Midterm Quiz in ACCTG2215

Please read each question carefully. Select the choice that corresponds to your
answer.

Polo corporation paid 1,425,000 in cash for 80% of Solo corporation common stock.

The assessed FMV of the NCI is 345,000. The 1/1/17 statement of financial position of

Solo corporation at book and market values were given below. How much is the partial

goodwill? *

420,000
237,000
285,000
297,000

Under the provisions of FASB Statement No. 141R, in a business combination, when

the fair value of identifiable net assets acquired exceeds the investment cost, which of

the following statements is correct? *

The difference is allocated first to reduce proportionately (according to market value)
non-current, depreciable assets to zero, and any negative remainder is classified as
a deferred credit.
The difference is allocated first to reduce proportionately (according to market value)
non-current assets, and any negative remainder is classified as an extraordinary
gain.
A gain from a bargain purchase is recognized for the amount that the fair value of the
identifiable net assets acquired exceeds the acquisition price.
The difference is allocated first to reduce proportionately (according to market value)
non-current assets, then to non-monetary current assets, and any negative
remainder is classified as a deferred credit.

Company FG acquires 80% of Company G for 10,000,000, carrying value of Company

G net assets at time of acquisition being 6,000,000 and fair value of these net

identifiable assets being 8,000,000. The amount of non-controlling interest arising on

consolidation to be valued on the proportionate basis is *

1,200,000
1,600,000
3,000,000
2,500,000

Ocean corporation holds 70% of Pool Company’s voting common stock. On January

1, 2014, Pool paid P500,000 to acquire a building with a 10-year expected economic

life, Pool uses straight-line depreciation for all depreciable assets. On December 31,

2019, Ocean purchased building from Pool for P180,000. Ocean reported income,

excluding investment income from Pool, of P140,000 and P162,000 for 2019 and

2020, respectively. Pool reported net income of P30,000 and P45,000 for 2019 and

2020, respectively. The amount to be reported as consolidated net income for 2020

will be: *
207,000
202,000
222,000
190,000

Polo corporation paid 1,425,000 in cash for 80% of Solo corporation common stock.

The assessed FMV of the NCI is 345,000. The 1/1/17 statement of financial position of
Solo corporation at book and market values were given below. How much of the total

goodwill/(IFAC) is attributable to parent? *

237,000
48,000
420,000
285,000

Pearl Company paid P270, 000 for 90% interest in Sea Company on January 1, 2016.

The stockholders’ equity of Sea Company included paid in capital of P200, 000 and

retained earnings of P100, 000. During 2016 the total comprehensive income of Pearl

Company was P60, 000 and dividends paid were P20, 000.During 2016 Seal

Company had a total comprehensive income of P20, 000 and it paid dividends of 10,

000 What is the non-controlling interest (NCI) on December 31, 2016? *

30, 000
31, 000
70, 000
59,000

KK Corporation owns 80 percent of LL Corporation’s common stock. During October,

LL sold merchandise to KK for P100.000. At December 31, 50 percent of this

merchandise remains in KK’s inventory. Gross profit percentages were 30 percent for

KK and 40 percent for LL. The amount of unrealized intercompany profit in ending

inventory at December 31 that should eliminated in the consolidation process is *

40,000
30,000
15,000
20,000

Company FG acquires 80% of Company G for 10,000,000, carrying value of Company

G net assets at time of acquisition being 6,000,000 and fair value of these net

identifiable assets being 8,000,000. Goodwill arising on consolidation is to be valued

on the proportionate basis or partial goodwill is *

3,600,000
1,600,000
4,500,000
2,000,000

I. The floor test in recording NCI states that the amount of NCI is simply the greater

value between the Fair value of the NCI and its proportionate share in the fair value of

the net assets of the subsidiary. II. In statutory merger, the acquiree is being

dissolved. *
Both Statements are False.
Both Statements are True.
Statement I is False; Statement II is True.
Statement I is True; Statement II is False.

