ACCOUNTANCY DEPARTMENT

Name:___________________________ Score:___ _

AVOID CHEATING. It is better to fail than to fool yourself. Answer the best way you can. You will
reap the rewards for that.
BE STICK TO ONE. It would be better if you choose the answer by avoiding erasures.
LEARN TO LET GO. Do not dwell too much time in one item. Move to the next and go back for it
later.

1. When two entities competing in the same industry combine, it is called a horizontal business
combination.
Horizontal business combinations are likely to occur when management is attempting to
dominate a geographic segment of the market.
a. Both statements are true.
b. Only statement 1 is true.
c. Only statement 2 is true.
d. Both statements are false.

2. One way that a horizontal business combination can increase sales for an entity is to expand
into new product markets.
A vertical business combination generally involves companies attempting to improve the
efficiency of operations by purchasing suppliers of inputs or purchasers of outputs.
a. Both statements are true.
b. Only statement 1 is true.
c. Only statement 2 is true.
d. Both statements are false.

3. When a retail clothing store purchases a competitor in another city, a vertical combination
has occurred.
A vertical combination is one where the entities have a potential buyer-seller relationship.
a. Both statements are true.
b. Only statement 1 is true.
c. Only statement 2 is true.
d. Both statements are false.

4. In a statutory consolidation form of business combination, the Retained Earnings account of

the newly formed corporation has a balance of zero immediately after the combination.
After completing a business combination in the form of a statutory merger or statutory
consolidation, there is only one legal entity in existence.
a. Both statements are true.
b. Only statement 1 is true.
c. Only statement 2 is true.
d. Both statements are false.

5. In a business combination accomplished as a stock acquisition normally two companies exist

after the combination.
A business combination accomplished as a stock acquisition must be accomplished with a
stock for stock exchange.
a. Both statements are true.
b. Only statement 1 is true.
c. Only statement 2 is true.
d. Both statements are false.

6. There are no uncertainties when two companies agree on a business combination.

When the acquisition price of an acquiree is contingent on acquiree future earnings, the
acquisition price may change.
a. Both statements are true.
b. Only statement 1 is true.
“SUCCESS US NOT FINAL; FAILURE IS NOT FATAL;
IT IS THE COURAGE TO CONTINUE THAT COUNTS.”
- WINSTON S. CHURCHILL
AFAR – 2ND MONTHLY ASSESSMENT
 ACCOUNTANCY DEPARTMENT

c. Only statement 2 is true.

d. Both statements are false.

7. There are different required levels of stock ownership in the acquiree for the three different
types of reorganizations for tax purposes.
One important benefit in a business combination is any net operating loss carryforward that
might exist and be available to the acquirer.
a. Both statements are true.
b. Only statement 1 is true.
c. Only statement 2 is true.
d. Both statements are false.

8. The business enterprises that enter into a business combination are termed the:
a. Merging companies
b. Joining companies
c. Constituent companies
d. Combiner companies

9. When an offer is made to acquire a company and the acquiree management supports the
offer, the offer called which of the following?
a. Friendly takeover
b. Tender offer
c. Hostile takeover
d. Defensive measure

10. In an acquisition of assets, the acquirer must give up which of the following?
a. Cash
b. Other assets
c. Liabilities
d. Any of the above can be given

11. In an acquisition where there is an exchange of assets, how does the value of the acquiree
net assets change?
a. The net assets increase
b. The net assets decrease
c. There is no change in net assets
d. The net assets may increase, decrease or remain the same

12. Which of the following forms of business combination is not subject to laws specific to
business combination?
a. Assets for assets
b. Statutory merger
c. Statutory consolidation
d. All three are subjects to laws

13. Which of the following contingencies may change the cost of an acquisition?
a. Future acquiree earnings
b. Future value of acquiree stock
c. Future value of acquirer stock
d. Future value of acquirer debt

14. Which of the following is not a business combination?

a. Statutory amalgamation
b. Joint venture
c. A company’s purchase of 100% of another company’s net assets.
d. A company’s purchase of 80% of another company’s voting shares.

