Professional Documents
Culture Documents
Problem I
1. Consideration transferred : FMV of shares issued by Robin (80,000 sh P28) =
P2,240,000
2. Consideration trasnferred
P2,240,000
Less: Fair value of Hopes net assets (P2,720,000+P200,000P1,200,000) 1,720,000
Goodwill
P 520,000
Problem II
1..
Accounts Receivable
Inventory
Land
Building
Equipment
Patent
Goodwill
Acquisition Expense
Current Liabilities
Long-term Debt
Cash
Consideration trasnsferred : Cash P560,000
Less : Fair value of Wests net assets
(P180,000 + P400,000 + P50,000
+ P60,000 + P P70,000 + P20,000
P70,000 - P160,000)
550,000
Goodwill
P 10,000
2.
Acquisition Expense
Accounts Receivable
Inventory
Land
Building
Equipment
Patent
Current Liabilities
Long-term Debt
Cash
Gain on Acquisition
180,000
400,000
50,000
60,000
70,000
20,000
10,000
20,000
20,000
180,000
400,000
50,000
60,000
70,000
20,000
70,000
160,000
520,000
50,000
70,000
160,000
580,000
231,000
330,000
550,000
1,144,00
0
848,000
33,000
275,000
450,000
45,000
1,500,000
300,000
450,000
50,000
P2,300,000
Problem IV
Current Assets
Plant and Equipment
Goodwill
Liabilities
Cash
1,452,000
P
848,000
960,000
1,440,000
336,000
216,000
2,160,00
0
360,000
Problem V
The amount of the contingency is P500,000 (10,000 shares at P50 per share)
1.
Goodwill
500,000
Paid-in-Capital for Contingent Consideration Issuable
2.
Problem VI
1. January 1, 20x4
Accounts Receivable
Inventory
Land
Buildings
Equipment
Goodwill
Allowance for Uncollectible Accounts
Accounts Payable
Note Payable
Cash
72,000
99,000
162,000
450,000
288,000
54,000
500,000
100,000
400,000
7,000
83,000
180,00
0
720,00
0
135,00
0
135,000
3. January 2, 20x6
Estimated Liability for Contingent Consideration
Gain on Contingent Consideration
135,000
Problem VII
1.
Accounts Receivable
Inventory
Land
Buildings
Goodwill
Allowance for Uncollectible Accounts
Accounts Payable
Note Payable
Cash
240,000
320,000
1,508,000
1,392,000
30,000
Goodwill
Estimated Liability for Contingent Consideration
Consideration transferred
Fair value of net assets acquired
(P3,440,000 P870,000)
Goodwill
2.
135,000
135,000
20,000
270,000
600,000
2,600,000
200,000
200,000
P2,600,000
2,570,000
P 30,000
200,000
200,000
Problem VIII
Current Assets
Long-term Assets (P1,890,000 + P20,000) + (P98,000 + P5,000)
Goodwill *
Liabilities
Long-term Debt
Common Stock (144,000 P5)
Other Contributed Capital (144,000 x P15 - P5))
362,000
2,013,000
395,000
119,000
491,000
720,000
1,440,000
144,000
= P2,160,000
Problem IX
Case A
Consideration transferred
P130,000
120,000
P 10,000
Case B
Consideration transferred
Less: Fair Value of Net Assets
Goodwill
P110,000
90,000
P 20,000
Case C
Consideration transferred
Less: Fair Value of Net Assets
Gain
Goodwill
Case A
P15,000
20,000
(P 5,000)
Assets
Current Assets
P10,000
Liabilities
Long-Lived Assets
P130,000
P20,000
Case B
Case C
20,000
0
Retained
Earnings
(Gain)
30,000
20,000
P30,000
80,000
40,000
20,000
40,000
Problem X
1. Fair Value of Identifiable Net Assets
Book values P500,000 P100,000 =
Write up of Inventory and Equipment:
(P20,000 + P30,000) =
Consideration transferred above which goodwill would result
0
0
5,000
P400,000
50,000
P450,000
2.
