1.

When AAA Company acquired BBB Company’s net assets

by issuing its own capital stock, it had the following acquisition
related costs:
Broker’s fee P50,000; Pre acquisition audit fee P40,000; General
administrative costs P15,000; Legal fees for the combination
P32,000; Audit fee for SEC registration of stock issue P46,000; SEC
registration fee for stock issue P5,000; Other acquisition cost P6,000.
The acquisition related costs should be debited to the following
accounts:
Expenses Additional Paid in capital
a. P143,000 P78,000
b. 21,000 51,000
c. 143,000 51,000
d. 11,000 5,000

BROKER'S FEE 50,000 AUDIT FEE FOR SEC REGISTRATION OF STOCK ISSUE
PRE-ACQUISITION AUDIT FEE 40,000 SEC REGISTRATION FEE FOR STOCK ISSUE
GEN. ADMIN COSTS 15,000 ADDITIONAL PAID IN CAPITAL
LEGAL FEES FOR COMBINATION 32,000
OTHER ACQUISITION COST 6,000
TOTAL EXPENSES 143,000
ANS: LETTER C
___2. On January 1, 2020, CCC Company pays P270,000 cash and
also issue 18,000 shares of P10 par common stock with a market
value of P330,000 for the net asset of DDD Company. In addition CCC
pays P30,000 for registering and issuing the 18,000 shares and
P70,000 for professional fees to effect the combination. Summary
balances immediately before the combination is as follows:
CCC DDD DDD
Book Value Book Value Fair Value
Asset P760,000 P320,000 P340,000
Liabilities 240,000 80,000 70,000
What is the total asset of CCC Company after acquisition?
a. P1,090,000 b. P1,080,000 c. P1,260,000 d. P1,060,000

ACQUISITION COSTS CCC ASSETS BEFORE COMBINATION

CONSIDERATION TRANSFERRED: CASH PAID
CASH 270,000 REGITRATION OF ISSUED SHARES
ISSUANCE OF COMMON STOCK 330,000 PROFESSIONAL FEES
TOTAL 600,000 CCC ASSETS AFTER COMBINATION COMBINATION
LESS: FV OF NET IDENTIFIABLE ASSETS (270,000) ASSETS ACQUIRED AT FAIR VALUE
GOOWILL 330,000 GOODWILL
TOTAL ASSETS AFTER COMBINATION
 3. On April 1, 2020, the EEE Company paid P600,000 for the
net assets of FFF Company in a transaction properly accounted for as
acquisition. On this date, the assets and liabilities of FFF Company
were as follow:
Cash P60,000
Merchandise Inventory 180,000
Plant assets (net) 360,000
Liabilities 135,000
Furthermore, it was determined that the merchandise inventory of
FFF Company had a fair market value of P142,500 and the plant
assets of P420,000. What should be the amount recorded as goodwill
by EEE Company as a result of business combination?
a. P0 b. P37,500 c. P112,500 d. P112,000

ACQUISITION COSTS 600,000

FAIR VALUE OF NET IDENTIFIABLE ASSETS ACQUIRED:
CASH 60,000
MERCHANDISE INVENTORY 142,500
PLANT ASSETS 420,000
LIABILITIES (135,000) (487,500)
GOODWILL 112,500 ANS: LETTER C

4. GGG Company issued its common stock for the net assets
of HHH Company in a business combination treated as acquisition.
GGG’s common stock issued was worth P1,000,000. At the date of
combination, HHH’s net assets had a book value of P1.2 million and a
fair value of P1.6 million; GGG’s net assets had a book value of
P650,000 and a fair value of P800,000. Immediately following
combination, the net assets of the combined company should have
been reported at what amount?
a. P3,000,000 b. P2,200,000 c. P2,000,000 d. P2,250,000

ACQUISITION COSTS 1,000,000

FAIR VALUE OF NET IDENTIFIABLE ASSETS ACQUIRED (800,000)
GOODWILL 200,000
HHH NET ASSETS AT BOOK VALUE 1,200,000
GGG ASSETS AT FAIR VALUE 800,000
COMBINED NET ASSETS 2,200,000 ANS: LETTER B
 Use information for no. 5 to 8.
On February 28, 2020, JJJ Products Corporation issues 12,000 shares
of its P10 par value stock to acquire the net assets of KKK Company.
Underlying book value and fair value information for the statement
of financial position items of JJJ and KKK Company at the time of
acquisition are as follows:
JJJ Company KKKCompany .
Book Value Book Value Fair Value
Cash P300,000 P 60,000 P60,000
Land 250,000 250,000 350,000
Other Asset 1,000,000 210,000 285,000
Total Assets P1,550,000 P520,000 P695,000
Liabilities P320,000 P210,000 P190,000
JJJ Products Company shares were selling at P50 just before the
merger announcement. Additional cash payments made by JJJ
Corporation in completing the acquisition were:
Brokers fee paid to firm that located KKK P10,000
Audit fee for stock issued by JJJ Products 12,000
Cost of SEC registration of JJJ Products shares 6,000
Contingent consideration determined on date of acquisition
46,000 amounted to P10,000. On August 31, 2020, the end of accounting
5,000 period, it was valued at P15,000. In January 31, 2021, the value of
51,000 contingent consideration decreases by P4,000. The actual and final
determination of this is on April 15, 2021, valued at P14,000.
On August 31, 2020, the provisional value of land was P400,000. An
additional provision fair value was P410,000 on January 1, 2021. And
decrease provisional fair value was made on March 31, 2021,
P390,000, and on May 1, the fair value was finalize at P405,000.
5. How much is goodwill/(gain) on the date of acquisition?
6. How much is goodwill/(gain) to be presented to 2020 statement of
financial position?
7. Value of land to be presented on 2020 statement of financial
position?
8. How much is goodwill/(gain) to be presented to 2021 statement of
financial position?

760,000
(270,000) 5) ACQUISITION COST 600,000
(30,000) CONTINGENT CONSIDERATION 10,000
(70,000) TOTAL 610,000
INATION COMBINATION 390,000 FV OF ASSETS ACQUIRED (505,000)
340,000 GOODWILL 105,000
330,000
1,060,000
ANS: LETTER D 6) ACQUISITION COST 600,000
CONTINGENT CONSIDERATION 15,000
TOTAL 615,000
FV OF ASSETS ACQUIRED (555,000)
GOODWILL 60,000

7) PROVISIONAL VALUE OF LAND 400,000

FAIR VALUE AT ACQUISITION DATE 350,000
INCREASE IN VALUE OF LAND 50,000

8) ACQUISITION COST 600,000

CONTINGENT CONSIDERATION 11,000
TOTAL 611,000
FV OF ASSETS ACQUIRED (565,000)
GOODWILL 46,000
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