1. Upon merger between Rivendell Co. and Cline Co.

, Rivendell paid the following:

 finder's fees of P40,000
 accountants fee of P10,000
 legal fees of P15,000
 salaries of Rivendell's employees assigned to the implementation of the merger of
P16,000
 cost of closing duplicate facilities of P12,000
 cost of shareholder's meeting to vote on the merger of P14,000
 cost of printing stock certificates of P7,000
 audit and accountant's fee related to the stock issuance of P3,000
 SEC registration fee of P5,000
 stock listing application fees of P4,000

Based on the preceding information, what amount relating to the business combination would
be expensed?

Ans. finder's fees of P40,000

accountants fee of P10,000
legal fees of P15,000
salaries of Rivendell's employees P16,000
cost of closing duplicate facilities of P12,000
cost of shareholder's meeting to vote on the merger of P14,000
Total = 107,000

2. ELOY Co. is acquiring ALI Inc. ALI Inc. has the following intangible asset:
 Patent on a product that is deemed to have no useful life P10,000.
 Customer list with an observable fair value of P50,000.
 A 5-year operating lease with favorable terms with a discounted present value of
P8,000.
 Identifiable R&D of P100,000.

ELOY Co. will record how much for acquired Intangible Assets from the purchase of ALI Inc.?

Ans. Customer list with an observable fair value of P50,000.

A 5-year operating lease with favorable terms with a discounted present value of
P8,000.
Identifiable R&D of P100,000.
Total = 158,000
3.  On June 1, 2022, Regina Co. paid P800,000 cash for the assets and liabilities of Narda Co. The
carrying values for Narda’s assets and liabilities on June 1, 2022, follow:

Accounts Receivable P180,000

Inventory P150,000
Capitalized software P320,000
Goodwill P100,000
Accounts Payable P130,000
Net Assets P620,000

On June 1, 2022, Narda’s accounts receivable had a fair value of P140,000. Additionally, Narda’s
in-process and development costs were estimated to have a fair value of P200,000. All other
items were stated at their fair value.
Compute for the goodwill (gain on bargain purchase).
Prepare the necessary journal entries for Regina Co. and Narda Co. books.

Ans. Consideration transferred 800,000

Less: FVNIA
Accounts Receivable P140,000
Inventory P150,000
Capitalized software P320,000
In-process cost P200,000
Accounts Payable (P130,000) (680,000)
Goodwill 120,000

Regina Co. Book

Accounts Receivable 140,000
Inventory 150,000
Software 320,000
In-process R&D 200,000
Goodwill 120,000
Accounts Payable 130,000
Cash 800,000
Narda Co. Book
Cash 800,000
Accounts Payable 130,000
Accounts Receivable 180,000
Inventory 150,000
Software 320,000
Goodwill 100,000
Gain on disposal of business 180,000
4. Vien Corp. acquires 75% of Vincent Co.’s common stock for P225,000 cash. The carrying value
of Vincent Co.’s identifiable assets at the time of acquisition was P400,000 and the fair value of
P510,000 and it has liabilities with a carrying value and fair value of P190,000.

a. If Vien Corp elects to measure the non-controlling interest at the non-controlling

interest’s proportionate share of Vincent Co.’s net identifiable assets. How much is the
goodwill (gain on bargain purchase)?
a.1 Prepare the necessary journal entries.

Ans. Consideration transferred 225,000

Non-controlling interest in the acquiree 80,000
Total 305,000
Less: FVNIA 320,000
Gain on bargain purchase 15,000

Investment in subsidiary 225,000

Cash 225,000

Identifiable assets acquired 510,000

Liabilities assumed 190,000
Investment in subsidiary 225,000
Non-controlling interest in Vincent Co 80,000
Gain on bargain purchase 15,000

b. If Vien Corp elects to measure the non-controlling interest at fair value. How much is the
goodwill (gain on bargain purchase)?
b.1 Prepare the necessary journal entries.

Ans. Consideration transferred 225,000

Non-controlling interest in the acquiree 75,000
Total 300,000
Less: FVNIA 320,000
Gain on bargain purchase 20,000

Investment in subsidiary 225,000

Cash 225,000
 Identifiable assets acquired 510,000
Liabilities assumed 190,000
Investment in subsidiary 225,000
Non-controlling interest in Vincent Co 75,000
Gain on bargain purchase 20,000

5. On July 1, 2022, Pedro Ltd acquired all the issued share capital of Santi Ltd. giving in exchange
of P100,000 shares in Pedro Ltd. having a fair value of P5 per share. At acquisition date, the
book and fair value of Santi Ltd., were as follows:

Carrying Amount Fair Value

Liabilities
Provisions P60,000 P60,000
Payables P34,000 P34,000
Tax liabilities P6,000 P6,000
Asset
Land P150,000 P170,000
Equipment P480,000 P330,000
Accumulated depreciation (P170,000)
Inventory P75,000 P80,000
Cash P5,000 P5,000

At the acquisition date, Santi Ltd. has an unrecorded patent with a fair value of P20,000 and a
contingent liability with a fair value of P15,000. The tax rate is 30%.

a. How much is deferred tax asset?

b. How much is the deferred tax liability?
c. How much is the fair value of net identifiable assets acquired?
d. How much is the fair value of liabilities assumed?
e. How much is the goodwill?

Ans. Fair Value Carrying amount TTD(DTD)

Land P170,000 P150,000 20,000
Equipment P330,000 P310,000 20,000
Inventory P80,000 P75,000 5,000
Cash P5,000 P5,000 0
Patent 20,000 20,000
Contingent Liability 15,000 (15,000)

a. 15,000*30% = 4,500
b. 65,000*30% = 19,500
c. 170,000+330,000+80,000+5,000+20,000+4,500 = 609,500
d. 60,000+34,000+6,000+15,000+19,500 = 134,500
e. Consideration transferred 500,000
Less: FVNIA 475,000
Goodwill 25,000