REVIEWER- XBUSCOM
1. This is defined as the financial statements of a group in which the assets, liabilities, equity, income and
expenses and cash flows of the parent and the subsidiaries are presented as those of a single economic unit.
a. Consolidated financial statements
b. General purpose financial statements
c. Separate financial statements
d. Group financial statements
2. This is defined as the financial statements presented by a parent in which the investments are accounted
for on the basis of the direct equity interest.
a. Unconsolidated FS
b. Combined FS
c. Separate FS
d. Consolidated FS
3. A “group” for consolidation purposes
a. A parent and all of the subsidiaries
b. An entity that has one or more subsidiaries
c. An entity, including an unincorporated entity such as partnership, controlled by another
d. An entity that obtains control over entities or businesses.
entity.
4. It is an entity that controls one or more entities.
a. Investor
b. Parent
c. Associate
d. Affiliate
5. It is an entity that is controlled by another entity.
a. Subsidiary
b. Associate
c. Investee
d. Affiliate
6. Which of the following is not a valid condition that will exempt an entity from preparing consolidated FS?
a. The parent entity is a wholly owned subsidiary of another entity
b. The parent entity’s debt or equity capital is not traded in the stock exchange.
c. The ultimate parent entity produces consolidated FS available for public use that comply
with
IFRS
d. The parent entity is in the process of filing FS with a securities commission for the purpose of
issuing any class of instruments in a public market.
7. Control is presumed to exist when the parent owns directly or indirectly through subsidiaries.
a. More than half of the equity of an entity
b. More than half of the ordinary shares of an entity
c. More than half of the preference and ordinary shares of an entity
d. More than half of the voting power of an entity
8. Control exists even if the parent owns half or less of the voting power of an entity under all of the following
circumstances, except
a. Power over more than half of the voting rights by virtue of a contractual agreement with other
investors.
b. Power to govern the financial and operating policies of the entity under a statute
c. Power to appoint or remove the members of the board of the entity or the power to cast the
majority of votes at meetings of the board directors or equivalent governing body.
d. Under all of these conditions
9. A parent loses control of a subsidiary under all of the following conditions, except
a. When there is change in absolute or relative ownership level
b. When a subsidiary becomes subject to the control of a government, court, administrator,
or
regulator.
c. When the loss of control is the result of a contractual agreement
d. When the subsidiary is operating under a severe long-term restrictions that impair the
ability
to transfer funds to the parent.
10. What is the initial measurement of an investment in subsidiary retained by the investor when control is
lost?
a. Fair value at the date when control is lost
b. Fair value at the beginning of the reporting period.
c. Carrying amount at the date when control is lost
d. Management estimate of fair value
11. Consolidated FS are typically prepared when one entity has a controlling financial interest in another
unless
a. The subsidiary is a finance entity
b. The fiscal year ends of the two entities are more than three months apart.
c. Such control is likely to be temporary
d. The two entities are in unrelated industries, such as manufacturing and real estate
12. Consolidated FS are typically prepared when one entity has a controlling financial interest in another,
unless
a. The subsidiary is a bank
b. The fiscal year-ends of the two entities are more than three months apart
c. The investee is in bankruptcy
d. The two entities are in related industries
13. A parent entity controls 100% of an overseas subsidiary. Because of exchange controls, it is difficult to
transfer funds out of the country to the parent entity. How should the subsidiary be accounted for?
a. The subsidiary should be excluded from consolidation and the equity method should be used
b. The subsidiary should be excluded from consolidation and the cost method should be used
c. The subsidiary should be excluded from consolidation and accounted for as financial asset
d. The subsidiary is not permitted to be excluded from consolidation because control is not lost.
