CPA REVIEW SCFIOOL OF T}iE PHILIPPINUES
MANII-A
PRACTICAL ACCOI.';'ITING PROBLEMS dJERR.ERO 1 GERMAN
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IJM
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II
BUSINESS COMBINATION DATE OF ACQUISITION
trRRER
PROBLEM 1.
STARCorporaticnisaCompi]n),invclvedinmanufactLtringcars,onJanuaryl,20l3,theboardofdirectors and RISE Corporation' of tire said company has deci,:1eci to acqLrire the net asieis of l',lovA Corporation to result in producing higher quality suppliers of materials they Lrss in prorluctir.rn. The merger is expected cars with lower total cost was gathered from the books of The deal was clo:ecl on i.ebruary 29,2073 anci the following information the entilies: I I
,{
NOVA
,G'il
- ,t1P,,0:F -o-i.lu=ipp[l-t:rjplql :;zi,pq0 , 2rss0,0rc i 14!pq!,1
__]fl-,il,q!eete--- -l-L,"JEq{g[t Cggglr
Liabilities Liabilities
RISE
r,.stE'Xo
L-Ptj!,-0-0q- e! oqo.oo-q n{ rn nnn
jlt-,'!.!!!-"
-_---_l_-
I
r-Il^i11"-"-l
?qq i--1-1ry,99?] wqc -*,(41!2u-W-1-=r*- -- : r/e,5oq @ :il.-t:.:.'. L. &d{letel-8!id-i! Gp1al = -- .1-9?.P91 s2opqoj lll-1?l L1yy,ly,t?_t_:t",1,
I Retaineci
earninqs
.
i
. ----j.: :
l,25u.ooo
---1,1s-0,
_ _ zll.".u i . _
i
@-31g!niql----.:, I -o+]oqCqL -P2,e-40,o00 I -e1,05o.ooo-1
and 11,200 of its common Star vrrlil issue 22,500 of its ccr'nnron stock in exchange for- the net assets of Nova is P150' In addition, the shares Star's of value stock in exchange for the net assets of Rise, tnJ fair following adjustments shc'".rlcl Le triade:
. "
Current assets of liluva ancj Risc have a fair value of tr450,000 and P230,000 respectiveiy' Rise, respectively' Noncurrent assets nlve a fair value of P2,150,CCO arid P1,9/5,000 for Nova and
Ccmpute for the folio'win! balances of Star Compan;'on ihe date oi acquisition:
D
Stockholders'equlty
A. B. c,
D.
A
P6, 118,5Ci-)
P7.980,00i' P3,496,500 P9,615,000
Assets
A. P10,290,000 B. P9,240,000 c. P10,500,000 D P9,840,000
PAT-7400
?aEc-
I
PR,OBLEM 2. Denim Co. merged into Kraft Corp, on July 1, 2013. In exchange for the net assets at fair market value of Denim Co. amountirrg to P696,450 , Kraft issued 68,000 common siiares at P9 par value with a market price of P12 per share.
Out of pocket costs of the combination were as follows:
iG-eel GsiiqltLErerifqqJpi !,Gu-e-qq!q[bi!rai'.q!- I - -PIi-6,q! 90,0qq l_A@it ruejq1lEc Iqgislrq_tjgt of_9!o9[ 1!4,!9q l_p,,|.tri,lgl9{r_-qlrlq.Kqgtjllcalet . ---, -23-qop -" rya19.;
i-grot-e-rtree--
-
1s:qe
____ L@ition ceneiJi ancl allocateilqxpsdiqr
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Denim rvill pay an adrJitionai cash consideration of P455,000 in the event ti,at Kraft's net income will be equal or greater than P950,Ct00 for the period ended December 31, 2013. At acquisition date, lhere is a high probability of ieaching the target qet income ancJ the fair rralue of the acJdilional consicJeratiolt ',vas determined to be P195,000.
Actual net incrme ior the period end:d Decembei-31,20i3 amounted to P1,250,J00. The additional cash consideration was paid,
C
VVhat is the arnount
of goodwill to be recognized in the staler-lertt of finarrciai rrcsition as of December 31'
20t3?
A. P295,450 B. P3OB,5CG c, P314,550 D,
B
P326,550
What is the amount of expense to be recogttized rn ihe statel[ent ci"ic:lipiefiefisive income for the year ended December
A. B. c, D.
3i,
2013?
P257,240 P517,244 P307,4llc P412,500
PROBLEM 3.
