Escolar Documentos
Profissional Documentos
Cultura Documentos
Problem I
1. Consideration transferred : FMV of shares issued by Robin (80,000 sh P28) = P2,240,000
2. Consideration trasnferred
Less: Fair value of Hopes net assets (P2,720,000+P200,000P1,200,000)
Goodwill
Problem II
1..
Accounts Receivable
Inventory
Land
Building
Equipment
Patent
Goodwill
Acquisition Expense
Current Liabilities
Long-term Debt
Cash
Consideration trasnsferred : Cash
P560,000
Less : Fair value of Wests net assets
(P180,000 + P400,000 + P50,000
+ P60,000 + P P70,000 + P20,000
P70,000 - P160,000)
550,000
Goodwill
P 10,000
2.
Acquisition Expense
Accounts Receivable
Inventory
Land
Building
Equipment
Patent
Current Liabilities
Long-term Debt
Cash
Gain on Acquisition
P2,240,000
1,720,000
P 520,000
180,000
400,000
50,000
60,000
70,000
20,000
10,000
20,000
20,000
180,000
400,000
50,000
60,000
70,000
20,000
231,000
330,000
550,000
1,144,000
70,000
160,000
580,000
70,000
160,000
520,000
50,000
Goodwill
Allowance for Uncollectible Accounts (P231,000 - P198,000)
Current Liabilities
Bonds Payable
Premium on Bonds Payable (P495,000 - P450,000)
Preferred Stock (15,000 x P100)
Common Stock (30,000 x P10)
PIC - par (P25 - P10) x 30,000
Cash
Consideration transferred: (P1,500,000 + P750,000
+ P50,000)
Less: Fair value of net assets (198,000 + 330,000 +
550,000 + 1,144,000 275,000 495,000) =
Goodwill
848,000
33,000
275,000
450,000
45,000
1,500,000
300,000
450,000
50,000
P2,300,000
1,452,000
P 848,000
Problem IV
Current Assets
Plant and Equipment
Goodwill
Liabilities
Cash
Estimated Liability for Contingent Consideration
960,000
1,440,000
336,000
216,000
2,160,000
360,000
Problem V
The amount of the contingency is P500,000 (10,000 shares at P50 per share)
1.
Goodwill
500,000
Paid-in-Capital for Contingent Consideration - Issuable
2.
Problem VI
1. January 1, 20x4
Accounts Receivable
Inventory
Land
Buildings
Equipment
Goodwill
Allowance for Uncollectible Accounts
Accounts Payable
Note Payable
Cash
Estimated Liability for Contingent Consideration
Consideration transferred (P720,000 + P135,000)
Total fair value of net assets acquired (P1,064,000 - P263,000)
Goodwill
72,000
99,000
162,000
450,000
288,000
54,000
P855,000
801,000
P 54,000
500,000
100,000
400,000
7,000
83,000
180,000
720,000
135,000
2. January 2, 20x6
Estimated Liability for Contingent Consideration
Cash
135,000
3. January 2, 20x6
Estimated Liability for Contingent Consideration
Gain on Contingent Consideration
135,000
Problem VII
1.
Accounts Receivable
Inventory
Land
Buildings
Goodwill
Allowance for Uncollectible Accounts
Accounts Payable
Note Payable
Cash
240,000
320,000
1,508,000
1,392,000
30,000
Goodwill
Estimated Liability for Contingent Consideration
Consideration transferred
Fair value of net assets acquired
(P3,440,000 P870,000)
Goodwill
2.
