Acct52 Buisness Combination Quizes

QUIZ 1
Question 1 of 10
According to PFRS 10, which of the following is not an element of control?
a) ability to affect return

b) exposure er right to variable return
c) major holdings
d) power
Question 2 of 10
Non-controlling interest shall be presented in the consolidated statement of financial position
a) AS a mezzanine item between liabilities and equity w

b) within equity. not distinguished from the equity of the owners of the parent
c) within equity, separately from the equity of the owners of the parent
d) any of these as a matter of accounting policy choice
Question 3 of 10
Which of the following statements is TRUE?
a) In a consolidated statement of financial position prepared immediately after a business

combination, the consolidated total equity is always equal to the parent's total equity
b) All of the given are true
c) Consolidation is performed by adding line by line similar items of assets. Liabilities, income and
expenses of both and its subsidiaries
d) The amount of goodwill is not affected when NOn-controlling interest is measured at fair value
rather than at the net controlling interests proportionate share in the net assets of the acquire
Question 4 of 10
According to PFRS 10, which of the following statement is true?
a) Apart entity is ruined to consolidate is sub diaries

b) A parent ENTITY coursed but not required to consolidate its subsidiaries
c) A parent entity reared to consolidate Subsidiaries only for real reporting purposes
d) A parent need not consolidate the business of the Subsidiaries are business of the parent
Question 5 of 10
This is the basis for preparing consolidated financial statements?
a) maximum efficiency
b) existence of control
c) proprietary concept
d) legal existence as a group
Question 6 of 10
According to PERS 10, when is a parent exempted from ting consolidated financial statement?
a) The parents is of itself subsidiary and all of its owners do not object to, the parent, not
presenting consolidated financial statement.
b) All of the given
c) The parent is neither a listed entity not in the process of enlisting
d) The parent’s ultimate or intermediate parent produces consolidated general purpose financial
statement that comply with PFRS
Question 7 of 10
According to the IFRS for SMEs a parent entity still present
a) Consolidated and separate financial statemtents

b) Consolidated financial statement
c) None
d) Separate financial statements
Question 8 of 10
Kiwi Inc, acquired Mori Co on December 31, 20x0 in a business combination, Both Kiwi and Mori were
incorporated and begun business on January 1, 1999. Both Kiwi and Mori reported net income for 1999
and 20x0. Consolidated remained eamings for the and Subsidiary as of December 31, 20x0 will include
the net income of Mori Co, from what date?
a) It will not include the net income of Mori Co

b) . January 1, 1999
c) January 1, 20x0 to December 31, 20x0 only
d) January 1, 20x0
Question 9 of 10
Profit or loss and comprehensive income in the consolidated financial statements
a) need not be attributed to the owners of the parent and NCI

b) pertain to the owners of the patentather than to the group
c) pertain only to the caters of the parent
d) shall be attributed to the owners of the parent and NCI
Question 10 of 10
According to the PFRS for SMEs a parent entity shall present
a) consolidated financial statements

b) consolidated financial statements AND separate financial statements
c) separate financial statements
d) None of the given
QUIZ 2
PROBLEM 1
On January 1, 20x1, ABC Co. acquired 80% interest in XYZ, Inc. by issuing 5,000 shares with fair value of
P30 per share and par value of P20 per share. The financial statements of ABC Co. and XYZ, Inc.
immediately after the acquisition are shown below:
Jan. 1, 20x1
ABC Co. XYZ, Inc.
Cash 20,000 10,000
Accounts receivable 60,000 24,000
Inventory 80,000 46,000
Investment in subsidiary 150,000
Equipment 400,000 100,000
Accumulated depreciation (40,000) (20,000)
Total assets 670,000 160,000
Accounts payable 40,000 12,000
Bonds payable 60,000 -
Share capital 340,000 100,000
Share premium 130,000 -
Retained earnings 100,000 48,000
Total liabilities and equity 670,000 160,000
On January 1, 20x1, the fair value of the assets and liabilities of XYZ, Inc. were determined by appraisal,
as follows:
Carrying Fair Fair value