1.Fernando company acquires 100% of the voting stock of Rhine Company on

January 1, 2018 for P400,000 cash. A contingent payment of P16,500 will be paid on

April 15,2018 if Rhine generates cash flows from operations of P27,000 or more in the

next year. Fernando estimates that there is a 20% probability that Rhine will generate

at least P27,000 next year and uses an interest rate of 5% to incorporate the time
value of money. The fair value of P16,500 at 5%, using a probability weighted

approach is P3,142. What will Fernando record as the acquisition price on January 1,

2018? *
409,142
416,500
400,000
403,142

On October 1, 2018 the Garcia Company acquired 100% of the Fernando Company

when the fair value of Fernando’s net assets was 116 million and their carrying

amount was 120 million. The consideration transferred comprised 200 million in cash

transferred at the acquisition date, plus another 60 million in cash to be transferred 11

months after the acquisition date if a specified profit target was net by Fernando. At

the acquisition date there was only a low probability of the profit target being met, so

the fair value of the additional consideration liability was 10 million. In the event, the

profit target was met and the 60 million cash was transferred, how much is the

goodwill? *
80 million
144 million
84 million
94 million

I. When a parent controls more than one subsidiary, PFRS 10 requires that

consolidated FSs are prepared to include all subsidiaries both foreign and domestic

subject to some restrictions. II. If a Subsidiary is operating at a loss, PFRS 10

mandates that it should be included still in consolidation. *

Both Statements are False.
Statement I is True; Statement II is False.
Both Statements are True.
Statement I is False; Statement II is True.
On January 1, 20x1, P Company acquired a 90% interest in S Company. During 20x2,

S Company sold merchandise to P Company at 25% above cost in the amount (selling

price) of P225,000. At the end of the year, P Company had in its inventory one-third of

the amount of good purchased from S Company. On January 1, 20x2, P Company

sold equipment that had a book value of P80,000 to S Company for P120,000. The

equipment had an estimated remaining life of four years.S Company reported net

income of P120,000, and P Company reported net income of P300,000 from their

independent operations (including sales to affiliates) for the year ended December

31,20x2. Calculate consolidated net income for the year ended December 31,20x2. *
391,000
370,000
375,000
381,000

I. Under equity method, the parent’s company net income as reported is exactly equal

to the controlling interest in the consolidated net income in the consolidated FSs. II.

The parent’s company retained earnings is exactly equal to the consolidated retained

earnings on the consolidated FSs under the equity method. *

Statement I is False; Statement II is True.
Both Statements are False.
Statement I is True; Statement II is False.
Both Statements are True.

On January 1, 20x1, P Company acquired a 90% interest in S Company. During 20x2,

S Company sold merchandise to P Company at 25% above cost in the amount (selling

price) of P225,000. At the end of the year, P Company had in its inventory one-third of

the amount of good purchased from S Company. On January 1, 20x2, P Company

sold equipment that had a book value of P80,000 to S Company for P120,000. The

equipment had an estimated remaining life of four years.S Company reported net
income of P120,000, and P Company reported net income of P300,000 from their

independent operations (including sales to affiliates) for the year ended December

31,20x2. Calculate controlling interest in consolidated net income for the year ended

December 31,20x2. *
380,000
364,500
365,000
366,000

If Pledis reported separate income from own operations of P120, 000 for 2016, what is

the NCI as of the end of 2016? For additional data, refer below. *

58,500
73, 500
60,000
75, 000

Ocean corporation holds 70% of Pool Company’s voting common stock. On January

1, 2014, Pool paid P500,000 to acquire a building with a 10-year expected economic

life, Pool uses straight-line depreciation for all depreciable assets. On December 31,

2019, Ocean purchased building from Pool for P180,000. Ocean reported income,

excluding investment income from Pool, of P140,000 and P162,000 for 2019 and

2020, respectively. Pool reported net income of P30,000 and P45,000 for 2019 and
2020, respectively. The amount to be reported as consolidated net income for 2019

will be: *
170,000
190,000
150,000
130,000

In a business combination, which of the following will occur? *

None of the above is correct.
All identifiable assets and liabilities are recorded at book value at the date of
acquisition.
All identifiable assets and liabilities are recorded at fair value at the date of
acquisition.
Goodwill is recorded if the fair value of the net assets acquired exceeds the book
value of the net assets acquired.

