Q 1 Abcd

11/25/22, 1:07 PM QUIZ 1 - Accounting for Business Combinations (1st Sem SY2223)
QUIZ 1 - Accounting for Business

Combinations (1st Sem SY2223)
Business Combination
READ ME FIRST:
1. Your gadget and internet connection will be your primary responsibility. As much as possible, prepare a
backup for internet connection (especially for students who are dependent on WIFI plugged via electricity).
2. Avoid refreshing the browser/link to avoid technical issues.
3. Avoid opening other applications/tabs in your browser. They may interrupt not only your internet connection
but also the MS Forms.
4. Maintain screenshots of your answers that can be used in case of an emergency.
5. For the problem solving cases, please present your solutions in good form in a separate worksheet. I will be
requiring you to submit after the quiz. Non-compliance will result to invalidation of your score for the
problem solving part.
6. Make sure to choose/put your correct section. Failure to do so will also result to invalidation of your score.
7. For questions requiring you to key in your answers, do not round off during computation. Observe and use
the following format: P1,234,567 (capital P as the peso sign, comma sign to separate values, no space, and
no decimal points) and P0 (capital P and zero, no space in between). In case of percentage/ratio like 30%,
use P0.30 as the format. For negative amount, enter the absolute amount. Failure to follow the said format
will automatically receive no point for the said answer even though you got the correct answer.
8. Be honest. Cheating in any form before or during the quiz will result in a zero score.
9. For any technical difficulties encountered while taking the exam, send me an e-mail with the screenshots
with the subject "Course Code Quiz #x - Technical Issues" as soon as practicable. To reiterate, all official
communications must be coursed through PUP webmail.
https://forms.office.com/pages/responsepage.aspx?id=cYWpTercOUiPsQvdXclp-f4VCj6Hw1RDtxj9z4hpdUtUMEVTMlBIN0RTODRBNDM3OU82UERMNTBEUSQlQCNjPTEu&fbclid=IwAR3GGGj-pIOy… 1/50
God bless and good luck :-)
Hi, Jhon Lloyd. When you submit this form, the owner will see your name and email address.
* Required
NAME (Surname, Given Name, Middle Name) *
Luna, Jhon Lloyd Baluyot
SECTION *
BSA 3-4
BSA 3-5
BSA 3-6
BSA 3-7
BSA 3-8
BSA 3-11
BSMA 3-6
The exchange ratio in a business combination is the:
* (1 Point)
Ratio of the market value per share of the issuing company’s share capital to the market value per share of the
acquiree’s share capital
Ratio of the number of shares of the issuing company’s share capital to be exchanged for each share of the
acquiree’s share capital on the date of combination
Ratio of the total market value of the share capital issued to the total market value of share capital received
Ratio of the number of shares of the acquiree’s share capital to be exchanged for each share of the acquirer’s
share capital
Which of the following is not included in the cost of an acquired company?
* (1 Point)
Contingent consideration determinable at the consummation date of the combination
Finder’s fee for arranging the combination
Cost of registering and issuing equity securities
None of the above
Which of the following is correct regarding reverse acquisition?
* (1 Point)
The entity whose equity interest are acquired (the legal acquiree) must be the acquirer for accounting purposes
for the transaction to be considered a reverse acquisition.
In a reverse acquisition, the legal acquirer usually issues no consideration for the acquiree.
The accounting acquirer must meet the definition of a business for the transaction to be accounted as a reverse
acquisition.
All of the above.