200,000
135,000
135,000
20,000
270,000
600,000
2,600,000
200,000
P2,600,000
2,570,000
P 30,000
200,000
200,000
Problem VIII
Current Assets
Long-term Assets (P1,890,000 + P20,000) + (P98,000 + P5,000)
Goodwill *
Liabilities
Long-term Debt
Common Stock (144,000 P5)
PIC - par (144,000 x P15 - P5))
362,000
2,013,000
395,000
144,000
= P2,160,000
Problem IX
Case A
Consideration transferred
Less: Fair Value of Net Assets
Goodwill
P130,000
120,000
P 10,000
119,000
491,000
720,000
1,440,000
Case B
Consideration transferred
Less: Fair Value of Net Assets
Goodwill
P110,000
90,000
P 20,000
Case C
Consideration transferred
Less: Fair Value of Net Assets
Gain
Case A
Case B
Case C
Assets
Goodwill
Current Assets
P10,000
P20,000
20,000
30,000
0
20,000
P15,000
20,000
(P 5,000)
Long-Lived Assets
P130,000
80,000
40,000
Liabilities
P30,000
20,000
40,000
Problem X
1. Fair Value of Identifiable Net Assets
Book values P500,000 P100,000 =
Write up of Inventory and Equipment:
(P20,000 + P30,000) =
Consideration transferred above which goodwill would result
Retained
Earnings (Gain)
0
0
5,000
P400,000
50,000
P450,000
2.
Equipment would not be written down, regardless of the purchase price, unless it was
reviewed and determined to be overvalued originally.
3. A gain would be shown if the purchase price was below P450,000.
4. Anything below P450,000 is technically considered a bargain.
5. Goodwill would be P50,000 at a purchase price of P500,000 or (P450,000 + P50,000).
Problem XI
Present value of maturity value, 20 periods @ 6%:
Present value of interest annuity, 20 periods @ 6%:
Total Present value
Par value
Discount on bonds payable
Cash
Accounts Receivable
Inventory
Land
Buildings
Equipment
Bond Discount (P40,000 + P68,822)
Current Liabilities
Bonds Payable (P300,000 + P600,000)
Gain on Acquisition of Stalton (ordinary)
0.3118 x P600,000 =
11.46992 x 30,000 =
P187,080
344,098
531,178
600,000
P68,822
114,000
135,000
310,000
315,000
54,900
39,450
108,822
95,300
900,000
81,872
P886,478
P968,350
(P 81,872)
Problem XII
In accounting for the combination of NT and OTG, the fair value of the acquisition is allocated to
each identifiable asset and liability acquired with any remaining excess attributed to goodwill.
Consideration transferred (shares issued)
Fair value of net assets acquired:
Cash
Receivables
Trademarks
Record music catalog
In-process R&D
Equipment
Accounts payable
Notes payable
Goodwill
Entry by NT to record combination with OTG:
Cash
Receivables
Trademarks
Record Music Catalog
Capitalized R&D
Equipment
Goodwill
Accounts Payable
Notes Payable
Common Stock (NewTune par value)
PIC - par
(To record merger with OTG at fair value)
PIC - par
Cash
(Stock issue costs incurred)
P750,000
P29,000
63,000
225,000
180,000
200,000
105,000
(34,000)
(45,000)
29,000
63,000
225,000
180,000
200,000
105,000
27,000
25,000
723,000
P27,000
34,000
45,000
60,000
690,000
25,000
64,000
213,000
625,000
1,020,000
200,000
425,000
27,000
P 2,574,000
P 144,000
415,000
Common stock
Paid-in capital - par
Retained earnings
Total
460,000
695,000
860,000
P 2,574,000
Problem XIII
Stockholders Equity:
Common Stock, P1 par
Other Contributed Capital
Retained Earnings
Total stockholders Equity
P1,100,000
4,090,000 [P2,800,000 + (100,000 x P13) P10,000]
600,000
P 5,790,000
Problem XIV
Entry to record the acquisition on Pacificas records:
Cash
Receivables and inventory
PPE
Trademarks
IPRD
Goodwill
Liabilities
Common Stock (50,000 x P5)
Paid-In Capital in excess of par (50,000 x P15)
Contingent performance obligation
85,000
180,000
600,000
200,000
100,000
77,500
180,000
250,000
750,000
62,500
15,000
9,000
15,000
9,000
Note: The following amounts will appear in the income statement and statement of retained
earnings after business combination:
PP Inc.