On December 31, 2017, Popoy Company purchased 70 percent of the outstanding

shares of Shasha Company for ₱245,000. On that date, Shasha Company had

₱100,000 of capital stock and ₱250,000 of retained earnings. For 2018, Popoy had

Comprehensive Income(CI) of ₱200,000 from its own operations and paid dividends of

₱100,000. For 2018 Shasha reported CI of ₱30,000 and paid dividends of ₱20,000. All

assets and liabilities of Shasha have book values approximately equal to their book

values. The beginning inventory of Popoy includes ₱6,000 of merchandise purchased

from Shasha on December 31, 2017 at 150 percent of cost. The ending inventory of

Popoy includes ₱9,000 of merchandise purchased from Shasha at the same mark-up.

Popoy uses FIFO inventory costing. What is the Consolidated CI attributable to parent

for the year 2018? *

206,300
220,300
229,300
250,300
Grebe Company routinely receives goods from its 80%-owned subsidiary, Swamp

Corporation. In 20x4, Swamp sold merchandise that cost P80,000 to Grebe for

P100,000. Half of this merchandise remained in Grebe’s December 31, 20x4

inventory. During 20x5, Swamp sold merchandise that cost P160,000 to Grebe for

P200,000. P62,500 of the 20x5 merchandise inventory remained in Grebe’s December

31, 20x5 inventory. Selected income statement information for the two affiliates for the

year 20x5 was given below. Consolidated cost of goods sold for Grebe and Subsidiary

for 20x5 were *

520,000
510,000
532,500
522,500

Polo corporation paid 1,425,000 in cash for 80% of Solo corporation common stock.

The assessed FMV of the NCI is 345,000. The 1/1/17 statement of financial position of

Solo corporation at book and market values were given below. How much of the total

goodwill/(IFAC) is attributable to NCI? *

20,000
37,000
85,000
48,000

Company FG acquires 80% of Company G for 10,000,000, carrying value of Company

G net assets at time of acquisition being 6,000,000 and fair value of these net

identifiable assets being 8,000,000. The amount of non-controlling interest arising on

consolidation to be valued on the full basis is *

3,000,000
2,500,000
1,200,000
1,600,000

Ace Corporation acquired 70 percent of Base Company’s stock on September 1, 20x5.

At the acquisition date, Base had the following account balances below. Base has net

income of P150,000 and pays dividends of P30,000 during 20x5. Assuming there is no

goodwill impairment, what is the amount of income allocated to non-controlling interest

for 20x5? *
13,200
31,800
13,800
31,200

Posch Company issued 12,000 shares of its P20 par value common stock for the net

assets of Sato Company in a business combination under which Sato Company will be

merged into Posch Company. On the date of the combination, Posch Company

common stock had a fair value of P30 per share. Balance sheets for Posch Company

and Sato Company immediately prior to the combination were given below. If the

business combination is treated as an acquisition and Sato Company’s net assets

have a fair value of P343,200, Posch Company’s balance sheet immediately after the

combination will include goodwill of: *

103,200
(16,800)
16,800
(103,200)

On September 1, 2017, Company PA acquires 75% (750,000 ordinary shares) of

Company SU for 7,500,000 (10 per share). In the period around the acquisition date,

Company SU’s shares are trading at about P8 per share. Company PA pays a

premium over market because of the synergies it believes it will get. It its therefore

reasonable to conclude that the fair value of Company SU’s as a whole may not be

P8,000,000. In fact, an independent valuation shows that the value of Company SU is

9,700,000 (fair value of Company SU). Assuming that the fair value of the net

identifiable assets is 8,000,000 (carrying value is 6,000,000). Goodwill arising on

consolidation is to be valued on the proportionate basis or “Partial” Goodwill: *

2,000,000
200,000
1,500,000
1,700,000
I. The measurement period is the period after the acquisition date during which the

acquirer may adjust the provisional amounts recognized at the acquisition date. II.

PFRS 3 allows adjustments to items recognized in the original accounting for a

business combination as long as it is within the measurement period. *

Statement I is True; Statement II is False.
Both Statements are True.
Both Statements are False.
Statement I is False; Statement II is True.

On January 2, 2017, Pau corporation acquired 75% of the outstanding common stock

of San Company for P270,000 cash. The investment was accounted for by the cost

method. On January 2, 2017, San company’s identifiable net assets were 300,000.

