Documentos de Académico
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SUGGESTED ANSWERS
EXERCISES
Exercise 1 - 1
1.
Direct cost
2.
Direct cost
3.
Indirect cost
4.
Cost of issuing and registering securities
5.
Cost of issuing and registering securities
6.
Cost of arranging and registering debt
7.
Cost of arranging and registering debt
8.
Indirect cost
9.
Direct cost
10.
Indirect cost
Expense
Expense
Expense
Reduction in additional paid in capital
Reduction in additional paid in capital
Bond issue cost
Bond issue cost
Expense
Expense
Expense
Exercise 1 - 2
Consideration transferred (10,000 sh x P120)
Fair value of net assets acquired
Goodwill
P1,200,000
450,000
P 750,000
Exercise 1 - 3
1. Consideration transferred
FMV of net assets acquired
Gain on Bargain Purchase/Negative Goodwill
2.
Exercise 1 - 4
1. Assets
Goodwill
Liabilities
Ordinary Share Capital (325,000 x P10)
Paid-In Capital in Excess of Par (325,000 x P5)
Consideration transferred (325,000 x P15)
FMV of net assets acquired (P6,000,000 - P1,675,000)
Goodwill
2.
P 500,000
600,000
P 100,000
Assets
Goodwill
Liabilities
Ordinary Share Capital (475,000 x P5)
Additional Paid-in Capital (475,000 x 7)
Consideration transferred (475,000 x 12)
FMV of net assets acquired (P10,000,000 P4,525,000)
Goodwill
Exercise 1 -5
Requirement 1
6,000,000
550,000
1,675,000
3,250,000
1,625,000
P4,875,000
4,325,000
P 550,000
10,000,000
225,000
4,525,000
2,375,000
3,325,000
P 5,700,000
5,475,000
P
225,000
Accounts Receivable
Inventories
Property. Plant, and Equipment
Goodwill
Cash
Current Liabilities
Consideration transferred
FMV of net assets acquired
Goodwill
Expenses of Business Combination
Cash
Requirement 2
Cash
Current Liabilities
Accounts Receivable
Inventories
Property, Plant, and Equipment
Retained Earnings
Ordinary Share Capital
Retained Earnings
Cash
Exercise 1 6
1. Accounts Receivable
Inventories
Property Plant and Equipment
Goodwill
Cash
Current Liabilities
Estimated Liability for contingent Consideration
page 2
120,000
140,000
300,000
40,000
550,000
50,000
P550,000
510,000
P 40,000
5,000
5,000
550,000
50,000
120,000
100,000
280,000
100,000
200,000
350,000
550,000
120,000
140,000
300,000
60,000
550,000
50,000
20,000
Consideration transferred
Contingent consideration P100,000 x 20%
Total
FMV of net assets acquired
Goodwill
2.
3.
4.
5.
P550,000
20,000
P570,000
510,000
P 60,000
40,000
Goodwill
Estimated Liability for Contingent Consideration
15,000
40,000
15,000
5,000
5,000
70,000
30,000
page 3
Cash
Exercise 1 7
1. Current Assets
Plant Assets
Patent
Current Liabilities
Long term Liabilities
Cash
Ordinary Share Capital 50,000 x 5 par
Additional Paid in Capital 50,000 x P9
Gain on Bargain Purchase
100,000
575,000
1,200,000
50,000
300,000
450,000
300,000
250,000
450,000
75,000
Consideration transferred:
Cash
Ordinary Share Capital 50,000 x P14
Total
FMV of net assets acquired
Gain in Bargain Purchase
Expenses of Business Combination
Additional Paid in Capital
Cash
2.
P 300,000
700,000
P1,000,000
1,075,000
P 75,000
75,000
50,000
125,000
300,000
300,000
Consideration transferred:
Cash
Ordinary Share Capital 50,000 x P14
Total
FMV of net assets acquired
Gain in Bargain Purchase
3.
Current Assets
Plant Assets
Patent
Current Liabilities
Long term Liabilities
Cash
Ordinary Share Capital 50,000 x 5 par
Additional Paid in Capital 50,000 x P9
Paid in Capital for Contingent Consideration
Gain on Bargain Purchase
Consideration transferred:
Cash
Ordinary Share Capital 50,000 x P14
Stock Contingent Consideration
Total
FMV of net assets acquired
Gain in Bargain Purchase
P 300,000
700,000
P1,000,000
1,375,000
P 375,000
575,000
1,200,000
50,000
300,000
450,000
300,000
250,000
450,000
30,000
45,000
P 300,000
700,000
30,000
P1,030,000
1,075,000
P 45,000
4.
page 4
30,000
20,000
25,000
5,000
20,000
Prior to the termination of the contingency, the stock contingency is described through a
footnote.
