GOOD Company is into paper-manufacturing business while

GOOD Company is into paper-manufacturing business while LUCK Company is producing different kinds of drawing pencil. On June 1, 2017, GOOD Company decided to purchase 160,000 shares of the total outstanding shares of LUCK Company for cash amounting to P425,000. At that time, the balance sheet of LUCK Company includes a current assets of P180,000 and non-current assets of 320,000 while liabilities of P100,000, common stock of 200,000, additional paid in capital of 100,000 and retained earnings of P100,000.   

 

There were no difference between the book values and fair values of the assets and liabilities of LUCK Company at the date of acquisition and any excess cost will be attributable to either the Goodwill or Bargain Purchase Gain.

 

In addition, the following information was provided by both companies:

  1. On August 6, 2017, GOOD Corporation sold P35,000 of goods to LUCK Company with a gross profit rate of 15%. LUCK Company also sold P20,000 goods to GOOD Company and earned a gross profit of P4,000. The latter transaction showed a sales invoice dated, April 9, 2018.
  2. GOOD purchased goods amounting to P30,000 on November 14, 2018. It reveals that the cost of this product is only P22,500. On February 14, 2019, LUCK Company purchased P32,000 worth of goods from GOOD company. The company employed a gross profit rate of 22% on this transaction.
  3. The ending inventory of GOOD Corporation on May 31, 2018 includes P3,500 of goods coming from its purchase from LUCK Company. At the same date, there were P9,000 remaining inventory on LUCK’s purchase from GOOD.
  4. There is an unsold intercompany merchandise in the inventory of LUCK amounting to P6,000 while the ending inventory of GOOD contains P3,500 merchandise purchased from LUCK.
  5. On June 1, 2019, GOOD owed LUCK P10,000, and LUCK owed GOOD P5,000 as a result of the intercompany sales.
  6. GOOD paid P25,000 in cash dividends on March 20,2018 and 2019, LUCK paid its first cash dividend on March 10, 2019, giving each share of outstanding common stock a P0.15 cash dividend.

 

The trial balances of the two companies as of May 31, 2019, follow:

 

 

GOOD Corporation

LUCK Company

 

Dr

Cr

Dr

Cr

Cash

216,200

 

44,300

 

Accounts Receivable, net

290,000

 

97,000

 

Merchandise Inventory

310,000

 

80,000

 

Investment in LUCK Company

425,000

 

 

 

Property and Equipment, net

1,991,000

 

340,000

 

Goodwill

60,000

 

 

 

Accounts Payable

 

642,200

 

106,300

Common Stock, P0.50 par

 

250,000

 

 

Common Stock, P1.00 par

 

 

 

200,000

Additional Paid In Capital

 

1,250,000

 

100,000

Retained Earnings

 

1,105,000

 

140,000

Sales

 

880,000

 

630,000

Dividend Income

 

24,000

 

 

Cost of Goods Sold

704,000

 

504,000

 

Other expenses

130,000

 

81,000

 

Dividends Declared

25,000

 

30,00

 

Totals

P4,151,200

P4,151,200

P 1,176,300

P1,176,300

Question 10. How much is the goodwill in the 2019 consolidated financial statements?

 Question 11. What is the amount of the 2019 consolidated asset? 

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