DMC COLLEGE FOUNDATION

BACHELOR OF SCIENCE AND ACCOUNTANCY

ADVANCED ACCOUNTING AND REPORTING
QUIZ-II SY: 2016-2017

Instruction: Provide an answer for each problem.(5 points each)

PROBLEM I:

AIG Company acquired a 70% interest in EASTWEST Company for P1,960,000 when the fair
value of EASTWEST’s identifiable assets and liabilities was P700,000 and elected to
measure the non-controlling interest at its share of the identifiable net assets. Annual
impairment reviews of goodwill have not resulted in any impairment losses being
recognized.

EASTWEST’s current statement of financial position shows share capital of P100,000,a

revaluation reserve of P300,000 and retained earnings of P1,400,000.

Under IFRS 3 Business Combination, what figure in respect of goodwill should now be
carried in AIG’s consolidated statement of financial position?

PROBLEM II:

On 1 October 2016 BDO Company acquired 100% of PCI Company when the fair value of PCI’s
net assets was P116,000,000 and their carrying amount was P120,000,000. The consideration
transferred comprised P200,000,000 in cash transferred at the acquisition date, plus
another P60,000,000 in cash to be transferred 11 months after the acquisition date if a
specified profit target was met by PCI. At the acquisition date there was only a low
probability of the profit target being met, so the fair value of the additional
consideration liability was P10,000,000. In the event, the profit target was met and the
P60,000,000 cash was transferred. What amount should BDO present for goodwill in its
statement of financial position at 31 December 2016, according to IFRS 3 Business
Combination?
PROBLEM III:

Best Company has gained control over the operations of Cure Corporation by acquiring 85%
of its outstanding capital stock for P2,580,000. This amount includes a control premium
of P30,000. Acquisition expenses, direct and indirect, amounted to P83,000 and P42,000
respectively.

Best Cure
Book Value Book Value
Cash P3,541,500 P128,000
Accounts receivable 300,000 325,000
Inventories 550,000 360,000
Prepaid expenses 148,500 125,000
Land 2,350,000 879,000
Building 1,560,000 558,000
Equipment 300,000 185,000
Goodwill - 300,000
Total Assets P8,750,000 P2,860,000

Accounts payable 675,000 253,000

Notes payable 1,400,000 730,000
Capital stock,P50 par 3,400,000 800,000
Additional paid in capital 1,575,000 600,000
Retained Earnings 1,700,000 477,000
Total Equities P8,750,000 P2,860,000

The following was ascertained on the date of acquisition for Cure Corporation:
 The value of receivables and equipment has decreased by P25,000 and P14,000
respectively.
 The fair value of inventories is now P436,000 whereas the value of land and
building has increased by P471,000 and P107,000 respectively.

There was an unrecorded accounts payable amounting to P27,000 and the fair value of notes
is P738,000.

Compute for the following balances to be presented in the consolidated statement of

financial position at the date of business combination.

Determine the following:

a. Total assets
b. Total shareholder’s equity