CHAPTER 1 BUSINESS COMBINATION- STATUTORY MERGERS AND STATUTIRY CONSOLIDATION

No. of Problem Page

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1-2 Rivendell paid finder’s fee of 40,000 accountants fee (Advisory) of P 10,000 legal 424
fees (advisory) of P 15,000, salaries of Rivendell’s employees assigned to the
implementation of the merger of 16,000, cost of closing duplicate facilities…..
3 ABC Co. is acquiring XYZ Inc. XYZ has the following intangible asset: 424
 Patent on a product that is deemed to have no useful life P10,000.
 Customer list with an observable fair value of P 50,000.
4 Orbit Inc. purchase Planet Co. on 20x4. At that time an existing patent was not 424
recorded as a separately identified intangible asset. At the end of fiscal year 20x5,
the patent is valued at P 15,000 and goodwill has a book of value of P100,000.
5-6 ACME Co. paid $110,000 for the net assets of Comb Corp. At the time of the 425
acquisition the following information was available related to
Comb's balance sheet:
Book Value Fair Value
Current Assets $50,000 $ 50,000
Building 80,000 100,000
Equipment 40,000 50,000
Liabilities 30,000 30,000
7 Burrough Corporation concluded that the fair value of Helyar Company was 80,000 425
and paid that amount to acquire all of its net assets. Helyar Company reported
assets with a book value of P 60,000 and Fair value of P 98,000 and liabilities with a
book value of 23,000on the date of combination.
8 On June 1, 20x6 . Cline Company paid P80,000 cash for the assets and liabilities of 425
Renn Corp. The carrying values for Renn’s asset and liabilities on June 1, 20x6..
9 On April 1, 20x6, ZZ Corp. paid cash of P620,000 for all the net assets of AA 426
Company appropriately accounted for as merger…
10 The VV Company had these accounts at the time it was acquired by Bush Co. 426
11 KK Inc. was merged into LL. Inc. in a combination properly accounted for as 427
acquisition of interests. Their condensed balance sheet before the combination
shows:

Per independent appraiser’s report, KK’s assets have fair market values of
1,653,600
12 On 1 December 20x5, Casio Ltd. Acquired all the assets and liabilities of Aurora Ltd. 427
With Casio Ltd. Issuing 100,000 shares to acquire all these net assets.
13 Diwalwal, a private limited company, has acquired Coal, a private limited company 428
on January 1, 20x5
14 Richard Ltd. And Liway Ltd. Are two family owned ice cream producing companies 429
in Pampanga.
15 Jane Ltd., a supplier of snooker equipment, agreed to acquire the business of a 429
rival firm. Mercy Ltd. Taking over all assets and liabilities as at 1 June 20x6. The
price agreed upon was 40,000 payable 20,000 cash…
16 The Geek company acquired 100% of The Okay Company for a consideration 430
transferred of P 112 million. At the acquisition date the carrying amount of Okay’s
 net assets was P 100 million and their fair value was P120 million….
17 Air Philippines June 1, 20x5 balance sheet is as follow (000s omitted) 431
18-26 Fay acquires asset and liabilities of May Company on January 1, 20x6. To obtain 432
these shares, Fay pays P400 (in thousands) and issues 10,000 shares of P 20 par
value common stock on this date.
27-29 On January 1, 20x5, CC Co. acquired the net identifiable net asset of DD, Inc. On 433
this date, the identifiable assets and liabilities assumed have fair values of P
6,680,000 and P 4,320,000, respectively.
30-35 Sandy Corporation’s balance sheet at January 2, 20x8 is as follows:
434
An analysis of Sandy’s asset and liabilities reveals that book values of some
reported items do not reflect their market values on the date of acquisition.
36- 37 On January 1, 20x5, Kim Co. acquired all the identifiable assets and assumed the 435
liabilities of Dorothy, Inc. by paying cash of P 4,800,000. On this date, identifiable
assets and liabilities assumed have fair value of P 7,680,000 and P 4,320,000
respectively.
38 On January 1, 20x5, Drei Co. acquired all the identifiable assets and assumed the 435
liabilities of Cerise, Inc. by paying P 4,800,000. On this date, identifiable assets and
liabilities assumed have fair value of P 7,680,000 and P 4,320,000 respectively.
Terms of the agreement are as follows:
39-42 The balance sheet of Salt Company, along with market values of the assets and 436
liabilities is as follows;
43-53 On December 31, 20x4, PP Inc. acquired assts and liabilities of SS Company, PP will 437
maintain SS as a wholly owned subsidiary with its own legal and accounting
identity. The consideration transferred to the owner of SS include 50,000 newly
issued PP common shares…
54 Batler Inc. acquired Jersey company January 1, 20x6. When the purchase occurred 439
Jersey company had the following information related to fixed assets.
55 On July 1, 20x5 The Magi Company acquired 100% of the Nato Company for a 440
consideration transferred of P160 million. At the acquisition date the carrying
amount of Nato’s assets was P100 million.
56-57 On January 1, 20x5, the fair value of Pink Conrad’s net assets were as follows: 440
58 Using the same information in Nos. 56 and 57, assuming that on January 1, 20x7, 440
the date of settlement of the contingent consideration clause agreement for
P175,000 the entry should be:
59-60 The Boy George Company acquired he net assets of the Girl Conrad Company on 441
January 1, 20x5, made the following entry to record the purchase:
61 Polka issues common stock to acquire all the assets of Dots Company on January 1, 441
20x6. There is a contingent share agreement, which states that if the income of the
Dot’s Division exceeds a certain level during 20x6 and 20x7, additional shares will
be issued on January 1, 20x8.
62-64 Major Corporation acquired Problem Company through an exchange of common 441
shares. All the Problem’s assets and liabilities were immediately transferred to
Major.
65-69 Zyxel Corporation acquired all the assets and liabilities of Globe Tattoo Corporation 442
by issuing shares of its common stock On January 1, 2016. Partial balance sheet
data for the companies prior to the business combination and immediately
 following the combination is provided:
70 Ruben Inc. is to acquire James Corp. by absorbing all the assets and assuming all 443
the liabilities to the latter in exchange for shares of the former’s stock. Below are
the balance sheets of the two companies, with the corresponding appraised value
increment for James Corp.
71 Sicat Co. will issue share of P10-par common stock for the net assets of Max Co. 443
Sicat’s common stock has a current market value of P40 per share.
72 Philip Company will issue share of its P10 par value stock for all the outstanding 444
stock of the Siylay Company. Philip Company stock has a market value of P40 per
share.
73 Companies A and B decide to consolidate. Assets and estimated annual earnings 444
contributions are as follows:
74 Companies X, Y and Z, parties to a consolidation, have the following data: 445
75 Bats Inc., a new corporation formed and organized because of the recent 445
consolidation of II Inc. and JJ, Inc,, shall issue 10% participating preferred stocks
with a par value of P100 for II and JJ net assets contributions, and common shares
with a par value of P50 for the difference between the total shares to be issued
and the preferred shares to be issued.