ACC 113 | Accounting for Business Combinations WEEK 3 Online Assessment

Part I
1. When a company purchased shares of another company that represent less than 20% of the issuer company’s interest, what
type of investment is recorded by acquirer company.
a. Investment in equity securities
b. Investment in associate
c. Investment in joint venture
d. Investment in subsidiary

2. When a company purchased shares of another company that represent more than 20% but at most 50% of the issuer
company’s interest, what type of investment is recorded by acquirer company.
a. Investment in equity securities
b. Investment in associate
c. Investment in joint venture
d. Investment in subsidiary

3. When a company purchased shares of another company that represent more than 50% of the issuer company’s interest, what
type of investment is recorded by acquirer company.
a. Investment in equity securities
b. Investment in associate
c. Investment in joint venture
d. Investment in subsidiary

4. If the acquirer initially recognized an Investment in Associate, what type of income/gain from the issuer company is
recognized in separate financial statement profit or loss?
a. Share in Acquired Company’s net income
b. Dividend Income
c. Both a and b
d. None of the above

5. If the acquirer initially recognized an Investment in Equity Securities, what type of income/gain from the issuer company is
recognized in separate financial statement profit or loss if the acquirer classified its investment at FVOCI?
a. Share in Acquired Company’s net income
b. Dividend Income
c. Both a and b
d. None of the above

6. If the acquirer initially recognized an Investment in Equity Securities, what type of income/gain from the issuer company is
recognized in separate financial statement profit or loss if the acquirer classified its investment at FVPL?
a. Share in Acquired Company’s net income
b. Dividend Income
c. Both a and b
d. None of the above

7. If the acquirer initially recognized an Investment in Subsidiary, what type of income/gain is recognized in separate financial
statement profit or?
a. Share in Acquired Company’s net income
b. Dividend Income
c. Both a and b
d. None of the above

8. Assume that a company-shareholder owns 25,000 shares of another company’s 100,000 outstanding shares. After 5 years, the
issuer company still have the same outstanding shares. If the company-shareholder purchase 30,000 shares from another
shareholder of the company, what rights did the company-shareholder acquired after purchase.
a. Significant influence
 b. Joint Control
c. Control
d. Equity Interest

9. When computing goodwill in business combination achieved in stages, the previously held interest of the acquirer is
remeasured at FAIR VALUE. Where does the acquirer recognize the gain or loss on remeasurement if the equity interest
represents Significant Influence? a. Profit or Loss
b. Other comprehensive income
c. Either a or b
d. Both a or b

10. When computing goodwill in business combination achieved in stages, the previously held interest of the acquirer is
remeasured at FAIR VALUE. Where does the acquirer recognize the gain or loss on remeasurement if the equity interest
represents Joint Control?
a. Profit or Loss
b. Other comprehensive income
c. Either a or b
d. Both a or b

11. When computing goodwill in business combination achieved in stages, the previously held interest of the acquirer is
remeasured at FAIR VALUE. Where does the acquirer recognize the gain or loss on remeasurement if the equity interest
under PFRS 9 is classified as FVPL? a. Profit or Loss
b. Other comprehensive income
c. Either a or b
d. Both a or b

12. When computing goodwill in business combination achieved in stages, the previously held interest of the acquirer is
remeasured at FAIR VALUE. Where does the acquirer recognize the gain or loss on remeasurement if the equity interest
under PFRS 9 is classified as FVOCI? a. Profit or Loss
b. Other comprehensive income
c. Either a or b
d. Both a or b

13. Under accounting for business combination without transfer of consideration, a goodwill is recognized if the NCI is measured
at proportionate share or partial goodwill method. a. True
b. False
c. Bonus, sir.
d. Not sure

14. Under accounting for business combination without transfer of consideration, a goodwill is recognized if the NCI is measured
at fair value or full goodwill method. a. True
b. False
c. Bonus, sir.
d. Not sure

15. This is the amount used during combination of accounts to compute for goodwill when there is incomplete business
combination such as proper valuation of accounts are yet to be done. a. Provisional amount
b. Initial Fair value
c. Management Judgment
d. Cost

