PROBLEMS (STRAIGHT)

I - Statutory Merger (Chap

(Chapter
ter 1) versus Stock Acquisition (Chapters 2-5)
 V
 Valuation
aluation of assets and liabilities acquired, stock acquisition, goodwill,
stock price contingency.
Below is the condensed balance sheet of Sons, Inc. along with estimates
of fair values. Pop, Inc. is planning to acquire Sons by issuing 100,000
shares of its P1 par value common stock (market value P8/share) in
exch
exchan
ange
ge for
for al
alll th
the
e outs
outsta
tand
ndin
ing
g co
commmo
monn st
stoc
ock
k of So
Sons
ns,, Pop al
also
so
guarantees the value of its shares issued. The expected present value of 
this stock price contingency is P200,000.
Pre-Combination
Pre-Combination Condensed Balance Sheet

Book  Fair 
 Value
 Value  Value
 Value

Current Assets 380,000 P 350,000

Plant assets 740,000 810,000

Total assets P 1,
120,000

Liabilities P 500,000 450,000

Common stock 50,000

 Additional paid-in
paid-in 170,000
capital

Retained earnings 400,000

Total liabilities and P 1,

equity 120,000

Required:
1. Statutory Merger (Chapter 1): prepare Pops'
ing) entry(ies) to record the acquisition.
(acquirer/acquiring)
(acquirer/acquir
2. Stock Acquisition (Chapters 2-5): prepare Pops'
iring) entry to record the acquisition.
(parent/acquirer/acquiring)
(parent/acquirer/acqu

Solution:
1. Cur
Curren
rentt Ass
Asset
etss 350
350,00
,000
0
 

Plant Assets 810,000

Goodwill 290,000*
  Liabilities 450,000
  Common Stock, 1par 100 shares 100,000
  Additional Paid-in capital(7x100)/
capital(7x100)/SPrem.
SPrem. 700,000
  APIC Stock Contingent Consideration 200,000

  Common Stock ( 100k shares x 8 ) 800,000

  Expected probability of PV stock price contingency 200,000
  Total Consideration Transferred: 1,000,000
FV of net identiable assets and liabilities acquired
Current Assets 350,000
Plant Assets 810,000
Liabilities
Liabiliti es (450,00
(450,000)
0) (710,00
(710,000)
0)
*Goodwill  290,000

2. Inve
Investmen
stmentt in Subsidia
Subsidiary(c
ry(consi
onsi transferr
transferred)
ed) 1,000
1,000,000
,000
  Common Stock, 1par 100 shares 100,000
  Additional Paid- in capital(7x100) 700,000
  APIC Stock Contingent Consideration 200,000

Consideration transferred:
  Common Stock ( 100 shares x 8 ) 800,000
PV stock price contingency 200,000
  FV of Subsidiary 1,000,000
BV of Shareholders’ Equity of Subsidiary:
  Common Stock, 50,000
  Additional Paid-in capital 170,000
  Reta
Retained
ined Earni
Earnings
ngs 400
400,000
,000 (62(620,0
0,000)
00)
 Allocated Excess 380,000
 Add (Deduct): Over/Underva
Over/Undervaluation
luation of net asset
assetss
  Decrease in Current Asset(350-380) (30,000)
   Increase
Dec
Decreas ein
rease inPlant Asset(810-740)
Liabili
Liab ilities
ties(45
(450-50
0-500)
0) 70,000
50,
50,000
000 (90,000)
(90, 000)
*Goodwill  290,000

Th
Ther
ere
e is an un
unde
derv
rval
alua
uati
tion
on of as
asse
sets
ts fo
forr 90
90,0
,000
00.. Th
Ther
eref
efor
ore
e
90,000 is deducted from allocated excess.

 Notes:
  When we involve contingent consideration, it will be included in
the:
o  Liability - if paid in cash or other lia
liabilities
bilities
o  Equity - if the company
company will be issuing
issuing additional sha
shares
res

III - Assets and Liabilities Acquired, Goodwill and Bargain Purchase Gain,
Contingent Consideration, Changes in Contingent Consideration
 

Here are the pre acquisition

acquisition balance
balance sheets of Pop Com
Company
pany and Sicle
Company on December 31, 20x5:

Pop Co. Sicle Co.

Book  Book  Market

 Value
 Value  Value
 Value  Value
 Value

Current Assets P 5,000,000 P 2,000,000 P 1,500,000

Investments 1,000,000 500,000 500,000

Land 10,000,000 5,000,000 6,000,000

Building (net) 40,000,000 25,000,000 16,000,000
Equipment (net) 25,000,000 10,000,000 2,000,000
Total Assets  P   P 
81,000,000  42,500,000

Current Liabilities P 4,000,000 P 1,500,000 P 1,500,000

Long-Term Liabilities 20,000,000 10,000,000 12,000,000
Common Stock, P10 5,000,000 1,000,000
par
 APIC 40,000,000 20,000,000
Retained E
Ea
arnings 12,000,000 10,000,000
Total Liabilities and  P   P 
Equity 81,000,000  42,500,000

In addition
 value to the above,
of P5.000,000, notSicle Co. has identiable
recognized intangibles
on its books with a fair
but appropriately
appropriat ely
capitalized by Pop.

On January 1, 20x6, Pop issues 400,000 shares of its stock, with a par
 value of P10/share and a market value of PlO0/share, to acquire Sicle
Company's assets and liabilities. SEC registration fees are Pl1,100.000.
paid in cash.

Required:
1. Determine the following:
(a) Total assets;
(b) Total liabilities;
(c) Additional paid-in capital (share premium);
(d) Retained earnings (accumulated prot or loss); and
 

(e) Stockholders'/
Stockholders'/Shareholders'
Shareholders' equity:
 

a. Asset
Assetss of Pop
Pop .(81M - 1.1M
1.1M)) P 79,90
79,900,000
0,000
 Assets of Sicle:
Current Assets P 1,500,000
Investment 500,000
Land
Building (net) 6,000,000
16,000,000
Equipment (net) 2,000,000
Initial Goodwill 5,000,000
Goodwill 22,500,
22,500,000*
000* 53,500,
53,500,000
000
Total Assets P 133,400,000

b. Liab
Liabiliti
ilities
es of Pop:
Pop: (4M + 20M) P 24,00
24,000,000
0,000
Liabilities of Sicle:
Current Liabilities P 1,500,000
Long Term Liab
Liabili
ilities
ties 12,000,
12, 000,000
000 13,5
13,500,
00,000
000
Total Liabiliti
Liabilities
es P 37,500,000
c. Pop: (40M + (90 X 400k
400k)) - 1.1M
1.1M)) P 74,90
74,900,000
0,000
Sicle: -  .
 APIC (Share Premium)
Premium) P 74,900,0
74,900,000
00

d. Pop: P 12,000
12,000,00
,000
0
Sicle: -  .
Retained Earnings (AP/L) P 12,000,00
12,000,000
0

e. Pop: 5M + (10 X 400

400k)
k) P 9,0
9,000,
00,000
000
 APIC (Share Premium)
Premium) - c 74,900,000
  Retained Earnings (AP/L) - d 12,000,
12,000,000
000
Stockholders’ Equity P 95,900,00
95,900,000
0

 JOURNAL ENTRIES:
ENTRIES:
  Current Assets 1,500,000
  Investment 500,000
  Land 6,000,000
Building (net) 16,000,000
Equipment (net) 2,000,000
Identiable Intangibles 5,000,000
Goodwill 22,500,000
  Current Liabilities 1,500,000
Long Term Liabilities 12,000,000
Common Stock 4,000,000
 APIC (90 x 400 shares)
shares) 36,000,000
 
Share Issue Cost 1,100,000

    Cash 1,100,000
   Debited as deduction
deduction for apic
 

Consideration Transferred (100 x 400 shares) 40,000,000

Less: FV of assets and liabilities acquired
Current Assets 1,500,000
  Investment 500,000
  Land 6,000,000
Building (net) 16,000,000
Equipment (net) 2,000,000
Identiable Intangibles 5,000,000
Current Liabilities (1,500,000)
Long Term Liab
Liabili
ilities
ties (12,
(12,000,
000,000)
000) 17,500,
17,5 00,000
000
*Goodwill 22,500,000

2. Assume Pop issued 90,000 shares of stock at a market value of P100

per share with
Contin
Con tingen
gentt ca
cash
sh con
consid
sidera
eratio
tion
n amo
amount
unted
ed to P500,0
P500,000
00 that
that is pr
prese
esent
nt
obligation and
reliably
relia bly meas
measurab
urable,
le, expe
expected
cted present value of earn
earnout
out agreement
agreement of 
P200,000 and
prob
probababil
ilit
ity
y pr
pres
esen
entt va
valu
lue
e of ststoc
ock
k pr
pric
ice
e co
cont
ntin
inge
genc
ncy
y ag
agre
reem
emen
entt of 
P300,000. The
following Out-of-pocket
Out-of-pocket costs in relation to acquisition are as follows:

Legal fees for the contract of business combination 80,000

Broker's fee 40,000
 Accountant's fee for
for pre-acquisition audit 100,000
Other direct cost of acquisition 70,000
Internal Secretarial, general and allocated expenses 60,000
Documentary stamp tax on the new shares 20,000
SEC registration tee of issued snores 90,000
Printing costs of share certicates 50,000
Stock exchange listing fee 30,000
Tot
otal
al Ou
Outt of Pococke
kett Co
Cost
st 540,
540,00
000
0

Determine the following:

(a) Total assets;
(b) Total liabilities:
(c) Additional paid-in capital (share premium);
(d) Retained earnings (accumulated profíft or loss; and
(e) Stockholder
Stockholders'/Shareholders'
s'/Shareholders' equity:

a. Assets o
of 
f  Pop
 Pop.(81M - 540K) P 80,460,000
 Assets of Sicle:

