Problem 1

1 Cost capitalized (consideration) 3,500,000

(100,000 shares x 35/share)

2 Consideration 3,500,000
FV of net assets 3,000,000
Goodwill 500,000

Problem 2
1 Cost capitalized (consideration) 1,800,000
(50,000 shares x 36/share)

2 Consideration 1,800,000
FV of net assets * 1,550,000
Goodwill 250,000
*550,000 + 400,000 + 1,600,000 - 300,000 - 700,000

3 Accounts Receivable (net) 550,000

Inventory 400,000
PPE (net) 1,600,000
Goodwill 250,000
Account Payable 300,000
Notes Payable 700,000
Share Capital 1,000,000
Share Premium 800,000

Business combination expenses 100,000

Share Premium 50,000
Cash 150,000

Problem 3
1 Cash paid 500,000
FV of shares issued 3,000,000
FV of contingent consideration 150,000
Total consideration 3,650,000

2 Consideration 3,650,000
FV of net assets 2,374,000
Goodwill 1,276,000

3 Cash 300,000
Accounts receivable 980,000
Inventory 600,000
B/E, net 1,064,000
Goodwill 1,276,000
Cash 500,000
Ordinary share capital 2,400,000
Ordinary share premium 600,000
Liabilities (assumed) 570,000
Liability for contingent consideration 150,000
 Business combination expenses 70,000
Ordinary share premium 30,000
Cash 100,000

Problem 4
1 Consideration 800,000
FV of net assets 755,000
Goodwill 45,000

Current assets 404,500

Plant assets 690,000
Patent 48,000
Goodwill 45,000
Cash 800,000
Current liabilities 107,500
Long term debt 280,000

2 Consideration 800,000
FV of net assets 755,000
Goodwill 45,000

Investment in subsidiary 800,000

Cash 800,000

3 NCI @ FV
Consideration 800,000
NCI 200,000
Total 1,000,000
FV of net assets 755,000
Goodwill 245,000

NCI @ Proportionate
Consideration 800,000
NCI 151,000
Total 951,000
FV of net assets 755,000
Goodwill 196,000

Investment in subsidiary 800,000

Cash 800,000

Problem 5
1 Investment in Minor Company 8,000,000

2 Investment in Minor Company 8,000,000

Ordinary share capital 6,000,000
Ordinary share premium 2,000,000

Business combination expenses 500,000

 Preferrence share capital 400,000
Preferrence share premium 100,000

Problem 6
Customer list 50,000
Lease (with favourable terms) 18,000
Identifiable R & D 100,000
Franchise 60,000
Total acquired Intangibles 228,000

Problem 7
Consideration 600,000
FV of net assets 470,000
Goodwill 130,000

Problem 8
Consideration 2,880,000
FV of net assets 3,000,000
Gain on bargain purchase -120,000

Problem 9
1 NCI @ FV
Consideration 510,000
NCI 160,000
Total 670,000
FV of net assets 564,000
Goodwill 106,000

2 NCI @ Proportionate
Consideration 510,000
NCI 141,000
Total 651,000
FV of net assets 564,000
Goodwill 87,000

Problem 10
1 Cash payment 106,500 (squeezed)
Contingent consideration 18,000
Total 124,500
FV of net assets 91,500
Goodwill 33,000

Investment in Hope Company 124,500

Cash 106,500
Liability for contingent consideration 18,000

2 Consideration 121,500
NCI 13,500
Total 135,000
FV of net assets 91,500
 Goodwill 43,500

Investment in Hope Company 121,500

Cash 121,500

Problem 11
1 (1,575,000 / 70%) x 20% 450,000

2 Fair value of previous interest 225,000

Consideration for second purchase 1,575,000
NCI (20%) 450,000
Total 2,250,000
FV of net assets (1.7M + 250K) 1,950,000
Goodwill 300,000

