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ACCO 30023 Accounting for Business Combinations Midterm
Reviewer
ACCOUNTANCY (Our Lady of Fatima University)
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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
ACCO 30023: ACCOUNTING FOR BUSINESS COMBINATIONS
(Midterm Examinations)
THEORIES: Select the best answer for each of the following.
1. Statement 1 (S1): In an acquisition of assets for assets, the ownership structure of the
acquirer changes.
Statement 2 (S2): There is an increase in the total capitalization of an acquirer when
the acquirer issues stock for acquiree assets.
A.
B.
C.
D.
S1 - True; S2 – True
S1 - True; S2 - False
S1 - False; S2 - True
S1 - False: S2 – False
2. Which of the following is not a business combination?
A. Statutory amalgamation
B. Joint venture
C. A company's purchase of 100% of another company's net assets
D. A company's purchase of 80% of another company’s voting shares
3. Which of the following is not a reason why a private enterprise may be acquired as a
bargain purchase?
A. It is a family business and the next generation does not want to continue the
business.
B. The owner has health problems and does not have a successor.
C. The business only has equity financing and has no debt financing.
D. The owner is no longer interested in the business
4. When the acquisition price of on acquired firm is less than the fair value of the
identifiable net assets, all of the following recorded at fair value except
A. Assumed labilities
B. Current assets
C. Long-lived assets
D. Each of the above is recorded at fair value
5. Enchanted Corporation and Delicate Company, both publicly owned companies, are
planning a merger, with Enchanted being the survivor. Which of the following is a
requirement of the merger?
A. The Securities and Exchange Commission must approve the merger.
B. The common stockholders of Delicate must receive common stock of Enchanted.
C. The creditors of Delicate must approve the merger.
D. The boards of directors of both Enchanted and Delicate must approve the merger.
6. According to IFRS 10, these refer to financial statements of a group in which the
assets, liabilities, equity, income, expenses and cash flows of the parent and its
subsidiaries are presented as those of a single economic entity.
A. Separate financial statements
B. General purpose financial statements
C. Consolidated financial statements
D. Group financial statements
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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
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CAF Review
ACCO 30023: ACCOUNTING FOR BUSINESS COMBINATIONS
(Midterm Examinations)
7. According to IFRS 10, an investor controls an investee if and only if the investor has
all of the following elements except:
A. Power over the investee
B. Exposure, or rights, to variable returns from its involvement with the investee
C. The ability to use its power over the investee to affect the amount of the investor's
returns.
D. Holds protective rights as an investor.
8. An entity acquired an investment in a subsidiary with the view to dispose of the
investment within six months. The investment in the subsidiary has been classified as
held for sale. How should the investment in the subsidiary be treated in the financial
statements?
A. Acquisition accounting should be used.
B. The subsidiary should not be consolidated but IFRS 5 should be used.
C. The subsidiary should be derecognized.
D. Equity accounting should be used.
9. An investor has a power over the investee when:
A. It has existing rights that give it the current ability to direct the relevant activities.
B. It is exposed, or has rights, to variable returns from its involvement with the
investee.
C. It has the practical ability to affect the returns through its power over the investee.
D. None of the above.
10. Control is presumed to exist when the parent owns directly or indirectly through
subsidiaries
A. More than half of the preference and ordinary shares of an entity.
B. More than half of voting power of an entity.
C. More than half of the ordinary shares of an entity.
D. More than half of the equity of an entity.
11. Which of the statements is true?
I.
At the date of consolidation, the debit differential consists solely of one item—in
this example that one item is an expense.
II.
There are no intercompany transactions at the date of consolidation
III.
The subsidiary’s stock and the related stockholders’ equity accounts must be
eliminated because the stock of the subsidiary is held entirely within the
consolidated entity and none represents claims by outsiders.
IV.
The investment account must be eliminated because, from a single entity viewpoint,
a company cannot hold an investment in itself.
A.
B.
C.
D.
I, III, IV
I, II, IV
II, III, IV
I, II, III
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CAF Review
ACCO 30023: ACCOUNTING FOR BUSINESS COMBINATIONS
(Midterm Examinations)
12. A majority-owned subsidiary that is in legal reorganization should normally be
accounted for using:
A.
B.
C.
