ACCOUNTING7A

PROBLEM1.JerelynCorporationisacompanyinvolvedinmanufacturingcars.OnJanuary1,
2016,theboardofdirectorsofthesaidcompanyhasdecidedtoacquirethenetassetsof
Jo Ann Corporation and Mary Grace Corporation, suppliers of materials they use in
production.Themergerisexpectedtoresultinproducinghigherqualitycarswithlower
totalcost.ThedealwasclosedonFebruary29,2016andthefollowinginformationwas
gatheredfromthebooksoftheentities:

Jerelyn JoAnn MaryGrace

CurrentAssets P1,375,000 P390,000 P260,000
NoncurrentAssets 3,125,000 2,550,000 1,700,000
TotalAssets P4,500,000 P2,940,000 P1,960,000

Liabilities P325,000 P210,000 P140,000

Commonstock,P100par 2,748,500 1,780,200 1,186,800
SharePremium 176,500 169,800 113,200
RetainedEarnings 1,250,000 780,000 520,000
TotalLiabilitiesandEquity P4,500,000 P2,940,000 P1,960,000

Jerelynwillissue22,500ofitscommonstockinexchangeforthenetassetsofJoAnn
and11,200ofitscommonstockinexchangeforthenetassetsofMaryGrace.Thefair
valueofJerelyn'ssharesisP150.Inaddition,thefollowingadjustmentsshouldbemade:
CurrentassetsofJoAnnandMaryGracehaveafairvalueofP450,000andP230,000,
respectively.
NoncurrentassetshaveafairvalueofP2,150,000andP1,975,000forJoAnnand
MaryGrace,respectively.

Computefortheconsolidatedstockholder'sequityandassetsonthedateofacquisition.

PROBLEM2.JessecaCo.mergedintoJericaCorp.onJuly1,2016.Inexchangeforthenet
assetsatfairmarketvalueofJessecaCo.amountingtoP696,450,Jericaissued68,000
commonsharesatP9parvaluewithamarketpriceofP12pershare.Outofpocketcosts
ofthecombinationwereasfollows:

Legalfeesforthecontractofbusinesscombination P35,600
AuditfeeforSECregistrationofstockissue 90,000
Printingcostsofstockcertificates 14,500
Broker'sfee 23,600
Accountant'sfeeforpreacquisitionaudit 80,000
Otherdirectcostofacquisition 75,000
Generalandallocatedexpenses 43,000
Listingfeesinissuingnewshares 36,000

JericawillpayanadditionalcashconsiderationofP455,000intheeventthatJesseca's
netincomewillbeequaltoorgreaterthanP950,000fortheperiodendedDecember31,
2016.Atacquisitiondate,thereisahighprobabilityofreachingthetargetnetincome
andthefairvalueoftheadditionalconsiderationwasdeterminedtobeP195,000.Actual
netincomefortheperiodendedDecember31,2016amountedtoP1,250,000.Theadditional
cashconsiderationwaspaid.

Compute for the amount of goodwill to be recognized in the statement of financial

position as of December 31, 2016 and the amount of expense to be recognized in the
statementofcomprehensiveincomefortheyearendedDecember31,2016.

Ms.
PROBLEM3.TheStatementofFinancialPositionofAngelicaCorporationonJune30,2016
ispresentedbelow:

CurrentAssets P32,500 Liabilities P87,500

Land 220,000 CapitalStock,P5par 150,000
Building 110,000 SharePremium 137,500
Equipment 87,500 RetainedEarnings 75,000
TotalAssets P450,000 TotalLiabilitiesandEquity P450,000

AlltheassetsandliabilitiesofAngelicaareassumedtoapproximatetheirfairvalues
exceptforLandandBuilding.ItisestimatedthatthelandhasafairvalueofP350,000
andthefairvalueoftheBuildingshouldbeincreasedbyP80,000.DanielleCorporation
acquired80%ofAngelica'scapitalstockforP500,000.

Computeforthegoodwill/gaininthefollowingindependentsituations:
1. TheconsiderationpaidincludesthecontrolpremiumofP142,000.
2. TheconsiderationpaidexcludesthecontrolpremiumofP23,000andthefairvalue
ofthenoncontrollinginterestisP122,750.
3. TheconsiderationpaidincludescontrolpremiumofP37,000.

PROBLEM4.BlessylCo.acquires25%ofChristineCompany'scommonstockforP190,000cash
andcarriestheinvestmentusingthecostmethod.Afterthreemonths,Blessylpurchases
another 60% of Christine's common stock for P540,000. On this date, acquired company
reports identifiable net assets with carrying value of P720,000 and fair value of
P920,000.Theliabilitiesoftheacquiredcompanyhasabookvalueandafairvalueof
P280,000.Thefairvalueofthe15%noncontrollinginterestisP125,000.Computeforthe
goodwillorgainonacquisition.

PROBLEM5.OnJanuary2,2015,JongCorporationpurchased80%oftheoutstandingshares
of Jude Company for P4,750,000. At that date, Jude had P4,000,000 of ordinary shares
outstandingandretainedearningsofP1,600,000.
Jude'sequipmentwitharemaininglifeof5yearshadabookvalueofP2,250,000
andafairvalueofP2,630,000.Jude'sremainingassetshadbookvaluesequalto
theirfairvalues.
Allintangiblesexceptgoodwillareexpectedtohaveremaininglivesof8years.
TheincomeanddividendfiguresforbothJongandJudeareasfollows:Netincome
of Jong in 2015 is P900,000; 2016 is P1,100,000. Net income of Jude in 2015 is
P340,000;2016isP510,000.
DividendsofJongin2015isP220,000;2016isP390,000.DividendsofJudein2015
isP70,000'2016isP130,000.
Jong'sretainedearningsbalanceatthedateofacquisitionwasP3,450,000.
Compute for the consolidated retained earnings attributable to controlling interest in
2016,consolidatedprofitin2016andnoncontrollinginterestinnetassetsin2016.

PROBLEM6.PositiveCorporationacquired80%oftheoutstandingcommonstockofSynergy
CompanyonJune1,2016forP586,250.
SynergyCompany'sstockholder'sequitycomponentsattheendofthisyearareas
follows: Ordinary shares, P100 par, P250,000; Share Premium, P112,500; Retained
Earnings,P222,500.
Noncontrollinginterestismeasuredatfairvalue
AlltheassetsofSynergywerefairlyvalued,exceptforinventories,whichwere
overstated by P11,000 and equipment, which was understated by P15,000. Remaining
usefullifeoftheequipmentisfouryears.
Both companies use the straightline method for depreciation and amortization.
Stockholder'sequityofPositiveonJanuary1,2016iscomposedofOrdinaryshares,
P750,000;SharePremium,P175,000;andRetainedEarningsP525,000.
FairvalueofnoncontrollinginterestonthedateofacquisitionisP117,500.
Goodwill,ifany,shouldbewrittendownbyP14,225atyearend.
NetincomefortheyearofPositiveandSynergyareP75,000andP42,500(fromdate
ofacquisition)respectively.
Dividends declared at the end of the year amounted to P20,000 and P15,000 for
PositiveandSynergyrespectively.Duringtheyear,therewasnoissuanceofnew
ordinaryshares.
ComputeforthebalanceofthenoncontrollinginterestinthenetassetsofSynergyand
theamountoftheconsolidatedshareholder'sequityonDecember31,2016.

Ms.