SAINT COLUMBAN COLLEGE

College of Business Education

Pagadian City

HANDOUT BUS-COM 2310

SUBSEQUENT TO DATE OF ACQUISITION –
MULTIPLE CHOICE QUESTIONS
PROBLEM 1:
On January 1, 2030, A corporation acquired 80% interest in X Corporation by issuing 16,000 shares
with fair value of P60 per share and par value of P40 per share. The financial statements of A
Corporation and X Corporation on the acquisition date are shown below:

A Corporation X Corporation
Book Value Book Value Fair Value
Cash 128,000 64,000 64,000
Accounts Receivable 384,000 153,600 153,600
Inventory 512,000 294,400 396,800
Equipment 2,560,000 640,000 768,000
Accumulated Depreciation (256,000) (128,000) (153,600)
Total Assets 3,328,000 1,024,000 1,228,800

Accounts Payable 256,000 76,800 76,800

Bonds Payable 384,000
Ordinary Share Capital 1,536,000 640,000
Share Premium 512,000
Retained Earnings 640,000 307,200
Total Liabilities and Equity 3,328,000 1,024,000

A Corporation elects to measure non-controlling interest at its proportionate share in X Corporation’s

net identifiable assets. Inventory is sold during 2030. The equipment has a remaining useful life of four
years from January 1, 2030. The separate statement of financial position on December 31, 2030 of A
and X Corporation is presented as follows:

A Corporation X Corporation
Cash 294,400 729,600
Accounts Receivable 960,000 281,600
Inventory 1,344,000 192,000
Investment in X Company 960,000
Equipment 2,560,000 640,000
Accumulated Depreciation (768,000) (256,000)
Total Assets 5,350,400 1,587,200

Accounts Payable 550,400 384,000

Bonds Payable 384,000
Ordinary Share Capital 2,176,000 640,000
Share Premium 832,000
Retained Earnings 1,408,000 563,200
Total Liabilities and Equity 5,350,400 1,587,200

The statement of profit or loss of A and X Corporation for year 2030 is shown below:

A Corporation X Corporation
Sales 3,840,000 1,536,000
Less: Cost of Goods Sold (2,112,000) (921,600)

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ACCOUNTING FOR BUSINESS COMBINATIONS HANDOUT 2310
MYLENE P. ALFANTA, CPA
 Gross Profit 1,728,000 614,400
Less: Depreciation Expense (512,000) (128,000)
Less: Distribution Costs (409,600) (230,400)
Less: Interest Expense (38,400) -
Net Profit 768,000 256,000

A Corporation and X Corporation did not declare any dividends in 2030. There were also no
intercompany transactions. The group determined that there is no goodwill impairment.

1. How much is the consolidated total assets as of January 1, 2030?

a. P4,403,200
b. P4,595,200
c. P4,604,800
d. P5,555,200

2. The total consolidated shareholders’ equity as of January 1, 2030?

a. P3,878,400
b. P3,888,000
c. P3,840,000
d. P4,364,800

3. How much is the consolidated net income for 2030?

a. P896,000
b. P768,000
c. P947,200
d. P665,600

4. How much is the consolidated total assets as of December 31, 2030?

a. P5,947,400
b. P6,060,800
c. P6,092,800
d. P6,102,400

5. How much is the total consolidated shareholders’ equity as of December 31, 2030?
a. P4,710,400
b. P4,518,400
c. P4,527,000
d. P4,774,400

PROBLEM 2:
PAPA Corporation acquired 80% of the outstanding common stock of MAMA Company on June 1,
2022 for P2,345,000. The following are the related information:

▪ MAMA Company’s stockholders’ equity components at the end of this year are as follows:
Ordinary Share P100 par of P1,000,000, Share Premium of P450,000, and Retained Earnings
of P890,000.
▪ Non-controlling interest is measured at fair value.
▪ All the assets of MAMA were fairly valued, except for inventories which are overstated by
44,000, and equipment which was understated by P60,000. Remaining useful life of equipment
is 4 years. Inventory was sold during the year.
▪ Both companies use the straight-line method for depreciation and amortization. Stockholder’s
equity of PAPA on June 1, 2022 is composed of Ordinary Share P3,000,000, Share Premium
P700,000, and Retained Earnings P2,100,000.
▪ Fair value of non-controlling interest on the date of acquisition is P470,000.
▪ Goodwill, if any should be written down by P56,900 at year-end.
▪ Net Income for the first year of parent and subsidiary are P300,000 and P170,000 from the
date of acquisition respectively.

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ACCOUNTING FOR BUSINESS COMBINATIONS HANDOUT 2310
MYLENE P. ALFANTA, CPA
 ▪ Dividends declared by parent and subsidiary amounted to P80,000 and P60,000. During the
year, there was no issuance of ordinary shares.

