25.How much goodwill is presented in 2015 statement of financial position?

a. 230,000

b. 180,000

c. 150,000

d. 200,000

Ans. C

Agreed price 1,000,000

Less: fair value of net assets

(1,050,000-200,000) 850,000

150,000

26. Westport Ltd. a suplier of snooker equipment, agreed to acquire the business of a rival firm,
Manukau Ltd. taking over all assets and liabilities as at 1June 20x4.

The price agreed upon was P40,000, payable P20,000 cash and the balance by the issue to the selling
company of P16,000 fully paid shares in Westport Ltd. these shares having a fair value of P2.50 per
share.

The trial balances of the two companies aa at 1 June 20x4 were as follows:

Westport Ltd Manukau Ltd.

Share capital P100,000 P 90,000

Retained earning 12,000 P 24,000

Accounts payables 2,000 20,000

Cash P 30,000 -

Plant 50,000 30,000

Inventory 14,000 26,000

Accounts receivable 8,000 20,000

Government bonds 12,000 -

Goodwill ---- 10,000

P 114,000

P 114,000
P 110,000

P 110,000

All the identifiable net assets of Manukau Ltd. were recorded by manukau Ltd. At fair value except for
the inventory which was considered to be worth P28,000. The plant had an expected remaining life of
five years.

The business combination was completed and Manukau Ltd. went into liquidation. Westport Ltd.
Incurred incidental costs of P500 in relation to the acquisition cost. Cost of issuing shares in Wesport Ltd.
were P400. The amount of goodwill to:

A. Nil or zero

B. P2,509

C. P2,900

D. P3,900

ANSWER: B

Cost of investment {20,000 + (16,000 shares x P2.50) + 500 incidental cost} P 60,500

Less: markt value of net assets acquired: P 30,000

Plant 28,000

Inventory 5,000

Account receivable 20,000

Plant (20,000)

Accounts payable 58,000

Goodwill P 2,500

27. Bats Inc., a new corporation formed and organized because of the recent consolidationof II Inc. and
JJ Inc., shall issue 10% participating preferred stocks with a par value of P100 for all II andJJ net assets
contributions, and common shares with a par value of P50 for the difference between the total shares to
be issued and the preffered shared to be issued. The total shares to be issued by Bats shall be equivalent
to average annual earnings capitalized at 10%. Relevant data on II and JJ follows:
 II JJ

Total assets.................................... P720,000 P921,600

Total liabilities................................ 432,000 345,600

Annual earnings (average)............ 46,080 69,120

The total preferred shares to be issued and the amount of goodwill to be recognized by Bats are:

A. Preferred shares: 8,640 Goodwill: P288,000

B. Preferred shares: 5,760 Goodwill: P288,000

C. Preferred shares: 2,880 Goodwill: P864,000

D. Preferred shares: 7,280 Goodwill: P864,000

ANSWER: A

II JJ Total

Average annual arnings P 46,080 P 69,120 P 115,200

Divided by: capitalized at 10%

Total stock to be issued P 1,152,000

Less: net assets (for P/S) 864,000

Goodwill (for common stock) P 288,000

Preferred stock (same with Net assets):864,000/100 8,640 shares

28. Cormorant Corporatlon paid 800,000 for a 40% Interest in Plumage Company on January 1, 2005
when Plumage's stockholder's equity was as follows:

10% cumulative preferred stock, $100 par S 500,000

Common stock, $10 par value S 300,000

Other paid-In capital S 400,000

Retained earnings S 800,000

Total stockholders’ equity S 2,000,000

On this date, the book values of Plumage's assets and liabilities equaled their fair values and there were
no dividends In arrears. Goodwill from the investment is

a.S 0.

b. 150,000.

c. 200,000.

d. None of the above ls correct.

Answer: d