Answer key
14-1: d
Price paid (8,000 shares x P30) P240,000
Contingent consideration 5,000
Acquisition cost P245,000
14-2: b
Purchase price P250,000
Less: Fair value of net assets acquired 180,000
Goodwill P70,000
14-3: c
Purchase price (100,000 shares x P36) P3,600,000
Contingent consideration 120,000
Total costs P3,720,000
14-4: d
Price paid (600,000 shares x P50) P30,000,000
Less: goodwill recorded 6,120,000
Fair value of net assets acquired P23,880,000
Capital stock issued (600,000 shares x P10) P 6,000,000
APIC (600,000 shares xP40) P30,000 23,970,000
Increase in CJs equity P29,970,000
14-5: d
Price paid P2,550,000
Less: Fair value of net assets acquired
Current assets P1,100,000
Plant assets 2,200,000
Liabilities ( 300,000) 3,000,000
Income from acquisition P( 450,000)
APIC: [(P2,550,000 P1,200,000) - P35,000*] P1,315,000
*Costs of SEC registration P12,000
Cost of issuing stock certificates 3,000
Documentary stamp tax 20,000
Total P35,000
14-6: a (at fair value at date of acquisition)
14-7: d
Abel net income, January to December (P80,000 + P1,320,000) P1,400,000
Cain net income, April to December 400,000
Total net income P1,800,000
14-8: a
Price paid P 800,000
Less: Fair value of net assets acquired
Cash P 160,000
Inventory 380,000
Property, plant and equipment 1,120,000
Liabilities ( 360,000) 1,300,000
Income from acquisition P (500,000)
Price paid P 700,000
Less: Fair value of net assets acquired (P600,000 P188,000) 412,000
Goodwill P 288,000
Avons assets 2,000,000
Bells assets at fair value 600,000
Total assets P2,888,000
14-10: c
Debit to expenses:
Brokers fee P 50,000
Pre-acquisition audit fee 40,000
General administrative costs 15,000
Legal fees for business combination 32,000
Other acquisition costs 6,000
Total P 143,000
Debit to APIC
Audit fee for SEC registration of stock issue P 46,000
SEC registration fee for stock issue 5,000
Total P 51,000
14-11: d
Consideration given:
Cash P270,000
Stocks issued at fair value 330,000
Total P600,000
Less: fair value of net assets acquired:
Cash P40,000
Inventories 100,000
Other current assets 20,000
Plant assets (net) 180,000
Current liabilities (30,000)
Other liabilities (40,000) 270,000
Goodwill P330,000
Total assets after combination:
Total assets before combination P 760,000
Cash paid (P270,000 + P70,000) (340,000)
Registration and issuance costs of shares issued ( 30,000)
Polos assets after combination P 390,000
Assets acquired at fair values 340,000
Goodwill 330,000
Total assets after combination P1,060,000
14-12: d
Price paid P1,400,000
Less: Fair value net assets acquired 1,350,000
Goodwill P 50,000
14-13: a
Price paid P160,000
Less: Fair value of net identifiable assets acquired:
Current assets P 80,000
Non-current assets 120,000
Liabilities ( 20,000) 180,000
Income from acquisition P(20,000)
Non- current assets P120,000
14-14: c
Price paid P600,000
Less: Fair value of identifiable assets acquired:
Cash P 60,000
Merchandise inventory 142,500
Plant assets (net) 420,000
Liabilities (135,000) 487,500
Goodwill P112,500
14-15: b
Price paid P1,000,000
Less: Fair value of identifiable assets acquired 800,000
Goodwill P 200,000
MMs net assets at book value 1,200,000
PPs net assets at fair value 800,000
Total assets after combination P2,200,000
14-16: c, Under the acquisition method assets are recorded at their fair values (P225.000)
14-17: d
Capital stock issued at par (10,000 shares x P10) P100,000
APIC (10,000 shares x P40) 400,000
Total P500,000
14-18: d, net assets are recorded at their fair values; No APIC is recorded and stock acquisition costs of
P5,000 is recognized (P405,000 less P400,000).
