1. On April 1, 2020, Quad Corporation paid P800,000 for the assets and liabilities of Jadd Co.

o. The book value of the

assets and liabilities of Jadd Co. on April 1, 2020, follow:

Cash P 80,000
Inventory 240,000
Plant and Equipment (net accumulated depreciation
of P320,000) 480,000
Liabilities 180,000
On April 1, 2020, it was determined that the inventory of Jadd had a fair value of P190,000 and the plant and
equipment (net) had a fair value of P560,000

What is the amount of goodwill resulting from the business combination?

a. 0 c. P150,000
b. P50,000 d. P180,000

2. When Parlade Company acquired Soberano Company’s net assets by issuing its own capital stock, it had the
following expenditures:
Broker’s fee P50,000
Pre-acquisition audit fee 40,000
Legal fees for merger agreement 47,000
Audit fee for SEC registration of stock issue 46,000
Printing of stock certificates 11,000
Under IFRS -3, the expenditures that should be debited to Share premium account is?
a. P57,000 c. 0
b. P137,000 d. P46,000

3. On May 1, 2020, Quezo Corporation paid cash of P600,00 for all of the net assets of Price Company and Price is
dissolved. The carrying value of the assets and liabilities of Price on May 1, 2020 follow:
Cash P 60,000
Inventory 180,000
Plant and equipment (net of accumulated depreciation of
(220,000) 320,000
Goodwill 100,000
Liabilities 120,000
On May 1, 2020, Price inventory had a fair value of P150,000, and the plant and equipment (net) had a fair value
P380,000.

What is the amount of goodwill recorded in the books of Quezo as a result of the business combination?
a. P130,000 c. P100,000
b. P30,000 d. P0

4. On May 31, 2020, Daet Co. has assets and liabilities with the following fair values:

Current assets P 180,000

Non-current liabilities 220,000
Liabilities 40,000
On June 1, 2020, Lubak Co. purchases the net assets of Daet Co. for P310,000 cash.

In the books of Lubak Co., the acquisition resulted in?

a. Goodwill of P50,000
b. Income from acquisition of P50,000
c. Reduction from current assets of P50,000
d. Deduction from non-current assets of P50,000

5. Red Co. will issue common shares with a par value of P10 for the net assets of Blue Company. Red’s common stock
has a current value of P40 per share. Blue’s statement of financial position on the date of acquisition follow:
 Current assets P320,000 Common stock, P5 par P80,000
Property and equipment 880,000 additional paid in capital 320,000
Liabilities 400,000 Retained earnings 400,000

Blue’s current assets are appraised at P400,000 and the property and equipment were also appraised at P1,600,000. Its
liabilities are fairly valued. Accordingly, Red Corporation issued shares of its common stock with a total market
value equal to that of Blue’s net assets including goodwill.

To recognize goodwill of P200,000, how many shares were to be issued by Red?

a. 45,000 c. 50,000
b. 40,000 d. 55,000

6. Pan Corporation and Solt Company agreed to combine their businesses, with Pan Corporation as the surviving
entity. Pan will issue 48,000 shares of its capital stock, with a par value of P100 per share, and a fair market value of
P175 per share. Pan incurred the following additional acquisition- related costs:
Professional fees P120,000
Broker’s fees 80,000
Costs to register and issue stock 50,000

Before combination, their respective statement of financial position showed stock holders’ equity accounts as follows:
Pan Solt
, Capital stock P 7,200,000 P 3,600,000
Additional paid in capital 3,120,000 360,000
Retained earnings 6,000,000 2,040,000
The total shareholder’s equity of Pan Corporation after the combination is:
a. P24,720,000 c. P24,670,000
b. P24,470,000 d. P24,890,000

7. Papa Corporation issued 120,000 shares of P10 par common stock with a fair value of P2,550,000 for all the
outstanding stock of Mama Company. In addition, Papa incurred the following costs:

Professional fees to arrange the business combination P27,000

Cost of SEC registration 12,000
Cost of printing and issuing stock certificates 3,000

Immediately before the business combination in which Mama Co. was dissolved, Mama’s assets and equities were as
follows (in thousands):
Book value Fair value
Current assets P 1,000 P 1,100
Plant assets 1,500 2,200
Liabilities 300 300
Common stock 2,000
Retained Earnings 200
What is the amount of good (gain on acquisition)?
a. P450,000 c. (450,000)
b. P (550,000) d. P500,000

8. Using the data in No. 7, how much is the additional paid in capital by Papa after acquisition?
a. P1,350,000 c. P1,365,000
b. P1,335,000 d. P1,330,000

9. Using the data in No.7. Papa should recognize expense of:

a. P32,000 c. P15,000
b. P27,000 d. P12,000

10. Using the data in No.7, the net increase (decrease) in the retained earnings of Papa is?
a. P2,600,000 c. P3,300,000
b. P3,000,000 d. P2,200,000
Use the following data to answer Nos. 11 -13:
Chico Company acquired Atis Corporation on January 2, 2020, by issuing common shares. All of Atis’ assets and
liabilities were immediately transferred to Chico, which reported total par value of shares outstanding of P218,400 and
P327,600 and additional paid in capital of P370,000 and P650,800 immediately before and after the business combination,
respectively.