15. Which of the following income factors should not be factored into an estimation of goodwill?
a. sales for the period
“SUCCESS US NOT FINAL; FAILURE IS NOT FATAL;
IT IS THE COURAGE TO CONTINUE THAT COUNTS.”
- WINSTON S. CHURCHILL
AFAR – 2ND MONTHLY ASSESSMENT
 ACCOUNTANCY DEPARTMENT

b. income tax expense

c. extraordinary items
d. cost of goods sold

16. Rivendell paid finder’s fees of P40,000, accountant’s fee (Advisory) of P10,000, legal fees
(advisory) of P15,000, salaries of Rivendell’s employees assigned to the implementation of
the merger of P16,000, cost of closing duplicate facilities of P12,000, cost of shareholder’s
meeting to vote on the merger of P14,000, cost of printing stock certificates of P7,000, audit
and accountant’s fee related to the stock issuance of P3,000, SEC registration fee of P5,000
and stock listing application fee of P4,000. Based on the fee of P5,000 and stock listing
application method following PFRS 3, preceding information, under the acquisition method
following PFRS 3, what amount relating to the business combination would be expensed?
a. P42,000
b. P50,000
c. P107,000
d. P124,000

17. Using the same information in No. 1:

a. P44,000 of stock issue costs are treated as a reduction in the issue price.
b. P19,000 of stock issue costs are treated as a reduction in the issue price.
c. P19,000 of stock issue costs are expensed.
d. P44,000 of stock issue costs are expensed.

18. ABC Co. is acquiring XYZ Inc. XYZ has the following intangible asset:
• Patent on a product that is deemed to have no useful life P10,000.
• Customer list with an observable fair value of P50,000.
• A 5-year operating lease with favorable terms with a discounted present value of
P8,000.
• Identifiable R & D of P100,000.
a. P168,000
b. P158,000
c. P150,000
d. P58,000

19. KK Inc. was merged into LL Inc. in a combination properly accounted for as acquisition of
interests. Their condensed balance sheets before the combination show:
LL KK
Current Assets P2,288,000 P1,627,6000
Plant and equipment, net 4,654,000 1,040,000
Patents - 260,000
Total Assets P6,942,000 P2,927,600

Liabilities P2,704,000 P171,600

Capital stock, par P100 2,600,000 1,300,000
Additional paid-in capital 390,000 390,000
Retained Earnings 1,248,000 1,066,000
Total Liab. and Equity P6,942,000 P2,927,600
Per independent appraiser’s report, KK’s assets have fair market values of P1,653,600 for
current assets, P1,248,000 for plant and equipment and P338,000 for patents. KK’s liabilities
are properly valued. LL purchases KK’s net assets for P3,068,000. How should the difference
between the book value of KK’s net assets and the consideration paid by LL be considered?
a. Goodwill: P0; Increase in Assets: P234,00
b. Goodwill: P0; Increase in Assets: P312,000
c. Goodwill: P338,000; Increase in Assets: P234,000
d. Goodwill: P338,000; Increase in Assets: P78,000

20. Richard Ltd. and Liway Ltd. are two family-owned ice cream producing companies in
Pampanga. Richard Ltd. is owned by the Melad family, while the Basilio family owns Liway
Ltd. The Melad family has only one son, and he is engaged to be married to the daughter of
“SUCCESS US NOT FINAL; FAILURE IS NOT FATAL;
IT IS THE COURAGE TO CONTINUE THAT COUNTS.”
- WINSTON S. CHURCHILL
AFAR – 2ND MONTHLY ASSESSMENT
 ACCOUNTANCY DEPARTMENT

Basilio family. Because the son currently managing Liway Ltd., it is proposed that he be
allowed to manage both companies after the wedding. As a result, it is agreed by the two
families that Richard and Ltd. should take over the net assets of Liway Ltd. The balance
sheet of Liway Ltd. immediately prior to the takeover is as follows:
The take over agreement specified the following details:
Carrying Amount Fair Value
Accounts Receivable P20,000 P20,000
Inventory 140,000 125,000
Land 620,000 840,000
Buildings (net) 530,000 550,000
Farm Equipment (net) 360,000 364,000
Irrigation equipment (net) 220,000 225,000
Vehicles (net) 160,000 172,000
P2,050,000

Accounts Payable P80,000 P80,000

Loan- Metrobank 480,000 480,000
Share Capital 670,000
Retained Earnings 820,000
P2,050,000

