PROBLEM 1-1

On August 1, 2021, Wood Corporation issued 100,000 shares of its P20 par value common stock for the net assets of Pine Inc.,
Required:
1. What amount should Wood capitalize as the cost of acquiring Pine's net assets?
2. How much id the goodwill (gain) on combination assuming the fair value of Pine's net assets is P3,000,000?

PROBLEM 1-2
On June 30, 2021 White Corporation issued 50,000 shares of its P20 par value common stock for the net assets of Black Comp

Book Value Fair Value

Accounts Receivable 500,000 550,000
Inventory 600,000 400,000
PPE 1,400,000 1,600,000
Accounts Payable 300,000 300,000
Notes Payable 700,000 700,000
Required:
1. Determine the amount of consideration
2. Compute the goodwill/ (gain) on combination
3. Journalize the transactions in the books of White Corporation

PROBLEM 1-3
On January 2, 2022, P Company purchased the net asset of S Company by paying P500,000 cash and issuing 100,000 shares of

P Company S Company
Book Value Fair Value Book Value Fair Value
Cash 4600000 4600000 300000 300000
Accounts Receivable 1000000 1000000 980000 980000
Inventory 1500000 1300000 710000 600000
PPE, net 1800000 1460000 1520000 1064000
Goodwill 90000 80000
Total 8900000 8360000 3600000 3024000

Liabilities 1000000 1000000 570000 570000

Share Capital 1600000 600000
Share Premium 900000 960000
Retained Earnings 5400000 1470000
Total 8900000 3600000

P incurred and paid legal and brokerage fees of P50,000 for business combination; share issue costs of P30,000 and P20,000 i

Required:
1. Determine the amount of consideration
2. Compute the goodwill / (gain) on combination
3. Journalize the transactions in the books of the acquirer

Problem 1-4
A condensed Statement of Financial Position of Cable Company at August 1, 2022 and related fair value are presented below:
 Book Value Fair Value
Current Assets 368000 404500
Plant Assets 592500 690000
Patent 58500 48000
Total 1019000

Current Liabilities 107500 107500

Long-term debt 280000 280000
Share Capital, P20 par 210000
Retained Earnings 421500
Total 1019000

On August 1, 2022, Sky Corporation paid P800,000 cash for the net assets of Cable Company

Required:
1. How much is the goodwill on combination? Journalize the transaction in the books of Sky
2. Assuming Sky purchased all the outstanding voting shares of Cable, how much is the goodwill on combination? Journalize th
3. Assuming Sky purchased 80% of the outstanding voting shares of Cable, how much is the goodwill on combination? Journali
a. If NCI is measured at Fair Value
b. If NCI is measured at Proportionate

Problem 1-5
On May 1, 2022, Kingdom Corporation paid cash of P600,000 for all of the net assets of United Company and United is dissolve

Cash 60000
Inventory 180000
Plant and equipment (net of accumulated depreciation of P220,000) 320000
Goodwill 100000
Liabilities 120000

On May 1, 2022, United's inventory had a fair value of P150,000, and the plant and equipment (net) had a fair value of P380,0

What is the amount of goodwill recorded in the books of Kingdom as a result of the business combination?

Problem 1-6
Lee Land Company acquired 75% of Way Maker Company's ordinary share for P510,000 cash. At that date, Way Maker report
How much is the goodwill or gain on acquisition arising from combination if control premium of P30,000 is included in the pur

Assuming:
1. NCI is measured at Fair Value
2. NCI is measured at Proportionate
ock for the net assets of Pine Inc., in a business combination accounted for by the acquisition method. The market value of Wood's comm

ets is P3,000,000?

k for the net assets of Black Company. The market value of White's common stock on June 30 was P36 per share. White paid a fee of P100

ash and issuing 100,000 shares of stocks at P3,000,000 fair market value. The par value of P's shares is P24 per share. Book value and fair v

ue costs of P30,000 and P20,000 indirect acquisition cost. It is determinable that contingency fee of P150,000 (estimated fair value) would

d fair value are presented below:

will on combination? Journalize the transactions in the books of Sky
goodwill on combination? Journalize the transaction in the books of Sky.

