On September 18, 2010, OL Co. acquired all the TM Inc.

’s P2,000,000
identifiable assets and P500,000 liabilities. Book values of the TM’s assets
and liabilities equal to their fair values except for the overvalued plant &
equipment. As a consideration, OL issued its own shares of stock with a market
value of P1,600,000. The merger resulted into P700,000 goodwill. Assuming OL
had P50,000,000 total assets prior the combination.
1. How much is the combined total assets?
a. P6,400,000 c. P7,100,000
b. P6,600,000 d. P7,000,000

A condensed balance sheet at July 1, 2010 and the related current fair
value data for DEF Company are presented below:

Carrying value Fair Value

Current assets P 184,000 P 202,250
Property and equipment 296,250 345,000
Patent 29,250 24,000
Total asstes P 509,500

Current Liabilities P 53,750 P 53,750

Non-current liabilities 140,000 148,750
Capital stock, P20 par value 105,00
0
Retained earnings 210,750
Total liabilities and P 509,750
stockholders’equity

2. How much is the goodwill (gain on acquisition) to be recorded by LMN

Corp.?
a. P 12,500 c. P (43,000)
b. P (12,500) d. P 43,000

3. What is the net increase in the stockholder’s equity in the books of LMN
Corporation as a result of the business combination?
a. P 139,500 c. P 127,000
b. P 319,500 d. P 200,250

The following statement of financial position were prepared for HIJ

Corp. and NOP Co. on January 1, 2010, just before they entered into a business
combination.

HIJ Corp NOP Co.

Cash P 210,000 P 5,000
Accounts receivable 75,000 20,000
Merchandise inventory 200,000 50,00
0
Building and equipment 400,000 100,000
Accumulated depreciation (100,000) 25,000
Goodwill 50,000
Total Assets P 785,000 P 200,000

Accounts payable P 125,000 P 70,000

Bonds payable 200,000 30,000
Common stock
P30 par value 210,000
P20 par value 50,000
Additional paid-in capital 50,000 10,000
Retained earnings 200,000 40,000
Total Liabilities & P 785,000 P 200,000
Stockholders’ equity

On that date, the fair market value of NOP’s inventories and building and
equipment were P78,000 and P124,000 respectively, while bonds payable has a
fair value of P42,000. The fair market values of all other assets and
liabilities of NOP (except for goodwill) were equal to thier book values. HIJ
Corp. acquired the net assets of NOP Co. by issuing 2,500 shares of its P30
par value common stock (current fair value P36 per share) and purchase price
in cash amounting to P12,000. Contingent consideration that is determinable
(probable and resonably estimated) amount to P2,000. Additional cash payments
made by HIJ Corp. in completing the acquisition were: Legal fees for contract
of business combination, P8,000; Accounting and legal fees for SEC
registration, P11,000; Printing costs of stock certificates, P6,000; Finder’s
fee, P7,000; Indirect cost, P5,000.

4. As a result of the business combination, the amount of total assets and

liabilities, respectively, in the books of the surviving company
a. P 1,016,000 : P437,000 c. P 963,000 : P439,000
b. P 963,000 : P437,000 d. P 1,013,000 : P439,000

5. As a result of the business combination, the amount of common stock,

additional paid-in capital and retained earnings, respectively, in the
books of the surviving company
a. P285,000 : P48,000 : P195,000 c. P285,000 : P50,000 : P189,000
b. P285,000 : P50,000 : P193,000 d. P260,000 : P60,000 : P240,000

On January 2, 2010, the FB Company purchased the net assets of CP

Company by issuing shares of stocks at P1,500,000 fair market value. Book
value and fair value balances sheet data on January 1, 2010, are as follows:
FB Company CP Company
Book Fair Book Fair
Value Value Value Value
Cash P P P P
2,300,000 2,300,000 150,000 150,000
Accounts receivable 50 500 49 49
0,000 ,000 0,000 0,000
Inventory 75 650 35 30
0,000 ,000 5,000 0,000
Building & Equipment, net 90 730 76 53
0,000 ,000 0,000 2,000
Goodwill
45,000 40,000
TOTAL ASSETS P P P P
4,450,00 4,180,000 1,800,000 1,512,000
Liabilities P P P P
500,000 500,000 285,000 285,000
Capital stock 80 30
0,000 0,000
Additional pain in 45 48
capital 0,000 0,000
Retained Earnings 2,700 73 `
,000 5,000
TOTAL LIAB & SHE P P
4,450,000 1,800,000

