1. On April 1, 2010, Carlo Corp.

p. paid cash of P620,000 for all of the net assets of John Company appropriately Current tax liability 8,000
accounted for as a merger. The recorded assets and liabilities of John Corporation on April 5, 2010 follow: Provision for annual leave 2,000

Cash P 60,000 The financial year for Darlene Ltd. is January- December.
Inventory 180,000
Property, plant and equipment (net of accumulated depreciation of P220,000) 320,000 The fair value of each Darlene Ltd. Share at acquisition date is P1.90. At acquisition date, the
Goodwill (net of accumulated amortization of P50,000) 100,000 acquirer could only determine a provisional fair value for the plant. On March 1, 2011, Darlene Ltd.
Liabilities (120,000) received the final value from the independent appraisal, the fair value at acquisition date being
Net assets P131,000. Assuming the plant had a further five-year life from the acquisition date.
P540,000
On April 1, 2010, John’s inventory had a fair value of P150,000, and the property, plant and equipment The amount of goodwill arising from the business combination at December 1, 2010:
(net) had a fair value of P380,000. The amount of goodwill recorded in the books of
Carlo as a result of the business combination should be: A. P15,000 C. P5,000
B. P13,000 D. P 0
A. P150,000 C. P50,000
B. P120,000 D. P 0 4. On January 1, 2011, the fair values of Pia’s net assets were as follows:

2. The Marc Company had these accounts at the time it was acquired by Francis Co.: Current Asset P200,000
Equipment 300,000
Cash P 72,000 Land 100,000
Accounts receivable 914,000 Buildings 600,000
Inventories 240,000 Liabilities 160,000
Plant, property and equipment 1,392,800
Accounts payable 701,600 On January 1, 2011, Ruth Company purchased the net assets of Pia Company by issuing 200,000
shares of its P1 par value stock when the fair value of the stock was P6.20. It was further agrees
Francis Co. paid P2,800,000 for net assets of Marc Company. It was determined that fair market that Ruth’s would pay an additional amount on January 1, 2013, if the average income during the
values of inventories and plant, property, and equipment were P266,000 and P1,800,000, respectively. 2-year period of 2011-2012 exceeded P160,000 per year. The expected value of this consideration was
An assumed contingent liability arising from past events with a fair value amounting to P20,000 calculated as P268,000; the measurement period is one year.
and as such amount is considered reliable measurement.
What amount will be recorded as goodwill on January 1, 2011?
In the books of Francis Co., this transaction resulted in:
A. Zero C. P360,000
A. Goodwill recorded at P882,800 B. P200,000 D. P568,000
B. Goodwill recorded at P449,600
C. Goodwill recorded at P469,600
D. Current assets increased by P469,600 5. Using the same information above, assuming that on August 1, 2011 the contingent consideration happens
to be P340,000, what amount will then be recorded as goodwill on the said date?
3. On December 1, 2010. Darlene Ltd. acquired all assets and liabilities of Shyndelle Ltd with Darlene Ltd.
issuing 100,000 shares to acquire these net assets. The fair value of Shyndelles Ltd’s. assets and liabilities A. Zero C. P332,000
at this date were: B. P172,000 D. P540,000

Cash P 50,000 6. Using the same information above, assuming that on January 1, 2013, the date of settlement of the
Furniture and fittings 20,000 contingent consideration clause agreement for P350,000, the entry should be:
Accounts receivable 5,000
Plant 125,000 A. Estimated liability for contingent consideration P340,000
Accounts payable 15,000 Loss on estimated contingent consideration 10,000
Cash P350,000
 Printing costs 5,000
SEC registration costs and fees 12,000
B. Estimated liability for contingent consideration 350,000 P97,000
Cash 350,000
The fair value of the consideration transferred accounting will be:

C. Estimated liability for contingent consideration 368,000 A. P3,097,000 C. P3,017,000

Cash 350,000 B. P3,080,000 D. P3,000,000
Gain on estimated contingent consideration 18,000
10. Pia Co. owns 80,000 shares of Rose Corp.’s 100,000 outstanding common shares, acquired at book value.
D. No entry required. The December 31, 2010, consolidated balance sheet presented by Pia and Rose included net assets of
Rose in the amount of P600,000. On January 1, 2011, Pia sells 70,000 shares of Rose for P490,000. The fair
value of Pia’s remaining 10% interest in Rose is P70,000. What amount of gain or loss, if any, should be
7. Pine Company acquires 15 percent of Shine Company’s common stock for P1,000,000 cash and recognized on the sale of Pia’s shares resulting in deconsolidation, and how much of that should be
carries the investment using the cost method. A few months later, Pine purchases another attributed to Pia?
60 percent of Shine Company’s stock for P4,320,000. At that date, Shine Company reports
identifiable assets with a book value of P7,800,000 and a fair value of P10,200,000, and it has Determine the gain or loss on disposal (or deconsolidation) should be:
liabilities with a book value and fair value of P3,800,000. The fair value of the 25% non-
controlling interest in Shine Company is P1,800,000. A. P40,000 loss C. P10,000 gain
B. P80,000 loss D. P80,000 gain
Goodwill arising on consolidation is to be valued on the proportionate basis or “Partial”
Goodwill:
On January 1, 2010, Maru Corporation and Nong Corporaton and their condensed balance sheet are as follows:
A. P168,000 C. P600,000
B. P200,000 D. P800,000 Maru Corp. Nong Corp
Current Assets P 140,000 P 40,000
Non-current Assets 180,000 80,000
8. On September 1, 2010, Company A acquires 75% (750,000 ordinary shares) of Company B for Total Assets P 320,000 P 120,000
P7,500,000 (P10per share). In the period around the acquisition date, Company B’s shares are Current Liabilities P 60,000 P 20,000
trading at about P8 per share. Company A pays a premium over market because of the synergies it Long-term Debt 100,000 -
believes it will get. It is therefore reasonable to conclude that the fair value of Company B’s as a whole Stockholders’ Equity 160,000 100,000
may not be P10,000,000. In fact, an independent valuation shows that the value of company B is Total Liabilities & Equities P 320,000 P 120,000
P9,700,00 (fair value of Company B). Assuming that the fair value of the net identifiable assets is
P8,000,000 ( carrying value is P6,000,000). On January 2, 2010, Maru Corporation borrowed P120,000 and used the proceeds to obtain 80% of the
outstanding common shares of Nong Corporation. The acquisition price was considered
Goodwill arising on consolidation is to be valued on the proportionate basis or “Partial” Goodwill: proportionate to Nong’s fair value. The P120,000 debt is payable in 10 equal annual principal
payments, plus interest, beginning December 31, 2010. The excess fair value of the investment over the
A. P 200,000 C. P1,700,000 underlying book value of the acquired net assets is allocated to inventory (60%) and to goodwill (40%).
B. P1,500,000 D. P2,000,000
On a consolidated balance sheet as of January 2, 2010, what should be the amount for each of the
9. Rupert Corporation issued 100,000 shares of P20 for common stock for all the outstanding stock of Rita following?
Corporation in a business combination consummated on July 1, 2010. Rupert Corporation
common stock was selling at P30 per share at the time of the business combination was 11. The amount of goodwill using proportionate basis (partial):
consummated. Out-of-pocket costs of the business combination were as follows:
Finder’s fee P50,000 A. P 0
Accountant’s fee (advisory) 10,000 B. P16,000
Legal fees (advisory) 20,000 C. P20,000
 D. P40,000
18. Using the same information in above, the amount of stockholders’ equity using proportionate (partial
12. Using the same information above, the amount of goodwill using full fair value (full/gross-up) goodwill) basis to determine non-controlling interest should be:
basis:
A. P 160,000
A. P 0 B. P 186,000
B. P16,000 C. P 190,000
C. P20,000 D. P 260,000
D. P40,000
19. Using the same information above, the amount of stockholders’ equity using full fair value
13. Using the same information above, the amount of current assets should be: (full/gross-up goodwill) basis to determine non-controlling interest should be:

A. P210,000 A. P160,000
B. P204,000 B. P186,000
C. P200,000 C. P190,000
D. P180,000 D. P260,000

14. Using the same information above, the amount of non-current asset using proportionate basis
(partial) in computing goodwill should be: 20. Philippine Co. acquired 100% of the outstanding common stock of Star Co. in a purchase transaction. The
cost of acquisition exceeded the fair value of the identifiable net assets and assumed liabilities. The general
A. P260,000 guidelines for assigning amounts to the inventories acquired provide for:
B. P268,000 A. Raw materials to be valued at original cost.
C. P276,000 B. Work in process to be valued at the estimated selling prices of finished goods, less both costs to
D. P280,000 complete and costs of disposal.
C. Finished goods to be valued at replacement cost.
15. Using the same information above, the amount of non-current asset using full fair value basis D. Finished goods to be valued at estimated selling prices, less both costs of disposal and a
(full/gross-up) in computing goodwill should be: reasonable profit allowance.