5.
100,000
100,000
Prior to the termination of the contingency, the stock contingency is described through a
footnote.
Exercise 1- 8
Consideration transferred
Non-controlling interest
P42,500,000 x 20%
P50,000,000 P12,000,000/80% x 20%
Total
Fair market value of net assets acquired
Goodwill
No. 1
P50,000,000
No. 2
P50,000,000
8,500,000
P58,500,000
42,500,000
P16,000,000
9,500,000
P59,500,000
42,500,000
P17,000,000
Exercise 1 9
1. P4,800,000/60% x 20% = P1,600,000
2.
Consideration transferred
Fair value of previously held equity interest
Fair value of non controlling interest
Total
FMV of net assets
Goodwill
4.
P1,600,000
1,200,000
P 400,000
5.
Consideration transferred
P4,800,000/
60%
P8,000,000
x 20%
P1,600,000
P7,700,000
6,900,000
P 800,000
P4,800,000
1,600,000
1,600,000
P8,000,000
7,700,000
P 300,000
page 5
Exercise 1 - 10
1. Assets, other than goodwill
Goodwill
Liabilities
Ordinary Share Capital
Net asset contribution
Goodwill contribution
Average earnings
Normal earnings
Excess earnings
Capitalization rate
Goodwill
Total contribution
Share capital distribution
550,000
196,000
230,000
516,000
Co. A
P 90,000
Co. B
P120,000
Co. C
P110,000
Total
P320,000
P 16,000
10,800
P 5,200
10%
P 52,000
P142,000
14,200 sh
P 20,000
14,400
P 5,600
10%
P 56,000
P176,000
17,600 sh
P 22,000
13,200
P 8,800
10%
P 88,000
P198,000
19,800 sh
196,000
P516,000
51,600 sh
2. Assets
Liabilities
Ordinary Share Capital
Co. A
142,000/516,000 x 32,000 sh
Co. B
176,000/516,000 x 32,000 sh
Co. C
198,000/516,000 x 32,000 sh
550,000
230,000
320,000
8,806 sh
10,915 sh
12,279 sh
Exercise 1 - 11
Total contribution (P50,000 / 10%)
Net asset contribution equal to preference shares issued
Goodwill contribution equal to ordinary shares issued
P500,000
400,000
P100,000
4,000 shares
2,000 shares
= 75 shares
= P225,000
= P150,000
= P 25,000
PROBLEMS
Problem 1 - 1
1.
Cash
Accounts Receivable
Inventory
Goodwill
Land
Long-term Investment in Marketable Securities
Equipment
Accounts Payable
Ordinary Share Capital (6,000 @ 50)
APIC
100,000
150,000
140,000
35,000
120,000
140,000
180,000
115,000
300,000
450,000
Consideration transferred
FMV of net assets acquired
Goodwill
2.
63,000
140,000
750,000
63,000
140,000
Cash
Accounts Receivable
Inventory
Land
Long term Investment
Equipment
Goodwill
Accounts Payable
Paid in Capital from Contingent Consideration
Ordinary Share Capital (6,000 @ 50)
APIC
Consideration transferred 6,000 @ 125
Stock Contingent Consideration
Total
FMV of net assets acquired
Goodwill
Additional Paid in Capital
Expenses of Business Combination
Cash
3.
P750,000
715,000
P 35,000
Problem 1 - 2
1.
Land
Goodwill
2.
page 6
203,000
300,000
450,000
203,000
30,000
30,000
100,000
150,000
140,000
120,000
140,000
180,000
135,000
115,000
100,000
300,000
450,000
P750,000
100,000
P850,000
715,000
P135,000
63,000
140,000
203,000
100,000
100,000
50,000
50,000
100,000
Prior to the termination of the contingency, the stock contingency is described through a footnote.
4.
page 7
75,000
75,000
Prior to the termination of the contingency, the stock contingency is described through a footnote.
Problem 1 - 3
1. Investment in Share Capital (75,000 @ P14)
Ordinary Share Capital (75,000 @ P10)
Ordinary Share Premium(75,000 x P4)
2. Additional Paid-in Capital (40,000 @ P4) =
Retained Earnings
1,050,000
750,000
300,000
P160,000
zero
Problem 1 - 4
1.
