1

. On April 1,2013, Queen Corporation paid P800,000 for the assets and liabilities of Jack Company. Broker's fee _ P50,000
The book value of the assets and liabilities of Jack Company on April 1,2013, follow: Pre-acquisition audit fee 40,000
Cash P80,000 Legal fees for merger agreement 47,000
Inventory 240,000 Audit fee for SEC registration of stock issue 46,000
Plant and equipment (net of accumulated depreciation Printing of stock certificates 11,000
ofP320,000) 480,000 Under IFRS-3 (2008), the expenditures that should be debited to Additional Paidin Capital
Liabilities 180,000 (APIC) account is:

On April 1, 2013, it was determined that the inventory of Jack had a fair value of PI90,000 and a. P57,000 c. P-0-
the plant and equipment (net) had a fair value of P560,000. b. PI 3 7,000 d. P 46,000

What is the amount of goodwill resulting from the business combination? .

5
On May 1,2013, Queen Corporation paid cash of P600,000 for all of the net assets of Prince
Company and Prince is dissolved. The carrying value of the assets and liabilities of Prince on
a. P-0- c. PI 50,000 May 1,2013 follow:
b. P 50,000 d. P180,000 Cash P60,000
Inventory 180,000
2
. Plata Corporation paid PI00,000 cash for the net assets of Oro Company, which consisted of Plant and equipment (net of accumulated
the following: Depreciation of P220,000) 320,000
Book Value Fair value Goodwill 100,000
Current assets P20,000 P28,000 Liabilities 120,000
Property and equipment 80,000 110,000 On May 1,2013, Prince inventory had a fair value of P150,000, and the plant and equipment
Liabilities assumed 20,000 18,000 (net) had a fair value of P3 80,000.
The property and equipment acquired in the business combination should be re¬ corded at:
What is the amount of goodwill recorded in the books of Queen as a result of the business
a. P110,000 c. P91,666 combination?
b. PI 00,000 d. P90,000 a. PI 3 0,000 c. PI 00,000
b. P 30,000 d. P -0-
3
. On June 30, 2013 White Corporation issued 100,000 shares of its P20 par value common stock
for the net assets of Black Company. The market value of White's common stock on June 30 .
6
On May 31,2013, Dear Company has assets and liabilities with the following fair values:
was P36 per share. White paid a fee of P100,000 to the broker who arranged this acquisition.
Costs of SEC registration and issuance of the equity securites amounted to, P50,000. Current assets PI80,000
Non-current assets 220,000
Contingent consideration determined to be paid after acquisition amounts to P 120,000. Liabilities 40,000
What amount should White capitalize as the cost of acquiring Black's net assets. On June 1,2013, Love Corporation purchases the net assets of Dear Company for P310,000
a. P3,700,000 c. P3,720,000 cash.
b. P3,65 0,000 d. P3,750,000 In the books of Love corporation, the acquisition resulted in:
a. Negative goodwill of P50,000. c. Reduction from current assets of
4
. When Pedro Company acquired Sam Company's net assets by issuing its own capital stock, it P50,000.
had the following expenditures: b. Income from acquisition of P50,000. d. Deduction from non current assets of
 P50,000. Additional paid in capital 390,000 350,000
Retained earnings 1,248,000 1,106,000
7
. The stockholders' equities of Par Corporation and Son Company at July 1, 2013 were as follows: Total liabilities and equity P7,942,000 P2,927,600
Par Son Per appraisal's report, Horse assets have fair values of:
Capital stock, P100 par P15,000,000 P8,000,000
Additional paid in capital 2,000,000 4,000,000 Current assets
Retained earnings 6,000,000 3,000,000
On July 2,2013, Par issued 150,000 of its shares with a market value of PI 20 per share for the PI,653,600
assets and liabilities of Son, and Son was dissolved. On the same day, Par paid P50,000 for Property and equipment 1,248,000
professional fees and P 100,000 for SEC registration of equity securities. Patents 338,000
Rook Corporation purchases the net assets of Horse for P3,168,000 cash. What is the
After the combination, what is the total stockholders' equity of Par Corporation? total asset of Rook Corporation after the combination?
a. P41,000,000 c. P41,150,000 a. P7,354,000 c. P8,l13,600
b. P40,850,000 d. P40,900,000 b. P7,254,000 d. P9,181,600
8
. Red Corporation will ispue common shares with a par value P10 for the net assets of Blue 10
. Pete Corporation and Sol Company agreed to combine their businesses, with Pete Corporation