XYZ, Inc.
amounts values increment
Cash 10,000 10,000 -

Accounts receivable 24,000 24,000 -
Inventory 46,000 62,000 16,000
Equipment 100,000 120,000 20,000
Accumulated depreciation (20,000) (24,000) (4,000)
Accounts payable (12,000) (12,000) -
Net assets 148,000 180,000 32,000
The equipment has a remaining useful life as of 4 years from

.
Requirement: Prepare the consolidated statement of financial position as at January 1, 20x1. ABC Co.
elects to measure non-controlling interest as its proportionate share in XYZ’s net identifiable assets.
Goodwill
Consideration transferred (5k shares p30 per share) 150,000

Non-controlling interest (180k *(100%-80%)) 36,000
Previously-held equity interest -
Total 186,000
Fair value of net identifiable assets -180,000
goodwill 6,000
Consolidation journal entry is as follows:
Cje#1
Jan. 1, 2020 inventory 16,000

Equipment 20,000
Share capital –XYZ Inc. 100,000
Retained earnings –XYZ Inc. 48,000
Goodwill 6,000
Investment in subsidiary 150,000
Non-controlling interest 36,000
Accumulated depreciation 4,000
ABC Group
Consolidation Worksheet
Jan. 1 2020
ABC Co. XYZ Inc. CJE Consolidation Adjustment CJE Consolidated

ref debit credit ref#
#
ASSETS
Cash 20,000 10,000 30,000
Accounts Receivable 60,000 24,000 84,000
Inventory 80,000 46,000 1 16,000 142,000
Investment in Subsidiary 150,000 150,000 1 -
Equipment 400,000 100,000 1 20,000 520,000
Accumulated Depreciation 40,000 20,000 4,000 1 -64,000
Goodwill - - 1 6,000 6,000
TOTAL ASSETS 670,000 160,000 718,000
LIABILITIES AND EQUITY
Accounts Payable 40,000 12,000 52,000
Bonds Payable 60,000 - 60,000
Total Liabilities 100,000 12,000 112,000
Share Capital 340,000 100,000 1 100,000 340,000
Share Premium 130,000 - 130,000
Retained Earnings 100,000 48,000 48,000 100,000
Non-controlling Interest - - 1 36,000 1 36,000
Total Equity 570,000 148,000 606,000
TOTAL LIABILITIES AND 670,000 160,000 190,000 190,000 718,000
EQUITY
ABC Group
Consolidated statement of financial position
As of January. 1 2020
ASSETS
Cash 30,000
Accounts Receivable 84,000
Inventory 142,000
Equipment 520,000
Accumulated Depreciation - 64,000
Goodwill 6,000
TOTAL ASSETS 718,000

Accounts Payable 52,000
Bonds Payable 60,000
Total Liabilities 112,000
Share Capital 340,000

