QUIZZER

ACQUISITION OF STOCKS – DATE OF ACQUISITION

PROBLEM 1
Taiza Co. issued 120,000 shares of its P25 par common stock for all the outstanding stocks of
Deliyos Corp. in a business combination completed on August 1, 2013. Taiza Co.’s stock has
FMV of P32 per share. Deliyos Corp.’s net assets are worth P3.04 million at book value. Out of
pocket costs of the combination were as follows:
Legal fees P 20,800
Contingent consideration
(reasonable & measurable) 14,400
Printing costs of stock certificates 6,400
Finder’s fees 21,600
Professional fees paid to a CPA 16,800
Fees paid to company lawyers 8,000
Fees paid to company accountants 12,000
The goodwill from the combination is:
a. P 880,000
b. P 800,000
c. P 900,000
d. P 859,200

PROBLEM 2
de Chavez Corporation issued 100,000 shares of P20 par common stock for all the outstanding
stock of Malilin Enterprises in a business combination consummated on August 1, 2013. de
Chavez Corporation common stock was selling at P30 per share at the time the business
combination was consummated. Out-of-pocket costs of the business combination were as
follows:
Finder’s fee P 50,000
Accountant’s fee (advisory) 10,000
Legal fees (advisory) 20,000
Printing costs of stock certificates 5,000
SEC registration costs and fees 12,000
Total P 97,000
The acquisition cost of the combination will be:
a. P 3,080,000
b. P 3,000,000
c. P 3,097,000
d. P 3,017,000
PROBLEM 3 - 6
Fair Value of Non-controlling interest in the acquiree (Subsidiary) is not given. de Chavez
Co. acquires 80% of Deliyos Co. for P7,500,000, carrying value of Deliyos Co. net assets at time
at acquisition being P4,500,000 and fair value of these net identifiable assets being 6,000,000.
Goodwill arising on consolidation is to be valued on the proportionate basis or “partial”
Goodwill:
a. P 2,700,000
b. P 3,000,000
c. P 2,600,000
d. P 4,200,000

Using the same information in No.3, the amount of non-controlling interest arising on
consolidation is to be valued on the proportionate basis or “partial” Goodwill:
a. P 3,000,000
b. P 1,500,000
c. P 1,200,000
d. P 2,000,000

Using the same information in No.3, the amount of goodwill arising on consolidation is to be
valued on the full (fair value) basis or “Full/Gross-up” Goodwill:
a. P 1,200,000
b. P 3,375,000
c. P 2,700,000
d. P 4,000,000

Using the same information in No.3, the amount of non-controlling interest arising on
consolidation is to be valued on the full (fair value) basis or “Full/Gross-up” Goodwill:
a. P 2,500,000
b. P 1,200,000
c. P 3,600,000
d. P 1,875,000

PROBLEM 7 - 10
Fair Value of non-controlling interest in the Acquiree (Subsidiary) is given. Joaquin Co. has
40% of its share publicly traded on an exchange. Castelltort purchases the 60% non-publicly
traded shares in one transaction, paying P5,670,000. Based on the trading price of the shares of
Joaquin Co. at the date of gaining control a value of P3,600,000 assigned to the 40% non-
controlling interest (or fair value of non-controlling interest), indicating that Joaquin Co. has paid
a control premium of P270,000. The fair value of Joaquin Co.’s identifiable net assets is
P6,300,000 and a carrying value of P4,500,000.
Goodwill arising on consolidation is to be valued on the proportionate basis or “partial”
Goodwill:
a. P 2,100,000
b. P 1,960,000
c. P 2,050,000
d. P 1,890,000

Using the same information in No. 7, the amount of non-controlling interest arising on
consolidation is to be valued on the proportionate basis or “partial” Goodwill:
a. P 2,520,000
b. P 4,020,000
c. P 2,680,000
d. P 3,520,000

Using the same information in No.7, the amount of goodwill arising on consolidation is to be
valued on the full (fair value) basis or ”Full/Gross-up” Goodwill:
a. P 2,680,000
b. P 2,500,000
c. P 2,970,000
d. P 3,100,000