ed Company and United is dissolved. The carrying value of the assets and liabilities of United on May 1, 2022 follow:

nt (net) had a fair value of P380,000

combination?

h. At that date, Way Maker reports identifiable assets with book value of P1,040,000 and a fair value of P1,280,000, and it has liabilities wit
m of P30,000 is included in the purchase price?
et value of Wood's common stock on August 1 was P35 per share. Wood paid a fee of P200,000 to the consultant who arranged this acqu

. White paid a fee of P100,000 to the broker who arranged this acquisition. Costs of SEC registration and issuance of the equity securities a

hare. Book value and fair value data on the Statement of Financial Position on January 2, 2022 are as follows:

stimated fair value) would be paid within the year.

00, and it has liabilities with book value and fair value of P716,000.
nt who arranged this acquisition. Cost of registering and issuing the equity securities amounted to P50,000.

e of the equity securities amounted to P50,000. Below is the structure of assets and liabilities of Black Company as of the date of acquisitio
as of the date of acquisition.
PROBLEM 2-1
The condensed balance sheet as of December 31, 2021 of Moses Corporation and Jacob Corporation are:
Moses Corp Jacob Corp
Current Assets 350000 150000
Noncurrent Assets 550000 350000
Total Assets 900000 500000

Liabilities 250000 100000

Ordinary Share, P20 par 400000 250000
Retained earnings 250000 150000
Total Liabilities & SHE 900000 500000

On January 1, 2022, Moses Corp. issued 20,000 shares of its ordinary shares in exchange of all the outstanding voting shares o

Required:
1. Journalize the transaction in the book of Moses Corp. to recognize the purchased of interest in Jacob Corp.
2. Journalize the working paper elimination entries as of the date of acquisition

Problem 2-2
The condensed balance sheet as of December 31, 2021 of Moses Corporation and Jacob Corporation are:
Moses Corp Jacob Corp
Current Assets 750000 250000
Noncurrent Assets 550000 450000
Total Assets 1300000 700000
Liabilities 300000 200000
Ordinary share, P20 par 500000 300000
Retained earnings 500000 200000
Total Liabilities & SHE 1300000 700000

On January 1, 2022, Moses Corp. paid P405,000 for 60% of the outstanding voting shares of Jacob Corp. The combination qual
Also, the current assets of Jacob are fairly valued except for Inventory with fair value lower than the recorded amount by P20,

Required:
1. Allocation Schedule
2. Journalize the transaction in the book of Moses Corp to recognize the purchase of interest in Jacob Corp
3. Journalize the working paper elimination entries as of the date of acquisition
4. Consolidated Statement of Financial Position as of date of acquisition

PROBLEM 2-3
Consolidated Statement of Financial Position of Love Corp and You Corp as of December 31, 2021 are as follows:
Love You
Current Assets 175000 65000
Noncurrent Assets 725000 425000

Liabilities 65000 35000

Ordinary shares, P20 par 550000 300000
Share premium 35000 25000
Retained earnings 250000 130000
On January 1, 2022, Love Corp issued 35,000 shares with a market value of P25/ share for the assets and liabilities of You Corp
The book value reflects the fair value of the assets and liabilities except that the noncurrent assets of You have fair values of P
Required:
1. Consolidated assets as of date of acquisition
2. Consolidated equity as of date of acquisition

PROBLEM 2-4
On January 2, 2022, the Statement of Financial Position of Love and Hope Company prior to combination are:

Love Company Hope Company

Cash 225000 7500
Inventories 150000 15000
PPE 375000 52500
Total Assets 750000 75000

Current Liabilities 45000 7500

Ordinary Share, P100 par 75000 7500
Ordinary Share Premium 225000 15000
Retained Earnings 405000 45000
Total Liabilties and SHE 750000 75000

The fair market value of Hope Company's PPE (net) is P76,500

Required:
1. Assuming Love Company acquired all the outstanding share of Hope Company resulting to a goodwill of P33,000, the contin
a. Assets
b. Liabilities
c. Shareholders Equity
2. Assuming Love Company acquired 90% of the outstanding ordinary share of Love Company for P121,500 and NCI is measure
a. Assets
b. Liabilities
c. Shareholders Equity

