PRACTICAL ACCOUNTING PROBLEMS II c.

P2,016,000
d. P2,482,900
Problem 1. Jinky is trying to decide whether to
accept a bonus of 25% of net income after salaries Problem 3. Jamby and Miriam have just formed a
and bonus or a salary of P97,500 plus a bonus of partnership. Jamby contributed cash of P2,205,000
10% of net income after salaries and bonus as a and office equipment that cost P945,000. The
means of allocating profit among thee partners. equipment had been used in her sole proprietorship
Salaries traceable to the other partners are and had been 70% depreciated, the appraised value
estimated to be P450,000. What amount of income of the equipment is P630,000. Jamby also
would be necessary so that Jinky would consider contributed a note payable of P210,000 to be
the choices to be equal? assumed by the partnership. Jamby is to have 60%
a. P1,100,000 interest in the partnership. Miriam contributed
b. P1,197,500 only P1,575,000 merchandise inventory at fair
c. P650,000 market value. Assume the use of bonus method, the
d. P1,262,500 partners capital must be in conformity with their
profit and loss ratio upon formation.
Problem 2. Susan and Suset are lawyers who have
been operating their own separate practices as a In the formation of a partnership, which off the
sole proprietors. They decided to combine the two following is true?
firms as a partnership on January 3,2010. The a. The agreed capital of Jamby upon formation
following assets were contributed by each: is P2,625,000
Susan Suset b. The total agreed capital of the partnership
Cash P350,000 P350,000 is P4,375,000
Trade Receivables 787,500 665,000 c. The capital of Miriam will increase by
Equipment 122,500 133,000 P105,000 as a result of the transfer of
Fixtures 161,000 capital
d. There is either an investment or withdrawal
The partners agreed to split profits on the basis of asset under the bonus method
of gross cash collections from billing generated
from clients. During 2010, Susans clients paid Problem 4. The following information is available
the firm a total of P5,250,000 and Susets clients concerning Random Inc. on the date the company
paid P5,687,500. Expenses for the year were entered bankruptcy proceedings:
P3,780,000 of which P1,680,000were attributable to
Susan and the balance to Suset. During 2010 Suset Account Balance per books
withdrew P2,625,000 cash for personal needs and Cash P2,860
contributed an additional computer valued at Accounts Receivable 52,260
P77,000. What is the capital balance of Suset at Inventory 28,000
December 31,2010? Prepaid Expenses 4,300
a. P3,112,900 Buildings, Net 59,000
b. P2,937,900 Equipment, Net 5,600
Goodwill 7,650 books showed a debit balance of P234,900. The
Wages Payable 2,500 interoffice accounts were in agreement at the
Taxes Payable 1,810 beginning of the year. For purposes of reconciling
Accounts Payable 79,000 the interoffice accounts, the following facts were
Notes Payable 15,150 ascertained:
Common Stock 72,000 a. Computer equipment costing the home office
Deficit 10,790 P27,000 was sent to Laoag branch. The home
office will maintain the records of the
Inventory with book value of P20,000 is a security asset used by the branch. Meanwhile, back at
for notes of P10,100. The other notes are secured the branch no entry was made.
by the equipment. b. The branch acquired a machinery costing
P18,000. The home office will maintain the
Expected realizable values of the assets are: records of the asset used by the branch. The
Accounts Receivable P44,100 home office was not yet notified.
Inventory 18,500
c. The home office charged the branch for
Buildings 22,500
freight amounting to P2,220. It should have
Equipment 2,000
been charged to its customer.
What is the expected amount of cash partially d. The home office inadvertently recorded a
secured creditors will receive? laoag branch remittance at P4,200, as
collection from its customers on account.
a. P5,050
e. On December 24,2009, the branch sent a check
b. P2,734
for P9,600 to its suppliers on account. The
c. P4,734 branch erroneously recorded the transaction
d. P4,894 as a remittance to the home office and sent
a copy of the debit memo to the home office.
Problem 5. Batanes Construction Company recognized The home office this upon receiving the
gross loss of P42,000 on its long-term project debit memo on December 29,2009.
which has accumulated costs P490,000. To finish f. On December 26, 2009 the branch returned
the project, the company estimates that it has to P6,600 of excess merchandise to the home
incur additional cost of P735,000. The contract office. The merchandise was received by the
price is: home office on December 30,2009 and credited
a. P798,000 Lanao Branch Current.
b. P1,330,000 g. The home office allocated advertising and
c. P1,225,000 rent expense totalling P5,400 to Laoag
d. P1,183,000 branch. The home office charged the said
expense to Laguna Branch by mistake, Laoag
Problem 6. Mariano operates a branch in Laoag branch had not entered the allocation at
City. At close of the business on December year-end.
