MULTIPLE CHOICE – COMPUTATIONAL

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1.) Man Inc. purchased all of the net assets of Woman Company on January 2, 2011 by
issuing 8,000 shares of its P10 par common stock. At the time, the stock was selling for
P30 per share. Direct costs associated with consummating the combination totaled
P4,000. Unders IFRS 3 (2008), what total amount should the net assets acquired be
recorded by Man Inc. Assuming that contingent consideration of P5,000 is determined?
a. P249,000
b. P271,000
c. P244,000
d. P245,000

(8,000 x 30) + 5,000 = 245,000

2.) The net assets of Acquired Company have a book value of P150,000 and a fair value of
P180,000. Acquiring company paid P250,000 cash for all the net assets of Acquired
Company. Acquiring Company also paid P50,000 to an investment house as finder’s fee.
At what amount should goodwill be recorded on Acquiring Company’s books?
a. P120,000
b. P 70,000
c. P120,000
d. P 70,000

Price paid 250,000

FVNA 180,000
Goodwill 70,000

3.) On June 30, 2017, White Corporation issued 100,000 shares of its P20 par value
common stock for the net assets of Black company in a business combination accounter
for by the acquisition method. The market value of White’s common stock on June 30
was P36 per share. White paid a fee of P100,000 to the broker who arranged this
acquisition. Costs of SEC registration and issuance of the equity securities amounted to
P50,000.

Contingent consideration determined to be paid to Black Company after acquisition

amounts to P120,000.

What amount should White capitalize as the cost of acquiring Black’s net assets?
 a. P3,620,000
b. P3,650,000
c. P3,720,000
d. P3,750,000

(100,000 x 36) +120,000 = 3,720,000

4.) On January 1, 2017, CJ Corporation acquired the net assets of Rex, Inc., by issuing
600,000 shares of its P10 par value common stock. Subsequently, Rex was liquidated
and its assets and liabilities merged into CJ Corporation. CJ’s stock was selling P50 per
share on January 1, 2017. The amount of goodwill recorded by CJ in connection with
the combination was P6,120,000. CJ incurred P300,000 of legal and brokers fees
associated with the combination and P30,000 of stock issuance costs.

What is the fair value of Rex’s net assets and the amount of the increase in CJ’s
stockholder’s equity as a result of the combination, respectively?

a. P23,880,000 and P30,000,000

b. P24,180,000 and P30,000,000
c. P24,180,000 and P29,970,000
d. P23,880,000 and P29,970,000

Price paid 600,000 x 50 30,000,000

FVNA 23,880,000 ?? workback
Goodwill 6,120,000

FV of shares 600,000 x 50 30,000,000

Less: share issuance cost charged against share premium 30,000
Increase in Shareholders’ equity 29,970,000

5.) Pool Company issued 120,000 shares of P10 par common stock with a fair value of
P2,550,000 for the net assets of Spot Company. In addition, Pool incurred the following
acquisition-related costs:

Legal fees to arrange the business combination P25,000

Costs of SEC registration, including accounting
And legal fees 12,000
Costs of issuing stock certificates 3,000
General administrative costs 20,000
 Immediately before the business combination in which Spot Company was dissolved,
Spot’s assets and equities were as follows (in thousands):
Book Value Fair Value
Current assets P2,000 P1,100
Plant Assets 1,500 2,200
Liabilities 300 300
Common Stock 2,000
Retained Earnings 200

What is the amount of goodwill (income from acquisition) and APIC to be recognized by
Pool Company?
a. P(450,000) and P1,335,000
b. P(410,000) and P1,200,000
c. P(425,000) and P1,185,000
d. P550,000 and P1,185,000

Price paid 2,550,000

FVNA 3,000,000
Income from acquisition ( 450,000)

FV of shares 2,550,000
Par value (120,000 x 10) 1,200,000
Share Premium 1,350,000
Less: share issuance cost 15,000 (items highlighted with yellow)
Share premium balance 1,335,000

6.) Plata Corporation paid P100,000 cash for the net assets of Oro company, which
consisted of the following:
Book Value Fair Value
Current assets P20,000 P28,000
Property and Equipment 80,000 110,000
Liabilities assumed 20,000 18,000
The property and equipment acquired in this business combination should be recorded
at:
a. P110,000
b. P100,000
c. P91,666
d. P90,000
7.) Abel and Cain Corporations were combined on April 1, 2017 in a business combination,
and Cain Corporation was dissolved and liquidated. For the year 2017, the companies
had the following net income records:
Abel Corporation (January 1 – April 1) P 80,000
Abel Corporation (April 1 – December 31) 1,320,000
Cain Corporation (January 1 – April 1) 200,000
Cain Corporation (April 1 – December 31) 400,000
Abel Corporation, the surviving corporation, will report income for 2017 of:
a. P1,320,000
b. P1,400,000
c. P1,720,000
d. P1,800,000

