Midterm Exam Accounting FOR Business Combinations PDF

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Midterm ExamDue Apr 8 at 11:59pm Points 32 Questions 32Available Apr 7 at 7:30am - Apr 9 at 1am 1 day Time Limit 180 MinutesAempt HistoryAttempt Time Score LATEST Attempt 1 94 minutes 32 out of 32 Correct answers will be available Apr 13 at 12am - Apr 14 at 12am.Score for this quiz: 32 out of 32Sub...

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4/8/2021

Midterm Exam: ACCOUNTING FOR BUSINESS COMBINATIONS

Midterm Exam Due Apr 8 at 11:59pm

Points 32

Questions 32

Available Apr 7 at 7:30am - Apr 9 at 1am 1 day

Time Limit 180 Minutes

Aempt History LATEST

Attempt

Time

Score

Attempt 1

94 minutes

32 out of 32

 Correct answers will be available Apr 13 at 12am - Apr 14 at 12am. Score for this quiz: 32 out of 32 Submitted Apr 8 at 9:53pm This attempt took 94 minutes.

Question 1

1 / 1 pts

The term "control" means ownership, directly or indirectly through subsidiaries of

More than one-half of the outstanding voting stock of another company.

Question 2 https://feu.instructure.com/courses/64876/quizzes/592052

1 / 1 pts

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Jones Corporation issues 45,000 shares of previously unissued P10 par value common stock with a fair market value of P32 per share for net assets of Dunn Corporation. Jones pays the following costs and expenses related to the business combination: Registering and issuing securities P15,000 Accountants' and legal fees 8,000 Salaries of Jones's employees assigned to the implementation of the merger 16,000 Cost of closing duplicate facilities 12,000 Cost of shareholders' meeting to vote on the merger 5,000 The expenses amounted to:

41,000

Question 3

1 / 1 pts

I Corporation is a company involved in manufacturing mining equipment. At the Beginning of the year, the board of directors of the said company has decided to enter into a business combination with S Corporation and B Corporation, top suppliers of materials in the mining industry which they use in production. The said acquisition is expected to result in producing higher quality mining equipment with lower total cost. The deal was closed

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on February 28, 2016 and the following information was gathered from the books of the entities: I

S

B

Current Assets

8,250,000

2,340,000

1,560,000

Non-Current Assets

18,750,000

15,300,000

10,200,000

Total Assets

27,000,000

17,640,000

11,760,000

Liabilities

1,950,000

1,260,000

840,000

Ordinary Shares, P100 par

16,491,000

10,681,200

7,120,800

1,018,800

679,200

7,500,000

4,680,000

3,120,000

27,000,000

17,640,000

11,760,000

Share Premium 1,059,000 Retained Earnings Total Equities

I, who has the legal and economic entity, will issue 135,000 shares of its ordinary shares in exchange for the acquisition of S and 67,200 of its ordinary shares in exchange for the acquisition of B. The fair value of I’s share is P150. In addition, the following adjustments should be made to the current assets of S and B which has a fair value of 2,700,000 and 1,380,000 respectively. The noncurrent assets have a fair value of 12,900,000 and 11,850,000 for S and B, respectively. Compute the Stockholders' Equity at the date of acquisition.

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57,690,000

1 / 1 pts

Question 4

I Corporation is a company involved in manufacturing mining equipment. At the Beginning of the year, the board of directors of the said company has decided to enter into a business combination with S Corporation and B Corporation, top suppliers of materials in the mining industry which they use in production. The said acquisition is expected to result in producing higher quality mining equipment with lower total cost. The deal was closed on February 28, 2016 and the following information was gathered from the books of the entities: I

S

B

Current Assets

8,250,000

2,340,000

1,560,000

Non-Current Assets

18,750,000

15,300,000

10,200,000

Total Assets

27,000,000

17,640,000

11,760,000

Liabilities

1,950,000

1,260,000

840,000

Ordinary Shares, P100 par

16,491,000

10,681,200

7,120,800

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Share Premium 1,059,000

1,018,800

679,200

Retained Earnings

7,500,000

4,680,000

3,120,000

Total Equities

27,000,000

17,640,000

11,760,000

I, who has the legal and economic entity, will issue 135,000 shares of its ordinary shares in exchange for the acquisition of S and 67,200 of its ordinary shares in exchange for the acquisition of B. The fair value of I’s share is P150. In addition, the following adjustments should be made to the current assets of S and B which has a fair value of 2,700,000 and 1,380,000 respectively. The noncurrent assets have a fair value of 12,900,000 and 11,850,000 for S and B, respectively. Compute the Total Assets at the date of acquisition.

