MULTIPLE CHOICE PROBLEMS

#49 undone
Use the following information for questions 1 to 4:
On December 31, 2014, Add-On Company acquired 100 percent of Venus Corporations common stock
for P300,000. Balance sheet information Venus just prior to the acquisition is given here:
Cash and receivables P 35,000
Inventory.. 75,000
Land.. 100,000
Buildings and equipment (net).. 220,000
Total assets 420,000

Liabilities and Stockholders Equity

Accounts payable P 65,000
Bonds payable 150,000
Common stock (P1 par).. 100,000
Retained earnings. 115,000
Total liabilities and equity 430,000

At the date of the business combination. Venuss net assets and liabilities approximated fair value
except for inventory, which had a fair value of P60,000, land which had a fair value of P125,000, and
buildings and equipment (net), which had a fair value of P250,000.
1. What amount of inventory will be included in the consolidated balance sheet immediately following
the acquisition?
a. P15,000 c. P60,000
b. P45,000 d. P75,000
2. What amount of goodwill will be included in the consolidated balance sheet immediately following
the acquisition?
a. P15,000 c. P45,000
b. P30,000 d. P85,000
3. What amount of differential will be reflected in a consolidation work paper to prepare a
consolidated balance sheet immediately after the business combination?
a. P 0 c. P45,000
b. P15,000 d. P85,000
4. What amount will be included as investment in Venus Corporation in the consolidated balance sheet
immediately following the acquisition?
a. P 0 c. P300,000
b. P255,000 d. P395,000
Use the following information for questions 5 and 6:
Enya Corporation acquired 100 percent of Celtic Corporations common stock on January 1, 2014.
Summarized balance sheet information for the two companies immediately after the combination is
provided.
 Enya Celtic
Book Value Book Value Fair Value
Cash and receivables. P 60,000 P 15,000 P 15,000
Inventory.. 110,000 32,000 38,000
Building and equipment (net) 160,000 90,000 120,000
Investment in Celtic Stock 150,000 - -
Total assets. 480,000 137,000 173,000
Accounts payable.. P 40,000 P 5,000 P 5,000
Bonds payable. 200,000 40,000 40,000
Common stock (P1 par) 100,000 40,000
Retained earnings. 140,000 52,000 -
Total liabilities and equity.. 480,000 137,000 45,000

5. The amount of differential associated with the acquisition:

a. P 0 c. P36,000
b. P22,000 d. P58,000
6. The consolidated balance sheet of Enya and Celtic will reflect goodwill in the amount of:
a. P 0 c. P36,000
b. P22,000 d. P58,000
Use the following information for questions 7 and 8:
Piatek Enterprises purchases 100 percent of Smith Company for P600,000. At that date, Smith Company
had the following book values and market values:
Book Value Market Value
Cash and Receivables P 25,000 P 25,000
Inventory 125,000 180,000
Plan Assets (net) 300,000 475,000
Current Liabilities (60,000) (60,000)
Long-term Debt (120,000) (120,000)
Common Stock (15,000)
Retained Earnings (255,000)
7. What is the total purchase differential?
a. P150,000 c. P420,000
b. P100,000 d. P330,000
8. What is the amoung of the worksheet elimination to plan assets on the acquisition date?
a. P475,000 debit c. P175,000 debit
b. P300,000 credit d. P175,000 credit
Use the following information for questions 9 to 14.
Bristie Corporation acquired 75 percent of Silver Corporations common stock on December 31, 2008 for
P300,000. The fair value of the non-controlling interest of that date was determined to be P100,000.
Silvers balance sheet immediately before the combination reflected the following balances:
Cash and receivables. P 40,000
Inventory.. 70,000
Land. 90,000
Building and equipment (net) 250,000
Total assets. P450,000

