Module 36.

1 Quizzer 1 – Date of Acquisition

Pendon

Problem 1 (Net Asset Acquisition)

Sarawat Co. acquired the net assets of Tine Co. in exchange for the former’s 80,000 shares.
The shares has a par value of P10 and has a fair value of P28.
Tine Co.’s balance sheet at acquisition date shows the following:
Current Assets P 920,000
Non-current Assets 1,800,000
Liabilities 1,200,000
Capital Stock P10 par 800,000
Retained Earnings 720,000

Tine Co.’s assets and liabilities are fairly valued except for its land which is undervalued by
P200,000. Tine Co.’s common shares have a current market value of P19.
Sarawat paid finder’s fee P10,000, stock registration and issuance cost P5,000, and legal and
accounting fee P6,000 in connection with the combination.
1. How much is the amount of consideration transferred?
a. 2,240,000
b. 2,251,000
c. 2,256,000
d. 2,270,000

2. How much is the goodwill from the business combination?

a. 475,000
b. 520,000
c. 531,000
d. 560,000

3. How much additional paid-in capital was recognized by Sarawat?

a. 1,419,000
b. 1,429,000
c. 1,434,000
d. 1,440,000
Problem 2 (Goodwill)

On April 1, year 1, OFF Co. paid P620,000 for all the issued and outstanding common stock
of GUN Corp. The recorded assets and liabilities of GUN Corp. on April 1, year 1, follow:
Cash P P60,000
Inventory 180,000
Net Property and equipment 320,000
Goodwill 100,000
Liabilities (120,000)
On April 1, year 1, GUN’s inventory had a fair value of P150,000, and the property and
equipment (net) had a fair value of P380,000. What is the amount of goodwill resulting from
the business combination?

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Module 36.1 Quizzer 1 – Date of Acquisition

a. P150,000
b. P120,000
c. P50,000
d. P20,000

Problem 3 (Acquisition Cost)

On August 31, year 1, Wood Corp. issued 100,000 shares of its P20 par value common stock
for the net assets of Pine, Inc., in a business combination accounted for by the acquisition
method. The market value of Wood’s common stock on August 31 was P36 per share. Wood
paid a fee of P160,000 to the consultant who arranged this acquisition. Costs of registering
and issuing the equity securities amounted to P80,000. No goodwill was involved in the
acquisition. What amount should Wood capitalize as the cost of acquiring Pine’s net assets?
a. P3,600,000
b. P3,680,000
c. P3,760,000
d. P3,840,000

Problem 4 (Full PFRS vs PFRS for SMEs)

TOL Co, acquired 80% of the outstanding voting stocks of KMA Co. for P475,000. At the date
of acquisition, the net assets at book value of TOL & KMA is P1,500,000 and P500,000
respectively. The equipment of KMA was understated by P 65,000. Transaction cost is P 6,000
& P4,000 for direct and indirect cost respectively.
1. How much is the goodwill if the non-controlling interest is measured at fair value?
a. 23,000
b. 25,000
c. 28,750
d. 90,000

2. How much is the goodwill if the non-controlling interest is measured based on the net
assets of the acquiree?
a. 23,000
b. 25,000
c. 28,750
d. 90,000

3. PFRS for SMEs, how much is the goodwill recognized?

a. 33,000
b. 29,000
c. 28,750
d. 23,000
Problem 5 (Subsequent measurement)

On July 1, 2020 The Magna Company acquired 100% of The Natural Company for a
consideration transferred of P160,000. At the acquisition date the carrying amount of Natural's
net assets was P100,000. At the acquisition date a provisional fair value of P120,000 was
attributed to the net assets. An additional valuation received on May 31, 2021 increased this

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Module 36.1 Quizzer 1 – Date of Acquisition

provisional fair value to P135,000 and on July 30, 2021 this fair value was finalized at
P140,000. What amount should Magna present for goodwill in its statement of financial
position at December 31, 2021, according to IFRS3 Business combinations?
a. P20,000
b. P40,000
c. P25,000
d. P60,000
Problem 6 (Contingent Cash Consideration)

On December 31, 2019, Neal Co. issued 100,000 shares of its $10 par value common stock
in exchange for all of Frey Inc.’s outstanding stock. The fair value of Neal’s common stock on
December 31, 2019, was $19 per share. The carrying amounts and fair values of Frey’s assets
and liabilities on December 31, 2019, were as follows:
Carrying Value Fair Value
Cash 240,000 240,000
Receivable 270,000 270,000
Inventory 435,000 405,000
PPE 1,305,000 1,440,000
Liabilities (525,000) (525,000)
Net Assets 1,725,000 1,830,000

1. Determine the amount of goodwill if Neal Co. will pay an additional P500,000 on
January 21, 2021 if the average income of Frey Inc during 2019-2020 exceeds
P3,500,000 per year. The expected value is P200,000 based on the 40% probability
of achieving the target.
a. 70,000
b. 150,000
c. 270,000
d. 570,000

