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ACCOUNTING7A
SEMIFINALEXAMINATION
March3,2016
WEDNESDAY,8:00AM11:00AM
SETA
INSTRUCTIONS: CHOOSE THE BEST ANSWER FOR EACH OF THE FOLLOWING QUESTIONS. FULLY
SHADEONLYONEBOXFOREACHITEM.STRICTLYNOERASURESALLOWED.
PROBLEM1.ChapelHillCompanyhadcommonstockofP350,000andretainedearnings
ofP490,000.BlueTown,Inc.hadcommonstockofP700,000andretainedearningsof
P980,000.OnJanuary1,2016,BlueTownissued34,000sharesofcommonstockwith
aP12parvalueandaP35fairvalueforallofChapelHillCompany'soutstanding
commonstock.Thiscombinationwasaccountedforasanacquisition.
1.Immediatelyafterthecombination,whatwastheconsolidatednetasset?
A.P2,870,000
B.P2,520,000
C.P3,710,000
D.P1,680,000
PROBLEM2.AtlasCorporationacquiredan80%interestinRogetsCompanyonJanuary
1,2016forP1,225,000.Onthisdate,thecapitalstockandretainedearningsof
thetwocompanieswereasfollows:
Atlas
Rogets
CapitalStock
P3,150,000
P875,000
RetainedEarnings
1,400,000
175,000
TheassetsandliabilitiesofRogetswerestatedattheirfairvalueswhenAtlas
acquiredits80%interestandtheproportionateshareinnetidentifiableassets
wasusedtoinitiallymeasurethenoncontrollinginterest.
Netincomeanddividendsfor2016fortheaffiliatedcompanieswere:
Atlas
Rogets
Netincome
P525,000
P157,500
Dividendsdeclared
315,000
87,500
2.WhatistheconsolidatedretainedearningsatDecember31,2016?
A.P2,041,400
B.P1,969,000
C.P1,656,400
D.P1,654,000
PROBLEM3. TheMCompanyholdsan85%interestintheHCompany.Atthecurrent
yearend,MholdsinventorypurchasedfromHforP330,000atcostplus10%.The
group'sconsolidatedstatementoffinancialpositionhasbeendraftedwithoutany
adjustmentsinrelationtothisholdingofinventory.
3.Whatadjustmentshouldbemadetothedraftconsolidatedstatementoffinancial
positionfiguresfornoncontrollinginterest?
A.Nochange
C.ReducebyP4,500
B.ReducebyP6,000
D.IncreasebyP6,000
4.Whatadjustmentshouldbemadetothedraftconsolidatedstatementoffinancial
positionfiguresforretainedearnings?
A.ReducebyP30,000
C.ReducebyP25,500
Ms.
B.ReducebyP33,000
D.ReducebyP28,050
PROBLEM 4. The S company owns 95% of the G company. On the last day of the
accounting period, G sold to S a noncurrent asset for P230,000. The asset
originally cost P480,000 and at the end of the reporting period its carrying
amount in the books of G was P175,000. The group's consolidated statement of
financial position has been drafted without any adjustments in relation to this
noncurrentasset.Whatadjustmentsshouldbemadetotheconsolidatedstatement
offinancialpositionfiguresfornoncurrentassetsandretainedearnings?
5.
Noncurrentassets
Retainedearnings
A.
IncreasebyP250,000
IncreasebyP237,500
B.
ReducebyP55,000
ReducebyP55,000
C.
ReducebyP55,000
ReducebyP52,250
D.
IncreasebyP250,000
Increaseby250,000
PROBLEM5.ACorporationacquiredan80%interestinRCompanyonJanuary1,2016
for P245,000. On this date, the capital stock and retained earnings of the two
companieswereasfollows:
A
CapitalStock
P630,000
P175,000
RetainedEarnings
280,000
35,000
TheassetsandliabilitiesofRwerestatedattheirfairvalueswhenAacquired
its80%interestandtheproportionateshareinnetidentifiableassetswasused
to initially measure the noncontrolling interest. Net income and dividends for
2016forthecompanieswere:
A
NetIncome
P105,000
P31,500
Dividendsdeclared
63,000
17,500
Dividendspayable
31,500
8,750
EndofyearevaluationindicatesaP2,400impairmentingoodwill.