Share Premium 130,000
Retained Earnings 100,000
Owner of parent 570,000
Non-controlling Interest 36,000
Total Equity 606,000
TOTAL LIABILITIES AND EQUITY 718,000
QUIZ 3
1. In its financial statements, Pare, Inc. uses the fair value accounting for its 15% ownership of Sabe
Co. At December 31, 2003, Pare has a receivable from Sabe. How should the receivable be
reported in Pare’s December 31, 2003 financial statements?
a. The total receivable should be reported separately.
b. Sabe’s payable to Pare.
c. The total receivable should be offset against Sabe’s payable to Pare, without separate
Disclosure.
d. The total receivable should be included as part of the investment in Sabe, without
separate disclosure.
2. Basketball Co. wholly owns Volleyball Co. During the year, Basketball purchased inventory from
Volleyball. Volleyball has marked-up the goods at 20% above cost. How should the group compute
for the consolidated ending inventory?
a. Ending inventory of Basketball plus ending inventory of Volleyball minus unrealized profit
in ending inventory
b. Ending inventory of Basketball plus ending inventory of Volleyball minus intercompany
sales plus unrealized profit in ending inventory
c. Ending inventory of Basketball plus ending inventory of Volleyball minus intercompany
sales minus unrealized profit in ending inventory and plus realized profit in beginning
inventory
d. Ending inventory of Basketball plus ending inventory of Volleyball minus intercompany
sales plus unrealized profit in ending inventory and minus realized profit in beginning
inventory
3. P Co. purchased term bonds at a premium on the open market. These bonds represented 20% of
the outstanding class of bonds issued at a discount by S Co., P's wholly owned subsidiary. P intends
to hold the bonds until maturity. In a consolidated balance sheet, the difference between the bond
carrying amounts of the two companies is
a. Included as a decrease in retained earnings.
b. Included as an increase in retained earnings.
c. Reported as a deferred debit to be amortized over the remaining life of the bonds.
d. Reported as a deferred credit to be amortized over the remaining life of the bonds.
4. Basketball Co. wholly owns Volleyball Co. During the year, Basketball purchased
inventory from Volleyball. Volleyball has marked-up the goods at 20% above cost. How should
the group compute forthe consolidated sales?
a. Sales of Basketball plus sales of Volleyball
b. Sales of Basketball plus sales of Volleyball minus the intercompany sale
c. Sales of Basketball plus sales of Volleyball plusthe intercompany sale
d. Sales of Basketball plus sales of Volleyball minus the unrealized gross profit intercompany
sale
5. Perez, Inc. owns 80% of Senior, Inc. During 2012, Perez sold goods with a 40% gross profit to
Senior. Senior sold all of these goods in 2012. For 2012 consolidated financial statements, how
should the summation of Perez and Senior income statement items be adjusted?
a. Sales and cost of goods sold should be reduced by the intercompany sales.
b. Sales and cost of goods sold should be reduced by 80% of the intercompany sales.
c. Net income should be reduced by 80% of the gross profit or intercompany sales.
d. No adjustment is necessary
6. Basketball Co. wholly owns Volleyball Co. During the year, Basketball purchased inventory from
Volleyball. Volleyball has marked-up the goods at 20% above cost. How should the group compute
for the consolidated cost of sales?
a. Cost of sales of Basketball plus cost of sales of Volleyball
b. Cost of sales of Basketball plus cost of sales of Volleyball minus intercompany sales
c. Cost of sales of Basketball plus cost of sales of Volleyball plus unrealized profit in ending
inventory and minus realized profit in the beginning inventory
d. Cost of sales of Basketball plus cost of sales of Volleyball plus unrealized profit in ending
inventory and plus realized profit in the beginning inventory
7. Port, Inc. owns 100% of Salem, Inc. On January 1, year 6, Port sold Salem delivery equipment at a
gain. Port had owned the equipment for two years and used a five-year straight-line depreciation
rate with no residual value. Salem is using a three-year straight-line depreciation rate with no
residual value for the equipment. In the consolidated income statement, Salem’s recorded
depreciation expense on the equipment for year 6 will be decreased by
a. 20% of the gain on sale.
b. 33 1/3% of the gain on sale.
c. 50% of the gain on sale.
d. 100% of the gain on sale.
8. A 70 percent owned subsidiary company declares and pays a cash dividend. What effect does the
dividend have on the retained earnings and non-controlling interest balances in the parent
company's consolidated balance sheet?
a. No effect on either retained earnings or non-controlling interest
b. No effect on retained earnings and a decrease in non-controlling interest
c. Decreases in both retained earnings and non-controlling interest
d. A decrease in retained earnings and no effect in non-controlling interest
9. Water Co. owns 80% of the outstanding common stock of Fire Co. On December 31, Year 3, Fire
sold equipment to Water at a price in excess of Fire�s carrying amount but less than its original
cost. On a consolidated balance sheet at December 31, Year 3, the carrying amount of the
equipment should be reported at
a. Waters original cost.
b. Fire’s original cost.
c. Water’s original cost minus Fire’s recorded gain.
d. Water’s original cost minus 80% of fire’s recorded gain.
10. Sun Co. is a wholly owned subsidiary of Star Co. Both companies have separate general ledgers, and
prepare separate financial statements. Sun requires stand-alone financial statements. Which of the
following statements is correct?
a. Consolidated financial statements should be prepared for both Star and Sun.
b. Consolidated financial statements should only be prepared by Star and not by Sun.
c. After consolidation, the accounts of both Star and Sun should be changed to reflect
the consolidated totals for future ease in reporting.
d. After consolidation, the accounts of both Star and Sun should be combined together
into one general-ledger accounting system for future ease in reporting.
QUIZ 4
Use the following information for the next three questions:
Rainy Afternoon Co. owns 80% interest in Sunny Morning Co. During 20x1, Rainy sold inventories
costing ₱200,000 to Sunny for ₱300,000. One-fourth of the inventories were unsold as of December
31, 20x1 and were included in Sunny’s year-end statement of financial position at the purchase price
from Rainy. The individual financial statements of Rainy and Sunny on December 31, 20x1 show the
following information:
Rainy Sunny
Inventory 1,260,000 380,000
Sales 6,700,000 2,700,000
Cost of sales (1,755,000)