31,2009, Laoag Branch account in the home office
 h. A home office customer remitted P3,600 to retires from the partnership. On the date of
the branch. The branch inadvertently retirement the partnership net profit from
recorded this transaction on December operations is P48,000. The partners agreed further
28,2009 as a transfer of cash from the home to pay Ester P76,560 in settlement of her interest.
office. The home office made no entry during
the year. Upon retirement of Ester, which of the following
i. Inventory costing P36,000 was sent to the will result?
branch by the home office on December a. Goodwill of Ester is P7,840
14,2009. The branch recorded the transaction b. Judiths capital after retirement of Ester
as a purchase of merchandise on account from is P36,400 higher than Martha.
outsiders by mistake. c. Bonus from Ester is P9,440
d. Bonus to Judith is P5,600
Compute the unadjusted balance of the home office
current account as of December 31,2009: Problem 9.Eros Corporation acquired the net assets
a. P222,480 of Honey Company on January 1,2010, and made the
b. P171,480 following entry to record the acquisition:
c. P188,880 Current assets P600,000
d. P178,320 Equipment 900,000
Land 300,000
Problem 7.The following amounts were taken from Building 1,800,000
the statement of affairs for ABC Company: Goodwill 600,000
Unsecured Liabilities with Priority P52,500 Liabilities 480,000
Stockholders equity 189,000 Common stock, P1 par 600,000
Estimated liquidation expenses that have Additional paid in capital 3,120,000
not been entered in the accounting
records 23,625 The agreement further provides that additional
Unsecured liabilities without priority 472,500 cash payments would be made on January 1, 2012,
Loss on realization of assets 236,250 equal to twice the amount by which average
earnings of Honey Company exceed P100,000 per
How much is the total free assets? year, prior to January 1,2012. Net income was
P200,000 in 2010 and P240,000 in 2011. Assume that
a. P401,625 the liabilities recorded in January 1, 2010
b. P408,675 include an estimated contingent liability recorded
c. P425,250 at an estimated amount of P160,000. What should be
d. P454,125 the amount of goodwill on January 1,2012?
a. P520,000
Problem 8.Ester, Judith and Martha were partners b. P600,000
with capital balances on January 2, 2009 of
c. P440,000
P70,000, P84,000, and P62,000, respectively. Their
loss sharing ratio is 3:5:2. On May 1,2009, Ester d. P680,000
 If PD received P54,000 from the first distribution
Problem 10. Tito, Vic and Pete formed a joint of cash, how much did CG receive at that time?
venture in 2009 to sell sportswear merchandise. a. P30,000
Pete is designed as the manager of the venture. b. P12,000
The venture a agreed to divide profile and losses
c. P18,000
equally. The venture is terminated on December 31,
2009 even though there is still unsold d. P33,000
merchandise. On this date, Petes trial balance
shows the following account balances before profit Problem 12. The Eagle Company has a branch in
or loss distribution. Davao City. As of December 31,2009, books of the
Debit Credit home office and the branch show summaries of their
Joint Venture Cash P52,500 reciprocal accounts as follows:
Joint Venture 10,500
Tito, Capital 24,500 Investment In Branch
Vic, Capital P28,000
Dec.1 Balance P654,250 Dec.12 Remittance P94,500
Pete receives P7,500 for his share in the venture 8 Shipments 26 Remittances 166,500
profit. Furthermore, he agrees to be charged for To Branch 250,800
the unsold merchandise as of December 31, 2009. 12 Freight
What is the cost of the unsold merchandise changed On shipment 3,525
to Pete? 16 shipments
To Branch 407,250
a. P18,000
28 shipments
b. P3,000 To Branch 432,000
c. P33,000 31 Expenses 60,750
d. P12,000 Balance P1,547,575

Problem11. Partners PG, PD and CG share profits

and losses in the ratio of 5:3:2. At the end of a
very unprofitable year, they decided to liquidate Home Office
the firm. The partners capital account balances
at this time are as follows: Dec 10 Remittance P94,500 Dec 1 Balance P654,250
PG P330,000 22Remittance 16,500 10 Merchandise
PD 373,000 Home Office 250,800
CG 225,000 31 Remittance 144,000 18 Merchandise
From Home
The liabilities accumulate to P450,000, including Office 407,250
a loan of P150,000 from PG. The cash balance is Balance P1,057,300
P90,000. All the partners are personally solvent.