Accounts payable.. P 30,000

Income Taxes Payable 40,000
Bonds Payable. 100,000
Common stock 100,000
Retained earnings 180,000
Total liabilities and equity. P 450,000
A careful review of the fair value of Silvers assets and liabilities indicated that inventory, land, and
buildings and equipment (net) had fair values of P 65,000, P100,000, and P300,000 respectively.
Goodwill is assigned proportionately to Bristie and the non-controlling shareholders.
9. What amount of inventory will be deducted in the consolidated balance sheet immediately
following the acquisition?
a. P 0 c. P70,000
b. P32,000 d. P60,000
10. What amount of land will be included in the consolidated balance sheet immediately following the
acquisition?
a. P 0 c. P90,000
b. P10,000 d. P100,000
11. What amount of buildings and equipment (net) will be deducted in the consolidated balance sheet
immediately following the acquisition?
a. P 0 c. P250,000
b. P50,000 d. P300,000
12. What amount of goodwill will be reported in the consolidated balance sheet immediately following
the acquisition?
a. P 0 c. P65,000
b. P120,000 d. P20,000
13. What amount will be reported as investment in Silver Corporation stock in the consolidated balance
sheet immediately following the acquisition?
a. P 0 c. P300,000
b. P70,000 d. P100,000
14. What amount will be reported as non-controlling interest in the consolidated balance sheet
immediately following the acquisition?
a. P 0 c. P83,750
b. P70,000 d. P100,000
Use the following information for questions 15 to 21.
On the January 1, 2009, Jonathan Corporation acquired 80 percent of Sea-Gull Companys common
stock for P160,000 cash. The fair value of the non-controlling interest at the date was determined to be
P40,000. Data from the balance sheets of the two companies included the following amounts as of the
date of acquisition:
 Jonathan Sea-Gull
Corporation Corporation
Cash P 60,000 P 20,000
Accounts Receivable.. 80,000 30,000
Inventory.. 90,000 40,000
Land. 100,000 40,000
Buildings and Equiment. 200,000 150,000
Less: Accumulated Depreciation. (80,000) (50,000)

Investment in Sea-Gull Corporation Stock. 160,000 -

Total Assets P610,000 P 230,000
Accounts Payable. P110,000 30,000
Bonds Payable 95,000 40,000
Common Stock.. 200,000 40,000
Retained Earnings 205,000 120,000
Total Liabilities and Stockholders Equity.. P610,000 P 230,000
At the date of the business combination, the book values of Sea-Gulls net assets and liabilities
approximated for value except for inventory, which had a far value of P45,000, and land, which had a far
value of P60,000 (using the full-goodwill approach).

15. What amount of total inventory will be reported in the consolidated balance sheet prepared
immediately after the business combination?
a. P130,000 c. P90,000
b. P135,000 d. P45,000
16. What amount of goodwill will be reported in the consolidated balance sheet prepared immediately
after the business combination?
a. P 0 c. P20,000
b. P40,000 d. P15,000
17. What amount of total assets will be reported in consolidated balance sheet prepared immediately
after the business combination?
a. P720,000 c. P825,000
b. P840,000 d. P865,000
18. What amount of total liabilities will be reported in the consolidated balance sheet prepared
immediately after the business combination?
a. P395,000 c. P275,000
b. P280,000 d. P195,000
19. What amount will be reported as non-controlling interest in the consolidated balance sheet
prepared immediately after the business combination?
a. P 0 c. P40,000
b. P15,000 d. P46,000
20. What amount of consolidated retained earnings will be reported?
a. P205,000 c. P325,000
b. P120,000 d. P310,000
21. What amount will be reported as total stockholders equity in the consolidated balance sheet
prepared immediately after the business combination?
a. P445,000 c. P565,000
b. P205,000 d. P550,000
Use the following information for questions 22 and 23:
On January 1, 2004, Poole Company purchased 75% of the common stock of Swimmer Company.
Separate balance sheet data for the companies at the combination date are given below:
Swimmer Co. Swimmer Co.
Poole Co. Book Value Far Value
Cash P 24,000 P 206,000 P 206,000
Accounts receivable 144,000 26,000 26,000
Inventory 132,000 38,000 60,000
Land 78,000 32,000 60,000
Plant assets 700,000 300,000 350,000
Acc. Depreciation (240,000) (60,000)
Investment in Swimmer Co. 440,000 - -
Total assets P1,278,000 P 542,000 P702,000

Accounts Payable P 206,000 P 142,000 P142,000

Capital Stock 800,000 300,000
Retained Earnings 272,000 100,000
Total Liabilities & Equities P1,278,000 P 542,000

Determine below what the consolidated balance would be for each of the requested accounts on
January 2, 2004.