Cash
Accounts Receivable
Inventories
Non Current Marketable Securities
Property Plant and Equipment
Land
Goodwill
Current Liabilities
Long Term Debt
Cash
Estimated Liability for Contingent Consideration
Consideration transferred:
Cash
Contingent Consideration P80,000 x 40%
Total
FMV of net assets acquired
Goodwill
2.
3.
4.
5.
3,000
8,000
20,000
55,000
50,000
28,000
52,000
4,000
20,000
160,000
32,000
P160,000
32,000
P192,000
140,000
P 52,000
Goodwill
Estimated Liability for Contingent Consideration
18,000
Goodwill
Estimated Liability for Contingent Consideration
5,000
Goodwill
Estimated Liability for Contingent Consideration
5,000
18,000
5,000
5,000
60,000
20,000
Problem 1 - 5
1
FMV of net assets of Commander Co. [(P200,000 + P800,000) - P200,000]
MV of share capital of General Co.
80,000
P800,000
P40
page 8
20,000 sh
2:1
800,000
200,000
600,000
Company C
P1,000,000
100,000
Total
P1,600,000
200,000
10%
50%
100%
10,000 sh
2,500 sh
16,000 sh
9,000 sh
P50,000
50,000
80,000
P 80,000
80,000
128,000
Ordinary shares
a.
b.
c.
P 7,778
17,500
28,000
P 6,667
15,000
24,000
P 5,555
12,500
20,000
P 20,000
45,000
72,000
Total
a.
b.
c.
P27,778
37,500
60,000
P16,667
25,000
40,000
P55,555
62,500
100,000
P100,000
125,000
200,000
27.78%
30.00%
30.00%
16.67%
20.00%
20.00%
55.55%
50.00%
50.00%
100%
100%
100%
Plan A
Assets, other than Goodwill
Goodwill
Ordinary Share Capital, P10 par
Net asset contribution
Goodwill contribution
Est. annual earnings
Normal earnings
Excess earnings
Capitalization rate
Goodwill
Total contribution
6,000,000
1,000,000
7,000,000
Co.D
P3,000,000
Co. E
P1,500,000
Co. F
P1,500,000
Total
P6,000,000
P 300,000
240,000
P 60,000
12%
P 500,000
P3,500,000
P 165,000
120,000
P 45,000
12%
P 375,000
P1,875,000
P 135,000
120,000
P 15,000
12%
P 125,000
P1,625,000
1,000,000
P7,000,000
page 9
350,000 sh
187,500 sh
162,500 sh
700,000 sh
Plan B
Assets, other than Goodwill
Goodwill
Preference Share Capital, P10 par
Ordinary Share Capital, P10 par
6,000,000
2,000,000
6,000,000
2,000,000
Co. D
Total contributions
(Earnings/8%)
Net asset contribution
Goodwill contribution
Preference share dist.
equal to NA cont.
Ordinary share dist.
equal to earnings cont.
P4,000,000
3,750,000
P 250,000
Co. E
P2,200,000
2,062,500
P 137,500
Co. F
Total
P1,800,000
1,687,500
P 112,500
P8,000,000
7,500,000
P 500,000
375,000 sh
206,250 sh
168,750 sh
750,000 sh
25,000 sh
13,750 sh
11,250 sh
50,000 sh
Requirement 2
Plan A
Co. D
Co. E
Co. F
350,000/700,000 x P600,000
187,500/700,000 x P600,000
162,500/700,000 x P600,000
P300,000
160,714
139,286
P600,000
Plan B
Preference
P450,000
112,500
Regular dividends at 6%
Balance P120,000 x 7,500/8,000
P120,000 x 500/8,000
Total
P562,500
Dividends per share
P .75
Co. D
Co. E
Preference Share Capital
P281,250.00
P154,687.50
Ordinary Share Capital
18,750.00
10,312.50
Total
P300,000.00
P165,000.00
Ordinary
P 30,000
7,500
P37,500
P .75
Co. F
P126,562.50
8,437.50
P135,000.00
MULTIPLE CHOICE
6. A
11. D
7. A
12. C
8. A
13. A
9. D
14. C
10. C
15. C
1- A.
1.
2.
3.
4.
5.
A
B
C
C
D
1 B
1.