(3,015,000)
Gross profit 3,685,000 945,000
There are no fair value adjustments arising from the business combination date.
1. How much is the consolidated inventory on December 31, 20x1?

a. 1,615,000
b. 1,590,000
c. 1,665,000
d. 1,585,000
2. How much is the consolidated sales?

a. 9,400,000
b. 9,100,000
c. 9,375,000
d. 9,700,000
3. How much is the consolidated cost of sales?

a. 4,695,000
b. 4,495,000
c. 4,565,000
d. 4,545,000
Use the following information for the next two questions:

On January 1, 20x1, Horse Co. acquired 80% interest in Colt Co. by issuing bonds with fair value of
₱250,000. NCI is measured at proportionate share. The following information was determined
immediately before the acquisition:
Horse Co. Colt Co. Colt Co.

Carrying amount Carrying amount Fair value
Total assets 1,000,000 400,000 430,000
Total liabilities (600,000) (200,000) (200,000)
Net assets 400,000 200,000 230,000
Included in Colt’s liabilities is an account payable to Horse amounting to ₱20,000.
4. How much is the total assets in Horse’s separate financial statements immediately after the
combination?
a. 1,000,000
b. 1,400,000
c. 1,250,000
d. 1,430,000
5. How much is the total assets in the consolidated financial statements?

a. 1,476,000
b. 1,580,000
c. 1,465,000
d. 1,528,000
Use the following information for the next two questions:

Lion Co. acquired 80% of Cub Co. on January 1, 20x1 for ₱100,000. The following information was
determined at acquisition date:
Lion Co. Cub Co. Cub Co.

Carrying amt. Carrying amt. Fair value
Equipment 1,000,000 500,000 400,000
Net 800,000 400,000 320,000
Remaining useful life, 1/1/ x1 10 yrs. 5 yrs. 5 yrs.
6. How much is the consolidated “Equipment – net” in the December 31, 20x2 financial statements?
a. 880,000
b. 846,000
c. 852,000
d. 832,000
7. The consolidation journal entry for the depreciation of the fair value adjustment on December
31, 20x2 includes which of the following?
a. 16,000 debit to depreciation expense
b. 12,800 credit to retained earnings of Lion
c. 32,000 credit to accumulated depreciation
d. 16,000 credit to depreciation expense
8. On January 1, 20x1, Kangaroo Co. acquired 75% of Joey Co. At that time, Joey’s equipment has a
carrying amount of ₱100,000 and a fair value of ₱120,000. The equipment has a remaining useful
life of 10 years. On December 31, 20x2, Kangaroo and Joey reported equipment with carrying
amounts of ₱500,000 and ₱300,000, respectively. How much is the consolidated “equipment –
net” in the December 31, 20x2 financial statements?
a. 800,000
b. 816,000
c. 784,000
d. 826,000
9. On January 1, 20x1, ABC Co. acquired 80% interest in XYZ, Inc. by issuing 5,000 shares with fair
value of ₱15 per share. On this date, XYZ’s equity comprised of ₱50,000 share capital and ₱24,000
retained earnings. NCI was measured at its proportionate share in XYZ’s net identifiable assets.
XYZ’s assets and liabilities on January 1, 20x1 approximate their fair values except for the following:
Carryin
g Fair value
XYZ, Inc.
amount Fair adjustments
s values (FVA)
Inventory 23,000 31,000 8,000
Equipment (4 yrs.
remaining life) 50,000 60,000 10,000
Totals 63,000 79,000 16,000
XYZ, Inc. declared and paid dividends of ₱6,000 during 20x1. There was no impairment in goodwill.
The year-end individual statements of profit or loss are shown below:
Statements of profit or loss

