Monday c.

OBDURATE elected to measure non-controlling

interests at the non-controlling interest’s
1. On January 1, 20x1, CONJUNCTION Co., and UNION, proportionate share of STUBBORN’s identifiable net
Inc. entered into a business combination effected assets.
through exchange of equity instruments. The
combination resulted to CONJUNCTION obtaining Requirement: Compute for the goodwill. 160,000
100% interest in UNION. Both of the combining
3. OBSTREPEROUS Co. and NOISY, Inc. both engage in
entities are publicly listed. As of this date,
the same business. On January 1, 20x1,
CONJUNCTION’s shares have a quoted price of ₱200
OBSTREPEROUS and NOISY signed a contract, the
per share. CONJUNCTION Co. recognized goodwill of
terms of which resulted in OBSTREPEROUS
₱600,000 on the business combination. No
obtaining control over NOISY without any transfer
acquisition-related costs were incurred. Additional
of consideration between the parties.
selected information at acquisition date is shown
below:
The fair value of the identifiable net assets of NOISY,
Inc. on January 1, 20x1 is ₱2,000,000. NOISY chose to
CONJUNCTION measure non-controlling interest at the non-controlling
Co. Combined entity
interest’s proportionate share of the acquiree’s
(before (after identifiable net assets.
acquisition) acquisition)

Share capital 1,200,000 1,400,000 Requirement: Compute for the goodwill. 0

4. On January 1, 20x1, DIAPHANOUS Co. acquired all of
Share premium 600,000 2,400,000 the identifiable assets and assumed all of the
liabilities of TRANSPARENT, Inc. by paying cash of
Totals 1,800,000 3,800,000 ₱2,000,000. On this date, the identifiable assets
acquired and liabilities assumed have fair values of
₱3,200,000 and ₱1,800,000, respectively.
Requirements: Compute for the following: Additional information:
a. Number of shares issued by CONJUNCTION Co. in In addition to the business combination transaction, the
the business combination. 10,000
following have also transcribed during the negotiation
b. Par value per share of the shares issued. 20
period:
c. Acquisition-date fair value of the net identifiable
assets of UNION. 1,400,000 a. After the business combination, TRANSPARENT will
enter into liquidation and DIAPHANOUS agreed to
reimburse TRANSPARENT for liquidation costs
2. On January 1, 20x1, OBDURATE Co. acquired 30% estimated at ₱40,000.
ownership interest in STUBBORN, Inc. for ₱200,000. b. DIAPHANOUS agreed to reimburse TRANSPARENT
Because the investment gave OBDURATE significant for the appraisal fee of a building included in the
influence over STUBBORN, the investment was identifiable assets acquired. The agreed
accounted for under the equity method in reimbursement is ₱20,000.
accordance with PAS 28. c. DIAPHANOUS entered into an agreement to retain
From 20x1 to the end of 20x3, OBDURATE recognized the top management of TRANSPARENT for
₱100,000 net share in the profits of the associate and continuing employment. On acquisition date,
₱20,000 share in dividends. Therefore, the carrying DIAPHANOUS agreed to pay the key employees
amount of the investment in associate account on signing bonuses totaling ₱200,000.
January 1, 20x3, is ₱280,000. d. To persuade, Mr. Five-six Numerix, the previous
major shareholder of TRANSPARENT, to sell his
On January 1, 20x4, OBDURATE acquired additional 60%
major holdings to DIAPHANOUS, DIAPHANOUS
ownership interest in STUBBORN, Inc. for ₱1,600,000.
agreed to pay an additional ₱100,000 directly to Mr.
As of this date, OBDURATE has identified the following:
Numerix.
a. The previously held 30% interest has a fair value of e. Included in the valuation of identifiable assets are
₱360,000. inventories with fair value of ₱180,000. Ms. Vital
b. STUBBORN’s net identifiable assets have a fair value Statistix, a former major shareholder of
of ₱2,000,000. TRANSPARENT, shall acquire title to the goods.
Requirement: Compute for the goodwill (gain on bargain
purchase). 880,000

Tuesday

1. Which of the following factors is used as multiplier of super profits in valuation of goodwill of a business?
a. Average capital employed in the business d. Normal rate of return

b. Simple profits e. Normal profits.

c. Number of years’ purchase

2. This type of business combination occurs when, for example, a private entity decides to have itself “acquired” by a
smaller public entity in order to obtain a stock exchange listing.
a. Step acquisition c. Reverse acquisition

b. Rewind acquisition d. Stock acquisition

3. UNFLEDGED Co. is contemplating on acquiring IMMATURE, Inc. The following information was gathered through a
diligence audit:
 The actual earnings of IMMATURE, Inc. for the past 5 years are shown below:
Year Earnings

20x1 2,400,000

20x2 2,600,000

20x3 2,700,000

20x4 2,500,000

20x5 3,600,000

Total 13,800,000

 Earnings in 20x5 included an expropriation gain of ₱800,000.