3 Investment in Finest Company 1,800,000

EI@FVTPL 205,000
Gain on remeasurement 20,000
Cash 1,575,000

Problem 12
1 Consideration 32,000,000
Final value of net assets 30,000,000
Goodwill on combination 2,000,000
Impairment as of Dec. 31, 2023 200,000
Carrying value, 12/31/2023 1,800,000

2 July 1, 2022
Net assets 28,000,000
Goodwil 4,000,000
Cash 32,000,000

December 31, 2022

Goodwill 1,000,000
Net assets 1,000,000

March 31, 2023

Net assets 2,000,000
Goodwill 2,000,000

May 31, 2023

Net assets 1,000,000
Goodwill 1,000,000

December 31, 2023

Impairment Loss 200,000
Goodwill 200,000

Problem 13
 Consideration (100,000 x 2.15) 215,000
Final value of net assets* 185,000
Goodwill on combination 30,000

*50,000 + 25,000 + 5,000 + 130,000 - 15,000 - 8,000 - 2,000

Note: the final valuation of "plant" is the valuation as of March 1, 2020.
Measurement period will end on May 31, 2020.

Problem 14
1 Consideration (8,000 x 500) 4,000,000
FV of net assets (6.4M - 3.6M) 2,800,000
Goodwill on combination 1,200,000

2 Legal fees 40,000

Due diligence costs 400,000
Gen and admin costs 80,000
Total expenses 520,000

3 Assets acquired 6,400,000

Goodwill 1,200,000
Liabilities assumed 3,600,000
Ordinary share capital 3,200,000
Ordinary share premium 800,000

Expenses 520,000
Cash 520,000

Ordinary share premium 180,000

Cash 180,000

Problem 15
1 Cash paid 200,000,000
Contingent consideration (@FV) 1,000,000
Total consideration 201,000,000
FV of net assets 118,000,000
Goodwill on combination 83,000,000

2 Liability for contingent consideration 1,000,000

Loss on increase in value of contingency 4,000,000
Cash 5,000,000

3 see no. 1 83,000,000

Note: the contingent consideration is an exemption to measurement period

4 Liability for contingent consideration 1,000,000

Gain on extinguishment of contingent liability 1,000,000

Problem 16
1 Cash paid 12,000,000
Contingent consideration (@FV) 300,000
 NCI (30%) - proportionate 3,300,000
Total 15,600,000
FV of net assets 11,000,000
Goodwill on combination 4,600,000

2 Investment in Forgiveness Company 12,300,000

Cash 12,000,000
Share premium - contingent consideration 300,000

Share Premium - contingent consideration 300,000

Ordinary share capital 200,000
Ordinary share premium 100,000

3 see no. 1 4,600,000

4 Investment in Forgiveness Company 12,300,000

Cash 12,000,000
Share premium - contingent consideration 300,000

Share Premium - contingent consideration 300,000

Ordinary share premium 300,000

Problem 17
1 NCI @ FV
Consideration (700,000 shares x 13) 9,100,000
NCI (30%)* 3,450,000
Total 12,550,000
FV of net assets 10,000,000
Goodwill 2,550,000
*((700,000 x 11.5) / 70% )) *30%

2 NCI @ Proportionate
Consideration (700,000 shares x 13) 9,100,000
NCI (30%)* 3,000,000
Total 12,100,000
FV of net assets 10,000,000
Goodwill 2,100,000
*10M x 30%

Problem 18
Fair value of previous interest (25%) * 500,000
Consideration for second purchase (55%) 1,100,000
NCI (20%) 360,000
Total 1,960,000
FV of net assets (2.3M 700K) 1,600,000
Goodwill 360,000
*(1,100,000 / 55%) x 25%

Problem 19
Fair value of previous interest (20%) 24,000,000
 Consideration for second purchase (50%) 60,000,000
NCI (30%) * 36,000,000
Total 120,000,000
FV of net assets 120,000,000
Goodwill 0
*(60M / 50%) x 30%