Acquirer Company acquired 100% of Acquiree Company through an issue of 5,000,000 shares,
P10 par value, to the stockholders of Acquiree Company. The following information relates to
both companies at the date of acquisition (see image below).
How much is the consideration transferred? * (2 Points)
Enter your answer
Acquirer Company issued 5 shares in exchange for each ordinary share of Acquiree Company
(all outstanding shares) on January 2, 2022. The fair value of Acquirer’s shares on that date was
P60 while the fair value of Acquiree’s shares was P200. The statement of financial position of
both companies before the combination were (see image below).
On the same date, the fair value of Acquirer’s identifiable assets and liabilities assumed was
P5,800 and P2,100 respectively while the fair value of Acquiree’s net assets was the same as
the carrying value.
How much is the amount of consideration? * (2 Points)
Enter your answer
A business combination occurs when a company acquires an equity interest in another entity
and has:
* (1 Point)
At least 20% ownership in the entity
More than 50% ownership in the entity
100% ownership in the entity
Control over the entity, irrespective of the percentage owned
Acquirer Company started negotiating for the acquisition of Acquiree Company. The offer was
for shareholders of Acquiree to receive one Acquirer share with a market value of P125 for
every four shares held in exchange for all assets of Acquiree (except shares in listed
companies). In addition to the shares, Acquirer will transfer its shares in listed companies
which has a fair market value of P750,000. Acquirer will also pay Acquiree sufficient cash to
enable Acquiree to pay all its creditors then Acquiree will liquidate. The shareholders of
Acquiree accepted the offer. The Balance Sheet on December 31, 2021 is given below (see
image below).
The net assets of Acquiree are reflected at their fair values except for the following:
Inventory, P1,300,000 fair market value
Land and building, P4,000,000 fair market value
Shares in listed companies, P900,000 fair market value
How much is the goodwill/gain on bargain purchase? * (2 Points)
Enter your answer
https://forms.office.com/pages/responsepage.aspx?id=cYWpTercOUiPsQvdXclp-f4VCj6Hw1RDtxj9z4hpdUtUMEVTMlBIN0RTODRBNDM3OU82UERMNTBEUSQlQCNjPTEu&fbclid=IwAR3GGGj-pIO… 10/50
10
The stockholders’ equity of Acquirer Company and Acquiree Company on July 1, 2022 were as
follows (see image below).
On July 2, 2022, Acquirer issued 150,000 of its shares with a market value of P120 per share for
the assets and liabilities of Acquiree, and Acquiree was dissolved. On the same day, Acquirer
paid P50,000 for indirect cost and P100,000 for SEC registration of equity securities.
How much is the total stockholders’ equity of Acquirer after the combination? * (2 Points)
Enter your answer
11
In recording acquisition costs, which of the following procedures is correct?
* (1 Point)
Costs of registering shares are expensed.
Indirect costs are charged against the fair value of the shares issued.
Direct costs are added as part of the consideration transferred.
Amounts paid to lawyer and accountant are expensed.
12
Control over an acquiree can be attained through which of the following?
* (1 Point)
Acquisition of the acquiree assets
Acquisition of the acquiree stock
Either acquisition of the acquiree assets or stock
Neither acquisition of the acquiree assets or stock
13
Statement I. PFRS for SMEs should be applied to companies that are in the process of filing
financial statements for the purpose of issuing any class of instruments in the public market.
Statement II. Contingent consideration is included as part of the consideration transferred

