Coffee Company decided to open a branch in Manila.

Shipments of merchandise to the branch

totaled P54,000 which included a 20% markup on cost. All accounting records are kept at the
home office. The branch submitted the following report summarizing the operations for the year
ended December 31, 2018:

Sales on account 74,000

Sales on cash basis 22,000
Collections of accounts receivable 60,000
Expenses paid 38,000
Expenses unpaid 12,000
Purchase of merchandise for cash 26,000
Inventory on hand, December 31; 80% from home office 30,000
Remittance to home office 55,000

What is the branch inventory on December 31, 2018 at cost?

25,000
20,000
26,000
10,000

What is the branch net income for the current year?

1,000
4,000
800
500

Entity A acquired the net assets of Entity B by issuing 10,000 ordinary shares with par value of
P10 and bonds payable with face amount of P500,000. The bonds are classified as financial
liability at amortized cost.

At the time of acquisition, the ordinary shares are publicly quoted at P20 per share. On the other
hand, the bonds payable are trading at 110.

Entity A paid P10,000 share issuance costs and P20,000 bond issue costs. Entity A also paid
P40,000 acquisition related costs and P30,000 indirect costs of business combination.

Before the date of acquisition, Entity A and Entity B reported the following data:
 Entity A Entity B
Current assets 1,000,000 500,000
Noncurrent assets 2,000,000 1,000,000
Current liabilities 200,000 400,000
Noncurrent liabilities 300,000 500,000
Ordinary shares 500,000 200,000
Share premium 1,200,000 300,000
Retained earnings 800,000 100,000

At the time of acquisition, the current assets of Entity A have fair value of P1,200,000 while the
noncurrent assets of Entity B have fair value of P1,300,000. On the same date, the current
liabilities of Entity B have fair value of P600,000 while the noncurrent liabilities of Entity A
have fair value of P500,000.

What total amount should be expensed as incurred at the time of business combination?
20,000
70,000
30,000
50,000

What is Entity A’s amount of total assets after the business combination?
4,520,000
4,810,000
4,750,000
4,440,000

What is Entity A’s amount of total liabilities after the business combination?
2,240,000
2,510,000
2,320,000
2,130,000