1. What is the non-controlling interest in net assets of subsidiary on December 31, 2022?
a. P580,670
b. P508,970
c. P496,970
d. P487,670

2. What is the amount of consolidated shareholders’ equity?

a. P6,081,380
b. P6,569,050
c. P6,580,900
d. P6,578,350

PROBLEM 3:
Atlas Corporation acquired an 80% interest in Rogers Company on January 1, 2012 for P1,225,000.
On this date, the capital stock and retained earnings of the two companies were as follows:

Atlas Rogers
Capital Stock 3,150,000 875,000
Retained Earnings 1,400,000 175,000

The assets and liabilities of Rogers were stated at their fair values when Atlas acquired its 80% interest
and the proportionate share in net identifiable assets was used to initially measure the non-controlling
interest. Atlas uses the cost method to account for its investment in Rogers. Net Income and Dividends
for 2012 for the affiliated companies were:

Atlas Rogers
Net Income 525,000 157,500
Dividends Declared 315,000 87,500
Dividends Payable 157,500 43,750

End of year evaluation indicates P12,000 impairment in goodwill.

1. How much is the consolidated retained earnings at December 31, 2012:

a. P2,041,400
b. P1,969,000
c. P1,656,400
d. P1,654,000

PROBLEM 4:
On January 1, 2023, Josh Incorporated acquired 60% of Ivan Company for P1,200,000. The assets
and liabilities of Ivan approximates its fair value except for patent which is undervalued by P200,000
which is amortize for 5 years and an equipment which is overvalued by P20,000 which has a remaining
life of 4 years. The book value of net assets of Ivan on the date of acquisition is P1,500,000. The non-
controlling interest is measured at fair value.

On December 31, 2023, Ivan Company reported net income of P250,000 and paid dividend to Josh
Incorporated amounting to P120,000. Goodwill is impaired by P15,000 during the year.

1. What is the amount of non-controlling interest in net income of subsidiary?

a. P114,000
b. P80,000
c. P100,000
d. P38,000

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ACCOUNTING FOR BUSINESS COMBINATIONS HANDOUT 2310
MYLENE P. ALFANTA, CPA
 2. How much is the non-controlling interest in net assets of subsidiary on December 31, 2023?
a. P678,000
b. P834,000
c. P800,000
d. P838,000

3. What is the amount of Investment in Subsidiary in Ivan Company under cost method at
December 31, 2023?
a. P1,200,000
b. P1,278,000
c. P1,209,000
d. P1,272,000

PROBLEM 5:
On January 1, 2023, Puno Incorporated acquired 80% interest in Dong Company. During 2024, Puno
and Dong reported net income of P800,000 and P340,000, respectively. Puno declared dividend of
P250,000 and Dong P120,000. On the date of business combination, the fair value of inventory and
equipment of Dong Company were more than its book value by P100,000 and P200,000. The
equipment has a remaining useful life of 5 years.

1. What is the consolidated net income attributable to Puno Incorporated?

a. P944,000
b. P988,000
c. P908,000
d. P864,000

2. What is the non-controlling interest in net income of subsidiary?

a. P4,000
b. P16,000
c. P60,000
d. P40,000

PROBLEM 6:
Pam Incorporated acquired 60% interest in Sunny Company on January 1, 2022 for P2,250,000. The
shareholders’ equity of Pam and Sunny are as follows:

2022 2023
Pam Sunny Pam Sunny
Ordinary Shares 2,500,000 1,000,000 2,500,000 1,000,000
Share Premium 250,000 500,000 250,000 500,000
Retained Earnings 1/1 3,250,000 1,500,000 3,700,000 1,700,000

On January 1, 2022, the book value of assets and liabilities of Sunny Company approximates its fair
value except for inventory which is undervalued by P60,000 and its equipment which is overvalued by
P50,000. The equipment has a remaining useful life of 5 years. The non-controlling interest is
measured at fair value. The net income and dividend declared for 2022 and 2023 are as follows:

2022 2023
Pam Sunny Pam Sunny
Net Income 950,000 400,000 1,500,000 650,000
Dividend 12/30 500,000 200,000 800,000 400,000

1. What is the non-controlling interest in net income for 2022?

a. P140,000
b. P160,800
c. P180,000
d. P159,200

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ACCOUNTING FOR BUSINESS COMBINATIONS HANDOUT 2310
MYLENE P. ALFANTA, CPA
 2. What is the non-controlling interest in net assets for 2022?
a. P1,260,000
b. P1,560,000
c. P1,300,000
d. P1,600,000

3. What is the consolidated net income attributable to parent in 2022?

a. P1,040,000
b. P1,071,200
c. P1,100,000
d. P1,068,800

4. What is the consolidated retained earnings in 2022?

a. P3,850,000
b. P3,818,800
c. P3,790,000
d. P3,821,200

5. What is the consolidated shareholders’ equity in 2022?

a. P8,100,000
b. P7,800,000
c. P7,900,000
d. P8,200,000

6. What is the non-controlling interest in net income for 2023?

a. P259,000
b. P260,800
c. P264,000
d. P256,000

7. What is the non-controlling interest in net assets for 2023?

a. P1,664,000
b. P1,396,000
c. P1,364,000
d. P1,696,000

8. What is the consolidated net income attributable to parent in 2023?

a. P1,644,000
b. P1,678,400
c. P1,648,800
d. P1,656,000

9. What is the consolidated retained earnings in 2023?

a. P3,556,000
b. P3,551,200
c. P4,694,000
d. P4,646,000

10. What is the consolidated shareholders’ equity in 2023?

a. P8,840,000
b. P7,970,000
c. P8,760,000
d. P9,060,000

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ACCOUNTING FOR BUSINESS COMBINATIONS HANDOUT 2310
MYLENE P. ALFANTA, CPA