ACCOUNTING7A

PROBLEM1.JerelynCorporationisacompanyinvolvedinmanufacturingcars.OnJanuary1,
2016,theboardofdirectorsofthesaidcompanyhasdecidedtoacquirethenetassetsof
Jo Ann Corporation and Mary Grace Corporation, suppliers of materials they use in
production.Themergerisexpectedtoresultinproducinghigherqualitycarswithlower
totalcost.ThedealwasclosedonFebruary29,2016andthefollowinginformationwas
gatheredfromthebooksoftheentities:
Jerelyn

JoAnn

MaryGrace

CurrentAssets

P1,375,000 P390,000 P260,000

NoncurrentAssets

3,125,000 2,550,000 1,700,000

TotalAssets

P4,500,000 P2,940,000 P1,960,000

Liabilities

P325,000 P210,000 P140,000

Commonstock,P100par

2,748,500

1,780,200

1,186,800

176,500

169,800

113,200

SharePremium
RetainedEarnings

1,250,000 780,000 520,000

TotalLiabilitiesandEquity

P4,500,000 P2,940,000 P1,960,000

Jerelynwillissue22,500ofitscommonstockinexchangeforthenetassetsofJoAnn
and11,200ofitscommonstockinexchangeforthenetassetsofMaryGrace.Thefair
valueofJerelyn'ssharesisP150.Inaddition,thefollowingadjustmentsshouldbemade:
CurrentassetsofJoAnnandMaryGracehaveafairvalueofP450,000andP230,000,
respectively.
NoncurrentassetshaveafairvalueofP2,150,000andP1,975,000forJoAnnand
MaryGrace,respectively.
Computefortheconsolidatedstockholder'sequityandassetsonthedateofacquisition.
PROBLEM2.JessecaCo.mergedintoJericaCorp.onJuly1,2016.Inexchangeforthenet
assetsatfairmarketvalueofJessecaCo.amountingtoP696,450,Jericaissued68,000
commonsharesatP9parvaluewithamarketpriceofP12pershare.Outofpocketcosts
ofthecombinationwereasfollows:
Legalfeesforthecontractofbusinesscombination

P35,600

AuditfeeforSECregistrationofstockissue

90,000

Printingcostsofstockcertificates

14,500

Broker'sfee

23,600

Accountant'sfeeforpreacquisitionaudit

80,000

Otherdirectcostofacquisition

75,000

Generalandallocatedexpenses

43,000

Listingfeesinissuingnewshares

36,000

JericawillpayanadditionalcashconsiderationofP455,000intheeventthatJesseca's
netincomewillbeequaltoorgreaterthanP950,000fortheperiodendedDecember31,
2016.Atacquisitiondate,thereisahighprobabilityofreachingthetargetnetincome
andthefairvalueoftheadditionalconsiderationwasdeterminedtobeP195,000.Actual
netincomefortheperiodendedDecember31,2016amountedtoP1,250,000.Theadditional
cashconsiderationwaspaid.
Compute for the amount of goodwill to be recognized in the statement of financial
position as of December 31, 2016 and the amount of expense to be recognized in the
statementofcomprehensiveincomefortheyearendedDecember31,2016.

Ms.

PROBLEM3.TheStatementofFinancialPositionofAngelicaCorporationonJune30,2016
ispresentedbelow:
CurrentAssets

P32,500

Liabilities

P87,500

Land

220,000

CapitalStock,P5par

150,000

Building

110,000

SharePremium

137,500

Equipment

87,500

RetainedEarnings

75,000

TotalAssets

P450,000

TotalLiabilitiesandEquity

P450,000

AlltheassetsandliabilitiesofAngelicaareassumedtoapproximatetheirfairvalues
exceptforLandandBuilding.ItisestimatedthatthelandhasafairvalueofP350,000
andthefairvalueoftheBuildingshouldbeincreasedbyP80,000.DanielleCorporation
acquired80%ofAngelica'scapitalstockforP500,000.
Computeforthegoodwill/gaininthefollowingindependentsituations:
1. TheconsiderationpaidincludesthecontrolpremiumofP142,000.
2. TheconsiderationpaidexcludesthecontrolpremiumofP23,000andthefairvalue
ofthenoncontrollinginterestisP122,750.
3. TheconsiderationpaidincludescontrolpremiumofP37,000.
PROBLEM4.BlessylCo.acquires25%ofChristineCompany'scommonstockforP190,000cash
andcarriestheinvestmentusingthecostmethod.Afterthreemonths,Blessylpurchases
another 60% of Christine's common stock for P540,000. On this date, acquired company
reports identifiable net assets with carrying value of P720,000 and fair value of
P920,000.Theliabilitiesoftheacquiredcompanyhasabookvalueandafairvalueof
P280,000.Thefairvalueofthe15%noncontrollinginterestisP125,000.Computeforthe
goodwillorgainonacquisition.
PROBLEM5.OnJanuary2,2015,JongCorporationpurchased80%oftheoutstandingshares
of Jude Company for P4,750,000. At that date, Jude had P4,000,000 of ordinary shares
outstandingandretainedearningsofP1,600,000.
Jude'sequipmentwitharemaininglifeof5yearshadabookvalueofP2,250,000
andafairvalueofP2,630,000.Jude'sremainingassetshadbookvaluesequalto
theirfairvalues.
Allintangiblesexceptgoodwillareexpectedtohaveremaininglivesof8years.
TheincomeanddividendfiguresforbothJongandJudeareasfollows:Netincome
of Jong in 2015 is P900,000; 2016 is P1,100,000. Net income of Jude in 2015 is
P340,000;2016isP510,000.
DividendsofJongin2015isP220,000;2016isP390,000.DividendsofJudein2015
isP70,000'2016isP130,000.
Jong'sretainedearningsbalanceatthedateofacquisitionwasP3,450,000.
Compute for the consolidated retained earnings attributable to controlling interest in
2016,consolidatedprofitin2016andnoncontrollinginterestinnetassetsin2016.
PROBLEM6.PositiveCorporationacquired80%oftheoutstandingcommonstockofSynergy
CompanyonJune1,2016forP586,250.
SynergyCompany'sstockholder'sequitycomponentsattheendofthisyearareas
follows: Ordinary shares, P100 par, P250,000; Share Premium, P112,500; Retained
Earnings,P222,500.
Noncontrollinginterestismeasuredatfairvalue
AlltheassetsofSynergywerefairlyvalued,exceptforinventories,whichwere
overstated by P11,000 and equipment, which was understated by P15,000. Remaining
usefullifeoftheequipmentisfouryears.
Both companies use the straightline method for depreciation and amortization.
Stockholder'sequityofPositiveonJanuary1,2016iscomposedofOrdinaryshares,
P750,000;SharePremium,P175,000;andRetainedEarningsP525,000.
FairvalueofnoncontrollinginterestonthedateofacquisitionisP117,500.
Goodwill,ifany,shouldbewrittendownbyP14,225atyearend.
NetincomefortheyearofPositiveandSynergyareP75,000andP42,500(fromdate
ofacquisition)respectively.
Dividends declared at the end of the year amounted to P20,000 and P15,000 for
PositiveandSynergyrespectively.Duringtheyear,therewasnoissuanceofnew
ordinaryshares.
ComputeforthebalanceofthenoncontrollinginterestinthenetassetsofSynergyand
theamountoftheconsolidatedshareholder'sequityonDecember31,2016.

Ms.