22. What amount of inventory will be reported?

a. P170,000 c. P186,500
b. P177,000 d. P192,000
23. What is the amount of total assets?
a. P1,626,667 c. P1,980,000
b. P1,566,667 d. P2,006,667
Use the following information for questions 24 to 32:
PP Corporation acquired 70% of SS Corporations common stock on December 31, 2004. Balance sheet
data for the two companies immediately following the acquisition follow:
Item PP Corporation SS Corporation
Cash P 44,000 P 30,000
Accounts Receivable 110,000 45,000
Inventory 130,000 70,000
Land 80,000 25,000
Building and equipment 500,000 400,000
Less: Accumulated Depreciation (223,000) (165,000)
Investment in Corporation Stock 150,500
Total Assets P 791,500 P 405,000
Accounts Payable 61,500 28,000
Taxes Payable 95,000 37,000
Bonds Payable 280,000 200,000
Common Stock 150,000 50,000
Retained Earnings 205,000 90,000
Total Liabilities and Stockholders Equity P 791,500 P 405,000
At the date of business combination, the book values of SSs net assets and liabilities approximated fair
value except for inventory, which had a fair value of P85,000, and land, which had a fair value of
P45,000. The fair value of the non-controlling interest was P64,500 on December 31, 2004.

24. What amount of inventory will be reported?

a. P179,000 c. P210,500
b. P200,000 d. P215,000
25. What amount of goodwill (partial) will be reported?
a. P28,000 c. P52,000
b. P40,000 d. None of the above
26. What amount of goodwill (full) will be reported?
a. P 0 c. P40,000
b. P28,000 d. P52,000
27. What amount of total assets will be reported?
a. P1,081,000 c. P1,196,500
b. P1,121,000 d. P1,231,500
28. What amount of total liabilities will be reported?
a. P265,000 c. P622,000
b. P436,000 d. P701,500
29. What amount will be reported as non-controlling interest (partial)?
a. P52,500 c. P64,500
b. P60,900 d. None of the above
30. What amount will be reported as non-controlling interest (full-goodwill)?
a. P42,000 c. P60,900
b. P52,500 d. P64,500
31. What amount of consolidated retained earnings will be reported?
a. P295,000 c. P232,000
b. P268,000 d. P205,000
32. What amount of the total stockholders equity will be reported?
a. P355,000 c. P419,500
b. P397,000 d. P495,000
Use the following information for questions 33 to 41:
On January 1, 2004, Park Corporation and Strand Corporation and their condensed balance sheet are as
follows:
Park Corp. Strand Corp.
Current Assets P 70,000 P 20,000
Non-current Assets 90,000 40,000
Total Assets P160,000 P60,000

Current Liabilities P 30,000 P 10,000

Long-term Debt 50,000 -
Stockholders Equity 80,000 50,000
Total Liabilities and Equities P160,000 P 60,000

On January 2, 2004, Park Corporation borrowed P60,000 and used the proceeds to obtain 80% of the
outstanding common shares of Strand Corporation. The P60,000 debt is payable in 10 equal principal
payments, plus interest, beginning December 31, 2004. The excess fair value of the investment over the
underlying book value of the acquired net assets is allocated to inventory (60%) and to goodwill (40%).
On a consolidated balance sheet as of January 2, 2004, what should be the amount for each of the
following?
33. The amount of goodwill using proportionate basis (partial):
a. P 0 c. P10,000
b. P8,000 d. P20,000
34. The amount of goodwill using full fair value (full/gross-up) basis:
a. P 0 c. P10,000
b. P8,000 d. P20,000

