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CHAPTER 14
MULTIPLE CHOICES - COMPUTATIONAL
14-1:
d
Price paid (8,000 shares x P30)
Contingent consideration
Acquisition cost
14-2:
P240,000
5,000
P245,000
b
Purchase price
Less: Fair value of net assets acquired
Goodwill
14-3:
P250,000
180,000
P70,000
c
Purchase price (100,000 shares x P36)
Contingent consideration
Total costs
14-4:
14-5:
d
Price paid (600,000 shares x P50)
Less: goodwill recorded
Fair value of net assets acquired
P30,000,000
6,120,000
P23,880,000
P 6,000,000
23,970,000
P29,970,000
a
Price paid
Less: Fair value of net assets acquired
Current assets
Plant assets
Liabilities
Income from acquisition
APIC: [(P2,550,000 P1,200,000) - P15,000]
14-6:
P3,600,000
120,000
P3,720,000
P2,550,000
P1,100,000
2,200,000
( 300,000)
3,000,000
P( 450,000)
P1,335,000
37
38
14-7:
d
Abel net income, January to December (P80,000 + P1,320,000) P1,400,000
Cain net income, April to December
400,000
Total net income
P1,800,000
14-8:
a
Price paid
Less: Fair value of net assets acquired
Cash
Inventory
Property, plant and equipment
Liabilities
Income from acquisition
14.9
P 800,000
P 160,000
380,000
1,120,000
( 360,000)
1,300,000
P (500,000)
a
Price paid
Less: Fair value of net assets acquired (P600,000 P188,000)
Goodwill
Avons assets
Bells assets at fair value
Total assets
P 700,000
412,000
P 288,000
2,000,000
600,000
P2,888,000
14-10: c
Debit to expenses:
Brokers fee
Pre-acquisition audit fee
General administrative costs
Legal fees for business combination
Other acquisition costs
Total
P 50,000
40,000
15,000
32,000
6,000
P 143,000
Debit to APIC
Audit fee for SEC registration of stock issue
SEC registration fee for stock issue
Total
P 46,000
5,000
P 51,000
38
39
14-11: d
Consideration given:
Cash
Stocks issued at fair value
Total
Less: fair value of net assets acquired:
Cash
Inventories
Other current assets
Plant assets (net)
Current liabilities
Other liabilities
Goodwill
P270,000
330,000
P600,000
P40,000
100,000
20,000
180,000
(30,000)
(40,000)
270,000
P330,000
P 760,000
(340,000)
( 30,000)
P 390,000
340,000
330,000
P1,060,000
14-12: d
Price paid
Less: Fair value net assets acquired
Goodwill
P1,400,000
1,350,000
P 50,000
14-13: a
Price paid
Less: Fair value of net identifiable assets acquired:
Current assets
P 80,000
Non-current assets
120,000
Liabilities
( 20,000)
Income from acquisition
P160,000
P120,000
180,000
P(20,000)
14-14: c
Price paid
Less: Fair value of identifiable assets acquired:
Cash
P 60,000
Merchandise inventory
142,500
Plant assets (net)
420,000
Liabilities
(135,000)
Goodwill
P600,000
487,500
P112,500
39
40
14-15: b
Price paid
Less: Fair value of identifiable assets acquired
Goodwill
MMs net assets at book value
PPs net assets at fair value
Total assets after combination
P1,000,000
800,000
P 200,000
1,200,000
800,000
P2,200,000
14-16: c, Under the acquisition method assets are recorded at their fair values (P225.000)
14-17: d
Capital stock issued at par (10,000 shares x P10)
APIC (10,000 shares x P40)
Total
P100,000
400,000
P500,000
P 100,000
1,600,000
1,500,000
37,500 shares
14-20: d
Goodwill
Fair value of net assets acquired
Price paid
P 200,000
1,600,000
P1,800,000
45,000 shares
14-21: c
Total assets of Pablo before acquisition at book value
Total assets acquired from Siso at fair value (100,000 +440,000)
Total assets
Less: cash paid (15,000 + 25,000)
Total assets after cash payment
Goodwill to be recognized (Sched 1)
Total assets after combination
P 700,000
540,000
1,240,000
40,000
1,200,000
195,000
1,395,000
675,000
480,000
195,000
40
41
14-22: a
Capital stock issued at par (P500,000 + P300,000)
APIC (50,000 + 300,000) 15,000
Retained earnings (P100,000 25,000)
Stockholders equity after acquisition
P 800,000
335,000
75,000
1,210,000
14-23: a
B Company
P4,400,000
4,150,000
P 250,000
Consideration given
Less: fair value of net assets acquired
Goodwill
C Company
P638,000
370,000
P268,000
518,000
14-24: a
A Company
B Company
C Company
Cash paid for acquisition costs (P20,000 + P10,000)