For the year ended December 31, 20x1
ABC Co. XYZ, Inc.
Sales 300,000 120,000
Cost of goods sold (165,000) (72,000)
Gross profit 135,000 48,000
Depreciation expense (40,000) (10,000)
Distribution costs (32,000) (18,000)
Interest expense (3,000) -
Dividend income 4,800 -
Profit for the year 64,800 20,000
How much is the profit attributable to

Owners of the parent NCI
a. 68,000 2,000
b. 64,800 5,200
c. 52,000 18,000
d. 57,200 12,800
10. ABC Co. owns 80% interest in XYZ, Inc. The individual statements of financial position of the
entities as of December 31, 20x1 are shown below:
Statements of financial position

As at December 31, 20x1
ABC Co. XYZ, Inc.
ASSETS
Cash 23,000 44,000
Inventory 105,000 15,000
Investment in subsidiary (at cost) 75,000 -
Investment in bonds - 13,000
Equipment 200,000 50,000
TOTAL ASSETS 418,000 124,000

Bonds payable (at face amount) 30,000 -
Total liabilities 73,000 30,000
Total equity 345,000 94,000
TOTAL LIABILITIES AND
EQUITY 418,000 124,000
On December 31, 20x1, XYZ, Inc. purchased 50% of the outstanding bonds of ABC Co. from the open
market for ₱13,000. There were no other intercompany transactions during the year.
The consolidation journal entry to eliminate the intercompany bond transaction includes which of
the following?
a. debit to bonds payable for ₱30,000
b. credit to gain on extinguishment of debt for ₱4,000
c. credit to investment in bonds for ₱15,000
d. credit to gain on extinguishment of debt for ₱2,000
QUIZ 5
1. if non controlling interest is measured at ‘proportionate share’,
a. There is goodwill attributable to NCI
b. There is no goodwill attributable to NCI
c. There is an indirect holding adjustment
d. The computation of goodwill would be very complex
2. Which of the following statements is correct?
a. Consolidation begins when control is obtained and ceases when control is lost
b. Consolidation begins at the earliest comparative period presented if business combination
occurred during the current period
c. Consolidation begins when there is no non-controlling interest left in the subsidiary.
d. None of these
3. When NCI measured at PROPORTIONATE SHARE,
a. Goodwill is also attributed only to the owners of the parent.
b. goodwill is attributed to both owners of the parent and NCI
c. Goodwill is attributed to the both the owners of the parent and NCI and impairment is
allocated to both the owners of the parent and the NCI.
d. Goodwill is attributed to the both the owners of the parent and NCI
4. when non-controlling interest is measured at proportionate share then any goodwill will be
attributed to
a. parent only
b. either the parent and subsidiary
c. subsidiary only
d. neither the parent NOR subsidiary
5. When a parent loses control over a subsidiary, the parent shall
a. Derecognized the net identifiable assets of the former subsidiary from the
consolidated financial statements and shall recognize the gain or loss associated
with the loss of control attributable to the former controlling interest.
b. Restate the consolidated financial statements presented in previous years
c. Derecognize the net identifiable assets of the former subsidiary from the
consolidated financial statements and shall recognize the gain or loss directly
within equity
d. B and C
6. the parent’s ownership interest in a subsidiary changes but control is not lost, the change
a. is accounted for as a gain or loss transaction.
b. is accounted for retrospectively
c. is accounted for as equity transaction
d. is not accounted for
7. When a parent-subsidiary relationship exists, consolidated financial statements are prepared in
recognition of the accounting concept of:
a. Reliability.
b. Materiality.
c. Legal entity.
d. Economic entity
8. Consolidated financial statements are typically prepared when one company has a controlling
financial interest in another unless:
a. The subsidiary is a finance company.
b. The fiscal year-ends of the two companies do not coincide.
c. The two companies are in unrelated industries, such as manufacturing and real estate.
d. The parent is in itself a subsidiary of another entity, its debt or equity instruments are
not traded in a public market, and its ultimate parent produces consolidated general-
purpose financial statements that comply with PFRSs
9. If the impairment of the value of goodwill is seen to have reversed, then the company may
a. Reverse the impairment charge and credit income for the period.
b. Reverse the impairment charge and credit retained earnings.
c. Not reverse the impairment charge.
d. Reverse the impairment charge only if the original circumstances that led to the
Impairment no longer exist and credit retained earnings.
10. A change in the parent’s ownership interest in the subsidiary that Results to loss of control is
accounted for as
a. Deconsolidation
b. Correction error
c. Change in accounting policy
d. Change in accounting estimate
QUIZ 6
Oblong Co. owns 80% interest in Round Inc. The statement of financial postion of the entities on January
1, 20x1 are shown below:
Oblong Co. Round Inc. Consolidated
Investment in subsidiary 180,000 - -
Other assets 823,200 297,600 1,135,200
Goodwill - - 7,200
TOTAL ASSETS 1,003,200 297,600 1,142,400
Accounts payable 175,200 72,000 247,200
Share capital 564,000 120,000 564,000
Retained earnings 264,000 105,600 283,200
Equity - Parent 847,200
Non-controlling interest 48,000
TOTAL LIABILITIES and EQUITY 1,003,200 297,600 1,142,400
Explanation:
1. 0 No gain or loss will be recognized on the consolidated financial statements because the
transaction does not result to a loss of control and it is accounted as equity transaction. The carrying
amount of the controlling and non controlling interest are adjusted to reflect the changes in their
relative interest in the subsidiary.
2. 0 Since the remaining interest of 20% was acquired by the parents, their will be no non controlling
interest left. The whole 100% was pertaining to the owners of the parent.
3. 24,000
Non controlling interest 48,000
Divided by: percentage of NCI before changes ÷ 20%
Net assets of subsidiary 240,000
Multiply by: Additional percentage acquired x 10%
Changes in NCI(decrease) 24,000
NCI before additional percentage acquired 48,000