A. P260,000 21. In a business combination, an acquirer’s interest in the fair value of the net assets acquired exceeds the
B. P268,000 consideration transferred in the combination. Under IFRS 3, Business Combination, the acquirer should
C. P276,000 A. Recognize the excess immediately in profit or loss
D. P280,000 B. Recognize the excess immediately in other comprehensive income
C. Reassess the recognition and measurement of the net assets acquired and the consideration
16. Using the same information above, the amount of current liabilities should be: transferred, then recognize any excess immediately in profit or loss.
D. Reassess the recognition and measurement of the net assets acquired and the consideration
A. P100,000 transferred, then recognize any excess immediately in other comprehensive income.
B. P92,000
C. P80,000 22. Pangasinan Co. acquired 80% of the Ilocos Co. for a consideration transferred of P100,000,000. The
D. P60,000 consideration was estimated to include a control premium of P24,000,000. Ilocos net assets were
P85,000,000 at the acquisition date. Are the following statements TRUE or FALSE, according to IFRS 3,
17. Using the same information above, the amount of non-current liabilities should be: Business Combination?

A. P220,000 1. Goodwill should be measured at P32,000,000 if the non-controlling interest is measured at its
B. P208,000 share of Ilocos net assets.
C. P 180,000 2. Goodwill should be measured at P34,000,000 if the non-controlling interest is measured at fair
D. P 100,000 value.
 Statement (1) Statement (2) Accounts receivable (net) 68,400 18,200
A. False False Inventories 45,800 32,200
B. False True Equipment (net) 358,000 80,000
C. True False Patents 20,000
D. True True Total Assets P534,000 P225,200

23. Green Co., manufacturing company, owns 5% of the common stock of Meadow Co., an investment
Liabilities and stockholders’ equity
company. Meadow owns 60% of the common stock of Bell Inc. an insurance company. In Green’s Accounts payable P 8,000 P 13,200
consolidated accounting or equity method accounting be used for Meadow and Bell? Bonds payable, 10% 200,000
A. Consolidation used for Meadow and equity method for Bell. Common stock, P10 par 200,000 100,000
B. Consolidation used for both Meadow and Bell. Additional paid-in capital 30,000 30,000
C. Equity method used Meadow and consolidation for Bell. Retained earnings 96,000 82,000
D. Equity method used for both Meadow and Bell. Total liabilities and stockholders’ equity P534,000 P225,200
24. When a parent-subsidiary relationship exists, consolidated financial statements are prepared in
recognition of the accounting concept of At the date of acquisition, all assets and liabilities of Pacific Company have a book value
A. Reliability approximately equal to their respective market values except the following as determined by
B. Materiality appraisal as follows:
C. Legal entity
D. Economic entity Inventories (FIFO method) P34,200
25. A subsidiary was acquired for cash in a business combination. The purchase price exceeded the fair value of Equipment (net – remaining life – 4 yrs.) 96,000
identifiable net assets. The acquired company owned equipment with a market value in excess of the Patents (remaining life 10 yrs.) 26,000
carrying amount as of the date of combination. Goodwill (no impairment)
A consolidated balance sheet prepared would 1. Compute the amount of partial goodwill on January 1, 2011:
A. Report the unamortized portion of the excess of the market value over the carrying amount of the
equipment as part of goodwill.
A. P5,200 C. P28,800
B. Report the unamortized portion of the excess of the market value over the carrying amount of the
B. P7,600 D. P50,400
equipment as part of plant and equipment.
C. Report in excess of the market value over the carrying amount of the equipment as part of plant
and equipment. 2. Using the same information above, compute the non-controlling interests (in net assets) on January
D. Not report the excess of the market value over the carrying amount of the equipment because it 1,2011:
would be expressed as incurred.
A. P21,200 C. P23,600
B. P22,400 D. P26,180
On January 1, 2011, Euro Company acquired 90% of Pacific Company in exchange for 10,800 shares of
P10 par common stock having a market value of P241,200. Euro and Pacific condensed balance sheets 3. Using the same information above, compute the Consolidated Retained Earnings, January 1, 2011:
were as follows:
A. P 96,000 C. P169,800
Euro Company and Pacific Company B. P104,200 D. P198,000
Balance Sheets at January 1, 2011
(before combination) 4. Using the same information above, compute the Equity Holders of Parent - Retained Earnings, January
1, 2011:
Euro Co. Pacific Co.
Assets A. P 96,000 C. P169,800
Cash P 61,800 P 74,800 B. P104,200 D. P198,000
 In addition to the information above, assuming that on December 31, 2011, the following results
were given: 12. Using the same information above, compute the Equity Holders of Parent – Retained Earnings,
Dividends Paid Net Income December 31, 2011:
Euro Company P 30,000 P60,400
Pacific Company 8,000 18,800 A. P129,520 C. P138,800
B. P130,180 D. P139,600
5. Using cost method to record results of operations, compute the investment balance on
December 31, 2011: 13. Using the same information above, compute the Consolidated Total Equity (Stockholders’ Equity) on
December 31, 2011
A. P 0 C. P244,320 A. P216,180 C. P625,400
B. P241,200 D. P250,920 B. P601,380 D. P634,820

6. Using the information above, compute Dividend Income for 2011 using cost method: 14. Pete Co. acquires Dale, Inc on January 1, 2010. The consideration transferred exceeds the fair value of
Dale’s net assets. On that date, Pete has a building with a book value of P1,200,000 and a fair value of
A. P 0 C. P 8,000 P1,500,000. Dale has a building with a book value of P400,000 and a fair value of P500,000.
B. P7,200 D. P16,800 What amounts in the Building account appear on Dale’s separate balance sheet and on the
consolidated balance sheet immediately after acquisition?
7. Using the same information above, compute the Non-Controlling Interest in Net Income on December Push-down Accounting
31,2011: A. P400,000 and P1,600,000
B. P500,000 and P1,700,000
A. P 0 C. P1,220 (?) C. P400,000 and P1,700,000
B. P1,080 D. P1,880 (/) D. P500,000 and P2,000,000

8. Using the same information above, compute the Non-controlling Interests on December 31, 2011:
Income statement information for the year 2012 for Marc Corporation and its Francis 60% owned subsidiary,
A. P21,200 C. P24,020 Francis Corporation, is as follows:
B. P22,280 D. P24,600
Marc Francis
9. Using the same information above, compute the Profit for the period attributable to Equity Holders of Sales P1,800,000 P700,000
Parent on December 31, 2011: Cost of sales 800,000 500,000
Gross Profit P1,000,000 P200,000
A. P53,200 C. P72,000 Operating expenses 500,000 100,000
B. P64,180 D. P88,200 Francis’s net income P100,000
Marc’s separate income P 500,000
10. Using the same information above, compute the Consolidated/ Group Net Income on December 31,
2011: Intercompany sales for 2012 are upstream (from Francis to Marc) and total P200,000. Marc’s
December 31, 2011 and December 31, 2012 inventories contain unrealized profits of P10,000
A. P53,200 C. P65,400 and P20,000, respectively.
B. P64,180 D. P88,200
15. The consolidated sales for 2012:
11. Using the same information above, compute the Consolidated Retained Earnings, December 31, 2011:
A. P1,800,000 C. P2,380,000
A. P129,520 C. P138,800 B. P2,300,000 D. P2,500,000
B. P130,180 D. P139,600
16. The consolidated cost of sales for 2012: papers for the year ended December 31, 2012, the elimination entry concerning this transaction will
include:
A. P1,090,000 C. P1,110,000
B. P1,100,000 D. P1,120,000 A. A debit to equipment for P7,500.
B. A debit to gain on equipment for P7,500.
17. The Profit attributable to Equity Holders of Parent or CNI Contributable to Controlling Interests for 2012: C. A credit to depreciation expense for P7,500.
D. A debit to gain on equipment sale for P5,000.
A. P554,000 C. P564,000
B. P560,000 D. P610,000 22. On January 1, 2012, Pam Corp. sold a warehouse with a book value of P160,000 and a 20-year
remaining useful life to its wholly-owned subsidiary, Spam Corporation, for P240,000. Both Pam and
Income information for 2012 taken from the separate company financial statements of Pia Corporation and Spam use the straight-line depreciation method. On December 31, 2012, the separate company
its 75% owned subsidiary, Ruth Corporation is presented as follows:. financial statements contained the following balances connected with the warehouse:

Pia Ruth Pam Spam

Sales P 500,000 P230,000 Gain on sale of warehouse P80,000
Gain on sale of building 10,000 Depreciation expense P 12,000
Dividend income 37,500 Warehouse 240,000
Cost of goods sold ( 250,000) ( 130,000) Accumulated depreciation 12,000
Depreciation expense ( 50,000) ( 30,000)
Other expenses ( 100,000) ( 20,000) A working paper entry to consolidate the financial statements of Pam and Spam on December
Net income P 147,500 P 50,000 31, 2012 will include:

Pia’s gain on sale of building relates to a building with a book value of P 20,000 and a ten-year A. A debit to gain on sale of warehouse for P76,000.
remaining useful life that was sold to Ruth for P30,000 on January 1, 2012. B. A debit to gain sale of warehouse for P80,000.
C. A debit to accumulated depreciation for P4,000.
18. At what amount will the gain on sale of building appear on the consolidated/group income D. A credit to depreciation expense for P12,000.
statement of Pia and Ruth for the year 2012 should be:
23. Choco Company’s current receivables from affiliated companies at December 31, 2011 are (1) a
A. Zero C. P 7,500 P150,000 cash advance to Candy Corporation (Choco owns 30% of the voting stock of Candy and
B. P2,500 D. P10,000 accounts for the investment by the equity method), (2) a receivable of P520,000 from Cake Corporation
for administrative and selling services (Cake is 100%-owned by Choco and is included in Choco’s
19. The Consolidated/group depreciation expense for 2012 should be: consolidated financial statements), and (3) a receivable of P400,000 from Wheat Corporation for
merchandise sales on credit (Wheat is a 90%-owned, unconsolidated subsidiary of Choco accounted
A. P79,000 (?) C. P81,000 for by the equity method). In the current assets section of its December 31, 2011 consolidated balance
B. P80,000 D. P90,000 sheet, Choco should report accounts receivable from investee in the amount of:

20. The Profit attributable to Equity Holders of Parent or CNI Contributable to Controlling Interests for 2012 A. P360,000 C. P 550,000
should be: B. P310,000 D. P1,70,000

A. P147,500 C. P137,500 24. Golden Corporation owns a 70% interest in Bay Corporation, acquired several years ago at book value.
B. P138,500(?) D. P110,000 On December 31, 2011, Bay mailed a check for P20,000 to Golden in part payment of a P40,000
account with Golden. Golden had not received the check when its books were closed on December 31.
21. On January 1, 2012, Josh Corporation sold equipment with a three-year remaining useful life and a Golden Corporation had accounts receivable of P300,000 (including the P40,000 from Bay) and Bay
book value of P50,000 to its 70%-owned subsidiary for a price of P57,500. In the consolidation working
 had accounts receivable at P440,000 at year-end. In the consolidated balance sheet of Golden
Corporation and Subsidiary at December 31, 2011, accounts receivable will be shown in the amount of:
A. P740,000 C. P700,000
B. P720,000 D. P608,000
30. A parent loses control of a subsidiary (choose the incorrect one)
25. The following statements relate to consolidated financial statements. Which statements is incorrect?
A. A parent shall present consolidated financial statements in which it consolidates its investment
in subsidiaries.
B. Consolidated financial statements shall include all subsidiaries of the parent.
C. A subsidiary is excluded from consolidation if the investor is a venture capital organization,
mutual fund, unit trust or similar entity.
D. A subsidiary is not excluded from consolidation even if its business activities are dissimilar
from the other entities within the group.
A. Decrease the value attributed to goodwill, thus decreasing the risk of impairment of goodwill.
B. Decrease the value attributed to goodwill, thus increasing the risk of impairment of goodwill.
C. Increase the value attributed to goodwill, thus decreasing the risk of impairment of goodwill.
D. Increase the value attributed to goodwill, thus increasing the risk of impairment of goodwill.
A. When there is a change in absolute or relative ownership level.
B. When a subsidiary becomes subject to the control of a government, court, administrator or
regulator.
C. When the loss of control is the result of a contractual agreement.
D. When the subsidiary is operating under severe long-term restrictions that impair its ability to
transfer funds to the parent.

26. A parent is not required to present consolidated financial statements under all of the following
conditions, except
A. When the parent is itself a wholly-owned subsidiary, or is partially-owned subsidiary and its
owners do not object to the parent not representing consolidated financial statements.
B. When the parent’s debt and equity instruments are not traded in public market.
C. When the parent has filed or it is in the process of filing its financial statements with SEC for
the purpose of issuing any class of instruments in a public market.
D. When the ultimate or any intermediate parent of the parent produces consolidated financial
statements for public use that comply with PFRS.

27. What is the initial measurement of an investment in subsidiary retained by the investor when control is
lost?
A. Fair value at the date when control is lost.
B. Fair value at the beginning of the reporting period
C. Carrying amount at the date when control is lost
D. Carrying amount at the beginning of the reporting period

28. In a business combination achieved in stages, the acquirer shall

A. Not measure the previously held equity interest.
B. Remeasure the previously held interest at fair value with any resulting gain or loss included in
profit or loss.
C. Remeasure the previously held interest at fair value with any resulting gain or loss included in
other comprehensive income.
D. Remeasure the previously held interest at fair value with the resulting gain or loss included in
retained earnings.

29. PFRS 3 requires that the contingent consideration of the acquired entity shall be recognized at fair
value. The existence of contingent consideration is often reflected in a lower purchase price.
Recognition of such contingent consideration shall