D.
consolidated financial statements.
the equity method.
the market value method.
the cost method
13. In a business combination accounted for as an acquisition, registration costs related
to common stock issued by the parent company are:
A. expensed as incurred.
B. deducted from other contributed capital.
C. included in the investment cost.
D. deducted from the investment cost
14. On the consolidated balance sheet, consolidated stockholders' equity is:
A. equal to the sum of the parent and subsidiary stockholders' equity.
B. greater than the parent's stockholders' equity.
C. less than the parent's stockholders' equity.
D. equal to the parent's stockholders' equity.
15. Which of the following is a limitation of consolidated financial statements? Select one:
A. Consolidated statements provide no benefit for the stockholders and creditors of the
parent company.
B. Consolidated statements of highly diversified companies cannot be compared with
industry standards.
C. Consolidated statements are beneficial only when the consolidated companies
operate within the same industry.
D. Consolidated statements are beneficial only when the consolidated companies
operate in different industries.
16. Which one of the following accounts would not appear in the consolidated financial
statements at the end of the first fiscal period of the combination?
A. Additional Paid-In Capital
B. Investment in Subsidiary
C. Goodwill
D. Common Stock
17. Consolidated net income using the equity method for an acquisition combination is
computed as follows:
A. Parent company’s income from its own operations plus the equity from subsidiary’s
income recorded by the parent.
B. Combined revenues less combined expenses less equity in subsidiary’s income less
amortization of fair-value allocations in excess of book value.
C. Parent’s revenues less expenses for its own operations plus the equity from
subsidiary’s income recorded by parent.
D. All of the above.
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CAF Review
ACCO 30023: ACCOUNTING FOR BUSINESS COMBINATIONS
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18. When a company applies the initial method in accounting for its investment in a
subsidiary and the subsidiary reports income in excess of dividends paid, what entry
would be made for a consolidation worksheet?
A. Dr. Retained Earnings, Cr. Investment in Subsidiary
B. Dr. Retained Earnings, Cr. Additional Paid-In Capital
C. Dr. Investment in Subsidiary, Cr. Retained Earnings
D. Dr. Investment in Subsidiary, Cr. Equity in Subsidiary’s Income
19. When a company applies the initial value method in accounting for its investment in
a subsidiary and the subsidiary reports income less than dividends paid, what entry
would be made for a consolidation worksheet?
A. Dr. Retained Earnings, Cr. Investment in Subsidiary
B. Dr. Retained Earnings, Cr. Additional Paid-In Capital
C. Dr. Investment in Subsidiary, Cr. Retained Earnings
D. Dr. Investment in Subsidiary, Cr. Equity in Subsidiary’s Income
20. Under the initial value method, when accounting for an investment in a subsidiary,
A. Dividends received by the subsidiary decrease the investment account.
B. The investment account remains at initial value.
C. Income reported by the subsidiary increases the investment account.
D. The investment account is adjusted to fair value at year-end.
PROBLEMS: Select the best answer for each of the following.
1. Blank Space Co. is acquiring Love Story Inc. Love Story has the following intangible
asset:
a. Patent on a product that is deemed to have no useful life, P100,000.
b. Customer list with an observable fair value of P80,000.
c. A 5-year operating lease with favorable terms with a discounted present value
of P25,000.
d. Identifiable R & D of P150,000.
e. Goodwill of 300,000.
f. Franchise of P80,000.
g. Right of use machinery, held for production, P500,000.
Blank Space Co. will record how much for acquired Intangible Assets from the
purchase of Love Story Inc.?
A. P160,000
B. P185,000
C. P310,000
D. P335,000
2. On January 2, 2021, Gorgeous Company purchased the net asset of Lover Company
by paying P500,000 cash and issuing 100,000 shares of stocks at P3,000,000 fair
market value. The par value of Gorgeous Company's shares is P24 per share. Book
value and fair value data on the Statement of Financial Positions on January 2, 2021
are as follows:
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CAF Review
ACCO 30023: ACCOUNTING FOR BUSINESS COMBINATIONS
(Midterm Examinations)
Gorgeous incurred and paid legal and brokerage fees of P50,000 for business
combination; share issue costs of P30,000 and P20,000 indirect acquisition costs. It
is determinable that contingency fee of P150,000 (estimated fair value) would be
paid within the year. How much is the Goodwill or Gain on Bargain Purchase?
A. P1,126,000
B. P1,276,000
C. P1,326,000
D. P1,376,000
3. Using the information in No. 2, assuming that Gorgeous Company is an SME, how
much is the Goodwill or Gain on Bargain Purchase?