61,740,000

1 / 1 pts

Question 5

The statement of Financial Position L Company on June 30, 2016, is presented below:

Current Assets https://feu.instructure.com/courses/64876/quizzes/592052

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Land

1,320,000

Building

660,000

Equipment

525,000

TOTAL ASSETS

2,700,000

Liabilities

525,000

Ordinary Shares, P5 par

900,000

Share Premium

825,000

Retained Earnings

450,000

TOTAL EQUITIES

2,700,000

All the assets and liabilities of L assumed to approximate their fair values except for land and building. It is estimated that the land have fair value of P2,100,000 and the fair value of the building increased by P480,000. E Corporation acquired 80% of L’s outstanding shares for P3,000,000. The non-controlling interest is measured at Fair Value. Assuming the consideration paid includes control premium of 852,000, how much is the goodwill/ (gain on acquisition) on the consolidated financial statement?

252,000

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Question 6

The statement of Financial Position L Company on June 30, 2016, is presented below:

Current Assets

195,000

Land

1,320,000

Building

660,000

Equipment

525,000

TOTAL ASSETS

2,700,000

Liabilities

525,000

Ordinary Shares, P5 par

900,000

Share Premium

825,000

Retained Earnings

450,000

TOTAL EQUITIES

2,700,000

All the assets and liabilities of L assumed to approximate their fair values except for land and building. It is estimated that the land have fair value of P2,100,000 and the fair value of the building increased by P480,000. E

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Corporation acquired 80% of L’s outstanding shares for P3,000,000. The non-controlling interest is measured at Fair Value. Assuming the consideration paid includes control premium of 222,000, how much is the goodwill/ (gain on acquisition) on the consolidated financial statement?

259,500

1 / 1 pts

Question 7

B Co. merged into S Corp. on June 30, 2016. In exchange for the net assets at fair market value of B Co. amounting to 2,785,800, S issued 68,000 ordinary shares at P36 par value, at a market price of P41 per share. Relevant data on ordinary shareholders’ equity immediately before the combination show:

S

B

Share Capital

8,790,000

2,030,000

Share Premium

3,834,000

782,000

Retained Earnings

(1,516,000)

495,000

Out of pocket cost of the combination were as follows: https://feu.instructure.com/courses/64876/quizzes/592052

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Legal Fee Audit Fee for SEC Registration of stock issue Printing costs of stock certificates Broker’s fee Accountant’s fee for pre-acquisition audit

174,700 198,400 144,900 135,000 161,000

Other direct cost acquisition

90,400

General and allocated expenses

115,300

Listing Fee in issuing new shares

172,000

Included as part of the acquisition agreement is the additional cash consideration of P163,000 in the event S Co.’s will reach P32 per share by year-end. At the acquisition date, the share price is P27.50, and increased by P4.80 by December 31, 2016. At the acquisition date, there was only a low probability of reaching the target share price, so the fair value of the additional cash consideration was determined at P74,000. What amount of expense to be recognized in the statement of comprehensive income for the year ended December 31, 2016?

937,400

Question 8

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1 / 1 pts

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Parson Co. acquired 80% of the outstanding common stock of Smith Co. for P1,500,000 cash on January 2, 2009 , when the stockholders' equity of Smith-Co. totaled P1,400,000 (common stock, P500,000; additional paid in capital, P600,000; retained earnings, P300,000). The book values of assets and liabilities approximate with its market values, except building that was undervalued by P400,000, and equipment that was overvalued by P120,000. The building has an estimated useful life of 20 years and the equipment is expected to be useful for 5 years. Prior to acquisition, Smith Co. has unimpaired goodwill in the amount of P10,000. Assuming the non-controlling interest is measured at its share of the subsidiary's net assets, What is the amount of goodwill to be reported in the consolidated balance sheet at the date of acquisition?

156,000

Question 9

1 / 1 pts

A subsidiary, acquired for cash in a business combination, owned inventories with a market value greater than the book value as of the date of combination. A consolidated balance sheet prepared immediately after the acquisition would include this difference as part of

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Inventories

Question 10

1 / 1 pts

On October 1, 2012 The Ting Company acquired 100% of The Green Company when the fair value of Green's net assets was P116 million and their carrying amount was P120 million. The consideration transferred comprised P200 million in cash transferred at the acquisition date, plus another P60 million in cash to be transferred 11 months after the acquisition date if a specified profit target was met by Green. At the acquisition date there was only a low probability of the profit target being met, so the fair value of the additional consideration liability was P10 million. In the event, the profit target was met and the P60 million cash was transferred, Goodwill should be recorded at?

94M

Question 11

1 / 1 pts

On January 1, 2017, Ayala acquired 90% of outstanding ordinary shares of Globe Inc. The following data are provided:

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On year 2017, Ayala sold inventory at a price of P1,000,000 with gross profit rate of 20% based on sale to Globe. 40% remained in ending inventory of Globe on December 31, 2017. These inventories are eventually sold on year 2018 to third persons by Globe. During 2018, Globe sold inventory at a price of P500,000 with gross profit of 40% based on sale to Ayala of which 10% remained in ending inventory of Ayala on December 31, 2018. During 2018, Ayala reported sales of P10M while Globe reported sales of P4M. In the same year, Ayala reported gross profit of P3M while Globe reported gross profit of P2M. What is the amount of Ayala’s consolidated sales for the year ended December 31, 2018?