OR

Fair value of previous interest (20%) 24,000,000

Consideration for second purchase (50%) 60,000,000
NCI (30%) 36,000,000
Total 120,000,000
BV of net assets 115,000,000
Excess 5,000,000
Attributable to undervalued asset (PPE) 5,000,000
Excess attributable to Goodwill 0

Problem 20
Fair value of previous interest (25%) 1,920,000
Consideration for second purchase (40%) 4,800,000
NCI (35%) 2,940,000
Total 9,660,000
FV of net assets 8,400,000
Goodwill 1,260,000

NCI @ FV - given in the problem 2,400,000

NCI @ Proportionate (8,400,000 x 35%) 2,940,000 higher

Problem 21
1 Consideration (3,450,000 + 500,000) 3,950,000
NCI 0
Total 3,950,000
FV of net assets 3,600,000
Goodwill 350,000

2 Investment in Beta Co. 3,950,000

Cash 3,950,000

Business combination expenses 80,000

Cash 80,000

3 Cash 1,300,000
Accounts Receivable 450,000
Inventory 700,000
Equipment 1,300,000
Patents 50,000
Goodwill 350,000
Cash 3,950,000
Accounts Payable 200,000
 Business combination expenses 80,000
Cash 80,000

Problem 22
Cash 17,450,000
Contingent consideration (468 - 72) 396,000
Total 17,846,000
FV of net assets 16,815,000
Goodwill, 12/31/2022 1,031,000

Cash 17,450,000
Contingent consideration 284,000
Total 17,734,000
FV of net assets (16,815 - 640) 16,175,000
Goodwill, 12/31/2023 1,559,000

Relevant Journal Entries

08/01/2022
Net assets 12,385,000
Goodwill 5,533,000
Contingent consideration 468,000
Cash 17,450,000

12/31/2022
Net assets 4,430,000
Contingent consideration 72,000
Goodwill 4,502,000

03/31/2023
Contingent consideration 112,000
Goodwill 112,000

07/01/2023
Goodwill 640,000
Net assets 640,000

Payment of 1,015,000
Contingent consideration 284,000
Loss 731,000
Cash 1,015,000

Problem 23
Consideration transferred (5M x 60%) 3,000,000
Fair value of previous interest 0
NCI (5M x 40%) 2,000,000
Total 5,000,000
FV of net assets 5,000,000
Goodwill 0
Problem 24
Consideration transferred 0
Fair value of previous interest 0
NCI (3.5M x 100%) 3,500,000
Total 3,500,000
FV of net assets 3,500,000
Goodwill 0

Multiple Choice - Theory

1 A 11
2 C 12
3 B 13
4 A 14
5 B 15
6 D 16
7 D 17
8 B 18
9 B 19
10 C 20

1 B
300,000 shares x 10 3,000,000

2 D
100,000 shares x 36 3,600,000
Contingent consideration 120,000
Total consideration 3,720,000

3 D
Audit fee for SEC Registration of shares 60,000
Printing costs of share certificates 15,000
Chargeable to premium (APIC) 75,000

4 B
Consideration given (90%) 80,000,000
Contingent consideration 20,000,000
NCI (10%) - Proportionate 9,950,000
Total 109,950,000
FV of net assets 99,500,000
Goodwill 10,450,000

5 D
see no. 4 9,950,000

6 A
Consideration given (90%) 80,000,000
 Contingent consideration 20,000,000
NCI (10%) - fair value 11,111,111
Total 111,111,111
FV of net assets 99,500,000
Goodwill 11,611,111

7 D
Consideration given (80%) 600,000
NCI (20%) - FV 150,000
Total 750,000
FV of net assets 875,000
Gain on bargain purchase (125,000)

8 C
Shares acquired: (600,000 / 120) 5,000
Divided by shares outstanding (625,000 / 100) 6,250
Interest acquired 80%

9 D
see no. 7 150,000

10 B
Consideration given (45,000 sh x 40) 1,800,000 squeezed
FV of net assets 1,600,000
Goodwill 200,000
* Red will issue 45,000 shares