11. Assuming that Chico’s common stock had a market value of P25 per share at the time of acquisition, what number of
shares were issued?
a. 15,000 c. 15,600
b. 10,500 d. 10,000

12. What is the par value per share of Chico’s common stock?
a. P10 c. P8
b. P7 d. P9

13. Assuming that Atis’ identifiable assets had a fair value of P476,000 and its liabilities had a fair value of P120,000,
what amount of goodwill did Chico record at the time of the business combination?
a. P30,000 c. P35,000
b. P34,000 d. P40,000

14. On January 1, 2020, Dell Co. acquired all of the identifiable assets and assumed all liabilities of Charisse, Inc. by
paying P4,800,000. On this date identifiable assets and liabilities assumed have a fair value of P7,680,000 and
P4,320,000, respectively. Terms of agreement are as follows: (a) 20% of the price shall be paid on January 1, 2020 and
the balance on December 31, 2020 (the prevailing market rate on the same date is 10%); (b) the acquirer shall also
transfer its piece of land with book and fair value of P2,400,000 and P1,440,000, respectively. Included in the liabilities
assumed is an estimated warranty liability. The carrying amount and fair value of this warranty liability amounted to
P576,000 and P468,000, respectively. The acquiree guarantees that the warranty liability would only be settled for
P480,000. How much is the goodwill on the business combination??
a. P2,105,376 c. P2,213,376
b. P2,201,376 d. none of the above

15. Ball Inc. acquired Jersey Co. on January 1, 2020. When the purchase occurred, Jersey had the following information
related to fixed assets:
Land P 80,000
Building 200,000
Accumulated depreciation (100,000)
Equipment 100,000
Accumulated depreciation (50,000)
The building has a 10-year remaining useful life and the equipment has a 5-year remaining useful life. The fair values
of the assets on that date were:
Land P 100,000
Building 130,000
Equipment 75,000
What is the 2020 depreciation expense Ball will record related to purchasing Jersey Co.?
a. P8,000 c. P28,000
b. P15,000 d. P30,000

16. On January 1, 2020, the fair values of Soli Co.’s net assets were as follows:
Current asset P 100,000
Equipment 150,000
Land 50,000
Buildings 300,000
Liabilities 80,000

On January 1, 2020, Blue Co. purchased the net assets of the Soli Co. by issuing 100,000 shares of its P1 par value
stock when the fair value of the stock was P6.20. it was further agreed that Blue would pay additional amount on
January 1, 2022 if the average income during the 2-year period of 2020-2021 exceeded P80,000 per year. The expected
value of this consideration was calculated as P184,000; the measurement period is one year. What amount will be
recorded as goodwill on January 1, 2020?
a. Zero c. P180,000
b. P100,000 d. P284,000
 17. Using the same information in No. 16, assuming that on August 1, 2020, the contingent consideration happens to be
P170,000, what amount will then be recorded as goodwill on the said date?
a. Zero c. P166,000
b. P86,000 d. P270,000

18. Using the same information in Nos. 16 and 17, assuming that on January 2022, the date of settlement of the
contingent consideration clause agreement for P175,000, the entry should be?
a. Estimated liability for contingent consideration 170,000
Loss on estimated contingent consideration 5,000
Cash 175,000
b. Estimated liability for contingent consideration 175,000
Cash 175,000
c. Estimated liability for contingent consideration 184,000
Gain on estimated contingent consideration 9,000
Cash 175,000
d. No entry required:

One entry = 1 point

19. On January 2, 2014, P Corporation issues its own P10 par common stock for all the outstanding stock of S
Corporation, and S is dissolved. In addition, P pays P20,000 for registering and issuing securities and P30,000 for
other costs of combination. The market price of P’s stock on January 2, 2014 is P30 per share. Relevant balance sheet
information for P and S Corporation on January 1, 2014 just before the business combination, is as follows:
P Corp. S Corp S Corp.
Book Values Book Values Fair Values
Cash P 120,000 P 10,000 P 10,000
Inventories 50,000 30,000 40,000
Other current assets 100,000 90,000 100,000
Land 80,000 20,000 100,000
Plant and Equipment-net 650,000 200,000 300,000
P1,000,000 P350,000 P550,000
Liabilities P 200,000 P 50,000 P 50,000
Capital stock- P10 par 500,000 100,000
Additional paid-in-capital 200,000 50,000
Retained Earnings 100,000 150,000
P1,000,000 P350,000

Part A: Assume that P issues 25,000 shares of its stock for all of S’s net assets.
1.) Prepare journal entries to record the business combination of P.

Part B: Assume that P issues 15,000 shares of its stock for all of S’s net assets
1.) Prepare journal entries to record the business combination of P.

The P Company purchased the net assets of S company which has the following balance sheet on the purchase date:
S Company
Balance Sheet
December 31,2014
Cash P100,000 Accounts Payable P85,000
Accounts Receivable 155,000 Bonds Payable 200,000
Inventory 390,000 Capital Stock, P10 par 300,000
Building, net 750,000 APIC 480,000
Equipment, net 360,000 Retained Earnings 735,000
Goodwill 45,000 _______
Total P1,800,000 P1,800,000

The following market values have been secured for the assets and liabilities of S Company:

Inventory P 425,000
Building 600,000
Equipment 300,000
Bonds Payable 225,000

P Company incurred the following costs and expenses:

Direct acquisition costs
(legal fees for business combination and brokerage fees) 50,000
Indirect costs and general expenses 25,000

Required:
On P’s book record the purchase of the net assets of S Company in each of the following cases:
a. Assume the purchase price is P1,550,000
b. Assume that P Company issued 10,000 of its own shares, P100 par value stock with market value of P125,000. In
addition to the costs and expenses incurred above, the company incurred the following out-of-pocket costs for
stock issuance and registration, P25,000.