even if the outcome is not probable provided that it is a present obligation and the amount
can be measured reliably.
* (1 Point)
Both statements are true.
Both statements are false.
Statement I is true; Statement II is false.
Statement I is false; Statement II is true.
14
Acquirer Company acquired 30% interest from Acquiree Company by paying cash of P150,000
and issuing its own shares with a fair value of P200,000 on January 2, 2022. As a result,
Acquirer acquired a significant influence over Acquiree. On July 1, 2022, Acquirer purchased
another 50% of Acquiree’s ordinary share for cash payment of P1,100,000. On this date, the
net asset of Acquiree had a fair value of P1,300,000. For the first semester of 2022, Acquiree
reported a profit of P900,000 and declared dividends of P100,000. Acquirer opted to measure
NCI using the proportionate share. Related to the latest acquisition, Acquirer paid the
following: legal fees - P20,000; audit fees – P10,000; and brokerage fees – P10,000.
Enter your answer
15
An acquirer should at the acquisition date recognize goodwill acquired in business

combination as an asset. Goodwill should be accounted for as follows:
* (1 Point)
Recognize as an intangible asset and amortize over its useful life
Write off against retained earnings
Recognize as an intangible asset and impairment test when a trigger event occurs
Recognize as an intangible asset and annual impairment test (or more frequently if impairment is indicated)
16
Acquirer Company purchased the net asset of Acquiree Company by paying cash of P800,000
and issuing shares with a fair market value of P3,110,000 on January 2, 2022. The statement of
financial position of both companies is as follows (see image below).
Acquirer determined that the fair values of the assets acquired and liabilities assumed
approximated their book values. Acquirer also incurred and paid legal and brokerage fees of
P25,000 for business combination, share issue cost of P15,000 and indirect acquisition costs of
P10,000.
Enter your answer
17
Acquirer Company issued 100,000 shares of its P5 par value ordinary share capital with market
value P510,000 for all the outstanding shares of Acquiree Company on July 1, 2021. Acquirer
also incurred legal fees of P35,000 and cost of issuing and registering new shares of P15,000.
On this date, the fair value of the net asset of Acquiree was P450,000. The journal entry to
record the business combination should include:
* (1 Point)
A debit of P525,000 to the Investment in Subsidiary
A debit of P15,000 to the Share Premium
A debit of P5,000 to Retained Earnings
A credit of P510,000 to Share Capital
18
Acquirer Company issued 80,000 new shares of its P5 par value ordinary shares valued at P12
per share in exchange for 100,000 outstanding shares (P2 par value) of Acquiree Company on
March 31, 2022. The fair value and book value of Acquiree’s identifiable assets and liabilities
were the same except Inventory which was overstated by P50,000 and Equipment which was
understated by P100,000. The financial statements of both companies were (see image below).
Acquirer also agreed to pay P500,000 one year after the acquisition date if the net income of
Acquiree will exceed P10,000,000. The fair value of the contingent consideration is P300,000.
Acquirer incurred the following costs: Finder’s Fee - 20,000; Professional Fee - 60,000; Other
Indirect Cost - 10,000 and Printing and Registration of Shares - 5,000.
How much is the goodwill/gain on bargain purchase if NCI is measured using fair value? *
(2 Points)
Enter your answer
19
Acquirer Company issued 5 shares in exchange for each ordinary share of Acquiree Company
(all outstanding shares) on January 2, 2022. The fair value of Acquirer’s shares on that date was
P60 while the fair value of Acquiree’s shares was P200. The statement of financial position of
both companies before the combination were (see image below).
On the same date, the fair value of Acquirer’s identifiable assets and liabilities assumed was
P5,800 and P2,100 respectively while the fair value of Acquiree’s net assets was the same as
the carrying value.
Enter your answer
20
Acquirer Company purchased the net asset of Acquiree Company on June 1, 2021 for a
consideration of P8,000,000. On this date, the carrying amount of Acquiree’s net asset was
P5,000,000 with provisional fair value of P7,550,000. An additional valuation was received on
October 1, 2021 which increased the provisional amount by P200,000. On December 31, 2021,
an update of the provisional fair value of P6,500,000 was attributable to the net asset. Another
update on the valuation was received on April 1, 2022 which decreased the provisional amount
by P150,000. The provisional fair value was finalized on July 31, 2022 with an amount of
P6,990,000.
How much is the goodwill to be presented in the books of the acquirer on December 31,
2021? * (2 Points)
Enter your answer
21
Acquirer Company acquired the net assets of Acquiree Company by issuing 150,000 shares of
its P10 par value ordinary share capital on July 1, 2022. The market value of the shares was
P12. Acquirer also paid direct costs of P100,000 which includes P15,000 cost of issuing and
registering new shares. The financial statements of Acquirer and Acquiree were (see image
below).
The fair value and book value of Acquiree Company’s identifiable assets and liabilities were the
same except Equipment which was undervalued by P250,000 and Inventory which was
overvalued by P100,000. Assuming that Acquirer Company is an SME.
How much is the total assets after business combination?
* (2 Points)
Enter your answer
22
Acquirer Company started negotiating for the acquisition of Acquiree Company. The offer was
for shareholders of Acquiree to receive one Acquirer share with a market value of P125 for
every four shares held in exchange for all assets of Acquiree (except shares in listed
companies). In addition to the shares, Acquirer will transfer its shares in listed companies
which has a fair market value of P750,000. Acquirer will also pay Acquiree sufficient cash to
enable Acquiree to pay all its creditors then Acquiree will liquidate. The shareholders of
Acquiree accepted the offer. The Balance Sheet on December 31, 2021 is given below (see
image below).
The net assets of Acquiree are reflected at their fair values except for the following:
Inventory, P1,300,000 fair market value
Land and building, P4,000,000 fair market value
Shares in listed companies, P900,000 fair market value
How much is the total assets of Acquirer after the merger? * (2 Points)
Enter your answer
23
Statement I. The acquisition date should be the same as the date when the acquirer legally
transfers the consideration, acquires the assets and assumes the liability.
Statement II. According to PFRS for SMEs, the acquirer measures non-controlling interest (NCI)
in the acquiree using either fair value or proportionate share based on the accounting policy
choice.
* (1 Point)
24
How much is the amount of consideration transferred? * (2 Points)
Enter your answer
25
An entity shall determine whether a transaction or other event is a business combination by