Equipment would not be written down, regardless of the purchase price, unless it was
reviewed and determined to be overvalued originally.
3. A gain would be shown if the purchase price was below P450,000.
4. Anything below P450,000 is technically considered a bargain.
5. Goodwill would be P50,000 at a purchase price of P500,000 or (P450,000 + P50,000).
Problem XI
Present value of maturity value, 20 periods @ 6%:
P187,080
Present value of interest annuity, 20 periods @ 6%:
344,098
Total Present value
Par value
Discount on bonds payable
0.3118 x P600,000 =
11.46992 x 30,000 =
531,178
600,000
P68,822
Cash
Accounts Receivable
Inventory
Land
Buildings
Equipment
Bond Discount (P40,000 + P68,822)
Current Liabilities
Bonds Payable (P300,000 + P600,000)
Gain on Acquisition of Stalton (ordinary)
114,000
135,000
310,000
315,000
54,900
39,450
108,822
95,300
900,000
81,872
P886,478
P968,350
(P 81,872)
Problem XII
In accounting for the combination of NT and OTG, the fair value of the acquisition is
allocated to each identifiable asset and liability acquired with any remaining excess
attributed to goodwill.
Consideration transferred (shares issued)
Fair value of net assets acquired:
Cash
Receivables
Trademarks
Record music catalog
In-process R&D
Equipment
Accounts payable
Notes payable
Goodwill
Entry by NT to record combination with OTG:
Cash
Receivables
Trademarks
Record Music Catalog
Capitalized R&D
Equipment
Goodwill
Accounts Payable
Notes Payable
Common Stock (NewTune par value)
Additional Paid-in Capital
(To record merger with OTG at fair value)
Additional Paid-in Capital
P750,000
P29,000
63,000
225,000
180,000
200,000
105,000
(34,000)
(45,000)
29,000
63,000
225,000
180,000
200,000
105,000
27,000
25,000
723,000
P27,000
34,000
45,000
60,000
690,000
Cash
(Stock issue costs incurred)
25,000
64,000
213,000
625,000
1,020,000
200,000
425,000
27,000
P 2,574,000
Problem XIII
Stockholders Equity:
Common Stock, P1 par
Other Contributed Capital
P10,000]
Retained Earnings
Total stockholders Equity
P 144,000
415,000
460,000
695,000
860,000
P 2,574,000
P1,100,000
4,090,000 [P2,800,000 + (100,000 x P13)
600,000
P 5,790,000
Problem XIV
Entry to record the acquisition on Pacificas records:
Cash
Receivables and inventory
PPE
Trademarks
IPRD
Goodwill
Liabilities
Common Stock (50,000 x P5)
Additional Paid-In Capital (50,000 x P15)
Contingent performance obligation
85,000
180,000
600,000
200,000
100,000
77,500
180,000
250,000
750,000
62,500
Cash
15,000
15,000
9,000
9,000
Note: The following amounts will appear in the income statement and statement of retained
earnings after business combination:
PP Inc.
(1,200,000)
890,000
(310,000)
(950,000)
(310,000)
90,000
*(1,170,000)
Revenues
Expenses (P875,000 + P15,000)
Net income
Retained earnings, 1/1
Net income
Dividends paid
Retained earnings, 12/31
* or, P1,185,000 P15,000 = P1,170,000
Problem XV
Acquisition MethodEntry to record acquisition of Sampras
Consideration transferred
Contingent performance obligation
Consideration transferred (fair value)
Fair value of net identifiable assets
Goodwill
P300,000
15,000
315,000
282,000
P33,000
Receivables
Inventory
Buildings
Equipment
Customer list
IPRD
Goodwill
Current liabilities
Long-term liabilities
Contingent performance liability
Cash
80,000
70,000
115,000
25,000
22,000
30,000
33,000
10,000
50,000
15,000
300,000
Acquisition expenses
Cash
10,000
Problem XVI
1.
