Problem 1:

Ahlbert, Babsy, and Chiggy decided to form ABC partnership. It was agreed that Ahlbert will contribute
an equipment with assessed value of P200,000 with historical cost of P1,600,000 and accumulated
depreciation of P1,400,000. A day after the partnership formation, the said equipment was sold for
P600,000.

Babsy will contribute a land and building with carrying amount of P2,400,000 and fair value of
P3,000,000. The land and building are subject to a mortgage payable amounting to P600,000 to be
assumed by the partnership. The partners agreed that Babsy will have 60% capital interest in the
partnership. The partners also agreed that Chiggy will contribute sufficient cash to the partnership.

1. How much is the total agreed capitalization of the ABC partnership?

a. 3,000,000
b. 4,000,000
c. 5,000,000
d. 6,000,000
e. None of the above. Please specify.

2. How much is the cash to be contributed by Chiggy?

a. 1,000,000
b. 1,200,000
c. 1,400,000
d. 1,600,000
e. None of the above. Please specify.

Problem 2:

On January 1, 2020, Ahlbert, Babsy, and Chiggy formed ABC partnership with original capital
contribution of P600,000, P1,000,000, and P400,000. Ahlbert is the managing partner.

During 2020, Ahlbert, Babsy and Chiggy made additional investments of P1,000,000, P400,000, and
P600,000, respectively. At the end of 2020, Ahlbert, Babsy, and Chiggy made drawings of P400,000,
P200,000 and P800,000, respectively. At the end of 2020, the partnership had a credit balance in the
income summary account of P2,100,000. The profit or loss agreement of the partners is as follows:

 10% interest on original capital contribution of the partners.

 Quarterly salary of P20,000, and P80,000 for Babsy, and Ahlbert, respectively.
 Bonus to Ahlbert equivalent to 20% of net income after interest and salary to all partners.
 Remainder is to be distributed equally among the partners.

3. How much is Ahlbert’s share in partnership profits in 2020?

a. 380,000
b. 680,000
c. 1,080,000
d. 400,000
e. None of the above. Please specify.
 4. How much is the ending capital balance of Ahlbert as of December 31, 2020?
a. 2,000,000
b. 2,500,000
c. 2,300,000
d. 2,200,000
e. None of the above. Please specify.

Problem 3:

On December 31, 2020, the statement of financial position of ABC partnership provided the following
data with profit or loss ratio of 5:1:4:

ASSETS LIABILITIES AND EQUITY

Current Assets 3,000,000 Total Liabilities 1,000,000
Noncurrent Assets 4,000,000 Ahlbert Capital 2,200,000
Babsy Capital 2,400,000
Chiggy Capital 1,400,000

On January 1, 2021, Damby is admitted to the partnership by investing P1,000,000 to the partnership for
10% capital interest. The total agreed capitalization of the new partnership is P6,000,000.

5. How much is the capital balance of Chiggy after the admission of Damby in the partnership?
a. 1,160,000
b. 1,640,000
c. 1,000,000
d. 1,560,000
e. None of the above. Please specify.

Problem 4:

On December 31, 2020, the Statement of Financial Position of ABC Partnership with profit or loss ratio of
6:1:3 of partners Ahlbert, Babsy, and Chiggy, respectively, revealed the following data:

ASSETS LIABILITIES AND EQUITY

Cash 2,000,000 Other liabilities 4,000,000
Receivables from A 1,000,000 Payable to Babsy 2,000,000
Other noncash assets 4,000,000 Payable to Chiggy 200,000
Ahlbert, Capital 1,400,000
Babsy, Capital (!,300,000)
Chiggy, Capital 700,000

On January 1, 2021, the partners decided to liquidate the partnership. All partners are legally declared
to be personally insolvent. The other noncash assets were sold for P3,000,000. Liquidation expenses
amounting to P200,000 were incurred.

6. How much cash was received by Babsy at the end of partnership liquidation?
a. 500,000
 b. 300,000
c. 580,000
d. 540,000
e. None of the above. Please specify.