Net income of acquirer (ALL) + Net income of acquiree from the date of acquisition
and onwards

Abel 80,000 + 1,320,000 1,400,000

Cain (April-Dec.) 400,000
Total 1,800,000

8.) On April 27, 2017, Peter, Inc. paid P800,000 for the assets of Ana Company. The
recorded assets and liabilities of Ana Company on April 27, 2017 follow:
Cash P160,000
Inventory 480,000
Property & Equipment (net of accumulated
Depreciation of P640,000) 960,000
Liabilities 360,000
On April 27, 2017 it was determined that the inventory of Ana had a fair value of
P380,000 and the property and equipment (net) had a fair value of P1,120,000. What is
the amount of goodwill (income from acquisition) resulting from the business
combination?
a. (P500,000)
b. P100,000
c. P300,000
d. (P360,000)

Price paid 800,000

 FVNA 1,300,000
Income from acquisition (500,000)

9.) Avon Corporation issued common stock with a par value of P450,000 and a market
value of P700,000 to acquire the net assets of Bell Corporation in a business
combination. Avon reported assets of P2,000,000 and liabilities of P542,000
immediately before the business combination. Bell Corporation’s assets and liabilities
had book values of P460,000 and P187,000, respectively. The fair values of Bell’s assets
and liabilities were P600,000 and P188,000, respectively.
What amount should be reported as total assets of the combined entity immediately
following the business combination?
a. P2,888,000
b. P2,600,000
c. P2,158,000
d. P1,870,000

Price paid 700,000

FVNA 412,000
Goodwill 288,000

2,000,000 + 600,000 + 288,000 = 2,888,000

10.) When White Company acquired Black Company’s net assets by issuing its own
capital stock, it had the following acquisition-related costs:
Broker’s fee P50,000
Pre-acquisition audit fee 40,000
General Administrative costs 15,000
Legal fees for the combination 32,000
Audit fee for SEC registration of stock issue 46,000
SEC registration fee for stock issue 5,000
Other acquisition costs 6,000

The acquisition-related costs should be debited to the following accounts:

Expenses Additional paid in capital

a. P143,000 P78,000
b. P 21,000 P51,000
c. P143,000 P51,000
 d. P 11,000 P 5,000

Expenses = 50,000 + 40,000 +15,000 +32,000 +6,000 = 143,000

Stock issuance cost = 46,000 + 5,000 = 51,000

11.) On January 1, 2011, Polo Company pays P270,000 cash and also issue 18,000
shares of P10 par common stock with a market value of P330,000 for the net asset of
Sure company. In addition Polo pays P30,000 for registering and issuing the 18,000
shares and P70,000 for professional fees to effect the combination. Summary balances
imeediately before the combination is as follows (in thousands):
Polo Book Value Sure Book Value Sure Fair Value
Cash P350 P40 P40
Inventories P120 80 100
Other current assets 30 20 20
Plant assets – net 260 180 180
Total assets P760 P320 P340

Current liabilities 160 30 30

Other liabilities 80 50 40
Common stock, P10 par 420 200
Retained Earnings 100 40
Total P 760 320

What is the total assets of Polo Company after the acquisition?

a. P1,090,000
b. P1,080,000
c. P1,260,000
d. P1,060,000

Assets(er) @ BV + Assets of A(ee) @ FV + GW – cash payment

760,000 + 340,000 + 330,000 – 370,000 = 1,060,000

Price paid 600,000

FVNA 270,000
Goodwill 330,000

12.) Astro Corporation purchased the net assets of Bistro Corporation for P160,000.
On the date of the purchase, Bistro Corporation had no long-term investments in
 marketable securities. The liabilities of the corporation amounted to P20,000. The
market values of its assets were:
Current Assets P80,000
Noncurrent Assets 120,000
Total 200,000
The noncurrent assets and goodwill (income from acquisition) acquired should
be recorded at:
Noncurrent assets Goodwill (Income from acquisition)
a. P120,000 (P20,000)
b. P100,000 0
c. P140,000 P100,000
d. P150,000 0

Price paid 160,000

FVNA 200,000 – 20,000 ) 180,000
Income from acquisition (20,000)