FB incurred and paid legal and brokerage fees of P45,000 for business
combination; and P15,000 indirect acquisition costs. Contingency fee of
P20,000 for additional legal services would be paid within the year.
Immediately after the business combination:

6. The combined total assets.

a. P4,750,000 c. P6,195,000
b. P6,240,000 d. P6,300,000

BGP, SRL and KCJ agreed to a business combination. Their condensed

balance sheets before combination show:
BGP SRL KCJ
Book Value Fair Value Book Value Fair Value
ASSETS P 7,000,000 P P950,000 P9,625,000 P9,000,000
875,000
Liabilities 4,987,50 307,0 2,625,000
0 00
Capital stock, P100 par 2,625,00 437,0 1,750,000
0 00
Additional paid in 218,0 700,00
capital 00 0
Retained (612,000 (87,50 4,550,000
earnings/(deficit) ) 0)
LIABILITIES & SHE P 7,000,000 P 875,000 P9,625,000
It was agreed that BGP will be the continuing entity and shall issue 4,180
shares to SRL and 60,800 shares to KCJ. Market value of BGP’s share on the
date of business combination is P102. Immediately after the business
combination:
7. The stockholders’ equity of BGP increased by:
a. P6,237,920 c. P7,018,000
b. P9,030,500 d. P6,627,960

AB Inc., CD Inc. and EF Inc. are to combine. The stockholder’s equity on

their respective balance sheets immediately prior to combination show:

AB Inc. CD Inc. EF Inc.

Common stock P 300,000 P200,000 P400,000
Additional paid in capital 70,000 100,000 -
Retained earnings (40,000) 60,000 90,000

As per appraisal, book values of CD’s assets and liabilities approximate their
fair values except for the Land and Non-current liabilities, which is
undervalued by P50,000 and P10,000 respectively. EF’s Equipment and Long-term
debt is overvalued by P80,000 and P130,000, respectively. All other EF’s
assets and liabilities equal to their fair values. It was agreed that AB shall
issue its own shares of stocks to CD and EF. Twenty five percent of the total
stocks issued shall be received by CD and the remaining, will be given to EF.
Ab paid P20,000 and P90,000 Indirect costs with CD’s and EF’s business;
respectively. Immediately after the combination, AB has Common stock balance
of P1,100,000. AB P100 par common stock has a market value of P150.
8. How much retained earnings is to be reported in the combined balance
sheet?
a. P50,000 c. P(50,000)
b. P60,00 d. P(60,000)

The following are the balance sheets of GBX and PSP Company as of
December 31, 2009.

GBX PSP
Cash P 250,000 P
50,000
Receivables 175,00 37,5
0 00
Inventories 200,00 62,5
0 00
Land 187,50 250,0
0 00
Building (net) 800,00 250,00
0 0
Equipment (net) 625,00 600,00
0 0
Total Asstes P 2,237,500 P 1,250,000

Accounts Payable P P
462,500 150,000
Ordinary Shares 1,250,00 500,0
0 00
Share Premium 125,0 350,0
00 00
Retained Earnings 400,0 250,0
00 00
Total Liabilities and Equity P2,237,500 P 1,250,000

GBX decided to acquire 17,000 outstanding shares of PFP on January 1, 2020.

GBX will issue 25,500 ordinary shares with market value of P30 per share in
exchange for the 17,000 outstanding shares of PSP. GBX and PSP’s ordinary
shares both have a par value of P25 per share. The book values reflect fair
values except for building of GBX which has a net realizable value of
P1,050,000 and inventories and land of PSP which have a net realizable value
of P87,000 and P325,000, respectively. GBX also paid costs of registering and
issuing securities amounting to P30,000 and direct costs combination amounting
to P62,500.
 9. How much is the consolidated shareholders’equity after the combination?
a. P 2,627,500 c. P 2,882,500
b. P 2,702,500 d. P 2,327,500

On August 1, 2009 the MNO Company acquired 100% of the NOP Company for a
consideration transferred of P32M. At the acquisition date the carrying amount
of NOP’s net asset was P20M. At the acquisition date a provisional fair value
of P24M was attributed to the net assets. An additional valuation received on
June 30, 2010 increased this provisional fair value to P27M and on august 31,
2010 this fair value was finalized at P28M.
10. What amound should MNO present for goodwill in its statement of
financial position at December 31, 2010?
a. P5M c. P4M
b. P8M d. P12M