On October L, 7-913, Winner Corporation acquired all i.ne clSS;€rr Sird asbri:ned all the liaoriities of Getter Company by rssr.ring 20,000 snares rryith a fair vllr"re of Pc7 5 oer sliirl'e and an obligation to pay a contingent consideration wiih a fair value of P750,000,
In additron, \Ninrrer paici the foilow!ng acquisiiion :eiaieri co:!:s:
P{\"**740C
YaqeZ and Getter, togelher with the fair The Statement of i:inencial position as of September 30, 2013 of Winner market value of the assets un6 116[ililies are presenled below:
s*k vai"tfi*yefge-L q99t(Valqe-Eel'-Jqpe --i l=t610-qc0-!--r!tp.q4"----B1r/otf --P1L9P
l1J,f 't@--l-gggf iffi,r*.a,vabte -l---:ooxoo f
:
/uuuu' 33s.ooc 33s,00c I _--70,000 -!-1q00 - --7aooI --7g t- -:;ffi0 -:=ffin-l--_.-;7ono"i airc-o"r l-Llrvetqlqe, -J- l.:.q!! ;tlrr,;;3i3 rlisausxp-s,rer- - ; uooo'oo0 [.-, 33] ;H e00/0qq--l!lg.uuy ;;;;, 2q00'00J1 2,900,00!l I z,ooo,ooo fE!g_--:-- -=t I gqop* --9!!Iqq --l!lg.ur ioaqop _Jl;;aqa [L - i:]*: r99,qr!-] I suirdinq !q0l_0r,_t_-,I99,qr!_] i--[f_:___. . __--_---l----,-;1ffi
l;;,3$
i
)'1'uuu
OOO
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19aqo!ffi-ffi,___:--l---_z_oqgqql-H*1---leqpry -z;.qqo qdluL- --- -l---,--.-i-*--i-Ps,000,000"t - . -:l -.:90'00! l-^-Ptr50,000 L-Pa!!9000 I P2'860'009 rotar acsetc Tg!9]_e5e_1":.=___ |ri tr5,guu/uuu+-8l-?UqU Notes
qJqI-itr
00_q!!o_
stork 50 I pqg_iLqgp tel Retainecl earni Total equities
n{d
r
i
!_c1!rl
_B_S.qqq.
400,000
L!!!pQO_i
liq,0qq"
750,000 P!,0_0_ql0!
_L
e2,sqE-o_o_q
statement of financial position of the Cornpute for the b,:larrces that will be shov;r'l on the Cctober 1, 2013 surviving comPanY:
C
Retained earnings
A. P480,000 B. P540,000
c.
P526,000
D. P475,000
D
Total assets
R
P7,015,000 P6,980,000
C.
P7,1 18,00C
A.
P7,491,000
PROBLEM 4, presented below: The Statement of Financial Position cf Luster Co;-poration cn June 30, 2013 is
Current assets Land Equ
C Elal p!o5k, 5_ frsf _ Aq![!o na I pqlc!_t n _qqPltq]
building'
for land ancl All the assets and iiabiiitres of Luster assumeci to apprr:rimate their falr values except building increased the of value It is estimaled lhat the iand have a faii- value of P350,000 and the fair PBC,OOC.
PA2-7+o(
bY
?"g.
*
Kernel Corporation acquired B0o/o of Luster's capital stock for P500,000,
C
Assuming the consideration paid irrcludes contro! premium of P142,000, how much is the goodwill/(gain on acquisition) on the consolidated financiai statement?
A. B,
c.
D,
B
P60,000 P48,000 P42,000 P50,000
of P23,000 and the fair value of the non goodwilll(gain on acquisition) on the consolidated is how muc6 the controlling interest is P122,750, Assulning the ccnsideration paiC excludes -control premium financial statement? P
A
78,250
P73,254
B. C.
P69,500
D,
P74,750
Assuming the consideratiorr paid includes control Drerniunr cf P37,000, hotv rnuch is the gor:'Jwill/(gain on acquisition). on the consclidated financial statenrent?
A. B. c. D.
P43,250
?73,250 P56,750 P68,350
PROBTEM 5.
tsetter Company has gainect conlrol cver the operatii:ns r:f Calnr Corocration ily acouiring B5olo of its outstanding capital stoik for p2,580,00C. This arnorrnt includes a contrcl prerrium of P30,000. Acquisition expenses, direct and indirect, amounted to P83,0C0 and 42,0C0 respectivelv
r
,
..-| Better- i
Caim
_j
i qpel* ilg_e *Ee+ Vdue_: ^\:..+: r[?ir *-?l-zq.-oo!:lEqrL --f-:fuQol@ll1-sq'yeuLe--- -]- ---lq-,r,0gc[ -'r5pqq, - - I 5.s!,0c9 - 150,00! Irtyeltgriel
ri
: E-,iv lfrlrrr-
6- ^t. tr.-1..^
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qurqu---_* qqulPrnenl
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ECd*rL _ __ Iolgi qs_sg!:
l-----,--.-li LAligllls pgyaple_ _ __
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+_
par- I-
:-"'::-r:l-::=--*Nqtls-psv!q!e---
a -!r_^
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/',rlil
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l,soO,qooi- 5c,tgo; :oo,ooo _.iuuruuu
Ii__
i85,1,00
__575,000
.
..