35. Current assets should be:

a. P105,000 c. P100,000
b. P102,000 d. P90,000
36. Non-current asset using proportionate basis (partial) in computing goodwill should be:
a. P130,000 c. P138,000
b. P134,000 d. P140,000
37. Non-current assets using full fair value basis (full/gross-up) in computing goodwill should be: :
a. P130,000 c. P138,000
b. P134,000 d. P140,000
38. Current Liabilities should be: :
a. P50,000 c. P40,000
b. P46,000 d. P30,000
39. Non-current liabilities should be: :
a. P110,000 c. P90,000
b. P104,000 d. P50,000
40. Stockholders equity using proportionate (partial goodwill) basis of determine non-controlling
interest should be: :
a. P80,000 c. P95,000
b. P93,000 d. P130,000
41. Stockholders equity using full fair value (full/gross-up goodwill) proportionate basis determine non-
controlling interest should be: :
a. P80,000 c. P95,000
b. P90,000 d. P130,000
42. Pagach Company purchased 100% of the voting common stock of Rage Company for P1,800,000.
The following book and fair values are available:
Book Value Fair Value
Current Assets P150,000 P300,000
Land and Building 280,000 280,000
Machinery 400,000 700,000
Bonds Payable (300,000) (250,000)
Goodwill 150,000 ?
The bonds payable will appear on the consolidated balance sheet
a. At P300,000 (with no premium or discount shown)
b. At P300,000 less a discount of P50,000
c. At P0; assets are recorded net of liabilities
d. At an amount less than P250,000 since it is a bargain purchase
43. Price Company acquired 75% of the common stock of Shandie Corporation on December 31, 2005.
On the date of acquisition, Price held land with a book value of P150,000 and a fair value of
 P300,000; Shandie held land with a book value of P100,000 and fair value of P500,000. What
amount would land be reported in consolidated balance sheet prepared immediately after the
combination? :
a. P650,000 c. P550,000
b. P500,000 d. P375,000
44. On January 1, 2005, Prima Corporation acquired 80% of Sunder Corporations voring common stock.
Sunders buildings and equipment had a book value of P300,000 and a fair value of P350,000 at the
time of acquisition. At what amount will Sunders buildings and equipment will be reported in the
consolidated statements? :
a. P350,000 c. P280,000
b. P340,000 d. P300,000
45. When it purchased Sutton, Inc, on January 1, 2001, Pavin Corporation issued 500,000 shares of its P5
par voting common stock. On that date the fair value of those shares totaled P4,200,000. Related to
the acquisition, Pavin had payments to the attorneys and accountants of P200,000, and stock
issuance fees of P100,000. Immediately prior to the purchase, the equity sections of the two firms
appeared as follows:
Pavin Sutton
Common stock P4,000,000 P700,000
Paid-in capital excess of par 7,500,000 900,000
Retained Earnings 5,500,000 500,000
Total P17,000,000 P2,100,000

Immediately after the purchase, the consolidated balance sheet should report paid-in capital iin excess
of par of
a. P8,900,000 c. P9,200,000
b. P9,100,000 d. P9,300,000
46. On June 30, 2001, Naeder Corporation purchased for cash at P10 per share all 100,000 shares of the
outstanding common stock of the Tedd Company. The total fair value of all identifiable net assets of
Tedd was P1,400,000. The only noncurrent asset is property with a fair value of P350,000. The
consolidated balance sheet on Naeder and its wholly owned subsidiary on June 30, 2011, should
report
a. A retained earnings balance that is inclusive of a gain of P400,000
b. Goodwill of P400,000
c. A retained earnings balance that is inclusive of a gain of P350,000
d. A gain of P400,000
47. Paro Company purchased 80% of the following common stock of Sabon Company for P900,000.
There are no liabilities. The following book and fair values are available for Sabon:
Book Value Fair Value
Current Asset P 100,000 P200,000
Land and Building 200,000 200,000
Mavhinery 300,000 600,000
Goodwill 100,000 ?
The machinery will appear on the consolidated balance sheet of:
a. P600,000 c. P480,000
b. P540,000 d. P300,000
Use the following information for questions 48 to 49:
Pinehollow acquired all of the outstanding stock of Stonebriar byu issuing 100,000 shares of its P1 par
value stock. The shares have a fair value of P15 per share, Pinehollow also paid P25,000 in direct
acquisition costs. Prior to the transaction to the companies have the following balance sheets:
Assets Pinehollow Stonebriar
Cash P150,000 P 50,000
Accounts receivable 500,000 350,000
Inventory 900,000 600,000
Property, Plant and Equipment (net) 1,850,000 900,000
Total assets P3,400,000 P1,900,000
Current liabilities P300,000 P 100,000
Bonds Payable 1,000,000 600,000
Common stock (P1 par) 300,000 100,000
Paid-in capital excess at par 800,000 900,000
Retained earnings 1,000,000 200,000
Total Liabilities and equity P3,400,000 P1,900,000