PROBLEM 2-5
On January 1, 2022, P Company acquired 2,700 shares of the outstanding ordinary share of S Company for P540,000. As of this

Required:
1. Goodwill/ gain on bargain purchase
2. Entries in the book of the parent as of date of acquisition
Elimination entries as of date of acquisition

PROBLEM 2-6
Romeo Company issued 120,000 shares of P10 par ordinary shares with a fair value of P30 per share for all the net assets of Jo

Legal fees to arrange the business combination P25000

Accounting and consultancy fees related with business combination 12000
Costs of printing and issuing new stock certificates 3000
Indirect costs of combinining, including allocated overhead and executive salaries 20000
Broker's and finder's fee related with business combination 30000

Immediately before the business combination in which Jorge Company was dissolved, Jorge's assets and equities were as follo
Book value Fair value
Current assets 1000000 1100000
Plant assets 1500000 2200000
Liabilities 300000
Ordinary shares 2000000
Retained earnings 200000

Required:
1. how much is the retained earnings after the business combination?
2. how much is the net increase in the shareholders equity of the acquirer?
tstanding voting shares of Jacob Corp. Moses Corp. shares has market value of P30 per share. The combination qualifies as an acquisition

rp. The combination qualifies as an acquisition and Moses incurred legal fees of P50,000. Also, Moses will pay additional P75,000 to Jacob
recorded amount by P20,000. Of the noncurrent assets, machinery is assessed to be undervalued by P70,000, the rest are fairly stated. No

e as follows:
 and liabilities of You Corp.
f You have fair values of P630000, and the noncurrent assets of Love are overstated by P30000. Contingent consideration, which is determ

will of P33,000, the contingent consideration is P18,000, compute the consolidated balances of the following as of date of acquisition:

21,500 and NCI is measured at fair value, compute the consolidated balances of the following as of date of acquisition:

ny for P540,000. As of this date, the shareholders equity section of S Company consisted of Share Capital, P100 par, P300,000 and Retaine

for all the net assets of Jorge Company. Romeo's retained earnings prior to business combination amounted to P1,000,000. Romeo incurr
and equities were as follows:
qualifies as an acquisition and Moses incurred legal fees of P50,000 and share issuance cost of P10,000.

dditional P75,000 to Jacob if it will hit a profit that is higher by at least 20% compare to the average profit of the latest 3 years of operation
e rest are fairly stated. Non-controlling interest is measured based on proportionate share of Jacob's identifiable net assets.
ideration, which is determinable, is equal to P15000. Love also paid for the stock issuance costs worth P34000 and other acquisition costs

of date of acquisition:

par, P300,000 and Retained Earnings, P150,000. The carrying value of S Company's identifiable assets and liabilities are equal to their fair m

P1,000,000. Romeo incurred the following additional costs:

latest 3 years of operation. The contingent consideration, when the condition is met, is payable on January 31, 2023. Based on the most r
e net assets.
nd other acquisition costs amounting to P10000.

es are equal to their fair market values except for equipment, which is undervalued by P50,000, with remaining useful life of 5 years. P op
2023. Based on the most reasonable estimates, the probability that the target will be satisfied is between 45% to 75%.
useful life of 5 years. P opt to measure NCI at fair value.
PROBLEM 1-1
On August 1, 2021, Wood Corporation issued 100,000 shares of its P2
Required:
1. What amount should Wood capitalize as the cost of acquiring Pine
2. How much is the goodwill (gain) on combination assuming the fair

1 Cost capitalized (consideration)

(100,000 shares x 35/share)

2 Consideration
FV of net assets
Goodwill

PROBLEM 1-2
On June 30, 2021 White Corporation issued 50,000 shares of its P20 p

Accounts Receivable
Inventory
PPE
Accounts Payable
Notes Payable
Required:
1. Determine the amount of consideration
2. Compute the goodwill/ (gain) on combination
3. Journalize the transactions in the books of White Corporation