Revenues
(1,200,000)
Expenses (P875,000 + P15,000)
890,000
Net income
(310,000)
Retained earnings, 1/1
(950,000)
Net income
(310,000)
Dividends paid
90,000
Retained earnings, 12/31
*(1,170,000)
* or, P1,185,000 P15,000 = P1,170,000
Problem XV
Acquisition MethodEntry to record acquisition of Sampras
Consideration transferred
Contingent performance obligation
Consideration transferred (fair value)
Fair value of net identifiable assets
Goodwill
P300,000
15,000
315,000
282,000
P33,000
Receivables
Inventory
Buildings
Equipment
Customer list
IPRD
Goodwill
Current liabilities
Long-term liabilities
Contingent performance liability
Cash
80,000
70,000
115,000
25,000
22,000
30,000
33,000
Acquisition expenses
Cash
Problem XVI
1.
a. The computation of goodwill is as follows:
Consideration transferred;
Common shares: 30,000 shares x P25
Notes payable
Contingent consideration (cash contingency):
P120,000 x 30% probability
Total
Less: Fair value of identifiable assets acquired and
liabilities assumed:
Cash
Receivables net
Inventories
Land
Buildings net
Equipment net
In-process research and development
Accounts payable
Other liabilities
Positive Excess Goodwill
10,000
50,000
15,000
300,000
10,000
P 750,000
180,000
36,000
P 966,000
P
24,000
48,000
72,000
240,000
360,000
300,000
60,000
( 72,000)
( 168,000)
864,000
P 102,000
10,000
24,000
48,000
72,000
240,000
Buildings net
Equipment net
In-process research and development
Goodwill
Accounts payable
Other liabilities
Notes payable
Estimated Liability for Contingent Consideration
Common stock (P10 par x 30,000 shares)
Paid-in capital in excess of par
[(P25 P10) x 30,000 shares]
Acquisition of Saul Company.
360,000
300,000
60,000
102,000
62,000
168,000
180,000
36,000
300,000
450,000
Acquisition-related expenses
Cash
Acquisition related costs direct costs.
78,000
32,400
Acquisition-related expenses
Cash
Acquisition related costs indirect costs.
27,600
78,000
32,400
27,600
c. The balance sheet of Pure Corporation immediately after the acquisition is as follows:
Pure Corporation
Balance Sheet
December 31, 20x4
Assets
Cash
Receivables net
Inventories
Land
Buildings net
Equipment net
In-process research and development
Goodwill
Total Assets
Liabilities and Stockholders Equity
Liabilities
Accounts payable
Other liabilities
Notes payable
Estimated liability for contingent consideration
Total Liabilities
Stockholders Equity
162,000
144,000
360,000
348,000
840,000
732,000
60,000
102,000
P2,748,000
P 288,000
408,000
180,000
36,000
P 912,000
P 1,020,000
657,600
158,400
P1,836,000
P2,748,000
It should be noted that under PFRS 3, in-process R&D is measured and recorded at fair value as an asset on the
acquisition date. This requirement does not extend to R&D in contexts other than business combinations.
2.
a. Assets that have been provisionally recorded as of the acquisition date are retrospectively
adjusted in value during the measurement period for new information that clarifies the
acquisition-date value. The adjustments affect goodwill since the measurement period is
still within one year (i.e., eight months) from the acquisition date. Therefore, the goodwill to
be reported then on the acquisition should be P78,000 (P102,000 P24,000).
b.
Buildings
Goodwill
24,000
3.
24,000
c.
c.1. The goodwill remains at P126,000, since the change of estimate should be done only
once (last August 31, 20x5).
c.2. On November 1, 20x5, the probability value of the contingent consideration
amounted to P48,000, the entry to adjust the liability would be:
Estimated liability for contingent consideration
Gain on estimated contingent consideration
Adjustment after measurement date.
12,000
12,000
c.3.
c.3.1. The goodwill remains at P126,000, since the change of estimate should be done
only once (last August 31, 20x5).
c.3.2. On December 15, 20x5, the entry would be:
30,000
30,000
c.3.3.
c.3.3.1. P126,000.
c.3.3.2. On January 1, 20x7, Sauls average income in 20x5 is P270,000 and 20x6
is P260,000, which means that the target is met, Peter Corporation will
make the following entry:
Estimated liability for contingent consideration
Loss on estimated contingent consideration
Cash
78,000
42,000
4.