Goodwill (see 14-23)
Total assets after combination
5,250,000
6,800,000
900,000
(30,000)
518,000
13,438,000
14-25: a
Stockholders equity before acquisition
Capital stock issued at par (229,000 shares x P10)
Additional paid-in-capital [(229,000 x 12) 10,000]
Other acquisition cost (reduction from retained earnings)
Stockholders equity after acquisition
14-26: 1. a
Equipment:
P180,000/5 yrs. =
Building:
P550,000/20 yrs. =
Total depreciation
2. b
Price paid
Less fair value of net assets acquired:
Current assets
Land
Equipment
Building
Current liabilities
Goodwill
14-27: b
Price paid
Final fair value of net assets
Goodwill
P1,300,000
2,290,000
2,738,000
(20,000)
6,308,000
P36,000
27,500
P63,500
P900,000
P100,000
50,000
180,000
550,000
(150,000)
730,000
P170,000
P32 M
28 M
P 4 M
41
42
PROBLEMS
Problem 14-1
1.
120,000
140,000
300,000
50,000
10,000
500,000
5,000
5,000
P500,000
510,000
P( 10,000)
500,000
50,000
120,000
100,000
280,000
50,000
200,000
300,000
500,000
42
43
Problem 14-2
(1) To record the acquisition of net assets:
Cash
Inventory
Building and equipment net
Patent
Accounts payable
Cash
Income from acquisition
50,000
150,000
300,000
200,000
30,000
565,000
105,000
P565,000
670,000
P(105,000)
5,000
5,000
Problem 14-3
(1) To record acquisition of net assets:
Cash and receivables
Inventory
Building and equipment
Goodwill
Accounts payable
Common stock, P10 par value
Additional paid-in capital
50,000
200,000
300,000
40,000
50,000
60,000
480,000
Computation of Goodwill
Price paid (6,000 shares x P90)
Less: fair value of net identifiable assets acquired
Total assets
P550,000
Accounts payable
( 50,000)
Goodwill
(2) To record acquisition-related costs:
Additional paid-in capital
Acquisition expenses
Cash
P540,000
500,000
P 40,000
25,000
15,000
40,000
43
44
Problem 14-4
(1) To record acquisition of net assets:
Cash
Accounts receivable
Inventory
Land
Building and equipment
Bond discount
Goodwill
Accounts payable
Bonds payable
Common stock, P10 par value
Additional paid-in capital
60,000
100,000
115,000
70,000
350,000
20,000
95,000
Computation of Goodwill
Purchase price (12,000 shares x P50)
Less: Fair value of net identifiable assets acquired
Total assets
P695,000
Total liabilities
( 190,000)
Goodwill
10,000
200,000
120,000
480,000
P600,000
505,000
P 95,000
18,000
10,000
28,000
Problem 14-5
1.
2.
3.
4.
5.
6.
7.
P280,000
190,000
185,000
530,000
45,000
340,000
330,000
44
45
Problem 14-6
Combined Statement of Financial Position
After acquisition
Based on P40/share
Based on
P20/share
Cash and receivables
Inventory
Building and equipment
Accumulated depreciation
Goodwill
Total assets
P 350,000
645,000
1,050,000
(200,000)
180,000
P2,025,000
P 350,000
645,000
1,050,000
(200,000)
P1,845,000
Accounts payable
Bonds payable
Common stock P10 Par value
Additional paid-in capital
Retained earnings(including income from acquisition)
Total liabilities and stockholders equity
P 140,000
485,000
450,000
550,000
400,000
P2,025,000
P 140,000
485,000
450,000
250,000
520,000
P1,845,000
P600,000
420,000
P180,000
P300,000
420,000
P(120,000)
Problem 14-7
(a)
ASSETS
Cash and receivables
Inventory
Land
Plant and equipment
Less: Accumulated depreciation
Goodwill
Total assets
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities
Capital stock, P20 par value
Capital in excess of par
Retained earnings
Total liabilities and stockholders equity
P 110,000
142,000
115,000
P540,000
150,000
390,000
13,000
P 770,000
P 100,000
214,000
216,000
240,000
P 770,000
45
46
Computation of Goodwill
Price paid (700 shares x P300)
Less: Fair value of net identifiable assets acquired
(P217,000 P20,000)
Goodwill
(b)
P210,000
197,000
P 13,000
P222,000
328,000
240,000
P790,000
P 236,000
524,000
240,000
P1,000,000
P260,000
860,000
240,000
P1,360,000
Problem 14-8
Revenue
Net income
Earnings per share
(a)
(b)
(c)
(d)
(e)
2010 (a)
P1,400,000
500,000
P 5.00
2011
P1,800,000 (b)
545,000
P 4.84 (d)
2012
P2,100,000
700,000
P 5.60 (e)
46
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Problem 14-9
a.