1 Cost capitalized (consideration)

(50,000 shares x 36/share)

2 Consideration
FV of net assets *
Goodwill
*550,000 + 400,000 + 1,600,000 - 300,000 -

3 Accounts Receivable (net)

Inventory
PPE (net)
Goodwill
Account Payable
Notes Payable
Share Capital
Share Premium

Business combination expenses

Share Premium
Cash

PROBLEM 1-3
On January 2, 2022, P Company purchased the net asset of S Compan
 Cash
Accounts Receivable
Inventory
PPE, net
Goodwill
Total

Liabilities
Share Capital
Share Premium
Retained Earnings
Total

P incurred and paid legal and brokerage fees of P50,000 for business

Required:
1. Determine the amount of consideration
2. Compute the goodwill / (gain) on combination
3. Journalize the transactions in the books of the acquirer

1 Cash paid
 FV of shares issued
FV of contingent consideration
Total consideration

2 Consideration
FV of net assets
Goodwill

3 Cash
Accounts receivable
Inventory
PPE, net
Goodwill
Cash
Ordinary share capital
Ordinary share premium
Liabilities (assumed)
Liability for contingent consideration

Business combination expenses

Ordinary share premium
Cash

Problem 1-4
A condensed Statement of Financial Position of Cable Company at Au

Current Assets
Plant Assets
Patent
Total

Current Liabilities
Long-term debt
Share Capital, P20 par
Retained Earnings
Total

On August 1, 2022, Sky Corporation paid P800,000 cash for the net as

Required:
1. How much is the goodwill on combination? Journalize the transacti
2. Assuming Sky purchased all the outstanding voting shares of Cable
3. Assuming Sky purchased 80% of the outstanding voting shares of C
a. If NCI is measured at Fair Value
b. If NCI is measured at Proportionate

1 Consideration
FV of net assets
 Goodwill

Current assets
Plant assets
Patent
Goodwill
Cash
Current liabilities
Long term debt

2 Consideration
FV of net assets
Goodwill

Investment in subsidiary
Cash

3 NCI @ FV
Consideration
NCI
Total
FV of net assets
Goodwill

NCI @ Proportionate
Consideration
 NCI
Total
FV of net assets
Goodwill

Investment in subsidiary
Cash

Problem 1-5
On May 1, 2022, Kingdom Corporation paid cash of P600,000 for all o

Cash
Inventory
Plant and equipment (net of accumulated depreciation of P220,000)
Goodwill
Liabilities

On May 1, 2022, United's inventory had a fair value of P150,000, and

What is the amount of goodwill recorded in the books of Kingdom as

Consideration 600,000
FV of net assets 470,000
Goodwill 130,000
Problem 1-6
Lee Land Company acquired 75% of Way Maker Company's ordinary
How much is the goodwill or gain on acquisition arising from combina

Assuming:
1. NCI is measured at Fair Value
2. NCI is measured at Proportionate

1 NCI @ FV
Consideration
NCI
Total
FV of net assets
Goodwill

2 NCI @ Proportionate
Consideration
NCI
Total
FV of net assets
Goodwill
00,000 shares of its P20 par value common stock for the net assets of Pine In

cost of acquiring Pine's net assets?

tion assuming the fair value of Pine's net assets is P3,000,000?

3,500,000

3,500,000
3,000,000
500,000

000 shares of its P20 par value common stock for the net assets of Black Com

Book Value Fair Value

500,000 550,000
600,000 400,000
1,400,000 1,600,000
300,000 300,000
700,000 700,000
hite Corporation

1,800,000

1,800,000
1,550,000
250,000
1,600,000 - 300,000 - 700,000

550,000
400,000
1,600,000
250,000
300,000
700,000
1,000,000
800,000

100,000
50,000
150,000

net asset of S Company by paying P500,000 cash and issuing 100,000 shares o
 P Company
Book Value Fair Value
4600000 4600000
1000000 1000000
1500000 1300000
1800000 1460000