14-19: a
Income from acquisition P 100,000
Fair value of net assets acquiredP2,000,000 P400,000) 1,600,000
Price paid 1,500,000
Shares to be issued (P1,500,000 ÷ P40) 37,500 shares
14-20: d
Goodwill P 200,000
Fair value of net assets acquired 1,600,000
Price paid P1,800,000
Shares to be issued (P1,800,000 ÷ P40) 45,000 shares
14-21: c
Total assets of Pablo before acquisition at book value P 700,000
Total assets acquired from Siso at fair value (100,000 +440,000) 540,000
Total assets 1,240,000
Less: cash paid (15,000 + 25,000) 40,000
Total assets after cash payment 1,200,000
Goodwill to be recognized (Sched 1) 195,000
Total assets after combination 1,395,000
Sched 1: Consideration given:
Purchase price (30,000 shares x P20) 600,000
Contingent consideration 75,000 675,000
Fair value of net assets acquired (540,000 60,000) 480,000
Goodwill 195,000
14-22: a
Capital stock issued at par (P500,000 + P300,000) P 800,000
APIC (50,000 + 300,000) 15,000 335,000
Retained earnings (P100,000 25,000) 75,000
Stockholders equity after acquisition 1,210,000
14-23: a
B Company C Company
Consideration given P4,400,000 P638,000
Less: fair value of net assets acquired 4,150,000 370,000
Goodwill P 250,000 P268,000
Total goodwill recorded (250,000 + 268,000) 518,000
14-24: a
A Company 5,250,000
B Company 6,800,000
C Company 900,000
Cash paid for acquisition costs (P20,000 + P10,000) (30,000)
Goodwill (see 14-23) 518,000
Total assets after combination 13,438,000
14-25: a
Stockholders equity before acquisition A Company P1,300,000
Capital stock issued at par (229,000 shares x P10) 2,290,000
Additional paid-in-capital [(229,000 x 12) 10,000] 2,738,000
Other acquisition cost (reduction from retained earnings) (20,000)
Stockholders equity after acquisition 6,308,000
14-26: 1. a
Equipment: P180,000/5 yrs. = P36,000
Building: P550,000/20 yrs. = 27,500
Total depreciation P63,500
2. b
Price paid P900,000
Less fair value of net assets acquired:
Current assets P100,000
Land 50,000
Equipment 180,000
Building 550,000
Current liabilities (150,000) 730,000
Goodwill P170,000
14-27: b
Price paid P32 M
Final fair value of net assets 28 M
Goodwill P 4 M
PROBLEMS
Problem 14-1
1. Books of Big Corporation
(a) To record acquisition of net assets of Small:
Accounts receivable 120,000
Inventories 140,000
Property, plant and equipment 300,000
Current liabilities 50,000
Income from acquisition 10,000
Cash 500,000
(b) To record acquisition-related costs:
Acquisition expense 5,000
Cash 5,000
Computation of Income from Acquisition:
Price paid P500,000
Less: Fair value of net identifiable assets acquired:
Accounts receivable P120,000
Inventories 140,000
Property, plant and equipment 300,000
Current liabilities ( 50,000) 510,000
Income from acquisition P( 10,000)
2. Books of Small Corporation
(a) To record the sale of net assets to Big:
Cash 500,000
Current liabilities 50,000
Accounts receivable 120,000
Inventories 100,000
Property, plant and equipment 280,000
Retained earnings 50,000
(b) To record liquidation of the corporation:
Common stock 200,000
Retained earnings 300,000
Cash 500,000
Problem 14-2
(1) To record the acquisition of net assets:
Cash 50,000
Inventory 150,000
Building and equipment net 300,000
Patent 200,000
Accounts payable 30,000
Cash 565,000
Income from acquisition 105,000
Computation of Income from Acquisition
Price paid P565,000
Less: Fair value of net identifiable assets acquired
Total assets P700,000
Accounts payable ( 30,000) 670,000
Income from acquisition P(105,000)
(2) To record acquisition-related costs:
Acquisition expenses 5,000
Cash 5,000
Problem 14-3
(1) To record acquisition of net assets:
Cash and receivables 50,000
Inventory 200,000
Building and equipment 300,000
Goodwill 40,000
Accounts payable 50,000
Common stock, P10 par value 60,000
Additional paid-in capital 480,000
Computation of Goodwill
Price paid (6,000 shares x P90) P540,000
Less: fair value of net identifiable assets acquired
Total assets P550,000
Accounts payable ( 50,000) 500,000
Goodwill P 40,000
(2) To record acquisition-related costs:
Additional paid-in capital 25,000
Acquisition expenses 15,000
Cash 40,000