A. P1,126,000
B. P1,276,000
C. P1,326,000
D. P1,376,000
4. On January 1, 2020, Drei Co. acquired all of the identifiable assets and assumed all
liabilities of Cerise, Inc. by paying P4,800,000. On this date, identifiable assets and
liabilities assumed have fair value of P7,680,000 and P4,320,000, respectively. Terms
of the agreement are as follows:
a. 20% of the price shall be paid on January 1, 2020 and the balance on
December 31, 2021 (the prevailing market rate on the same date is 10%).
b. the acquirer shall also transfer its piece of land with book and fair value of
P2,400,000 and P1,440,000, respectively.
Included in the liabilities assumed is an estimated warranty liability. The carrying
amount and fair value of this warranty liability amounted to P576,000 and P468,000,
respectively. The acquiree guarantees that the warranty liability would only be settled
for P480,000. How much is the consideration transferred?
A. P2,400,000
B. P4,133,376
C. P4,800,000
D. P5,573,376
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CAF Review
ACCO 30023: ACCOUNTING FOR BUSINESS COMBINATIONS
(Midterm Examinations)
5. Using the information in No. 4, how much is the goodwill on the business
combination?
A. P2,105,376
B. P2,201,376
C. P2,213,376
D. None of the above
6. Del Valle Company paid P150,000 for its 75% interest in Enrile Company. Del Valle
elected to value NCI at fair value. Enrile’s net identifiable assets approximated their
fair values at acquisition date. The acquisition resulted in a goodwill attributable to
NCI of P10,000.
Since the acquisition date, Enrile has made accumulated profits of P200,000. There
have been no changes in Enrile’s share capital since acquisition date. The group
determined that goodwill has been impaired by P8,000. Since the acquisition date,
Enrile has made accumulated profits of P200,000. There have been no changes in
Enrile’s share capital since acquisition date. The group determined that goodwill has
been impaired by P8,000. A summary of the individual statements of financial
positions of the entities as at the end of reporting period is shown below:
Del Valle Company
Total Assets
Enrile Company
P 1,000,000
P 500,000
Total Liabilities
200,000
120,000
Share capital
300,000
100,000
Retained earnings
500,000
280,000
P 1,000,000
P 500,000
Total Liabilities and equity
How much is the fair value assigned to NCI at the date of acquisition?
A. P55,000
B. P76,000
C. P98,000
D. P112,000
7. Using the information in No. 6, how much is the goodwill at the end of reporting
period?
A. P9,000
B. P13,000
C. P15,000
D. P17,000
8. Using the information in No. 6, how much is the NCI in net assets?
A. P89,000
B. P103,000
C. P95,000
D. P112,000
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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
ACCO 30023: ACCOUNTING FOR BUSINESS COMBINATIONS
(Midterm Examinations)
9. Using the information in No. 6, how much is the consolidated retained earnings?
A. P556,000
B. P628,000
C. P644,000
D. P702,000
10. Using the information in No. 6, how much is the consolidated total assets?
A. P1,402,000
B. P1,387,000
C. P1,367,000
D. P1,298,000
11. On January 1, 2021, Siri Company purchased 90% of the outstanding shares of Alexa
Company for P16,000,000. Siri Company also paid P500,000 as direct costs
attributable to the acquisition. Siri Company was also obligated to pay additional
P4,000,000 to the stockholders of Alexa company at the end of the year if Alexa
Company maintained existing profitability and it is highly probable that Alexa
Company would achieve this expectation. The fair value of the contingent
consideration is P4,000,000. NCI is measured at proportionate share.
Cash & CE
Accounts Receivables
Inventory
Plant & Equipment
Other Assets
Total Assets
Siri Company
Book Value
P 18,000,000
6,500,000
9,500,000
20,000,000
1,200,000
P 55,200,000
Alexa Company
Book Value
FV
P 1,500,000
P 1,500,000
3,500,000
3,300,000
5,000,000
4,600,000
10,000,000
12,000,000
800,000
500,000
P 20,800,000
P 21,900,000
Compute for the NCI.