The fair values of Stonebriars inventory and property, plant and equipment are P700,000 and
P1,000,000, respectively.
48. The journal entry to record the purchase of Stonebriar would include a
a. Credit to common stock for P1,500,000
b. Credit to additional paid-in capital for P1,100,000
c. Debit to investment for P1,500,000
d. Debit to investment for P1,525,000
49. Goodwill associated with the purchase of Stonebriar is .
a. P100,000 c. P300,000
b. P125,000 d. P325,000

On December 31, 20x4, GG Company acquired all of NNs outstanding common stock for P1, 500,000
cash. On that date, the fair [market] value of NNs inventories was P450.000, and the fair value of NNs
property, plant, and equipment was P1.000,000 The fair values of all other assets and liabilities of NN
were equal to their book values

50. As result of GGs acquisition of NN, the consolidated balance sheet of GG and NN should reflect
goodwill in the amount of:
a. P500.000 c. P600.000
b. P550.000 d. P650.000
51. Assuming that the balance sheet of GG [unconsolidated] on December 31, 20x4, reflected retained
earnings of P2.000.000, what amount of retained earnings should be shown in the December 31,
20x4, consolidated balance sheet of GG and its new subsidiary, NN?
a. P2,000,000 c. P2,800,000
b. P2,600,000 d. P3,250,000
52. BB Corporation acquired 100 percent of CC Corporations outstanding capital stock for P430.000
cash. Immediately before the purchase, the balance sheets of both corporations reported the
following:
BB CC
Assets P2,000,000 P750.000
Liabilities P750.000 P400.000
Common Stock 1,000,000 310.000
 Retained Earnings 250,000 40,000
Liabilities and Stockholders Equity P2,000,000 P750,000

At the date of purchase, the fair value of CCs assets was P50,000 more than the aggregate carrying
amounts. In the consolidated balance sheet prepared immediately after the purchase, the
consolidated stockholders equity should amount to:
a. P1,680,000 c. P1,600,000
b. P1,650,000 d. P1,250,000
Use the following information for questions 53 to 56:
On January 1, 20x4, Pamela Company purchased 75% of the common stock of Snicker Company.
Separate balance sheet data for the companies at the combination data are given below:
Snicker Co. Snicker Co
Pamela Co Book values Fair values
Cash P18,000 P155,000 P155,000
Accounts receivable 108,000 20,000 20,000
Inventory 99,000 26,000 45,000
Land 60,000 24,000 45,000
Plant assets 525,000 225,000 300,000
Accumulated depreciation (180,000) (45,000)
Investment in Snicker Co 330,000
Total assets P960,000 P405,000 P565,000

Accounts payable P156,000 P105,000 P105,000

Capital stock 600,000 225,000
Retained earnings 204,000 75,000
Total liabilities & equities P960,000 P405,000

Determine below what the consolidated balance would be for each of the requested accounts on
January 2, 20x4.
53. What amount of inventory will be reported?
a. P125,000 c. P139,250
b. P132,750 d. P144,000
54. What amount of goodwill or (gain) be reported based on fair value basis will be reported?
a. (P20,000) c. P25,000
b. (P25,000) d. Zero
55. What is the amount of consolidated retained earnings?
a. P204,000 c. P260,250
b. P209,250 d. P279,000
56. What is the amount of total assets?
a. P921,000 c. P1,525,000
b. P1,185,000 d. P1,195,000
57. Seminarian, Inc, has 100,000 shares of P2 par value stock outstanding. Priests Corporation acquired
30,000 shares of Seminarians shares on January 1, 20x4 for P120,000 when Seminarians net assets
had a total fair value of P350,000. On July 1,20x7, Priests agreed to buy an additional 60,000 shares
of Seminarian from single stockholder for P6 per share. Although Seminarians shares were selling in
the P5 range around July 1, 20x7. Priests forecasted that obtaining control of Seminarian would
produce significant revenue synergies to justify the premium price paid. If Seminarians net
identifiable assets had a fair value of P500,000 on July 1, 20x7, how much goodwill