On October 1, 2009 the TUV Company acquired 100% of GHI Company when the
fair value of G’s net assets was P29M and thier carrying amount was P30M. The
consideration transferred comprised of P50M in cash transferred at the
acquisition date, plus another P15M in cash to be transferred 11 months after
the acquisition date if a specified profit target was met by GHI. At the
acquisition date there was only a low probability of the profit target being
met, so the fair value of the additional consideration liability was P25M. In
the event, the profit target was met and the P15M cas was transferred.
11. What amount should TUV present for goodwill in its statement of
consolidated financial position at december 31, 2010.
a. P23.5m c. P21m
b. P20M d. P36M

On January 2, 2010, Polo Corporation purchase 80% of Son Co.’s common

stock for P324,000. P15,000 of the excess is attributable to goodwill and the
balance to a depreciable asset with an economic life of 10 years. Non-
controlling interest is measured at its fair value on the date of the
acquisition. On the date of acquisition, stockholder’s equity of the two
companies are as follows:
Polo Son Company
Corporation
Common Stock P525,000 P120,000

Retained Earnings 780,000 210,000

On December 31, 2010, Son Co. reported net income of P52,500 and paid
dividends of P18,000 to Polo. Polo reported earnings from its separate
operations of P142,500 and paid dividends of P69,000. Goodwill had been
impaired and should be reported at P3,000 on December 31, 2010.
12. What is the consolidated net income on December 31, 2010?
a. P178,175 c. P189,375
b. P177,000 d. P180,000

13. What is the consolidated retained earnings on December 31, 2010?

a. P879,000 c. P881,100
b. P878,700 d. P1,039,875

14. What is the NCI in net income of Son Company on December 31, 2010?
a. P9,375 c. P9,300
b. P10,500 d. P6,900

15. What amount of the NCI is to be presented in the consolidated

balance sheet on December 31, 2010?
a. P82,125 c. P77,250
b. P83,400 d. P72,750

16. What is the consolidated net income attributable to parent’s

stockholders on December 31, 2010?
a. P168,000 c. P178,200
b. P170,100 d. P180,000
On November 15, 2010, Manila company, a Philippine company ordered merchandise
from US company for 3,500 US dollars. The merchandise was shippep and invoice
on December 10, 2010. Manila company paid the invoice on January 10,2010. The
spot rates for US dollars on the respective dates were:
November 15, 2010 P49.85
December 10, 2010 48.65
December 31, 2010 45.25
January 10, 2011 46.75
17. In Manila’s December 31, 2010, income statement, what is the
foreign exchange gain (loss)?
a. P16,100 c. P(11,900)
b. P(16,100) d. P11,900

On October 1, 2010,Pinoy company sold goods on account to a Thai corporation

for 9,000 Baht. The date of delivery is October 7, 2010 and payment is due on
January 30,2011. Exchange rates were as follows:
BID rate OFFER rate
Oct. 01, 2010 P47.50 P49.20
Oct. 27, 2010 48 46
Dec. 31, 2010 44.70 43
Jan. 30 2011 42 45.50
18. How much is the forex gain or loss to be recognized on January 30,
2011?
a. P22,500 gain c. P24,300 gain
b. P24,300 loss d. P22,500 loss

A corporation received a promissory note denominated in foreign currency

from the sales made to a Singaporean customer. The following were the related
transactions: (in Singaporean dollars). On December 1, A corporation sold
merchandise to a Singaporean customer for 60-ady, 15% promissory note for
$48,000, at a buying rate of $1 to P47.50. On December 31, the buying spot
rate is $1 to P46.85. On January 30, the buying spot rate is $1 to P47.75.
19. On the settlement date, how much is the forex gain or loss?
a. P43,740 gain c. P31,590 gain
b. P31,590 loss d. P43,740 loss

On December 1, 2010, M Company acquired goods on account from a Korean

Company. The amount of purchase was 370,000 Korean won. M will settle the
account on January 2, 2011. On December 1, the spot rate was 25 Korean won for
one Philippine peso. Also on December 1, M entered into a futures contract to
purchase 370,000 Korean won on January 2, 2011 at a forward rate of 50 Korean
won for one Philippine peso. The spot rate and forward rate for one Philippine
peso on December 31, 2010 is 40 Korean won.