13.) On April 1, 2011, The Rolex company paid P600,000 for the net assets of Seiko
company in a transaction properly accounted for as acquisition. On this date, the assets
and liabilities of Seiko company were as follows:
Cash P 60,000
Merchandise Inventory 180,000
Plant Assets (net) 360,000
Liabilities 135,000
Furthermore, it was determined that the merchandise inventory of Seiko
Company had a fair market value of P142,500 and the plant assets of P420,000. What
should be the amount recorded as goodwill by Rolex Company as a result of the
business combination?
a. P0
b. P 37,500
c. P112,500
d. P112,000

Price paid 600,000

FVNA 60,000+142,500 +420,000 -135,000 487,500
Goodwill 112,500
14.) MM company issued its common stock for the net assets of PP company in a
business combination treated as acquisition. MM’s common stock issued was worth
P1,000,000. At the date of combination, MM’s net assets had a book value of P1.2
million and a fair value of P1.6 million; PP’s net assets had a book value of P650,000 and
a fair value of P800,000. Immediately following the combination, the net assets of the
combined company should have been reported at what amount?
a. P3,000,000
b. P2,200,000
c. P2,000,000
d. P1,850,000

Price paid 1,000,000

FVNA 800,000
Goodwill 200,000

MM 1,200,000
PP 800,000
Goodwill 200,000
Total assets 2,200,000

15.) The net assets of BB company have a book value of P300,000 and a fair market
value of P420,000. Among the undervalued assets are the plant and equipment which
have a book value of P200,000 and a fair value of P225,000. AA company issues stock
with a par value of P250,000and a market value of P600,000 for the net assets of BB
company. Shortly after the stock issue BB merges with AA company. At what amount
should BB’s plant and equipment be recorded on AA company’s books?
a. P250,000
b. P200,000
c. P225,000
d. P300,000

16.) Presented below is a condensed balance sheet for the Tiger company as of
December 31, 2011:
Book value Market value
Current assets P200,000 P225,000
Plant Assets 300,000 400,000
Total P500,000 P625,000
 Liabilities P150,000 P125,000
Capital stock, par P10 50,000
Additional paid in capital 100,000
Retained Earnings 200,000
Total P500,000

On January 1, 2011, Acquisition, Inc. issues 10,000 shares of its P10 par value
stock with a market value of P50 per share for the net assets of Tiger Company. What is
the total stockholders’ equity of Acquisition, Inc. after acquisition?
a. P850,000
b. P350,000
c. P450,000
d. P500,000

10,000 x 50 = 500,000

17.) Using the data in question 17, the acquisition should be recorded by Acquisition,
Inc. with the following entry:
a. Current assets 200,000
Plant assets 300,000
Liabilities 150,000
Capital stock 100,000
Additional paid in capital 50,000
Retained Earnings 200,000

b. Current assets 200,000

Plant assets 300,000
Goodwill 150,000
Liabilities 150,000
Capital stock 100,000
Additional paid in capital 400,000

c. Current assets 225,000

Plant assets 400,000
Goodwill 150,000
Liabilities 125,000
Capital stock 100,000
Additional paid in capital 50,000
 Retained Earnings 200,000

d. Current assets 225,000

Plant assets 400,000
Liabilities 125,000
Capital stock 100,000
Additional paid in capital 400,000

18.) The VV company will issue shares of P10 par value common stock for all the
assets and liabilities of the NN company. VV company’s common stock has a current
market value of P40 per share. The NN company’s statement of Financial Position prior
to the acquisition is shown below:
NN Company
Statement of Financial Position
January 1, 2017
Assets Liabilities and Equity
Current assets P320,000 Liabilities 400,000
Property/Plant & Equipment 880,000 Common stock 80,000
APIC 320,000
_______ Retained Earnings 400,000
Total assets 1,200,000 Total liabilities and SHE 1,200,000

The fair market value of the current assets is P400,000 while that of the property, plant and
equipment is P1,600,000. All the liabilities are correctly stated. VV company issued sufficient
shares of stock so that fair market value of the stock issued is equal the fair market value of NN
company’s net assets.

To have an income from acquisition of P100,000 the number of shares to be issued by VV

company should be:
a. 37,500
b. 37,000
c. 42,500
d. 42,000

Price paid ????? 1,500,000 / 40 = 37,500 shares

FVNA 1,600,000
Income from acquisition (100,000)
 19.) Using the data in question 19, to have a goodwill of P200,000, the number of
shares to be issued by VV company is:
a. 40,000
b. 44,500
c. 36,000
d. 45,000

Price paid ???? 1,800,000 / 40 = 45,000 shares

FVNA 1,600,000
Goodwill 200,000