120,000
750,000
180,000
40,385
P 970,385
864,000
P 106,385
62,000
168,000
180,000
40,385
300,000
450,000
c.
40,385
40,385
Since the contingent event does not happen, the position taken by PFRS 3 is that the
conditions that prevent the target from being met occurred in a subsequent period
and that Peter had the information to measure the liability at the acquisition date
based on circumstances that existed at that time. Thus the adjustment will flow through
income statement in the subsequent period.
d. The entry by Peter Corporation on January 1, 20x7 for the payment of the contingent
consideration would be:
Estimated liability for contingent consideration
Loss on estimated contingent consideration
Cash [(P78,000 + P84,000)/2 P30,000] x 2
Settlement of contingent consideration.
5.
36,000
66,000
102,000
300,000
450,000
c. Pure Corporation will make the following entry for the issuance of 1,200 additional shares:
Paid-in capital for Contingent Consideration
18,000
Common stock (P10 par x 1,200 shares)
12,000
Paid-in capital in excess of par
6,000
Settlement of contingent consideration.
6. On January 1, 20x7, the average income amounted to P132,000 (the contingent event
occurs). Thus, the entry record the occurrence of such event to reassign the P750,000 original
consideration to 36,000 shares (30,000 original shares issued + 6,000 additional shares due to
contingency) would be:
Paid-in capital in excess of par
Common stock (P10 par x 6,000 shares)
60,000
7.
60,000
On January 1, 20x7, the contingent event happens since the fair value per share fall below
P25. Thus, the entry record the occurrence of such event to reassign the P750,000 original
consideration to 37,500 shares (30,000 original shares issued + 7,500* additional shares due to
contingency) would be:
Paid-in capital in excess of par
Common stock (P10 par x 7,500 shares)
75,000
75,000
P 750,000
180,000
92,308
P1,022,308
864,000
P 158,308
60,000
158,308
62,000
168,000
180,000
92,308
300,000
450,000
On December 31, 20x5, the contingent event occurs, wherein Peters stock price had fallen to
P20, thus requiring Peter to issue additional shares of stock to the former owners of Saul
Corporation. The entry for Peter Corporation on December 31, 20x5 to record such
occurrence such event to reassign the P750,000 original consideration to 37,500 shares (30,000
original shares issued + 7,500* additional shares due to contingency) would be:
Paid-in capital for Contingent Consideration
Common stock, P10 par
Paid-in capital in excess of par
92,308
75,000
17,308
P 1,800,000
1,440,000
12,000
240,000
26,400
P3,518,400
P1,440,000
900,000
240,000
1.380,000
( 300,000)
( 120,000)
3,540,000
P ( 21,600)
300,000
120,000
Cash
Common stock (P10 par x 120,000 shares)
Paid-in capital in excess of par
[(P12 P10) x 120,000 shares]
Gain on sale of Patent
Estimated liability for contingent consideration
Bargain purchase gain
Problem XVIII
1.
Consideration transferred:
Shares: 2/3 x 60,000 x P3.20
Cash
Accounts payable
Mortgage and interest
Debentures and premium
Liquidation expenses
Cash held
Less: Fair value of assets and liabilities acquired:
Accounts receivable
Inventory
Freehold land
Buildings
Plant and equipment
Bargain Purchase Gain
Homer Ltd
Accounts Receivable
Inventory
Freehold Land
Buildings
Plant and Equipment
Payable to Tan Ltd
Common stock, P1 par x 40,000 shares
Additional paid-in capital
Gain on acquisition
(Acquisition of net assets of
Tan Ltd and shares issued)
Payable to Tan Ltd
Cash
(Being payment of cash consideration)
Paid-in capital in excess of par
Cash
(Being costs of issuing shares)
1,812,000
1,200,000
240,000
240,000
26,400
21,600
128,000
45,100
44,000
52,500
2,400
144,000
(12,000)
P34,700
39,000
130,000
40,000
46,000
34,700
39,000
130,000
40,000
46,000
132,000
1,200
132,000
260,000
289,700
29,700
132,000
40,000
88,000
29,700
132,000
1,200
2.