2. With the same facts in number 1, before the contingency period is over, how much is
the goodwill if the probable present value of the earnings contingency declines to
P150,000 if the changes in value is within the measurement period, and due to events
occurring subsequent to acquisition, respectively?
a. 270,000; 220,000
b. 270,000; 270,000
c. 220,000; 270,000
d. 220,000; 220,000
Problem 7 (Contingent Shares)

Cairo Company acquired the net assets of Gavril Company on January 1, 2021 for a total
consideration of 100,000 of Cairo’s share of stock. The net assets of Gavril and the stocks of
Cairo have a fair value of P520,000 and P6.20/share respectively. Share premium of P520,000
was recognized on the date of acquisition. It was further agreed that additional shares would
be issued on January 2, 2023 to compensate for the for any value of Cairo’s common stock
below P16/share. The settlement would cure the deficiency by issuing added shares based
on their fair value on January 1, 2023.
The fair value of per share on January 1, 2023 is P10.

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Module 36.1 Quizzer 1 – Date of Acquisition

1. How many additional shares was issued on January 1, 2023?

a. 10,000
b. 60,000
c. 100,000
d. 160,000

2. How much is the decrease in of share premium immediately after the shares were
issued?
a. P0
b. P60,000
c. P80,000
d. P160,000

Problem 8 (NCI w/ given FV)

The parent purchased 60% of shares of the subsidiary for P63,000,000. The remaining 40%
non-controlling interest has a fair value of P40,000,000. The fair value of the subsidiary’s net
assets is P70,000,000 and a carrying amount of P50,000,000.

1. How much is the control premium paid by the parent?

a. 3,000,000
b. 12,000,000
c. 21,000,000
d. 23,000,000

2. Find the goodwill & value of NCI using the partial goodwill method
a. 12,000,000; 40,000,000
b. 21,000,000; 28,000,000
c. 33,000,000; 41,200,000
d. 41,200,000; 20,000,000

3. Find the goodwill & value of NCI using the fair value basis
a. 33,000,000; 40,000,000
b. 21,000,000; 20,000,000
c. 41,200,000; 28,000,000
d. 12,000,000; 41,200,000

Problem 9 (Gain on Bargain Purchase)

Kent Corp., in exchange for P305,000 cash, acquired the 70% shares of Manuel Corp. At
that time, the non-controlling interest has a fair value of P157,000. Manuel reports, on the
same day, identifiable assets with book value and fair value of P674,000 and P712,000
respectively while liabilities if valued at P247,000.

1. How much is the gain on bargain purchase arising from the consolidation if the
proportionate basis is used?
a. 11,000
b. 13,000
c. 18,500
d. 20,500

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Module 36.1 Quizzer 1 – Date of Acquisition

2. How much is the gain on bargain purchase arising from the consolidation if the full
goodwill method is used?
a. 11,000
b. 13,000
c. 18,500
d. 20,500

3. If the NCI has a fair value of P 88,500, NCI is reflected in the consolidated balance
sheet on the date of acquisition in the amount of
a. 68,500
b. 139,500
c. 147,000
d. 195,000

Problem 10 (Step-acquisition)

Jeanette Company acquires 15% of Honey Boy’s common stock for P500,000 cash and
carries the investment as a financial asset. A months later, Jeanette purchased another
60% of Honey Boy’s stock for P2,575,000. At that date, Honey Boy reports the following:

Book Value Fair Value

Cash 1,520,000 1,520,000
Inventory 797,000 800,000
Other current assets 490,000 490,000
Plant, Property, and Equipment 1,900,000 1,870,000
Intangible Assets 546,000 590,000

Current Liabilities 1,300,000 1,265,000

Non-current Liabilities 453,000 467,000
Shareholder’s equity 1,300,000
Retained earnings 2,200,000

The fair value of the 25% non-controlling interest is P950,000.

1. Jeanette’s “Investment in Honey Boy” account, immediately after acquisition, has a

balance of
a. 2,575,000
b. 2,850,000
c. 3,075,000
d. 3,145,000

2. How much is the remeasurement gain/(loss) to be recognized in profit or loss if the

15% shares are accounted for using the FVPL and FVOCI respectively?
a. Zero; Zero
b. 70,000; Zero
c. (143,750); 70,000
d. (70,000); 143,750
e. None of the above

3. How much is the goodwill recognized under the gross-up method?

a. 557,000
b. 491,500
c. 487,000
d. 421,500

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Module 36.1 Quizzer 1 – Date of Acquisition

4. How much is the goodwill recognized under the partial goodwill method?
a. 557,000
b. 491,500
c. 487,000
d. 421,500

Problem 11 (Consolidated FS)

On September 31, 2021 Lods Co. issues 2.5 shares in exchange for each ordinary share of
Dude Co. or a total of 150,000 ordinary shares in exchange for all 60,000 ordinary shares
of Dude Co. All of Dude Co.’s shareholders exchange their shares in Dude Co. The
statements of financial position of Lods Co. and Dude Co. immediately before the business
combination are:
Lods Co. Dude Co.
Current assets 500,000 700,000
Non-current assets 1,300,000 3,000,000
Total Assets 1,800,000 3,700,000
Current liabilities 300,000 600,000
Non-current liabilities 400,000 1,100,000
Total Liabilities 700,000 1,700,000
Retained earnings 800,000 1,400,000
Share Capital
100,000 shares 300,000
60,000 shares 600,000
Total Shareholders’ Equity 1,100,000 2,000,000
Total Liabilities and Shareholders’ Equity 1,800,000 3,700,000

The fair value of each ordinary share of Dude Co. at September 31, 2021 is P40. The quoted
market price of Lods Co.’s ordinary shares at that date is P16. All assets and liabilities book
values equal their fair values except Lods’s Co.’s non-current assets with fair value of
P1,500,000 and Dude Co. non-current assets at P3,500,000.