16. What is the measurement period of remeasurement and recomputation of Goodwill and adjustment of combined accounts
when the provisional amount is already satisfied with actual valuation.
a. One fiscal year
b. 12 months
c. One calendar year
 d. None of the above

17. Business combination achieved in stages/step acquisition is accounted for a. retrospectively

b. prospectively
c. Either a or b
d. Both a or b

18. A Co. is great supporter of B Co. as the former let the latter company use its own patent for a manufacturing technology.
Later on, A Co. bought B Co. as a whole, how do A Co. recognized the rights reacquired?
a. As intangible asset
b. As goodwill
c. Either a or b
d. Both a or b

19. When a contingent consideration issued by the acquirer to the acquiree entity is both measurable and probable, how do the
acquiree company recognize this aside from ‘as consideration’? a. Liability
b. Share Capital
c. Share Premium
d. Either a or c

20. EASY BONUS QUESTION: Cutest Full-time Accountancy Department Faculty teacher? a. Sir Ronnie
b. Sir AJ
c. Sir Mark
d. Sir Bernard

PART II

Problem No. 1
As of Dec 20x1, Sipiyey Corp. has significant influence on Narseng Co. The former owns 35% interest of the latter company’s
outstanding shares. On Dec 20x2, Narseng Co. wants to increase its outstanding shares by 15%, so it issues new shares to the public.
Shown below is the balance sheet of Narseng Co.
Dec 20x1 Dec 20x2
Current Asset 130,000 150,000
Non-current Asset 330,000 ?
Total Asset 460,000 ?

Current Liability 50,000 65,000

Non-current Liability 98,000 105,000
Share Capital, P7 140,000 ?
Share Premium 100,000 124,000
Retained Earnings 72,000 65,000
Total L&E 460,000 ?

On Nov 20x3, A lot of Narseng Co. shareholders exercise their appraisal right which entitles them to fair value of their shares/interest
in the company. Unfortunately, no outside buyers are interested to buy the shares of the dissenting stockholders. Instead, on Dec 20x3,
Narseng Co. bought its own shares from the dissenting stockholders. During the year 20x3, no new shares were issued. All the
dissenting stockholders own a total of 43% interest in the company

Compute for the following:

1. Narseng Co. Outstanding shares as of Dec 20x3
2. Sipiyey Corp. owned shares
3. Fair Value of Narseng Co’s shares on Dec 20x2
4. Sipiyey Corp. Controlling Interest(%) as of Dec 20x3
5. Goodwill as of Dec 20x3

Problem No. 2
As of Dec 20x1, Sipiyey Corp. has significant influence on Narseng Co. The former owns 35% interest of the latter company’s
outstanding shares. On Dec 20x2, Narseng Co. wants to increase its outstanding shares by 15%, so it issues new shares to the public.
Shown below is the balance sheet of Narseng Co.
Dec 20x1 Dec 20x2
Current Asset 130,000 150,000
Non-current Asset 330,000 ?
Total Asset 460,000 ?

Current Liability 50,000 65,000

Non-current Liability 98,000 105,000
Share Capital, P7 140,000 ?
Share Premium 100,000 127,000
Retained Earnings 72,000 65,000
Total L&E 460,000 ?
On Dec 20x2, Sipiyey Corp. bought 6,800 shares directly from Narseng Co.’s shareholders. Sipiyey Corp. paid P125,000 cash for the
bought shares. Prior to acquisition, Sipiyey Corp.’s investment in associate is carried on its book at P93,000 which is undervalued by
P12,000. Sipiyey elected the proportionate share method of accounting for NCI.

Compute for the following, as of Dec 20x2

1. Narseng Co.’s Non-current Asset
2. Sipiyey Corp.’s Controlling Interest(%)
3. Non-controlling interest
4. Investment Account’s Remeasurement gain on Sipiyey Corp.’s Other Comprehensive Income 5. Goodwill
6. Investment in Subsidiary (Sipiyey’s Separate FS)
7. Goodwill under Fair Value Method of accounting for NCI