14. 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
subsidiary be treated in the FS?
a. Acquisition accounting should be used
b. Equity accounting should be used
c. The subsidiary should not be consolidated but reported as held for sale
d. The subsidiary should be derecognized
15. The controlling interest shall be presented in the consolidated statement of financial position
a. As part of the parent shareholders’ equity
b. As part of current liabilities
c. As part of noncurrent liabilities
d. Within equity, separated from the equity of the owners of the parent
16. The noncontrolling interest should be recorded at what amount?
a. The FV of the shares held by the acquirer.
b. The FV of the shares not held by the acquirer or the proportionate share of the FV of net identifiable
assets of the acquiree
c. The proportionate share of the carrying amount of net identifiable net assets of the acquiree.
d. The FV of the shares held by the noncontrolling interest plus goodwill
17. ST1
A subsidiary is excluded from consolidation when the subsidiary is acquired with the intention
to dispose of it within twelve months from the date of acquisition
ST2
A subsidiary is excluded from consolidation when the subsidiary is operating under severe longterm restrictions that significantly impair its ability to transfer funds to the parent.
a. Both statements are true
b. Both statements are false
c. True, false
d. False, true
18. ST1
A parent is an entity that is controlled by another entity
ST2
A subsidiary is an entity that controls one or more entities
a. Both true
b. Both false
c. True, false
d. False, true
19. ST1
PFRS 10 provides that an investor has power over the investee when the investor has existing
rights that give it the current liability to direct the relevant activities of the investee.
ST2
Relevant activities are the activities of the investee that significantly affect the investee’s
returns
a. both true
b. both false
c. true, false
d. false , true
20. ST1
Controls is presumed to exist when the parent owns, directly or indirectly through subsidiaries,
more than half of the voting power of an entity, unless in exceptional circumstances it can be clearly
demonstrated that such ownership does not constitute control
ST2
Generally, apparent loses control over the subsidiary if there is a change in absolute ownership
interest.
a. Both true
b. Both false
c. True, false
d. False, true
21. It is a transaction or other event in which an acquirer obtains control of one or more business.
a. Business combination
b. Merger
c. Consolidation
d. Controlling interest
22. This is defined as an integrated set of activities and assets capable of being conducted and managed
for the purpose of providing a return directly to investors or other owners, members or participants.
a. Business
b. Transaction
c. Isolated event
d. Undertaking
23. An acquirer might obtain control of an acquire in all of the following, except
a. By transferring cash, cash equivalents and other assets
b. By issuing equity interests
c. By contract alone, even without consideration
d. By acquiring interest in a joint venture
24. A business combination may be structured in all of the following, except
a. One or more businesses become a subsidiaries of an acquirer
b. one entity transfers net assets to another entity
c. A group of former owners of one of the combining entities obtains control of
the combined entity.
d. An entity acquires assets that are not a business
25. It is a business combination in which all of the combining entities or businesses ultimately are
controlled by the same party or parties both before and after the
combination and that control is not
transitory.
a. Combination of entities or business under common control
b. True merger
c. Merger of equals
d. Consolidation
26. What is the term for the business combination where all combining entities transfer
their net
assets to a newly formed entity?
a. True merger
b. Legal merger
c. Roll up transaction
d. Spin off
27. Which statement best describe the term control?
a. The mutual sharing of risks and benefits
b. The power to participate in the financial and operating policy decisions of an
entity
c. The holding of a significant proportion of the share capital in another entity
d. The power to govern the financial and operating policies of an entity so as to
obtain benefits from the activities
28. This is defined as the entity that obtains control of an acquiree.
a. Acquirer
b. Investor
c. Shareholder
d. Owner
29. This is defined as holders of equity interest of investor-owned entities, or members and participants in
mutual entities.
a. Shareholders
b. Investors
c. Owners
d. Participants
30. An entity shall account for all business combination by applying
a. Acquisition method
b. Pooling method
c. Proportional consolidation
d. Equity method
31. It is an entity that controls one or more entities.
a. Parent
b. Subsidiary
c. Associate
d. Affiliate
32. It is an entity that is controlled by another entity.
a. Subsidiary
b. Associate
c. Investee
d. Affiliate
33. Control is presumed to exist when the parent owns directly or indirectly through
a. More than half of the equity of an entity.
b. More than half of the ordinary shares of an entity
c. More than half of the preference and ordinary shares of an entity
d. More than half of the voting power of an entity.
subsidiaries
34. This is defined as “the financial statements of a group in which the assets, liabilities, equity, income and
expenses and cash flows of the parent and its subsidiaries are presented as those of a single economic unit”.
a. Consolidated financial statements
b. General purpose financial statements
c. Separate financial statements
d. Group financial statements
35. This is defined as “the financial statements presented by a parent in which the investments are accounted
for on the basis of the direct equity interest”
a. Unconsolidated financial statements
b. Combined financial statements
c. Separate financial statements
d. Consolidated financial statements
PROBLEMS
On January 1, 2023, P Company acquired 80% interest in S Company for P1,000,000 cash. The Stockholders’ equity of S
at the time of acquisition is P875,000.