The partners plan to sell the assets in instalment.
Additional information:
 a. Merchandise was billed to the branch at cost What is the market value per share of Shine
b. The freight charged to the Davao branch on Corporations common shares at the date of the
December 12 was erroneous. It should have business combination?
been charged to Cebu branch. a. P86
c. Expenses charged to the branch on December b. P44
31 represent allocated portions of home c. P58
office expenses chargeable to branch d. P66
operations.
d. The branch income summary shows a credit Problem 14. The following selected accounts
balance of P876,750. appeared in the trial balance of Valentines
Company as of December 31,2009:
How much is the reconciled balance of the Installment receivable- 2008 sales P12,000
reciprocal accounts? Installment receivable- 2009 sales 160,000
a. P2,426,800 Inventory, December 31,2008 56,000
b. P673,300 Purchases 444,000
Repossessions 2,400
c. P2,276,800 Installment sales 340,000
d. P2,430,325 Regular sales 308,000
Deferred gross profit- 2008 43,200
Problem 13. Shine Corporation will issue 50,000 of Operating expenses 92,000
its P5 par value common shares for the net assets
of Glow Company. Glows trail balance at the date Additional information:
of acquisition shows the following: Installment receivable-2008 sales,
DR CR December 31,2008 P114,200
Current Assets P840,000 Inventory of new and repossessed
Property and Equipment 1,960,000 Merchandise As of December 31,2009 76,000
Liabilities P1,000,000 Gross profit percentage on instalment sales in
Common stock, P5 par 360,000 10% higher than the gross profit percentage
Additional paid in capital 640,000 On regular sales in 2009.
Retained Earnings 800,000
Repossession was made during the year and was
Glows current assets are appraised at P1,100,000 recorded correctly. It was a 2008 sale and the
and the property and equipment was also appraised corresponding uncollected account at the time of
at P2,800,000. Its liabilities are fairly valued. repossession was P6,200.
Accordingly, Shine Corporation issued common
shares with a total market value equal to that of What is the net income for 2009
Glows net assets including goodwill of P400,000.
a. P108,360
b. P13,480
c. P105,880
 d. P107,200 b. P750,000
c. P911,220
Problem 15. The following data were taken from the d. P0
statement of realization and liquidation of ABC
Corp. for the quarter ended June 30, 2009 Problem 17. On April 30,2009, the capital accounts
Assets to be realized P515,625 of P,Q, and R shows the following balances: P-
Supplementary credits 796,875 P150,000, Q-P75,000 and R-P45,000. At this time, S
Liabilities to be liquidated 843,750 is admitted to the firm when he purchases a one-
Supplementary charges 731,250 sixth interest in the firm for P27,500. The old
Liabilities liquidated 562,500 partners equalized their capital investments.
Assets acquired 562,500 Afterwards, all the partners agree to divide
Assets realized 656,250 profits and losses equally. The new partnership
Liabilities assumed 281,250 closes its books on June 30, 2009 reporting a
Assets not realized 234,375 profit of P4,200 for two months. The partners made
The ending capital balances of capital stock and the following withdrawals: P and R, P450 per
retained earnings are P468,750 and P187,500, month; Q and S 300 per month. On June 30, 2009, S
respectively. A net loss of P262,500 for the invests enough cash to increases his capital to a
period. How much is the ending balance of cash? one-third interest in the partnership. How much
a. P1,125,000 cash is to be invested by S?
b. P337,500 a. P108,025
c. P843,750 b. P68,025
d. P862,500 c. P67,425
d. P107,425
Problem 16. On December 30, 2009, Loveless Company
authorized NBSB Corp. to operate as a franchise Problem 18. The books of Magic, Inc. show the
for an initial franchise fee of P1,950,000. Of following balances on December 31, 2009:
this amount, P750,000 was received upon signing
the agreement and the balance, represented by a Accounts Receivable P533,375
note, is due in four annual payments starting Deferred Gross Profit, unadjusted 64,600
November 30, 2010. Present value of P1 at 12% for Analysis of the aging schedule reveals the
periods is O.6355. Present value of an ordinary following:
annuity of P1 at 12% for 4 periods is 3.0374. The Regular accounts P352,750
period of refund will elapsed on January 31,2010. 2008 installment accounts 27,625
The franchisor has performed substantially all of 2009 installment accounts 153,000
the initial services but the operations of the
store have yet to start. Collectibility of the Sales on an installment basis in 2008 were made at
note is reasonably certain. How much is the 30 percent above cost and in 2009, at 33 1/3
unearned franchise fee on the year ended December percent above cost. What is the total realized
31,2009? gross profit for the year ended December 31, 2009?