a. The computation of goodwill is as follows:
Consideration transferred;
Common shares: 30,000 shares x P25
Notes payable
Contingent consideration (cash
contingency):
P120,000 x 30% probability
Total
Less: Fair value of identifiable assets acquired
and
liabilities assumed:
Cash
Receivables net
Inventories
Land
10,000
P
750,000
180,000
36,00
0
P 966,000
24,000
48,000
72,000
240,000
Buildings net
Equipment net
In-process research and development
Accounts payable
Other liabilities
Positive Excess - Goodwill
360,000
300,000
60,000
( 72,000)
( 168,000)
864,000
P
102,000
24,000
48,000
72,000
240,000
360,000
300,000
60,000
102,000
62,000
168,000
180,000
36,000
300,000
450,000
Acquisition-related expenses
Cash
Acquisition related costs direct costs.
78,000
32,400
Acquisition-related expenses
Cash
Acquisition related costs indirect costs.
27,600
78,000
32,400
27,600
c. The balance sheet of Pure Corporation immediately after the acquisition is as follows:
Pure Corporation
Balance Sheet
December 31, 20x4
Assets
Cash
Receivables net
Inventories
Land
Buildings net
162,000
144,000
360,000
348,000
840,000
Equipment net
In-process research and development
Goodwill
732,000
60,000
102,00
0
P2,748,000
Total Assets
Liabilities and Stockholders Equity
Liabilities
Accounts payable
Other liabilities
Notes payable
Estimated liability for contingent
consideration
Total Liabilities
Stockholders Equity
Common stock, P10 par
P 288,000
408,000
180,000
36,000
P 912,000
P
1,020,000
657,600
158,400
P1,836,000
P2,748,000
It should be noted that under PFRS 3, in-process R&D is measured and recorded at fair value as an asset on
the acquisition date. This requirement does not extend to R&D in contexts other than business combinations.
2.
a. Assets that have been provisionally recorded as of the acquisition date are
retrospectively adjusted in value during the measurement period for new information
that clarifies the acquisition-date value. The adjustments affect goodwill since the
measurement period is still within one year (i.e., eight months) from the acquisition
date. Therefore, the goodwill to be reported then on the acquisition should be P78,000
(P102,000 P24,000).
b.
Buildings
Goodwill
24,000
24,000
3.
c.
c.1. The goodwill remains at P126,000, since the change of estimate should be done
only once (last August 31, 20x5).
12,000
12,000
c.3.
c.3.1. The goodwill remains at P126,000, since the change of estimate should be
done only once (last August 31, 20x5).
c.3.2. On December 15, 20x5, the entry would be:
Loss on estimated liability contingent
consideration
Estimated liability for contingent
consideration
30,000
30,000
c.3.3.
c.3.3.1. P126,000.
c.3.3.2. On January 1, 20x7, Sauls average income in 20x5 is P270,000
and 20x6 is P260,000, which means that the target is met, Peter
Corporation will make the following entry:
Estimated liability for contingent consideration
Loss on estimated contingent consideration
Cash
78,000
42,000
120,000
4.
a. The amount of goodwill on acquisition will be recomputed as follows:
Consideration transferred;
Common shares: 30,000 shares x P25
Notes payable
Contingent consideration (cash contingency):
P120,000 x 35% probability x (1/[1 + .04]*)
Total
Less: Fair value of identifiable assets acquired and
liabilities assumed (refer to 1a above)
Goodwill
750,000
180,000
40,385
P 970,385
864,000
P 106,385
Receivables net
Inventories
Land
Buildings net
Equipment net
In-process research and development
Goodwill
Accounts payable
Other liabilities
Notes payable
Estimated Liability for Contingent
Consideration
Common stock (P10 par x 30,000 shares)
Paid-in capital in excess of par
[(P25 P10) x 30,000 shares]
48,000
72,000
240,000
360,000
300,000
60,000
106,386
62,000
168,000
180,000
40,385
300,000
450,000
c.
c.1. Goodwill remains at P106,385.