On January 1, 2023, NCI is measured at its implied fair value. The excess of cost over book value of interest acquired is
allocated on the following assets;
Inventories
P50,000 (sold in 2019)
Building
100,000 (5-year remaining life)
During 2020, S company reported total comprehensive income of P400,000 and paid dividends of P50,000.
1. What is the fair value on NCI on January 1, 2023?
a. 250,000
b. 187,500
c. 262,500
d. 200,000
2. How much goodwill (gain on acquisition) is reported in the consolidated statement of financial position on
1/1/23?
a. 225,000
b. 100,000
c. (225,000)
d. (250,000)
3. What is the consolidated total comprehensive income attributable to parent on 12/31/23, if P’s net income is
P500,000?
a. 760,000
b. 790,000
c. 724,000
d. 748,000
4 What is the NCI in net assets of subsidiary on December 31, 2023?
a. 306,000
b. 295,000
c. 355,000
d. 395,900
Pearl company paid P270,000 for a 90% interest in Seal Company on January 1, 2023. The Stockholders’ equity of
Seal Company included paid in capital of P200,000 and retained earnings of P100,000.
During 2023, the total comprehensive income of Pearl Company was P60,000 and dividends paid were P20,000.
During 2023, Seal Company had a total comprehensive income of P20,000 and it paid dividends of P10,000.
5. What is the non-controlling interest (NCI) on December 31, 2023?
a. 30,000
b. 59,000
c. 31,000
d. 70,000
P Corporation purchased a 70% interest in S company on January 1 2023, for P140,000, when S stockholders’
equity consisted of P30,000 common stock, P100,000 additional paid in capital and P20,000 retained earnings.
Income and dividend data for Star are as follows:
Net income (or loss)
Dividends
NCI is measured at fair value.
6. What is the NCI at December 31,2023?
P50,000
5,000
a. 149,600
b. 73,500
c. 151,370
d. 148,000
PC Company purchased 80% interest in SD Company for P600,000 on January 1, 2022 at which time SD’s
stockholders’ equity amounts to P700,000. The excess cost over book value was assigned to goodwill which is
not amortized.
Statement of comprehensive income of the two companies for 2023 are as follows:
PC
SD
Sales
1,000,000
500,000
Income from subsidiary-SD
150,000
Cost of Sales
(400,000)
(250,000)
Operating Expenses
(220,000)
(100,000)
Comprehensive Income
492,000
150,000
During 2022, SD sold inventory items to PC for P80,000. This merchandise cost SD P50,000 and one-fourth of it
remained in PC’s December 31, 2022 inventory.
During 2023 SD’s sale to PC amounted P90,000. This merchandise cost SD P63,000 and one-half of it remained in
PC’s December 31, 2023 inventory.
7. What is the consolidated comprehensive income attributable to parent on December 31, 2023?
a. 492,000
b. 490,000
c. 492,600
d. 495,200
Below are the relevant data for Pan and Sol Companies for 2022 and 2023:
Intercompany sales by Sol to Pan
2022
100,000
2023
120,000
Intercompany cost of sales
Intercompany merchandise in Pan’s
Inventory at Dec. 31 at billed price
Comprehensive income from its own operations
P
S
40,000
20,000
200,000
80,000
60,000
30,000
250,000
120,000
At January 1, 2022 P owned 80% of the outstanding voting common stock of S, acquired
several years ago, at book value.
8. What is the consolidated comprehensive income attributable to parent on 2023?
a. 343,600
b. 338,600
c. 339,600
d. 338,600
On January 1, 2021, S Company purchased a computer with an expected life of 5 years. On Jan. 1, 2023, SST sold
the computer to P Corporation and recorded the ff. entry.
Cash
39,000
Accumulated depreciation
16,000
Computer Equipment
40,000
Gain on sale of Equipment
15,000
PMN holds 60% of the voting shares of S. S and P reported net income from own operations of P50,000 and
P90,000 for 2023 respectively. There is no change in the estimated life of the equipment as a result of
intercompany sale.
