Name: __________________________________________________

Block: __________

FINAL EXAMINATION
AFAR 2
MARCH 15, 2019

1. Chapil Hill Company had common stock of P350,000 and retained earnings of P490,000.
Blue Town Inc, had common stock of P700,000 and retained earnings of P980,000. On
January 1, 2014, Blue Town issued 34,000 shares of common stock with a P12 oar value
and a P35 fair value for all of Chapel Hill Company’s net assets. This combination was
accounted for as an acquisition. Immediately after the combination, what were the
consolidated net assets?

a. P2,870,000 d. P1,680,000
b. P2,520,000 e. P1,190,000
c. P2,030,000

Use the following information for 2 and 3:

Porpoise Corporation acquired Sims Company through an exchange of common shares.
All of Sims assets and liabilities were immediately transferred to Porpoise. Porpoise
Company’s common stock was trading at P20 per share at the time of exchange. The
following selected information for Porpoise Corporation is also available.

Before Acquisition After Acquisition

Par value of shares outstanding….. P200,000 P250,000
Additional Paid in Capital…….. P350,000 P550,000

2. What is the par value of Porpoise’s common stock?

a. P10 c. P4
b. P5 d. P1

3. What is the fair value of Sim’s net assets, if goodwill of P56,000 is recorded?

a. P194,000 c. P300,000
b. P244,000 d. P306,000

4. On July 1,2017, Sony Company purchased all of the outstanding stock of Aiwa Company
for P4,000,000. At the time, Aiwa Company’s statement of financial position showed net
 assets of P2,50,000. Aiwa Company’s assets and liabilities gad fair market values
different from their book values, as follows:

Book Value Fair Value

Property and equioment – net P5,000,000 P5,750,000
Other assets P500,000 P350,000
Long-term debt P3,000,000 P2,800,000

As a result of the combination above, what amount, if any, will be shown as goodwill in
the July 1,2017 consolidated statement of financial position of Sony Company and its
wholly owned subsidiary, Aiwa Company?

a. P0
b. P600,000
c. P800,000
d. P700,000

5. Pita Company acquires a controlling interest in Soda Company in the open market for
P120,000. The P100 par value capital stock of Soda Company at the date of acquisition is
P125,000 and its retained earnings amounts to P50,000. The market value per share of
Soda Company is P120 per share. In the consolidated statement of financial position on
the date of acquisition, non-controlling interest would show a balance of:

a. P40,000
b. P35,000
c. P17,500
d. P30,000

6. Pablo Company purchased 95 percent of the outstanding common stock of Siso Company
on January 2, 2016 for P600,000. The purchase price was P20,000 above the book value
of the shares acquired, all related to goodwill. Pablo Corporation accounts for its
investment in SIso Company using the cost method. Siso Company’s CI and dividends
during the next two years were follows:

Comprehensive Income Dividends

2016 P80,000 P10,000
2017 P110,000 P30,000

Investment in Siso Company Dividend Income

a. P600,000 P28,500
b. P600,000 P1,500
c. P738,500 P100,500
d. P742,500 P104,500
7. Puzon, Inc., purchased 80% of Santos Company’s outstanding common stock for
P260,000, P60,000 above the underlying book value on January 2, 2017. The fair value of
Santos’ net assets approximated book value. On the December 31, 2017 consolidated
statement of financial position, non-controlling interest (NCI) should be reported at:

a. P75,000
b. P42,000
c. P65,000
d. P60,000

8. On January 1, 2016, Puzon Company purchased 75% of the outstanding stock of Suazon
Company sold inventory items costing P50,000 to Puzon for P75,000. Puzon resold 60%
of this inventory to outsiders during the year for P200,000 and paid dividends of
P120,000. Suazon’s CI for the year was P110,000; it paid P40,000 in dividends. What is
the consolidated CI attributable to parent for 2017.

a. P273,000
b. P276,000
c. P300,000
d. P275,000