On January 1, 2019. P Corporation purchased 75% of the common stock of S Company.

Separate balance
sheet data for the companies at the combination date are given below:
P S
Corporation Company
Cash P9,600 P82,400
Accounts receivable 57,600 10,400
Inventory 52,800 15,200
Land 31,200 12,800
Plant assets 280,000 120,000
Accumulated (96,000) (24,000)
depreciation
Investment in Ucky 156,800 ________
Total assets P492,000 P216,800
Accounts payable P82,400 P56,800
Capital stock 320,000 120,000
Retained earnings 89,600 40,000
Total equities P492,000 P216,800

At the date of combination the book values of S Company’s net assets was equal to the fair value of the net
assets except for S Company’s inventory which has a fair value of P24,000. Indicate in each of the questions
what the consolidated balance would be for the requested account, assuming the amount assigned to NCI is
the proportionate share in the fair value of net assets.

1. What amount of inventory will be reported

a. P52,800 c. P74,600
b. P68,000 d. P 76,800

2. What is the amount of the non-controlling interest?

a. P 40,000 c. P 52,267
b. P 42,200 d. P 120,000

What date should be used as the acquisition date for a business combination?
a. The date when the acquirer signs the contract to purchase the business
b. The date when the acquirer obtains control of the acquiree
c. The date when all the contingencies related to the transaction are resolved
d. The date when the acquirer purchased more than 20% of the stock of the acquiree

3. Should the following costs be included in the consideration transferred in a business combination under
PFRS 3?
I) Costs of maintaining an acquisition department
II) Fees paid to accounts to effect the combination
I II
a. Yes Yes
b. No Yes
c. Yes No
d. No No

4. Working paper eliminations are entered in

a. Both the parent company’s and the subsidiary’s accounting records
b. The parent company’s accounting records only
c. Neither the parent company’s nor the subsidiary’s accounting records
d. The subsidiary’s accounting records only

On January 1, 2018, BLACKWATER CORPORATION purchased 75% of the ordinary shares of HIGH TIDE
ENTERPRISES. Separate balance sheet for the two companies at the combination date are given below:
BLACKWATER HIGH TIDE
Current assets P 96,000 P 86,400
Land 24,960 10,240
Plant assets 224,000 96,000
Accumulated depreciation ( 76,800)
(19,200)
Inv. in High Tide Ent. 125,440 _________
Totals P 393,600 P 173,440

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EXCEL PROFESSIONAL SERVICES, INC.

Accounts payable P 65,920 P 45,440

Ordinary shares 256,000 96,000
Retained earnings 71,680 32,000
Totals P 393,600 P 173,440

At the date of combination, the net assets of HIGH TIDE are fairly valued, except for its inventory which is
understated by P7,040. The amount of non-controlling interests assigned at the said date is their
proportionate share on the fair value of identifiable net assets
5. Determine the amount of goodwill to be recognized in the consolidated balance sheet at January 1, 2018.
a. P32,214 c. P33,654
b. P24,160 d. P36,966

Separate balance sheets for P Company and S Company at December 31, 2019 are as follows:
P COMPANY S COMPANY
Cash P 150,000 20,000
Other current assets 150,000 80,000
Land 300,000 50,000
Buildings 400,000 150,000
Current liabilities 200,000 50,000
Common stock, P 10 par 600,000 100,000
Additional paid-in capital 60,000 75,000
Retained earnings 140,000 75,000
P Company issued 20,000 shares of its own common stock with a market value of P250,000 on January 1,
2020 in exchange for 80% of S Company’s outstanding stock. All of the excess differential is attributable
25% to land and the balance to the buildings . The following out of pocket costs were paid by P Company
Finder’s fees 25,000
Fees paid to company accountants 5,000
Cost to register and issue stocks 30,000
Cost of printing the stock certificates 25,000
Legal fees paid 5,000
Direct acquisition cost 20,000
Indirect cost 10,000