a. P1,661,220
 a. P19,975 a. P408,500
b. P44,625 b. P416,000
c. P38,250 c. P457,000
d. P59,285 d. P402,375

Problem 19. Ping, Pong and Pang decided to Problem 20. Bataan Construction Company recognized
dissolve their partnership on May 31, 2009. On gross profit of P42,000 on its long-term project
this date, their capital balances were as follows: which has accumulated costs of P490,000. To finish
Ping P87,500 the project, the company estimates that it has to
Pong 105,000 incur additional cost of P735,000. The contract
Pang 35,000 price is:
a. P798,000
The following provision for sharing profits and b. P1,330,000
losses is provided in the agreement. Available
c. P1,102,500
income is distributed only as far as it is
available. d. P1,837,500
Available income is to be distributed in the
following sequence: Problem 21. The Red Roses Company has a branch in
Isabela City. Shipments of merchandise to the
1. Ping, who is the managing partner gets a
branch totaled P297,000 for the year, which
salary of P180,000 a year; the remaining
included a 25% mark-up on cost.
partners gets a salary of P72,000 each.
2. Interest is imputed on the average capital The following data summarizing branch operations
balances at 12% per annum for the period ended December 31, 2009:
3. Any remaining profits and losses are to be Sales on account P407,000
shared 3:2:5 Sales on cash basis 121,000
Collections of accounts 330,000
The average capital balances during the period Expenses paid 149,000
ended were P70,000, P85,000 and P27,500, for Ping, Expenses unpaid 41,000
Pong and Pang, respectively. Purchase of merchandise for cash 143,000
The net income from January to May 31, 2009 was Inventory on hand, January 1
P121,500. Also, before liquidation on May 31,2009, (60% from outside purchases) 114,000
the partnerships cash and liabilities, Inventory on hand, December 31
respectively, were P70,000 and P157,500 (inclusive (70% from home office) 165,000
of customer deposits amounting to P4,000). Remittance to home office 302,500
Liquidation expenses of P7,500 was paid. For Pong
to receive P126,400 in full settlement of his Allowance for overvaluation of branch inventory
interest in the partnership, how much must be amounted to P67,000 in the home office books.
realized from the sale of the partnerships non-
cash assets?
In the home office books, the branch net income
(loss) is: Problem 23. The following information relates to
a. P16,000 Jenna and Jennys partners capital accounts for
b. (P15,000) fiscal year ending June 30:
Jenny Jenna
c. (P7,100) Balance, July 1 P86,400 P115,200
d. (P5,580) Add: Additional Investment,
January 1 38,400 19,200
Problem 22. Amor Inc., franchisor, entered into Net Income for the year:
franchise agreement with Adore Inc., Franchisee on Salaries 20,500 14,500
July 1, 2009. The initial franchisee fees agreed Interest 7,920 9,360
upon is P850,000,of which P150,000is payable upon Bonus 3,720 -
signing and the balance to be covered by a non- Remainder 14,880 9,920
interest bearing note payable in four equal annual Total 171,820 168,180
anstallments. It was agreed that the down payment Deduct: Drawings
is not refundable, notwithstanding lack of Monthly amounts 15,070 15,060
substantial performance of services by franchiser. Additional drawings,
Probability of collection is unlikely. June 30 2,400 403
Balance, June 30 154,350 152,717
The following expenses were incurred:
Initial services: Bonus is based on net income after
Direct cost P235,000 salaries,interest and bonus. If the net income
Indirect cost 75,000 remains the same the following fiscal year, and if
Continuing services: there is no change in the partnership agreement
Direct cost 37,800 nor any additional investment, how much will
Indirect cost 15,000 Jennas total share of the net income be the
following year?
