BusCom Seatwork - 05 15 2021

Problem 1:
Joshua Company acquired the net assets of Umali Company by paying 500,000 cash, issuing 20,000
ordinary shares with par value of P10 and bonds payable with face amount of P2,000,000. The bonds are
classified as financial liability at amortized cost.
Moreover, a contingent consideration of P100,000 will be paid when the average net income for the
next years will reach P10,000,000. The determinable amount of the said contingent consideration at the
date of combination amounted to P30,000.
At the time of acquisition, the ordinary shares are publicly quoted at 20 per share. On the other hand,
the bonds payable are trading at 105.
Joshua Company paid P30,000 share issuance costs and P50,000 bond issue costs. Joshua Company also
paid P100,000 acquisition related expenses.
Before the date of acquisition, Joshua Company and Umali Company reported the following data:
ASSETS Joshua Umali

Current Assets 3,000,000 1,500,000
Noncurrent Assets 5,000,000 3,000,000
Current Liabilities 500,000 900,000
Noncurrent Liabilities 700,000 1,500,000
Ordinary Shares 2,200,000 1,000,000
Share Premium 2,500,000 800,000
Retained Earnings 2,100,000 300,000
At the time of acquisition, the noncurrent assets of Joshua Company have fair value of P5,100,000 while
the noncurrent assets of Umali Company have fair value of P4,000,000. On the same date, the current
liabilities of Joshua Company have fair value of P1,200,000 while the noncurrent liabilities of Umali
Company have fair value of P1,800,000.
1. How much is the total consideration transferred?

a) 3,030,500 c) 2,530,000
b) 3,000,500 d) 2,630,000
2. How much is the goodwill or income from acquisition?
a) 200,000 goodwill c) 230,000 goodwill
b) (200,000) income d) (230,000) income
3. How much is the combined shareholders’ equity at the date of acquisition?
a) 7,100,000 c) 7,170,000
b) 6,970,000 d) 7,070,000
4. How much is the combined liabilities at the date of acquisition?
a) 5,950,000 c) 6,030,000
b) 5,980,000 d) 6,060,000
5. How much is the combined assets at the date of acquisition?
c) 12,820,000 c) 13,730,000
d) 12,980,000 d) 13,050,000
Problem 2:
On January 1, 2020, Luffy Company acquired 25,000 out of 100,000 outstanding ordinary shares of Zorro
Company for P80,000. For the six month period ending June 30, 2020, Zorro Company reported net
income of P40,000 and declared dividends amounting to 20,000.
On July 1, 2020. Luffy Company acquired additional 50,000 ordinary shares of Zorro Company at a price
of 4 per share or total cost of P200,000. Robert Company paid P20,000 acquisition related costs and
P10,000 indirect costs of business combination.
The acquisition price per share of the additional shares clearly reflected the fair value of the existing
interest of Luffy Company in Zorro Company. It is the policy of Luffy Company to initially measure the
noncontrolling interest in net assets of the acquiree at FAIR VALUE-ASSESSED. The fair value of the
noncontrolling interest in net assets of the acquiree is reliably measured at P40,000.
At the acquisition date, the net assets of Zorro Company were reported at P380,000. The following are
changes in fair value of Zorro Company’s books:
 After effecting the correct allowance for expected credit losses in accordance with PFRS 9,
financial instruments, Zorro’s trade and other receivables should be reduce by 20,000.
 Physical inventory count conducted a day before the date of acquisition revealed that there are
inventories amounting to P10,000, the are already obsolete.
 Upon checking of the PSE edge, market value of Zorro Company’s investment in equity
securities decreased by 20,000 on the date of acquisition.
6. How much is luffy’s investment in Zorro as of June 30, 2020?

