9.Companies A and B decide to consolidate.

Asset and estimated annual earnings contributions are as

follows:

Co.A Co. B Co.C

Net asset contribution P300,000 P400,000 P700,000
Estimated annual earnings 50,000 80,000 130,000
contribution

Stockholders of the two companies agree that a single class of stock be issued, that their contributions be
measured by net assets plus allowances for goodwill, and that 10% be considered as a normal rate of
return. Earnings in excess of the normal rate of return shall be capitalized at 20% in calculating goodwill.
It was also agreed that authorizes capital stock of the new company shall be 20,000 shares with a par
value of P100 a share.

What is amount of goodwill credited to Co. A, and the total contribution of Co.B(net assets plus goodwill)”

a. P100,000; P400,000 c. P100,000; P600,000

b. P150,000;P500,000 d. P200,000; P600,000

ANSWER: C