The management of Adore has estimated that they
a. P33,577
can borrow loan at rate of 12%. The franchisee
commenced its operatipns on July 31,2009 A b. P33,780
continuing franchise fee equal to 5% of its c. P33,696
monthly gross sales. Adore reported gross sales of d. P33,874
P1,300,000 for the month. When Amor prepares its
financial statements on August 31,2009, how much Problem 24. On July 1, 2009, TL Construction Corp.
is the net income to be reported? PV factor is contracred to build an office building for LQ,
3.04. Inc. for a total contract price of P2,950,000.
a. P99,350 Estimated total contract costs is P2,600,000.
b. P75,640
Costs incurred to date are as follows related to
c. P46,150 the project were as as follows:
d. P35,510 Cost of direct materials used P200,000
Cost of direct labor, including site
supervision of P50,000 150,000
Cost of indirect materials used 55,000
Cost incurred in obtaining the contract
previously written of 70,000
Depreciation of plant and equipment used
on the contract 120,000
Payroll of design and technical department
allocated to the contract 80,000
Insurance costs (2/3 for other contracts) 180,000
Costs of contracted research and
development activities 105,000
Depreciation of idle plant and equipment
not used on a particular contract 60,000
Selling costs 45,000
General and administrative expenses
specifically included under the terms
of the contract 30,000
Borrowing cost incurred during the
construction period 130,000
Advances made to subcontractors 100,000
What is the realized gross profit for the period?
a. P104,335
b. P111,055
c. P125,195
d. P134,610
Problem 25. Forever, Inc. granted a franchise to
Hopeless Romantic for the Manila area. The
franchisee was to pay a franchise fee of P250,000,
payable in five equal annual anstallments starting
with the payment upon signing of the agreement.
The franchise was to pay monthly 3% of gross sales
of the preceding month. Should the operations of
the outlet prove to be unprofitable, the franchise
may be canceled wiyh whatever obligations owing
Forever, Inc. in connection with the P250,000
franchise fee waived. The prevailing interest rate
for a non-interest bearing note is 14%. The first
year generated a gross sales of P1,250,000. What
is the amount of unearned franchise fee after the
first year of operations?
a. P287,500
b. P145,700
c. P195,700
d. P250,000
Problem 26.Lovebirds Corporation sells goods on
the installment basis. For the year just ended,
the following were reported:
Cost of installment sales P525,000
Loss on repossession 13,500
Fair value of repossessed merchandise 112,500
Account defaulted 180,000
Deferred gross profit,end 108,000
How much was the collections for the year?
a. P210,000
b. P264,000
c. P390,000
d. P415,715
Problem 27. On December 31,2009, ABC Corporation
combined net income together with its Bacolod
branch amounted to P350,000. During the year,
shipments of merchandise to the branch amounted to
P135,000. On June 30,2009, the home office
purchased and recorded fixed asset for the use of
the branch amounting to P200,000. Useful life is 5
years. Remittance of P70,000 was made during the
year to the home office. Purhases of merchandise
from outside suppliers amounted to P125,000.
Ending inventories amounted to P80,000. Sales for
the year was reported at P400,000. The branch paid
selling and administrative expenses amounting to
P75,000. How much is the separate income of the
home office?
a. P105,000
 b. P225,000 What amount should Venus present for goodwill in
c. P245,000 its statement of financial position at December
31,2010?
d. P125,000
a. P6,000,000
Problem 28. Carol and Manny agreed on a joint b. P3,000,000
venture to purchase and sell custom-made items. c. P4,000,000
They agreed to contribute P250,000 each to be used d. P2,000,000
in purchasing the merchandise, share equally in
any gain or loss, and record their venture Problem 30. The following is the income statement
transactions in their individual books. of Makati City Branch for the year ended December
Upon termination of the venture, the following 31,2009.
information were available: Sales P600,000
Joint venture account credit balances: Cost of Sales
Carol,P180,000; Manny, P202,000 Inventory, beginning 80,000
Cost of custom-made items taken:by Carol, Shipments from home office 350,000
P15,000; Manny, P29,0000 Purchases from outsiders 110,000
Total goods available for sale 540,000
Expenses paid: by Carol, P18,500; Manny, Inventory, ending (100,000)(440,000)
P23,000 Gross Profit 160,000
Compute for the joint venture sales. Operating Expenses (100,000)
a. P882,000 Net Income P60,000
b. P838,000
c. P923,500 20% of the beginning inventory and 46% of the
d. P879,500 ending inventory came from outside purchases.