Consideration transferred
Fair market value of net assets acquired
Gain on Bargain Purchase/Negative Goodwill
1C
1.
Consideration transferred
FMV of net assets
(P1,890,000 + P2,900,000 P1,140,000)
Credit to profit and loss
Total
P480,000
112,500
7,500
P600,000
TOTAL
P562,500.00
37,500.00
P600,000.00
16. C
17. A
18. B
19. B
20. C
P80,000
90,000
P10,000
P2,650,000
3,650,000
P 1,000,000
1 D
1.
Consideration transferred
FMV of net assets acquired
(P3,239,600 171,600)
Goodwill
page 10
P3,068,000
3,068,000
Zero
1E
1.
1 F
1.
P1,097,500
1,733,250
850,000
P3,680,750
P2,200,000
1,350,000
P 850,000
1-G
1.
Customers Lists
Research and Development
Operating Lease
Goodwill
1-H
1.
1I
1.
2.
APIC of Co. U
1 J
1- K
1.
1.
P 90,000
220,000
25,000
P335,000
P200,000
15,000
P215,000
1- L
1.
P200 P145 = P55 million. The P160 million fair value is beyond the one
year measurement period.
1- M
1.
1- N
1.
1- O
1.
page 11
1- P
1.
1- Q
1.
1 R.
1.
Average earnings
Normal earnings (P300,000 x 8%)
Excess earnings
Goodwill (P26,000/10%)
P 50,000
24,000
P 26,000
P260,000
2.
Average earnings
Normal earnings (P400,000 x 8%)
Excess earnings
Goodwill (P48,000/10%)
Net asset contribution
Total contribution
P 80,000
32,000
P 48,000
P480,000
400,000
P880,000
1S
1.
1T
1.
Average earnings
Normal earnings (P1,200,000 x 10%)
Excess earnings
Capitalization rate
Goodwill
2.
Consideration transferred
FMV of net assets acquired
(P520,000 + P1,480,000 P800,000)
Goodwill
1U
1.
C
Expected annual earnings
Capitalization rate
Total contribution
Asset contribution equal to
preference shares
Goodwill equal to ord. sh
Par value of ord. shares
Ordinary shares dist.
1V
1 W
1.
2.
1.
B
D
Abner
P 36,000
8%
P450,000
400,000
P 50,000
P10
5,000 sh
P 100,000
50,000
P 150,000
P300,000
120,000
P180,000
25%
P720,000
P1,500,000
1,200,000
P 300,000
Bertha
80,000
8%
P1,000,000
800,000
P 200,000
P10
20,000 sh
800,000
P 400,000
P10
40,000 sh
(P3,800,000 - P2,500,000)/P100
Excess earnings = P481,000 (P1,300,000 x 15%)
Goodwill equal to par value of ordinary share
to be issued = P286,000/20%
Premium on ordinary share = P1,430,000 x 50%
C
Earnings contribution
Frannie
P 30,000
Charlie
96,000
8%
P1,200,000
Giselle
P 30,000
Hazel
P 40,000
13,000 sh
P 286,000
P1,430,000
P 715,000
Total
P 100,000
page 12
Normal
earnings
12,000
(6%)
Excess earnings
P 18,000
Capitalization rate
20%
Goodwill
P 90,000
Asset contribution
200,000
Total contribution
P290,000
Share capital dist.
290/1,200 x 1,000
242 sh
360/1,200 x 1,000
550/1,200 x 1,000
1 X
1.
A
Estimated earnings
Normal
earnings
(6%)
Excess earnings
Capitalization rate
Goodwill
Asset contribution
Total contribution
Share capital dist %
458,750/1,800,000
900,000/1,800,000
431,250/1,800,000
18,000
30,000
P 12,000
20%
P 60,000
300,000
P360,000
P 10,000
20%
P 50,000
500,000
P550,000
60,000
P
40,000
20%
P 200,000
1,000,000
P1,200,000
300 sh
458 sh
1,000 sh
Polar
P 41,250
22,500
Quickie
P 75,000
45,000
Robot
P 33,750
22,500
Total
P 150,000
90,000
P 18,750
20%
P 93,750
375,000
P458,750
P 30,000
20%
P150,000
750,000
P900,000
P 11,250
20%
P 56,250
375,000
P431,250
60,000
20%
P 300,000
1,500,000
P1,800,000
26%
50%
1Y
1.
1Z
1.
24%
P250,000
P50
5,000
.80
P2,000,000
P100
20,000 sh