Accounts Receivable
Inventory
Freehold Land
Buildings
Plant and Equipment
Goodwill
Interest Payable
Liquidation Expenses
Premium on Debentures
Accounts Payable
Shareholders Distribution
Opening Balance
Receivable from Homer Ltd
Tan LTD
General Ledger
Liquidation
P
34,700 Additional paid in capital
27,600 Retained earnings
100,000 Receivable from Homer Ltd
30,000
46,000
2,000
4,000
2,400
2,500
1,600
68,000
318,800
Liquidators Cash
P
12,000 Liquidation Expenses
132,000 Mortgage and Interest
Debentures and Premium
Accounts Payable
144,000
Shareholders Distribution
P
128,000 Common stock
Liquidation
128,000
Problem XIX
Cash
Accounts Receivable
Inventory
Land
Plant Assets
Discount on Bonds Payable
Goodwill*
Allowance for Uncollectible Accounts
Accounts Payable
Bonds Payable
Deferred Income Tax Liability
Cash
Consideration transferred
Less: Fair value of net assets acquired
(P784,000 P10,000 P54,000 P180,000 - P67,200*)
Goodwill
P
26,800
32,000
260,000
318,800
P
2,400
44,000
52,500
45,100
144,000
P
60,000
68,0000
128,000
20,000
112,000
134,000
55,000
463,000
20,000
127,200
P600,000
472,800
P127,200
10,000
54,000
200,000
67,200
600,000
P148,000
( 20,000)
P168,000
P 67,200
6. a
PFRS 3 (2008 requires that, at the acquisition date, the identifiable assets acquired and
liabilities assumed should be designated as necessary to apply other PFRSs subsequently. The
acquirer makes those classifications or designations on the basis of contractual terms, ... as
they exist at the acquisition date [PFRS 3 (2008).15]
Since, the patent was not recorded separately as identifiable intangible asset on the date of
acquisition, and then no amount of patent should be subsequently recognized.
7. b
Consideration transferred (fair value)..
P80,000
Less: Fair value of net identifiable assets acquired:
Fair value of assets
P 98,000
Less: Present value/ Fair Value of liabilities
23,000
75,000
Goodwill
P 5,000
A net identifiable asset means net assets excluding goodwill (unidentifiable asset).
An acquisition-related costs are considered outright expenses.
8. d [P1,600,000 P1,210,000] = P390,000
9. a [(P1,600,000 PP390,000) - P1,210,000] = P0
10. b
PFRS No. 3 par. 62 states that: If the initial accounting for business combination can be
determined only provisionally by the end of the period in which the combination is effected
because either the fair values to be assigned to the acquirees identifiable assets, liabilities,
or contingent liabilities or the cost of the combination can be determined only provisionally,
the acquirer shall account for the combination using those provisional values. The acquirer
shall recognize any adjustments to those provisional values as a result of completing the
initial accounting:
(a) within twelve months of the acquisition date; and
11. b
The consideration transferred should be compared with the fair value of the net assets
acquired, per PFRS3 par 32. When provisional fair values have been identified at the first
reporting date after the acquisition, adjustments arising within the measurement period (a
maximum of 12 months from the acquisition date) should be related back to the acquisition
date. Subsequent adjustments are recognized in profit or loss, unless they can be classified
as errors under PAS8 Accounting policies, changes in accounting estimates and errors. See
PFRS 3 pars. 45 and 50. The final amount of goodwill is P160 million consideration transferred
less P135 million fair values on May 31, 20x5 = P25 million.
12. c
Fair value of Subsidiary - Homer
Consideration transferredP 200 million
Add: Fair value of contingent consideration
10 million
Fair value of subsidiary P 210 million
Less: Fair value of identifiable assets and liabilities of Homer............... 116 million
Goodwill P 94 million
Note: The consideration transferred should be compared with the fair value of the net
assets acquired, per PFRS3 par. 32. The contingent consideration should be measured
at its fair value at the acquisition date; any subsequent change in this cash liability
comes under PAS 39 Financial instruments: recognition and measurement and should
be recognized in profit or loss, even if it arises within the measurement period. See PFRS
3 pars. 39, 40 and 58.