c.2. The entry for Pure Corporation on December 31, 20x5 to record such occurrence
would be:
Estimated liability for contingent consideration
Gain on estimated contingent consideration
40,385
40,385
Since the contingent event does not happen, the position taken by PFRS 3 is that
the conditions that prevent the target from being met occurred in a subsequent
period and that Peter had the information to measure the liability at the acquisition
date based on circumstances that existed at that time. Thus the adjustment will
flow through income statement in the subsequent period.
d. The entry by Peter Corporation on January 1, 20x7 for the payment of the contingent
consideration would be:
Estimated liability for contingent consideration
Loss on estimated contingent consideration
Cash [(P78,000 + P84,000)/2 P30,000] x 2
36,000
66,000
102,000
5.
P 120,000
6. On January 1, 20x7, the average income amounted to P132,000 (the contingent event
occurs). Thus, the entry record the occurrence of such event to reassign the P750,000
original consideration to 36,000 shares (30,000 original shares issued + 6,000 additional
shares due to contingency) would be:
Paid-in capital in excess of par
Common stock (P10 par x 6,000 shares)
60,000
60,000
7. On January 1, 20x7, the contingent event happens since the fair value per share fall
below P25. Thus, the entry record the occurrence of such event to reassign the P750,000
original consideration to 37,500 shares (30,000 original shares issued + 7,500*
additional shares due to contingency) would be:
Paid-in capital in excess of par
Common stock (P10 par x 7,500 shares)
75,000
75,000
P 750,000
Notes payable
Contingent consideration (stock contingency):
[(P750,000 P510,000) x 40% probability
x (1/[1 + .04]*)
Total
Less: Fair value of identifiable assets acquired and
liabilities assumed (refer to 1a above)
Positive Excess Goodwill
* present value of P1 @ 4% for one period.
180,000
92,308
P1,022,308
864,000
P 158,308
62,000
168,000
180,000
92,308
300,000
450,000
On December 31, 20x5, the contingent event occurs, wherein Peters stock price had
fallen to P20, thus requiring Peter to issue additional shares of stock to the former owners
of Saul Corporation. The entry for Peter Corporation on December 31, 20x5 to record such
occurrence such event to reassign the P750,000 original consideration to 37,500 shares
(30,000 original shares issued + 7,500* additional shares due to contingency) would be:
Paid-in capital for Contingent Consideration
Common stock, P10 par
Paid-in capital in excess of par
92,308
75,000
17,308
P 1,800,000
1,440,000
12,000
240,000
26,400
P3,518,400
P1,440,00
0
900,000
240,000
1.380,000
( 300,000
)
( 120,000)
Accounts receivable
Copyrights
Equipment
Accounts payable
Loan payable
Negative Excess Bargain Purchase Gain
3,540,000
P ( 21,600)
128,000
45,100
44,000
52,500
2,400
144,000
(12,000)
P34,700
39,000
130,000
40,000
46,000
34,700
39,000
130,000
40,000
46,000
132,000
260,000
289,700
29,700
132,000
40,000
88,000
29,700
132,000
1,200
132,000
1,200
2.
Tan LTD
General Ledger
Liquidation
P
34,700 Additional paid in capital
27,600 Retained earnings
100,000 Receivable from Homer Ltd
30,000
46,000
2,000
4,000
2,400
2,500
1,600
68,000
318,800
Accounts Receivable
Inventory
Freehold Land
Buildings
Plant and Equipment
Goodwill
Interest Payable
Liquidation Expenses
Premium on Debentures
Accounts Payable
Shareholders Distribution
Opening Balance
Receivable from Homer Ltd
Liquidators Cash
P
12,000 Liquidation Expenses
132,000 Mortgage and Interest
Debentures and Premium
Accounts Payable
144,000
Shareholders Distribution
P
128,000 Common stock
Liquidation
128,000
Problem XIX
Cash
Accounts Receivable
Inventory
Land
Plant Assets
Discount on Bonds Payable
Goodwill*
Allowance for Uncollectible Accounts
Accounts Payable
Bonds Payable
Deferred Income Tax Liability
Cash
P
26,800
32,000
260,000
318,800
P
2,400
44,000
52,500
45,100
144,000
P
60,000
68,0000
128,000
20,000
112,000
134,000
55,000
463,000
20,000
127,200
10,000
54,000
200,000
67,200
600,000
Consideration transferred
P600,000
Less: Fair value of net assets acquired
(P784,000 P10,000 P54,000 P180,000 - P67,200*)
472,800
Goodwill
P127,200
P148,000
( 20,000)
P168,000
P 67,200
680,000
P120,000
17
.