8900000 8360000

1000000 1000000
1600000
900000
5400000
8900000

P50,000 for business combination; share issue costs of P30,000 and P20,000

e acquirer

500,000
 3,000,000
150,000
3,650,000

3,650,000
2,374,000
1,276,000

300,000
980,000
600,000
1,064,000
1,276,000
500,000
2,400,000
remium 600,000
570,000
ingent consideration 150,000

70,000
30,000
100,000
Cable Company at August 1, 2022 and related fair value are presented below

Book Value Fair Value

368000 404500
592500 690000
58500 48000
1019000

107500 107500
280000 280000
210000
421500
1019000

00 cash for the net assets of Cable Company

ournalize the transaction in the books of Sky

oting shares of Cable, how much is the goodwill on combination? Journalize
ing voting shares of Cable, how much is the goodwill on combination? Journ

800,000
755,000
 45,000

404,500
690,000
48,000
45,000
800,000
107,500
280,000

800,000
755,000
45,000

800,000
800,000

800,000 ((80%))
200,000 (800K/.8)*.2 ((20%))
1,000,000
755,000
245,000

800,000 ((80%))
 151,000 ((755K*.2)) ((20%))
951,000
755,000
196,000

800,000
800,000

h of P600,000 for all of the net assets of United Company and United is disso

eciation of P220,000)

alue of P150,000, and the plant and equipment (net) had a fair value of P380

books of Kingdom as a result of the business combination?

Company's ordinary share for P510,000 cash. At that date, Way Maker repo
arising from combination if control premium of P30,000 is included in the p

510,000
160,000 ((510K-30K=480K/.75)*.25)
670,000
564,000
106,000

510,000
141,000 ((564KX.25))
651,000
564,000
87,000
for the net assets of Pine Inc., in a business combination accounted for by th

P3,000,000?

the net assets of Black Company. The market value of White's common stoc
and issuing 100,000 shares of stocks at P3,000,000 fair market value. The pa
 S Company
Book Value Fair Value
300000 300000
980000 980000
710000 600000
1520000 1064000
90000 80000
3600000 3024000

570000 570000
600000
960000
1470000
3600000

osts of P30,000 and P20,000 indirect acquisition cost. It is determinable that

r value are presented below:

on combination? Journalize the transactions in the books of Sky

will on combination? Journalize the transaction in the books of Sky.
ompany and United is dissolved. The carrying value of the assets and liabilitie

60000
180000
320000
100000
120000

net) had a fair value of P380,000

mbination?
 that date, Way Maker reports identifiable assets with book value of P1,040,
P30,000 is included in the purchase price?
bination accounted for by the acquisition method. The market value of Wood

ue of White's common stock on June 30 was P36 per share. White paid a fee
00 fair market value. The par value of P's shares is P24 per share. Book value
cost. It is determinable that contingency fee of P150,000 (estimated fair valu
he books of Sky
n the books of Sky.
ue of the assets and liabilities of United on May 1, 2022 follow:
with book value of P1,040,000 and a fair value of P1,280,000, and it has liab
arket value of Wood's common stock on August 1 was P35 per share. Wood p

re. White paid a fee of P100,000 to the broker who arranged this acquisition
r share. Book value and fair value data on the Statement of Financial Position
(estimated fair value) would be paid within the year.
,000, and it has liabilities with book value and fair value of P716,000.
r share. Wood paid a fee of P200,000 to the consultant who arranged this ac

this acquisition. Costs of SEC registration and issuance of the equity securiti
nancial Position on January 2, 2022 are as follows:
716,000.
arranged this acquisition. Cost of registering and issuing the equity securities

equity securities amounted to P50,000. Below is the structure of assets and

quity securities amounted to P50,000.

re of assets and liabilities of Black Company as of the date of acquisition.

acquisition.
PROBLEM 2-1
The condensed balance sheet as of December 31, 2021 of Moses Cor
Moses Corp
Current Assets 350000
Noncurrent Assets 550000
Total Assets 900000

Liabilities 250000
Ordinary Share, P20 par 400000
Retained earnings 250000
Total Liabilities & SHE 900000

On January 1, 2022, Moses Corp. issued 20,000 shares of its ordinary

Required:
1. Journalize the transaction in the book of Moses Corp. to recognize
2. Journalize the working paper elimination entries as of the date of a

1 Investment in Jacob Corp. 600,000

Ordinary share capital
Ordinary share premium

Legal fees 50,000

Ordinary share premium 10,000
Cash
 2 Ordinary share capital - Jacob Corp. 250,000
Ordinary share premium - Jacob Corp 150,000
Goodwill 200,000
Investment in Jacob Corp.

