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#49 undone
Use the following information for questions 1 to 4:
On December 31, 2014, Add-On Company acquired 100 percent of Venus Corporations common stock
for P300,000. Balance sheet information Venus just prior to the acquisition is given here:
Cash and receivables P 35,000
Inventory.. 75,000
Land.. 100,000
Buildings and equipment (net).. 220,000
Total assets 420,000
At the date of the business combination. Venuss net assets and liabilities approximated fair value
except for inventory, which had a fair value of P60,000, land which had a fair value of P125,000, and
buildings and equipment (net), which had a fair value of P250,000.
1. What amount of inventory will be included in the consolidated balance sheet immediately following
the acquisition?
a. P15,000 c. P60,000
b. P45,000 d. P75,000
2. What amount of goodwill will be included in the consolidated balance sheet immediately following
the acquisition?
a. P15,000 c. P45,000
b. P30,000 d. P85,000
3. What amount of differential will be reflected in a consolidation work paper to prepare a
consolidated balance sheet immediately after the business combination?
a. P 0 c. P45,000
b. P15,000 d. P85,000
4. What amount will be included as investment in Venus Corporation in the consolidated balance sheet
immediately following the acquisition?
a. P 0 c. P300,000
b. P255,000 d. P395,000
Use the following information for questions 5 and 6:
Enya Corporation acquired 100 percent of Celtic Corporations common stock on January 1, 2014.
Summarized balance sheet information for the two companies immediately after the combination is
provided.
Enya Celtic
Book Value Book Value Fair Value
Cash and receivables. P 60,000 P 15,000 P 15,000
Inventory.. 110,000 32,000 38,000
Building and equipment (net) 160,000 90,000 120,000
Investment in Celtic Stock 150,000 - -
Total assets. 480,000 137,000 173,000
Accounts payable.. P 40,000 P 5,000 P 5,000
Bonds payable. 200,000 40,000 40,000
Common stock (P1 par) 100,000 40,000
Retained earnings. 140,000 52,000 -
Total liabilities and equity.. 480,000 137,000 45,000
15. What amount of total inventory will be reported in the consolidated balance sheet prepared
immediately after the business combination?
a. P130,000 c. P90,000
b. P135,000 d. P45,000
16. What amount of goodwill will be reported in the consolidated balance sheet prepared immediately
after the business combination?
a. P 0 c. P20,000
b. P40,000 d. P15,000
17. What amount of total assets will be reported in consolidated balance sheet prepared immediately
after the business combination?
a. P720,000 c. P825,000
b. P840,000 d. P865,000
18. What amount of total liabilities will be reported in the consolidated balance sheet prepared
immediately after the business combination?
a. P395,000 c. P275,000
b. P280,000 d. P195,000
19. What amount will be reported as non-controlling interest in the consolidated balance sheet
prepared immediately after the business combination?
a. P 0 c. P40,000
b. P15,000 d. P46,000
20. What amount of consolidated retained earnings will be reported?
a. P205,000 c. P325,000
b. P120,000 d. P310,000
21. What amount will be reported as total stockholders equity in the consolidated balance sheet
prepared immediately after the business combination?
a. P445,000 c. P565,000
b. P205,000 d. P550,000
Use the following information for questions 22 and 23:
On January 1, 2004, Poole Company purchased 75% of the common stock of Swimmer Company.
Separate balance sheet data for the companies at the combination date are given below:
Swimmer Co. Swimmer Co.
Poole Co. Book Value Far Value
Cash P 24,000 P 206,000 P 206,000
Accounts receivable 144,000 26,000 26,000
Inventory 132,000 38,000 60,000
Land 78,000 32,000 60,000
Plant assets 700,000 300,000 350,000
Acc. Depreciation (240,000) (60,000)
Investment in Swimmer Co. 440,000 - -
Total assets P1,278,000 P 542,000 P702,000
Determine below what the consolidated balance would be for each of the requested accounts on
January 2, 2004.
On January 2, 2004, Park Corporation borrowed P60,000 and used the proceeds to obtain 80% of the
outstanding common shares of Strand Corporation. The P60,000 debt is payable in 10 equal principal
payments, plus interest, beginning December 31, 2004. The excess fair value of the investment over the
underlying book value of the acquired net assets is allocated to inventory (60%) and to goodwill (40%).
On a consolidated balance sheet as of January 2, 2004, what should be the amount for each of the
following?
33. The amount of goodwill using proportionate basis (partial):
a. P 0 c. P10,000
b. P8,000 d. P20,000
34. The amount of goodwill using full fair value (full/gross-up) basis:
a. P 0 c. P10,000
b. P8,000 d. P20,000
Immediately after the purchase, the consolidated balance sheet should report paid-in capital iin excess
of par of
a. P8,900,000 c. P9,200,000
b. P9,100,000 d. P9,300,000
46. On June 30, 2001, Naeder Corporation purchased for cash at P10 per share all 100,000 shares of the
outstanding common stock of the Tedd Company. The total fair value of all identifiable net assets of
Tedd was P1,400,000. The only noncurrent asset is property with a fair value of P350,000. The
consolidated balance sheet on Naeder and its wholly owned subsidiary on June 30, 2011, should
report
a. A retained earnings balance that is inclusive of a gain of P400,000
b. Goodwill of P400,000
c. A retained earnings balance that is inclusive of a gain of P350,000
d. A gain of P400,000
47. Paro Company purchased 80% of the following common stock of Sabon Company for P900,000.
There are no liabilities. The following book and fair values are available for Sabon:
Book Value Fair Value
Current Asset P 100,000 P200,000
Land and Building 200,000 200,000
Mavhinery 300,000 600,000
Goodwill 100,000 ?