San Company’s Comprehensive Income for the year ended December 31, 2017 was

160,000. During year 2017, Pau corporation received P60,000 cash dividends from

San company. There were no other inter-company transactions. The balance of NCI

account on December 31, 2017 is: *

120,000
115,000
114,000
110,000

Polo corporation paid 1,425,000 in cash for 80% of Solo corporation common stock.

The assessed FMV of the NCI is 345,000. The 1/1/17 statement of financial position of

Solo corporation at book and market values were given below. How much is the full

goodwill? *
237,000
285,000
297,000
420,000

Brown Company is a 70 percent subsidiary of Denison Corporation. Brown sells

P28,000 of inventory for P37,000 to Denison on December 27, 20x5. None of this

inventory was sold to unrelated parties by the end of 20x5. During 20x6, 60 percent of

this inventory is sold to unrelated parties for P33,000. Brown and Denison have

income in 20x6 of P184,000 and P298,000, respectively. What is the income to non-

controlling interest in 20x6? *

56,820
92,100
91,020
57,900

If Pledis reported separate income from own operations of P120, 000 for 2016, what is

the consolidated total comprehensive income for 2016? For additional data, refer

below. *
170, 000
115, 370
166, 500
113, 870

On September 1, 2017, Company PA acquires 75% (750,000 ordinary shares) of

Company SU for 7,500,000 (10 per share). In the period around the acquisition date,

Company SU’s shares are trading at about P8 per share. Company PA pays a

premium over market because of the synergies it believes it will get. It its therefore

reasonable to conclude that the fair value of Company SU’s as a whole may not be

P8,000,000. In fact, an independent valuation shows that the value of Company SU is

9,700,000 (fair value of Company SU). Assuming that the fair value of the net

identifiable assets is 8,000,000 (carrying value is 6,000,000). The amount of goodwill

arising on consolidation is to be valued on the basis of “Full” Goodwill is: *

1,500,000
2,200,000
2,000,000
1,700,000

On September 1, 2017, Company PA acquires 75% (750,000 ordinary shares) of

Company SU for 7,500,000 (10 per share). In the period around the acquisition date,

Company SU’s shares are trading at about P8 per share. Company PA pays a
premium over market because of the synergies it believes it will get. It its therefore

reasonable to conclude that the fair value of Company SU’s as a whole may not be

P8,000,000. In fact, an independent valuation shows that the value of Company SU is

9,700,000 (fair value of Company SU). Assuming that the fair value of the net

identifiable assets is 8,000,000 (carrying value is 6,000,000). The amount of non-

controlling interest arising on consolidation is to be valued on the proportionate basis

is: *
1,500,000
1,875,000
2,200,000
2,000,000

On January 1, 20x1, P Company acquired a 90% interest in S Company. During 20x2,

S Company sold merchandise to P Company at 25% above cost in the amount (selling

price) of P225,000. At the end of the year, P Company had in its inventory one-third of

the amount of good purchased from S Company. On January 1, 20x2, P Company

sold equipment that had a book value of P80,000 to S Company for P120,000. The

equipment had an estimated remaining life of four years. S Company reported net

income of P120,000, and P Company reported net income of P300,000 from their

independent operations (including sales to affiliates) for the year ended December

31,20x2.Calculate non-controlling interest in consolidated net income for the year

ended December 31,20x2. *

10,000
11,500
11,000
10,500
I. PFRS 3 states that the cost of consideration transferred is measured at fair value at

the date of acquisition. II. Control premium on the price paid by the acquirer under

stock acquisition is always considered in the computation of Goodwill/IFAc. *

Statement I is False; Statement II is True.
Statement I is True; Statement II is False.
Both Statements are False.
Both Statements are True.

On September 1, 2017, Company PA acquires 75% (750,000 ordinary shares) of

Company SU for 7,500,000 (10 per share). In the period around the acquisition date,

Company SU’s shares are trading at about P8 per share. Company PA pays a

premium over market because of the synergies it believes it will get. It its therefore

reasonable to conclude that the fair value of Company SU’s as a whole may not be

P8,000,000. In fact, an independent valuation shows that the value of Company SU is

9,700,000 (fair value of Company SU). Assuming that the fair value of the net

identifiable assets is 8,000,000 (carrying value is 6,000,000). The amount of amount

of non-controlling interest arising on consolidation is to be valued on the “Full/Gross-

up” Goodwill is: *

1,500,000
2,200,000
2,000,000
1,875,000