Current Assets
Investment P 1,500,000
500,000
Land 6,000,000
 

Building (net) 16,000,000

Equipment (net) 2,000,000
Identia
Iden tiable
ble Good
Goodwil
willl 5,000,0
5,0 00,000
00 31,
31,000,
000,000
000
Total Assets P 111,460,000

b. Liab
Liabiliti
ilities
es of Pop:
Pop: (4M + 20M + 200k)
200k) P 24,200,000
24,200,000
Liabilities of Sicle:
Current Liabilities P 1,500,000
Long Term Liab
Liabili
ilities
ties 12,000,
12, 000,000
000 13,5
13,500,
00,000
000
Total Liabiliti
Liabilities
es P 37,700,000

c. Pop: 40M + (90 X 90k shar shares)

es) + 300k P 48,40
48,400,000
0,000
Less: Stock Issuance Cost:
DS 20,000
SEC Reg fee 90,000
Printing
Prin ting cost
costss SC 50,
50,000
000 160
160,000
,000
 APIC of Pop
Pop 48,240,000
Sicle: -  .
 APIC (Share Premium)
Premium) P 48,240
48,240,000
,000

d. Pop:RE
op:RE,Init
,Initial
ial P 12,00
12,000,000
0,000
Legal fees (80,000)
Broker's fee (40,000)
 Accountant's fee for
for pre-acquisition audit (100,000)
Other direct cost of acquisition (70,000)
Internal Secretarial, general and allocated exp (60,000)
Stock exchange listing fee (30,000)
Total 11,620,000
Negative Goodwill/GAIN 8,000,000*
Sicle: - . 
Retained Earnings (AP/L) P 19,620,00
19,620,000
0

f. Pop: 5M + (10 X 90k

90k)) P 5,9
5,900,
00,000
000
 APIC (Share Premium)
Premium) - c 48,240,000
  Retained Earnings (AP/L) - d 19,620,
19,620,000
000
Stockholders’ Equity P 73,760,00
73,760,000
0

Consideration Transferred (100 x 90M shares) 9,000,000

PV of Cash Contingent Consideration 200,000
PV of Stock Price Contingent 300,000
Total Consideration Transferred 9,500,000
Less: FV of assets and liabilities acquired
Current Assets 1,500,000
  Investment 500,000
  Land 6,000,000
Building (net) 16,000,000
Equipment
Identiable(net)
Intangibles 2,000,000
5,000,000
Current Liabilities (1,500,000)
 

Long Term Liab

Liabili
ilities
ties (12,
(12,000,
000,000)
000) 17,500,
17,5 00,000
000
*Negative Goodwill 8,000,000

*Negative goodwill is added to the retained earnings

3. Now assume that Pop issues 100,000 shares for all of Sicle's shares, as
in requirement
Owne
Ow ners
rs if th
the (1)mbin
e comb
co above,
ed and
ined ea
earnPop
rnings agrees
ings of Poptoan
pay
and cash
d Si
Sicle fo
cle ex Salt's
exce ed aprevious
ceed ce
cert
rtai
ain
n
threshold over the next two years. The expected present value of the
earnings contingency is P8,000,000. Determine the amount of 
g00dwill (bargain purchase gain or gain on acquisition).

Consideration Transferred (100 x 100M shares) 10,000,000

Estimated Liability for Contingent Consideration 8,000,000
Total Consideration Transferred 18,000,000
Less: FV of assets and liabilities acquired
Current Assets 1,500,000
  Investment 500,000
  Land 6,000,000
Building (net) 16,000,000
Equipment (net) 2,000,000
Identiable Intangibles 5,000,000
Current Liabilities (1,500,000)
Long Term Liab
Liabili
ilities
ties (12,
(12,000,
000,000)
000) 17,500,
17,5 00,000
000
Goodwill 500,000

4. Assume the same facts as in requirement (3). Before the contingency

period is over, the estimated value of the earnings contingency declines
to P7,800.000. Prepare Pop's entry to reect the change in value of the
earnings contingency, if 
(a) the value decline occurs within the measurement period, or
(b) the value decline is due to events occurring subsequent to acquisition.

*The measurement period is only good for 1 year. - mod.2

 Journal Entries:
Entries:
a. Estim
Estimated
ated Liab
Liability
ility for conti
contingen
ngentt cons
consider
ideration
ation 200,0
200,000
00
Goodwill (8M - 7.8M) 200,000

b. Estim
Estimated
ated Liab
Liability
ility for conti
contingen
ngentt cons
consider
ideration
ation 200,0
200,000
00
Gain on Acquisition(8M - 7.8M) 200,000

Gain on Acquisition 200,000

Retained Earnings 200,000

MULTIPLE CHOICE PROBLEM :

 

1. Manet Corporation exchanges 150,000 shares of newly issued P1 par

 value common stock with a fair market value of P25 per share for all of 
the outstanding P5 par value common stock of Gardner Inc and Gardner
is then dissolved. Manet paid the following costs and expenses related to
the business combination:

  Costs of special shareholders’ meeting to vot

vote
e on the me
merger
rger
P 13,000
  Registering and issuing securities 14,000
  Accounting and legal fees 9,000
 Salaries of Manet’s employees assigned to the implementation of the
merger 15,000
 Cost of closing duplicate facilities 11,000

 
In the business combination of Manet and Gardner:
a. all of the it
items
ems list
listed
ed abo
above
ve are tr
treated
eated a
ass expen
expenses.
ses.
b. al
alll of th
the
e ititem
emss li
list
sted
ed ab
abov
ovee ex
exce
cept
pt the cocost
st of re
regi
gist
ster
erin
ing
g an
and
d
issuing the securities are expensed.
c. th
the
e costs of reregi
gis
ste
teri
rin
ng an
and
d iss
issuin
ing
g the sec
ecu
uriti
ritie
es ar
are
e
deducted from the fair market value of the common stock 
used to acquire Gardner.
d. only the cost
costss of closing dup
duplicat
licate
e facilit
facilities,
ies, the sala
salaries
ries of Man
Manet's
et's
employees assigned to the merger, and the costs of the
shareholders' meeting would be treated as expenses.
 
 PFRS 3, recognizes acquisition cost related as expenses in the period at
which the costs incurred and the services received,with one exception,
the cost to issue equity securities as recorded to ‘’debit - APIC’’. In the
currency, because registering and issuing the certicates are deducted
 from the FV of the
the common stock so tthat
hat would mean ‘’‘’debit
debit - APIC’’

2-6: DJ pays P 5,000,000 in cash and issues 50,000 shares of stock with a
par value of P10/share and fair value of P40/share to acquire Builder's
assets and liabilities on January 1, 20x4.  Refer to page 76 (, Dayag 2021)
for the balance sheet just prior to the acquisition and other details:

2. Calculate the amount of consideration transferred:

a. P 7
7,0
,00
00,
0,00
000
0
b. P 7,
7,69
694,
4,44
440
0
c. P 8
8,0
,09
94,
4,44
440 0
d. No
None
ne o
off th
the
ea abo
bove
ve

  Cash - to former shareholder P 5,000,000

  FV of stock - to former shareholder (50k x 40) 2,000,000
  PV of cash considerat
Total contingention
considera
consideration
consideration tion (4M x .25 x .69444)
transferred .69444
P )7,694,440
694,44
694,4400
 

3. Calculate the goodwill that should be reported on this transaction:

a. P 1
1,7
,72
24,
4,44
440
0
b. P 2,
2,38
384,
4,44
440
0
c. P 2
2,4
,43
34,
4,44
440 0
d. No
None
ne o
off th
the
ea abo
bove
ve

Total consideration transferred

transferred P 7,694,440
Less: FV of net identiable assets acquired
  Current Assets 2,100,000
  PPE 3,000,000
  Identiable Intangible Assets 7,000,000
  Previously unreported Intangible:
 Advance Production
Production technology 170,000
Non-competition agreements 70,000
Customer contracts 50,000
Current Liabilities (1,000,000)
Long term debt (5,800,000)
Prev.. unre
Prev unreport
ported
ed warr
warranty
anty con. obli. (280,
(280,000)
000)
(5,310,000)
Goodwill P 2,384,440

 Pero
 Pero hambl ni ma’
ma’am
am letter C pro ang
ang amount ya na for letter B.

4. The total asset after the acquisition:

a. P 70
70,4
,400
00,0
,000
00
b. P 7
71,
1,28
284,
4,44
4400
c. P 71
71,5
,574
74,4
,440
40
d. No
None
ne o
off th
the
eaabo
bove
ve

Initial Asset DJ 62,400,000

FV of net identiable assets acquired
Current Assets 2,100,000
PPE 3,000,000
Identiable Intangible Assets 7,000,000
Previously unreported Intangible:
 Advance Production
Production technology 170,000
Non-competition agreements 70,000
Customer contracts 50,000
Goodwill 2,384,440
Direct Cost (400,000)
Cost to issue (200,000)
Cash considera
consideration
tion (5,000,0
(5,000,000)
00)
Total Assets P 71,574,440

*
Unreported Intangibles:
 Advance Production
Production
Non-competition technology
agreements 170,000
70,000
Customer contracts 50,000
 

Cash Paid (290,000

(290,000))
Total 0

5. The total liabilities after the acquisition:

a. P 43
43,3
,300
00,0
,000
00
b. P 4
44,
4,27
274,
4,44
440
0
c. No
d. P 4
44,
4,5
None
ne5o
54
54,4
of ,440
f the40a
the abo
bove
ve

Initial Liabilities DJ (6.5M +30M) 36,500,000

FV of net identiable assets acquired
Current Liabilities 1,000,000
Long term debt 5,800,000
Prev.. unreported warranty con. obli.
Prev 280,000
PV of cash continge
contingent nt considerat
consideration
ion 694,440
Total Liabilities P 44,274,440

6. Th
The
e stoc
stockh
khol
olde
ders
rs’/
’/sh
shar
areh
ehol
olde
ders
rs/e
/equ
quit
ity
y hold
holder
erss of DJ afte
afterr th
the
e
acquisition:
a. P 25
25,9
,900
00,0
,000
00
b. P 2
27,
7,30
300,
0,00
000
0
c. P 2
27,
7,9
900
00,0,000
00
d. No
None
ne o
off th
the
eaabo
bove
ve

Common Stock (200k + 300k) P 700,000

 APIC: 22M + (50k x 30=1.5)
30=1.5)-- 200k 23,300,000
RE (4M - 400k) 3,600,000
 Accum. OCI 100,000
Treasury Shares (400,000)
Stockholders Equity P 27,300,000

7-
7-13
13:: Dr
Dr.. ofPep
liabilities eppe
perr Sn
Snap
Turquoise appl
ple
e Gr
WaterGrou
oup
Inc. pon(D
(DPS
PSG)
G) ac
acqu
Septemberquir
ired
30, ed th
the
e inass
2018, sset
a ets
s an
and
d
merger.
The acqacquis
uisiti
ition
on inv
involv
olves
es the fol
follow
lowing
ing pay
paymen
ments:
ts:  Refer to page 77 (,
 Dayag 2021)
 
7. Calculate the amount of consideration transferred:
a. P 92
92,0
,000
00,0
,000
00
b. P 9
97,
7,00
000,0,00
0000
c. P 10
104,
4,60
600,0,00
000
0
d. No
None
ne o
off th
the
eaabo
bove
ve

Consideration transferred:
Cash paid P 85,000,000
  New stock issued (100k x 50) 5,000,000
  PV of Earnings contingent 2,000,0
2,000,000
00
Total considerat
consideration
ion transferred P 92,000,000
 

8. Calculate the goodwill that should be reported on this transaction:

a. P 86
86,2
,200
00,0
,000
00
b. P 9
91,
1,20
200,0,00
0000
c. P 9
92,
2,2
200
00,0,000
00
d. No
None
ne o
off th
the
eaabo
bove
ve

