Chapter 1 Business Combinations (Part 1) PROBLEM 1: TRUE OR FALSE 1. FALSE 6. TRUE 2. FALSE 7. FALSE 3. FALSE 8. TRUE 4. TRUE 9. TRUE 5. FALSE 10. TRUE PROBLEM 2: FOR CLASSROOM DISCUSSION 1.
A
2.
D
3.
D
4. Solution: Consideration transferred Non-controlling interest in the acquiree Previously held equity interest in the acquiree
12,000,000 -
Total
12,000,000
Fair value of net identifiable assets acquired (11.5M – 2K)
Goodwill
5.
(11,498,000)
502,000
Solutions:
R eq equir uirem emen entt (a): (a): Consideration transferred NCI in the acquiree Previously held equity interest in the acquiree Total
800,000 202,000 1,002,000
FV of net identifiable assets acquired (1.02M – 4K)
(1,016,000)
G ain on barg barg ain purchas purchas e
(14,000) (14,000)
R eq equir uirem emen entt (b): Consideration transferred NCI in the acquiree [(800K ÷ 80%) x 20%] Previously held equity interest in the acquiree
800,000 200,000 -
Total
1,000,000
Fair value of net identifiable assets acquired 1
(1,016,000)
G ain on barg barg ain purchas purchas e
(16,000) (16,000)
Requirement (c): Consideration transferred NCI in the acquiree (1,016,000 x 20%) Previously held equity interest in the acquiree
800,000 203,200 -
Total
1,003,200
Fair value of net identifiable assets acquired
G ain on barg barg ain purchas purchas e 6.
(1,016,000)
(12,800) (12,800)
Solution:
Finder’s fees
Professional fees of consultants General administrative costs
10,000 50,000 30,000
Total amount to be expens ed
90,000
7. Solution: Publishing title R&D costs Patent
2,000 80,000 50,000
Net identifiable identifiable as s ets ets acquired cqui red
8.
Solution: (1M – 800K) = 200,000 200, 000
9.
A
132,000
300, 000 10. Solution: [1M – (800K – 100K)] = 300,000 11. Solutions:
R eq equirem uireme ent (a): (a): full P FR S Consideration transferred NCI in the acquiree Previously held equity interest in the acquiree
1,000,000 200,000 -
Total
1,200,000
Fair value of net identifiable assets acquired
(800,000)
Goodwill
400,000
R equirem quireme ent (b): (b): P FR S for for S ME s Purchase cost Direct costs
1,000,000 100,000
2
Total
1,100,000
Interest in net identifiable i dentifiable assets acquired (800K x 75%)
(600,000)
500,000 500, 000
Goodwill
PROBLEM 3: EXERCISE 1.
Solutions:
R eq equir uirem emen entt (a): (a): P roportionat roportionate s hare hare Consideration transferred [250K + (10,000 x 2)] NCI in the acquiree (205,000 x 5%)
270,000 10,250
Previously held equity interest in the acquiree
-
Total
280,250
Fair value of net identifiable assets acquired
(205,000)
Goodwill
75,250
R eq equir uirem emen entt (b): F air value value Consideration transferred [250K + (10,000 x 2)]
270,000
NCI in the acquiree
11,500
Previously held equity interest in the acquiree
-
Total
281,500
Fair value of net identifiable assets acquired
(205,000)
Goodwill
76,500
PROBLEM 4: MULTIPLE CHOICE - THEORY 1. A 6. B 11. C 2. C 7. B 12. A 3. D 8. E 13. D 4. D 9. C 14. C 5. A 10. B 15. D
3
16. 17. 18. 19. 20.
B C C C D
PROBLEM 5: MULTIPLE CHOICE - COMPUTATIONAL 20,0 00 1. A [300,000 – (220,000 + 60,000)] = 20,000 2.
B [860,000 – (840,000 – 140,000)] = 160,000
3.
350, 000 C [(15 x 250,000) – (3,000,000 + 400,000)] = 350,000
4.
B (250,000 x 50) – (10,750,000 + 500,000 + 225,000 + 365,000) = 12,500,000 – 11,840,000 = 660,000
5.
A
Solution:
Consideration transferred NCI in the acquiree (200,000 x 25% x 18.50) Previously held equity interest in the acquiree Total
Fair value of net identifiable assets acquired
2,850,000 925,000 3,775,000
(3,650,000)*
Goodwill
125,000
*(3,000,000 + 200,000 + 150,000 + 300,000) = 3,650,000 6.
D [275,000 – (550,000 – 200,000 + 60,000)] = (135,000)
7.
A (2,000,000 – 1,600,000) = 400,000 g oodwill
8.
C
₱2,000,000
Net proceeds –
₱2,800,000
los s on dis dis pos pos al 9.
A
10. D
4
Carrying amount = 800,000