A. P1,880,000
B. P1,990,000
C. P1,050,000
D. P1,060,000
12. Using the data in No. 11, how much is the goodwill?
A. P1, 780,000
B. P3,080,000
C. P2,090,000
D. P1,980,000
13. On January 1, 2021, Ferreira Company issued 300,000 shares of its P18 par ordinary
share for all Lorenzo Company’s common stock. The shares have a market price of
P20 per share. Data below presents the shareholder’s equity before the consolidation:
Ordinary Share
Ordinary Share Premium
Retained Earnings
Ferreira Company Lorenzo Company
P3,000,000
P1,500,000
1,300,000
150,000
2,500,000
850,000
P6,800,000
P2,500,000
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CAF Review
ACCO 30023: ACCOUNTING FOR BUSINESS COMBINATIONS
(Midterm Examinations)
Ferreira Company incurred finder’s fee amounting to P30,000 and share issuance
costs of P35,000. At the date of acquisition, the total consolidated equity should be
reported at:
A. P12,855,000
B. P12,900,000
C. P12,735,000
D. P10,355,000
14. On January 1, 2021, Yuchengco Company acquired 75% interest in Arellano
Company for P2,500,000 cash. Yuchengco Company incurred transaction costs of
P250,000 for legal, accounting and consultancy fees in negotiating the business
combination. NCI is measured at proportionate share in Arellano Company’s
identifiable net assets. The carrying amounts and fair values of Arellano Company’s
assets and liabilities at the acquisition date were as follows:
Cash in bank
Accounts Receivable
Inventory
Equipment (net)
Goodwill
Total Assets
Payables
Carrying Amount
P 25,000
425,000
1,300,000
2,500,000
250,000
P4,500,000
Fair Value
P 25,000
300,000
875,000
2,750,000
50,000
P4,000,000
P1,000,000
P1,000,000
How much is the goodwill (gain on bargain purchase)?
A. 278,500
B. 140,000
C. 264,500
D. 287,500
15. On September 4, 2022, Cantavieja Corporation paid P560,000 in acquiring 4,000
shares of Laurel Company. At the same date, the 1,000 shares of Laurel Company
had a market price of P140 per share.
Cantavieja Corporation and Laurel Company presents its condensed financial
statements as of September 4, 2022 below:
Assets
Liabilities
Ordinary Shares, P100 par
Retained earnings
Total
Cantavieja Corporation
P3,800,000
1,350,000
1,500,000
950,000
P3,800,000
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Laurel Company
P850,000
250,000
500,000
100,000
P850,000
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CAF Review
ACCO 30023: ACCOUNTING FOR BUSINESS COMBINATIONS
(Midterm Examinations)
On September 4, 2022, Cantavieja Corporation paid P560,000 in acquiring 4,000
shares of Laurel Company. At the same date, the 1,000 shares of Laurel Company
had a market price of P140 per share.
In the consolidated statement of financial position on September 4, 2022, the total
assets and total equity must be:
A. Total Assets - P4,170,000, Total Liabilities - P2,550,000
B. Total Assets - P4,650,000, Total Liabilities - P3,190,000
C. Total Assets - P4,750,000, Total Liabilities - P3,050,000
D. Total Assets - P4,190,000, Total Liabilities - P2,590,000
16. On January 1, 2018, Tender Corporation acquired 100% of Juicy Co. On that date,
both Tender Corporation and Juicy Company’s equipment has a 10-year remaining
useful life. Tender Corp. uses the equity method to record its investment in Juicy Co.
Tender Corporation
Juicy Company
Book Value Fair Value Book Value Fair Value
January 1, 2018
P320,000
P420,000
P272,000
P400,000
December 31, 2020
394,000
545,200
190,400
357,000
What is the consolidated balance for the Equipment account as of December 31, 2020?
A. P674,000
B. P712,400
C. P612,400
D. P546,000
17. On January 1, 2019, Lucario Company purchased 80% of the common stock of Blue
Company for P320,000. On this date, Blue Company had common stock, other paidin capital, and retained earnings of P40,000, P120,000, and P200,000, respectively.
Lucario Company’s common stock amounted to P500,000 and retained earnings of
P200,000. On the same date, the only tangible assets of Blue that were undervalued
were inventory and building. Inventory, for which FIFO is used, was worth P5,000
more than cost. The inventory was sold in 2019. Building, which was worth P15,000
more than book value, has a remaining life of 8 years, and straight-line depreciation
is used. Any remaining excess is full-goodwill with an impairment for 2019 amounting
to P3,000.
Blue Company reported net income of P50,000 and paid dividends of P10,000 in 2019,
while Lucario Company reported net income amounted to P100,000 and paid
dividends of P20,000.
How much is the consolidated net income, attributable to Lucario Company?
A. P20,000
B. P124,100
C. P8,025
D. P132,125
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CAF Review
ACCO 30023: ACCOUNTING FOR BUSINESS COMBINATIONS
(Midterm Examinations)
18. Using the information in No. 17, how much is the consolidated net income,
attributable to the Non-Controlling Interest?
