Question 1

TJC CORP ACQUIRED THR NET ASSETS OF VLA CORPORATION, PAYING 860,000 IN CASH AND ISSUING
10,000 SHARES. PAR VALUE OF SHARES IS 10, WHILE ITS MARKET VALUE AT THE TIME OF TRANSACTION
WAS 24.

STATEMENT OF FINANCIAL POSITION OF VLA BEFORE THE ACQUISITION:

ASSETS - 1,375,000

LIABILITIES - 355,000

OS - 600,000

SP - 100,000

RE - 320,000

AT THE TIME OF TRANSACTION, VLA'S ASSETS WERE UNDERVALUED BY 2,760 WHILE ITS LIABILITIES
WERE UNDERVALUED BY 9,000

QUESTION: HOW MUCH IS THE GOODWILL/GAIN IN BARGAIN PURCHASE?

CONSIDERATION:
CASH 860,000
SHARES @ 24 240,000
TOTAL CONSIDERATION 1,100,000
LESS: BV OF EQUITY
OS 600,000
SP 100,000
RE 320,000 (1,020,000)
EXCESS 80,000
FV ADJUSTMENTS:
ASSETS (2,760)
LIABILITIES 9,000
GOODWILL 86,240

QUESTION 2

CH-VL PARTNERSHIP EARNED 150,000 PROFIT FOR THE WHOLE YEAR. PARTNERS A& B HAS A P&L RATIO
OF 1:4 RESPECTIVELY. PARTNERSHIP AGREEMENT STATES THAT PARTNER A SHALL RECEIVE A 5,000
ALLOWANCE EVERY MONTH.

QUESTION: HOW MUCH WILL EACH PARTNER RECEIVE FROM THE PROFIT

PARTNERS TOTAL
A B
PROFIT 150,000
ALLOWANCE 60,000 (60,000)
 (5,000 x 12 months)
DIFFERENCE 90,000
ALLOCATION
90,000 x 1 ÷ 5 18,000
90,000 x 4 ÷ 5 72,000 (90,000)
PROFIT DISTRIBUTION 78,000 72,000 -

QUESTION 3

ON JANUARY 1, 2020 TJC SOLD AN EQUIPMENT COSTING 860,000 WITH ACCUMULATED DEPRECIATION
OF 440,000.

TJC RECEIVED 200,000 CASH AND A 500,000 NOTES, PAYABLE IN EQUAL PAYMENTS OF 100,000 FOR 5
YEARS.

PREVAILING RATES FOR THIS TYPE OF NOTE IS 10%

PV RATE OF 1 AT 10% FOR 5 YEARS IS 0.6209

PV RATE OF ORDINARY ANNUITY OF 10% FOR 5 YEARS IS 3.7908

QUESTION:

HOW MUCH IS THE UNEARNED INTEREST/DISCOUNT ON NR

WHAT IS THE GAIN/LOSS ON SALE OF THE EQUIPMENT

FACE AMOUNT 500,000

PV (379,080)
(100,000 X 3.7908)
UNEARNED 120,920
INTEREST/DISCOUNT ON NR

PV OF NOTE 379,080
CASH 200,000
SALES PRICE 579,080
CA OF EQUIPMENT (420,000)
(860,000 – 440,000)
GAIN ON SALE 159,080