Provision for annual leave 2, 000

The financial year for Killua Ltd. is January- December.

The fair value of each Killua Ltd. share at acquisition date is 1.90. At acquisition date, the acquirer could
only determine a provisional fair value for the plant. On March 1, 2016, Killua Ltd. received the final value
from the independent appraisal, the fair value at acquisition date being P131, 000. Assuming the plant
had a further five year life from the acquisition date.
The amount of goodwill arising from the business combination at December 1, 2015 ?
a. P15, 000 c. P5, 000
b. 9, 000 d. 0

ANSWER: B

Consideration transferred (100, 000 x 1.90) P190,

000
Less: Fair Value of net identifiable assets acquired
Cash P50, 000
Furniture & Fittings 20, 000
Accounts Receivable 5, 000
Plant 131, 000
Accounts Payable (15, 000)
Current tax liability (8, 000)
Liabilities (2, 000) 181,
000
Goodwill P9,
000

2. The E. Vendivel Company acquired the net assets of the Vivar Company on January 1, 2015 and
made the following entry to record the purchase:
Current Assets……………………………………… 100, 000
Equipment…………………………………………… 150, 000
Land…………………………………………………….. 50, 000
Buildings………………………………………………. 300, 000
Goodwill………………………………………………. 100, 000
Liabilities…………………………………. 80, 000
Common Stock, P1 par……………. 100, 000
Paid-in capital in excess of par… 520, 000

Assuming that the additional shares on January 1, 2017 would be issued on that date to compensate for
any fall in the value of E. Vendivel common stock below P16 per share, the settlement would be to cure
the deficiency by issuing added shares based on their fair values on January 1, 2017. The fair price of the
shares on January 1, 2017 was P10.

What is the additional number of shares issued on January 1, 2017 to compensate for any fall in the value
of the stock?

a. P160, 000 c. 60, 000

b. 100, 0000 d. 10, 000

ANSWER: C
Deficiency (16-10) x 100, 000shares issued to acquire………………………………. P600, 000
Divided by: Fair value of the share……………………………………………………… 10
Additional number of shares to issued…………………………………………………. P60, 000

3. X Company acquires all of Y Company in an acquisition properly accounted for as an asset

acquisition. X issues 80,000 shares of common stock with a fair value of P8,000,000 for Y’s net assets.
The fair values of Y’s assets and liabilities approximate their book values, except Y has customer lists
valued at P3,000,000 that are not reported on its balance sheet, and its plant assets are overvalued by
P5,000,000. Here are the balance sheets of X and Y prior to the acquisition:

X Company Y Company

Assets P30,000,000 P10,000,000

Liabilities P16,000,000 P 6,000,000

Common stock, $1 par 1,000,000 100,000

Additional paid-in capital 9,000,000 2,900,000

Retained earnings 4,000,000 1,000,000

P30,000,000 P10,000,000

How much goodwill is recognized for this acquisition?

a. P 2,000,000
b. P 3,000,000
c. P 6,000,000
d. P 11,000,000

ANS: C