Answer Key

1st Semester Final Examination

(Advance Accounting and Reporting II)

PART I: IDENTIFICATION

1. BUSINESS 4. ACQUISITION DATE 8. CONTROL

COMBINATION
5. FAIR VALUE 9.NON-CONTROLLING
2. CONTINGENT INTEREST
6. ACQUIREE
CONSIDERATION
9. EQUITY INTEREST
7. ACQUIRER
3. GOODWILL

PART II: TRUE OR FALSE

1. GOOD 4. WILL 7. GOOD 10. GOOD

2. GOOD 5. GOOD 8. GOOD

3. WILL 6. GOOD 9. WILL

PART III: MULTIPLECHOICE

1. C

2. D

3. C

4. D

5. B

6. D

7. C
8. D

9. A

10. B
Solutions:

1. C

Finder’s Fees P50,000

Legal Fess 18,000

Total P68,000

3. C

Assets P98,000

Less: Liabilities (23,000)

Future Value of Net Asset P75,000

Future Value of Net Asset- Consideration Given

(P75,000-80,000)= P5,000 Goodwill

5. B

Assets: P520,000

Less: Liabilities (77,000)

Future Value of Net Asset P443,000

Future Value of Net Asset- Consideration Given

(P443,000-P360,000)= P83,000 Bargain Purchase

7. C

Accounts Receivable P235,000

Inventory 400,000

Land 93,000

Building 90,000
Equipment 40,000

Total Assets P858,000

Current Liabilities (60,000)

Long-Term Debt (180,000)

Total Fair Value of Net Asset P618,000

8. D

Future Value of Net Asset- Consideration Given

(P618,000-P720,000)= P102,000 Goodwill

10. B

Book Value Fair Value

Current Asset P1,200,000 x 103% = P1,236,000

Property&Equipment P2,000,000 x 102% = P2,040,000

Total Asset P3,276,000

Less: Liabilities (200,000)

Total Fair Value of Net Asset P3,076,000

PART IV: PROBLEM SOLVING

Solutions for Problem 1-a:

General journal entry recorded by Mahal Kita for the acquisition of Pogi (Pogi
survive as a separate legal entity).

Investment in Pogi P2,640,000

 Cash P640,000

Notes Payable 2,000,000

Solution for Problem 1-b:

General journal entry recorded by Mahal Kita for the acquisition of Pogi (Pogi
dissolve as a separate legal entity).

Cash P120,000

Inventories 250,000

Other Current Assets 600,000

Land 320,000

Plant Assets 4,600,000

Patent 50,000

Accounts Payable P1,200,000

Notes Payable 2,100,000

Cash 640,000

Notes Payable 2,000,000

Solution for Problem 2:

a. Cash = P490,000+140,000-400,000-35,000-8,000= P187,000

b. Inventory= P520,000+260,000= P780,000

c. Construction Permit= P380,000+190,000= P570,000

d. Goodwill= P720,000 (Paid 400,000+320,000)= P720,000(Fair Value of Net

Asset)= 0

e. Notes Payable= P800,000+ 460,000= P1260,000

f. Common Stock= P960,000+300,000(10,000 shares issued x P30 par)

= P1,260,000

g. Additional Paid in Capital= P192,000+20,000(10,000 shares issued x P20

par excess over per share) - 8,000(cost of performance)= P204,000

h. Retained Earnings= P818,000-35,000(investment expense)= P783,000