Total consideration transferred

transferred P 92,000,000
Less: FV of net identiable assets acquired
  Current Assets 800,000
  PPE 10,000,000
  Patents and trademarks 20,000,
20,000,000
000
  Previously unreported Intangible:
Bottlers franchise rights 5,000,000
Customers contracts for cp 1,000,000

I’net domain names 3,000,000

Customer order backlogs 1,500,000
Employment Contracts 500,000
Reg. company names 1,000,000

W ell-publicized
Trade dress i’net DN 2,000,000
1,200,000
Proprietary databases of ind.data 800,000
Trade Secrets 400,000
Current Liabilities (400,000)
Long term debt (41,000
(41,000,000)
,000) (5,800,0
(5,800,000)
00)
Goodwill P86,200,000

9. The total asset in the balance sheet of DPSG on september 30, 20x5:
a. P 1
185
85,8
,800
00,0
,000
00
b. P 19
190,
0,80
800,0,00
000
0
c. P 19
191,
1,80
800,0,00
000
0
d. No
None
ne o
off th
the
eaabo
bove
ve

Initial Asset DPSG 150,000,000

Cash paid for acquisition (85,000,000)
Cash paid for consulting (12,000,000)
Cash paid for stock registration (600,000)
FV of net identiable assets acquired
Current Assets 800,000
PPE 10,000,000
Patents and trademarks 20,000,
20,000,000
000
Previously unreported Intangible:
Bottlers franchise rights 5,000,000
Customers contracts for cp 1,000,000
I’net domain names 3,000,000
Customer order
Employment backlogs
Contracts 1,500,000
500,000
Reg. company names 1,000,000
 

Well-publicized i’net DN 2,000,000

Trade dress 1,200,000
Proprietary databases of ind.data 800,000
Trade Secrets 400,000
Goodwill 86,200,000 133,400,000
Total Assets P 185,800,000

10. The total liabilities in the balance sheet of DPSG on September 30,
20x5:
a. P 13
13,0
,000
00,0
,000
00
b. P 4
43,
3,40
400,
0,00
000
0
c. P 54
54,4
,400
00,0
,000
00
d. No
None
ne o
off th
the
eaabo
bove
ve

Initial Liabilities of DPSG (10M + 1M) 11,000,000

PV of Earnings contingency 2,000,000
Liabilities Assumed:
Current Liabilities 400,000
Long term debt 41,000,000 41,400,000
Total Liabilities 54,400,000

11. The common stock in the balance sheet of DPSG on September 30,
20x5:
a. P 77
77,2
,200
00,0
,000
00
b. P 7
77,
7,70
700,
0,00
000
0
c. P 77
77,2
,250
50,0
,000
00
d. No
None
ne o
off th
the
eaabo
bove
ve

Common Stock - DSPG 77,200,000

Issue @ par - (100k x .50) 50,000
Common stock P 77,250,000

12. The APIC in the balance sheet of DPSG on September 30, 20x5:
a. P 36
36,2
,200
00,0
,000
00
b. P 4
40,
0,55
550,
0,00
000
0
c. P 4
44,
4,7
700
00,0,000
00
d. No
None
ne o
off th
the
eaabo
bove
ve

 APIC - DPSG 36,200,000

 APIC for issuance 4,350,000
Total P 40,550,000

5m - 650k (6oo+50) = 4.35m

 

13. Th
13. The e st
stoc
ockh
khol
olde
ders
rs’/
’/sh
shar
areh
ehol
olde
ders
rs/e
/equ
quit
ity
y hold
holder
erss of DJ afte
afterr th
the
e
acquisition:
a. P 1
131
31,4
,400
00,0
,000
00
b. P 13
139,
9,00
000,0,00
000
0
c. P 16
161,
1,00
000,0,00
000
0
d. No
None
ne o
off th
the
eaabo
bove
ve

Common stock P 77,250,000

 APIC 40,550,000
RE -initial 8,800,000?
 Accum OCI 5,500,000
Treasury
Trea sury Stoc
Stockk (700
(700,00
,000)
0)
RE P 131,400,000

14-16: Geri acquired the net assets of Caigo Corp. on July 1,20x5. In
exchange for net assets at fair market value of Caiga Co. amounting to
P835,740, Geri issued 81,600 shares at a market price of P12 per share
(P9 par value). Refer to page 78
78 (, Dayag 2021)

14. What is the amount of goodwill to be recognized in the SFP as of 

December 31, 20x5?
a. P 0
b. P 25
257
7,04
,040
c. P 3
37
77,4
,46
60
d. P 42
425
5,64
,640

Issued common shares(81,600 x 12) P 979,200

Contingent consideration 234,000
Total considera
consideration
tion 1,213,2
1,213,200
00
FV net identiabl
identiablee assets and liab. Assumed (835,74
(835,740)
0)
Goodwill P 377,460

15. What is the amount of expense to be recognized in the SFP as of 

December 31, 20x5, assuming that Geri issued 45,000 share capital on
 July 1, 20x5?
a. P 0
b. P 25
257
7,20
,200
c. P 377,64
640
0
d. P 6
620
20,6
,640
40

Issued shares (45,000 x 12) P 540,000

Contingent consideration 234,000
Total 774,000
FV net identiabl
identiablee assets and liab. Assumed (835,74
(835,740)
0)
Bargain Purchase Gain P 61,740
 
Sin
Since
ce the tar
target
consideration get
wereisasmet
me t ,th
,there
follows:erefor
fore
e the act
actual
ual pa
payme
yment
nt of con
contin
tingen
gentt
  Estimated Liability of contingent consideration 234,000
 

  Loss/Expense on contingent consideration 312,000

  Cash 546,000

Out-0f-Pocket:
  Legal Fees 42,720
  Broker’s Fee 28,320
  Accountant’s fee 96,000
  Other direct Cost 90,000
  General and allocated exp 51,600
Total 308,640
  Loss/Expense on contingent consideration 312,000
Total Expense P 620,640

16. What Amount to be chargeable to operations/prot or loss (net) for

the year ended
ended Decem
December
ber 31, 20x5, assum
assuming
ing that Geri issued
issued 45,000
shares ?
a. P 0
b. P 25
2577,20
,200
c. P 315,72
720
0
d. P 5
558
58,9
,900
00

Total Expense P 620,640

Bargain
Barg ain Pu rcha
rchase
se Gain (61,
(61,740
740))
Total P 558,900

17. Map
17. aple
lewo
wood
od CoCorrpo
porrat
atio
ion
n pu
purrch
chas
ase
ed th
the
e ne
nett asse
setts of Wes
estt
Corporation on January 2, 20x4 from P500,000 and also paid P20,000
indire
ind irect
ct acq
acquis
uisiti
ition
on cos
costs.
ts.  Refer to page 77 (, Dayag 2021)  for We
West
st
balance sheet on January 2, 20x4.

The bargain purchase gain amounted to:

a. None
b. P 30,000
c. P 5
50
0,000
d. P 70,000
 Acquisition related expenses P 20,000
 Accounts Receivable
Receivable 180,000
Inventory 400,000
Land 50,000
Building 60,000
Equipment 70,000
Patent 20,000
  Bargain Purchase Gain 50,000
Current Liabilities 70,000
Long term debt 160,000
Cash 520,000
 

18-20: On January 1, 20X5, CC Co acquired the identiable net assets of 

DD,, Inc
DD Inc.. On thi
thiss dat
date,
e, the identi
identiab
able
le asset
assetss acquir
acquired
ed and lia
liabil
biliti
ities
es
assumed have fair values of P7,680,000 and P4,320,000, respectively
respectively.. CC
Co inc
incurr
urred
ed the fol
follow
lowing
ing acq
acquis
uisiti
ition
on cost:
cost:  Refer to page 77 (, Dayag
 2021)

18. How much is the goodwill (bargain purchase gain) on the business
combination?
a. P 6
66
67,20
200
0
b. P 72
720
0,00
,000
c. P 1
1,4
,440
40,0
,000
00
d. No
None
ne o
off th
the
eaabo
bove
ve

Contingent consideration:
Issued shares (9,600 x 500) P 4,800,000
FV net identiable assets and liab. Assumed
  7,680,000 - 4,320,000 (3,360,000)
  Goodwill P 1,440,000

19. How much is the total amount charged to prot or loss in relation to

theatransaction
. P662
24,20
2000above?
b. P 6
648
48,0
,000
00
c. P 816,00
000 0
d. No
None
ne o
off th
the
eaabo
bove
ve

 Acquisition related costs:

  Legal Fees 48,000
  Allegiance Cost 480,000
  Gen and Admin 96,000
  Lis
Listing
ting fees 24,
24,000
000
Total 648,000

20. Ig
20. Igno
nori
ring
ng th
the
e co
cons
nsid
ider
erat
atio
ion
n an
and
d isissu
sue
e co
cost
stss abov
above,
e, bu
butt in
inst
stea
ead,
d,
issued both bonds with a face value of P4,800,000 before incurring the
transa
transacti
ction
on cos
costs.
ts. Tr
Trans
ansact
action
ion Cos
Costs
ts iss
issuin
uing
g the bobonds
nds am
amoun
ounted
ted to
P240,000. How much is the goodwill (gain on bargain purchase) on the
business combination.
a. P 6
6667,20
200
0
b. P 72
7200,00
,000
c. P 1
1,4
,440
40,0
,000
00
d. No
None
ne o
off th
the
eaabo
bove
ve

Consideration transferred:
FV Issued bonds P 4,800,000
FV net identiable assets and liab. Assumed
  7,680,000 - 4,320,000 (3,360,000)
  Goodwill P 1,440,000
 

21-22: Balance sheet of Hope Corporation at January 1, 20x4 as follows:

 Refer to page 80 (, Dayag 2021)

21. Calculate the amount of consideration transfer

transferred:
red:
a. P 2
2,2
,240
40,0
,000
00
b. P 2,25
2,251,
1,00
000
0
c. P 2
2,2
,25
56,
6,00
000
0
d. No
Nott det
deter
ermi
mina
nabl
ble
e
(80,000 x 28) = P 2,240,000

22. Calculate the goodwill from the business combination:

a. P 4
47
75,00
000
0
b. P 520,000
c. P 531,00
000
0
d. No
Nott det
deter
ermi
mina
nabl
ble
e

Consideration transferred P 2,240,000

FV net identiable assets -Hope
  (2,720,000 + 200,000 - 1,200,000) (1,720,000)

  Goodwill P 520,000

23. Pretzel Company acquired the assets (except for cash) and assumed
the liabilities of Salt Company on January 2, 20x4. Calculate any goodwill
from the business combination.
a. P 0
b. P 68
683 3,00
,000
c. P 798,00 000
0
d. P 8
848
48,0
,000
00

