3.

X Company acquires all of Y Company in an acquisition properly accounted for as an asset

acquisition. X issues 80,000 shares of common stock with a fair value of P8,000,000 for Y’s net assets.
The fair values of Y’s assets and liabilities approximate their book values, except Y has customer lists
valued at P3,000,000 that are not reported on its balance sheet, and its plant assets are overvalued by
P5,000,000. Here are the balance sheets of X and Y prior to the acquisition:

X Company Y Company

Assets P30,000,000 P10,000,000

Liabilities P16,000,000 P 6,000,000

Common stock, $1 par 1,000,000 100,000

Additional paid-in capital 9,000,000 2,900,000

Retained earnings 4,000,000 1,000,000

P30,000,000 P10,000,000

How much goodwill is recognized for this acquisition?

a. P 2,000,000
b. P 3,000,000
c. P 6,000,000
d. P 11,000,000

ANS: C

Cost P8,000,000
Fair value of net assets acquired
Reported assets P 5,000,000
Customer lists 3,000,000
Liabilities (6,000,000) 2,000,000
Goodwill P6,000,000