Changes in NCI (24,000)
NCI after additional percentage acquired 24,000
4. 207,200
Fair value of consideration 100,000
Changes in NCI (24,000)
Direct adjustment to equity(Retained earnings decrease) 76,000
Retained earnings before additional percentage acquired 283,200
Direct adjustment to equity (76,000)
Retained earnings after additional percentage acquired 207,200
5. (39,200)
Consideration transferred 120,000
Investment retained in the subsidiary(120,000/60% x 20% 40,000
Non controlling interest 48,000
Total 208,000
Less: Subsidiary's net identifiable assets(carrying amount)* (240,000)
Goodwill (7,200)
Gain or loss on disposal on controlling interest (39,200)
*Carrying amount of subsidiary's net asset = Consolidated net asset(other asset - accounts payable) -
Parents net asset(other asset - accounts payable) = (1,135,200 - 247,200) - (823,200 - 175,200) =
888,000 - 648,000 = 240,000
Exercise 1
Net 800,000 400,000 320,000
Remaining useful life, 1/1/ x1 10 yrs. 5 yrs. 5 yrs.
1. How much is the consolidated “Equipment – net” in the December 31, 20x2 financial statements?
a. 880,000
b. 846,000
c. 852,000
d. 832,000
2. The consolidation journal entry for the depreciation of the fair value adjustment on December
31, 20x2 includes which of the following?
a. 16,000 debit to depreciation expense
3. On January 1, 20x1, Kangaroo Co. acquired 75% of Joey Co. At that time, Joey’s equipment has a
carrying amount of ₱100,000 and a fair value of ₱120,000. The equipment has a remaining useful
life of 10 years. On December 31, 20x2, Kangaroo and Joey reported equipment with carrying
amounts of ₱500,000 and ₱300,000, respectively. How much is the consolidated “equipment –
net” in the December 31, 20x2 financial statements?
a. 800,000
b. 816,000
c. 784,000
d. 826,000
4. On January 1, 20x1, ABC Co. acquired 80% interest in XYZ, Inc. by issuing 5,000 shares with fair
value of ₱15 per share. On this date, XYZ’s equity comprised of ₱50,000 share capital and ₱24,000
retained earnings. NCI was measured at its proportionate share in XYZ’s net identifiable assets.
Fair value
XYZ, Inc. Carrying Fair adjustments
amounts values (FVA)
Inventory 23,000 31,000 8,000
Equipment (4 yrs. remaining