A. P20,000
B. P124,100
C. P8,025
D. P132,125
19. Using the information in No. 17, how much is the consolidated Retained Earnings on
December 31, 2019?
A. P304,100
B. P305,000
C. P344,100
D. P320,000
20. Using the information in No. 17, how much is the ending balance of the NonControlling Interest on December 31, 2019?
A. P85,025
B. P88,025
C. P87,025
D. P86,025
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CAF Review
ACCO 30023: ACCOUNTING FOR BUSINESS COMBINATIONS
(Midterm Examinations)
ANSWER KEY:
THEORIES
1. C. S1 - False; S2 – True
2. B. Joint venture
3. C. The business only has equity financing and has no debt financing.
4. D. Each of the above is recorded at fair value.
5. D. The boards of directors of both Enchanted and Delicate must approve the merger.
6. C. Consolidated financial statements
7. D. Holds protective rights as an investor.
8. B. The subsidiary should not be consolidated but IFRS 5 should be used.
9. A. It has existing rights that give it the current ability to direct the relevant activities.
10. B. More than half of voting power of an entity.
11. C. II, III, IV
12. A. the cost method
13. A. expensed as incurred
14. D. equal to the parent's stockholders' equity.
15. B. Consolidated statements of highly diversified companies cannot be compared with
industry standards.
16. B. Investment in Subsidiary
17. C. Parent’s revenues less expenses for its own operations plus the equity from subsidiary’s
income recorded by parent.
18. C. Dr. Investment in Subsidiary, Cr. Retained Earnings
19. A. Dr. Retained Earnings, Cr. Investment in Subsidiary
20. B. The investment account remains at initial value.
PROBLEMS
1. D. P335,000
Patent
Customer List
Operating Lease
R&D
Goodwill
Franchise
Right of use machinery
Total
P 80,000.00
25,000.00
150,000.00
80,000.00
P335,000.00
2. B. P1,276,00
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Consideration transferred:
Cash
Issued shares of stock
Contingency Fee
Less: Fair value of net identifiable
assets acquired:
Cash
Accounts Receivable
Inventory
PPE, net
Liabilities
Goodwill
P
P
500,000
3,000,000
150,000
300,000
980,000
600,000
1,064,000
(570,000)
P3,650,000
2,374,000
P1,276,000
3. C. P1,326,000
Consideration transferred:
Cash
Issued shares of stock
Contingency Fee
Direct Cost
Less: Fair value of net identifiable assets
acquired:
Cash
Accounts Receivable
Inventory
PPE, net
Liabilities
Goodwill
P
P
500,000
3,000,000
150,000
50,000
300,000
980,000
600,000
1,064,000
(570,000)
4. D. P5,573,376
Cash (down payment): P4,800,000 x 20%
Balance: PV of an annuity of P1 for 2 periods
[0.8264 x (P4,800,000 x 80%)]
Land (fair value)
Consideration transferred
5. D. P2,201,376
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P 960,000
3,173,376
1,440,000
P5,573,376
P3,700,000
2,374,000
P1,326,000
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CAF Review
ACCO 30023: ACCOUNTING FOR BUSINESS COMBINATIONS
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6. A. P55,000
Enrile Company
Share capital
Retained earnings
Subsidiary’s net assets at fair value
Acquisition date
P100,000
80,000
P180,000
Consolidation date
P100,000
280,000
P380,000
Goodwill attributable to NCI - acquisition date
NCI’s proportionate share in net assets of subsidiary (P180,000 x 25%)
Fair value of NCI
Net change
P200,000
P10,000
45,000
P55,000
7. D. P17,000
Consideration transferred
Less: Parent’s proportionate share in the net assets of subsidiary
(P180,000 x 75%)
Goodwill attributable to owners of parent - acquisition date
Less: Parent’s share in goodwill impairment (P8,000 x 75%)
Goodwill attributable to owners of parent - current year
P150,000
(135,000)
P15,000
(6,000)
P9,000
Fair value of NCI
Less: NCI’s proportionate share in the net assets of subsidiary (P180,000 x 25%)
Goodwill attributable to NCI - acquisition date
Less: NCI’s share in goodwill impairment (P8,000 x 25%)
Goodwill attributable to NCI - current year
Goodwill attributable to owners of parent - current year