6. Total amount of land on the consolidated balance sheet

a. P 300,000 c. P 375,000
b. P 350,000 d. P 365,626

7. Total amount of buildings on the consolidated balance sheet

a. P 550,000 c. P 596,875
b. P 400,000 d. P 592, 350

8. Total assets on the consolidated balance sheet

a. P 1,362,000 c. P 1, 362,500
b. P 1,000,000 d. P 1,242,500

9. Total common stock on the consolidated balance sheet

a. P 800,000 c. P 600,000
b. P 850,000 d. P 900,000

10. Total APIC on the consolidated balance sheet

a. P 60,000 c. P 135,000
b. P 110,000 d. P 80,000

11. Total retained earnings on the consolidated balance sheet

a. P 75,000 c. P 20,000
b. P 70,000 d. P 140,000
12. Non-controlling interest as of January 1, 2020
a. P 62,500 c. P 50,000
b. P 60,000 d. P 55,000

On January 1, 2020, West Corporation purchased 80% of the common stocks of Fast Company. Separate
balance sheets for the companies at acquisition date are as follows:
West Corp Fast Co. FMV
Cash P 12,000 P 119,000
Accounts receivable 72,000 13,000
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Inventory 66,000 19,000 29,000

Plant assets, net 230,000 120,000 140,000 (remaining life –
5 years)
Investment in Fast 196,000 _________
Total assets P 615,000 P 271,000
Accounts payable P103,000 P 71,000
Capital stock 400,000 150,000
Retained earnings 112,000 50,000
Total equities P 615,000 P 271,000
13. Goodwill (income) to be recorded by West Corp.
a. P 45,000 c. P 15,000
b. (P 26,000) d. (P 34,000)

14. Total assets on the consolidated balance sheet

a. P 735,000 c. P 720,000
b. P 931,000 d. P 705,000

15. Non-controlling interest in net assets as of January, 2020

a. P 39,200 c. P 46,000
b. P 40,000 d. P 49,000

On January 1, 2016, Multiple Company, an SME, acquired Unilateral Company, another SME, by issuing
600,000 of its own P10 par value ordinary shares. Subsequently, Unilateral was liquidated and its net assets
and liabilities merged into Multiple Company. Multiple’s stock was selling at P50 per share on January 1,
2016. The amount of goodwill recorded by Multiple in connection with the combination was P6,120,000.
Multiple incurred P300,000 of professional fees associated with the combination and P30,000 of indirect
costs.
16. Determine (1) the fair value of Unilateral’s net assets and (2) amount of increase in Multiple’s
stockholders’ equity at the date of acquisition.
a. (1) P23,880,000 and (2) P29,670,000
b. (1) P24,180,000 and (2) P29,670,000
c. (1) P23,880,000 and (2) P29,970,000
d. (1) P24,180,000 and (2) P 29,970,000

17. Under the acquisition method, the retained earnings of the acquirer after the combination is equal to
a. The sum of the retained earnings of the acquire and acquirer
b. The retained earnings of the acquirer plus any income from acquisition
c. The retained earnings of the acquirer only
d. The retained earnings of the acquirer less any amortization of goodwill

On June 1, 2019, Portland Company acquires 100% of the stock of Seattle Company. On this date Portland
has Retained Earnings of P100,000 and Seattle has Retained Earnings of P50,000. On December 31, 2019,
Portland has Retained Earnings of P120,000 and Seattle Company has Retained Earnings of P60,000.
18.The amount of Retained Earnings that should appear in the December 31, 2019 consolidated balance
sheet is:
a. P180,000 c. P150,000
b. P130,000 d. P120,000

The balance sheet of Piedmont Enterprises and Skelton Company at December 31, 2018 are summarized as
follows:
Piedmont Skelton
Assets P5,000,000 P 2,000,000
Liabilities P1,500,000 P 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, Skelton’s assets are understated while its liabilities are fairly valued.