Company Red's common stock has a current market value of P40 per share. Blue's as the surviving entity. Pete will issue 48,000 shares of its capital stock, with a par value of
statement of financial position on the date of acquisition follow: PI00 per share, and a fair market value of PI75 per share. Pete incurred the following
Current assets P320,000 Common stock, P5 par P80,000 additional acquisition-related costs:
Property and equipment 880,000 Additional paid in capital 320,000
Liabilities 400,000 Retained earnings 400,000 Professional fees PI20,000
Blue's current assets are appraised at P400,000 and the property and equipment was also Broker's fees 80,000
appraised at P1,600,000. Its liabilities are fairly valued. Accordingly, Red Corporation issued Costs to register and issue stock 50,000
shares of its common stock with a total market value equal to that of Blue's net assets
including goodwill. Before combination, their respective statement of financial position showed stockholders' equity
accounts as follows:
To recognize goodwill of P200,000, how many shares were to be issued by Red'.
a. 45,000 c. 50,000 Pete Sol
b. 40,000 d. 55,000 Capital stock P7,200,000 P3,600,000
Additional paid in capital 3,120,000 360,000
9
. Rock Corporation was merged into Horse Company in a combination properly accounted for as Retained earnings 6,000,000 2,040,000
an acquisition. Their condensed statement of financial position before the combination are:
Rook Horse The total stockholder's equity of Pete Corporation after the combination is:
Current assets P3,288,000 PI,627,600
Property and equipment, net 4,654,000 1,040,000 a. P24,720,000 c. P24,67 0,000
Patents 260,000 b. P24,47 0,000 d. P24,890,000
Total assets P7,942,000 P2,927,000
Liabilities P3,704,000 P171,600 .
11
Papa Corporation issued 120,000 shares of P10 par common stock with a fair value of
Capital stock, Par P100 2,600,000 1,300,000 P2,550,000 for all the outstanding stock of Mama Company. In addition,
 Papa incurred the following costs: New Old Old
Professional fees to arrange the business combination P27,000 Book Value Book Value Fair Value
Cost of SEC registration 12,000 Cash P350 P40 P40
Cost of printing and issuing stock certificates 3,000 Inventories 150 100 120
Immediately before the business combination in which Mama Company was dissolved, Mama's Property and equipment, net 260 180 280
assets and equities were as follows (in thousands): Total assets P760 P320 P440
Book value Fair value
Current assets PI,000 PI, 100 Liabilities P240 P80 P70
Plant assets 1,500 2,200 Common stock 420 200
Liabilities 300 300 Retained earnings 100 40
Common stock 2,000 Total liabilities and equity P760 P320
Retained earnings 200 What is the amount of goodwill to be recognized by New Corporation?
What is the amount of goodwill (gain on acquisition)? a. P2 3 0,000 c. P370,000
a. P 450,000 c. P(450,000) b. PI 60,000 d. P260,000
b. P(550,000) d. P 500,000
16
. Malakas Company acquired all of Maganda Corporation's assets and laibilities on January
12
. Using the data in No. 11, how much additional paid in capital is recorded by Papa? 2,2013, in a business combination, at that date, Maganda reported assets with a book value of
a. Pl,350,000 c. Pl,365,000 P624,000 and liabilities of P356,000. Malakas noted that Maganda had P40,000 of research
b. Pl,335,000 d. PI,330,000 and development costs on its books at the acquisition date that did not appear to be of value.
Malakas also determined that patents developed by Maganda had a fair value of PI20,000 but
13
. Using the data in No. 11, Papa should recognize expense of: had not been recorded by Maganda. Except for building and equipment, Malakas determined
a. P32,000 c. PI 5,000 the fair value of all other assets and liabilities reported by Maganda approximated the recorded
b. P27,000 d. P12,000 amounts. In recording the transfer of assets and liabilities to its books, Malakas recorded goodwill
of P93,000. Malakas paid P517,000 to acquire Maganda's assets and liabilities.
14
, Using the data in No. 11, the net increase (decrease) in the retained earnings of Papa is:
a. P2,600,000 c. P3,300,000 If the book value of Maganda's buildings and equipment was P341,000 at the date of
b. P3,000,000 d. P2,200,000 acquisition, what was their fair value?
a. P441,000 c P341,000
b. P 417,000 d. P417,500
15
. On January 2,2013, New Corporation pays P200,000 cash and also issues 18,000 shares of
P10 par common stock with a market value of P330,000 for all the outstanding stock of Old Use the following data to answer Nos. 17-19:
Company, in addition, New pays P3 0,000 for registering and issuing the 18,000 shares and Chico Company acquired Atis Corporation on January 2,2013, by issuing common shares. All of Atis'
P70,000 for accounting and legal fees of the business combination, in which Old Corporation is assets and liabilities were immediately transfered to Chico, which reported total par value of
dissolved. Summary information for the companies immediately before the merger is as follows (in shares outstanding of P218,400 and P327.600 and additional paid in capital of P370,000 and
thousands): P650,800 immediately before and after the business combiantion, respectively.
17
. Assuming that Chico's common stock had a market of P25 per share at the time of acquisition,
what number of shares was issued?
a. 15,000 c. 15,600
 b. 10,500 d. 10,000 a. P208,000 c. P250,000
b. P200,000 d. P208,500
18
. What is the par value per share of Chico's common stock?
a. P10 c. P 8 .
22
What was the fair value of the inventory held by Yakal at the date of combination?
b. P 7 d. P 9 a. P40,000 c. P3 5,000
b. P46,000 d. P64,000
19
. Assuming that Atis' identifiable assets had a fair value of P476,000 and its liabilities had a fair
value of PI 20,000, what amount of goodwill did Chico record at the time of the business
combination? 23
. What was the fair value of the net assets held by Yakal at the date of combination?
a. P30,000 c. P3 5,000 a. PI30,000 c. P140,000
b. P34,000 d. P40,000 b. PI 3 5,000 d. PI25,000
24
. What amount of goodwill, if any, will be reported by the combined entity immediately
Use the following data to answer numbers 20 - 25: following the combination?
On January 2, 2013 Narra Corporation acquired all of Yakal Corporation's assets and liabilities by a. P88,000 c. P8 7,000
issuing shares of its common stock. Partial statement of financial position data for the companies prior b. P78,000 d. P5,000
to the business combination and immediately after the com¬ bination are as follows:
25
. If the depreciable assets held by Yakal had an average remaining life of 10 years at the date of
Narra Corp. Yakal Corp. Combined acquisition, what amount of depreciation expense will be reported on those assets on December
Book Value Book Value Entity 31, 2013?
Cash P 40,000 P 10,000 P 50,000 a. P15,000 c. PI 3,000
Accounts receivable 60,000 30,000 88,000 b. PI4,000 d. PI2,000
Inventory 50,000 35,000 96,000
Buildings & equipment (net) 300,000 110,000 430,000 26
. The stockholders' equities of Pablo Corporation and Siso Company at June 1,2013 before
Goodwill ? combination were as follows:
Total assets P450,000 PI85,000 Pablo , Siso
Capital stock, P100 par value P10,000,000 P3,000,000
Accounts payable PI 88,000 P84,000 P272,000 Share premium (APIC) 50,000
Common stock, P15 par 100,000 40,000 126,000 Retained earnings 5,000,000 1,000,000
Additional paid in capital 65,000 28,000 247,000 On June 2, 2013, Pablo Corporation issued 50,000 of its unissued issued shares with a market
Retained earnings 97,000 33,000 ? value of P103 per share for the assets and liabilities of Siso Company. On the same day Pablo
Total liabilities and equities P450,000 PI 85,000 P ? Corporation paid PI00,000 for legal fees, documentary stamp tax of P20,000 and PI 90,000 for
SEC registration fees of equity security.
20
. What number of shares did Narra issue to acquire Yakal's assets and liabilities?
a. 5,000. c. 4,500 How much of the acquisition-related costs is to be recognized as expense on date of the
b. 5,200 d. 2,500 combination?
a. PI00,000 c. PI 70,000
21
. What was the market value of the shares issued by Narra? b. PI 20,000 d. P20,000
27
. Using the data in No. 26, what is the total stockholders' equity of Pablo Corporation after the
combination will show the following:
a. Capital stock (P10,000,000 + P5,000,000), P100 par P15,000,000
Retained earnings 4,900,000
Share issuance costs (10,000)
Total stockhoders' equity P 19,890,000
b. Capital stock PI5,000,000
Share premium 10,000
Retained earnings 4,880,000
Total stockholders' equity P19,890,000
c. Capital stock PI5,150,000
Share premium 50,000
Retained earnings 4,690,000
Total stockholders' equity P19,890,000
d. Capital stock PI 5,000,000
Share premium 200,000
Retained earnings 4,690,000
Total stockholders' equity P19,890,000
 1
Price paid P800,000
Less: Fair value of net identifiable assets acquried
Cash P 80,000
Inventory 190,000
Plant and equipment 560,000
Liabilities (180,000) 650,000
Goodwill P150,000