1. What is the amount of goodwill on the combination?

a. P300,000 b. P400,000 c. P3,000,000 d. P3,500,000

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Module 36.1 Quizzer 1 – Date of Acquisition

2. How much total assets to be shown in the consolidated statement of financial

position?
a. P5,500,000 b. P6,000,000 c. P8,000,000 d. P9,500,000

3. How much total liabilities to be shown in the consolidated statement of financial

position?
a. P2,800,000 b. P2,600,000 c. P2,400,000 d. P3,000,000

4. How much is the consolidated retained earnings on December 31, 2021?

a. P800,000 b. P1,000,000 c. P1,200,000 d. P1,400,000

5. How much is the consolidated share capital on December 31, 2021?

a. P2,200,000 b. P2,400,000 c. P6,200,000 d. P6,300,000

6. Assume the same facts as above, except that only 56,000 of Dude Co. 60,000
ordinary shares are exchanged. How much should be shown as noncontrolling
interest?
a. P132,000 b. P134,000 c. P136,000 d. P138,000

Problem 12 (Consolidated FS)

On January 1, 2021, Tharn Corporation and Type Corporation and their condensed
balance sheet are as follows:
Tharn Corp. Type Corp.
Current Assets P 70,000 P 20,000
Non-current Assets 90,000 40,000
Total Assets P160,000 P60,000
Current Liabilities P30,000 P10,000
Long-term Debt 50,000
Stockholder’s Equity 80,000 50,000
Total Liabilities and Equities P160,000 P60,000

On January 2, 2021, Tharn Corporation borrowed P60,000 and used the proceeds to obtain
80% of the outstanding common shares of Type Corporation. The acquisition price was
considered proportionate to Type’s fair value. The P60,000 debt is payable in 10 equal
annual principal payments, plus interest, beginning December 31, 2021. The excess
over the underlying book value of the acquired net assets is allocated to inventory (60%)
and to goodwill (40%).

On the consolidated statement of financial position as of January 2, 2021, answer the

following

1. The amount of goodwill using proportionate basis (partial):

a. P 0 b. P8,000 c. P10,000 c. P20,000

2. Using the same information above, the amount of goodwill using full fair value
(full/gross-up) basis:
a. P 0 b. P8,000 c. P10,000 c. P20,000

3. Using the same information above, the amount of currents assets should be
a. P105,000 b. P102,000 c. P100,000 d. P 90,000

4. Using the same information above, the amount of non-current assets using
proportionate basis (partial) in computing goodwill should be:
a. P130,000 b. P134,000 c. P138,000 d. P140,000

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Module 36.1 Quizzer 1 – Date of Acquisition

5. Using the same information above, the amount of non-current assets using full fair
value basis in computing goodwill should be:
a. P130,000 b. P134,000 c. P138,000 d. P140,000
6. Using the same information above, the amount of current liabilities should be
a. P50,000 b. 46,000 c. P104,000 d. P160,000

7. Using the same information above, the amount of non-current liabilities should be:
a. P50,000 b. 46,000 c. P104,000 d. P160,000

8. Using the same information above, the amount of stockholders’ equity using
proportionate (partial goodwill) basis to determine non-controlling interest
should be:
a. P80,000 b. P93,000 c. P95,000 d. P130,000

9. Using the same information above, the amount of stockholders’ equity using full
fair value basis to determine non-controlling interest should be:
a. P80,000 b. P93,000 c. P95,000 d. P130,000
Problem 13 (Push-down Accounting)

On January 1, 2020, Ben Corp. acquired Ebe Co. for consideration that exceeded the fair
value of Ebe’s net assets. On the same date, Ben has a piece of land with a carrying amount
of P4,000,000 and fair value of P4,500,000. Ebe also has a piece of land with carrying value
of P1,250,000 and fair value of P1,360,000.
1. If push-down accounting is used, the land on Ebe’s separate financial statement and
on the consolidated financial statement shall reflect the following amount immediately
after acquisition
a. 1,250,0000; 5,360,000
b. 1,250,000; 5,250,000
c. 1,360,000; 5,360,000
d. 1,360,000; 5,250,000

2. If push-down accounting is not used, the land on Ebe’s separate financial statement
and on the consolidated financial statement shall reflect the following amount
immediately after acquisition
a. 1,250,0000; 5,360,000
b. 1,250,000; 5,250,000
c. 1,360,000; 5360,000
d. 1,360,000; 5,250,000

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