20. How much is the foreign exchange gain or loss on hedging

instrument - forward contract?
a. P5,550 gain c. P1,850 gain
b. P5,550 loss d. P1,850 loss

The following data applies to Davao Company’s sale of 8,250 foreign

currency units under a forward contract dated November 1, 2010 for delivery on
January 31, 2011:

11/1/10 12/31/10
Spot Rates P55 P53
30-day forward 51 50
rate
90-day forward 48 45
rate
Davao entered into the forward contract to speculate in the foreign currency.

21. In its income statement for the year ended December 31, 2010, what
amount of loss should Davao report from this forward contract?
a. P41,250 c. P16,500
b. P24,750 d. -0-

Reed Company. has the following information for November:

Beginning Work in Process Inventory

(70% complete as to conversion) 6,000 units

Started 24,000 units
Ending Work in Process Inventory
(10% complete as to conversion) 8,500 units

Beginning WIP Inventory Costs:

Material $23,400

Conversion 50,607

Current Period Costs:

Material $31,500

Conversion 76,956

All material is added at the start of the process and all finished products
are transferred out.

22. Refer to Reed Company. How many units were transferred out in
November?
a. 15,500
b. 18,000
c. 21,500
d. 24,000

23. Refer to Reed Company. Assume that weighted average process

costing is used. What is the cost per equivalent unit for material?
a. $0.55
b. $1.05
c. $1.31
d. $1.83

24. Refer to Reed Company. Assume that FIFO process costing is used.
What is the cost per equivalent unit for conversion?
a. $3.44
b. $4.24
c. $5.71
d. $7.03

The Holiday Company makes wreaths in two departments: Forming and

Decorating. Forming began the month with 500 wreaths in process that were 100
percent complete as to material and 40 percent complete as to conversion.
During the month, 6,500 wreaths were started. At month end, Forming had 2,100
wreaths that were still in process that were 100 percent complete as to
material and 50 percent complete as to conversion. Assume Forming uses the
weighted average method of process costing. Costs in the Forming Department
are as follows:
Beginning Work in Process Costs:
Material $1,000
Conversion 1,500
Current Costs:
Material $3,200
Conversion 5,045
The Decorating Department had 600 wreaths in process at the beginning of the
month that were 80 percent complete as to material and 90 percent complete as
to conversion. The department had 300 units in ending Work in Process that
were 50 percent complete as to material and 75 percent complete as to
conversion. Decorating uses the FIFO method of process costing, and costs
associated with Decorating are:

Beginning WIP Inventory:

Transferred In $1,170
Material 4,320
Conversion 6,210
Current Period:
Transferred In ?
Material $67,745
Conversion 95,820

25. Refer to Holiday Company. How many units were transferred to

Decorating during the month?
a. 600
b. 4,900
c. 5,950
d. 7,000

26. Refer to Holiday Company. What was the cost transferred out of
Forming during the month?
a. $5,341
b. $6,419
c. $8,245
d. $8,330

27. Refer to Holiday Company. Assume 8,000 units were transferred to

Decorating. Compute the number of equivalent units as to costs in
Decorating for the transferred-in cost component.
a. 7,400
b. 7,700
c. 8,000
d. 8,600

28. Refer to Holiday Company. Assume 8,000 units were transferred to

Decorating. Compute the number of equivalent units in Decorating for
material.
a. 7,970
b. 8,000
c. 8,330
d. 8,450

29. Refer to Holiday Company. Assume 8,000 units were transferred to

Decorating. Compute the number of equivalent units in Decorating for
conversion.
a. 7,925
b. 7,985
c. 8,360
d. 8,465

30. Refer to Holiday Company. Assume that 8,000 units were transferred
to Decorating at a total cost of $16,000. What is the material cost per
equivalent unit in Decorating?
a. $8.50
b. $8.65
c. $8.80
d. $9.04

31. Refer to Holiday Company. Assume that 8,000 units were transferred
to Decorating at a total cost of $16,000. What is the conversion cost
per equivalent unit in Decorating?
a. $11.32
b. $11.46
c. $12.00
d. $12.78

32. Refer to Holiday Company. Assume the material cost per EUP is
$8.00 and the conversion cost per EUP is $15 in Decorating. What is the
cost of completing the units in beginning inventory?
a. $ 960
b. $ 1,380
c. $ 1,860
d. $11,940