Вы находитесь на странице: 1из 5

ASIA PACIFIC COLLEGE OF ADVANCED STUDIES

MIDTERM EXAMINATION
ADVANCED ACCOUNTING II

Name : _________________________________________________ Score :____________________


Professor : Gemine Ailna C. Panganiban Date : ___________________

Multiple Choice. Show your SOLUTIONS.

PROBLEM 1.
STAR Corporation is a company involved in manufacturing cars. On January 1, 2013, the board of
directors of the said company has decided to acquire the net assets of NOVA Corporation and RISE
Corporation, suppliers of materials they use in production. The merger is expected to result in producing
higher quality cars with lower total cost.
The deal was closed on February 29, 2013 and the following information was gathered from the books of
the entities:

STAR NOVA RISE


Current Assets P1,375,000 P390,000 P260,000
Noncurrent Assets 3,125,000 2,550,000 1,700,000
Total Assets P4,500,000 P2,940,000 P1,960,000

Liabilities P325,000 P210,000 P140,000


Common stock, P100 par 2,748,500 1,780,200 1,186,800
Additional Paid-in capital 176,500 169,800 113,200
Retained earnings 1,250,000 780,000 520,000
Total equity & liability P4,500,000 P2,940,000 P1,960,000

Star will issue 22,500 of its common stock in exchange for the net assets of Nova and 11,200 of its
common stock in exchange for the net assets of Rise. The fair value of Stars shares is P150. In addition,
the following adjustments should be made:
Current assets of Nova and Rise have a fair value of P450,000 and P230,000 respectively.
Noncurrent assets have a fair value of P2,150,000 and P1,975,000 for Nova and Rise, respectively.
Compute for the following balances of Star Company on the date of acquisition:

1. Stockholders equity
a. P6,118,500
b. P7,980,000
c. P3,496,500
d. P9,615,000
2. Assets
a. P10,290,000
b. P9,240,000
c. P10,500,000
d. P9,840,000
PROBLEM 2.
Denim Co. merged into Kraft Corp. on July 1, 2016. In exchange for the net assets at fair market value of
Denim Co. amounting to P696,450, Kraft issued 68,000 common shares at P9 par value with a market
price of P12 per share.
Out of pocket costs of the combination were as follows:

Legal fees for the contract of business combination P35,600


Audit fee for SEC registration of stock issue 90,000
Printing costs of stock certificates 14,500
Brokers fee 23,600
Accountants fee for pre-acquisition audit 80,000
Other direct cost of acquisition 75,000
General and allocated expenses 43,000
Listing fees in issuing new shares 36,000

Denim will pay an additional cash consideration of P455,000 in the event that Krafts net income will be
equal or greater than P950,000 for the period ended December 31, 2016. At acquisition date, there is a
high probability of reaching the target net income and the fair value of the additional consideration was
determined to be P195,000.
Actual net income for the period ended December 31, 2016 amounted to P1,250,000. The additional cash
consideration was paid.
What is the amount of goodwill to be recognized in the statement of financial position as of December 31,
2016?
a. P295,450
b. P308,500
c. P314,550
d. P326,550
What is the amount of expense to be recognized in the statement of comprehensive income for the year
ended December 31, 2016?
a. P257,200
b. P517,200
c. P307,400
d. P412,500
PROBLEM 3.
On October 1, 2016, Winner Corporation acquired all the assets and assumed all the liabilities of Getter
Company by issuing 20,000 shares with a fair value of P67.5 per share and an obligation to pay a
contingent consideration with a fair value of P750,000.
In addition, Winner paid the following acquisition related costs:

Legal fees P 105,600


Audit fee for SEC registration of stock issue 320,400
Costs of stock certificates 35,000
Brokers fee 49,000
Other direct cost of acquisition 50,000
General and allocated expenses 14,000

The Statement of Financial Position as of September 30, 2016 of Winner and Getter, together with the
fair market value of the assets and liabilities are presented below:

Winner Getter
Book value Fair value Book value Fair value
Cash P640,000 P640,000 P45,000 P45,000
Accounts Receivable 360,000 335,000 70,000 54,000
Inventories 475,000 390,000 87,000 78,000
Prepaid expenses 25,000 - 13,500 5,000
Land 2,000,000 2,900,000 900,000 1,550,000
Building 800,000 900,000 723,000 768,000
Equipment 700,000 585,000 361,500 360,000
Goodwill - - 300,000 -
Total Assets 5,000,000 5,750,000 2,500,000 2,860,000

Accounts Payable 312,500 312,500 200,000 200,000


Notes payable 937,500 980,000 700,000 765,000
Capital stock, P50 par 2,000,000 850,000
Additional paid in capital 1,000,000 400,000
Retained earnings 750,000 350,000
Total Liability & Equity 5,000,000 2,500,000
Compute for the balances that will be shown on the October 1, 2016 statement of financial position of the
surviving company:
Retained earnings
a. P480,000
b. P540,000
c. P531,400
d. P475,000
Total Assets
a. P7,015,000
b. P6,980,000
c. P7,118,000
d. P7,491,000
PROBLEM 4.
The Statement of Financial Position of Luster Corporation on June 30, 2016 is presented below:
Current assets P32,500
Land 220,000
Building 110,000
Equipment 87,500
Total Assets P450,000