Goodwill attributable to NCI - current year
Goodwill, net - current year
P9,000
8,000
P17,000
8. B. P103,000
Del Valle’s net assets at FV - current year
Multiply by: NCI percentage
Total
Add: Goodwill attributable to NCI - current year
Non-controlling interest in net assets - current year
P380,000
25%
P95,000
8,000
P103,000
9. C. P644,000
Del Valle’s retained earnings - current year
Consolidation adjustments
Del Valle’s share in the net change in Enrile’s net assets
Del Valle’s share in goodwill impairment
Consolidated earnings - current year
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P500,000
P150,000
(6,000)
P144,000
P644,000
P55,000
(45,000)
P10,000
(2,000)
P8,000
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CAF Review
ACCO 30023: ACCOUNTING FOR BUSINESS COMBINATIONS
(Midterm Examinations)
10. C. P1,367,000
Total Assets of Del Valle
P1,000,000
Total Assets of Enrile
500,000
Investment in subsidiary (consideration transferred)
(150,000)
Goodwill – net
17,000
Consolidated total assets
P1,367,000
11. B. P1,990,000
Fair Value of net assets acquired
Total liabilities at book value of Alexa Company
Total
Multiply
NCI
P21,900,000
(2,000,000)
19,900,000
10%
P1,990,000
12. C. P2,090,000
Consideration transferred (P16m + 4m)
NCI [(P21.9m-2m) x 10%]
Total
FVNAA (P21.9m - 2m)
Goodwill
P20,000,000
1,990,000
P21,990,000
(19,900,000)
P2,090,000
13. C. P12,735,000
Shares issued (300,000 shares x 20)
Equity, Ferreira Company
Less: Finder’s Fee
Less: Share issuance costs
Total consolidated equity
P6,000,000
6,800,000
(30,000)
(35,000)
P12,735,000
14. D. P287,500
Cash paid
NCI (at proportionate share)
Total
Less: FVNA
Goodwill (gain on bargain purchase)
P2,500,000
737,500
P3,237,500
(2,950,000
P287,500
15. D. Total Assets - P4,190,000, Total Liabilities - P2,590,000
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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
ACCO 30023: ACCOUNTING FOR BUSINESS COMBINATIONS
(Midterm Examinations)
Cantavieja Co. Assets
Laurel Co. Assets
Goodwill
Cash paid
NCI
FVNA
Less: Cash paid
Total Assets
P3,800,000
850,000
P560,000
140,000
(600,000)
Ordinary Shares, Cantavieja Co.
Retained Earnings, Cantavieja Co.
NCI
Total Equity
100,000
(560,000)
P4,190,000
P1,500,000
950,000
140,000
P2,590,000
16. A. P674,000
Tender Corp. Book Value
Juicy Co. Book Value
Original Acquisition Date – allocation to Juicy Co.’s
Equipment (400000 – 272000)
Less: Amortization (128000 * 3/10)
Consolidated balance of Equipment, 12/31/20
P394,000
190,400
128,000
38,400
P674,000
17. B. P124,100
Consideration Transferred (80%)
NCI at FV (320000/80% * 20%)
Less: FV of Net Assets Acquired
Common Stock
APIC
Retained Earnings
Inventory adj.
Building adj.
Goodwill
Consolidated Net Income
Net Income
Inventory
Building (15000/8 yrs)
Impairment – Full Goodwill
Dividends (10000 * 80%)
CNI, attributable to Lucario Co.
From CNI, Lucario Co.
From CNI, Blue Co. (40,125 * 80%)
CNI, attributable to Lucario Co.
P320,000
80,000
40,000
120,000
200,000
5,000
15,000
380,000
P20,000
Lucario Co.
P100,000
Blue Co.
P50,000
(5,000)
(1,875)
(3,000)
P40,125
(8,000)
P92,000
P92,000
32,100
P124,100
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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
ACCO 30023: ACCOUNTING FOR BUSINESS COMBINATIONS
(Midterm Examinations)
18. C. P8,025
CNI, attributable to the Non-Controlling Interest
From CNI, Blue Co.
Multiply: NCI %
CNI, attributable to the Non-Controlling Interest
P40,125
20%
P8,025
19. A. P304,100
Retained Earnings, beginning
CNI – Lucario Company
Less: Dividends
Consolidated Retained Earnings, 12/31/19
P200,000
124,100
20,000
P304,100
20. D. P86,025
NCI at FV, beginning (320000/80% * 20%)
NCI – NI
Less: NCI Dividends (10000* 20%)
NCI on 12/31/19
P80,000
8,025
2,000
P86,025
** Nothing Follows **
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Reference:
Various CPA Review Materials.
Checked and Verified:
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