Problem 5:

On December 31, 2020, the statement of financial position of Ahlbert, Babsy and Chiggy with profit or
loss ratio of 5:3:2 of respective partners A, B, and C, showed the following information:

ASSETS LIABILITIES AND EQUITY

Cash 3,200,000 Total liabilities 4,000,000
Noncash assets 2,800,000 Ahlbert Capital 200,000
Babsy Capital 1,000,000
Chiggy Capital 800,000

On January 1, 2021, the partners decided to liquidate the partnership in installment. All partners are
legally declared to be personally insolvent.

As of January 31, 2021, the following transactions occurred:

 Noncash assets with a carrying amount of P2,000,000 were sold at a gain of P200,000.
 Liquidation expenses for the month of January amounting to P100,000 were paid.
 It is estimated that liquidation expenses amounting to P300,000 will be incurred for the month
of February, 2021.
 20% of liabilities to third parties were settled.
 Available cash was distributed to the partners.

7. How much is the amount of cash received by Chiggy on January 31, 2021?
a. 520,000
b. 480,000
c. 600,000
d. 700,000
e. None of the above. Please specify.

8. How much is the TOTAL cash withheld on January 31, 2021?

a. 1,100,000
b. 3,200,000
c. 3,500,000
d. 3,400,000
e. None of the above. Please specify.
Problem 6:

Robert Company acquired the net assets of Jake Company by issuing 10,000 ordinary shares with par
value of P20 and bonds payable with face amount of P1,000,000. The bonds are classified as financial
liability at amortized cost.

At the time of acquisition, the ordinary shares are publicly quoted at 40 per share. On the other hand,
the bonds payable are trading at 110.

Robert Company paid P20,000 share issuance costs and P40,000 bond issue costs. Robert Company also
paid P80,000 acquisition related costs and P60,000 indirect costs of business combination.

Before the date of acquisition, Robert Company and Jake Company reported the following data:

ASSETS Robert Jake

Current Assets 2,000,000 1,000,000
Noncurrent Assets 4,000,000 2,000,000
Current Liabilities 400,000 800,000
Noncurrent Liabilities 600,000 1,000,000
Ordinary Shares 1,000,000 400,000
Share Premium 2,400,000 600,000
Retained Earnings 1,600,000 200,000

At the time of acquisition, the current assets of Robert Company have fair value of P2,400,000 while the
noncurrent assets of Jake Company have fair value of P2,600,000. On the same date, the current
liabilities of Jake Company have fair value of P1,200,000 while the noncurrent liabilities of Robert
Company have fair value of P1,000,000.

9. How much is the goodwill or income from acquisition?

a. 100,000 goodwill
b. 3000,000 income from acquisition
c. 240,000 goodwill
d. 140,000 income from acquisition
e. None of the above. Please specify.

10. How much is Robert Company’s amount of total liabilities after the business combination?
a. 4,480,000
b. 5,020,000
c. 4,640,000
d. 4,260,000
e. None of the above. Please specify.

Problem 7:

On January 1, 2020, Robert Company acquired 30,000 out of 100,000 outstanding ordinary shares of
Jake Company for P90,000. For the six month period ending June 30, 2020, Jake Company reported net
income of P40,000.
On July 1, 2020. Robert Company acquired additional 60,000 ordinary shares of Jake Company at a price
of 4 per share or total cost of P240,000. Robert Company paid P20,000 acquisition related costs and
P10,000 indirect costs of business combination.

The acquisition price per share of the additional shares clearly reflected the fair value of the existing
interest of Robert Company in Jake Company. It is the policy of Robert Company to initially measure the
noncontrolling interest in net assets of the acquiree at fair value. The fair value of the noncontrolling
interest in net assets of the acquiree is reliably measured at P50,000.

At the acquisition date, the net assets of Jake Company were reported at P400,000. An asset of Jake
Company was overvalued by P50,000 while one liability was overvalued by P30,000.

11. How much is the gain on remeasurement of the existing investment in Jake Company as a result
of the step acquisition?
a. 18,000
b. 30,000
c. 24,000
d. 12,000
e. None of the above. Please specify.