Liabilities 87,500
Capital stock, P5 par 150,000
Additional paid in capital 137,500
Retained earnings 75,000
Total equities P450,000

All the assets and liabilities of Luster assumed to approximate their fair values except for land and
building. It is estimated that the land have a fair value of P350,000 and the fair value of the building
increased by P80,000.
Kernel Corporation acquired 80% of Lusters capital stock for P500,000.
Assuming the consideration paid includes control premium of P142,000, how much is the goodwill/(gain
on acquisition) on the consolidated financial statement?
a. P60,000
b. P48,000
c. P42,000
d. P50,000
Assuming the consideration paid excludes control premium of P23,000, and the fair value of the
noncontrolling interest is P122,750, how much is the goodwill/(gain on acquisition) on the consolidated
financial statement?
a. P78,250
b. P73,250
c. P69,500
d. P74,750
Assuming the consideration paid includes control premium of P37,000, how much is the goodwill/(gain
on acquisition) on the consolidated financial statement?
a. P43,250
b. P73,250
c. P56,750
d. P68,350
PROBLEM 5.
Better Company has gained control over the operations of Calm Corporation by acquiring 85% of its
outstanding capital stock for P2,580,000. This amount includes a control premium of P30,000.
Acquisition expenses, direct and indirect, amounted to P83,000 and P42,000 respect
ively.
Better Calm
Book Value Book Value
Cash P3,541,500 P128,000
Accounts receivable 300,000 325,000
Inventories 550,000 360,000
Prepaid expenses 148,500 125,000
Land 2,350,000 879,000
Building 1,560,000 558,000
Equipment 300,000 185,000
Goodwill 0 300,000
Total Assets P8,750,000 P2,860,000

Accounts Payable 675,000 253,000


Notes payable 1,400,000 730,000
Capital stock, 50 par 3,400,000 800,000
Additional paid in capital 1,575,000 600,000
Retained earnings 1,700,000 477,000
Total equities P8,750,000 P2,860,000

The following was ascertained on the date of acquisition for Calm Corporation:
The value of receivables and equipment has decreased by P25,000 and P14,000 respectively.
The fair value of inventories is now P436,000 whereas the value of land and building has increased
by P471,000 and P107,000 respectively.
There was an unrecorded accounts payable amounting to P27,000 and the fair value of notes is
P738,000.
Compute for the following balances to be presented in the consolidated statement of financial position at
the date of business combination:
Total Assets
a. P9,875,000
b. P10,093,000
c. P10,112,000
d. P9,215,000
Total Shareholders Equity
a. P7,000,000
b. P7,500,000
c. P8,200,000
d. P8,000,000
PROBLEM 6.
On January 2, 2016, the Statement of Financial Position of Pepper and Steak Company prior to the
combination are:
Pepper Co. Steak Co.
Cash P450,000 P 15,000
Inventories 300,000 30,000
PPE, net 750,000 105,000
Total Assets P1,500,000 P150,000

Current Liabilities P 90,000 P 15,000


Common stock, P100 par 150,000 15,000
Additional Paid in capital 450,000 30,000
Retained earnings 810,000 90,000
Total Liabilities and Stockholders equity P1,500,000 P150,000
The fair value of Steak Companys equipment is P153,000.
Assume the following independent cases:
1. Assuming Pepper Company acquired 70% of the outstanding common stock of Steak Company for
P105,000 and Non-controlling interest is measured at fair value of P61,000, how much is the
goodwill (gain on acquisition)?
a. P(17,000)
b. P17,000
c. P23,100
d. P(23,100)
2. Assuming Pepper Company acquired 80% of the outstanding common stock of Steak Company for
P136,800 and non-controlling interest is measured at non-controlling interests proportionate share of
Steak Companys identifiable net assets, how much is the consolidated stockholders equity on the
date of acquisition?
a. P1,410,000
b. P1,419,600
c. P1,446,600
d. P1,456,200
3. Assuming Pepper Company acquired 90% of the outstanding common stock of Steak Company for
P243,000 and Non-controlling interest is measured at fair value, how much is the total consolidated
assets on the date of acquisition?
a. P1,542,000
b. P1,785,000
c. P1,737,000
d. P1,494,000
PROBLEM 7.
Condensed statements of financial position of Care Corp. and Charm Corp. as of December 31, 2015 are
as follows:

Care Charm
Current Assets P 43,750 P 16,250
Noncurrent assets 181,250 106,250
Total assets P225,000 P122,500

Liabilities P 16,250 P8,750


Common stocks, P20 par 137,500 75,000
Additional paid in capital 8,750 6,250
Retained earnings 62,500 32,500

On January 1, 2016, Care Corp. issued 8,750 stocks with a market value of P25/share for the assets and
liabilities of Charm Corp. The book value reflects the fair value of the assets and liabilities, except that
the noncurrent assets of Charm has a temporary appraisal of P157,500 and the noncurrent assets of Care
are overstated by P7,500. Contingent consideration, which is determinable, is equal to P3,750. Care also
paid for the stock issuance costs worth P8,500 and other acquisition costs amounting to P4,750.
On March 1, 2016, the contingent consideration has a determinable amount of P5,000. On June 1, 2016,
the provisional fair value of the noncurrent assets of Charm increased by P2,250.
How much is the combined total assets at the end of 2016?
a. P435,500
b. P443,000
c. P442,000
d. P444,250
*** END ***