life) 50,000 60,000 10,000
Totals 63,000 79,000 16,000
XYZ, Inc. declared and paid dividends of ₱6,000 during 20x1. There was no impairment in goodwill. The
year-end individual statements of profit or loss are shown below:
ABC Co. XYZ, Inc.
Sales 300,000 120,000
Dividend income 4,800 -
How much is the profit attributable to
Owners of the parent NCI
a. 68,000 2,000
b. 64,800 5,200
c. 52,000 18,000
d. 57,200 12,800
5. ABC Co. owns 80% interest in XYZ, Inc. The individual statements of financial position of the
entities as of December 31, 20x1 are shown below:
ABC Co. XYZ, Inc.
ASSETS
Cash 23,000 44,000
Inventory 105,000 15,000
Investment in subsidiary (at

cost) 75,000 -
Investment in bonds - 13,000
Equipment 200,000 50,000
TOTAL ASSETS 418,000 124,000
Bonds payable (at face amount) 30,000 -

Total equity 345,000 94,000
TOTAL LIABILITIES AND EQUITY 418,000 124,000
On December 31, 20x1, XYZ, Inc. purchased 50% of the outstanding bonds of ABC Co. from the open
market for ₱13,000. There were no other intercompany transactions during the year.
The consolidation journal entry to eliminate the intercompany bond transaction includes which of the
following?
a. debit to bonds payable for ₱30,000

b. credit to gain on extinguishment of debt for ₱4,000
c. credit to investment in bonds for ₱15,000
d. credit to gain on extinguishment of debt for ₱2,000
Rainy Afternoon Co.
Horse Co.
Lion Co.
2. The consolidation journal entry for the depreciation of the fair valueadjustment on December 31,
20x2 includes which of the following?
a. .16,000 debit to depreciation expense

Exercise 2
On January 1, 20x1, ABC Co. acquired 80% interest in XYZ, Inc. The business combination resulted to
goodwill of ₱3,000. On this date, XYZ’s equity comprised of ₱50,000 share capital and ₱24,000 retained
earnings. NCI was measured at its proportionate share in XYZ’s net identifiable assets.
Fair value
XYZ, Inc. Carrying Fair adjustments
amounts values (FVA)
Inventory 23,000 31,000 8,000
Equipment (4 yrs. remaining life) 50,000 60,000 10,000
Totals 63,000 79,000 16,000
During 20x1, the following intercompany transactions occurred:
a. ABC Co. sold goods costing ₱12,000 to XYZ, Inc., for cash, at a markup of 40% on selling price. A
quarter of these goods are held in inventory by XYZ, Inc. by year-end.
b. ABC Co. acquired inventory from XYZ, Inc. for ₱12,000 cash. XYZ, Inc. uses a normal markup of 25%
above its cost. ABC's ending inventory included ₱4,000 from this purchase.
The year-end individual financial statements are shown below:
ABC Co. XYZ, Inc.
ASSETS
Cash 41,000 67,750
Inventory 97,000 10,400
Investment in subsidiary (at cost) 75,000
Equipment 200,000 50,000
TOTAL ASSETS 428,000 130,150
Bonds payable 30,000 -

Total equity 355,000 100,150
TOTAL LIABILITIES AND EQUITY 428,000 130,150
ABC Co. XYZ, Inc.
Sales 330,000 150,750
1. How much is the total unrealized gross profit from the intercompany sales of inventory?
a. 2,000
b. 800
c. 2,800
d. 3,600
2. How much is the NCI in net assets as of December 31, 20x1?