9. What is the consolidated total comprehensive income attributable to parent for 2023?
a. 130,000
b. 112,000
c. 106,000
d. 103,000
On April 1, 2023, AA Corporation paid P900,000 for the assets and liabilities of JJ Company. The book value of
the assets and liabilities of JJ Company on April 1, 2023 follow:
Cash
90.000
Inventory
250,000
Plant and equipment (net of accumulated
Depreciation of P320,000)
480,000
Liabilities
200,000
On April 1, 2023, it was determined that the inventory of JJ had a fair value of P200,000 and the plant and
equipment (net) had a fair value of P560,000.
10. What is the amount of goodwill resulting from business combination?
a. 0
b. 250,000
c. 150,000
d. 180,000
On May 31, 2023, D Company has assets and liabilities with the following values:
Current assets
Noncurrent assets
Liabilities
200,000
240,000
60,000
On June 1, 2023, L Corporation purchases the net assets of D Company for P320,000 cash.
11. In the books of L corporation, the acquisition resulted in: ____________
a. Negative goodwill of P60,000
b. Income from acquisition of P60,000
c. Reduction from current assets of P60,000
d. Deduction from noncurrent assets of P60,000
On May 1, 2023, Q Corporation paid cash of P800,000 for all of the net assets of P Company and P is dissolved.
The carrying value of the assets and liabilities of P on May 1, 2023 follow:
Cash
Inventory
Plant and equipment (net of accumulated
Depreciation of P240,000)
Goodwill
Liabilities
70,000
190,000
340,000
110,000
130,000
On May 1, 2023, P inventory had a fair value of P160,000 and the plant and equipment (net) had a fair value of
390,000.
12. What is the amount of goodwill recorded in the books of Q as a result of business combination?
a. 310,000
b 490,000
c. 410,000
d. 510,000
P Corporation paid P110,000 cash for the net assets of O Company which consisted of the following:
Book Value
Fair Value
Current assets
20,000
28,000
Property and equipment
80,000
120,000
Liabilities assumed
20,000
18,000
13. The property and equipment in the business combination should be reported at:
a. 120,000
b. 100,000
c. 91,666
d. 102,000
P company issued 120,000 shares of P10 par common stock with a fair value of P2,550,00 for all the outstanding
stock of M Company. In addition, P incurred the following costs: Professional fees to arrange the business
combination, P27,000; cost of SEC registration, P12,000; cost of printing stock certificates, P3,000.
Immediately, before the business combination in which M was dissolved, M’s assets and equities were as follows:
Book Value
Fair Value
Current assets
1,000,000
1,100,000
Plant assets
1,500,000
2,200,000
Liabilities
300,000
300,000
Common stock
2,000,000
Retained earnings
200,000
14. What is the amount of goodwill (gain on acquisition)?
a. 450,000
b. 500,000
c. (450,000)
d. (550,000)
15. Using the data in 29, how much is the additional paid in capital is recorded by P?
a. 1,335,000
b. 1,350,000
c. 1,365,000
d. 1,330,000
16. Using the data in 29, P should recognize expense of:
a. 42,000
b. 27,000
c. 15,000
d. 12,000
On January 2, 2023, N Corporation acquired all Y Corporation’s assets and liabilities by issuing shares of its
common stock. Partial statement of financial position data for the companies prior to business combination and
immediately after the business combination are as follows:
Cash
Accounts receivable
Inventory
buildings and equipment (net)
N Corp
Book Value
40,000
60,000
50,000
300,000
Y Corp
Book Value
10,000
30,000
35,000
110,000
Total assets
450,000
185,000
Accounts payable
Common stock, P5 par
Additional paid in capital
Retained earnings
Total liabilities and equities
188,000
100,000
65,000
97,000
450,000
84,000
40,000
28,000
33,000
185,000
Combined
Entity
50,000
88,000
96,000
430,000
272,000
126,000
247,000
17. What number of shares did N issue to acquire Y’s assets and liabilities?
a. 5,000
b. 5,200
c. 4,500
d. 2,500
18. What was the market value of the shares issued by N?
a. 208,000
b. 200,000
c. 250,000
d. 208,500
19. What was the fair value of the inventory held by Y at the date of combination?
a. 40,000
b. 46,000
c. 35,000
d. 64,000
20. What was the fair value of the net assets held by Y at the date of combination?
a. 130,000
b. 135,000
c. 140,000
d. 125,000
21. What amount of goodwill, if any will be reported by the combined entity immediately following the combination?
a. 88,000
b. 78,000
c. 87,000
d. 75,000
22. If the depreciable assets held by Y had an average remaining life of 10 years at the date of acquisition, what
amount of depreciation expense will be reported on those assets on December 31, 2023?