Using the same information in No.7, the amount of non-controlling interest arising on
consolidation is to be valued on the full (fair value) basis or “full/gross-up” Goodwill:
a. P 2,800,000
b. P 4,000,000
c. P 4,400,000
d. P 3,600,000

PROBLEM 11 - 15
Step Acquisition: Consideration transferred, fair value of Non-controlling interest of the
acquiree/subsidiary) and Fair Value of any previously held equity interest in the
acquiree/subsidiary (step acquisition) is given. Francisco Company acquires 15% of Valdez
Company’s common stock for P750,000 cash and carries the investment using the cost method.
A few months later, Francisco purchases another 60% of Valdez Company’s stock for
P3,240,000. At that date, Valdez Company reports identifiable assets with a book value of
P5,850,000 and a fair value of P7,650,000, and it has liabilities with a book value and fair value
of P2,850,000. The fair value of the 25% non-controlling interest in Valdez Company is
P1,350,000.
Goodwill arising on consolidation is to be valued on the proportionate basis or “partial”
goodwill:
a. P 400,000
b. P 450,000
c. P 350,000
d. P 300,000

Using the same information in No.11, the amount of non-controlling interest arising on
consolidation is to be valued on the proportionate basis or “partial” goodwill:
a. P 1,000,000
b. P 1,050,000
c. P 900,000
d. P 1,200,000

Using the same information in No.11, the amount of goodwill arising on consolidation is to be
valued on the full (fair value) basis or “full/gross-up” goodwill:
a. P 550,000
b. P 400,000
c. P 600,000
d. P 500,000

Using the same information in No.11, the amount of non-controlling interest arising on
consolidation is to be valued on the full(fair value) basis or “full/gross-up” goodwill:
a. P 1,350,000
b. P 1,000,000
c. P 1,400,000
d. P 1,200,000

Using the same information in No.11, the amount of gain or loss should be recognized when the
additional shares are acquired:
a. 0
b. P 60,000 loss
c. P 60,000 gain
d. P 50,000 gain
PROBLEM 16 - 19
Fair Value of subsidiary is given. On September 1, 2014, Taiza Co. acquires 75% (750,000
ordinary shares) of Alejandro Co. for P5,625,000 (P7.50 per share). In the period around the
acquisition date, Alejandro Co.’s shares are trading at about P6 per share. Taiza Co. pays a
premium over market because of the synergies it believes it will get. It its therefore reasonable to
conclude that the fair value of Alejandro Co.’s as a whole may not be P7,500,000. In fact, an
independent valuation shows that the value of Alejandro Co. is P7,275,000 (fair value of
Alejandro Co.). Assuming that the fair value of the net identifiable assets is P6,000,000 (carrying
value is P4,500,000). Goodwill arising on consolidation is to be valued on the proportionate
basis or “partial” Goodwill:
a. P 2,000,000
b. P 1,250,000
c. P 1,125,000
d. P 2,250,000

Using the same information in No.16, the amount of non-controlling interest arising on
consolidation is to be valued on the proportionate basis or “partial” goodwill
a. P 1,675,000
b. P 1,500,000
c. P 2,250,000
d. P 2,000,000

Using the same information in No.16, the amount of goodwill arising on consolidation is to be
valued on the full (fair value) basis or “full/gross-up” goodwill:
a. P 1,275,000
b. P 1,300,000
c. P 1,500,000
d. P 1,475,000

Using the same information in No.16, the amount of non-controlling interest arising on
consolidation is to be valued on the full(fair value) basis or “full/gross-up” goodwill
a. P 1,700,000
b. P 1,650,000
c. P 1,850,000
d. P 2,100,000
PROBLEM 20 - 21
Alejandro Company purchases 8,000 shares of Valdez Company for P96 per share. Before
acquisition, Valdez Company has the following balance sheet:
Assets Liabilities and Equity
Cash and cash equivalents P 30,000 Current Liabilities P 375,000
Inventory 420,000 Common Stock, P5 par 75,000
Property and equipment 600,000 APIC 195,000
Goodwill 150,000 Retained Earnings 555,000
Total assets P 1,200,000 Total liabilities and equity P 1,200,000
On the date of acquisition, Alejandro believes that the inventory has a fair value of P600,000
and that the property and equipment is worth P 750,000. On the date of acquisition, what is
the goodwill (gain on acquisition) to be reported on the consolidated balance sheet?
a. P (36,000)
b. P 36,000
c. P (28,000)
d. P 28,000