• Richard ltd. is to acquire all the assets of Liway ltd. and except one of the vehicles
(having a carrying amount of P45,000 and a fair value of P48,000), and assume all
the liabilities except for the loan from Metrobank. Liway ltd. is then to go into
liquidation.
• Cash of P20,000, half to be paid on date of exchange and half in one year’s time.
The increment borrowing rate is 10% per annum (present value for P1 at 10% for 1
period is 0.909091).
• Supply of a patent relating to the manufacture of ice cream. This has a fair value of
P60,000 but has not been recognized in the records of Liway ltd. because it resulted
from an internally generated research project.
• Richard ltd. is to supply sufficient cash to enable the debt to Metrobank to be paid
off and to cover the liquidation costs of P5,500, it will also give P150,000 to be
distributed to Mr. and Mrs. Melad to assist in paying the wedding costs.
• Richard ltd. is also to give a piece of its own prime land to Liway ltd. to be distributed
to Mr. and Mrs. Melad, this eventually being available to be given to any offspring of
the forthcoming marriage. The piece of land in question has a carrying amount of
P80,000 and a fair value of P220,000.
• Richard ltd. is to issue 90,000 shares, these having a fair value of P14 per share, to
be distributed via Liway ltd. to the soon to-be-married-daughter of Mr. and Mrs.
Melad, who is currently a shareholder in Liway ltd.
The takeover proceeded as per the agreement with Richard ltd. incurring incidental
acquisition costs of P25,000, while there were P18,000 share issue costs. The amount of
goodwill or (bargain purchase gain):
a. P45,682
b. P70,682
c. P118,682
d. P (109,818)

21. Jane ltd., a supplier of snooker equipment, agreed to acquire the business of a rival firm,
Mercy ltd. taking over all assets and liabilities as at 1 June 20x6. The price agreed upon was
P40,000, payable P20,000 cash and the balance by the issue to the selling company of
16,000 fully paid shares in Jane ltd. these shares having a fair value of P2.50 per share.
The trial balances of the two companies as at 1 June 20x6 were as follows:
Jane ltd. Mercy ltd.
Dr. Cr. Dr. Cr.
Share Capital P100,000 P90,000
Retained Earnings 12,000 P24,000
Accounts Payable 2,000 20,000
“SUCCESS US NOT FINAL; FAILURE IS NOT FATAL;
IT IS THE COURAGE TO CONTINUE THAT COUNTS.”
- WINSTON S. CHURCHILL
AFAR – 2ND MONTHLY ASSESSMENT
 ACCOUNTANCY DEPARTMENT

Cash P30,000 -
Plant (net) 50,000 30,000
Inventory 14,000 26,000
Accounts Receivable 8,000 20,000
Government Bonds 12,000 -
Goodwill - 10,000
Total P114,000 P114,000 P110,000 P110,000

All the identifiable net assets of Mercy ltd. were recorded by Mercy ltd. at fair value except
for the inventory which was considered to be worth P28,000. The plant had an expected
remaining life of five years. The business combination was completed and Mercy ltd. went
into liquidation. Costs of liquidation amounted to P1,000. Jane ltd. incurred incidental costs
of P500 in relation to the acquisition costs. Costs of issuing shares in Jane ltd. were P400.
The amount of goodwill:
a. P0
b. P2,000
c. P2,900
d. P3,900

For items 22-30:

Fay acquires assets and liabilities of May Company on January 1, 20x6. To obtain these shares, Fay
pays P400 (in thousands) and issues 10,000 shares of P20 par value common stock on this date.
Fay’s stock had a fair value of P36 per share on that date. Fay also pays P15 (in thousands) to a
local investment firm for arranging the transaction. An additional P10 (in thousands) was paid by
Fay in stock issuance costs.

The book values for both Fay and May as of January 1, 20x6 follow. The fair value of each of Fay
and May accounts is also included. In addition, May holds a fully amortized trademark that still
retains a P40 (in thousands) value. The figures below are in thousands. Any related question also is
in thousands.

