QUIZ-1 - Bdnxjwnsvhwdn PDF

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Tacurong City, Sultan Kudarat Entity A and Entity B combined their businesses. The acquirer in the business combination is not clearly identifiable. Which of the following is not an indicator that Entity A is the acquirer? a. Entity A is the initiator of the business combination. b. Entity A’s forme...

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Notre Dame of Tacurong College Tacurong City, Sultan Kudarat

_____________________________________________________________________________________ 1. Entity A and Entity B combined their businesses. The acquirer in the business combination is not clearly identifiable. Which of the following is not an indicator that Entity A is the acquirer? a. Entity A is the initiator of the business combination. b. Entity A’s former owners receive the largest portion of the voting rights in the combined entity. c. Entity A’s former management team dominates the management of the combined entity. d. Entity C, a new entity, is formed and Entity C transfers cash to Entity A and Entity B. 2. Direct costs incurred in a business combination are a. capitalized b. expensed c. capitalized, except for costs of issuing equity and debt instruments d. expensed, except for costs of issuing equity and debt instruments 3. Which of the following assets of an acquire may not be included when computing for the goodwill arising from a business combination? a. Capitalized kitchen utensils and equipment b. Intangible assets not previously recorded c. Research and development costs charged as expenses d. Goodwill 4. Entity A obtained control of Entity B in a business combination. When computing for goodwill, Entity A would least likely account for which of the following? a. Entity B’s research and development projects that were already charged as expenses, but have a fair value as at the acquisition date. b. Entity B’s unrecorded identifiable intangible assets c. Operating lease between Entity A and Entity B, wherein Entity B is the lessee. d. Entity A’s expected costs of exiting or terminating some or all of Entity B’s activities after the combination. 5. According to PFRS 3, a ‘gain on a bargain purchase’ is a. recognized in profit or loss in the year of acquisition. b. amortized in profit or loss over the lower of its legal life and estimated useful life. c. recognized in profit or loss in the year of acquisition but only after reassessment of the assets acquired and liabilities assumed in the business combination d. any of these 6. Carpenter Co. acquires 100% controlling interest in Wood Co. by issuing 2,000 shares with par value per share of P100 and fair value per share of P500. Carpenter Co. incurs stock issuance costs of P10 per share. On acquisition date, Wood Co.’s identifiable assets and liabilities have fair values of P2,800,000 and P1,600,000, respectively. Carpenter Co. incurred P40,000 in hiring an independent appraiser to value Wood’s assets and liabilities. After the combination, Carpenter intends to eliminate some of Wood’s activities. The estimated costs are P20,000. In addition, Carpenter Co. expects to incur losses of P80,000 during the first year after the business combination. How much is the goodwill (gain on bargain purchase)? a. (260,000) b. 240,000 c. (200,000)

Notre Dame of Tacurong College Tacurong City, Sultan Kudarat

_____________________________________________________________________________________ d. 280,000 Consideration transferred (2,000 sh. x ₱500) NCI Previously held equity interest in the acquiree Total Fair value of net identifiable assets acquired (2.8M – 1.6M)

Gain on bargain purchase

1,000,000 1,000,000 (1,200,000) (200,000)

7. Silent Co. acquires 80% controlling interest in Peaceful Co. for P1,200,000. Peaceful Co.’s identifiable assets and liabilities have fair values of P3,300,000 and P1,700,000, respectively. Included in Peaceful’s assets is a web press machine with fair value of P900,000 which Silent Co. intends to sell immediately. The machine qualifies for classification as ‘held for sale’. The costs to sell are P150,000. Silent Co. opts to measure the non-controlling interest at fair value. How much is the goodwill? (Assume the fair value of the NCI is equal to the grossed-up value of the consideration transferred multiplied by the NCI percentage.) a. 60,000 b. 40,000 c. 50,000 d. 20,000 Consideration transferred NCI (1.2M ÷ 80%) x 20% Previously held equity interest in the acquiree Total Fair value of net identifiable assets acquired (3.3M – 150K costs to sell – 1.7M)

Goodwill

1,200,000 300,000 1,500,000 (1,450,000) 50,000

8. On October 26, 2019, Entity A acquired 100% interest in Entity B for P2,800,000. On this date, Entity B’s identifiable assets and liabilities have fair values of P4,000,000 and P1,600,000, respectively. Included in Entity B’s liabilities are cash dividends of P280,000 declared on October 1, 2019, to shareholders of record on November 1, 2019, and payable on December 1, 2019. How much is the goodwill? a. 400,000 b. 680,000 c. 120,000 d. 200,000 Consideration transferred (2.8M – 280K dividends on) Non-controlling interest in the acquiree Previously held equity interest in the acquiree Total Fair value of net identifiable assets acquired (4M – 1.6M)

Goodwill

2,520,000 2,520,000 (2,400,000) 120,000

Notre Dame of Tacurong College Tacurong City, Sultan Kudarat

_____________________________________________________________________________________ 9. A Co. acquired 60% interest in the net assets of B Co. for P1,500,000. On Acquisition date, B Co.’s identifiable assets and liabilities have fair values of P5,000,000 and P2,800,000, respectively. Additional information:  B Co. has an unrecorded customer list with fair value of P80,000. The customer list is separable.  A Co. is renting out a license to B Co. under an operating lease. The terms of the lease compared with market terms are unfavorable. The fair value of the differential is P30,000.  A Co. opted to measure the NCI at fair value. An independent valuer assessed the fair value of the NCI to be P800,000. How much is the goodwill?

a. b. c. d.

50,000 100,000 150,000 200,000

Consideration transferred Non-controlling interest in the acquire Previously held equity interest in the acquiree Total Fair value of net identifiable assets acquired (5M + 80K customer list –2.8M – 30K liability on operating lease with unfavorable terms)

Goodwill

1,500,000 800,000 2,300,000 (2,250,000) 50,000

10. Entity A acquired all the assets and assumed all the liabilities of Entity B for P1,800,000. Information on Entity B’s assets and liabilities as at the acquisition date is shown below: Assets Receivables – net Inventory Building – net Goodwill Total Assets Liabilities Payables

Carrying Amounts 200,000 600,000 1,200,000 100,000 2,100,000

Fair Values 100,000 450,000 1,800,000 20,000 2,370,000

900,000

700,000

How much is the goodwill (gain on bargain purchase)? a. 150,000 b. 130,000 c. 100,000 d. 180,000 Consideration transferred Non-controlling interest in the acquiree

1,800,000 -

Notre Dame of Tacurong College Tacurong City, Sultan Kudarat

_____________________________________________________________________________________ Previously held equity interest in the acquiree Total Fair value of net identifiable assets acquired (2.37M – 20K goodwill – 700K liabilities)

Goodwill

1,800,000 (1,650,000) 150,000...