The allocation of goodwill (gain on acquisition) is:

Parent NCI
a. P (28,000) P (8,000)
b. P 28, 000 P 8, 000
c. P (36,000) -
d. P 36, 000 -

PROBLEM 22 -25
On January 2, 2014, the Statement of Financial Position of Malilin and Taiza Company prior to
the combination are:
Malilin Co. Taiza Co.
Cash P 675,000 P 22,500
Inventories 450,000 45,000
Property and equipment (net) 1,125,000 157,500
Total Assets P 2,250,000 P 225,000
Current Liabilities P 135,000 P 22,500
Ordinary Shares, P100 par 225,000 22,500
Share Premium 675,000 45,000
Retained Earnings 1,215,000 135,000
Total Liabilities and Stockholder’s Equity P 2,250,000 P 225,000

The fair value of Taiza Co.’s equipment is P 229,500.

Assuming Malilin Co. acquired all of the outstanding stock of Taiza Co. resulting to a goodwill
of P 99,000, contingent consideration is P 54,000, how much is the price paid to Taiza Co.’s
stock?
a. P 472,500
b. P 319,500
c. P 427,500
d. P 373,500

Assuming Malilin Co. acquired 70% of the outstanding common stock of Taiza Co. for P157,500
and Non-controlling interest is measured at fair value of P 91,500, how much is the goodwill
(gain on acquisition)?
a. P 34,650
b. P (34,650)
c. P (25,500)
d. P 25,500

Assuming Malilin Co. acquired 80% of the outstanding common stock of Taiza Co. for P205,200
and Non-controlling interest is measured at Non-controlling interest’s proportionate share of
Taiza Co.’s identifiable net assets, how much is the goodwill (gain on acquisition)?
a. P 2,184,300
b. P 2,115,000
c. P 2,129,400
d. P 2,169,900

Assuming Malilin Co. acquired 90% of the outstanding common stock of Taiza Co. for P364,500
and Non-controlling interest is measured at fair value, how much is the goodwill (gain on
acquisition)?
a. P 2,241,000
b. P 2,313,000
c. P 2,677,500
d. P 2,605,500
PROBLEM 26 -30
Statement of financial position for de Chavez Corporation and Castelltort Company on
December 31, 2014, are given below:
de Chavez Castelltort
Corporation Company
Cash and cash equivalents P 52,500 P 67,500
Inventory 75,000 45,000
Property and equipment (net) 375,000 187,500
Investment in Castelltort Company 195,000 _________
Total assets P 697,500 P 300,000
Current liabilities P 135,000 P 45,000
Long- term liabilities 150,000 67,500
Common stock 225,000 75,000
Retained earnings 187,500 112,500
Total liabilities and stockholders’ equity P 697,500 P 300,000

de Chavez Corporation purchased 80 percent ownership of Castelltort Company on December

31, 2014, for P195,000. On that date, Castelltort Company’ s property and equipment had a fair
value of P37,500 more than the book value shown. All other book values approximated fair
value. In the consolidated statement of financial position on December 31, 2014: What amount
of goodwill will be reported?

a. P 21,300
b. P 19,250
c. P 20,000
d. P 18,750

What amount of total stockholders’ equity will be reported?

a. P 461,250
b. P 605,000
c. P 515,750
d. P 712,500

What amount of non-controlling interest will be reported?

a. P 50,500
b. P 45,500
c. P 52,000
d. P 48,750
What amount of total liabilities will be reported?
a. P 320,500
b. P 295,000
c. P 397,500
d. P 380,000

What amount of total assets will be reported?

a. P 875,500
b. P 858,750
c. P 920,000
d. P 905,250