6.WhatistheconsolidatedretainedearningsatDecember31,2016?
A.P408,280
B.P393,800
C.P331,280
D.P330,800
PROBLEM6. OnJanuary1,2016,ACompanypurchased80%oftheoutstandingshares
ofECorporationatacostofP280,000.Onthatdate,ECorporationhadP120,000
of capital stock and P200,000 of retained earnings. For 2016, A had income of
P120,000 from its own operations and paid dividends of P40,000. For 2016, E
reportednetincomeofP60,000andpaiddividendsofP20,000.Alloftheassets
and liabilities of E had book values approximately equal to their respective
marketvalues.OnApril1,2016,EsoldequipmentwithabookvalueofP12,000to
AforP24,000.ThegainonsaleisincludedintheincomeofE.Theequipmentis
expectedtohaveausefullifeoffiveyearsfromthedateofthesale.
7.Howmuchisthenoncontrollinginterestinnetincome?
A.P9,960
B.P10,080
C.P13,800
D.P10,560
PROBLEM7. ER,Inc.,EE1,Inc.,andEE2,Inc.aretocombine.Thestockholders'
equity on their respective Statement of Financial Position immediately prior to
combinationshow:
ER,Inc.
EE1,Inc.
EE2,Inc.
Commonstock
P300,000
P200,000
P400,000
Sharepremium
70,000
100,000
Retainedearnings
(40,000)
60,000
90,000
As per appraisal, book values of EE1's assets and liabilities approximate their
fair value except for Land and Noncurrent liabilities which are undervalued by
P50,000 and P10,000, respectively. EE2's Equipment and Longterm debt is
overvalued by P80,000 and P130,000, respectively. All other book values of the
assetsandliabilitiesofEE2areequaltotheirfairvalues.Itwasagreedthat
ERshallissueitsownsharesofstockstoEE1andEE2.Twentyfivepercentofthe
totalstocksissuedshallbereceivedbyEE1andtheremainingwillbegivento
EE2. ER paid P20,000 and P90,000 indirect cost with EE1 and EE2's business.
Immediately,afterthecombination,ERhasacommonstockbalanceofP1,100,000.
ER'sstockhasaP100parvalueandamarketvalueofP!50.
8.Howmuchisthegainontheacquisition?
A.P100,000
B.P120,000
C.P140,000
9.Howmuchisthegoodwillfromtheacquisition?
A.P200,000
B.0
C.P360,000
D.0
D.P620,000
year, Marie reported net income of P215,000 and Paz reported net income of
P140,000.
12.HowmuchistherealizedprofittobeallocatedtoNCIin2016?
A.P6,580
B.P1,974
C.P2,467.50
D.P3,666.67
PROBLEM 10. Provided below is the Condensed Statement of Financial Position (in
thousands)forPlayandStationCorporationsatDecember31,2015
Play
Station
Currentassets
P585
P270
Noncurrentassets
2,565
1,980
Totalassets
P3,150
P2,250
Currentliabilities
P225
P270
Ordinaryshare,P30
2,250
900
Sharepremium
225
630
Retainedearnings
450
450
TotalLiabilitiesandEquity
P3,150
P2,250
OnJanuary2,2016,Playissues120,000sharesofitsstockwithamarketvalueof
P30 per share for the net assets of Station Corporation. Because of the
acquisition,Stationwasdissolved.Thebookvaluesreflectfairvaluesexceptfor
anoncurrentassetofPlay,whichhasafairvalueofP1,800,000,andthecurrent
assetsofStation,whichhasanetrealizablevalueofP450,000.PlaypaysP67,500
for costs of registering and issuing securities issued and P112,500 for other
acquisitioncostsrelatedtocombination.Contractforcontingentconsiderationto
bepaidtoStationisP337,500.Thisisdeterminedonthedateofacquisition.