a. 15,000
b. 14,000
c. 13,000
d. 12,000
On January 2, 2023, N Corporation acquired all Y Corporation’s assets and liabilities by issuing shares of its
common stock. Partial statement of financial position data for the companies prior to business combination and
immediately after the business combination are as follows:
N Corp
Y Corp
Combined
Book Value
Book Value
Entity
Cash
40,000
10,000
50,000
Accounts receivable
60,000
30,000
88,000
Inventory
50,000
35,000
96,000
Buildings and equipment (net)
400,000
110,000
530,000
Total assets
550,000
185,000
Accounts payable
Common stock, P5 par
Additional paid in capital
Retained earnings
Total liabilities and equities
288,000
100,000
65,000
97,000
550,000
84,000
40,000
28,000
33,000
185,000
23. What number of shares did N issue to acquire Y’s assets and liabilities?
a. 7,200
b. 7,000
c. 7,500
d. 4,500
372,000
136,000
257,000
24. What was the market value of the shares issued by N?
a. 308,000
b. 328,000
c. 350,000
d. 308,500
25. What was the fair value of the inventory held by Y at the date of combination?
a. 40,000
b. 46,000
c. 35,000
d. 64,000
26; What was the fair value of the net assets held by Y at the date of combination?
a. 135,000
b. 130,000
c. 140,000
d. 125,000
27. What amount of goodwill, if any will be reported by the combined entity immediately following the combination?
a. 198,000
b. 178,000
c. 187,000
d. 715,000
28. .If the depreciable assets held by Y had an average remaining life of 10 years at the date of acquisition, what
amount of depreciation expense will be reported on those assets on December 31, 2023?
a. 13,000
b. 12,000
c. 14,000
d. 15,000
On January 1, 2023, P Company acquired 80% interest in S Company for P2,000,000 cash. The Stockholders’
equity of S at the time of acquisition is P1,875,000.
On January 1, 2023, NCI is measured at its implied fair value. The excess of cost over book value of interest
acquired is allocated on the following assets;
Inventories
P100,000 (sold in 2019)
Building
200,000 (5-year remaining life)
During 2023, S company reported total comprehensive income of P500,000 and paid dividends of P50,000.
29. What is the fair value on NCI on January 1, 2023?
a. 375,000
b. 500,000
c. 525,000
d. 400,000
30. How much goodwill (gain on acquisition) is reported in the consolidated statement of financial position on
1/1/23?
a. 200,000
b. 325,000
c. (325,000)
d. (375,000)
31. What is the consolidated total comprehensive income attributable to parent on 12/31/23, if P’s net income is
P600,000?
a. 860,000
b. 808,000
c. 888,000
d. 948,000
32. What is the NCI in net assets of subsidiary on December 31, 2023?
a. 455,000
b. 495,000
c. 552,000
d. 495,900
The condensed statement of financial position of P Corporation and S Company as of October 31, 2023 are
presented below:
P Corp.
S Co.
Assets
3,800,000
850,000
Liabilities
Common stock, P100 par
Retained earnings
Total
1,350,000
1,500,000
950,000
3,800,000
250,000
500,000
100,000
850,000
On October 31,2023, P Corp acquired 4,000 shares of S Co at P520,000. The market price of the 1,000 shares of S
on October 31,2023 is P140 per share.
33. In the consolidated statement of financial position on October 31, 2023, how much is the goodwill?
a. (60,000)
b. 60,000
c. (50,000)
d.50,000
34. How much is the total assets on October 31, 2023 in the consolidated statement of financial position?
a. 4,170,000
b. 4,190,000
c. 4,562,000
d. 4,200,000
35. How much is the stockholders’ equity on October 31, 2023?
a. 2,570,000
b. 2,590,000
c. 2,500,000
d. 2,450,000