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On January 1, 20x1, COLLOQUY Co. acquired all of the identifiable assets and assumed all of the
liabilities of CONVERSATION, Inc. by issuing its own ordinary shares. Information at acquisition
date is shown below:
Combined
COLLOQUY Co. CONVERSATION, Co. entity
(carrying amounts) (fair values)
Identifiable assets 9,600,000 6,400,000 16,000,000
Goodwill - - ?
Total assets 9,600,000 6,400,000 ?
Liabilities 2,800,000 3,600,000 6,400,000
Share capital 2,400,000 1,200,000 2,800,000
Share premium 1,200,000 1,000,000 4,800,000
Retained earnings 3,200,000 600,000 ?
Total liabilities & equity 9,600,000 6,400,000 ?

Additional information:
 COLLOQUY’s share capital consists of 60,000 ordinary shares with par value of ₱40 per share.
 CONVERSATION’s share capital consists of 3,000 ordinary shares with par value of ₱400 per
share.

1. How much is the fair value of consideration transferred on the business combination?
a. 4,000,000 b . 2,400,000 c. 4,400,000 d. 4,800,000

A
Solution:
COLLOQUY Co. Combined entity Increase
Share capital 2,400,000 2,800,000 400,000
Share premium 1,200,000 4,800,000 3,600,000
Totals 3,600,000 7,600,000 4,000,000

The fair value of the shares transferred as consideration for the business combination is ₱4,000,000 (i.e.,
total increase in share capital and share premium accounts).

2. How many shares were issued in the business combination?

a. 40,000 b. 12,000 c. 36,000 d. 10,000

D
Solution:
Increase in COLLOQUY’s share capital account
(see table above) 400,000
Divide by: ABC’s par value per share 40
Number of shares issued 10,000

3. How much is the acquisition-date fair value per share?

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a. 400 b. 440 c. 280 d. 360

A
Solution:
Fair value of consideration transferred 4,000,000
Divide by: Number of shares issued 10,000
Acquisition-date fair value per share 400

4. How much goodwill was recognized on acquisition date?

a. 980,000 b. 1,200,000 c. 1,280,000 d. 1,080,000

B
Solution:
Consideration transferred 4,000,000
Non-controlling interest in the acquiree -
Previously held equity interest in the acquiree -
Total 4,000,000
Fair value of net identifiable assets acquired (6.4M - 3.6M) (2,800,000)
Goodwill 1,200,000

5. What is the retained earnings of the combined entity immediately after the business
combination?
a. 3,120,000 b. 3,320,000 c. 3,280,000 d. 3,200,000

D 3,200,000 – COLLOQUY’s retained earnings