b.

175,200

c. 162,200

d. 157,334
PROB. 4-20 (AICPA)
The Chief Executive Officer (CEO) of buy- It Company is contemplating selling the business to new
interest. The cumulative earnings for the past 5 years amounted to P800,000. The annual earnings, based
on an average rate of return of investment for this industry, would have been P145,000. If excess earnings
are to be capitalized at 8%, what would be the implied goodwill in this transaction?
a. Ock,937,500

b. 800,000

c. 187,500

d. 52,400

PROB. 4-21 (RPCPA)

On July 1, 2009, the balance sheet of Com Co. and Pol Co. are as follows:
Com Co. Pol Co.
Assets P4,000,000 P2,500,000
Liabilities 1,500,000 800,000
Capital stock, no par 2,000,000
Capital stock, 100 par 1,000,000
Additional paid in capital 700,000 300,000
Retained earnings (200,000) 400,000
Com Co. on this date, agreed to acquire all the assets and assume all the liabilities of Pol Co. in exchange
to shares of stock that it will issue. The stock of Com Co. is in the market at P50 per share. The assets of
Pol Co. are to be appraised, and Com Co. is to issue shares of its stock with a market value equal to that
of the net assets transferred by Pol Co. The value of the assets of Pol Co. per appraisal, increased by
P300,000
a. On the assumption that the “purchase” method is applied, the total liabilities and stockholders equity of
Com Co. reflecting the combination is:
a. 6,800,000