100% satisfaction guarantee Immediately available after payment Both online and in PDF No strings attached
logo-home
ACCT200 NOTES, QUESTIONS AND ANSWERS $4.62   Add to cart

Exam (elaborations)

ACCT200 NOTES, QUESTIONS AND ANSWERS

 0 view  0 purchase

ACCT200 NOTES, QUESTIONS AND ANSWERS

Preview 4 out of 38  pages

  • November 1, 2024
  • 38
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers
All documents for this subject (1)
avatar-seller
Baver
ACCT200 EXAM PORTFOLIO

ACCOUNTING NOTES,
QUESTION AND ANSWERS
FOR FURTHER CLARIFICATION CONTACT ME
AT: BEV18KAGOE@GMAIL.COM

, lOMoARcPSD|44660598




Page |1



NAME: Date:
Professor: Section: Score:

ACCOUNTING FOR BUSINESS COMBINATIONS
SECOND GRADING EXAMINATION

1. On January 1, 20x1, ABC Co. acquired 75% interest in XYZ, Inc. for ₱2,500,000 cash. ABC Co.
incurred transaction costs of ₱250,000 for legal, accounting and consultancy fees in negotiating
the business combination. ABC Co. elected to measure NCI at the NCI’s proportionate share in
XYZ, Inc.’s identifiable net assets. The carrying amounts and fair values of XYZ’s assets and
liabilities at the acquisition date were as follows:

Assets Carrying amounts Fair values
Cash in bank 25,000 25,000
Accounts receivable 425,000 300,000
Inventory 1,300,000 875,000
Equipment – net 2,500,000 2,750,000
Goodwill 250,000 50,000
Total assets 4,500,000 4,000,000
Liabilities
Payables 1,000,000 1,000,000

How much is the goodwill (gain on a bargain purchase)?
a. 140,000 c. 278,500
b. 287,500 d. 264,500



Solution:
Fair value of identifiable assets acquired excluding
goodwill (4,000,000 total assets – 50,000 goodwill) 3,950,000
Less: Fair value of liabilities assumed (1,000,000)
Fair value of identifiable net assets acquired 2,950,000

Fair value of identifiable net assets acquired 2,950,000
Multiply by: Non-controlling interest (100% - 75%) 25%
NCI’s proportionate share in identifiable net assets 737,500

 Goodwill (Negative goodwill) is computed as follows:

Consideration transferred 2,500,000
NCI in the acquiree 737,500
Previously held equity interest in the acquiree -
Total 3,237,500
Less: Fair value of identifiable net assets acquired (2,950,000)
Goodwill 287,500

, lOMoARcPSD|44660598




Page |2




The ₱250,000 transaction costs are expensed. Acquisition-related costs do not affect the
measurement of goodwill.

2. On January 1, 20x1, HISTRIONAL Co. acquired all of the identifiable assets and assumed all of
the liabilities of THEATRICAL, Inc. by paying cash of ₱4,000,000. On this date, the identifiable
assets acquired and liabilities assumed have fair values of ₱6,400,000 and ₱3,600,000,
respectively.

As of January 1, 20x1, HISTRIONAL holds a building and a patent which are being rented out to
THEATRICAL, Inc. under operating leases. HISTRIONAL has determined that the terms of the
operating lease on the patent compared with market terms are unfavorable. The fair value of the
differential is estimated at ₱80,000. How much is the goodwill (gain on bargain purchase)?
a. 1,080,000 b. 1,280,000 c. 1,120,000 d. 1,200,000

B
Solution:
A liability shall be recognized because the terms of the operating lease where the acquiree is the lessee
is unfavorable.

The fair value of net identifiable assets acquired is computed as follows:
Fair value of identifiable assets acquired 6,400,000
Fair value of liabilities assumed, including liability on the (3,680,000)
operating lease with unfavorable terms (₱3.6M + ₱80K)
Fair value of net identifiable assets acquired 2,720,000

Goodwill (gain on bargain purchase) is computed as follows:
Consideration transferred 4,000,000
Non-controlling interest in the acquiree -
Previously held equity interest in the acquiree -
Total 4,000,000
Fair value of net identifiable assets acquired (2,720,000)
Goodwill 1,280,000



Use the following information for the next three questions:
On January 1, 20x1, CONJUNCTION Co., and UNION, Inc. entered into a business combination
effected through exchange of equity instruments. The combination resulted to CONJUNCTION
obtaining 100% interest in UNION. Both of the combining entities are publicly listed. As of this date,
CONJUNCTION’s shares have a quoted price of ₱400 per share. CONJUNCTION Co. recognized
goodwill of ₱300,000 on the business combination. No acquisition-related costs were incurred.
Additional selected information at acquisition date is shown below:
CONJUNCTION Co. Combined entity
(before acquisition) (after acquisition)
Share capital 2,400,000 2,800,000
Share premium 1,200,000 4,800,000
Totals 3,600,000 7,600,000




Downloaded by Gabriel Musyoka (gabumusyoka928@gmail.com)

, lOMoARcPSD|44660598




Page |3




3. How many shares were issued by CONJUNCTION Co. in the business combination?
a. 40,000 b. 20,000 c. 12,000 d. 10,000

D
Solution:
COLLOQUY Co. Combined entity Increase
Share capital 2,400,000 2,800,000 400,000
Share premium 1,200,000 4,800,000 3,600,000
Totals 3,600,000 7,600,000 4,000,000

Fair value of shares transferred 4,000,000
Divide by: ABC’s fair value per share 400
Number of shares issued 10,000




4. What is the par value per share of the shares issued?
a. 10 b. 40 c. 12 d. 32

B
Solution:
400,00
Increase in share capital account (see table above)
0
10,00
Divide by: Number of shares issued
0
Par value per share 40




5. What is the acquisition-date fair value of the net identifiable assets of UNION?
a. 3,700,000 b. 3,200,000 c. 2,800,000 d. 2,400,000



A
Solution:
Consideration transferred (see previous computation) 4,000,000
Non-controlling interest in the acquiree -
Previously held equity interest in the acquiree -
Total 4,000,000
Fair value of net identifiable assets acquired (squeeze) (3,700,000)
Goodwill (given information) 300,000




Downloaded by Gabriel Musyoka (gabumusyoka928@gmail.com)

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

Quick and easy check-out

You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.

Focus on what matters

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

Frequently asked questions

What do I get when I buy this document?

You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.

Satisfaction guarantee: how does it work?

Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.

Who am I buying these notes from?

Stuvia is a marketplace, so you are not buying this document from us, but from seller Baver. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy these notes for $4.62. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

82215 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy study notes for 14 years now

Start selling
$4.62
  • (0)
  Add to cart