The machinery will appear on the consolidated balance sheet of:
a. P600,000 c. P480,000
b. P540,000 d. P300,000
Use the following information for questions 48 to 49:
Pinehollow acquired all of the outstanding stock of Stonebriar byu issuing 100,000 shares of its P1 par
value stock. The shares have a fair value of P15 per share, Pinehollow also paid P25,000 in direct
acquisition costs. Prior to the transaction to the companies have the following balance sheets:
Assets Pinehollow Stonebriar
Cash P150,000 P 50,000
Accounts receivable 500,000 350,000
Inventory 900,000 600,000
Property, Plant and Equipment (net) 1,850,000 900,000
Total assets P3,400,000 P1,900,000
Current liabilities P300,000 P 100,000
Bonds Payable 1,000,000 600,000
Common stock (P1 par) 300,000 100,000
Paid-in capital excess at par 800,000 900,000
Retained earnings 1,000,000 200,000
Total Liabilities and equity P3,400,000 P1,900,000
The fair values of Stonebriars inventory and property, plant and equipment are P700,000 and
P1,000,000, respectively.
48. The journal entry to record the purchase of Stonebriar would include a
a. Credit to common stock for P1,500,000
b. Credit to additional paid-in capital for P1,100,000
c. Debit to investment for P1,500,000
d. Debit to investment for P1,525,000
49. Goodwill associated with the purchase of Stonebriar is .
a. P100,000 c. P300,000
b. P125,000 d. P325,000
On December 31, 20x4, GG Company acquired all of NNs outstanding common stock for P1, 500,000
cash. On that date, the fair [market] value of NNs inventories was P450.000, and the fair value of NNs
property, plant, and equipment was P1.000,000 The fair values of all other assets and liabilities of NN
were equal to their book values
50. As result of GGs acquisition of NN, the consolidated balance sheet of GG and NN should reflect
goodwill in the amount of:
a. P500.000 c. P600.000
b. P550.000 d. P650.000
51. Assuming that the balance sheet of GG [unconsolidated] on December 31, 20x4, reflected retained
earnings of P2.000.000, what amount of retained earnings should be shown in the December 31,
20x4, consolidated balance sheet of GG and its new subsidiary, NN?
a. P2,000,000 c. P2,800,000
b. P2,600,000 d. P3,250,000
52. BB Corporation acquired 100 percent of CC Corporations outstanding capital stock for P430.000
cash. Immediately before the purchase, the balance sheets of both corporations reported the
following:
BB CC
Assets P2,000,000 P750.000
Liabilities P750.000 P400.000
Common Stock 1,000,000 310.000
Retained Earnings 250,000 40,000
Liabilities and Stockholders Equity P2,000,000 P750,000
At the date of purchase, the fair value of CCs assets was P50,000 more than the aggregate carrying
amounts. In the consolidated balance sheet prepared immediately after the purchase, the
consolidated stockholders equity should amount to:
a. P1,680,000 c. P1,600,000
b. P1,650,000 d. P1,250,000
Use the following information for questions 53 to 56:
On January 1, 20x4, Pamela Company purchased 75% of the common stock of Snicker Company.
Separate balance sheet data for the companies at the combination data are given below:
Snicker Co. Snicker Co
Pamela Co Book values Fair values
Cash P18,000 P155,000 P155,000
Accounts receivable 108,000 20,000 20,000
Inventory 99,000 26,000 45,000
Land 60,000 24,000 45,000
Plant assets 525,000 225,000 300,000
Accumulated depreciation (180,000) (45,000)
Investment in Snicker Co 330,000
Total assets P960,000 P405,000 P565,000
Determine below what the consolidated balance would be for each of the requested accounts on
January 2, 20x4.
53. What amount of inventory will be reported?
a. P125,000 c. P139,250
b. P132,750 d. P144,000
54. What amount of goodwill or (gain) be reported based on fair value basis will be reported?
a. (P20,000) c. P25,000
b. (P25,000) d. Zero
55. What is the amount of consolidated retained earnings?
a. P204,000 c. P260,250
b. P209,250 d. P279,000
56. What is the amount of total assets?
a. P921,000 c. P1,525,000
b. P1,185,000 d. P1,195,000
57. Seminarian, Inc, has 100,000 shares of P2 par value stock outstanding. Priests Corporation acquired
30,000 shares of Seminarians shares on January 1, 20x4 for P120,000 when Seminarians net assets
had a total fair value of P350,000. On July 1,20x7, Priests agreed to buy an additional 60,000 shares
of Seminarian from single stockholder for P6 per share. Although Seminarians shares were selling in
the P5 range around July 1, 20x7. Priests forecasted that obtaining control of Seminarian would
produce significant revenue synergies to justify the premium price paid. If Seminarians net
identifiable assets had a fair value of P500,000 on July 1, 20x7, how much goodwill