showing net income of NCI
Particulars Amount
Simee Revenue $1,400,000.00
Simee Expenses -$600,000.00
Excess amortisation expenses -$435,000.00
Adjusted Net Income $365,000.00
NCI Percentage 20%
Share of Consolidated Income NCI $73,000.00

4ACCOUNTING
Statement showing net income of Controlling Interest
Particulars Amount
Peter Pan Revenue $3,000,000.00
Peter Pan expenses $1,750,000.00
Net Income $1,250,000.00
Share of Adjusted Net Income of Simee $292,000.00
Controlling interest share of net income $1,542,000.00
Statement showing NCI amount reported in Balance sheet
Particulars Amount
Fair Value of NCI on January $600,000.00
Net adjusted Income $73,000.00
Dividend -$6,000.00
NCI on December $667,000.00
f.
In case the total fair value is assessed at $2250000 that means acquisition has been made
through bargain purchase method.
Calculation of bargaining Purchase
Particulars Amount
Total Fair Value $2,250,000.00
Collective fair value $2,900,000.00
Bargain purchase -$650,000.00

5ACCOUNTING
In this method of acquisition, the assets and liabilities of the subsidiary are recorded at
the fair value on the date of acquisition irrespective of fair value assessed. Therefore, it can be
said that neither of the value of the assets and the liabilities will change because of the assessed
fair value (Hoyle et al. 2015). It should be noted that no goodwill is recorded at the time of
recording the bargaining purchase.
Problem 2
Statement showing Consolidated Worksheet
Accounts Padre
Sierr
a
Consolidation
Entries
NCI
Consolidated
TotalDebit Credit
Revenue
13949
80
6849
00 2079880
COGS
77400
0
4320
00 1206000
Depreciation expenses
27400
0
1160
0 2400 283200
Amortization expenses 6100 4700 10800
Interest Expenses 52100 9200 61300
Separate Company Net
Income
29488
0
2260
00
4520
0 518580
NCI Income 45200
Padrees Interest in
Consolidated income 473380
Retained earnings
12750
00
5300
00 530000 1275000
Net Income
47200
0
2260
00 473380
Dividend Declared
26000
0
6500
0
1300
0 312000
Retained Earnings
20070
00
8210
00 2060380
Current Assets
85616
0
7647
00 1620860
Investment in Sierra
92784
0 927840 0
Land 36500 6500 225000 655000

6ACCOUNTING
0 0
Building and Equipment
90900
0
2754
00 2400 12400 1174400
Copyrights
1159
00 100100 4700 211300
Total Assets 3661560
Accounts Payable
27500
0
1940
00 469000
Notes Payable
54100
0
1760
00 2300 18400 733100
Common Stock
32000
0
1000
00 100000
2000
0 400000
Additional paid in capital
45000
0
6000
0 60000
1200
0 498000
Retained earnings
14870
0
6910
00
1382
00 552800
NCI 228400
Total 2881300
Statement showing FV in excess of BV
Particulars Amount
FV of subsidiary at the acquisition date $1,003,400.00
BV of Subsidiary -$690,000.00
Excess of FV over BV $313,400.00
Statement showing Allocation to Specific Accounts
Particulars Amount
Land $225,000.00
Building -$24,000.00
Copy right $94,000.00
Note payable $18,400.00
Total $313,400.00

7ACCOUNTING
Reference and Bibliography
Beatty, A. and Liao, S., 2014. Financial accounting in the banking industry: A review of the
empirical literature. Journal of Accounting and Economics, 58(2-3), pp.339-383.
Hoyle, J.B., Schaefer, T. and Doupnik, T., 2015. Advanced accounting. McGraw Hill.
Scott, W.R., 2015. Financial accounting theory (Vol. 2, No. 0, p. 0). Prentice Hall.
Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., 2015. Financial & managerial accounting. John
Wiley & Sons.
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