May Company
Fay Inc. Book Value Fair Value
Cash P900 P80 P80
Receivables 480 180 160
Inventory 660 260 300
Land 300 120 130
Buildings (net) 1,200 220 280
Equipment (net) 360 100 75
Accounts Payable 480 60 60
Long-term Liabilities 1,140 340 300
Common Stocks 1,200 80
Retained Earnings 1,080 480

Assuming the combination is accounted for as an acquisition, immediately after the acquisition, in
the balance sheet of Fay:
22. What amount will be reported as goodwill?
a. P55
b. P65
c. P70
d. P135

23. What amount will be reported for receivables?

a. P660
b. P640
c. P500
d. P460

“SUCCESS US NOT FINAL; FAILURE IS NOT FATAL;

IT IS THE COURAGE TO CONTINUE THAT COUNTS.”
- WINSTON S. CHURCHILL
AFAR – 2ND MONTHLY ASSESSMENT
 ACCOUNTANCY DEPARTMENT

24. What amount will be reported for inventory?

a. P960
b. P920
c. P700
d. P620

25. What amount will be reported for buildings (net)?

a. P1,420
b. P1,260
c. P1,140
d. P1,480

26. What amount will be reported for long-term liabilities?

a. P1,480
b. P1,440
c. P1,180
d. P1,100

27. What amount will be reported for common stocks?

a. P1,200
b. P1,280
c. P1,400
d. P1,480

28. What amount will be reported for retained earnings?

a. P1,065
b. P1,080
c. P1,525
d. P1,560

29. What amount will be reported for additional paid-in capital?

a. P165
b. P150
c. P160
d. P175

30. What amount will be reported for cash after the purchase transaction?
a. P980
b. P900
c. P875
d. P555

For items 31-37:

On December 31, 20x4, PP Inc. acquired assets and liabilities of SS Company, PP will maintain SS
as a wholly owned subsidiary with its own legal and accounting identity. The consideration
transferred to the owner of SS included 50,000 newly issued PP common shares (P20 market value,
P5 par value) and an agreement to an additional P130,000 cash if SS meets certain project
completion goals by December 31, 20x5, PP estimates a 50 percent probability that SS will be
successful in meeting these goals and uses a 4 percent discount rate to represent the time value of
money.
Immediately prior to the acquisition, the following data for both firms were available:
SS
PP Book Values Fair Values
Revenues (P1,200,000)
Expenses 875,000
Net Income (P325,000)
Retained Earnings, (950,000)
1/1/20x4

“SUCCESS US NOT FINAL; FAILURE IS NOT FATAL;

IT IS THE COURAGE TO CONTINUE THAT COUNTS.”
- WINSTON S. CHURCHILL
AFAR – 2ND MONTHLY ASSESSMENT
 ACCOUNTANCY DEPARTMENT

Net Income (325,000)

Dividends Paid 90,000
Retained Earnings, (P1,185,000)
12/31/20x4
Cash P85,000 P85,000
Receivables and 190,000 180,000
Inventory
Property, Plant and 450,000 600,000
Equipment
Trademarks 300,000 160,000 200,000
Total Assets P2,560,000 P885,000

Liabilities (P500,000) (P180,000) (P180,000)

Additional Paid-In (400,000) (200,000)
Capital
Common Stock (475,000) (70,000)
Retained Earnings (1,185,000) (435,000)
Total Liabilities and (P2,560,000) (P885,000)
Equity
Note: Parentheses indicate a credit balance.
In addition, PP assessed a research and development project under way at SS to have a fair value
of P100,000. PP paid legal and accounting fees of P15,000 in connection with the acquisition and
P9,000 in stock issue and registration costs. Use a 0.961538 present value factor applicable.

31. The consideration transferred amounted to:

a. P1,000,000
b. P1,015,000
c. P1,000,000
d. P1,062,500

32. The additional paid-in capital after combination amounted to:

a. P400,000
b. P600,000
c. P1,141,000
d. P1,150,000

33. The expenses for 20x4 amounted to:

a. P0
b. P875,000
c. P884,000
d. P890,000

34. The net income for 20x4 amounted to:

a. P0
b. P310,000
c. P316,000
d. P325,000

35. The retained earnings on December 31, 20x4 amounted to:

a. P435,000
b. P1,170,000
c. P1,185,000
d. P1,620,000

36. Assuming that on June 15, 20x5, the contingent performance obligation was revised to
P75,000 due to facts and information that exists on December 31, 20x4, determine the
amount of goodwill?
a. P0

