Question

Papilon Corporation acquired 90,000 shares of the 100,000 outstanding no-par ordinary share capital of Silicon Company...

Papilon Corporation acquired 90,000 shares of the 100,000 outstanding no-par ordinary share capital of Silicon Company for a price of P1,200,000 on January 1, 2011 at the time when Silicon Company had book and fair values as shown below. Papilon Corporation also paid P96,000 direct acquisition costs in the form of legal fees to outside consultants.  

Ordinary Share Capital

P480,000

Accumulated Profits

600,000

Total net assets at book value

P1,080,000

Add: Differences between current fair value and book value

Inventories (FIFO)

36,000

Property and Equipment

72,000

Total current fair value of identifiable net assets

P1,188,000

Required:

  1. Prepare journal entries for Papilon Corporation on January 1, 2011 to record the acquisition of share from Silicon Company.
  2. Prepare the required elimination entries in general journal form that are needed for a consolidated statements worksheet for a consolidated statement of financial position for Papilon Corporation and subsidiary on January 1, 2011
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