MULTIPLE CHOICE
14-1:
a
Purchase price (8,000 shares x P30)
Direct acquisition cost
Contingent consideration
Acquisition cost
14-2:
P240,000
4,000
5,000
P249,000
a
Purchase price
Direct acquisition cost
Acquisition cost
Less: Fair value of net assets acquired
Goodwill
14-3:
P250,000
50,000
P300,000
180,000
P120,000
c
Purchase price (100,000 shares x P36)
Direct acquisition cost
Contingent consideration
Acquisition cost
14-4:
14-5:
P3,600,000
100,000
20,000
P3,720,000
b
Purchase price (600,000 shares x P50)
Direct acquisition cost
Acquisition cost
Less: goodwill recorded
Fair value of net assets acquired
P30,000,000
300,000
P30,300,000
6,120,000
P24,180,000
P30,000,000
c
Purchase price
Legal fees
Acquisition cost
Less: Fair value of net assets acquired
Current assets
Plant assets
Liabilities
Income from acquisition
P2,550,000
25,000
P2,575,000
P1,100,000
2,200,000
( 300,000)
3,000,000
P( 425,000)
37
14-6:
14-7:
d
Abel net income, January to December (P80,000 + P1,320,000) P1,400,000
Cain net income, April to December
400,000
Total net income
P1,800,000
14-8:
a
Acquisition cost
Less: Fair value of net assets acquired
Cash
Inventory
Property, plant and equipment
Liabilities
Income from acquisition
14-9
P 800,000
P 160,000
380,000
1,120,000
( 360,000)
1,300,000
P (500,000)
a
Acquisition cost
Less: Fair value of net assets acquired (P600,000 P188,000)
Goodwill
Avons assets
Bells assets at fair value
Total assets
P 700,000
412,000
P 288,000
2,000,000
600,000
P2,888,000
14-10: b
Debit to Investment in Stock
Brokers fee
Pre-acquisition audit fee
Legal fees for the combination
Total
Debit to expenses:
General administrative costs
Other indirect costs
Total
Debit to APIC
Audit fee for SEC registration of stock issue
SEC registration fee for stock issue
Total
50,000
40,000
32,000
P 122,000
15,000
6,000
P 21,000
46,000
5,000
P 51,000
38
14-11: d
Acquisition costs:
Cash
Stocks issued at fair value
Contingent liabilities
Total
Less: fair value of net assets acquired:
Cash
Inventories
Other current assets
Plant assets (net)
Current liabilities
Other liabilities
Goodwill
P200,000
330,000
70,000
P600,000
P40,000
100,000
20,000
180,000
(30,000)
(40,000)
270,000
P330,000
P 760,000
(200,000)
( 30,000)
P 530,000
340,000
330,000
P1,200,000
14-12: d
Acquisition cost
Less: Fair value net assets acquired
Goodwill
P1,400,000
1,350,000
P 50,000
14-13: a
Acquisition cost
Less: Fair value of net identifiable assets acquired:
Current assets
P 80,000
Non-current assets
120,000
Liabilities
( 20,000)
Income from acquisition
P160,000
P120,000
180,000
P(20,000)
14-14: c
Acquisition cost
Less: Fair value of identifiable assets acquired:
Cash
P 60,000
Merchandise inventory
142,500
Plant assets (net)
420,000
Liabilities
(135,000)
Goodwill
P600,000
487,500
P112,500
39
14-15: b
Acquisition cost
Less: Fair value of identifiable assets acquired
Goodwill
MMs net assets at book value
PPs net assets at fair value
Total assets after combination
P1,000,000
800,000
P 200,000
1,200,000
800,000
P2,200,000
14-16: c, Under the purchase method assets are recorded at their fair values (P225.000)
14-17: d
Capital stock issued at par (10,000 shares x P10)
APIC (10,000 shares x P40)
Total
P100,000
400,000
P500,000
P 100,000
1,600,000
1,500,000
37,500 shares
14-20: d
Goodwill
Fair value of net assets acquired
Acquisition cost
P 200,000
1,600,000
P1,800,000
45,000 shares
P 700,000
540,000
1,240,000
40,000
1,200,000
195,000
1,395,000
675,000
480,000
195,000
14-21:
40
14-22:
Stockholders equity before acquisition
Capital stock issued at par (30,000 shares x P10)
APIC (50,000 +300,000) 15,000
Stockholders equity after acquisition
650,000
300,000
335,000
1,285,000
14-23: a
Acquisition cost
Less: fair value of net assets acquired
Goodwill
B Company
P4,400,000
4,150,000
P 250,000
C Company
P638,000
370,000
P268,000
518,000
5,250,000
6,800,000
900,000
(30,000)
518,000
13,438,000
P1,300,000
2,290,000
2,738,000
(20,000)
6,308,000
41
PROBLEMS
Problem 14-1
1.
120,000
140,000
300,000
50,000
5,000
505,000
P505,000
510,000
P( 5,000)
500,000
50,000
Common stock
Retained earnings
Cash
To record liquidation of the corporation.
200,000
300,000
120,000
100,000
280,000
50,000
500,000
42
Problem 14-2
Cash
Inventory
Building and equipment net
Patent
Accounts payable
Cash
Income from acquisition
To record acquisition of the net assets at fair values.