a. 80,000 c. 85,000
b. 90,000 d. 95,000
7. How much is the gain on remeasurement of the existing investment in Zorry Company as a
result of the step acquisition?
a. 15,000 c. 10,000
b. 5,000 d. 20,000
8. How much is the goodwill or income from acquisition as a result of the business combination?
c) 10,000 goodwill c) 20,000 goodwill
d) (10,000) income d) (20,000) income
Problem 3:
Son is a 75% owned subsidiary of Papa Corporation acquired at a book value (also fair value) on January
2, 2019. Comparative income statements for Papa and Son for 2021 are as follows:
Papa Son
Net Sales P500,000 P200,000
Cost of Sales 300,000 120,000
Gross Profit 200,000 80,000
Operating Expenses 60,000 30,000
Operating Income 140,000 50,000
Dividend Income 37,500 -
Net Income 177,500 50,000
Additional information:
 Son made sales to Papa of P60,000 in 2020 and P100,000 in 2021.

 Papa’s inventories at December 31, 2020 and December 31, 2021 included merchandise on
which Son reported profit of P15,000 and P24,000 during 2020 and 2021.
 Papa has not eliminated the effect of intercompany profits in accounting for its investment in
Son.
9. The consolidated cost of sales for 2021 amounted to:

a. 420,000 c. 329,000
b. 344,000 d. 305,000
10. The Profit attributable to equity holders of parent for 2021 amounted to:
a. 170,750 c. 188,750
b. 177,500 d. 190,000
Problem 4:
Silver Corporation is at 90% owned subsidiary by Proto Corporation. For the year 2021, Proto and Silver
report the following:
2021
Proto’s separate income 4,000,000
Silver’s separate income 2,000,000
The following intercompany transactions occurred for between the two entities:
 On January 1, 2021, Silver Company sold a land to Proto Company with a cost of P3,700,000 at a
selling price of P4,000,000. The land remained at Proto’s possession at the end of 2021.
 On July 1, 2021, Proto Company sold an equipment to Silver Company with a cost of P500,000
and accumulated depreciation of P100,000 at a selling price of P450,000. The remaining useful
life of the machinery from the date of sale was 10 years. Residual value is immaterial.
Silver Company distributed dividends to its investors amounting to 1,000,000 in 2021. It was further
determined in 2021 that the goodwill recognized as a result of the business combination is impaired by
10% annually. The goodwill attributable to Proto and Silver amounted to 120,000 and 20,000,
respectively.
11. How much is the share of non-controlling interest in the net income of subsidiary for the year
ended December 31, 2020?
a. 170,000 c. 200,000
b. 168,000 d. 173,000
12. How much is the share of controlling interest in the net income of subsidiary for the year ended
December 31, 2020?
a. 1,530,000 c. 1,518,000
b. 1,580,000 d. 1,538,000
13. How much is the net income attributable to parent for the year ended December 31, 2020?
a. 3,052,000 c. 3,220,500
b. 3,222,500 d. 4,570,500
Problem 5:
On January 1, 2020, Josh Co. acquired all of the identifiable assets and assumed all liabilities of Gio Inc.
by paying cash of 4,800,000. On this date, identifiable assets and liabilities assumed have fair value of
P7,680,000 and P4,320,000, respectively. Josh Co. has estimated restructuring provisions of P960,000
representing exit cost of the acquiree’s activities, termination cost of employees of Gio and relocation
costs of the said employees. The restructuring plan is conditional until the business combination process
is done. If the combination will not happen, no restructuring will happen.
14. For purposes of computing the result of business combination, how much is the fair value net
assets to be deducted from the total consideration transferred?
a. 2,400,000 c. 5,280,000
b. 3,360,000 d. cannot be determined
15. How much is the goodwill or income from acquisition on the business combination?
a. (480,000) income c. 2,400,000 goodwill
b. 1,440,000 goodwill d. cannot be determined

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Problem 1:

ASSETS Joshua Umali

1. How much is the total consideration transferred?

6. How much is luffy’s investment in Zorro as of June 30, 2020?

 Son made sales to Papa of P60,000 in 2020 and P100,000 in 2021.

9. The consolidated cost of sales for 2021 amounted to:

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