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BusCom Part 1 Activity

Balance sheet information for Hope Corporation at January 1, 20x4, is summarized as follows:

Current assets – 920,000

Plant Assets – 1,800,000
Liabilities – 1,200,000
Capital stock P10 par – 800,000
Retained earnings – 720,000

Hope’s assets and liabilities are fairly valued except for plant assets that are undervalued by P200,000.
On January 2, 20x4, Robin Corporation issues 80,000 shares of its P10 par value common stock for all of
Hope’s net assets and Hope is dissolved. Market quotations for the two stocks on this date are : Robin
common: P28; Hope common: P19.

Robin pays the following fees and costs in connection with the combination:

Finder’s fee, P10,000

Costs of registering and issuing stock, P5,000
Legal and accounting fees, P6,000

1. Calculate the amount of consideration transferred: (see problem 21 in your book)

a. 2,240,000
b. 2,251,000
c. 2,256,000
d. Not determinable
2. Calculate any goodwill from the business combination: (see problem 22 in your book)
a. 475,000
b. 520,000
c. 531,000
d. Not determinable
3. Silent Co. acquires 80% controlling interest in Peaceful Co. for P1,200,000. Peaceful Co.’s
identifiable assets and liabilities have fair values of P3,300,000 and P1,700,000, respectively.
Included in Peaceful’s assets is a web press machine with fair value of P900,000 which Silent
Co. intends to sell immediately. The machine qualifies for classification as “held for sale”.
The costs to sell are P150,000. Silent Co. opts to measure the non-controlling interest at fair
value. How much is the goodwill? (Assume the fair value of the NCI is equal to the grossed-
up value of the consideration transferred multiplied by the NCI %)
a. 60,000
b. 40,000
c. 50,000
d. 20,000
4. Carpenter Co. acquires 100% controlling interest in Wood Co. by issuing 2,000 shares with
par value per share of P100 and fair value per share of P500. Carpenter Co. incurs stock
issuance costs of P10 per share. On acquisition date, Wood Co.’s identifiable assets and
liabilities have fair values of P2,800,000 and P1,600,000, respectively. Carpenter Co.
incurred P40,000 in hiring an independent appraiser to value Wood’s assets and liabilities.
After the combination, Carpenter intends to eliminate some of Wood’s activities. The
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estimated costs are P20,000. In addition, Carpenter Co. expects to incur losses of P80,000
during the first year after the business combination. How much is the goodwill (gain on
bargain purchase)?
a. (260,000)
b. 240,000
c. (200,000)
d. 280,000

Entity A acquired 75% of the outstanding voting shares of Entity B for P2,000,000. On acquisition date,
Entity B’s identifiable assets and liabilities have fair values of P4,000,000 and P1,600,000, respectively.

5. How much is the goodwill if Entity A opts to measure the non-controlling interest at the
NCI’s proportionate share in Entity B’s net identifiable assets?
a. 100,000
b. 200,000
c. 500,000
d. 300,000
6. Entity A opts to measure the non-controlling interest at fair value. An independent valuer
assessed the NCI’s fair value to be P540,000. How much is the goodwill?
a. 140,000
b. 150,000
c. 160,000
d. 200,000

On January 1, 20x5, CC Co. acquired the identifiable net assets of DD, Inc. On this date, the identifiable
assets acquired and liabilities assumed have fair values of P7,680,000 and P4,320,000, respectively. CC
Co. incurred the following acquisition related costs; legal fees, P48,000, due diligence costs, P480,000;
and general and administrative costs of maintaining an internal acquisition, P96,000. As consideration,
CC Co. transferred 9,600 of its own shares with par value and fair value per share of P400 and P500,
respectively, to DD’s former owners. Costs of registering the shares (previously issued and newly issued)
amounted to P192,000 (24,000 pertains to listing fees of previously issued shares).

7. How much is the goodwill (gain on bargain purchase) on the business combination? (see
problem 18 of your book)
a. 667,200
b. 720,000
c. 1,440,000
d. None of the above
8. How much is the total amount charged to profit or loss in relation to the transaction above?
(see problem 19 of your book)
a. 624,000
b. 648,000
c. 816,000
d. None of the above
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9. A. Co. acquired 60% interest in the net assets of B Co. for P1,500,000. On acquisition date, B
Co’s identifiable assets and liabilities have fair values of P5,000,000 and P2,800,000,
respectively.
Additional information:
• B Co. has an unrecorded customer list with fair value of P80,000. The customer list is
separable
• A Co. is renting out a license to B Co. under an operating lease. The terms of the
lease compared with market terms are unfavorable. The fair value of the differential
is P30,000.
• A Co. opted to measure the NCI at fair value. An independent valuer assessed the
fair value of the NCI to be P800,000.

Compute for the goodwill.

a. 50,000
b. 100,000
c. 70,000
d. 80,000

10. Mason Co. acquired all the assets and liabilities of Hammer Co. for P2,600,000. On
acquisition date, Hammer’s identifiable assets and liabilities have fair values of P5,900,000
and P3,500,000, respectively. Relevant information follows:
• Mason is renting out a building to hammer co. on an operating lease. The terms of
the lease compared with market terms are favorable. The fair value of the
differential is P90,000.
• Hammer is a defendant on a pending lawsuit. No provision was recognized because
Hammer’s legal counsel believes they will successfully defend the case. The fair
value of settling the lawsuit is P10,000.

How much is the goodwill (gain on bargain purchase)?

a. 120,000
b. 140,000
c. 200,000
d. 180,000