Problem 2-2
The condensed balance sheet as of December 31, 2021 of Moses Cor
Moses Corp
Current Assets 750000
Noncurrent Assets 550000
Total Assets 1300000
Liabilities 300000
Ordinary share, P20 par 500000
Retained earnings 500000
Total Liabilities & SHE 1300000

On January 1, 2022, Moses Corp. paid P405,000 for 60% of the outsta
Also, the current assets of Jacob are fairly valued except for Inventory

Required:
1. Allocation Schedule
2. Journalize the transaction in the book of Moses Corp to recognize t
3. Journalize the working paper elimination entries as of the date of a
4. Consolidated Statement of Financial Position as of date of acquisiti
1 Cash paid 405,000
Fair value of contingent consideration 45,000
NCI (40%) - proportionate ** 220,000
Total 670,000
FMV of net assets *** 550,000
Goodwill 120,000
* ((45% + 75%) / (2 )) X 75,000
** 550,000 X 40%
*** 700,000 - 200,000 - 20,000 + 70,000

2 Investment in Jacob Corp. 450,000

Cash
Liab. for contingent consideration

Legal fees 50,000

Cash

3 Ordinary share capital - Jacob Corp. 300,000

Ordinary share premium - Jacob Corp 200,000
Investment in Jacob Corp.
Non controlling interest

Noncurrent asset (machinery) 70,000

Current asset (inventory)
Investment in Jacob Corp.
 Non controlling interest

Goodwill 120,000
Investment in Jacob Corp.

Note: you can journalized a compound entry

4
Moses
Assets
Current asssets 295,000
Noncurrent assets 550,000
Investment in Jacob 450,000
Goodwill -
Total Assets 1,295,000

Liabilities & Equity

Liabilities 345,000
Ordinary Share Capital 500,000
Retained Earnings 450,000
Non Controlling Interest -
Total Liabilities & Equity 1,295,000

Note: Initial balances of Moses are after the effect of journal en

PROBLEM 2-3
Consolidated Statement of Financial Position of Love Corp and You Co
Love
Current Assets 175000
Noncurrent Assets 725000

Liabilities 65000
Ordinary shares, P20 par 550000
Share premium 35000
Retained earnings 250000

On January 1, 2022, Love Corp issued 35,000 shares with a market va

The book value reflects the fair value of the assets and liabilities exce
Required:
1. Consolidated assets as of date of acquisition
2. Consolidated equity as of date of acquisition

1 Asset's book value before combinatio 900,000

Asset's fair value - date of combinati 695,000
Goodwill on combination 230,000
Stock issue cost paid (34,000)
other costs paid (10,000)
Consolidated assets 1,781,000

2 Equity before combination (Love) 835,000

 Shares issued 875,000
Stock issue cost paid (34,000)
other costs paid (10,000)
Consolidated equity 1,666,000

PROBLEM 2-4
On January 2, 2022, the Statement of Financial Position of Love and H

Love Company
Cash 225000
Inventories 150000
PPE 375000
Total Assets 750000

Current Liabilities 45000

Ordinary Share, P100 par 75000
Ordinary Share Premium 225000
Retained Earnings 405000
Total Liabilties and SHE 750000

The fair market value of Hope Company's PPE (net) is P76,500

Required:
1. Assuming Love Company acquired all the outstanding share of Hop
a. Assets
b. Liabilities
c. Shareholders Equity
2. Assuming Love Company acquired 90% of the outstanding ordinary
a. Assets
b. Liabilities
c. Shareholders Equity

