1.) On April, 2021, Queen Corporation paid P800,000 for the assets a liabilities of Jack Company.

The book value of assets and liabilities of Jack Company on April 1, 2021. follow: (20pts)

Cash 80,000
Inventory 240,000
Plant and Equioment (net of accumulated depreciation of P320,000) 480,000
Liabilities 180,000

On April 1, 2021, it was determined that the inventory of Jack had a fair value of 190,000 and
the plant and equipment (net) had a fair value of 560,000.

Question: Compute for the amount of goodwill resulting from the Business Combination?

Solution:
Consideration Paid for Acquisition Cost ₱ 800,000.00
Less Fair Value of Identifiable Net Assets
Cash ₱80,000.00
Inventory 190,000.00
Plant and equipment 560,000.00
Liabilities (180,000.00) 650,000.00
Goodwill ₱ 150,000.00

2.) On May 31, 2021, Dear Company has assets and liabilities with the following fair values:
(20pts)

Current Assets 180,000

Non-current Assets 220,000
Liabilities 40,000

On June 1, 2021, Love Corporation purchases the net assets of Dear Company for 310,000 cash.

Question: The transaction resulted in asset (goodwill) or Income (gain from bargain purchase)?
By what amount?
Solution:
Consideration Paid for Acquisition Cost ₱ 310,000.00
Less Fair Value of Identifiable Net Assets
Current Assets ₱180,000.00
Non-current Assets 220,000.00
Liabilities (40,000.00) 360.000.00
Excess Gain on Bargain Purchase ₱ 50,000.00

3.) 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: (20pts)
Professional fees to arrange the business combination 27,000
Cost of SEC registration 12,000
Cost of printing and issuing stock certificates 3,000

Immediately before the business combination in which Mama Company was dissolved, Mama’s
assets and equities were as follows (in thousands):

Book Value Fair Value

Current Assets 1,000 1,100
Plant Assets 1,500 2,200
Liabilities 300 300
Common Stock 2,000
Retained Earnings 200

Question: compute for the amount of goodwill or gain on acquisition?

Solution:
Consideration Paid for Acquisition Cost
Fair value of stock issued ₱2,550,000.00
Professional fees 27,000.00 ₱2,577,000.00
Less Fair value of identifiable net assets
Current assets ₱ 1,100,000.00
Plant assets 2,200,000.00
Liabilities (300,000.00) 3,000,000.00
Excess Gain on Bargain Purchase ₱ 423,000.00
 4.) On January 2, 2021, New Corporation pays P200,000 cash and also issues 18,000 shares of
P10 par common stock with a market value of P330,000 for all the outstanding stock of Old
Company. In addition, New pays P30,000 for registering and issuing the 18,000 shares and
P70,000 for accounting and legal fees of the business combination, in which Old Corporation is
dissolved. Summary information for the companies immediately before the merger is as follows
(in thousands): (20pts)

New Book Value Old Book Value Old Fair Value

Cash 350 40 40
Inventories 150 100 120
Property and Equipment, net 260 180 280

Total assets 760 320 440

Liabilities 240 80 70
Common stock 420 200
Retaiined Earnings 100 40

Total Liabilities and Equity 760 320

Question: compute for the amount of goodwill to be recognized by New Corporation?

Solution:
Consideration Transferred
Cash ₱200,000.00
Stock issued at fair value 330,000.00
Direct acquisition costs 70,000.00 ₱600,000.00
Less Fair value of identifiable net assets
Cash ₱40,000.00
Inventories 120,000.00
Property and equipment 280,000.00
Liabilities (70,000.00) 370,000.00
Goodwill ₱230,000.00

5.) The partners Aiko, Bren, Cinia and Dior who share profits and losses at 30%, 30%, 20%, 20%
respectively decided to liquidate. All partnership assets are to be converted into cash. Prior to
the liquidation, the condensed statement of financial position is as follows: (20pts)

Cash 100,000 Liabilities 750,000

Other Assets 1,800,000 Bren, Loan 60,000
Dior, Loan 50,000
Aiko, Capital 420,000
Bren, Capital 315,000
Cinia, Capital 205,000
 Dior, Capital 100,000

Total 1,900,000 Total 1,900,000

The non-cash assets realize P800,00, resulting to a loss of P1,000,000. All the Partners are
solvent, and can contribute any additional cash to cover any deficiency.

Question: Prepare a statement of Liquidation for the Partnership.

Aiko, Bren, Cinia and Dior

Statement of Liquidation

Cash Other Assets Liabilities Loan Capital

Bren Dior Aiko (30%) Bren (30%) Cinia (20%) Dior (20%)
Balance before liquidation P100,000 P1,800,000 P750,000 P60,000 P50,000 P420,000 P315,000 P205,000 P100,000
Sale of other asset-loss 1,000,000 -1,800,000 -240,000 -240,000 -160,000 -160,000
Balances ₱1,100,000 0 ₱750,000 ₱60,000 ₱50,000 ₱180,000 ₱75,000 ₱45,000 -₱60,000
Payment of liabilities -750,000 -750,000
Balances ₱350,000 0 ₱60,000 ₱50,000 ₱180,000 ₱75,000 ₱45,000 -₱60,000
Offsetting of loan -110,000 -60,000 -50,000
Balances 240,000.00 0 0 ₱180,000 ₱75,000 ₱45,000 -₱60,000
Additional Cash investment 60,000 60,000
Balances ₱300,000 ₱180,000 ₱75,000 ₱45,000 0
Distribution of the remaining cash -300,000 -180,000 -75,000 -45,000
Balances after liquidation 0 0 0 0 0 0 0 0 0
 Criteria Points
Complete solution with the correct answer 20
Half of the solution is correct 10
The first major step of the solution is correct 5