 The fair value of IMMATURE’s net assets as of the end of 20x5 is ₱20,000,000.
 The industry average rate of return is 12%.
 Probable duration of “excess earnings” is 5 years.

Requirements:
a. How much is the estimated goodwill under the multiples of average excess earnings method? 1,000,000
b. How much is the estimated goodwill under the capitalization of average excess earnings method? Use a
capitalization rate of 25%. 800,000
c. How much is the estimated goodwill under the capitalization of average earnings method? Use a capitalization rate
of 12.5%. 800,000
d. How much is the estimated goodwill under the present value of average excess earnings method? Use a discount
rate of 10%. 758,158
 Wednesday

On January 1, 20x1, ABC Co. acquired 80% interest in XYZ, Inc. by issuing 5,000 shares with fair value of P30 per share
and par value of P20 per share. The financial statements of ABC Co. and XYZ, Inc. immediately after the acquisition are
shown below:

Jan. 1, 20x1

ABC Co. XYZ, Inc.

Cash 20,000 10,000

Accounts receivable 60,000 24,000

Inventory 80,000 46,000

Investment in subsidiary 150,000

Equipment 400,000 100,000

Accumulated depreciation (40,000) (20,000)

Total assets 670,000 160,000

Accounts payable 40,000 12,000

Bonds payable 60,000 -

Share capital 340,000 100,000

Share premium 130,000 -

Retained earnings 100,000 48,000

Total liabilities and equity 670,000 160,000

On January 1, 20x1, the fair value of the assets and liabilities of XYZ, Inc. were determined by appraisal, as follows:

Carrying Fair Fair value

XYZ, Inc.
amounts values increment

Cash 10,000 10,000 -

Accounts receivable 24,000 24,000 -

Inventory 46,000 62,000 16,000

Equipment 100,000 120,000 20,000

 Accumulated depreciation (20,000) (24,000) (4,000)

Accounts payable (12,000) (12,000) -

Net assets 148,000 180,000 32,000

The equipment has a remaining useful life as of 4 years from January 1, 20x1.

Requirement: Prepare the consolidated statement of financial position as at January 1, 20x1. ABC Co. elects to measure
non-controlling interest as its proportionate share in XYZ’s net identifiable assets.

Thursday

Use the following information for the next three questions: a. 4,695,000
b. 4,495,000
Rainy Afternoon Co. owns 80% interest in Sunny Morning Co.
During 20x1, Rainy sold inventories costing ₱200,000 to c. 4,565,000
Sunny for ₱300,000. One-fourth of the inventories were d. 4,545,000
unsold as of December 31, 20x1 and were included in Sunny’s Use the following information for the next two questions:On
year-end statement of financial position at the purchase price January 1, 20x1, Horse Co. acquired 80% interest in Colt Co.
from Rainy. The individual financial statements of Rainy and by issuing bonds with fair value of ₱250,000. NCI is measured
Sunny on December 31, 20x1 show the following information: at proportionate share. The following information was
determined immediately before the acquisition:
Rainy Sunny
Horse Co. Colt Co. Colt Co.
Inventory 1,260,000 380,000
Carrying Carrying
amount amount Fair value

