Compute for the goodwill.

Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 19E
icon
Related questions
Question

Compute for the goodwill.

On January 1, 2021, OBDURATE Co. acquired 30% ownership interest in STUBBORN, Inc. for P200,000. Because the
investment gave OBDURATE significant influence over STUBBORN, the investment was accounted for under the equity
method in accordance with PAS 28.
From 2021 to the end of 20x3, OBDURATE recognized P100,000 net share in the profits of the associate and P20,000
share in dividends. Therefore, the carrying amount of the investment in associate account on January 1, 20x3, is
P280,000.
On January 1, 20x4, OBDURATE acquired additional 60% ownership interest in STUBBORN, Inc. for P1,600,000. As of this
date, OBDURATE has identified the following:
a.
The previously held 30% interest has a fair value of P360,000.
b. STUBBORN's net identifiable assets have a fair value of P2,000,000.
OBDURATE elected to measure non-controlling interests at the non-controlling interest's proportionate share of
STUBBORN's identifiable net assets.
C.
Requirement: Compute for the goodwill.
Transcribed Image Text:On January 1, 2021, OBDURATE Co. acquired 30% ownership interest in STUBBORN, Inc. for P200,000. Because the investment gave OBDURATE significant influence over STUBBORN, the investment was accounted for under the equity method in accordance with PAS 28. From 2021 to the end of 20x3, OBDURATE recognized P100,000 net share in the profits of the associate and P20,000 share in dividends. Therefore, the carrying amount of the investment in associate account on January 1, 20x3, is P280,000. On January 1, 20x4, OBDURATE acquired additional 60% ownership interest in STUBBORN, Inc. for P1,600,000. As of this date, OBDURATE has identified the following: a. The previously held 30% interest has a fair value of P360,000. b. STUBBORN's net identifiable assets have a fair value of P2,000,000. OBDURATE elected to measure non-controlling interests at the non-controlling interest's proportionate share of STUBBORN's identifiable net assets. C. Requirement: Compute for the goodwill.
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Optimal Portfolio
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Cornerstones of Financial Accounting
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning
SWFT Corp Partner Estates Trusts
SWFT Corp Partner Estates Trusts
Accounting
ISBN:
9780357161548
Author:
Raabe
Publisher:
Cengage
SWFT Comprehensive Volume 2019
SWFT Comprehensive Volume 2019
Accounting
ISBN:
9780357233306
Author:
Maloney
Publisher:
Cengage
Financial Accounting
Financial Accounting
Accounting
ISBN:
9781305088436
Author:
Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:
Cengage Learning