13.
14. d
APIC: P20,000 + [(P42 P5) x12,000 = P464,000
Retained earnings: P160,000, parent only
15. b
Inventory: PP230,000 + P210,000 = P440,000
Land: P280,000 + P240,000 = P520,000
16. b [P480,000 (P70,000 + P210,000 + P240,000 + P270,000 + P90,000 P420,000)] = P20,000
17. a
Cost of Investment (100,000 shares x P1.90)
Less: Market value of net assets acquired:
Cash
Furniture and fittings
Accounts receivable
Plant
Accounts payable
Current tax liability
Liabilities
Goodwill
18. b
P 190,000
P 50,000
20,000
5,000
125,000
(15,000)
( 8,000)
(
2,000)
175,000
P 15,000
P 60,500
58,000
P 2,500
When it liquidates, costs of liquidation paid by the acquiree should be for the liquidation
account of the acquiree and will eventually be transferred to shareholders equity account.
Any costs of liquidation paid or supplied by the acquirer should be capitalized as cost of
acquisition which is consistent with the cost model under PFRS No. 3 in measuring the cost of
the combination.
Any direct costs of acquisition should be capitalizable under the cost model reiterated in
PFRS No. 3 Phase I. This model in PFRS No. 3 will be amended under Phase II (pending
implementation possibly until early 2008), wherein all direct costs will be outright expense.
Costs of issuing shares will be debited to share premium or APIC account.
Any costs of liquidation paid or supplied by the acquirer should be capitalized as cost of
acquisition which is consistent with the cost model under PFRS No. 3 in measuring the cost of
the combination.
The fair values of liabilities undertaken are best measured by the present values of future
cash outflows.
Intangible assets are recognized when its fair value can be measured reliably.
Assets other than intangible assets must be recognized if it is probable that the future
economic benefits will flow to the acquirer and its fair value can be measured reliably.
19. c
P153,000
51,000
P102,000
90,000
P192,000
P 10,000
3,000
10,000
5,000
P 28,000
A bargain purchase is a business combination in which the net fair value of the identifiable
assets acquired and liabilities assumed exceeds the aggregate of the consideration
transferred.
It should be noted that bargain purchase gain would arise only in exceptional
circumstances. Therefore, before determining that gain has arisen, the acquirer has to:
1. Reassess whether it has correctly identified all of the assets acquired and all of the
liabilities assumed. The acquirer should recognize any additional assets or liabilities
that are identified in that review.
Cost
P180,000
Less: Accumulated depreciation (P180,000/30 years = P6,000/year x 3 yrs)
18,000
Net book value
P162,000
28. c
P312,000
150,000
P162,000
29. c
The consideration transferred should be compared with the fair value of the net assets
acquired, per PFRS3 par. 32. The gain of P8 million results from a bargain purchase and
should be recognized in profit or loss, per PFRS3 par. 34.
30. c
Consideration transferred:
Shares: 2/3 x 60,000 x P3.20
Cash
Accounts payable
Mortgage and interest
Debentures and premium
Liquidation expenses
Cash held
Less: Fair value of assets and liabilities acquired:
Accounts receivable
Inventory
Freehold land
Buildings
Plant and equipment
Bargain Purchase Gain
31. d
128,000
45,100
44,000
52,500
2,400
144,000
(12,000)
P34,700
39,000
130,000
40,000
46,000
132,000
260,000
289,700
29,700
PFRS 3 (2008) par. 18 requires an identifiable assets and liabilities assumed are measured
at their acquisition-date fair values.
32. c
Selling price
Less: Book value of Comb (P50,000 + P80,000 + P40,000
- P30,000)
Loss on sale of business by the acquiree (Comb)
P 110,000
140,000
P( 30,000)
33.
P215,000
P130,000 + P85,000
34.
P23,000
35.
P1,109,000
P 844,000
(198,000)
P 646,000
405,000
P1,051,000
58,000
P1,109,000
36.