1 Book value of asset before combinati 750,000

Fair value of assets (Hope) 99,000
Goodwill on combination 33,000
Cash paid as part of consideration (106,500)
Consolidated assets 775,500

Book value of liab before combinatio 45,000

Fair value of liab (Hope) 7,500
Contingent consideration 18,000
Consolidated liab 70,500

Equity before combination (Love) 705,000

Consolidated equity 705,000

2 Book value of asset before combinati 750,000

Fair value of assets (Hope) 99,000
Goodwill on combination 43,500
Cash paid as part of consideration (121,500)
 Consolidated assets 771,000

Book value of liab before combinatio 45,000

Fair value of liab (Hope) 7,500
Consolidated liab 52,500

Equity before combination (Love) 705,000

NCI 13,500
Consolidated equity 718,500

PROBLEM 2-5
On January 1, 2022, P Company acquired 2,700 shares of the outstan

Required:
1. Goodwill/ gain on bargain purchase
2. Entries in the book of the parent as of date of acquisition
Elimination entries as of date of acquisition

1 Cash paid 540,000

NCI (10%) - @fair value 60,000
Total 600,000
FMV of net assets 500,000
Goodwill 100,000

2 Investment in S Co. 540,000

 Cash

3 Ordinary share capital - S Co. 300,000

Retained earnings 150,000
Investment in S Co.
Non controlling interest

Equipment 50,000
Investment in S Co.
Non controlling interest

Goodwill 100,000
Investment in S Co.
Non controlling interest

PROBLEM 2-6
Romeo Company issued 120,000 shares of P10 par ordinary shares w

Legal fees to arrange the business combination

Accounting and consultancy fees related with business combination
Costs of printing and issuing new stock certificates
Indirect costs of combinining, including allocated overhead and execu
Broker's and finder's fee related with business combination

Immediately before the business combination in which Jorge Compan

 Book value
Current assets 1000000
Plant assets 1500000
Liabilities
Ordinary shares
Retained earnings

Required:
1. how much is the retained earnings after the business combination?
2. how much is the net increase in the shareholders equity of the acq

1 Romeo's RE before combination 1,000,000

Expenses during combination (87,000)
RE after combination 913,000

2 Fair value of shares issued 3,600,000

Expenses during combination (87,000)
Share issue cost (3,000)
Net effect in the equity of acquirer 3,510,000
1 of Moses Corporation and Jacob Corporation are:
Jacob Corp
150000
350000
500000

100000
250000
150000
500000

of its ordinary shares in exchange of all the outstanding voting shares of Jaco

p. to recognize the purchased of interest in Jacob Corp.

of the date of acquisition

400,000
200,000

60,000
 600,000

1 of Moses Corporation and Jacob Corporation are:

Jacob Corp
250000
450000
700000
200000
300000
200000
700000

% of the outstanding voting shares of Jacob Corp. The combination qualifies

pt for Inventory with fair value lower than the recorded amount by P20,000.

p to recognize the purchase of interest in Jacob Corp

of the date of acquisition
ate of acquisition
((60%))

405,000
45,000

50,000

300,000 ((60%))
200,000 ((40%))

20,000
30,000 50K
 20,000

120,000

Combined Eliminatio
Jacob
Balances n Entries
250,000 545,000 -20,000
450,000 1,000,000 70,000
- 450,000 -450,000
- - 120,000
700,000 1,995,000 -280,000

200,000 545,000
300,000 800,000 -300,000
200,000 650,000 -200,000
- - 220,000
700,000 1,995,000 -280,000

ct of journal entry in #2 requirement

orp and You Corp as of December 31, 2021 are as follows:
You
65000
425000630K

35000
300000
25000
130000

th a market value of P25/ share for the assets and liabilities of You Corp.
liabilities except that the noncurrent assets of You have fair values of P6300
n of Love and Hope Company prior to combination are:

Hope Company
7500 CONSIDERATIONS
15000 C.L.
52500 TOTAL
75000 LESS;FV OF NA ACQUIRED
GOODWILL
7500
7500
15000
45000
75000