On January 1, 2019, Piedmont purchased 80% of Skelton Company’s outstanding shares for P2,000,000
when the fair value of Skelton’s net assets was P2,200,000. Piedmont issued 10,000 previously unissued
shares in consideration of the acquisition. Piedmont is to assign an amount to the non-controlling interests at
the date of acquisition based on the total fair value of Skelton’s outstanding shares.
19. How much is the consolidated assets at the date of acquisition?
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EXCEL PROFESSIONAL SERVICES, INC.

a. P9,000,000 c. P8,000,000
b. P9,700,000 d. P 8,700,000

20. How much is the consolidated liability at the date of acquisition?

a. P2,000,000 c. P1,800,000
b. P1,500,000 d. P 500,000

21. How much is the stockholders’ equity in the consolidated balance at January 1, 2019?
a. P7,000,000 c. P6,000,000
b. P5,500,000 d. P6,700,000

22. Assume the amount assigned to the non-controlling interest at the date of acquisition is based on the
total fair value of identifiable net assets at that date, calculate the amount of goodwill recognized at
January 1, 2019.
a. P300,000 c. P 20,000
b. P280,000 d. P240,000

Salazar Corporation issued 100,000 shares of P28.50 par ordinary shares for all the outstanding shares of
Pine Enterprises on August 5, 2019. It also paid cash of P30,000 at the acquisition date and transferred
used equipment with a carrying value of P50,000 and a current value of 70% thereof. Papaya’s ordinary
stock was selling at P30 when the business combination was consummated. Pine Enterprises was to be
liquidated.
Out of pocket costs for the acquisition follows:
Finder’s fee P 50,000
Accountants’ fee (advisory) 10,000
Legal fees (advisory) 20,000
Indirect acquisition costs 5,000
SEC registration costs and fees 12,000

23. If Salazar Corporation is a non-SME, the acquisition cost of the combination will be:
a. P3,080,000 c. P3,065,000
b. P3,145,000 d. P3,162,000

24. If Salazar Corporation is an SME, the acquisition cost of the combination will be:
a. P3,080,000 c. P3,065,000
b. P3,145,000 d. P3,162,000

The net assets of Manila Company were acquired by Quezon Company for a total price of P18,000,000,
paying cash of P8,000,000 and issuing 40,000 shares of its stocks quoted at P250 per share at the time of
the acquisition. Quezon’s stocks has a par value of P100 each. The balance sheet of Manila Company just
before the merger follows:

Current assets P 5,000,000 Current liabilities P1,000,000

Plant and equipment 6,250,000 Long term debt 1,500,000
Share Capital , P50 par 2,500,000
Share premium 1,750,000
Retained earnings 4,500,000
Total P11,250,000 Total P11,250,000

25. How should the stocks of Quezon be distributed among the stockholders of Manila Company?
a. One share of Quezon Company stock per share of Manila Company stock.
b. 0.80 share of Quezon Company stock per share of Manila Company stock
c. 0.50 share of Quezon Company stock per share of Manila Company stock
d. 0.25 share of Quezon Company stock per share of Manila Company stock.

BAHAY-PARE CORPORATION purchases all the outstanding shares of SINAG-TALA COMPANY on January 2,
2015 for P385,000 cash. On this date the stockholders equity of SINAG-TALA is as follows:
Share capital, P10 par P175,000
Paid-in capital in excess of par 87,500
Retained earnings 175,000

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Any excess of the fair value of net assets over the fair value of the investment is attributable to SINAG-
TALA’s building which is currently overstated in its books. All other net asset items of the acquired company
are fairly valued at the acquisition date. The building has an estimated life of 10 years from January 2, 2015
without salvage value.
The condensed trial balances of the affiliated companies on December 31, 2015 appear as follows:
BAHAY-PARE SINAG-TALA
Current assets P 420,000 P 302,750
Land 210,000 210,000
Building (net) 1,050,000 283,500
Investment in SINAG-TALA 385,000 -
Current liabilities (708,750) (367,500)
Ordinary shares, P3 par (525,000) -
Share capital, P10 par - (175,000)
Paid-in capital in excess of par (315,000) ( 87,500)
Retained earnings, Jan. 2, 2015 (446,250) (175,000)
Sales (367,500) ( 70,000)
Cost of goods sold 210,000 61,250
Operating expenses 78,750 17,500
Dividends declared 8,750 -
Totals -- --