P23,000
1
8.
P1,109,000
P 844,000
(198,000)
P 646,000
405,000
P1,051,000
58,000
P1,109,000
19
.
P701,500
20
.
P257,500
21 a
P407,500
= The amount reported by TT Corporation
.
22. b [(P47 x 12,000 shares) (P70,000 + P210,000 + P240,000 + P270,000 + P90,000
P420,000)
= P104,000
23. d
APIC: P20,000 + [(P42 P5) x12,000 = P464,000
Retained earnings: P160,000, parent only
24. b
Inventory: PP230,000 + P210,000 = P440,000
Land: P280,000 + P240,000 = P520,000
25. b [P480,000 (P70,000 + P210,000 + P240,000 + P270,000 + P90,000 P420,000)] =
P20,000
26. c (P50,000 + P8,000 + P100,000 = P158,000)
The acquirer should recognize, separately from goodwill, the identifiable assets
acquired in a business combination. [PFRS 3 (2008).B31]
A patent that have no useful life is not considered an asset.
An intangible is separable if it capable of being separated or divided from the entity and
sold, transferred, licensed, rented or exchanged, either individually together with a
related contract[PFRS 3(2008).B33]
The amount by which the lease terms are favorable compared with the terms of current
market transactions for the same or similar items is an intangible assets that meets the
contractual-legal criterion for recognition separately from goodwill, even though the
acquirer cannot sell or otherwise transfer the lease contract. [PFRS 3 (2008).B32 (a)]
Customer and subscriber lists are frequently licensed and thus meet the separability
criterion. [PFRS 3(2008).B33].
It may seem that the terms research and development, which may be associated with
such assets as patent and software development, are not applicable to all internally
intangibles, such as brand names. However, it needs to be remembered that all intangible
assets must meet the identifiability criterion, one part of which is separability.
27. c [P400 + (40 shares x P10)] = P800
28. d [P1,080 + (P280 + P10) = P1,370
29. b [P1,260 + (P440 + P60) = P1,760
30. a [P600 + (P360 + P40)] = P1,000
31. e [P480 + P100] = P580
32. b [P330 + (40 shares x P1)] = P370
33. d [P1,080 + 40 shares x (P10 - P1)] P15, stock issuance costs = P1,425
34. a [P180 + P40 P20 P15} =P185
35. c [(50,000 shares x P 35) + P5,000] = P1,755,000
36. d [P1,230,000 + P580,000] = P1,810,000
37. c - [P1,800,000 + P250,000] = P2,050,000
38. e (P1,800,000 + P650,000]= P2,450,000
47. c
48. d
49. b
P270,000
51. c
52. b
53. a
Only the subsidiarys post-acquisition income is included in consolidated totals.
54. d
Cost
P180,000
Less: Accumulated depreciation (P180,000/30 years = P6,000/year x 3 yrs)
18,000
Net book value
P162,000
55. c
P162,000
56. b
PFRS No. 3 par. 62 states that: If the initial accounting for business combination can be
determined only provisionally by the end of the period in which the combination is
effected because either the fair values to be assigned to the acquirees identifiable
assets, liabilities, or contingent liabilities or the cost of the combination can be
determined only provisionally, the acquirer shall account for the combination using those
provisional values. The acquirer shall recognize any adjustments to those
provisional values as a result of completing the initial accounting:
(a) within twelve months of the acquisition date; and
57. c
The consideration transferred should be compared with the fair value of the net
assets acquired, per PFRS3 par. 32. The gain of P8 million results from a
bargain purchase and should be recognized in profit or loss, per PFRS3 par. 34.