P76,500

ng share of Hope Company resulting to a goodwill of P33,000, the contingent

anding ordinary share of YOU Company for P121,500 and NCI is measured at

CONSIDERATIONS PD
NCI
TOTAL
LESS: FV OF NA ACQUIR
 GOODWILL

of the outstanding ordinary share of S Company for P540,000. As of this dat

2700SH/3000SH
((540K/90%)= 600K X10%))
 540,000

405,000 ((90%))
45,000 ((10%))

45,000 ((90%))
5,000 ((10%))

90,000 ((90%))
10,000 ((10%))

inary shares with a fair value of P30 per share for all the net assets of Jorge C

combination

head and executive salaries

h Jorge Company was dissolved, Jorge's assets and equities were as follows:
 Fair value
1100000
2200000
300000
2000000
200000

s combination?
uity of the acquirer?
Corporation are:

TOTAL CONSID(20KSHXP30) 600K

LESS: FV OF NA ACQUIRED 400K
GOODWILL 200K

of all the outstanding voting shares of Jacob Corp. Moses Corp. shares has m

terest in Jacob Corp.

Corporation are:

of Jacob Corp. The combination qualifies as an acquisition and Moses incurr

er than the recorded amount by P20,000. Of the noncurrent assets, machine

rest in Jacob Corp

Consolidated Balances
525,000
1,070,000
-
120,000
1,715,000

545,000
500,000
450,000
220,000
1,715,000
31, 2021 are as follows:

CONSIDERATIONS(35000SHXP25) 875K
C/L 15K
TOTAL 890K
LESS;FV OF NA ACQUIRED 660K
GOODWILL 230K

r the assets and liabilities of You Corp.

ent assets of You have fair values of P630000, and the noncurrent assets of L
 to combination are:

NSIDERATIONS 106500
18000
124500
S;FV OF NA ACQUIRED 91500
ODWILL 33000

g to a goodwill of P33,000, the contingent consideration is P18,000, compute

pany for P121,500 and NCI is measured at fair value, compute the consolidat

121500((90%))
13500((10%)) ((121500/90%))*10%
135000
91500
 43500

of S Company for P540,000. As of this date, the shareholders equity section

(90%))
00K X10%))
0 per share for all the net assets of Jorge Company. Romeo's retained earnin

P25000
12000
3000SP
20000
30000

rge's assets and equities were as follows:

Corp. shares has market value of P30 per share. The combination qualifies a
n and Moses incurred legal fees of P50,000. Also, Moses will pay additional P
ent assets, machinery is assessed to be undervalued by P70,000, the rest are
ncurrent assets of Love are overstated by P30000. Contingent consideration,
s P18,000, compute the consolidated balances of the following as of date of
pute the consolidated balances of the following as of date of acquisition:

0%))*10%
ders equity section of S Company consisted of Share Capital, P100 par, P300,
eo's retained earnings prior to business combination amounted to P1,000,00
ation qualifies as an acquisition and Moses incurred legal fees of P50,000 and
 pay additional P75,000 to Jacob if it will hit a profit that is higher by at least 2
000, the rest are fairly stated. Non-controlling interest is measured based on
t consideration, which is determinable, is equal to P15000. Love also paid for
ng as of date of acquisition:
acquisition:
P100 par, P300,000 and Retained Earnings, P150,000. The carrying value of S
ed to P1,000,000. Romeo incurred the following additional costs:
s of P50,000 and share issuance cost of P10,000.
 her by at least 20% compare to the average profit of the latest 3 years of op
sured based on proportionate share of Jacob's identifiable net assets.
ve also paid for the stock issuance costs worth P34000 and other acquisition
rying value of S Company's identifiable assets and liabilities are equal to thei
st 3 years of operation. The contingent consideration, when the condition is
t assets.
ther acquisition costs amounting to P10000.
re equal to their fair market values except for equipment, which is underval
he condition is met, is payable on January 31, 2023. Based on the most reas
hich is undervalued by P50,000, with remaining useful life of 5 years. P opt to
n the most reasonable estimates, the probability that the target will be satis
5 years. P opt to measure NCI at fair value.
get will be satisfied is between 45% to 75%.