26. Compute the consolidated net income for 2015.

a. P75,520 c. P72,550
b. P70,525 d. P75,250

27. Compute the consolidated Retained Earnings at December 31, 2015.

a. P517,250 c. P515,270
b. P525,170 d. P512,750

On January 1, 2015, Petron Enterprises purchased 24,000 outstanding shares of Shell Corporation in the
open market for P756,000. The trial balances of PETRON and SHELL as of January 1 and December 31, 2015
are presented below:

PETRON ENTERPRISES SHELL CORPORATION

January 1 Dec. 31 January 1 Dec. 31
Cash P 109,000 P 153,600 P 15,000 P 48,000
Accounts receivable 300,000 240,000 35,000 70,000
Inventories 140,000 150,000 40,000 80,000
Land 80,000 170,000 170,000
Buildings 200,000 190,000
Equipment 250,000 349,000 450,000 405,000
Investment in Shell Co. 756,000 756,000 -- --
TOTAL P1,555,000 P1,728,600 P 910,000 P 963,000
Accounts payable P 175,000 P 150,600 210,000 125,000
Share capital, Petron (P50
par) 200,000 200,000
Share capital, Shell (P10
par) 300,000 300,000
Share premium 400,000 400,000
Retained earnings 780,000 978,000 400,000 538,000
P1,555,000 P1,728,600 P 910,000 P 963,000

At the date of acquisition the following assets of SHELL COMPANY had book values that were different from
their respective fair values:
Book Value Fair Value
Inventories P 40,000 P 70,000
Land 170,000 220,000
Building, net 200,000 270,000
Equipment, net 450,000 510,000

All other assets and liabilities had book values approximately equal to their respective fair values. On January
1, 2015, the building had a remaining useful life of 20 years and that of the equipment, 10 years. FIFO
inventory costing is used. GOODWILL was IMPAIRED by P5,000 in 2015.

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EXCEL PROFESSIONAL SERVICES, INC.

The following are the combined statements of income and retained earnings for the affiliated companies for
the year ended December 31, 2015.
PETRON SHELL
Sales P 1,200,000 P 700,000
Dividend income 48,000 -
Cost of sales 500,000 250,000
Expenses 400,000 252,000
Net income P 348,000 P 198,000
Retained earnings, January 1 780,000 P 400,000
Dividends paid 150,000 60,000
Retained earnings, December 31 P 978,000 P 538,000

28. How much total depreciable assets will be reported in the consolidated balance sheet at January 1,
2015?
a. P1,030,000 c. P909,000
b. P900,900 d. P900,090

29. How much equity will be attributable to (1) owners of PETRON Enterprises and (2) the non-controlling
interest of SHELL Corporation in the consolidated balance sheet at January 1, 2015?
a. (1) P1,830,000 and (2) P198,000
b. (1) P1,380,000 and (2) P189,000
c. (1) P1,830,000 and (2) P189,000
d. (1) P1,308,000 and (2) P198,000

30. How much is the goodwill or (negative goodwill/IFA) upon the acquisition of SHELL COMPANY by
PETRON CORPORATION?
a. P (53,000) c. P (35,000)
b. P 35,000 d. P P30,500

31. How much will be the amount of inventory that will be recognized in the consolidated balance sheet at
December 31, 2015?
a. P 260,000 c. P230,000
b. P 320,000 d. P210,000

32. Calculate the consolidated net income for the year 2015.
a. P 535,400 c. P 543,500
b. P 453,500 d. P 455,300

33. Calculate the consolidated net income in 2015 attributable to the shareholders of PETRON
CORPORATION.
a. P 422,800 c. P 428,200
b. P 482,200 d. P 420,280

34. How much is the general ledger balance of goodwill on December 31, 2015 after impairment?
a. P 35,000 c. P 53,000
b. P 30,000 d. P 0

35. How much will be the equity of the non-controlling-interest in the consolidated balance sheet at
December 31, 2015?
a. P 270,700 c. P207,770
b. P 277,000 d. P207,700

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