12. How much is the goodwill or income from acquisition as a result of the business combination?
a. 18,000 goodwill[
b. 20,000 income from acquisition
c. 24,000 goodwill
d. 30,000 goodwill
e. None of the above. Please specify.

Problem 8:

On January 1, 2020, Robert Company acquired 70% of outstanding ordinary shares of Jake Company at a
price of P420,000. The result of the business combination on the date of acquisition was 42,000 income
from acquisition. On January 1, 2020, Robert Company reported retained earnings of P4,000,000 while
Jake Company reported retained earnings of P400,000.

All the assets and liabilities of Jake Company are fairly valued except machinery which is undervalued by
P160,000 and inventory which is overvalued by P20,000. The said machinery has remaining useful life of
4 years while 40% of the said inventory remained unsold at the end of 2020.

For the year ended December 31, 2020, Robert Company reported net income of P2,000,000 and
declared dividends of P300,000 in the separate financial statements while Jake Company reported net
income of P300,000 and declared dividends of P40,000 in the separate financial statements.

13. How much is the share of non-controlling interest in the net income of subsidiary for the year
ended December 31, 2020?
a. 90,000
b. 98,400
c. 69,600
d. 81,600
 e. None of the above. Please specify
14. How much is the net income attributable to parent for the year ended December 31, 2020?
a. 2,204,400
b. 2,324,400
c. 2,282,400
d. 2,190,400
e. None of the above. Please specify

Problem 9:

On January 1, 2019, Robert Company acquired 60% of outstanding ordinary shares of Jake Company at a
gain on bargain purchase of P80,000. For the year-ended December 31, 2020, Robert Company and Jake
Company reported sales revenue of P4,000,000 and P2,000,000 in their respective separate financial
statements. At the same year, Robert Company and Jake Company reported cost of goods sold of
P2,400,000 and P1,400,000 in their respective separate financial statements.

During 2019, Robert Company sold inventory to Jake Company at a selling price of P560,000 with gross
profit rate of 40% based on cost. On the other hand, Jake Company sold inventory to Robert Company at
a selling price of P800,000 with gross profit rate of 30% based on sales during 2020.

On December 31, 2019, 25% of the goods coming from Robert Company remained in Jake Company’s
inventory but all were eventually sold to outside customers in 2020. As of December 31, 2020, 40% of
the goods coming from Jake Company were eventually sold by Robert Company to outside customers.

For the year ended December 31, 2020, Robert Company reported net income amounting to P1,120,000
while Jake Company reported net income of P400,000 and distributed dividends of P100,000.

15. How much is the consolidated sales revenue for the year ended December31, 2020?
a. 5,200,000
b. 4,640,000
c. 6,000,000
d. 5,440,000
e. None of the above. Please specify

16. How much is the consolidated cost of goods sold for the year ended December 31, 2020?
a. 3,800,000
b. 3,104,000
c. 2,896,000
d. 3,904,000
e. None of the above. Please specify

Problem 10:

On January 1, 2019, Robert Company acquired 80% of outstanding ordinary shares of Jake Company at a
gain on bargain purchase of P360,000. The following intercompany transactions occurred for between
the two entities:
  On January 1, 2019, Jake Company sold a land to Robert Company with a cost of P2,000,000 at a
selling price of P2,200,000. The land was eventually sold by entity A to third persons during
2020.
 On January 1, 2019, Robert Company sold a white machinery to Jake Company with a cost of
P400,000 and accumulated depreciation of P80,000 at a selling price of P360,000. The remaining
useful life of the machinery from the date of sale was 16 years. Residual value is immaterial.
 On July 1, 2020, Jake Company sold a black machinery to Robert Company at with a cost of
P540,000 and accumulated depreciation of P360,000 at a selling price of P120,000. The
remaining life of the machinery from the date of sale was 3 years. Residual value is immaterial.

For the year ended December 31, 2020, Robert Company reported net income of P1,600,000 while
Jake Company reported net income of P1,000,000 and distributed dividends of P300,000.