“SUCCESS US NOT FINAL; FAILURE IS NOT FATAL;

IT IS THE COURAGE TO CONTINUE THAT COUNTS.”
- WINSTON S. CHURCHILL
AFAR – 2ND MONTHLY ASSESSMENT
 ACCOUNTANCY DEPARTMENT

b. P62,500
c. P75,000
d. P90,000

37. In relation to No. 36, assuming that on July 31, 20x6, the contingent performance obligation
was revised to P80,000 due to facts and information that exists on December 31, 20x4,
determine the amount of goodwill and contingent performance obligation?
a. Goodwill: P90,000; Obligation: P75,000
b. Goodwill: P90,000; Obligation: P80,000
c. Goodwill: P95,000; Obligation: P75,000
d. Goodwill: P95,000; Obligation: P80,000

38. Company Z acquires 80% of Company Y for P10,000,000, carrying value of Company Y net
assets at time of acquisition being P6,000,000 and fair value of these net identifiable assets
being P8,000,000. Goodwill arising on consolidation is to be valued on the proportionate
basis or “Partial” Goodwill:
a. P1,600,000
b. P2,000,000
c. P3,600,000
d. P4,500,000

39. Using the same information in No. 39, the amount of non-controlling interest arising on
consolidation is to be valued on the proportionate basis or “Partial” Goodwill:
a. P1,200,000
b. P1,600,000
c. P2,500,000
d. P3,000,000

40. Using the same information in No. 39, the amount of goodwill arising on consolidation is to
be valued on the full (fair value) basis or “Full/Gross-up” Goodwill:
a. P1,600,000
b. P2,000,000
c. P3,600,000
d. P4,500,000

41. Using the same information in No. 39, the amount of non-controlling interest arising on
consolidation is to be valued on the full (fair value) basis or “Full/Gross-up” Goodwill:
a. P1,200,000
b. P1,600,000
c. P2,500,000
d. P3,000,000

42. Pares Company acquires 15 percent of Serap Company’s common stock for P500,000 cash
and carries the investment using the cost method. A few months later, Pares purchases
another 60 percent of Serap Company’s stock for P2,160,000. At that date, Serap Company
reports identifiable assets with a book value of P3,900,000 and a fair value of P5,100,000,
and it has liabilities with a book value and fair value of P1,900,000. The fair value of the
25% non-controlling interest in Serap Company is P900,000. Goodwill arising on
consolidation is to be valued on the proportionate basis or “Partial” Goodwill:
a. P84,000
b. P100,000
c. P300,000
d. P400,000

43. Using the same information in No. 42, the amount of non-controlling interest arising on
consolidation is to be valued on the proportionate basis or “Partial” Goodwill:
a. P500,000
b. P800,000
c. P900,000
“SUCCESS US NOT FINAL; FAILURE IS NOT FATAL;
IT IS THE COURAGE TO CONTINUE THAT COUNTS.”
- WINSTON S. CHURCHILL
AFAR – 2ND MONTHLY ASSESSMENT
 ACCOUNTANCY DEPARTMENT

44. Using the same information in No. 42, the amount of goodwill arising on consolidation is to
be valued on the full (fair value) basis or “Full/Gross-up” Goodwill:
a. P84,000
b. P100,000
c. P300,000
d. P400,000

45. Using the same information in No. 42, the amount of non-controlling interest arising on
consolidation is to be valued on the full (fair value) basis or “full/Gross-up” Goodwill:
a. P300,000
b. P500,000
c. P800,000
d. P900,000

46. Using the same information in No. 42, the amount of gain or loss should be recognized when
the additional shares are acquired:
a. Zero
b. P40,000 gain
c. P40,000 loss
d. P68,000 loss

For items 47-64:

Big Guy Inc. purchased 80% of the outstanding voting shares of Humble Corp. for P360,000 on July
1, 20x1. On that date, Humble Corp had Common Stock and Retained Earnings worth P180,000 and
P90,000. respectively. The Equipment had a remaining useful life of 5 years from the date of
acquisition. Humble’s Bonds maturity on July 1, 20x1. Both companies use straight line
amortizations, and no salvage value is assumed for assets. The trademark is assumed to have an
indefinite useful life.
Goodwill is tested annually for impairment. The Balance Sheet of Both Companies as well as
Humble’s Fair Market Values on the date of acquisition are disclosed below:
Big Guy Humber Fair Value
Cash P800,000 P245,000 P245,000
Accounts Receivable 240,000 40,000 40,000
Inventory 60,000 45,000 50,000
Equipment (net) 900,000 80,000 72,000
Trademark - 90,000 P193,000
Total Assets P2,000,000 P500,000