  Accounts Receivable 198,000

Inventory 330,000
Land 550,000
Building and Equipment 1,144,000
Goodwill 848,000 
Current Liabilities 275,000
Bonds Payable 450,000
Premiums on Bonds Payable 45,000
Preferred Stock (15k x 100) 1,500,000
Common Stock (30k x 10) 300,000
 Additional Paid
Paid in Capital (30
(30k
k x 15) 450,000
Cash 50,000

24. Air Philippines June 1, 20x5 balance sheet is as follows (in millions).
(Page 81 Dayag,2021)

Phlippine Airlines acquired Air Philippines on June 1, 20x5. Philippine

 Airlines accounted for the acquisition by putting Air Philippines' assets
 

and liab
and liabili
iliti
ties
es di
dire
rect
ctly
ly on it
itss ow
own
n bo
book
oks.
s. Ai
Airr Ph
Phil
ilip
ippi
pine
ness ca
cash
sh an
and
d
receivables, investments, and current liabilities were reported at market
 value. It’s maintenance supplies had a fair value of P400 million, ight
equipment had a fair value of P12,000 million, and international routes
were worth P500 million. Long-term debt had a fair value of P6,000
million. Air Philippines also had an unrecorded intangible, representing
eases with favorable terms, worth P800 million. Philippine Airlines paid
P8,000 million in cash to Air Philippines. the gain/goodwill arising from
the business combination. (in millions):
a. P 1
1,2
,25
50 g
ga
ain
b. P 1
1,6
,650
50 ga
gain
in
c. P4
P450
50 go
good
odwi
will
ll
d. P8
P850
50 g
goo
oodw
dwil
illl

  Cash 1,400
 Accounts Receivable
Receivable 650
Investment 1,000
Maintenance Supply 400
Flight Equipment 12,000
International Routes 500

Leases
Goodwill 800 450 
Current Liabilities 3,200
Long - term debt 6,000
Cash 8,000

24. Edina Company acquired the assets (except cash) and assumed the
liabilities of Burns Company on January 1, 20x4, paying P2,600,000 cash.
Immediately prior to the acquisition, Bums Company's balance sheet was
as follows; (Page 81 Dayag,2021)

Edina Com
Edina Compan
panyy ag
agree
reedd to pa
payy Bur
Burns
ns Compa
Company'ny'ss former
former ststock
ockhol
holder
derss
P200,000 cash in 20x6 if post- combination earnings or in Combined
comp
compananyy re
reac
ache
hedd P1
P1,0
,000
00,0
,000
00 du
duri
ring
ng 20
20x5
x5.. Calc
Calcululat
ate
e th
thee ga
gain
in on
cont
contin
inge
gent
nt co
cons
nsid
ider
erat
atio
ionn fo
forr Edin
Edina
a Co
Comp
mpan
any y in 2020x6
x6 as
assu
sumi
ming
ng th
the
e
earnings contingency was not met:
a. P 0
b. P 30,000
c. P 2
20
00,0
,00
00
d. P23
230,
0,00
000
0

 Accounts Receivable
Receivable 220,000
Inventory 320,000
Land 1,508,000
Buildings 1,392,000

Goodwill
 Accounts Payable
Payable 230,000  270,000
Notes Payable 600,000
 

Cash 2,600,000
Estimated contingent consideration 200,000

Consideration transferred:
Cash paid P 2,600,000
Estimated contingent consideration 200,000
 Total
FV of net P 2,800,0
identiable assets acquired2,800,000
00
(3,440,000
(3,440, 000 - 870,000) 2,570,000
2,570,0 00
Goodwill 230,000

Estimated liab for contingent consideration 200,000

  Gain on contingent consideration 200,000

25-26: On January 1, 20x5, Kim Co. acquired all of the identiable assets
and assumed all liabilities of Dorothy, Inc. by paying cash of P4,80.000.
On this date, identiable assets and liabilities assumed to have fair value
of P7P7,6,680
80,0,000
00 an andd P4P4,3
,320
20,0
,000
00,, reresp
spec
ecti
tive
vely
ly.. Kim
Kim ha hass esesti
tima
mate
ted
d
rest
restru
ructctur
urin
ingg pr
prov ovis
isio
ions
ns of P9P96060,0
,000
00 rerepr
pres
esen
enti ting
ng exexit
it co
cost
st of ththe
e
acquir
acq uiree'
ee'ss act
activi
ivitie
ties,
s, termin
terminati
ation
on cos
costs
ts of empemployloyees
ees of Dor
Doroth
othyy and
relo
reloca
catition
on co cost
stss of th thee said
said ememplploy
oyee
ees.
s. ThThee re rest
stru
ruct
ctur
urin
ing
g pl
plan
an is
cond
co ndit
itio
iona
nall un
unti
till the
the bubusi
sine
ness
ss cocomb
mbininat
atio
ionn pr
proc oces
esss is done
done.. If th
the
e
combination will not happen, no restructuring will happen.

25. For purposes of computing the goodwill (gain on bargain purchase),

how
how mumuch
ch is the
the fair
fair va
valu
lue
e of net
net as
asse
setts to be de
dedu
duct
cted
ed fr
from
om th
the
e
consideration transferred
transferred??
a. P2,40
2,400,
0,0
000
b. P3
P3,3
,360
60,0
,000
00
c. P5,28
5,280,
0,0 000
d. No
None
ne ooff th
the
eaabo
bove
ve

P7,680,000 - P4,320,000 = P3,360,000

26. How much is the goodwill (gain on bargain purchase) on the business
combination:
a. (P 4
480
80,0
,000
00))
b. P1
P1,4
,440
40,0
,000
00
c. P2,40
2,400,
0,0 000
d. No
None
ne ooff th
the
eaabo
bove
ve

Consideration transferred 4,800,000

Fair value of net assets (3,360,000)
(3,360, 000)
Goodwill P1,440,000  
 

*Possible future costs connected with restructuring or exit activities that

may be planned by the acquirer are not part of the acquisition and are
expensed in future periods.
*Est
*E stim
imat
ated
ed Re
Rest
stru
ruct
ctur
urin
ing
g Plan
Plan is no
nott in
incl
clud
uded
ed in co cons
nsid
ider
erat
atio
ion
n
transferred because it is conditional.

27. On January 1, 20x5, Drei Co. acquired all of the identiable assets
and assumed all liabilities of Cease, Inc. by paying P4,800,000. On this
date,
dat e, ide
identi
ntiab
able
le asset
assetss and lia
liabil
biliti
ities
es ass
assume
umedd to have
have fair
fair value
value of 
P7,680,000 and P4,320,000, respectively. Terms of the agreement are as
follows:
  20% of the price shall be paid on January 1, 20x5 and the balance
on December 31, 20x6 (the prevailing market rate on the same date
is 10%);
  The acquirer shall glso transfer its piece of land with book and fair
 value of P2,400,000 and Pl,440,000, respectively
respectively.. Included in the
liabilities assumed is an estimated warranty liability.

The carrying amount and fair value of those warranty liability amounted
to P576,000 and P468,000, respectively. The acquiree guarantees that

the warrantyon
the goodwill liability would Combination?
the business only be settled for P480.000. How much is
a. P2,10
2,105,
5,3
37
b. P2
P2,2
,201
01,3
,376
76
c. P2,21
2,213,
3,3 376
d. No
None
ne ooff th
the
eaabo
bove
ve

Consideration transferred:
20x5 - 20% x 4.8M 960,000
  Land 1,440,000
Consideration payable:
20x6 - 80% x 4.8M x .8264 3,173,376
Total 5,573,376
FV warranty liability 468,000
Estimated warranty liability (480,000)
Fair value of net assets:
(7,680,000 - 4,320,000) (3,360,000)
Goodwill P2,201,376

28-32: On January, 20x4, NT Company exchanged 15,000 shares of its

common stock for all of the assets and liabilities of OTG. Inc. Each of 
NT's shares has a P4 par value and a P50 fair value. The fair value of the
stock exchanged in the acquisition was considered equal to OTG's fair
 value. NT also paid P25.000 in stock registration and issuance costs in
connection with the merge.
Several of OTG's accounts have fair values that dier from their book 
 values on this date:
date: Refer to page
page 82 of (Dayag, 2021)
 

 Assume that this combination is a statutory merger so that OTG's

accounts will be transferred to the records of NI. OG will be dissolved
and
and wi
will
ll no lo
long
nger
er ex
exis
istt as a le
lega
gall en
enti
tity
ty.. Imme
Immedi
diat
atel
ely
y the
the bu
busi
sine
ness
ss
combination using the acquisition method, determine:

28. The total assets amounted to:

a. P2,12
2,124,
4,0
000
b. P2
P2,5
,547
47,0
,000
00
c. P2
P2,5
,574
74,0
,000
00
d. P2
P2,5
,599
99,0
,000
00

Initial Asset NT P 1,770,000

Cash paid for stock registration and issuance cost (25,000)
FV of net identiable assets acquired
Cash 29,000
Receivables 63,000
Trademarks 225,000
Record music catalog 180,000
PPE 105,000
R&D 200,
200,000
000 802
802,00
,000
0
Goodwil
Good
Total will
l
Assets 27,000
27,0 00 *
P2,574,000

Consideration transferred:
Shares (15k x 50) 750,000
FV identiabl
identiablee assets: (802k - 79k) (723,000
(723,000))
Goodwill 27,000*
 
29. The total liabilities amounted to:
a. P 8
84
4,000
b. P56
564,
4,00
0000
c. P480,000
d. P5
P559
59,0
,000
00

Initial Liabilities NT (110k +370k) P 480,000

FV of net identiable assets acquired
 Accounts Payable
Payable 34,000
Notess Payable
Note 45,0
45,000
00 79,0
79,000
00
Total Liabilities P559,000

30. The common stock amounted to:

a. P 5
50
0,000
b. P40
400,
0,00
000
0
c. P450,000
d. P4
P460
60,0
,000
00

Initial Common Stock NT P 400,000

Issue (15k x 4) 60,000
Total Common Stock P460,000
 

31. The additional paid-in capital amounted to:

a. P 3
30
0,000
b. P69
695,
5,00
000
0
c. P7
P72
20,0
,00
00
d. P 60,000

Initial APIC P 30,000

Iss uance
Issuanc e (15k x 46) 690
690,000
,000
Total P720,000

32. The retained earnings amounted to:

a. P190,000
b. P83
835,
5,00
000
0
c. P 8
86
60,0
,00
00
d. P1
P1,0
,050
50,0
,000
00

Common Stock 460,000

 APIC 695,000
Retained Earnings 860,
86 0,00
0000

Total Shareholder
Shareholderss Equity (2574-559) P2,015,000

24-30: On December 31, 20x4, PP Inc. acquired assets and liabilities of 
SS Company. PP will maintain SS as a wholly owned subsidiary with its
own legal and accounting identity. he consideration transferred to the
owne
ow nerr of SS ininclu
clude
dedd 50,0
50,000
00 ne
newl
wly
y is
issu
sued
ed PP comm
common
on sh
shar
ares
es (P
(P20
20
mark
ma rket
et va
valu
lue,
e, P5 paparr va
valu
lue)
e) an
and
d an ag
agre
reem
emen
entt to pay
pay an ad
addi
diti
tion
onal
al
P130,000 cash if SS meets certain project completion goals by December
31. 20x5. PP estimates a 50 percent probability that SS will be successful
in meeting these goals and uses a 4 percent discount rate to represent
the time value of money.

Immediately prior to the acquiSition, the following data for both rms
were available:
 Pp. 83 of (Dayag, 2021)

In addition, PP assessed a research and development project under way

at SS to have a fair value of PI00.000. PP paid legal and accounting fees
of P15,000 in connection with the acquisition and P9,000 in stock issue
and
an d re
regi
gist
stra
rati
tion
on co
cost
sts.
s. Use
Use a 0.61
0.6153
536
6 pr
pres
esen
entt va
valu
lue
e fact
factor
or wher
wheree
applicable.

24. The consideration transferr

transferred
ed amounted to:
a. P1,00
1,000,
0,0
000
b. P1
P1,0
,015
15,0
,000
00
c. P1,03
1,030,
0,0
000
d. P1
P1,0
,062
62,5
,500
00
Consideration transferred:
 

  Issued shares (50k x 20) 1,000,000

Consideration payable:
20x6 - 50% x 130k x .961538 62,500
Total P1,062,500
Fair value of net assets acquired:
(1,065,000 - 180,000) ( 885,000)
 R&D ( 100,000)
Goodwill P 77,500
25. The additional paid-in capital after combination amounted to:
a. P 4
40
00,00
0000
b. P 60
600
0,00
,000
c. P1,141,000
d. P1
P1,1
,150
50,0
,000
00

Initial APIC 400,000

Issued (50k x 15) 750,000
Total 1,135,000
Stock issue and
 regi
registra
stration
tion cost (9,0
(9,000)
00)
Total P1,141,000
26. The expenses for 20x4 amounted to:
a. P 0
b. P87
875,
5,00
000
0
c. P 884,00
0000
d. P 8
890
90,0
,000
00

Initial P875,000
Legal and accounting fees 15,000
Total P 890,000

27. The net income for 20x4 amounted to:

a. P 0
b. P310,000
c. P 316,00
000
0
d. P32
325,
5,00
000
0

  Initial P325,000
Legal and accounting fees 15,000
Total P310,000

28. The retained earnings on December 31, 20x4 amounted to.

a. P 4
43
35,00
0000
b. P1
P1,1
,170
70,0
,000
00
c. P1,18
1,185,
5,0
000
d. P1
P1,6
,620
20,0
,000
00

Initial 1,185,000
Legal and accounting fees (15,000)
 

Retained Earnings 1,170,000

29. As
29. Assu
sumi
ming
ng th
that
at on JuJune
ne 15
15,, 20
20x5
x5,, th
the
e co
cont
ntin
inge
gent
nt perf
perfor
orma
manc
ncee
obligation was revised to P75,000 due to facts and information that exists
on December 31, 20x4, determine the amount of goodwill?
a. P 0
b. P62,50
,500
c. P75,000
d. P9
P90
0,00
000
0

Consideration transferred:
Issued shares (50k x 20) 1,000,000
contingentt performance obligation
contingen obligatio n 75,000
Total P1,075,000
Fair value of net assets acquired:
(1,065,000 - 180,000) ( 885,000)
R&D ( 100,000)
Goodwill P90,000

30.
perf
pe In
rfor relation
orma
manc
nce
e ob toliga
obliNo.
gati29, assuming
tion
on wa
wass re
revi that
vise
sed on July
d to P80, 31,
P80,00 020x6,
000 due the
due to contingent
fact
factss an
and
d
information that exists on December 31, 20x4, determine the amount of 
goodwill and contingent performance obligation?

Goodwill Obligation
a. P9
P90,
0,00
000
0 P7
P75,
5,00
000
0
b. P90
P90,00
,000
0 P
P80
80,00
,000
0
c. P9
P95,
5,00
000
0 P7
P75,
5,00
000
0
d. P9
P95,
5,00
000
0 P
P80
80,0
,000
00

31. To induce the owners of Axel Company to sell to Ayala Corporation,

an amount was
included in the acquisition agreement. Ayala agrees to pay the former
owners of Axel P5.00 for every peso of total Net Income before Interest
and Taxes(NIBIT) earned over P20 million in the next four years. The
payment would be made at the end of four years. Expected total NIBIT in
the next four years is as follows:

  Total NIBIT (earned) Probability

Probabili ty
P 5,000,000 0.20
  15,000,000 0.50
 30,000,000 0.20
  35,
35,000
000,000
,000 0.10
P 85,000,000

What is the value of the earnout after the date of acquisition, assuming a
discount
a. P1 rate
P11,
1,12 of566
121, 12%
1,56 6 (PV factor of 1.57351936)?
b. P1
P11,
1,80
801,
1,39
395
5
 

c. P15
15,7
,751
51,9
,936
36
d. P1
P17,
7,50
500,
0,00
000
0

 (85M - 20M) / 4 = 16,250,000 ?

32.. Ra
32 Raph
phae
aell Co
Comp
mpan
any
y pa
paid
id P2
P20,
0,00
000,
0,00
000
0 fo
forr th
the
e ne
nett as
asse
sets
ts of Par
aris
is
Corporation and Paris was then dissolved. Paris had no liabilities. ihe Tai
 values ol Pan
Pans'
s' assets P2.500.000. Pa
Paris
ris only current assets were land
and equipment and fair values of P160,000 and P640,000, respectively. At
what value will the equipment be recorded by Raphael?
a. P6
P64
40,0
,00
00
b. P40
400,
0,00
000
0
c. P240,000
d. P 0

 Equipment is recorded
recorded at its fa
fair
ir value of P640,000.

33. Company Y is purchased by Company X, and the purchase price is

P2,500,000 greater than the fair values of the identiable net assets
acquired. One of the assets acquired is a building, originally valued at
P1,000,000 at the date of the purchase. Six months after the acquisition,
it was discovered that the building was really only worth P200,000 at the
date of acquisition. What entry is made to reect this new information?

a. dr
dr.. goodwi
goodwill,
ll, cr
cr.. build
building
ing for P800,000.
b. dr
dr.. loss o
on
n building, cr
cr.. building for P800,000.
c. dr
dr.. others contributed capital, cr cr.. building for P800,000.
d. dr
dr.. retained earnings, crcr.. building for P800,0
P800,000.
00.

The discovery of adjustment is within the measurement period, therefore

any
any ad
adju
just
stme
ment
nt to th
the
e ac
acqu
quir
ired
ed bu
buil
ildi
ding
ng is de
debi
bite
ted
d di
dire
rect
ctly
ly to th
the
e
goodwill.

34. Bolton Company acquires the net assets of Pamelia Company for a
cash consideration of P100,000. One half is to be paid on acquisition date
and one half is payable in one year's time. The appropriate discount rate
is 10% p.a. The present value of the cash outow in one year's time is?
a. P4
P45
5,45
454
4
b. P50,00
,000
c. P54,545
d. P55,00
,000

  PV (100k x 50% x .90909) = P45,454

35. On October 1, 20x4, The Tingling Company acquired the net assets of 

the
wass Greenbank
wa P1
P116
16 mi
mill Company
llio
ion
n an
and
d thwhen
their the
eir ca
carr fair
rrying value
ying am
amou of Greenbank's
ount
nt was
was P1
P120
20 mi net
mill assets
llon
on.
. The
The
consideration transferred comprised P200 million in, cash transferred at
 

the acquisition date, plus another P60 million in cash to be transferred

11 months after the acquisition date if a specied prot target was met
by Greenbank. At the acquisition date there was only a low probability of 
the pro
ott tar
targe
gett beiein
ng met
et,, so the
the fair
fair valu
lue
e of ththe
e addi
diti
tion
onal
al
consideration liability was P10 million. In the event, the prot target was
met and the P60 million cash was transferred.

What amount should Tingling present for goodwill in its statement of 
consolidated nancial position on December 31, 20x4, according to PFRS
3 Business combinations?
a. P80 mil
illi
lion
on
b. P8
P84
4 mi
mill
llio
ion
n
c. P 9
94
4mmil
illi
lion
on
d. P1
P144
44 mi
mill
llio
ion
n
 
Consideration transferred:
transferred:
  Cash 200
  FV Estimated consideration liability 10
FV of assets (116)
Total P 94 million 

36. An acquirer made the following entry to report an acquisition:

Tangible assets………………………………………. 4,000
Customer Lists………………………………………. 600
Goodwill……………………………………………….. 1,000
Cash……………………………………………….. 2,000
Liabilities.……………………………………….. 3,600

Six months after the acquisition, the customer lists are determined to be
worthless. How is this information reported if (1) the new information
relates to the value of the customer lists as of the date of acquisition, and
(2) the new information relates to changes in value since acquisition?
Customer lists are written o, and

a. A g
gain
ain on acq
acquis
uisiti
ition
on of P600
P600 is
is rreco
ecord
rded.
ed. Goo
Goodwi
dwill
ll decrea
decreases
ses
P600.
b. Goodwill increases P600. A loss of P600 is recorded.
c. A loss of P600 is recorded.
recorded. Goodwill
Goodwill increases
increases P600.
d. Cash is redu
reduced
ced by P600
P600.. A loss of P600 is recorded.
recorded.
 
37. Dosmann, Inc., acquired net assets of Lizzi Corporation on January 1,
20x4, for P700,000 in cash. This portion of the consideration transferred
results in a fair-value allocation of P35,000 of equipment and goodwill of 
P88,000. At the acquisition date, Dosmann also agrees to pay Lizzi’s
previous owners an additional P110,000 on January 1, 20x6, It Lizzi earns
a 10 percent return on the fair value of its assets in 20x4 and 20x5.
Lizzi's prots exceed this threshold in both years. Which of the following
is true?
a. the addi
diti
tion
onal
al P11
110
0,000
,000 paym
ymen
entt is a re
redu
duct
ctio
ion
n in ret
eta
ain
ined
ed
earnings.
 

b. the fair valu

value
e of the expe
expected
cted con
conting
tingent
ent payme
payment
nt incre
increases
ases
goodwill at the acquisition
acquisition date.
c. Good
Goodwill
will as o
off Jan
January
uary 1
1.20x6
.20x6,, incr
increase
easess by P11
P110,000
0,000
d. P110,
P110,000
000 is re
record
corded
ed as a
an
n exp
expense
ense in 2
20x6.
0x6.

38-41:The balance sheet of Salt Company,along with market values of its

assets and abilities, is as follows: Please refer to pp. 86 (Dayag, 2021)

38. Pail Company pays P100,000,000 in cash for Salt Company's assets
and liabilities. Pail records goodwill of:
a. P5
P50,
0,80
800,
0,00
000
0
b. P6
P66,
6,80
800,
0,00
000
0
c. P72
72,5,500
00,0
,000
00
d. P7
P77,
7,50
500,
0,00
000
0

Consideration Transferred P100,000,000

FV of identiable assets
(1.5 + 35 + 2 + 10 + 4 - 30 ) (22,500,
(22,500,000)
000)
Goodwill P77,500,000

39 Now assume Pail Company pays P10,000,000 in cash to acquire the

assets and liabilities of Salt Company. Pail records a bargain purchase
gain on acquisition of:
a. Zero
b. P1
P12,
2,50
500,
0,00
000
0
c. P17
17,5
,500
00,0
,000
00
d. P2
P28,
8,50
500,
0,00
000
0

Consideration Transferred P 10,000,000

FV of identiable assets
(1.5 + 35 + 2 + 10 + 4 - 30 ) (22,500,
(22,500,000)
000)
Bargain purchase gain P12,500,000

40. Pail paid P100,000,000 in cash for Salt. Three months later, Salt's
pate
patent
ntss ar
are
e de
dete
term
rmin
ined
ed to have
have bebeen
en wo
wort
rthl
hles
esss as of th
the
e date
date of 
acquisition. The entry to record this information includes

a. a debit to loss of P2,000,000.

b. a debit to patents of P2,000,000.
c. A debit to goodwill of P2,000,000.
d. A debit to retained earnings of P2,000,000

41. Pail paid P10,000,000 in cash for Seattle. Three months later, it is
determined that Seattle's acquisition-date liabilities omitted a pending

laws
lawsui
uitt va
includes valu
lued
ed at P2
P2,0
,000
00,0
,000
00.. Th
The
e entr
entry
y to reco
record
rd th
this
is in
info
form
rmat
atio
ion
n
 

a. a debit to bargain purchase gain on acquisition of 

P2,000,000.
b. a debit to liabilities of P2.000,000.
c. A debit to goodwill of P2.000.000.
d. A debit to retained earnings of P2,000.000.

42 anandd 43
43:: Pin
ingg Co
Commpanany
y ac
acq
quir
ires
es all of Sun Cor orpp. in an asse sett
acquisition. Ping paid P1,000,000 more than Sun's book value, and this
exce
ex cess
ss wawass o
oer
ered
ed en
enti
tire
rely
ly to go
good
odwi
will,
ll, as al
alll of Su
Sun'
n'ss as
asse
sets
ts and
and
liabilities were carried at amounts equivalent to fair value. At the time of 
the com
combin
binat
ation
ion,, a law
lawsui
suitt was pending
pending again
against
st Sun
Sun,, whi
whichch was not
recorded on its books. It was felt at the time that Sun would win the
lawsuit, so no provišion for it was made when Ping recorded the asset
acquisition.

42. Six months after the acquisition, new information reveals that the
expected value of the lawsuit at the date of acquisition was P400,000.
The appropriate entry on Ping's books to record this new information.
a. Reta
Retained
ined ear
earning
nings………
s……………………………… ………………
……….. 400,000
Estimated lawsuit liabili
liability
ty.………….
.…………. 400,000
b. Loss on law
lawsuit
suit…..…
Estimated…..…………
………………
lawsuit ………………
liabili
liability …………….
……. 400,
ty.………….
.…………. 400,000
000
400,000
c. Goodw
Goodwill…
ill……….
……..…..
.…..………
………………………………………………
……….. 400
400,000
,000
Estimated lawsuit liability
liability.………….
.…………. 400,000
d. No ent
entry
ry req
requir
uired.
ed.

43. Assume the same information as above, except that the value change
is a result of events occurring subsequent to acquisition. The appropriate
entry on Ping's books to record the new information.

a. Reta
Retained
ined ear
earning
nings………
s……………………………… ………………
……….. 400,000
Estimated lawsuit liabili
liability
ty.………….
.…………. 400,000
b. Loss on lawsuit…..…
lawsuit…..………………
……………………………
……………….. 40
400,000
0,000
Estimated lawsuit liability
liability.………….
.…………. 400,000
c. Good
Goodwill…
will………..
……..…..…
…..…………
……………………………… …………….
……. 4
400,00
00,000
0
Estimated lawsuit liabili
liability
ty.………….
.…………. 400,000
d. No ent
entry
ry req
requir
uired.
ed.

44 to 46: Nercom acquires all the assets of P570,000,000 and liabilities

amounting to P100,000,000 of Unicom by issuing 25,000,000 shares of 
no-par common stock valued at P400,000,000 plus cash of P50,000,000
and records the acquisition as a statutory merger acquisition. Included in
the agreement is a contingency guaranteeing the former shareholders of 
Unicom that Netcoms shares will be worth at least P350,000,000 after
one year. if not, Unicom will issue additional snares to bring the total
 value of shares issued to P350,000.000. This contingency is valued at
P20,
P2 0,00
000,
0,00
following000
0 at
the th
the
e da
date
te the
acquisition, of acqu
acquis
isit
itio
ion.
25,000,000n. shares
At th
the
e of
en
end
d of th
the
Netcomse stock
r
rst
st held
ye
year
ar
by the former shareholders of Unicom are worth P12/share.
 

44. The Netcom's journal entry to initially record the acquisition.

a. Inve
Investmen
stmentt in S……
S………..…
…..…..……
..……………
………………
………………
…………. …. 470,000,000
470,000,000
Com
ommo
mon n Stock
tock..
..…
…....…
……………………………….
400,000,000
Cash………
Cash ………...……
...……………
……………… ………………………………
…………….
…….
50,000,000
PIC - StStock
ock con
contin
tingen
gency
cy.……
.…………
……………………………………..
20,000,000
b. Assets………
Assets……………...……
……...………..…..……
…..…..……………….
…………. 570,000
570,000,000
,000
Liabilities..…..…………………….………. 400,000,000
Common Stock..…..……………………….
400,000,000
Cash
Ca sh……
………. …...
..……
…………
………… …………
…………
…………
……….
….
50,000,000
PIC
PIC - StStoc
ockk co
cont
ntin
inge
genc
ncy
y.…
.………
…………
…………
……….
….
20,000,000
c. Loss on Conti
Contingen
ngency
cy.………
.………..…..
..…..………
………………
………………
……….. 470,000,000
470,000,000
Com
ommo
monn Stock
tock..
..…
…..
..…
……………………………….
400,000,000
Cash………
Cash
50,000,000………...……
...……………
………………
………………………………
…………….
…….
PIC - StStock
ock con
contin
tingen
gency
cy.……
.…………
…………
…………
…………
……..
20,000,000
d. No e
ent
ntry
ry req
requi
uire
red
d

45. How many additional shares must Netcom subsequently issue to the
former shareholders of Unicom?
a. 25,0
5,000
00,0
,000
00
b. 4,
4,16
166,
6,6
667
c. 2,08
,083,333
d. No a
addi
dditio
tional
nal sha
shares
res

Total shares to be issued (350m / 12) = 29,166,667

Sharess acqu
Share acquired
ired 25,0
25,000,
00,000
000
 Addt’l shares to
to be issued 4,166,667

46. th
46. the
e Ne
Netc
tcom
om's
's jo
jour
urna
nall en
entr
try
y to reco
record
rd the
the is
issu
suan
ance
ce of the
the Ad
Addt
dt’l
’l
shares the previous
number should be:
a. Loss on Contingency
Contingency..…..……………
..…..…………………………………………….……. 50,000,000
Com
ommo
monn Stock
tock....…
…..
..…
……………………………….
50,000,000
b. PIC - Stock c
contingency
ontingency.………………
.………………………………
………………... ... 20,000,000
Loss on Contingen
Contingency
cy..…..……………………………….
..…..………………………………. 30,000, 30,000,000
000
Com
ommo
monn Stock
tock....…
…..
..…
……………………………….
50,000,000
c. PIC - Stock con
contingency
tingency.……………
.………………………...
…………... 20,000,00
20,000,000
0
 

PIC -Others…………....
-Others………….....…..……………………….
.…..………………………. 30,000,000
Common Stock..…..………………………. 50,000,000
e. No en
entr
try
y rreq
equi
uire
red
d

47. Pol
47. olk
k is
issu
sued
ed comm
common
on st
stoc
ock
k to acqu
acquir
ire
e al
alll th
the
e as
asse
sets
ts of th
the
e Sa
Sam
m
Company on January 1, 20x5. There is a contingent share agreement,
which states
states that if the incom
incomee of the Sam Divis
Division
ion excee
exceeds
ds a certain
level during 20x5 and 20x6, additional shares will be issued on January
1,20x7. The impact of issuing the additional shares is to?
a. incre
increase
ase th
the
e pric
price
e assi
assigned
gned tto
o xe
xed
d ass
assets
ets
b. hav
have
e no eec
eectt on asse
assett val
value
ues,
s, but to rea
reass
ssign
ign the amou
amount
nt
designed for equity accounts
c. red
reduce
uce ret
retain
ained
ed earnin
earnings
gs
d. rec
record
ord ad
addit
dition
ional
al goo
goodwi
dwill
ll

48. P Corporation issued 10,000 shares of common stock with a fair value
ot P25 per share for all the outstanding common stock of S Company in a
business combination property accounted for as an acquisition. The fair
 value of S Company's net assets on that date was P220,000. P Company

also agreedoftoP50,000
fair value issue antoadditional
the former 2,000 shares of common
stockholders stock with
of S Company a
as an
earnings contingency.
 Assuming that the contingencý is expected to be met, the P50,000 fair
 value of the
additional shares to be issued should be treated as a(n):
a. decr
decrease
ease in non
noncurr
current
ent liab
liabiliti
ilities
es of S Company
Company that were
were assumed
assumed
by P Company.
b. decr
decrease
ease in co
consoli
nsolidate
datedd reta
retained
ined ea
earning
rnings.
s.
c. incr
increase
ease in co
consol
nsolidate
idated
d goo
goodwil
dwill.
l.
d. decr
decrease
ease in conso
consolidat
lidated
ed other con
contribu
tributed
ted capital.
capital.