50,000
150,000
300,000
200,000
30,000
570,000
100,000
P570,000
670,000
P(100,000)
Problem 14-3
Cash and receivables
Inventory
Building and equipment
Goodwill
Accounts payable
Common stock, P10 par value
Additional paid-in capital
Cash
To record acquisition of net assets acquired.
50,000
200,000
300,000
65,000
Computation of Goodwill
Purchase price (6,000 shares x P90)
Direct acquisition cost
Acquisition cost
Less: fair value of net identifiable assets acquired
Total assets
P550,000
Accounts payable
( 50,000)
Goodwill
50,000
60,000
480,000
25,000
P540,000
25,000
P565,000
500,000
P 65,000
43
Problem 14-4
(1)
Cash
Accounts receivable
Inventory
Land
Building and equipment
Bond discount
Goodwill
Accounts payable
Bonds payable
Common stock, P10 par value
Additional paid-in capital
Cash (P10,000 + P3,000)
To record purchase of net assets of Tan.
60,000
100,000
115,000
70,000
350,000
20,000
108,000
10,000
200,000
120,000
480,000
13,000
Computation of Goodwill
Purchase price (12,000 shares x P50)
Professional fees (P10,000 + P3,000)
Acquisition cost
Less: Fair value of net identifiable assets acquired
Total assets
P695,000
Total liabilities
( 190,000)
Goodwill
(2)
P600,000
13,000
P613,000
505,000
P108,000
(3)
Expenses
Cash
To record indirect acquisition costs.
6,000
9,000
9,000
Problem 14-5
1.
2.
3.
4.
5.
6.
7.
P280,000
190,000
185,000
530,000
45,000
340,000
330,000
44
Problem 14-6
Combined Balance Sheet
After acquisition
140,000
485,000
450,000
550,000
400,000
P2,025,000
140,000
485,000
450,000
250,000
520,000
P1,845,000
P600,000
420,000
P180,000
P300,000
420,000
P(120,000)
Problem 14-7
(a)
ASSETS
Cash and receivables
Inventory
Land
Plant and equipment
Less: Accumulated depreciation
Goodwill
Total assets
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities
Capital stock, P20 par value
Capital in excess of par
Retained earnings
Total liabilities and stockholders equity
P 110,000
142,000
115,000
P540,000
150,000
390,000
13,000
P 770,000
P 100,000
214,000
216,000
240,000
P 770,000
45
Computation of Goodwill
Acquisition cost
Less: Fair value of net identifiable assets acquired
(P217,000 P20,000)
Goodwill
P210,000
197,000
P 13,000
(b)
P222,000
328,000
240,000
P790,000
P 236,000
524,000
240,000
P1,000,000
P260,000
860,000
240,000
P1,360,000
Problem 14-8
Revenue
Net income
Earnings per share
(a)
(b)
(c)
(d)
(e)
2007 (a)
P1,400,000
500,000
P 5.00
2008
P1,800,000 (b)
545,000
P 4.84 (d)
2009
P2,100,000
700,000
P 5.60 (e)
46
Problem 14-9
a.
6,500
137,200
500,000
20,000
100,000
1,000,000
180,000
2,298,000
135,000
P2,520,000
135,000
P2,655,000
2,410,300
P 244,700
42,000
42,000
47
b.
Books of HCC:
Common stock
APIC Common
Treasury stock
To record retirement of treasury stock.
P7,500 = P5 x 1,500 shares
P4,500 = P12,000 P7,500
Investment in stock - Peter
Allowance for bad debts
Accumulated depreciation
Current payable
Mortgage payable
Equipment trust notes
Debentures payable
Discount on bonds payable
Cash
Accounts receivable
Inventory
Long-term investments
Land
Rolling stock
Plant and equipment
Patents
Special licenses
Gain on sale of assets and liabilities
To record sale of assets and liabilities to Peter.
7,500
4,500
12,000
2,520,000
6,500
614,000
137,200
500,000
100,000
1,000,000
Common stock
592,500
APIC Common
495,500
APIC Retirement of preferred
22,000
Retained earnings
1,410,000
Investment in stock Peter
To record retirement of HCC stock and distribution of
Peter Industries stock:
P592,500 = P600,000 - P7,500
P495,500 = P500,000 P4,500
P1,410,000 = P220,000 + P1,189,900
40,000
28,000
258,000
381,000
150,000
55,000
130,000
2,425,000
125,000
95,800
1,189,900
2,520,000
48
Problem 14-10
a.
b.
P1,130,000
650,000
P 480,000
( 80,000)
P 400,000
55,000
P 345,000
c.
P 240,000
200,000
P 40,000
P5
8,000 shares
d.
P 400,000
8,000
P
50
40,000
360,000
P 400,000
Problem 14-11
a.
b.
c.
P 20,000
55,000
110,000
P570,000
(350,000)
220,000
P405,000
P100,000
5,000
P105,000
49
d.
e.
f.
P190,000
(120,000)
P 70,000
P5
14,000
P190,000
262,000
P120,000
10,000
P452,000
(130,000)
P322,000
14,000
P 23.00
P322,000
P405,000
(135,000)
(270,000)
P 52,000
30,000
P 82,000
g.
h.
i.
1.
Investment account
Additional paid-in capital
Cash
17,000
9,800
26,800
2.
P82,000
17,000
P99,000
3.
P262,000
(9,800)
P252,200
50