Current Liabilities P200,000 P160,000 P160,000

Bonds Payable 260,000 70,000 40,000
Common Shares 900,000 180,000
Retained Earnings 640,000 90,000
Total Liability and Equity P2,000,000 P500,000

The following are the financial statements for both companies for the fiscal year ended July 1, 20x4:
Income Statements: Big Guy Humber
Sales P640,000 P240,000
Investment Revenue 8,480
Less: Expenses
Cost of Goods Sold 300,000 160,000
Depreciation 81,000 34,000
Interest Expense 34,000 26,000
Other Expenses 5,000 8,000
Net Income P228,480 P12,000

Retained Earnings Statements:

Balance, July 1, 20x3 P960,560 P48,000

“SUCCESS US NOT FINAL; FAILURE IS NOT FATAL;

IT IS THE COURAGE TO CONTINUE THAT COUNTS.”
- WINSTON S. CHURCHILL
AFAR – 2ND MONTHLY ASSESSMENT
 ACCOUNTANCY DEPARTMENT

Net Income 228,480 12,000

Dividends 20,000 2,000
Balance, July 1, 20x4 P1,169,040 P58,000

Balance Sheets
Cash P1,200,000 P365,000
Accounts Receivable 270,000 55,000
Investment in Humble 319,040
Inventory 70,000 70,000
Equipment (net) 820,000 65,000
Trademark - 85,000
Total Assets P2,679,040 P640,000

Current Liabilities P350,000 P332,000

Bonds Payable 260,000 70,000
Common Shares 900,000 180,000
Retained Earnings 1,169,040 58,000
Total Liabilities and Equity P2,679,040 P640,000

An impairment test conducted in September 20x2 on Big Guy’s goodwill resulted in an impairment
loss f P10,000 being recorded. Both companies use a FIFO system, and Humble’s entire inventory
on the date of acquisition was sold during the following year. During 20x4, Humble Inc. borrowed
P20,000 in Cash from Big Guy Inc. interest free to finance its operations. Big Guys uses the Equity
Method to account for its investment in Humble Corp. Assume that the full goodwill method.

47. The amount of Goodwill arising from the business combination is:
a. P0
b. P(40,000)
c. P50,000
d. P64,000

48. The amount of non-controlling interest on Big Guy’s Consolidated Balance Sheet on July 1,
20x1 would be:
a. P0
b. P88,000
c. P90,000
d. P270,000

49. The amount of depreciation expense appearing on Big Guy’s July 1, 20x4 consolidated
income statement would be:
a. P116,280
b. P115,000
c. P113,720
d. P113,400

50. The amount of interest expense appearing on Big Guy’s July 1, 20x4 consolidated income
statement would be:
a. P63,000
b. P62,400
c. P57,600
d. P36,000

51. The amount of other expenses appearing on Big Guy’s July 1, 20x4 consolidated income
statement would be:
a. P11,600
b. P12,000
c. P13,000
d. P13,400

“SUCCESS US NOT FINAL; FAILURE IS NOT FATAL;

IT IS THE COURAGE TO CONTINUE THAT COUNTS.”
- WINSTON S. CHURCHILL
AFAR – 2ND MONTHLY ASSESSMENT
 ACCOUNTANCY DEPARTMENT

52. The amount of non-controlling interest appearing on Big Guy’s July 1, 20x4 consolidated
income statement would be:
a. P0
b. P2,000
c. P2,120
d. P3,600

53. The net income appearing on Big Guy’s consolidated income statement (controlling interest
in CNI) on July 1, 20x4 would be:
a. P216,000
b. P218,480
c. P228,480
d. P279,600

54. What amount of dividends would appear on Big Guy’s consolidated statement of retained
earnings as at July 1, 20x4?
a. P2,000
b. P20,000
c. P21,600
d. P22,000