applying the definition in PFRS 3, which requires that:
* (1 Point)
All of the combining entities or businesses are ultimately controlled by the same party or parties both before
and after the business combination.
The assets acquired and the liabilities assumed constitute a business.
All of the combining entities transfer their net assets, or the owners of those entities transfer their equity in‐
terests, to a newly formed entity.
All of the above.
26
Acquirer Company purchased the net asset of Acquiree Company on June 1, 2021 for a
consideration of P8,000,000. On this date, the carrying amount of Acquiree’s net asset was
P5,000,000 with provisional fair value of P7,550,000. An additional valuation was received on
October 1, 2021 which increased the provisional amount by P200,000. On December 31, 2021,
an update of the provisional fair value of P6,500,000 was attributable to the net asset. Another
update on the valuation was received on April 1, 2022 which decreased the provisional amount
by P150,000. The provisional fair value was finalized on July 31, 2022 with an amount of
P6,990,000.
How much is the goodwill to be presented in the books of the acquirer on December 31,
2022? * (2 Points)
Enter your answer
27
Statement I. Statutory merger occurs when two or more companies combined into a newly
formed entity.
Statement II. Under PFRS for SMEs, goodwill arising from business combination is amortized
over 10 years or its useful life whichever is longer.
* (1 Point)
28
Acquirer Company acquired a 10% interest in Acquiree Company for cash consideration of
P1,500,000 on January 1, 2022. Acquirer classified the interest as equity investment at fair value
through profit or loss. On June 1, 2022, Acquirer acquired another 50% of the equity interest
for cash consideration of P6,000,000. The identifiable net assets of Acquiree had a fair value of
P8,000,000. Acquirer elected to measure the NCI at their share of the net identifiable net
assets.
Enter your answer
29
Which of the following is incorrect regarding measurement period?
* (1 Point)
If the initial accounting for a business combination is incomplete by the end of the reporting period in which
the combination occurs, the acquirer shall report in its financial statements provisional amounts for the items
for which the accounting is incomplete.
During the measurement period, the acquirer shall prospectively adjust the provisional amounts recognized at
the acquisition date to reflect new information obtained about facts and circumstances that existed as of the ac‐
quisition date and, if known, would have affected the measurement of the amounts recognized as of that date.
During the measurement period, the acquirer shall also recognize additional assets or liabilities if new informa‐
tion is obtained about facts and circumstances that existed as of the acquisition date and, if known, would have
resulted in the recognition of those assets and liabilities as of that date.
The measurement period ends as soon as the acquirer receives the information it was seeking about facts and
circumstances that existed as of the acquisition date or learns that more information is not obtainable.
30
Which of the following types of business combinations typically occurs when management is
attempting to diversify its investment?
* (1 Point)
Horizontal combination
Vertical combination
Conglomerate combination
Diversification can be the goal of any type of business combination
31
An example of a business combination under PFRS 3 is:
* (1 Point)
Legal merger of net assets of acquired businesses into acquirer’s book
Net assets of combining entities transferred to a newly formed entity
Businesses become subsidiaries of acquirer
All of the above
32
P10,000.
How much is total shareholder’s equity after business combination? * (2 Points)
Enter your answer
33
Acquirer Company acquired all the outstanding shares of Acquiree Company by issuing 50,000
shares with a par value of P100 on July 1, 2022. Acquirer’s ordinary shares were selling at P102
per share at the date of acquisition. On the same date, the net asset of Acquiree had a carrying
value and fair value of P3,800,000 and P4,500,000 respectively. Out of pocket expenses of the
business combination were as follows (see image below).
How much is the amount charged to expense? * (2 Points)
Enter your answer
34
Acquirer Company acquired 80% interest from Acquiree Company on January 1, 2022, when
the stockholders’ equity of Acquiree consisted of:
Ordinary shares, P100 par - 500,000
Paid in capital in excess of par - 300,000
Retained earnings - 500,000
Acquirer paid P1,500,000 for the interest acquired plus P100,000 for costs directly attributable
to the acquisition and P20,000 for indirect costs. The amount paid by Acquirer included a
control premium of P50,000. Acquiree’s carrying value of net assets is equal to their fair market
values except of the Inventory which was undervalued by 100,000 and Equipment which was
underdepreciated by P75,000.
Enter your answer
35
In a business combination in which there is an exchange of cash for all the outstanding shares
of the acquiree, how does the ownership structure of the acquiree change?
* (1 Point)
There is no change in the acquiree ownership structure.
The acquirer stockholders become the acquiree stockholders.
The acquirer and acquiree stockholders share ownership of the acquiree.
It is impossible to determine if there is a change in the acquiree ownership structures.
36
Acquirer Company paid P15,000 to its accountants and lawyers in acquiring Acquiree
Company. Acquirer will treat the P15,000 as:
* (1 Point)
An expense for the current year
A prior period adjustment to retained earnings
Additional cost of the investment
A reduction in share premium
37
Statement I. In a stock acquisition, gain on bargain purchase is recognized in profit or loss of

