Joe Company acquired 100% of the net assets of Jak Company for P1,000,000 cash and P 500,000 one-year

non-interest-bearing notes. Applicable discount rate is 10%. The financial records of both companies were as
follows before the business combination:

Joe Company Jak Company

Current Assets 2,560,000 1,800,000

Non-Current Assets 5,000,000 550,000
Total Assets 7,560,000 2,350,000

Liabilities 2,000,000 1,250,000

Ordinary Shares 4,000,000 800,000
Share Premium 500,000 100,000
Retained Earnings 1,060,000 200,000
Total Liabilities and SHE 7,560,000 2,350,000

All assets and liabilities of Jak Company are fairly valued except for machinery that has a book value of P
300,000 and a fair value of P 250,000 and accounts receivable with book value of P 150,000 and a net
realizable value of P 130,000. Use three decimal places in your computation.

1. Total acquisition cost amounts to:

a. P 1,500,000 c. P 1,454,500
b. P 1,545,500 d. P 1,050,000

2. Fair value of net assets acquired amounts to:

a. P 1,030,000 c. P 1,003,000
b. P 1,300,000 d. P 1,330,000

3. Goodwill or gain to be recognized amounts to:

a. P 424,500 Goodwill c. P 442,500 Goodwill
b. P 424,500 Gain d. P 442,500 Gain

4. After the combination, total assets will amount to:

a. P 9,246,500 c. P 8,081,500
b. P 9,264,500 d. P 8,810,500

5. Consolidated retained earnings after the business combination amounts to:

a. P 1,600,000 c. P 1,006,000
b. P 1,660,000 d. P 1,060,000
JAY Company acquired all of the net assets of KAY Company for P1,000,000 cash and P 300,000 one-year
non-interest-bearing notes. Applicable discount rate is 10%. Prior to the acquisition, Jay holds 10% of the
shares of Kay as trading securities. The shares are fairly valued at 90,000 in the books of Jay. The financial
records of both companies were as follows before the business combination:

Jay Company Kay Company

Current Assets 2,560,000 1,800,000

Non-Current Assets 5,000,000 550,000
Total Assets 7,560,000 2,350,000

Liabilities 2,000,000 1,250,000

Ordinary Shares 4,000,000 800,000
Share Premium 500,000 100,000
Retained Earnings 1,060,000 200,000
Total Liabilities and SHE 7,560,000 2,350,000

All assets and liabilities of Kay Company are fairly valued except for machinery that has a book value of P
300,000 and a fair value of P 350,000 and accounts receivable with book value of P150,000 and a net
realizable value of P 135,000. Also, Kay should recognize accrued expense of 35,000. Use three decimal
places in your computation.

6. Total acquisition cost amounts to:

a. P 1,500,000 c. P 1,454,500
b. P 1,545,500 d. P 1,050,000

7. Fair value of net assets acquired amounts to:

a. P 1,030,000 c. P 1,003,000
b. P 1,300,000 d. P 1,330,000

8. Goodwill or gain to be recognized amounts to:

a. P 424,500 Goodwill c. P 442,500 Goodwill
b. P 424,500 Gain d. P 442,500 Gain

9. After the combination, total assets will amount to:

a. P 9,246,500 c. P 8,081,500
b. P 9,264,500 d. P 8,810,500

10. Consolidated retained earnings after the business combination amounts to:
a. P 1,600,000 c. P 1,006,000
b. P 1,660,000 d. P 1,060,000

Space Jam Company acquired all of the net assets of Moonstar Company for P700,000 cash and P200,000
two-year non-interest-bearing notes payable in lump sum upon maturity. Applicable discount rate is 12%
(use two decimal places for present value factors). In addition, Space Jam issued 100,000 shares of its P1 par
ordinary shares. Share premium is computed based on the difference between the fair value of the net assets
and the considerations transferred. Prior to the acquisition, Space Jam holds 10% of the shares of Moonstar
as trading securities. The shares are valued at 90,000 in the books of Space Jam but is valued at 100,000
based on current fair values. The financial records of both companies were as follows before the business
combination:

Space Jam Company Moonstar Company

Current Assets 2,560,000 1,800,000

Non-Current Assets 5,000,000 550,000
Total Assets 7,560,000 2,350,000

Liabilities 2,000,000 1,250,000

Ordinary Shares 4,000,000 800,000
Share Premium 500,000 100,000
Retained Earnings 1,060,000 200,000
Total Liabilities and SHE 7,560,000 2,350,000

All assets and liabilities of Moonstar Company are fairly valued except for machinery that has a book value
of P 300,000 and a fair value of P 375,000 and accounts receivable with book value of P150,000 and a net
realizable value of P130,000. Also, Moonstar should recognize accrued expense of 40,000.

11. Total acquisition cost amounts to:

a. P 1,500,000 c. P 1,454,500
b. P 1,545,500 d. P 1,050,000

12. Fair value of net assets acquired amounts to:

a. P 1,030,000 c. P 1,003,000
b. P 1,300,000 d. P 1,330,000

13. Goodwill or gain to be recognized amounts to:

a. P 424,500 Goodwill c. P 442,500 Goodwill
b. P 424,500 Gain d. P 442,500 Gain

14. After the combination, total assets will amount to:

a. P 9,246,500 c. P 8,081,500
b. P 9,264,500 d. P 8,810,500

15. Consolidated retained earnings after the business combination amounts to:
a. P 1,600,000 c. P 1,006,000
b. P 1,660,000 d. P 1,060,000