Sales 6,700,000 2,700,000 Total assets 1,000,000 400,000 430,000

Cost of Total (200,000

(3,015,000) (1,755,000) liabilities (600,000) (200,000) )
sales
230,00
Gross profit 3,685,000 945,000
Net assets 400,000 200,000 0
There are no fair value adjustments arising from the business
Included in Colt’s liabilities is an account payable to Horse
combination date.
amounting to ₱20,000.
1. How much is the consolidated inventory on
4. How much is the total assets in Horse’s separate
December 31, 20x1?
financial statements immediately after the
a. 1,615,000
combination?
b. 1,590,000
a. 1,000,000
c. 1,665,000
b. 1,400,000
d. 1,585,000
c. 1,250,000
2. How much is the consolidated sales?
d. 1,430,000
a. 9,400,000
5. How much is the total assets in Error! Hyperlink
b. 9,100,000
reference not valid.the consolidated financial
c. 9,375,000 statements?
d. 9,700,000 a. 1,476,000
3. How much is the consolidated cost of sales?
b. 1,580,000
 c. 1,465,000 a. Reverse the impairment charge and credit income
d. 1,528,000 for the period.
Use the following information for the next two questions: b. Reverse the impairment charge and credit retained
earnings.
Lion Co. acquired 80% of Cub Co. on January 1, 20x1 for c. Not reverse the impairment charge.
₱100,000. The following information was determined at d. Reverse the impairment charge only if the original
acquisition date: circumstances that led to the impairment no longer
exist and credit retained earnings.
Lion Co. Cub Co. Cub Co. 3. When NCI is measured at proportionate share,
Carrying Carrying a. goodwill is attributed only to the owners of the parent.
Fair value
amt. amt.
b. goodwill is attributed to both the owners of the parent
Equipment 1,000,000 500,000 400,000 and NCI.
c. goodwill impairment is allocated to both the owners of
Accumulated depreciation (200,000) (100,000) (80,000) the parent and NCI.
Net 800,000 400,000 320,000 d. b and c
4. On January 1, 20x1, ABC Co. acquired 80% interest in XYZ,
Inc. by issuing 5,000 shares with fair value of ₱15 per
Remaining useful life, 1/1/ x1 10 yrs. 5 yrs. 5 yrs. share. On this date, XYZ’s total equity was ₱74,000. The
investment in subsidiary is measured at cost.
XYZ’s assets and liabilities approximate their fair values on
January 1, 20x1 except for the following:
6. How much is the consolidated “Equipment – net” in
the December 31, 20x2 financial statements? Carrying Fair Fair value
XYZ, Inc.
a. 880,000 amounts values adjustments
b. 846,000
31,00
c. 852,000 Inventory 23,000 0 8,000
d. 832,000
7. The consolidation journal entry for the depreciation Equipment (4 yrs. 48,00
remaining life) 40,000 0 8,000
of the fair value adjustment on December 31, 20x2
includes which of the following? 79,00
a. 16,000 debit to depreciation expense Total 63,000 0 16,000
b. 12,800 credit to retained earnings of Lion
c. 32,000 credit to accumulated depreciation
d. 16,000 credit to depreciation expense There were no intercompany transactions during 20x1.
However, it was determined that goodwill is impaired by
₱1,000.

How much is the goodwill attributable to NCI as of December

31, 20x1?
Friday

1. Consolidated financial statements are typically prepared

when one company has a controlling financial interest in a. 550
another unless: b. 2,220
a. The subsidiary is a finance company. c. 620
b. The fiscal year-ends of the two companies do not
d. 1,280
coincide.
c. The two companies are in unrelated industries, such 5. On January 1, 20x2, ABC Co. sells 60% out of its 80%
as manufacturing and real estate. interest in XYZ, Inc. for ₱100,000. ABC’s remaining 20%
d. The parent is in itself a subsidiary of another entity, interest in XYZ has a fair value of ₱25,000. This gives ABC
its debt or equity instruments are not traded in a significant influence over XYZ. The statements of financial
public market, and its ultimate parent produces position immediately before the sale are shown below:
Statements of financial position
consolidated general-purpose financial statements
that comply with PFRSs. As at January 1, 20x2
2. If the impairment of the value of goodwill is seen to have
reversed, then the company may XYZ, Consolidate
ABC Co.
Inc. d
 ASSETS d. 78,000
Cash 23,000 57,000 80,000

Accounts receivable 75,000 22,000 97,000

Inventory 105,000 15,000 120,000

Investment in subsidiary 75,000 - -

Equipment 200,000 50,000 260,000

Accumulated depreciation (60,000) (20,000) (84,000)

Goodwill - - 3,000

TOTAL ASSETS 418,000 124,000 476,000

LIABILITIES AND EQUITY

Accounts payable 43,000 30,000 73,000

Bonds payable 30,000 - 30,000

Total liabilities 73,000 30,000 103,000

Share capital 170,000 50,000 170,000

Share premium 65,000 - 65,000

Retained earnings 110,000 44,000 118,000

Non-controlling interest - - 20,000

Total equity 345,000 94,000 373,000

TOTAL LIAB. & EQTY. 418,000 124,000 476,000

How much is the gain (loss) on the disposal?

a. 38,000
b. 42,000
c. 62,000