11 A
Consideration given 310,000
FV of net assets 360,000
Gain on bargain purchase (50,000)

12 C
Consideration given (80%) 1,200,000
NCI (20%) - FV 300,000
Total 1,500,000
FV of net assets * 1,450,000
Goodwill 50,000
*3,300,000 - 1,700,000 - 150,000

13 B
Finder;s fee 40,000
Legal fees 13,000
Total expenses (PnL) 53,000

14 D
Audit fee for stock issuance 10,000
Stock registration fee 5,000
Cost of certificate 4,000
 Share issue costs (chargeable to premium) 19,000

15 C
Acquisition of 70% interest in Sun-silk
Consideration given 1,420,000
NCI @ Proportionate 360,000
Total 1,780,000
FV of net assets 1,200,000
Goodwill 580,000 presented in consolidated balance sheet

Acquisition of 65% interest in Dove

Consideration given 300,000
NCI @ Proportionate 224,000
Total 524,000
FV of net assets 640,000
Gain on bargain purchase (116,000) presented in consolidated income statement

16 B
Consideration given (3.6M + 1.2M) 4,800,000
NCI @ Proportionate 1,280,000
Total 6,080,000
FV of net assets 6,400,000
Gain on bargain purchase (320,000)

Expense - legal fees 140,000

Share issue costs 200,000

17 A
Consideration given 90,000
NCI 35,100
Total 125,100
FV of net assets 117,000 squeezed
Goodwill 8,100

FV of net assets 117,000

Undervalued PPE 7,000
BV of net assets 110,000

BV of interest acquired (110,000 x 70%) 77,000

18 C
FV of net assets 117,000
Undervalued PPE 7,000
BV of net assets 110,000

19 D
Consideration transffered 32,000,000
Final value of net assets* 28,000,000
Goodwill on combination 4,000,000
 *measurement period is up to April 30, 2023 only

20 A
Legal fees 174,700
Broker's fee 135,000
Accountant's fee for pre-audit 161,000
Other direct costs 90,400
Gen and allocated expenses 115,300
Listing fees 172,000
Increase in value of contingent liability 89,000
Total amount charged to PnL 937,400

21 C
NCI @ FV NCI @ Prop.
Consideration transffered 920,000 920,000
NCI 280,000 220,000 squeezed
Total 1,200,000 1,140,000
FV of net assets 1,000,000 1,000,000
Goodwill 200,000 140,000

Non-controlling interest (220K / 1M) 22%

Interest acquired 78%

22 C
Consideration transffered 150,000,000
NCI 42,000,000
Total 192,000,000
FV of net assets 200,000,000
Gain on bargain purchase (8,000,000)

23 A
Consideration transffered 150,000,000
NCI 40,000,000
Total 190,000,000
FV of net assets 200,000,000
Gain on bargain purchase (10,000,000)

24 B measurement period cannot exceed 1 year

25 B
Consideration transffered 517,000
FV of net assets 424,000 squeezed
Goodwill 93,000

Book value of asset 624,000

Book value of liability (356,000)
RnD without value (40,000)
Patents not recognized 120,000
Total 348,000
 FV of net assets 424,000
Increase in value of PPE 76,000
Book value of PPE 341,000
Fair value of PPE 417,000

26 A
Consideration transffered 4,400,000
Contingent consideration 80,000
Total 4,480,000
FV of net assets 4,000,000
Goodwill 480,000

27 A
Liability for contingent consideration 80,000
Loss on increase in value of contingency 120,000
Cash 200,000

28 B
Fair value of previous interest (35%) 308,000
Consideration for second purchase (40%) 352,000
NCI 220,000
Total 880,000
FV of net assets 800,000
Goodwill 80,000

29 C
NCI @ FV NCI @ Prop.
Consideration transffered 300,000 300,000
NCI 72,500 70,000
Total 372,500 370,000
FV of net assets 350,000 350,000
Goodwill 22,500 20,000

