CHAPTER 14

MULTIPLE CHOICE 14-1: a Purchase price (8,000 shares x P30) Direct acquisition cost Contingent consideration Acquisition cost

P240,000 4,000 5,000 P249,000 P250,000 50,000 P300,000 180,000 P120,000 P3,600,000 100,000 20,000 P3,720,000 P30,000,000 300,000 P30,300,000 6,120,000 P24,180,000 P30,000,000

14-2: a Purchase price Direct acquisition cost Acquisition cost Less: Fair value of net assets acquired Goodwill 14-3: c Purchase price (100,000 shares x P36) Direct acquisition cost Contingent consideration Acquisition cost 14-4: b Purchase price (600,000 shares x P50) Direct acquisition cost Acquisition cost Less: goodwill recorded Fair value of net assets acquired Capital stock issued (at par)

14-5: c Purchase price P2,550,000 Legal fees 25,000 Acquisition cost P2,575,000 Less: Fair value of net assets acquired Current assets P1,100,000 Plant assets 2,200,000 Liabilities ( 300,000) 3,000,000 Income from acquisition P( 425,000) 14-6: a (at fair value at date of acquisition) 14-7: d Abel net income, January to December (P80,000 + P1,320,000) P1,400,000 Cain net income, April to December 400,000 Total net income P1,800,000 14-8: a Acquisition cost P 800,000 Less: Fair value of net assets acquired Cash P 160,000 Inventory 380,000 Property, plant and equipment 1,120,000 Liabilities ( 360,000) 1,300,000 Income from acquisition P (500,000)

14.9

a Acquisition cost Less: Fair value of net assets acquired (P600,000 P188,000) Goodwill Avons assets Bells assets at fair value Total assets

P 700,000 412,000 P 288,000 2,000,000 600,000 P2,888,000

14-10: b Debit to Investment in Stock Brokers fee Pre-acquisition audit fee Legal fees for the combination Total Debit to expenses: General administrative costs Other indirect costs Total Debit to APIC Audit fee for SEC registration of stock issue SEC registration fee for stock issue Total 14-11: d Acquisition costs: Cash Stocks issued at fair value Contingent liabilities Total Less: fair value of net assets acquired: Cash Inventories Other current assets Plant assets (net) Current liabilities Other liabilities Goodwill

50,000 40,000 32,000 P 122,000 P 15,000 6,000 P 21,000 P 46,000 5,000 P 51,000

P200,000 330,000 70,000 P600,000 P40,000 100,000 20,000 180,000 (30,000) (40,000)

270,000 P330,000 P 760,000 (200,000) ( 30,000) P 530,000 340,000 330,000 P1,200,000 P1,400,000 1,350,000

Total assets after combination: Total assets before combination Cash paid Registration and issuance costs of shares issued Polos assets after combination Assets acquired at fair values Goodwill Total assets after combination 14-12: d Acquisition cost Less: Fair value net assets acquired

Goodwill 14-13: a Acquisition cost Less: Fair value of net identifiable assets acquired: Current assets P 80,000 Non-current assets 120,000 Liabilities ( 20,000) Income from acquisition Non- current assets 14-14: c Acquisition cost Less: Fair value of identifiable assets acquired: Cash P 60,000 Merchandise inventory 142,500 Plant assets (net) 420,000 Liabilities (135,000) Goodwill 14-15: b Acquisition cost Less: Fair value of identifiable assets acquired Goodwill MMs net assets at book value PPs net assets at fair value Total assets after combination

50,000

P160,000

180,000 P(20,000) P120,000 P600,000

487,500 P112,500 P1,000,000 800,000 P 200,000 1,200,000 800,000 P2,200,000

14-16: c, under the purchase method assets are recorded at their fair values (P225.000) 14-17: d Capital stock issued at par (10,000 shares x P10) APIC (10,000 shares x P40) Total 14-18: d, net assets are recorded at their fair values. 14-19: a Income from acquisition Fair value of net assets acquired P2,000,000 P400,000) Acquisition cost Shares to be issued (P1,500,000 P40) 14-20: d Goodwill Fair value of net assets acquired Acquisition cost Shares to be issued (P1,800,000 P40) P 100,000 1,600,000 1,500,000 37,500 shares P 200,000 1,600,000 P1,800,000 45,000 shares P100,000 400,000 P500,000

14-21: Total assets of Pablo before acquisition at book value Total assets acquired from Siso at fair value (100,000 +440,000) Total assets Less: cash paid (15,000 + 25,000) Total assets after cash payment Goodwill to be recognized (Sched 1) Total assets after combination Sched 1: Acquisition cost: Purchase price (30,000 shares x P20) 600,000 Direct cost 25,000 Contingent consideration 50,000 Fair value of net assets acquired (540,000 60,000) Goodwill 14-22: Stockholders equity before acquisition Capital stock issued at par (30,000 shares x P10) APIC (50,000 +300,000) 15,000 Stockholders equity after acquisition 14-23: a Acquisition cost Less: fair value of net assets acquired Goodwill Total goodwill recorded (250,000 + 268,000) 14-24: a A Company B Company C Company Cash paid for combination expenses Goodwill (see 14-23) Total assets after combination 14-25: a Stockholders equity before acquisition Capital stock issued at par (229,000 shares x P10) Additional paid-in-capital [(229,000 x 12) 10,000] Indirect cost (reduction from retained earnings) Stockholders equity after acquisition P1,300,000 2,290,000 2,738,000 (20,000) 6,308,000 5,250,000 6,800,000 900,000 (30,000) 518,000 13,438,000 B Company P4,400,000 4,150,000 P 250,000 C Company P638,000 370,000 P268,000 518,000 650,000 300,000 335,000 1,285,000 P 700,000 540,000 1,240,000 40,000 1,200,000 195,000 1,395,000

675,000 480,000 195,000