University of Luzon

Dagupan City


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ADVANCED ACCOUNTING II
FINAL EXAM
Name: Schedule: Score:
Permit #

I. MULTIPLE CHOICE QUESTIONS: Write the letter before the number. No erasures
allowed.

Bristle Corporation acquired 75 percent of Silver Corporation's common stock on
December 31, 2012, for P300,000. The fair value of the noncontrolling interest at that
date was determined to be P100,000. Silver's balance sheet immediately before the
combination reflected the following balances:

Cash and Receivables P 40,000
Inventory 70,000
Land 90,000
Buildings and Equipment (net) 250,000
Total Assets 450,000

Accounts Payable P 30,000
Income Taxes Payable 40,000
Bonds Payable 100,000
Common Stock 100,000
Retained Earnings 180,000
Total Liabilities and Equity 450,000


A careful review of the fair value of Silver's assets and liabilities indicated that
inventory, land, and buildings and equipment (net) had fair values of P65,000,
P100,000, and, P300,000 respectively. Goodwill is assigned proportionately to Bristle
and the noncontrolling shareholders.

1. Based on the preceding information, what amount of inventory will be included in the
consolidated balance sheet immediately following the acquisition?

a. P0
b. P65,000
c. P70,000
d. P60,000

2. Based on the preceding information, what amount of land will be included in the
consolidated balance sheet immediately following the acquisition?

a. P0
b. P10,000
c. P90,000
d. P100,000

3. Based on the preceding information, what amount of buildings and equipment (net)
will be included in the consolidated balance sheet immediately following the
acquisition?

a. P0
b. P50,000
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Dagupan City


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c. P250,000
d. P300,000

4. Based on the preceding information, what amount of goodwill will be reported in the
consolidated balance sheet immediately following the acquisition?

a. P0
b. P120,000
c. P65,000
d. P20,000

5. Based on the preceding information, what amount will be reported as investment in
Silver Corporation stock in the consolidated balance sheet immediately following the
acquisition?

a. P0
b. P210,000
c. P300,000
d. P400,000

6. Based on the preceding information, what amount will be reported as noncontrolling
interest in the consolidated balance sheet immediately following the acquisition?

a. P0
b. P70,000
c. P83,750
d. P100,000

7. Dolmen Corporation purchased the net assets of Carnac Inc on January 2, 2005 for
P280,000 and also paid P10,000 in direct acquisition costs. Carnac's balance sheet on
January 2, 2005 was as follows:

Accounts receivable-net P 90,000 Current liabilities P 35,000
Inventory 180,000 Long term debt 80,000
Land 20,000 Common stock (P1 par) 10,000
Building-net 30,000 Paid-in capital 215,000
Equipment-net 40,000 Retained earnings 20,000
Total assets P360,000 Total liab. & equity P360,000

Fair values agree with book values except for inventory, land, and equipment that have
fair values of P200,000, P25,000 and P35,000, respectively. Carnac has patent rights
valued at P10,000.

After the combination, how much is goodwill (gain on acquisition)?
a. 35,000
b. 25,000
c. 5,000
d. (15,000)

8. Rivendell Corporation and Foster Company merged as of January 1, 2009. To effect
the merger, Rivendell paid finder's fees of P40,000, legal fees of P13,000, audit fees
related to the stock issuance of P10,000, stock registration fees of P5,000, and stock
listing application fees of P4,000.
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Dagupan City


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Based on the preceding information, under the acquisition method, what amount
relating to the business combination would be expensed?

a. P72,000
b. P19,000
c. P53,000
d. P63,000

9. The book value of net assets of target company for a possible business combination
was P11,550,000 which includes goodwill amounting P500,000. The fair value of the
identifiable net assets of the target company is determined to have P13,450,000. The
purchase of the net assets by acquirer is being considered. The acquirer will pay
P14,000,000 cash for the net assets at date of acquisition and will pay cash contingent
consideration after two years if target profit is earned for the two years. In order to
have a P1,000,000 goodwill, the fair value of the contingent consideration should be?

a. 450,000
b. 1,450,000
c. 50,000
d. 300,000

10. The fair value of Carnes' Land and Buildings are P650,000 and P550,000,
respectively. On May 1, 2010, Riley Company issues 30,000 shares of its P10 par value
(P25 fair value) common stock in exchange for all of the shares of Carnes' common
stock. Riley paid P10,000 for costs to issue the new shares of stock. Before the
acquisition, Riley has P700,000 in its common stock account and P300,000 in its
additional paid-in capital account.

At the date of acquisition, by how much does Riley's additional paid-in capital increase
or decrease?
a. P0.
b. P440,000 increase.
c. P450,000 increase.
d. P640,000 increase.
II. PROBLEM SOLVING:

Problem 1
Pain Company purchased 80 percent of the common stock of Sin Company by issuing
20,000 shares of Pain P5 par value common stock. The market value of the stock issued
on the date of combination, January 2, 2012 was P6 per share. Summarized statement
of financial position data at December 31, 2012 are as follows:
Pain Sin
Current assets P375,000 P100,000
Property and equipment 270,000 75,000
Other assets 30,000 40,000
Total debits P675,000 P215,000

Current Liabilities P220,000 P60,000
Mortgage payable 60,000 25,000
Accumulated depreciation 70,000 15,000
University of Luzon
Dagupan City


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Common Stock 100,000 35,000
Additional paid-in capital 45,000
Retained earnings 180,000 80,000
Total Credits P675,000 P215,000

On the date of combination, Sins property and equipment had a fair value of P85,000.
The book value of all other assets approximated fair value.

Required: Prepare a consolidated statement of financial position immediately following
the acquisition.

Problem 2
Primerose Corp. purchased a 70 percent interest in Stanman Corp. on January 1, 2012
for P15,600,000 when Starmans stockholders equity consisted of P3,000,000 common
stock, P10,000,000 share premium, and P2,000,000 retained earnings. The fair value of
the net identifiable assets of Starman is determined to be P15,400,000. Income and
dividend information for Starman in 2012 is as follows: (Any excess is allocated to
depreciable assets and is to be amortized over 20-years.)
Net income P1,000,000
Dividends P400,000
Primerose reported net income of P12,000,000 and paid dividends of P300,000 for
2012.
Required:
a. Consolidated Net Income
b. Consolidated Net Income attributable to Parent
c. NCI
d. Retained Earnings
e. Goodwill




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University of Luzon
Dagupan City


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