Attibutable to both parent and NCI 22,500

Attibutable to the parent 20,000
Attibutable to the NCI 2,500

30 B
Consideration transffered 3,971,800
FV of net assets 2,374,000
Goodwill 1,597,800

Asset's BV of acquirer before combination 8,900,000

Asset's FV of acquiree before combination 2,944,000
Cash paid to acquiree (850,000)
Cash paid to cost related to combination (60,600)
Goodwill on combination 1,597,800
Combined assets 12,531,200
31 A
Equity of acquirer before combination 7,900,000
FV of shares issued 3,110,000
Cash paid to cost related to combination (60,600)
Combined equity 10,949,400

32 C
Consideration transffered 3,168,000
FV of net assets 3,068,000
Goodwill 100,000

Asset's BV of acquirer before combination 7,942,000

Asset's FV of acquiree before combination 3,239,600
Cash paid to acquiree (3,168,000)
Goodwill on combination 100,000
Combined assets 8,113,600

33 B
Consideration transffered 14,400,000
FV of net assets 15,000,000
Gain on bargain purchase (600,000)

Equity of acquirer before combination 23,000,000

FV of shares issued 14,400,000
Expenses paid (50,000)
Share issue costs (100,000)
Gain on bargain purchase 600,000
Combined equity 37,850,000

34 A
Fair value of share issued 2,500,000
Cash paid 2,000,000
PV of future cash payment 1,732,553
Fair value of non-cash assets issued 240,000
Total consideration 6,472,553
FV of net assets 6,000,000
Goodwill 472,553

35 E
Gain on remeasurement of non-cash assets 40,000
Legal and accounting fees (30,000)
Impact in the PnL 10,000

36 C
Common stock - combined 160000
Common - Acquirer Gabriel 100,000
Common stock issued 60000
Divided by: Par value of common stock P2
Number of Gabriel shares to acquire Miguel 30,000
37 D
Paid-in capital books of Gabriel (P100,000 + P65,000) 165000
Paid-in capital in the combined balance sheet
(PI 60,000 + P245,000) 405,000
Paid-in capital from the shares issued to acquire
Miguel 240,000
Divided by: No. of shares issued 30,000
Fair value per share when stock was issued P8

38 C
Net identifiable assets of Gabriel before acquisition:
(P65,000 + P72,000 + P33,000 + P400,000 - P50,000
- P250,000) P270,000
Net identifiable assets in the combined balance sheet:
(P90,000 + P94,000 + P88,000 + P650,000 - P75,000
- P350,000) 497,000
Fair value of the net identifiable assets held by Miguel
at the date of acquisition P227,000

39 B
Consideration transferred (30,000 shares x P8) P240,000
Less: Fair value of net identifiable assets acquired 227,000
Goodwill P13,000

40 D
Retained earnings:
Acquirer- Gabriel (at book value) P105,000
It should be noted that, there was no bargain purchase
gain and acquisition-related costs which may affect
retained earnings on the acquisition date.)

41 B
Consideration transffered (700,000 sh x 13) 9,100,000
NCI (700,000 x 11.5) / 70% x 30% 3,450,000
Total 12,550,000
FV of net assets 10,000,000
Goodwill 2,550,000

42 A
Consideration transffered (700,000 sh x 13) 9,100,000
NCI (10M x 30%) 3,000,000
Total 12,100,000
FV of net assets 10,000,000
Goodwill 2,100,000

43 B

44 C
45 B
Co. A
Estimated annual earnings 50,000
Normal return (300,000 x 10%) 30,000
Excess 20,000
Capitalization rate 20%
Goodwill 100,000

Co. B
Estimated annual earnings 80,000
Normal return (400,000 x 10%) 40,000
Excess 40,000
Capitalization rate 20%
Goodwill 200,000

Net asset contribution 400,000

Goodwill 200,000
Total 600,000
ple Choice - Theory
A 21 A
B 22 D
A 23 C
A 24 B
C 25 D
A 26 C
B 27 B
D 28 D
D 29 D
B 30 A
nsolidated balance sheet

nsolidated income statement