49. P Co. issued 5,000 shares of its common stock, valued at P200,000, to
the former shareholders of S Company two years after S Company was
acquired in an all-stock transaction. The additional shares were issued
because P Company agreed to issue additional shares of common stock if 
the average post combination earnings over the next two years exceeded
P500,000. P Company will treat the issuance of the additional shares as a
(decrease in)

a. re
reta
tain
ined
ed ea
earn
rnin
ings
gs..
b. Go
Good
odwi
will
ll..
c. pa
paid
id-i
-in
n ca
capi
pita
tal.
l.
d. non-current liabilities of s C
Company
ompany a
assumed
ssumed by P Compan
Company
y.

50 to 53: Bullen InC. acquired assets and liabilities of Vicker inc. on

 January
that date1,(prior
20x4.toThe book the
creating value and fair value
combination) of Vickers
follow, accounts
along with on
the book 
 value of Bullen's accounts:
accounts:
 

 Refer to page 88-89

88-89 of (Dayag, 2021)

50. Assume that Bullen issued 12,000 shares of common stock with a P5
par value and a P47 fair value to obtain all of Vickers outstanding stock.
In this transaction how much goodwill should be recognized:
a. P144,000
b. P1
P104
04,0
,000
00
c. P 64,000
d. P60,00
,000
e. P 0

  Consideration transferred:
transferred: (12,000 shares x 47) 564,000
  FV of net assets acquired: (880k - 420k) (460k,000)
Goodwill P104,000

51. Assume that Bullen issued 12,000 shares of common stock with a P5
par value and a P47 fair value to obtain all of Vickers outstanding stock.
What will be the Additional Paid-In Capital and Retained Earnings after
the combination:
a. P20
P20,00
,000
0 and P16
P160,0
0,000
00
b.
c. P20
P20,00
P3 ,000
P380
80,00
00a
,000and
nd
andP26
andP260,0
P10,000
P160 00
60,0
,000
00
d. P464
P464,000
,000 and P160
P160,000
,000
e. P38
P380,0
0,000
00 and P26
P260,0
0,000
00

 Additional Pa
Paid-In
id-In Capital Retained
Earnings
Initial 20,000 160,000
Issuanc
Iss uance
e of shares(1
shar es(12k
2k x 37) 444,
444,000
000 ____
_______
___
Total P464,000 P160,000

52. As
52. Assu
sume
me th
that
at Bu
Bule
len
n is
issu
sued
ed pr
pref
efer
erre
red
d ststoc
ock
k wi
with
th a par va valu
lue
e of 
P240,000 and a fair value of P500,000 for all of the net assets of Vicker in
a business combination. What will be the balance in the Inventory and
Land accounts after the business combination:
a. P4
P440
40,0
,000
00,, P49
P496,
6,00
000
0
b. P44
P440,0
0,000
00,, P520
P520,00
,000
0
c. P4
P425
25,0
,000
00,, P5
P505
05,0
,000
00
d. P4
P402
02,0
,000
00,, P520
P520,0
,000
00
e. P4
P427
27,0
,000
00,, P5
P510
10,0
,000
00

Inventory Land
Initial 230,000 280,000
FV of acqu
acquired
ired asse
assett of Vicker
Vicke r 210,
210,000
000 240,
240,000
000
Total P440,000 P520,000

53. Assume that Bullen paid a total of P480,000 in cash for all of the
shares of Vicker. In addition, Bullen paid P35,000 to a group of attorneys
 

for their work in arranging the combination to be accounted for as an

acquisition. What will be the balance in goodwill?
a. P 0
b. P2
P20
0,00
000
0
c. P35,000
d. P55,00
,000
Consideration transferred: 480,000
  FV of net assets acquired: (880k - 420k) (460,000)
Goodwill P20,000

 P35,000 paid to a group of attorneys is credited/deduct

credited/deducteded to Bullen’s
account. Since this is not part of consideration transferred rather an
expense to the part of Bullen. It is an acquisition related cost, credited to
retained earnings account of Bullen.

54. Prior to being united in a business combination, AA, Inc., and WS

Corporation had the following stockholders' equity gures:
  AA WS
Common Stock (P1 par value) P180,000 P45,000

 Additional paid- in-capital

paid-
Retained Earnings 90,000 110,000
300,000 20,000

 AA issues 51,000 new shares of its common stock valued at P3 per share
for all of 
the outstanding stock of WS. Assume that AA acquires WS immediately
afterward,

What are Additional Paid-In Capital and Retained Earnings. respectively?

a. P10
P104,0
4,000
00 and P30
P300,0
0,000
00
b. P11
P110,0
0,000
00 a
and
nd P41
P410,0
0,000
00
c. P19
P192,0
2,000
00 a
and
nd P
P30
300,0
0,000
00
d. P21
P212,0
2,000
00 a
and
nd P41
P410,0
0,000
00

 Additional Pa
Paid-In
id-In Capital Retained
Earnings
Initial 90,000 300,000
Issuanc
Iss uance
e of shares(5
shar es(51k
1k x 2) 102,
102,000
000 _______
____ ___
Total P192,000 P300,000

55. Pat Co
55. Corp
rpor
orat
atio
ion
n pa
paid
id P1
P100
00,0
,000
00 ca
cash
sh fo
forr th
the
e ne
nett asse
assets
ts of Sa
Sag
g
Company, which consisted of the following:
  BV FV 
Current Assets P 40,000 P56,000
PPE 160,000 220,000
Liabilities assumed (40,000) (36,000)

 Assume Sag Company is dissolved. The plant and equipment acquired in

this business
Combination should be recorded at;
 

a. P2
P22
20,0
,00
00
b. P20
200,
0,00
000
0
c. P183,332
d. P18
180,
0,00
000
0

The acquired PPE is based on its fair value.

56. Balter Inc, acquired Jersey Company on January 1, 20x4, When the
purchase occurred Jersey Company had the following information related
to xed assets:
Land P80,000
Building 200,000
 Accumulated Depreciation
Depreciation (100,000)
Equipment 100,000
 Accumulated Depreciation
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
Building P100,000
130,000
Equipment 75,000

What is th
What the
e 20x4
20x4 de
depre
precia
ciatio
tion
n ex
expen
pense
se Bal
Balter
ter will
will record
record rel
relat
ated
ed to
purchasing Jersey
Company.
a. P 8,000
b. P15,00
,000
c. P28,000
d. P30,00
,000

Building 130,000 /10 = 13,000

Equipment 75,000/5 = 15,000
Total P28,000

57 and 58: North Company issued 24,000 shares of its P20 par value
comm
commonon st
stoc
ockk fo
forr th
the
e ne
nett as
asse
sets
ts of Prai
Prairi
rie
e Co
Comp
mpan
any
y in a bu
busi
sine
ness
ss
combination under which Prairie Company will be merged into North
Company. On the date of the combination, North Company common stock 
had a fair value of P30 per share. Balance sheets for North Company and
Prairie Company immediately prior to the combination were as follows:
 Please refer to pp
pp 90 of (Dayag, 2021)

57. If the business combination is treated as an acquisition and Prairie

Company's net assets have a fair value of P686,400, North Company's
balance
a. P3sheet
,600.immediately after the combination will include goodwill of:
0,60
b. P 38
38,4
,400
00..
 

c. P3
P33
3,60
600
0.
d. P56
56,0
,000
00..

Consideration transferred: (24k x 30) 720,000

Fair value of net assets acquired 686,400
Goodwill P33,600

58. If the business combination is treated as an acquisition and the fair

 value of Prairie
Comp
Co mpanany'
y'ss cu
curr
rren
entt as
asse
sets
ts is P2
P270
70,0
,000
00,, it
itss pl
plan
antt an
and
d eq
equi
uipm
pmen
entt is
P726,0
P72 6,000,
00, and its lia
liabil
biliti
ities
es are P16
P168,0
8,000,
00, NorNorth
th Compan
Company's
y's na
nanci
ncial
al
statements immediately after the combination will include?
a. Nega
Negative
tive good
goodwill
will of P
P108
108,000
,000
b. Plan
Plantt an
and
d eq
equipm
uipment
ent ooff P2,
P2,133,00
133,000.
0.
c. Plan
Plantt a
and
nd equi
equipmen
pmentt ooff P2
P2,343,
,343,000.
000.
d. An or
ordin
dinary
ary g
gain
ain of P
P108
108,00,000.
0.

Consideration transferred: (24k x 30) P 720,000

Fair value of net assets acquired
Current assets P270,000
PPE
Liabili
Liab ties P726,000
ilities (P16
(P168,0
8,000)
00) (828
(828,00
,000)
0)
Negative Goodwill P108,000

59. Publics Company acquired the net assets of Citizen Company during
20x4. The purchase price was P800,000. On the date of the transaction,
Citizen had no long-term investments in marketab
marketablele equity securities and
P400,000 in liabilities. The fair value of Citizen assets on the acquisition
date was as follows:
Current assets P800,000
Non Current assets P600,000

How should Publics account for the P200,000 dierence between the fair
 value of the net assets
assets acquired, P
P1,000,000,
1,000,000, and the cost,
cost, P800,000?
a. Reta
Retained
ined ea
earnin
rnings
gs sho
should
uld be re
reduced
duced b
by
y P200
P200,000.
,000.
b. Cu
Curr
rren
entt as
asse
sets
ts shou
should
ld be re
reco
cord
rded
ed at P6
P685
85,0
,000
00 an
andd no
nonc
ncur
urre
rent
nt
assets
recorded at P515,000.
c. A P200
00,0
,00
00 gai
ain
n on ac
acqu
quis
isit
itio
ion
n of busi
sin
nes
ess
s should be
recognized
c. A defer
deferred
red cr
credit
edit of P
P200,0
200,000
00 shou
should
ld be set up a
and
nd sub
subsequ
sequently
ently
amortized for future net income over d period not to exceed 40 years.

Consideration transferred: 800,000

Fair value of net assets acquired (1,000,0
(1,000,000)
00)
Gain on Bargain of Purchase P200,000
 

60 and 61: During its inception, Devon Company purchased land for
P100,
100,0
000 and a bui uild
ldin
ing
g fo
forr P180,
180,00
0000. After exac
acttly 3 ye
year
ars,
s, it
tr
tran
ansf
sfer
erre
red
d th
thes
ese
e asse
assets
ts an
andd ca
cash
sh of P50,
P50,00
0000 to a nenewl
wly
y crea
create
ted
d
subsidiary, Regan Company, in exchange for 15,000 shares of Regan's
P10 par value stock. Devon uses straight-line depreciation. Useful life for
the building is 30 years, with zero residual value.

60. At the time of the transfer, Regan Company should record:

a. Build
Building
ing at P1
P180,00
80,0000 and no ac
accumul
cumulated
ated de
deprec
preciatio
iation
n
b. Building af P162,
P162,000
000 and no accu
accumulated
mulated depreciation.
c. Build
Building
ing at P20
P200,000
0,000 an
and
d accum
accumulat
ulated
ed depr
depreciat
eciation
ion of P24,
P24,000.
000.
d. Build
Building
ing at P180
P180,000
,000 and accu
accumula
mulated
ted depr
depreciat
eciation
ion of P18,00
P18,000.
0.