the acquirer (after reassessment) if the consideration transferred, previously held interest, and
non-controlling interest are less than the fair value of net assets acquired.
Statement II. Costs incurred in public offering of shares are charged to share premium or
retained earnings.
* (1 Point)
38
Acquirer Company acquired the net assets of Acquiree Company by issuing 150,000 shares of
its P10 par value ordinary share capital on July 1, 2022. The market value of the shares was
P12. Acquirer also paid direct costs of P100,000 which includes P15,000 cost of issuing and
registering new shares. The financial statements of Acquirer and Acquiree were (see image
below).
The fair value and book value of Acquiree Company’s identifiable assets and liabilities were the
same except Equipment which was undervalued by P250,000 and Inventory which was
overvalued by P100,000. Assuming that Acquirer Company is an SME.
Enter your answer
39
P10,000.
How much is the total assets after business combination? * (2 Points)
Enter your answer
40
Statement I. When two or more separate businesses join into a single accounting entity, PFRS
3 should be applied.
Statement II. The acquirer shall measure the identifiable assets acquired and the liabilities
assumed at their reporting date fair value.
* (1 Point)
41
In a statutory merger, which of the following will occur?
* (1 Point)
One corporation takes over the operations of another business entity and the acquired entity is dissolved.
None of the business entities will be dissolved.
The acquired assets will be recorded at book values by the acquiring entity.
None of the above.
42
How much is the goodwill/gain on bargain purchase if NCI is measured using proportionate
share? * (2 Points)
Enter your answer
Send me an email receipt of my responses
This content is created by the owner of the form. The data you submit will be sent to the form owner. Microsoft is not responsible for the
privacy or security practices of its customers, including those of this form owner. Never give out your password.
Powered by Microsoft Forms | Privacy and cookies | Terms of use

Q 1 Abcd

Uploaded by

Copyright:

Available Formats

Q 1 Abcd

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Q 1 Abcd

Uploaded by

Copyright:

Available Formats

11/25/22, 1:07 PM QUIZ 1 - Accounting for Business Combinations (1st Sem SY2223)

QUIZ 1 - Accounting for Business

God bless and good luck :-)

NAME (Surname, Given Name, Middle Name) *

Luna, Jhon Lloyd Baluyot

The exchange ratio in a business combination is the:

Which of the following is not included in the cost of an acquired company?

Contingent consideration determinable at the consummation date of the combination

Finder’s fee for arranging the combination

Cost of registering and issuing equity securities

None of the above

Which of the following is correct regarding reverse acquisition?

All of the above.

How much is the consideration transferred? * (2 Points)

Enter your answer

How much is the amount of consideration? * (2 Points)

Enter your answer

At least 20% ownership in the entity

More than 50% ownership in the entity

100% ownership in the entity

Control over the entity, irrespective of the percentage owned

Inventory, P1,300,000 fair market value

Land and building, P4,000,000 fair market value

Shares in listed companies, P900,000 fair market value

How much is the goodwill/gain on bargain purchase? * (2 Points)

Enter your answer

Enter your answer

In recording acquisition costs, which of the following procedures is correct?

Costs of registering shares are expensed.

Direct costs are added as part of the consideration transferred.

Amounts paid to lawyer and accountant are expensed.

Control over an acquiree can be attained through which of the following?

Acquisition of the acquiree assets

Acquisition of the acquiree stock

Either acquisition of the acquiree assets or stock

Neither acquisition of the acquiree assets or stock

Statement II. Contingent consideration is included as part of the consideration transferred

Both statements are true.

Both statements are false.

Statement I is true; Statement II is false.

Statement I is false; Statement II is true.

How much is the goodwill/gain on bargain purchase? * (2 Points)

Enter your answer

An acquirer should at the acquisition date recognize goodwill acquired in business

Recognize as an intangible asset and amortize over its useful life

Write off against retained earnings

How much is the goodwill/gain on bargain purchase? * (2 Points)

Enter your answer

A debit of P525,000 to the Investment in Subsidiary

A debit of P15,000 to the Share Premium

A debit of P5,000 to Retained Earnings

A credit of P510,000 to Share Capital

Enter your answer

How much is the goodwill/gain on bargain purchase? * (2 Points)

Enter your answer

Enter your answer

How much is the total assets after business combination?

Enter your answer

Inventory, P1,300,000 fair market value