17. How much is the share of non-controlling interest in the net income of subsidiary for the year
ended December 31, 2020?
a. 248,000
b. 210,000
c. 250,000
d. 208,000
e. None of the above. Please specify

18. How much is the net income attributable to parent for the year ended December 31, 2020?
a. 2,412,500
b. 2,650,500
c. 2,197,500
d. 2,362,500
e. None of the above. Please specify

Problem 11:

The balance sheet of Robert Company and Jake Company at December 31, 2020 are summarized as
follows:

Robert Jake
Assets 5,000,000 2,000,000
Liabilities 1,500,000 500,000
Capital Stock, P40 par 2,500,000
Capital Stock, P25 par 1,000,000
Retained Earnings 1,000,000 500,000

At the date of acquisition, Jake Company’s assets are understated while its liabilities are fairly stated.

On January 1, 2021, Robert Company purchased 80% of Jake Company’s outstanding shares for
P2,000,000 when the fair value of Jake Company’s net assets was 2,200,000. Robert Company issued
10,000 shares in consideration of the acquisition. Robert Company is to assign an amount to non-
controlling interest at the date of acquisition based on the consideration transferred (shares).
19. How much is the consolidated assets at the date of acquisition?
a. 9,000,000
b. 9,700,000
c. 8,000,000
d. 8,700,000
e. None of the above. Please specify
20. How much is the consolidated liability at the date of acquisition?
a. 2,000,000
b. 1,500,000
c. 1,800,000
d. 500,000
e. None of the above. Please specify.
21. How much is the stockholder’s equity in the consolidated balance sheet as of January 1, 2021?
a. 7,000,000
b. 5,500,000
c. 6,000,000
d. 6,700,000
e. None of the above. Please specify.

22. If the new partner is admitted to the partnership by purchase of interest of existing partners,
which of the following statements is correct.
a. The partnership shall recognized gain or loss as a result of the admission.
b. The partnership shall recognized goodwill arising from the admission of a new partner.
c. The partners will personally recognize gain or loss upon the transfer of capital from old
partners to new partner.
d. The total capital of the old partnership will always change upon admission of a new partner.

23. In case of partnership liquidation, which of the following statements is correct regarding the
partner’s obligation for partnership’s debt?
a. A limited partner is liable prorate and subsidiarily up the extent of his separate assets.
b. A general-capital partner is liable solidary and subsidiarily up to the extent of his separate
assets unless otherwise agreed by partners provided by law.
c. An industrial partner is liable subsidiarily up to the extent of his separate assets but subject
to reimbursement of general capital partners in the absence of agreement to the contrary.
d. All partners regardless of classification are liable prorate and subsidiarily up to the extent of
their separate assets notwithstanding the source of partnership’s obligation.

24. A “group”, for consolidation purposes is:

a. A parent and all of its subsidiaries
b. An entity that has one or more subsidiaries
c. An entity, including an unincorporated entity.
d. An entity that obtains control over other entities or businesses.
25. Non-controlling interest shall be presented:
a. Separately from liabilities and the parent shareholders’ equity.
b. Within equity, separately from the parent shareholder’s equity.
c. As non-current liability
d. As component of the parent shareholders’ equity.

26. What is the initial measurement of the retained investment in subsidiary when the control is
lost?
a. Fair Value at the date when control is lost.
b. Fair Value at the beginning of the reporting period
c. Carrying amount at the date when control is lost
d. Carrying amount at the beginning of the reporting period

27. Control is presumed to exist when the parent owns directly or indirectly through subsidiaries:
a. More than half of the equity of an entity
b. More than half of the ordinary shares of an entity
c. More than half of the preference and ordinary shares of an entity
d. More than half of the voting power of an entity

28. The consideration transferred in a business combination shall be measured at:

a. Fair Value
b. Carrying Value
c. Fair Value or Carrying Value, whichever is Higher
d. Fair Value or Carrying Value, whichever is Applicable

29. 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

30. When should an acquirer derecognize a contingent liability as the result of the acquisition?
a. When it becomes more likely than not that the firm will not be liable.
b. When the contingency is resolved.
c. At the end of year of acquisition.
d. When it is reasonably possible that the liability will not require payment.