58. b
The consideration transferred should be compared with the fair value of the net
assets acquired, per PFRS3 par 32. When provisional fair values have been
identified at the first reporting date after the acquisition, adjustments arising
within the measurement period (a maximum of 12 months from the acquisition
date) should be related back to the acquisition date. Subsequent adjustments
are recognized in profit or loss, unless they can be classified as errors under
PAS8 Accounting policies, changes in accounting estimates and errors. See
PFRS 3 pars. 45 and 50. The final amount of goodwill is P160 million
consideration transferred less P135 million fair values on May 31, 20x5 = P25
million.
59. c
Fair value of Subsidiary - Homer
Consideration transferredP 200 million
Add: Fair value of contingent consideration
10 million
Fair value of subsidiary P 210 million
Less: Fair value of identifiable assets and liabilities of Homer............... 116
million
Goodwill P 94 million
Note: The consideration transferred should be compared with the fair value of the
net assets acquired, per PFRS3 par. 32. The contingent consideration should be
measured at its fair value at the acquisition date; any subsequent change in this
cash liability comes under PAS 39 Financial instruments: recognition and
measurement and should be recognized in profit or loss, even if it arises within the
measurement period. See PFRS3 pars. 39, 40 and 58.
60.
61.
62.
63.
64.
b
c
c
b
d
Consideration transferred:
Shares: (100,000 shares x P6.20)
P620,000
Contingent consideration.
184,000
Total.
P804,000
Less: Fair value of net identifiable assets acquired:
Current assets P100,000
Equipment 150,000
Land
50,000
Buildings .
300,000
Liabilities. ( 80,000)
520,000
Goodwill.
P284,000
The P184,000 is one classical example of contingencies is where the future income of
the acquirer is regarded as uncertain; the agreement contains a clause that requires
the acquirer to provide additional consideration to the acquiree if the income of the
acquirer is not equal to or exceeds a specified amount over some specified period.
65. d
Changes that are the result of the acquirer obtaining additional information about
facts and circumstances that existed at the acquisition date, and that occur within
the measurement period (which may be a maximum of one year from the acquisition
date) are recognized as adjustments against the original accounting for the
acquisition (and so may impact goodwill) see Section 11.3.[PFRS 3 (2008) par. 58]
Incidentally, the entry to record the revision of goodwill should be:
Estimated liability for contingent consideration. 14,000
Goodwill
14,000
66. a refer to No. 64 and 65 for further discussion.
67. c
Deficiency: (P16 P10) x 100,000 shares issued to acquireP 600,000
Divided by: Fair value of share...... P
10
Added number of shares to issue.....
60,000
68. (b) (P520,000 P60,000 = P460,000)
2.
Changes resulting from events after (post-combination changes) the acquisition date
(e.g. meeting an earnings target, reaching a specified chare or reaching a milestone on
research and development project) are not measurement period adjustments. Such
changes are therefore accounted for separately from the business combination. The
acquirer accounts for changes in the fair value of contingent consideration that are not
measurement period adjustments as follows:
1.
contingent consideration classified as equity is not remeasured and its
subsequent settlement is accounted for within equity; and
contingent consideration classified as an asset or liability
The problem on hand falls within No. 1, so no adjustment would be required to goodwill
but accounted for within the equity section.
69. c
70. a
71. c
Depreciation expense:
P200,000
250,000
P 50,000
__12,500
P
4
P 550,000
800,000
P 250,000
P
20
12,500
P250,000
56,000
P194,000
P 10,000
3,000
10,000
5,000
P 28,000
72. d
PFRS 3 (2008) par. 18 requires an identifiable assets and liabilities assumed are
measured at their acquisition-date fair values.
