Business Combination

CHAPTER 15

MULTIPLE CHOICE

15-1: a

Acquisition cost P4,000,000

Less: Book value of interest acquired (100%) 3,200,000

Difference 800,000

Allocation:

Property and equipment P(750,000)

Other assets 150,000

Long-term debt (200,000) ( 800,000)

Goodwill P -0-

15-2: c

Acquisition cost P 350,000

Less: Book value of interest acquired (P280,000 x 90%) 252,000

Difference 98,000

Allocation to plant assets (P40,000 x 90%) (36,000)

Goodwill P 62,000

15-3: c

Plant assets – Pall Company P 220,000

Plant assets – Mall Company 180,000

Consolidated P 400,000

15-4: a

Acquisition cost P495,000

Less: Book value of interest acquired (P560,000 – P70,000) 490,000

Difference 5,000

Allocation:

Inventory P 25,000

Property and equipment ( 35,000) (10,000)

Income from acquisition P( 5,000)

15-5: b

Acquisition cost P355,000

Less: Book value of interest acquired (P320,000 x 80%) 256,000

Difference P 79,000

Allocation:

Inventory (P20,000 x 80%) P(16,000)

Land (P10,000 x 80%) 8,000

Mortgage payable (P5,000 x 80%) ( 4,000) ( 12,000)

Goodwill P 67,000

15-6: a

Inventory (P360,000 + P130,000) P490,000

Plant and equipment (P500,000 + P420,000) P920,000

15-7: a

Building P180,000

Land P 90,000

15-8: d

Son’s stockholders’ equity P400,000

Minority interest proportionate share 20%

Minority interest in net assets of subsidiary P 80,000

15-9: d

Acquisition cost P160,000

Less: Book value of interest acquired (P145,000 x 75%) 108,750

Difference 51,250

Allocation to accounts payable (P5,000 x 75%) 3,750

Goodwill P 55,000

Therefore:

Total assets (P800,000 + P300,000 + P55,000) P1,155,000...