55. Big Guy’s consolidated retained earnings for the year ended July 1, 20x4 would be:
a. P1,169,040
b. P1,486,400
c. P1,500,000
d. P1,508,000

56. The amount of non-controlling interest appearing on Big Guy’s consolidated balance sheet
as at July 1, 20x4 would be:
a. P79,760
b. P83,600
c. P90,000
d. P226,400

57. What amount would appear on Big Guy’s investment in Humble Corp. om its July 1, 20x4
consolidated balance sheet?
a. None
b. P9,600
c. P12,000
d. P360,000

58. The amount of goodwill appearing on Big Guy’s Consolidated balance sheet as at July 1,
20x4 would be:
a. None
b. P30,000
c. P40,000
d. P50,000

59. The net amount appearing on Big Guy’s consolidated balance sheet for equipment as at July
1, 20x4 would be:
a. P872,000
b. P878,600
c. P881,800
d. P885,000

60. The amount of current liabilities appearing on Big Guy’s consolidated balance sheet as at
July 1, 20x4 would be:
a. P350,000
“SUCCESS US NOT FINAL; FAILURE IS NOT FATAL;
IT IS THE COURAGE TO CONTINUE THAT COUNTS.”
- WINSTON S. CHURCHILL
AFAR – 2ND MONTHLY ASSESSMENT
 ACCOUNTANCY DEPARTMENT

b. P630,000
c. P662,000
d. P682,000

61. The amount of Accounts Receivable appearing on Big Guy’s consolidated balance sheet as
at July 1, 20x4 would be:
a. P270,000
b. P305,000
c. P314,000
d. P325,000

62. The amount of cash on Big Guy’s consolidated balance sheet on July 1, 20x4 would be:
a. P1,200,000
b. P1,545,000
c. P1,565,000
d. P1,585,000

63. The amount of common shares appearing on Big Guy’s consolidated balance sheet on July
1, 20x4 would be:
a. P900,000
b. P1,044,000
c. P1,080,000
d. P1,800,000

64. The amount of bonds payable appearing on Big Guy’s consolidated balance sheet on July 1,
20x4 would be:
a. P309,000
b. P317,800
c. P330,000
d. P347,200

65. When eliminating any unrealized profit arising when a joint operator provides services to a
joint operation the profit is eliminated against: T8
a. the investment in the joint operation
b. retained earnings
c. work in progress, finished goods and other inventory related accounts
d. cost of goods sold

66. Which of the following statements is correct? T9

a. All joint arrangements are accounted for under PAS 28.
b. Joint arrangements classified as joint ventures are accounted for under PFRS 11.
c. Joint arrangements classified as joint ventures are accounted for under PAS 28.
d. Joint arrangements classified as joint operations are accounted for under PAS 28.

67. For the purpose of equity accounting for n investment in an associate, it is presumed that
the investor has significant influence over the other entity where the investor hold: T10
a. between 1% and 5% of the voting power of the investee.
b. between 5% and 10% of the voting power of the investee.
c. 20% or more of the voting power of the investee.
d. 50% or more of the voting power of the investee.

68. Which of the following is a reason why a company would expand through a combination,
rather than by building new facilities?
a. A combination might provide cost disadvantages.
b. A combination might provide higher operating delays.
c. A combination might provide easier access to intangible assets.
d. All of the above are possible reasons that a company might choose a combination.

“SUCCESS US NOT FINAL; FAILURE IS NOT FATAL;

IT IS THE COURAGE TO CONTINUE THAT COUNTS.”
- WINSTON S. CHURCHILL
AFAR – 2ND MONTHLY ASSESSMENT
 ACCOUNTANCY DEPARTMENT

69. A business combination in which a new corporation is created or two or more existing
corporations are combined into newly created corporation is called a
a. merger
b. purchase transaction
c. pooling-of-interests
d. consolidation

70. A business combination occurs when a company acquires an equity interest in another entity
and has
a. at least 20% ownership in the entity
b. more than 50% ownership in the entity
c. 100% ownership in the entity
d. control over the entity, irrespective of the percentage owned

“SUCCESS US NOT FINAL; FAILURE IS NOT FATAL;

IT IS THE COURAGE TO CONTINUE THAT COUNTS.”
- WINSTON S. CHURCHILL
AFAR – 2ND MONTHLY ASSESSMENT