ACCOUNTING FOR BUSINESS COMBINATIONS PRE 7 – MIDTERM QUIZZES

1. Glove will issue shares of P5 par value common Total FV P (75%) NCI (25%)
stock for the net assets of Combo Company. FV of the
970,000 750,000 **220,000
subsidiary
Glove’s common stock has a current market
FV of NA 800,000 600,000 200,000
value of P20 per share. The fair value of the net Goodwill
*170,000 150,000 20,000
assets of Combo is P800,000. How many shares (Gain)
shall be issued to have an income from
acquisition of P100,000? 4. On January 1, 2018, Box Corp. purchased
35,000 shares Mega’s net assets with fair value of P390,00 by
issuing 100,000 shares, P1 par value stock, with
*Consideration paid: 700,000 fair value of P4.65. It was further agreed that
FV of Identifiable net assets: (800,000) Box will pay an additional amount on January 1,
Gain from acquisition: 100,000 2020 if the average income during the next two
years will exceed P60,000 per year. The
*700,000/20 = 35,000 shares expected value of this consideration is at
P138,000. On September 2018, within the
2. Brown Corporation paid P120,000 to acquire measurement period, the contingent
the net assets of Perk Company. Perk reported consideration was revalued at P127,500 based
assets with a book value of P90,000 and fair on additional information. Determine the
value of P147,000 and liabilities with book value goodwill to be recognized on January 1, 2018
and fair value of P34,500 on the date of and value of goodwill as of September 2018.
combination. Brown paid P4,500 for *Goodwill, January 1, 2018 – P213,000
professional fees related to the acquisition.
What amount will be recorded as goodwill by **Goodwill, September 2018 – P202,500
Brown?
P7,500 Consideration transferred: 465,000
Contingent: 138,000
Consideration paid: 120,000 FV of net assets: (390,000)
*FV of Identifiable net assets: (112,500) *Goodwill, 01/01/2018: 213,000
Goodwill: 7,500 Revaluation: (10,500)
**Goodwill, 09/2018 202,500
*147,000 – 34,500 = 112,500
5. Determine the amount to be recorded for
3. Kopi Company acquires 75% of Pearl Company Additional paid-in capital and expenses based
for P750,000. The company implied fair value is on the following acquisition-related costs:
P970,000. If the fair value of Pearl’s net assets
on the date of acquisition is P800,000 with
Accountant’s professional fee 100,000
carrying value of P600,000, determine the
General administrative costs 30,000
amount of goodwill (gain) arising from
Audit fee for stock issue 92,000
consolidation and amount of non-controlling SEC registration for stock issue 10,000
interest arising from consolidation. Other acquisition costs 12,000
*Amount of goodwill (gain) arising from
consolidation – P170,000 Additional paid-in capital – 102,000

**Amount of non-controlling interest arising Expenses – 142,000

from consolidation – P220,000
 ACCOUNTING FOR BUSINESS COMBINATIONS PRE 7 – MIDTERM QUIZZES
6. Donatello paid P600,000 for the net assets of Total liabilities – P590,000
Italy Corporation which was dissolved. On the
date of purchase, the market value of Italy’s net Stockholder’s equity – P550,000
assets is P700,000. Liabilities amounted to
P40,000. It’s non-current assets were land and 8.
equipment with fair values of P320,000 and
P80,000, respectively. At what value will the
following be recorded by Donatello for the
equipment and (income from acquisition)
goodwill?
Equipment – 80,000

*(Income from acquisition) goodwill –

(100,000)

Consideration paid: 600,000

FV of Identifiable net assets: (700,000)
*(Income from acquisition): (100,000)

7.

Jook Corp Jin Corp

Cash & cash equivalents P70,000 P90,000
Inventory 100,000 60,000
Property & equipment
500,000 250,000
(net)
Investment in Jin
260,000
Company
Total assets P930,000 P400,000

Current liabilities P180,000 P60,000

Long-term liabilities 200,000 90,000
Common stock 300,000 100,000
Retained earnings 250,000 150,000
Total liabilities &
P930,000 P400,000
stockholder’s equity

Jook purchased 80% ownership of Jin Company

on December 31, 2020 for P260,000. On that
date, Jin’s property and equipment had a fair
value of P50,000 more than its book value,
while long-term liabilities had fair values of
P150,000. All other book values approximated
fair values. In the consolidated financial position
on December 31, 2020: what amount would be
reported for goodwill, total liabilities and
stockholder’s equity?
Goodwill – P85,000