P1 ACC 113 Assignment 1

1.
Rivendell paid finder’s fees of P40,000, accountant’s fee (Advisory) of P10,000, legal fees (advisory) of
P15,000, salaries of Rivendell’s employees assigned to the implementation of the merger of P16,000,
cost of closing duplicate facilities of P12,000, cost of shareholder’s meeting to vote on the merger of
P14,000, cost of printing stock certificate of P7,000, audit and accountant’s fee related to the stock
issuance of P3,000, SEC registration fee of P5,000 and stock listing application fees of P4,000.
Based on the preceding information, under the acquisition method following IFRS 3, what amount
relating to the business combination would be expensed?
A. 42,000
B. 50,000
C. 107,000
D. 124,000
2. ABC Co. is acquiring XYZ has the following intangible asset:

● Patent on a product that is deemed to have no useful life P10,000.
● Customer list with an observable fair value of P50,000.
● A 5-year operating lease with favorable terms with a discounted present value of P8,000.
● Identifiable R & of P100,000.
ABC will record how much for acquired Intangible Assets from the purchase of XYZ Ince?
A. 168,000
B. 158,000
C. 150,000
D. 58,000
3. Burrough Corporation concluded that the fair value of Helyar Company was P80,000 and paid that
amount to acquire all of its net assets. Helyar reported assets with a book value of P60,000 and fair value
of P98,000 and liabilities with a book value and fair value of P23,000 on the date of combination.
Burrough also paid P3,000 to a search firm for finder’s fees related to the acquisition. What amount will
be recorded as goodwill by Burrough Corporation?
A. P0
B. P5,000
C. P8,000
D. P13,000
4. On June 1, 2016, Cline Company paid P800,000 cash for the assets and liabilities of Renn Corp. the
carrying values for Renn’s assets and liabilities on June 1, 2016 follow:
Cash P150,000
Accounts receivable 180,000
Capitalized software costs 320,000
Goodwill 100,000
Liabilities (130,000)
Net assets P620,000
On June 1, 2016, Renn’s accounts receivable had a fair value of P140,000. Additionally, Renn’s in-process
and development costs was estimated to have a fair value of P200,000. All other items were stated at
their fair values. On Cline’s June 1 balance sheet. How much is reported for goodwill?
A. P320,000
B. P120,000
C. P80,000
D. P20,000
5. On April 1, 2016, ZZ Corp. paid cash of P620,000 for all of the net assets of AA Company appropriately
accounted for as a merger. The recorded assets and liabilities of AA Corporation on April 5, 2016 follow:
Cash P60,000
Inventory 180,000
Property, plant and equipment (net of
Accumulated depreciation of
P220,000) 320,000
Goodwill (net accumulated amortization
Of P50,000) 100,000
Liabilities (1200,000)
Net assets P540,000
On April 1, 2016, AA’s inventory had a fair value of P150,000, and the property, plant and equipment
(net) had a fair value of P380,000. The amount of goodwill recorded in the books of ZZ as a result of the
business combination should be:
A. P150,000
B. P120,000
C. P50,000
D. 0
6. The VV Company had these accounts at the time it was acquired by Bush Co.:
Cash P36,000
Accounts receivable 457,000
Inventories 120,000
Plant, property, and equipment 696,400
Accounts payable (350,800)
Bush Co. paid P1,400,000 for net assets of VV Company. It was determined that the fair market values of
inventories and plant, property, and equipment were P133,000 and P900,000, respectively.
An assumed contingent liability arising from past events with a fair value amounting to P10,000 and such
amount is considered a reliable measurement.
In the books of Bush Co., this transaction resulted in:
A. Goodwill recorded at P441,400

B. Goodwill recorded at P224,800
C. Goodwill recorded at P234,800
D. Current assets increased by P234,000
7. The Greek Company acquired 100% of The Okay Company for a consideration transferred of P112
million. At the acquisition date the carrying amount of Okay’s net assets was P100 million and their fair
value was P120 million.
How should the difference between the consideration transferred and the net assets acquired be
presented in Geek’s financial statements, according to PFRS 3 Business combinations?
A. Gain on bargain purchase of P8 million recognized in other comprehensive income.

B. Gain on bargain purchase of P8 million deducted from other intangibles assets.
C. Gain on bargain purchase of P8 million recognized in profit or loss.
D. Goodwill of P12 million as an intangible asset.
8. Major Corporation acquired Problem Company through an exchange of common shares. All of
Problem’s assets and liabilities were immediately transferred to Major. Major’s common stock was
trading at P20 per share at the time of exchange. Following selected information is also available.
Before Acquisition After Acquisition

Par value of shares outstanding P200,000 P250,000
Additional paid-in capital P350,000 P550,000
Based on the preceding information, what number of shares was issued at the time of the exchange?
A. P5,000
B. P10,000
C. P12,500
D. P17,500
9. Using the same information in No. 35, what is the par value of the Major’s common stock?
A. P10
B. P5
C. P4
D. P1
10. Using the same information in No. 35, what is the fair value of the Problem’s net assets, if goodwill of
P56,000 is recorded?
A. P194,000
B. P244,000
C. P300,000
D. P306,000

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1.

2. ABC Co. is acquiring XYZ has the following intangible asset:

In the books of Bush Co., this transaction resulted in:

A. Goodwill recorded at P441,400

A. Gain on bargain purchase of P8 million recognized in other comprehensive income.

Before Acquisition After Acquisition

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