28,000
258,000
395,000
175,000
100,000
63,000
2,500,000
500,000
100,000
5,000
50,000
109,700
6,500
137,200
500,000
20,000
100,000
1,000,000
180,000
2,340,000
Computation of Goodwill
Price paid (180,000 shares x P14)
Less: fair value of net identifiable assets acquired
Total assets
P4,112,500
Total liabilities
(1,702,200)
Goodwill
(2) To record acquisition-related costs:
Additional paid in capital
Acquisition expenses
Cash
P2,520,000
2,410,300
P 109,700
42,000
135,000
42,000
47
48
b.
Books of HCC:
Common stock
APIC Common
Treasury stock
To record retirement of treasury stock.
P7,500 = P5 x 1,500 shares
P4,500 = P12,000 P7,500
Investment in stock - Peter
Allowance for bad debts
Accumulated depreciation
Current payable
Mortgage payable
Equipment trust notes
Debentures payable
Discount on bonds payable
Cash
Accounts receivable
Inventory
Long-term investments
Land
Rolling stock
Plant and equipment
Patents
Special licenses
Gain on sale of assets and liabilities
To record sale of assets and liabilities to Peter.
7,500
4,500
12,000
2,520,000
6,500
614,000
137,200
500,000
100,000
1,000,000
Common stock
592,500
APIC Common
495,500
APIC Retirement of preferred
22,000
Retained earnings
1,410,000
Investment in stock Peter
To record retirement of HCC stock and distribution of
Peter Industries stock:
P592,500 = P600,000 - P7,500
P495,500 = P500,000 P4,500
P1,410,000 = P220,000 + P1,189,900
40,000
28,000
258,000
381,000
150,000
55,000
130,000
2,425,000
125,000
95,800
1,189,900
2,520,000
48
49
Problem 14-10
a.
P 40,000
360,000
P 400,000
b.
P1,130,000
650,000
P 480,000
( 80,000)
P 400,000
55,000
P 345,000
c.
P 240,000
200,000
P 40,000
P5
8,000 shares
d.
P 400,000
8,000
P
50
Problem 14-11
a.
b.
c.
P 20,000
55,000
110,000
P570,000
(350,000)
220,000
P405,000
P100,000
5,000
P105,000
49
50
d.
e.
f.
P190,000
(120,000)
P 70,000
P5
14,000
P190,000
262,000
P120,000
10,000
P452,000
(130,000)
P322,000
14,000
P 23.00
P322,000
P405,000
(135,000)
(270,000)
P 52,000
30,000
P 82,000
g.
h.
i.
1.
Acquisition expense
Additional paid-in capital
Cash
8,500
6,300
14,800
2.
P82,000
3.
P262,000
(6,300)
P255,700
50
51
Problem 14-12
(1)
(2)
(3)
12,000
100,000
120,000
12,000
100,000
P800,000
8
100,000 shares
Problem 14-13
(1)
(2)
Goodwill
Estimated liability for contingent consideration
(P100,000 x 90%) - P75,000
256,000
660,000
761,000
162,000
440,000
75,000
400,000
60,000
540,000
P 400,000
600,000
75,000
1,075,000
314,000
P 716,000
15,000
15,000
51
52
Problem 14-14
(1)
Price paid
Less: Fair value of net assets acquired
Goodwill recorded
P500,000
400,000
P100,000
(2 a) No, because the carrying amount of the net assets of the business is less
than the recoverable of the unit.
(2 b) Yes.
Estimated recoverable amount of the unit
Carrying value of the unit, excluding goodwill
Implied fair value of the goodwill
Existing recorded goodwill (No. 1)
Estimated impairment loss
Entry:
Impairment loss
Goodwill
P400,000
340,000
60,000
100,000
P(40,000)
40,000
40,000
52