After effecting the necessary adjustments the true
Problem 29. On July 1,2009 the Venus Company net income of the branch was ascertained to be
acquired the net assets of Cupid Company for a P132,000.
consideration transferred of P16,000,000. At the
acquisition date, the carrying amount of Cupids How much is the percentage mark-up on cost imposed
net assets was P10,000,000. by the home office to the branch and the cost of
goods sold of the branch in as far as the home
At the acquisition date, a provisional fair value office is concerned?
of P12,000,000 was attributed to the net assets. a. 25%; P288,000
An additional valuation received on May 31,2010 b. 25%; P368,000
increased this provisional fair value to c. 20%; P288,000
P13,000,000 and on July 30,2010 this fair value d. 20%; P368,000
was finalized at P14,000,000.
Problem 31. Lakers Corp.,which began operations on
January 1, 2009, appropriately uses the
Installment method of accounting for revenues. The d. P280,325
following information is available for the years
ended December 31,2009 and 2010:
2009 2010 Problem 33. Frenchkiss Corporation opened a sales
Cost of installment sales P1,500,000 P3,000,000 agency in Sta. Rosa Laguna in 2009. The following
Gross Profit realized on is a summary of the transactions of the sales
sales made in agency:
2009 225,000 135,000 List price P342,000
2010 - 300,000 Volume discount 5% and 5%
Gross profit percentage based Freight on shipment of agency 7,000
on cost 30% 40% Collections, net of 7.5% discount 249,750
Selling expenses paid from the agency
What is the ending balance of installment accounts Revolving fund 19,250
receivable on December 31,2010? Administrative expenses allocated to
a. P3,540,000 Agency 5% of net sales
b. P2,550,000 Samples shipped to agency:
c. P2,662,500 Cost 28,700
Inventory,end 15,925
d. P1,837,500
Remaining receivable is estimated to be 95%
Problem 32. Nora and Vilma formed a joint venture
collectible. The Companys gross profit rate based
to purchase and sell a special type of
on invoice price is 40% excluding the freight cost
merchandise. The venturers agreed to contribute
on shipments to agency.
cash of P270,000 each too be used in purchasing
the merchandise, and to share profits and losses
What is the net income of the agency for 2009?
equally. They also agreed that each shall record
his purchases, sales, and expenses in their own a. P34,334
books. b. P49,767
c. P47,834
Upon termination of the joint venture, the d. P47,535
following data are made available:
Nora Vilma Problem 34. Olongapo Construction Company entered
Joint Venture P234,000 CR P170,600 DR into two construction jobs which both commenced in
Inventory Taken 10,800 33,750 2009 (in thousands).
Expenses paid from JV Cash 5,400 9,900 Project 1 Project 2
Contract price P52,500 P37,500
How much cash is to be received by Vilma in the Costs incurred during 2009 30,000 35,000
final settlement? Estimated Cost to Complete 15,000 8,700
a. P267,950 General and administrative
b. P290,225 Expenses 2,500 1,250
c. P323,975 Billings for clients during 2009 31,500 30,000
Collections during 2009 28,000 25,000 Brokers fee paid to firm that located
Successful P15,000
Based on the information given, how much is the Engagement fee on agreed upon procedures
gross profit would Colt report in its 2009 income For share issuance 10,000
statement? Legal fees for the merger 12,000
Percentage of completion Zero Profit Cost of SEC registration of Congratulations
a. (6,200,000) (1,200,000) Share 7,000
b. 5,000,000 (6,200,000)
What is the amount of additional paid in capital
c. (1,200,000) (6,200,000)
related to the issuance of shares?
d. 1,300,000 (1,200,000)
a. P473,000
Problem 35. On January 1, 2010, Congratulations, b. P436,000
Inc. issues 12,000 shares of its P10 par value c. P448,000
stock to acquire the net assets of Successful, d. P463,000
Inc. Underlying book value and fair value
information for the balance sheet items of
Successful at the time of acquisition are as
follows:
Book Value Fair Value
Cash P80,000 P80,000
Accounts Receivable 120,000 120,000
Inventory 60,000 115,000
Land 50,000 70,000
Building and Equipment 400,000 350,000
Less:Accumulated depreciation(120,000)
Total Assets 590,000 735,000

Accounts Payable P30,000 P30,000

Bonds Payable 200,000 180,000
Common Stock (P5 par value) 150,000
Additional Paid-in Capital 70,000
Retained Earnings 140,000
Total Liabilities and Equities590,000

Successful, Inc. shares were selling at P18 and

Congratulations, Inc. were selling at P50 just
before the merger announcement. Additional cash
payments made by Congratulations, Inc. in
completing the acquisitions were: