ACCTG.

FOR BUSINESS COMBINATION

PRELIM EXAM. – MARCH 1, 2021

PLS. ANSWER THE FOLLOWING:

CHAPTER 1 – Problem 6 nos. 1, 3 and 5
CHAPTER 2 – Problem 5

Answer:
Chapter 1- Problem 6
1.
Contribution transferred(1,000,000+720,955) 1,720,955
NCI (3,400,000-1,700,000) x 20% 340,000
Previously Held Equity Interest in the acquire -
________
Total 2,060,955
Fair value of net identifiable assets acquired 1,700,000
________
Goodwill 360,955
========

Year 1: 200,000/1.12 = 178,571.43

2: 200,000/1.2544 = 159,438.78
3: 200,000/1.404928 = 142,356.05
4: 200,000/1.573519 = 127,103.64
5: 200,000/1.762342 = 113,485.35
__________
720,955.25
Answer: a
3.
Consideration transferred (2,000 x 500) 1,000,000
NCI -
Previously held equity interest in the acquire -
________
Total 1,000,000
Fair value of net identifiable asset acquired 1,200,000
________
Gain on bargain purchase ( 200,000)
========

Answer: c

5.

Consideration transferred 2,400,000

CTI -
Previously held equity interest -
________
Total 2,400,000
Fair value of net identifiable assets acquired
(2,860k-20k+60k+99k) –(480k+78k) 2,441,000
_________
Gain on bargain purchase ( 41,000)
=========

Answer: b
. Fair Previous
values Carrying
(CA for amounts TTD(DTD)
financial (TB for
reporting taxation)
_____________________________________________
Cash 10,000 10,000 -
Receivables-net 280,000 400,000 ( 120,000 )
Inventory 350,000 480,000 ( 130,000 )
Land 2,200,000 2,000,000 200,000
R&D 60,000 60,000
Payables 480,000 400,000 ( 80,000 )

Taxable temporary difference(TTD)(200k+60K) 260,000

Multiply by: Tax rate 30%
______
Deferred tax liability 78,000

Deductible temporary difference(DTD) 330,000

Multiply by: Tax rate 30%
_______
Deferred tax asset 99,000

Chapter 2- Problem 5
1. b
2. c
3. a
4. b
5. d
6. d
7. a
8. b
9.d
10.d