a. 15,350
b. 18,350
c. 19,350
d. 21,070
3. How much is the consolidated retained earnings?

a. 130,280
b. 136,720
c. 142,280
d. 146,280
4. How much is the consolidated profit or loss?

a. 83,350
b. 78,750
c. 86,270
d. 79,450
5. How much is the consolidated profit or loss attributable to

Owners of parent NCI
a. 80,280 3,070
b. 74,460 4,290
c. 82,990 3,280
d. 76,470 2,980
6. How much is the consolidated ending inventory?

a. 104,600
b. 103,800
c. 120,200
d. 98,800
7. How much is the consolidated sales?

a. 426,750
b. 428,750
c. 448,750
d. 456,750
8. How much is the consolidated cost of sales?

a. 260,400
b. 248,600
c. 256,400
d. 272,400
9. How much is the consolidated total assets?

a. 448,950
b. 489,350
c. 498,750
d. 502,250
10. How much is the consolidated total liabilities?

a. 98,000
b. 102,000
c. 102,800
d. 103,000
11. How much is the consolidated total equity?

a. 234,550
b. 332,850
c. 368,500
d. 386,350

Acct52 Buisness Combination Quizes

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Acct52 Buisness Combination Quizes

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QUIZ 1

According to PFRS 10, which of the following is not an element of control?

a) ability to affect return

Non-controlling interest shall be presented in the consolidated statement of financial position

a) AS a mezzanine item between liabilities and equity w

Which of the following statements is TRUE?

a) In a consolidated statement of financial position prepared immediately after a business

According to PFRS 10, which of the following statement is true?

a) Apart entity is ruined to consolidate is sub diaries

This is the basis for preparing consolidated financial statements?

According to the IFRS for SMEs a parent entity still present

a) Consolidated and separate financial statemtents

a) It will not include the net income of Mori Co

Profit or loss and comprehensive income in the consolidated financial statements

a) need not be attributed to the owners of the parent and NCI

According to the PFRS for SMEs a parent entity shall present

a) consolidated financial statements

ABC Co. XYZ, Inc.

Cash 20,000 10,000

Accounts receivable 60,000 24,000

Inventory 80,000 46,000

Investment in subsidiary 150,000

Equipment 400,000 100,000

Accumulated depreciation (40,000) (20,000)

Total assets 670,000 160,000

Accounts payable 40,000 12,000

Bonds payable 60,000 -

Share capital 340,000 100,000

Share premium 130,000 -

Retained earnings 100,000 48,000

Total liabilities and equity 670,000 160,000

Carrying Fair Fair value

Cash 10,000 10,000 -

Inventory 46,000 62,000 16,000

Equipment 100,000 120,000 20,000

Accumulated depreciation (20,000) (24,000) (4,000)

Accounts payable (12,000) (12,000) -

Net assets 148,000 180,000 32,000

The equipment has a remaining useful life as of 4 years from

Consideration transferred (5k shares p30 per share) 150,000

Consolidation journal entry is as follows:

Jan. 1, 2020 inventory 16,000

ABC Co. XYZ Inc. CJE Consolidation Adjustment CJE Consolidated

Consolidated statement of financial position

LIABILITIES AND EQUITY

Share Capital 340,000

Sales 6,700,000 2,700,000

Cost of sales (1,755,000)

1. How much is the consolidated inventory on December 31, 20x1?

2. How much is the consolidated sales?

3. How much is the consolidated cost of sales?

Use the following information for the next two questions:

Horse Co. Colt Co. Colt Co.

Included in Colt’s liabilities is an account payable to Horse amounting to ₱20,000.

5. How much is the total assets in the consolidated financial statements?

Use the following information for the next two questions:

Lion Co. Cub Co. Cub Co.

Statements of profit or loss

How much is the profit attributable to

Statements of financial position

LIABILITIES AND EQUITY

Investment in subsidiary 180,000 - -

Other assets 823,200 297,600 1,135,200