Baluyut, Alvin Christian De Guzman, Cindy Eroles, Cristine Rose Manzano, Krystelle Ann

On January 1, 2012, Imba Companys shares were purchased by Amba Company. The latter now owns 26% interest in the former. The goodwill included in the IIA account in the books of Amba on this date amount to 150,000. The following are relevant information about Imba Companys balance sheet on December 31, 2011. The cash and cash equivalents account include: petty cash 5,000; cash on hand 150,000; cash in bank 400,000; a 10%, 10-year treasury bond maturing on January 31, 2012 purchased on November 13, 2010 at face, 300,000; and redeemable preferred shares of Leaf Company issued and acquired on November 10, 2011, maturing on February 29, 2012, 500,000; they are redeemable for 550,000. Short-term instruments are currently sold at 110%. The accounts receivable have a book value of 2,000,000. Of this, 1,900,000 can be collected with a high degree of certainty. These receivables can be sold to Cable Bank for 1,850,000. Inventories include the following: inventory on company warehouse 1,000,000; samples on display 10,000; inventory held on consignment 600,000; inventory held out on consignment 550,000; office supplies 5,000; purchase from suppliers, FOB shipping point, shipped on December 28, received on January 3, 2012, 300,000; and shipments to customers, FOB shipping point, shipped on December 28, received on January 3, 2012, 250,000. The net realizable value of inventory is 99% of cost. PPE includes land with a cost 10,000,000 and a fair value of 12,000,000. The building with a cost of 15,000,000 is depreciated on a straight line basis for 20 years. Accumulated depreciation on this date totals 3,750,000. This building has a fair value of 11,000,000. The company also owns a machine costing 1,200,000. This is depreciated using SYD with an estimated useful life of 9 years. This was purchased on January 1, 2009. Currently, the market value for this machine is 600,000. The company also invested on 5-year bonds with a coupon of 10%. They were purchased on January 1, 2012. Each 150,000 interest payment is made on January 1 and July 1 of each year. The bonds are issued at and purchased at face value. The fair value of this investment based on the face at the end of each year is as follows:2012-90%; 2013-95%; 2014-105%; 2015-100%. Accounts payable total 1,250,000. The account deposits and advances from customers has a credit of 450,000. Notes payable amount to 1,500,000. The company also has outstanding bonds payable of 2,000,0000, with 8% coupon and issued to yield 7%. On January 1, 2012, market rate is 8.5%. Interests are payable at the end of each year. These bonds issued on January 1, 2010 will mature after 10 years. There are 1M common shares outstanding with par value of 5. Cumulative preferred shares with a dividend rate of 7% have a par value of 100. There are 40,000 shares outstanding. APIC amount to 12M. The last declaration and payment for dividends were made during 2010. Currently, there is no difference between book and market values for equity accounts. Imba Company engaged in the following transactions for each year: 2012 -All beginning inventory were sold during the year. -Revalued certain assets on December 31. The replacement costs are as follows: land 11,000,000; building 20,000,000; machine 2,000,000.

Baluyut, Alvin Christian De Guzman, Cindy Eroles, Cristine Rose Manzano, Krystelle Ann
2013 -On January 1, issued additional 200,000 common shares for 10. The number of shares the investor has did not change. -Another investor, Emba, sold building and land to Imba for 3,000,000. Fair value of the building is 1,600,000 and the land, 2,400,000. The building has a remaining useful life of 10 years with negligible residual value. This building is to be depreciated on a straight line basis. -Sold 10,000 units of inventory to Amba. Each unit costs 500. Mark-up on cost is 30%; 50% of the units were sold by the buyer during the year for 800 each. 2014 -Used the revaluation method to value the building bought from Emba. The sound value of a building is 1,800,000. -Sold 15,000 units of inventory which costs 500 each to Amba. Mark-up on selling price is 20%. 85% of the total available goods for sale of Amba were sold during the year for 800 each. Amba uses FIFO method to value its inventory. -On January 1, Imba reacquired 50,000 shares for 9 each. 2015 -Ambas unsold inventory bought from Imba was sold back to this associate for 700 each. -At the end of the year, sold the revalued building to Amba for 1,500,000. -The associates land (fair market value of 1,500,000) bought from Emba was exchanged for Ambas bond with a face value of 1,800,000. The coupon rate of this 10-year bond is 8%. There are four remaining annual interest payments occurring at the end of the year. The bonds were initially issued to yield 9%. Fair value of the bond is 1,600,000. The exchange occurred at the last day of the year. -On January 1, reissued 10,000 treasury shares. Amba Company bought 2,000 of these shares for 11 each. -On year-end, the investment in AFS was sold to Amba at a gain of 400,000. Net income, which were earned evenly throughout each year, are as follows: Net income (loss) Year 1 Year 2 Year 3 Year 4 526,340 (89,030) (298,300) (500,235)

Requirements: 1. Determine the purchase price on the date of acquisition. 2. Determine the balances of IIA, SIANI, SIAOCI and increase or decrease due to stock transactions for each year. 3. Show reconciliation of the proportionate share and the balance of IIA.