_
!.9.,.,-'YY,l ihn'r,rvr 3o_o,cooI
___ Pq,7s0r!q0 :
---
,
J2,8i0,00! --li
I
i i
Zp3p]q :-- -l - - 130rqW-1,--- --
_--i,tqq,-o-q0-1 : ='----. II -----J-i--
capital stock, 50 _ .--.-t ;L_:-r'-:_-t.-_-j_.-__ _._!()(l.Oqq_ --:-', -- r11 _____=l_-- J,tq.c,,.:_o!_ !spi!ei:!9"9!,Ee--)--'-zlq-c,'i-0!-;---!ry.qqq-i -.---paici in capital 1,575,00C ;i Additional paio caoital 1,575,000 I Rdditlonat _ tr00,000 I 'lJC,0.!! - --
l
_ --l
- -I Sit,tag ._ i_Belq49d_eernilgs____l . _1,2,]_q,8qQ - i Pj,ZsQ,0!o-L t-I Total equ!t1e9 -8,9-bo,;O i
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'
The following was ascertained on the date cf acquisiticn for Calm Corporation:
. The value of receivables and equipmeni has decreased by P25,000 and P1,4,000 respectively. . The fair value of inventories is riow P43ti,000 whereas the valire of lancl and building has increased by .
P471,000 and P107,000 respeciively.
There was an unrecorded accounts payabie amourrting F738,000,
io
P27,000 and the fair value
of notes
[eA&_"F*0c
logc
Compute for the following balances the date of business combination:
B
to be presented in the consolidated statement of financial position at
Total assets
A. P9,875,000 B. Pi0,093,000
c.
P10,112,000
D,
A
P9,215,000
Tctal shareholder's equitY
A. P7,000,000 B. P7,500,000
c.
P8,200,000
D, P8,000,000
PROBLEM 6.
prior to the On January 2, 7A13, the Statement of Financial Position of Pepper and Steak Company cornbination are: Cash
Inventories Property and eqr"riPment (net)
lotalAssets Current LiaLrilities Common Stcck, P100 Par Additiorral Paid in CaPital Retained Earnings Total Liabilities and Stockholder's Equity 'The
Pepper Co. P 450,000 300,000 z5a,-Qaa
P_!J!!e9B P 90,000
Steak Co.
P
15,000
30,000
u5-0!q g.$.'Q,000
P
15,000
150,000 450,C00 B1o,0o0
I 5,000 30,000 90,000
LLSog!0Q
L15.9*gqQ
fair value of Steak Company's equipment is P153,000'
@ependentcases: A
for 1, Assuming pepper Company acquired TOoic of the outstanding commort stock of Steak Company the is much p105,000 and Non-controlling interest is measurec at fair value of P61,000, how goodwill (gain on acquisition)?
A, P(17,000) B, P17,000 c. P23,100 D,
D
P(23,100)
2. Assuming pepper Company acquired B0% of lhe outstanding commorl stock ol Steak Company for p136,800 and Non-controlling interest is i-neasurecl at Non-controliing interest's proporlionate share of Steak Company's identifiatle net assets, how much is the consolldated stockholder's equity on the date of acquisition?
A. B. c.
D.
A
3,
P1,41-0,000
P1,419,600 P1,446,600 P1,456,200
for Assuming pepper Company acquired 90o/o of the outstanding common stock of Steak Company
p243,000 and Non-controlling interest is rneasured consolidated assets on the date of acquisition?
A, B.
c, n
P1,542,000 P1,785,000 PL,737,000 D1 4A4 nr)n
5
at fair value, how much is the total
PA2-72/o/
?age
Q
PROBLEM 7.
of Acquired Company's common stock for P190,000 cash and carries the investment using the cost method, After three months, Parent purchases another 600/o of net assets Subsidiary's common stock for P540,000. On this clate, acquired company reports identifiable has company p920,000. acquired ihe of The liabilities with carrying value of p720,000 and fair value ol is interest p280,000. non-controlling 15o/o The fair value of the a book value and a fair value of
Acquirer Company acquires
P
25o/o
i25,000. How much is the goodwill or (gain on acquisition)
A
A. B.
P(17,000) P250,000
c.
P(30,000)
D.
P263,000
PROBLEM 8. Condensed statements of financial position as follows:
ol Care Corp, anci Chai-m Corp. as of December 31, 2012 are
Current assets Noncurrent assets Total assets
'i LlaDllltlgs iiabitities
)trn D IO/Z)U ---L I fP 16,250 _t r
. t
aTqn oLt rw
I
_.
qo_ -Ll-B.ZIq _: _7?,_?o-o_ - - i - =^E2:9 i- r?-'-co
A!9rlip@-!.7-s-o-=--L---q?J!!
i Belcllgd-gglllrrgs
,
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- -]
-
ZOl3, Care Corp. issued 8,750 stocks',ryith a market value of PZ5lshare for the assets and liabilities of Charm Corp. the book value rerlects lhe fair value of the assets and liabilities, that the noncurrenl assets of Cnarm has a temporary appraisal of P157,500 and the
On January
l,
except noncurrent assets
Care are overstated by P7,500. Contingent consideration, which i5 olher determinable, is equal to P3,750. Care also paid for the stock issuance costs worth P8,500 and acquisition costs amounting to P4,754.
of
On March 1,2013 the contingent considei-ation has a determinable amount cf P5,000. On June 2013, the provisional fair value of the noncurren[ assets of Charm increased by P2,250.
D
How much is the combined total assets at the end of Z0I3?
B, C. D,
P435,500 P443,000
P442,000 P444,250
-end of hanciouts' :-1, .'"
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