73. c
Selling price
Less: Book value of Comb (P50,000 + P80,000 + P40,000
- P30,000)
Loss on sale of business by the acquiree (Comb)
P 110,000
140,000
P( 30,000)
74. a
Blue Town:
Stockholders equity before issuance of shares (P700,000 + P980,000)
P1,680,000
Issued shares: 34,000 shares x P35
1,190,000
Consolidated SHE/Net Assets
P2,870,000
75. No available answer - P115,000
Cost of Investment (100,000 shares x P1.90)
190,000
Less: Market value of net assets acquired:
Cash
Furniture and fittings
Accounts receivable
Plant
Accounts payable
Current tax liability
Liabities
75,000
Goodwill
P
P 50,000
20,000
5,000
25,000
(15,000)
( 8,000)
(
2,000)
P 115,000
76. b
Cost of Investment [P20,000 + (16,000 shares x P2.50)
+ P500, incidental costs)
Less: Market value of net assets acquired:
Plant
P 30,000
Inventory
28,000
Accounts receivable
5,000
Plant
20,000
Accounts payable
( 20,000)
Goodwill
P
P 60,500
58,000
2,500
When it liquidates, costs of liquidation paid by the acquiree should be for the
liquidation account of the acquiree and will eventually be transferred to shareholders
equity account. Any costs of liquidation paid or supplied by the acquirer should be
capitalized as cost of acquisition which is consistent with the cost model under PFRS No.
3 in measuring the cost of the combination.
Any direct costs of acquisition should be capitalizable under the cost model reiterated in
PFRS No. 3 Phase I. This model in PFRS No. 3 will be amended under Phase II (pending
implementation possibly until early 2008), wherein all direct costs will be outright
expense.
Costs of issuing shares will be debited to share premium or APIC account.
Any costs of liquidation paid or supplied by the acquirer should be capitalized as
cost of acquisition which is consistent with the cost model under PFRS No. 3 in
measuring the cost of the combination.
The fair values of liabilities undertaken are best measured by the present values of
future cash outflows.
Intangible assets are recognized when its fair value can be measured reliably.
Assets other than intangible assets must be recognized if it is probable that the future
economic benefits will flow to the acquirer and its fair value can be measured reliably.
77. c
Consideration transferred:
Shares: 2/3 x 60,000 x P3.20
Cash
Accounts payable
Mortgage and interest
Debentures and premium
Liquidation expenses
128,000
45,100
44,000
52,500
2,400
144,000
(12,000)
Cash held
Less: Fair value of assets and liabilities acquired:
Accounts receivable
Inventory
Freehold land
Buildings
Plant and equipment
Bargain Purchase Gain
78. d
79. c
Total______
Assets, appraised value
P1,500,000
Add: Goodwill:
Annual earnings
P150,000
Less: Normal earnings
6% x Assets
90,000
CC_____
P375,000
P41,250
22,500
132,000
260,000
P34,700
39,000
130,000
40,000
46,000
DD_______
P750,000
P75,000
45,000
289,700
29,700
EE
P375,000
P33,750
22,500
Excess earnings
P60,000
/ capitalized at
20%__
Goodwill
P300,000
Total stock to be issued
P1,800,000
P18,750
P30,000
20%
20% _
P93,750
P150,000
P468,750
P468,750
1,800,000
26%
Percentage
P11,250
20%__
P56,250
P900,000
P900,000
1,800,000
50%
P431,250
P431,250
431,250
24%
(c)
80. a
II ____
Average annual earnings
P 46,080
Divided by: Capitalized at
Total stock to be issued
Less: Net Assets (for P/S)
Goodwill (for Common Stock)
Preferred stock (same with Net Assets):
864,000/P100 par
_____JJ
_
P 69,120
____Total____
P 115,200
_
10%
P1,152,000
864,000
P 288,000
8,640 shares
81. c
Theories
1 a
6.
.
2 a
7.
.
3 c
8.
.
4 d
9.
.
5 d
10,
.
11.
16.
21.
26.
31
36.
12.
17.
22.
27.
32.
37.
13.
18.
23.
28.
33.
38.
14.
19.
24.
29.
34.
39.
15,
20.
25.
30.
35.
40.