13,500,000

Question 12

1 / 1 pts

On January 1, 2017, Ayala acquired 90% of outstanding ordinary shares of Globe Inc. The following data are provided:

On year 2017, Ayala sold inventory at a price of P1,000,000 with gross profit rate of 20% based on sale to Globe. 40% remained in ending inventory of Globe on December 31, 2017. These inventories are eventually sold on year 2018 to third persons by Globe. During 2018, Globe sold inventory at a price of P500,000 with gross profit of 40% based on sale to Ayala of which 10% remained in ending inventory of Ayala on December 31, 2018.

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During 2018, Ayala reported sales of P10M while Globe reported sales of P4M. In the same year, Ayala reported gross profit of P3M while Globe reported gross profit of P2M. What is Ayala’s consolidated gross profit for the year ended December 31, 2018?

5,060,000

Question 13

1 / 1 pts

On January 1, 2011, Wilt Corporation pays P388, 000 for a 60 percent ownership in Chamberlain. Annual excess fair value amortization of P15,000 results from the acquisition. On December 31, 2012, Chamberlain reports revenues of P400,000 and expenses of P300,000 and Wilt reports revenues of P700,000 and expenses of P400,000. The parent figures contain no income from the subsidiary. What is the consolidated net income attributable to the controlling interest / profit attributable to equity holders of parent?

351,000

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Question 14

1 / 1 pts

On July 1, 2017, SM acquired 80% of outstanding shares of BDO in exchange for P4M cash and 100,000 preferred shares with par value of P100 and quoted price of P200. On the acquisition date, the net assets of BDO has book value of P39M but a building with remaining useful life of 10 years is overstated by P4M. On October 1, 2017, BDO sold an equipment to SM at a gain of P200,000. On the date of sale, the equipment has remaining life of 5 years. For the year ended December 31, 2017, BDO reported net income of P900,000 and declared dividends of P100,000 on December 30, 2017. On the other hand, SM reported net income of P2M on its separate income statement and declared dividends of P1,000,000. The retained earnings balance of SM on December 31, 2016 is P10,000,000. What is SM’s consolidated net income for the year ended December 31, 2017?

6,380,000

Question 15

1 / 1 pts

On July 1, 2017, SM acquired 80% of outstanding shares of BDO in exchange for P4M cash and 100,000 preferred shares with par value of P100 and quoted price of P200. On the acquisition date, the net assets of BDO has book value of P39M but a building with remaining useful life of 10 years is overstated by P4M. On October 1, 2017, BDO sold an equipment to SM at a gain of P200,000. On the date of sale, the https://feu.instructure.com/courses/64876/quizzes/592052

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equipment has remaining life of 5 years. For the year ended December 31, 2017, BDO reported net income of P900,000 and declared dividends of P100,000 on December 30, 2017. On the other hand, SM reported net income of P2M on its separate income statement and declared dividends of P1,000,000. The retained earnings balance of SM on December 31, 2016 is P10,000,000. What is SM’s consolidated net income attributable to parent’s shareholders for the year ended December 31, 2017?

6,288,000

Question 16

1 / 1 pts

On July 1, 2017, SM acquired 80% of outstanding shares of BDO in exchange for P4M cash and 100,000 preferred shares with par value of P100 and quoted price of P200. On the acquisition date, the net assets of BDO has book value of P39M but a building with remaining useful life of 10 years is overstated by P4M. On October 1, 2017, BDO sold an equipment to SM at a gain of P200,000. On the date of sale, the equipment has remaining life of 5 years. For the year ended December 31, 2017, BDO reported net income of P900,000 and declared dividends of P100,000 on December 30, 2017. On the other hand, SM reported net income of P2M on its separate income statement and declared dividends of P1,000,000. The retained earnings balance of SM on December 31, 2016 is P10,000,000. What is noncontrolling interest in net assets on December 31, 2017?

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7,072,000

Question 17

1 / 1 pts

At the end of 2011, Paper Company's stockholders' equity includes common stock of P500,000 and additional paid-in capital of P300,000. Paper purchased a 70 percent interest in Slick Company on January 1, 2011, when the non-controlling interest in Slick had a fair value of P90,000. No differential arose from the business combination. During 2011, Slick reports net income of P20,000 and declares dividend of P5,000. The 2011 consolidated balance sheet includes retained earnings of P630,000 (controlling interest portion). Determine the consolidated equity on December 31, 2011:

1,524,500

Question 18 https://feu.instructure.com/courses/64876/quizzes/592052

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Papa, Inc. acquired 90% interest in Son Corp. on January 1, 2030. On January 1, 2031. Son sold a building with book value of P480,000 to Papa for P600,000. The building had a remaining useful life of 10 years. Both entities used straight line depreciation method. The separate financial of the entities on December 31, 2...