P701,500
37.
P257,500
38.
P407,500
39. d
Consideration transferred:
Shares: (100,000 shares x P6.20)
P620,000
Contingent consideration.
184,000
Total.
P804,000
Less: Fair value of net identifiable assets acquired:
Current assets P100,000
Equipment 150,000
Land
50,000
Buildings . 300,000
Liabilities. ( 80,000) 520,000
Goodwill.
P284,000
The P184,000 is one classical example of contingencies is where the future income of the
acquirer is regarded as uncertain; the agreement contains a clause that requires the
acquirer to provide additional consideration to the acquiree if the income of the acquirer is
not equal to or exceeds a specified amount over some specified period.
40. d
60,000
49. a
50. a
51. d
52. c
P200,000
250,000
P 50,000
__12,500
P
4
P 550,000
800,000
P 250,000
P
20
12,500
P250,000
56,000
P194,000
Blue Town:
Stockholders equity before issuance of shares (P700,000 + P980,000)
Issued shares: 34,000 shares x P35
Consolidated SHE/Net Assets
P1,680,000
1,190,000
P2,870,000
53. d
54. b
55. a
56. c
6
8
57. a
II ____
Average annual earnings
P 46,080
Divided by: Capitalized at
Total stock to be issued
Less: Net Assets (for P/S)
Goodwill (for Common Stock)
Preferred stock (same with Net Assets):
864,000/P100 par
Quiz - XIV
1.
2.
3.
4.
_____JJ
P 69,120
____Total____
P 115,200
_
10%
P1,152,000
864,000
P 288,000
8,640 shares
Theories
1.
True
21. False
41. True
61. c
81. b
101. c
121 a
2.
False
22. True
42. False
62. b
82. a
102. d
122. b
3.
True
23. False
43. a
63. c
83. d
103. d
123. b
4.
True
24. True
44. c
64. d
84. a
104. d
124. c
5.
False
25, True
45, b
65, d
85. c
105. c
125. b
6.
True
26. False
46. b
66. a
86. d
106. d
126. c
7.
False
27. True
47. d
67. a
87. c
107. d
127. c
8.
True
28. False
48. c
68. d
88. a
108. d
9.
True
29. True
49. c
69. a
89. c
109. b
10. True
30, True
50, b
70, b
90, d
110, c
11. True
31. False
51. a
71. c
91. b
111. c
12. True
32. True
52. b
72. A
92. a
112. c
13. False
33. True
53. c
73. c
93. C
113. a
14. False
34. False
54. a
74. c
94. B
114. d
15. False
35. True
55. c
75. a
95. D
115. d
16. True
36. True
56. b
76. d
96. A
116. c
17. False
37. False
57. a
77. a
97. A
117. b
18. True
38. True
58. c
78. d
98. c
118. b
19. True
39. False
59. a
79. b
99. d
119. b
20. False
40, False
60, c
80, c
100, d
120. a
Note for the following numbers:
2.
A horizontal combination occurs when management attempts to dominate an industry.
5.
A vertical combination exists when an entity purchases another entity that could have a
buyer-seller relationship with the acquirer. The combination described here is a
horizontal combination.
7.
A conglomerate combination is one where an unrelated or tangentially related business
is acquired. A vertical combination occurs when a supplier is acquired.
13.
15.
17.
20.
21.
23.
26.
28.
31.
34.
Greenmail is the payment of a price above market value to acquire stock back from a potential
acquirer.
The sale of the crown jewels results when a target sells assets that would be particularly valuable to
the potential acquirer. The scorched earth defense results when a target generally sells large
amounts of assets without regard to the specific desirability to the potential acquirer.
Golden parachutes are generally given only to top executives of the acquiree.
Control over the net assets of an entity can be accomplished by purchasing the net assets or by
purchasing the acquiree voting common stock that represents ownership of the assets.
The amount of cash will always equal the net assets recorded by the acquirer. As a result, the
acquirer book value will not change due to an acquisition.
There is no exchange of stock in an asset for asset acquisition so there cannot be a change in
ownership structure of either entity.
37.
39.
40.
42.