Building 180,000 - (180,000 x 3/30) = 162,000

61. Regan Company will report

a. additional paid-in capital of PO
b. additional paid-in capital of P150,000
c. additional paid-in capital of P162,000
d. additional paid-in capital of P180,000

The amount of Building acquired at P162,000 will credited to APIC

 
62. The Geek Company acquired net assets of The Okay Company for
consideration
transfer of P112 million. At the acquisition date the carrying amount of 
Okay's net assets was P100 million and their fair value was P120 milion.
How should the dierence between the consideration transfe
transferred
rred and the
nett as
ne asse
sets
ts ac
acqu
quir
ired
ed be prpres
esen
ente
ted
d in GeGeek
ek's's n
nan
anci
cial
al St
Stat
atem
emen
ents
ts,,
according to PFRS 3 Business combinations?
a. Gain
ain on barg rgaain purc
rcha
hase
se of P8 mi millli
lio
on rec
ecog
ognniz
ized
ed in otothe
herr
comprehensive income
b. Ga
Gain
in on barg rga
ain purc
rcha
hase
se of P8 mil illi
lion
on dedu
ductcted
ed frfrom
om other
ther
intangibles assets
c. Gain on bargain purchase of P8 million recognized in prot or 
loss
d. Goodwill of P12 million as an intangible asset

Consideration transferred: 100

Fair value of net assets acquired ( 120)
Gain on Bargain of Purchase P8

Gain on Bargain of Purchase 8m

  Retained Earnings - P/L 8m

63. Homer Ltd. is seeking to expand its share of the widgets market and
has negotiated for takeover the operations of Tan Ltd. on January 1,
20x4. The balance sheets to the two companies as of December 31, 20x4
were as follows. Refer to pp 91 - 92
92 of book ( Dayag, 2
2021).
021).
 

The excess of fair value of net assets over cost or gain on acquisition that
will be recognized immediately in the income statement is
a. Nil or Z
Zer
er0
0
b. P17,70
,700
c. P29,700
d. P34,30
,300

64 and 65: ACME CO. paid P110,000 for the net assets of Comb Corp. At
the
the ti
time
me of th
the
e acqu
acquis
isit
itio
ion
n th
the
e fo
foll
llow
owin
ing
g in
info
form
rmat
atio
ion
n was
was av
avai
aila
labl
ble
e
related to Comb's balance sheet

  BV FV 
Current Assets P 50,000 P50,000
Building 80,000 100,000
Equipment 40,000 50,000
Liabilities assumed (30,000) (30,000)

64. What is the amount recorded by ACME for the Building?

a
b.. P
P12100,0
,000
00
c. P 80,000
d.  P100,000

 Building is recorded
recorded at its fair val
value
ue of P100,000.

65. What amount of gain (loss) on disposal of a business should Comb

Corp, recognize?
a. Ga
Gain
in of P3
P30,
0,00
000
0
b. Ga
Gain
in of P6
P60,
0,00
000
0
c. Lo
Loss
ss of P3
P30,
0,00
000
0
d. Lo
Loss
ss of P6
P60,
0,00
000
0

Loss on Disposal ( SP - BV) 110k - 140k = 30,000

66 to 71: TT Corporation acquired assets and assumed liabilities of A 

Corpor
Corporati
ation'
on'ss on Dec
Decemb
ember
er 312
3120x4
0x4.. Bal
Balanc
ance
e she
sheet
et dat
dataa for the two
companies immediately following the acquisition follow:  Please refer to
page 92-93 0f (Dayag, 2021)

 At the date of the business combination, the book values of SS's net
assets and liabilities approximated fair value except for inventory, which
had a fair value of P85,000, and land, which had a fair válue of P45,000.
Indicate the appropriate total that should appear in the balance sheet
prepared immediately after the business combination.

66. What amount of inventory will be reported?

a. P70,00
,000
 

b. P13
130,
0,00
000
0
c. P200,000
d. P2
P215
15,0
,000
00
 
Initial 130,000
FV of acquired inventory 85,000
Total P215,000

67. What amount of goodwill will be reported?

a. P-O -
b. P2
P23
3,00
000
0
c. P43,000
d. P58,00
,000

Consideration transferred: 198

Fair value of net assets acquired (440k - 265) ( 175)
Goodwill P 23

68. What amount of total assets will be reported?

a. P84,40
,400
b. P1
c. P1
P1,0
,051
P1,1 51,0
,109,000
09,000
,000
00
d. 1,24
,249,
9,00
000
0

Initial Asset TT (844k - 198k) P 646,000

FV of identiable assets acquired 440,000
Goodwil
Good willl 23,000
23,0 00
Total Assets P1,109,000

69. What amount of total liabilities will be reported?

a. P265,000
b. P43
436,
6,50
500
0
c. P7
P70
01,5
,50
00
d. P1
P1,2
,249
49,0
,000
00

Initial Liabilities TT (61.5k + 95k + 280k) P 436,500

FV of identiab
identiablele liabili
liability
ty acquired 265,000
Total Liabilities P701,500

70. What amount of retained earnings will be reported?

a. P547,500
b. P39
397,
7,50
500
0
c. P347,500
d. P2
P257
57,5
,500
00

The balance of Retained Earnings of TT Co.

71. What amount of total stockholders' equity will be reported?

a. P4
P40
07,5
,50
00
b. P54
547,
7,50
500
0
 

c. P844,000
d. P1
P1,2
,249
49,0
,000
00

Total Assets P1,109,

P1,109,000
000
Total Liabi
Liabilit
lities
ies (701
(701,50
,500)
0)
Total Stockholders' Equity P407,500

72 and 73: AA Company acquired all of BB Corporation's assets and

liabilities on October 2, 20x5, in a business combination at that date. BB
repo
re port
rted
ed as
asse
sets
ts wi
with
th a bo
bookok va
valu
lue
e of P1
P1,1
,198
98,0,080
80 anand
d li liab
abil
ilit
itie
iess of 
P683,520. AA noted that BB included the amount of P76,800 obsolete
merchandise at the acquisition date that did not appear of any value. AA 
also determined that an old delivery van previously used by BB had a fair
 value of P230,400, but had not been recorded by BB. Except for
machin
mac hinery
ery an
andd equ
equipm
ipment
ent,, AA det
determ
ermine
ined
d the fai fairr value
value of all oth other
er
assets and liabilities reported by BB approxima
approximated
ted the recorded amounts.
In reco
recordrdin
ing
g th
thee tr
tran
ansf
sfer
er of asasse
sets
ts and
and li
liab
abil
ilit
itie
iess in it
itss book
books, s, AA 
recorded a gain on acquisition of P178,560. AA paid P392,640 to acquire
BB's assets and liabilities.

72.If the book value of BB's machinery and equipment was P414,720,
what was their fair value?
a. Nil
b. P32
322,
2,08
080
0
c. P394,560
d. Non
None
eooff tthe
he abo
above
ve

Consideration transferred: 392,640

Fair value of net assets acquired (571,200
(571,200))
Gain on acquisition (P178,560)

Fair value of net assets acquired 571,200

Book value of net assets acquired P1,198,080- P683,520 = (514,560)
Increase in net assets 56,640
Obsolete merchandise 76,800
Unrecorded van (230,400)
Decrease in FV of Machinery and Equipment (96,960)
BV Machinery and Equipment 619,800
FV Machinery and Equipment P522,840

73. As
73. Assu
summin
ing
g that BB reco corrded goo
ooddwi
willll of P482,
482,40
400.
0. AA paid
P1,244,400 to acquire BB's assets and liabilities. If the book value of the
machinery and equipment was P619,800, what was their FV?
a. Nil
b. P7
P713
13,6
,640
40
c. No
d. P79ne
None0,3o
of2
f 0th
the
eaabo
bove
ve
 

Consideration transferred: 1,244,400

Fair value of net assets acquired (762,000
(762,000))
Goodwill P482,400

Fair value of net assets acquired 762,000

Book value of net assets acquired P1,198,080- P683,520 = (514,560)
Increase in net assets 247,440
Obsolete merchandise 76,800
Unrecorded van (230,400)
Increase in FV of Machinery and Equipment 93,840
BV Machinery and Equipment 619,800
FV Machinery and Equipment P713,640

74 to 76: On September 18, 20x5, XX Co. acquired all the YY Inc.'s

P2,580,000 identiable assets and P636,000 liabilities. Carrying amounts
of the YYs assets and liabilities equal their fair value except for the
overvalued furniture and xtures.
   As a consideration, xx Issued its own shares with a market value of 

 
P2,058,000
Cont
Co ntin
inge nt and
gent co cash
cons
nsid
ider amounting
erat
atio
ion
n th attowa
that P450,000.
wass prprob
obab
able
le an
and
d rereas
ason
onab
ably
ly
estimated on the date of acquisition amounted to P177,600.
  The merger resulted in P776,400 goodwill.
   Assuming XX had P5,868,000 total assets and P3,277,200 total
liab
liabil
ilit
itie
iess as pr
prio
iorr to th
the
e comb
combininat
atio
ion
n and
and no ad
addi
diti
tion
onal
al ca
cash
sh
payments were made, but expenses were incurred for related cost
amounting to P33,600

74. Determine the amount of overvaluatio

overvaluation
n of the furniture and xtures.
a. Nil
b. P33,60
,600
c. P34,800
d. No
None
ne o
off th
the
eaabo
bove
ve

Contingent consideration ( 2.058M + .45 + .1776) 2,685,600

FV of net assets acquired: (1,909,200)
Goodwill 776,400

FV of net assets acquired: 1,909,200

BV of net assets acquired: (2,580,0
(2,580,000
00 - 636,000) (1,944,0
(1,944,000)
00)
Decrease in net asset acquired or (P34,800)
  overvaluation of the furniture an
and
d xtures

75. After the merger, how much is the combined total identiable assets
in the books of the acquirer?
a. Nil
b. P6
P6,6
,644
44,4
,400
00
c. P7
P7,9
,963
63,2
,200
00
d. No
None
ne o
off th
the
eaabo
bove
ve
 

Initial Asset (5,868k - 33.6k) P 5,834,400

FV of assets acquired 1,387,200
Overvaluation of the furniture and xtures (34,800)
Goodwil
Good willl 7
776,4
76,400
00
Total Assets P7,963,200

76. After the merger, how much is the increase in liabilities in the books
of the acquirer?
a. Nil
b. P8
P847
47,2
,200
00
c. P880,800
d. No
None
ne o
off th
the
eaabo
bove
ve

Initial Liabilities P 3,277,200

FV of liabilities 847,
84 7,20
2000
4,074,400