All assets acquired are to be recorded at fair values, therefore property and equip¬
2

ment is to be recorded at PI 10,000.

3
Fair value of shares issued (100,000 x P36) P3,600,000
Contingent consideration 120,000
Total acquisition cost P3,720,000
4
Audit fee for SEC registration of stock issue P46,000
Printing of stock certificates '11,000
Total debit to APIC P57,000
5
Price paid P600,000
Less: Fair value of net identifiable assets
Cash P 60,000
Inventory 150,000
Plant and equipment 380,000
Liabilities (120,000) 470,000
Goodwill PI 3 0,000
6
Price paid P310,000
Less: Fair value of net identifiable assets
Current assets P180,000
Non-current assets 220,000
Liabilities ( 40,000) 360,000
Income from acquisition P (50,000)
7
Stockholders'equity before combination-Par P23,000,000
Capital stock issued, at par (150,000 x 100) PI5,000,000
Additional paid in capital (150,000 x 20) 3,000,000
Cost of SEC registration ( 100,000)
Professional fees (expense) ( 50,000) 17,850,000
Stockholders' equity after combination - Par P40,850,000
8
Fair value of net identifiable assets acquired:
Current assets P 400,000
Property and equipment 1,600,000
Liabilities ( 400,000)
Net assets acquired PI,600,000
Add: Goodwill 200,000
Acquisition cost P1,800,000
Divided by market value per share -r- P 40
Number of shares to be issued 45,000
9
Price paid P3,168,000
Less; Fair value of net identifiable assets acquired
Current assets Pl,653,600
 Property and equipment 1,248,000
Patents 338,000
Liabilities ( 171,600) 3,068,000
Goodwill P 100,000
Total assets after combination:
Rook (P7,942,000 - P3,168,000) P4,774,000
Acquired from Horse (P3,239,600 + P100,000) 3,339,600
Total assets P8,ll3,600
10
Stockholders' equity before combination - Pete P16,320,000
Capital stock issued (48,000 x P100) P4,800,000
APIC (48,000 x P75) - P50,000 3,550,000
Expenses (P120,000+ P80.000) (200,000) 8,150,000
Stockholders' equity after combination - Pete P24,470,000
11
Fair value of stock issued P2,550,000
Fair value of net assets acquired 3,000,000
Gain on acquisition P(450,000)
12
Fair value of stock issued P2,550,000
Par value (120,000 shares x P10) 1,200,000
Additional paid in capital P1,3 50,000
Cost of SEC registration ( 12,000)
Cost printing and issuing stock certificates ( 3,000)
Additional paid in capital recorded PI,335,000
13
Expenses to be recognized are only the professional fees of P27,000.
14
Income on acquisition P450,000
Expenses (27,000)
Net increase P423,000
15
Price paid:
Cash P200,000
Capital stock issued at fair value 330,000 P530,000
Less: Fair value of net identifiable assets acquired:
Cash P 40,000
Inventories 120,000
Property and equipment 280,000
Liabilities ( 70,000) 370,000
Goodwill P160,000
16
Computation of Fair Value

Amount paid P 517,000

Book value of assets P624,000
Book value of liabilities (356,000)
Book value of net assets P268,000
Adjustment for research and development costs ( 40,000)
Adjusted book value P228,000
Fair value of patent rights 120,000
Goodwill recorded 93,000 ( 441,000)
Fair value increment of buildings and equipment P 76,000
Book value of buildings and equipment 341,000
 Fair value of buildings and equipment P417,0 00
17

18

19
Goodwill of P34,000 was recorded, computed as follows:

Increase in par value and paid-in capital P390,000

Fair value of net assets (P476,000 - PI 20,000) (356,000)
Goodwill P34i000
20
Combined common stock PI 26,000
Common stock - Narra (100,000)
Common stock issued P 26,000

No. of shares issued (P26,000 / P5) 5,200 shares

21
Combined common stock PI 26,000
Combined APIC 247,000
Common stock - Narra before acquisition (100,000)
APIC - Narra before acquisition ( 65,000)
Fair value of shares issued by Narra P208,000
22
Combined inventory P96,000
Book value of inventory - Narra (50,000)
Fair value of inventory of Yakal P46,000
23
Combined net assets before goodwill (P664,000-P272,000) P392,000
Book value of net assets of Narra (P450.000 - P188,000) (262,000)
Fair value of net assets of Yakal at the date of combination PI3 0,000
24
Fair value of shares issued (No. 21) v P208,000
Fair value of net assets acquired from Yakal (No. 23) (130,000)
Goodwill P78,000
25
Combined buildings & equipment P430,000
Book value of buildings & equipment - Narra (300,000)
Fair value of buildings & equipment - Yakal PI 30,000

Depreciation (PI30,000 / 10 years) PI 3,000

26
P100,000, the legal fees only.
27
Capital Stock:
Before combination PI0,000,000
Issued at par (50,000 x P100) 5,000,000 PI 5,000,000
Share Premium:
Before combination 50,000
Issuance (50,000 x P3) 150,000
Documentary stamp tax ( 20,000)
SEC registration fees ( 180,000) -0-
Retained Earnings:
Before combination 5,000,000
Legal fees ( 100,000) 4,900,000
Share issuance costs (210,000 - 200,000) ( 10,000)
«
Total stockholders' equity PI 5,890,000