13.WhatisthetotalassetsofPlayafteracquisition?
A.P5,580,000
B.P7,357,500
C.P5,400,000
D.P7,177,500
PROBLEM11. PiendaCompanyacquired80%ofPangoyroidCompany'scommonstockfor
P350,000. At that date, the noncontrolling interest in Pangoyroid has a fair
valueofP150,000.IdentifiableassetswerecarriedatP600,000inthebooksof
Pangoyroid but had a fair value of P800,000. Liabilities had a book value of
P250,000whichwasequaltothefairvalueonthesamedate.
14.If fair value of the net identifiable assets is to be valued on the
proportionatebasis,howmuchshouldberecognizedasgainonbargainpurchase?
A.P90,000
B.P40,000
C.P50,000
D.0
PROBLEM12.OnJanuary2,2015,PCorporationpurchased70%ofthecommonstockof
S Company for P1,650,000. At that date, S had P1,725,000 of common stock
outstandingandretainedearningsofP555,000.Equipmentwitharemaininglifeof
fiveyearshadabookvalueofP850,000andafairvalueofP900,000.S'remaining
assetshadbookvaluesequaltotheirfairvalues.Allintangiblesexceptgoodwill
areexpectedtohaveremaininglivesof10years.P'sincomedoesnotincludeany
dividendincomefromS.P'sretainedearningsbalanceatthedateofacquisition
wasP2,000,000.TheincomeanddividendfiguresforbothPandSareasfollows:
INCOME
DIVIDENDS
2015
P550,000
P150,000
2016
650,000
200,000
2015
100,000
30,000
2016
250,000
45,000
15.Howmuchistheconsolidatednetincomeattributabletoparentin2015?
A.P592,000
B.P613,000
C.P610,000
D.P620,000
16.Howmuchistheconsolidatednetincomein2016?
A.P890,000
B.P832,000
C.P786,500
D.P900,000
17.WhatistheconsolidatedretainedearningsatDecember31,2015?
A.P2,460,000
B.P2,442,000
C.P2,470,000
D.P2,463,000
18.WhatistheconsolidatedretainedearningsatDecember31,2016?
A.P3,088,000
B.P3,078,000
C.P3,081,000
D.P3,060,000
PROBLEM 13. On January 2, 2016, Kaykayy Corporation purchased 85% of the
outstanding shares of Nips Company for P3,060,000. At that date, Nips had
P4,000,000ofordinarysharesoutstandingandretainedearningsofP1,600,000.
Nips' equipment, with a remaining life of five years is undervalued by
P380,000.Theremainingassetshadbookvaluesequaltotheirfairvalues.
Kaykayy reported a separate net income in 2016 of P600,000 and paid
dividendsamountingtoP220,000.Forthesameyear,Nipsreportednetincome
ofP340,000andpaiddividendsofP70,000.
In 2017, Kaykayy reported net income of P1,100,000 and paid dividends of
P390,000 while Nips had a net income of P510,000 and paid dividends of
P130,000.
Kaykayy's retained earnings balance at the date of acquisition was
P3,450,000
Computeforthefollowing:
19.Goodwill(gain)fromtheacquistion
A.P2,023,000
B.(P2,023,000)
C.P2,380,000
D.(P2,380,000)
20.ConsolidatednetincomeattributabletoKaykayyin2016
A.P2,847,400
B.P953,600
C.P3,204,400
D.P824,400
21.NCINISin2017
A.P61,500
C.P87,900
D.P89,700
22.Consolidatedprofitin2017
A.P1,419,900
B.P1,358,400
C.P1,423,500
C.P1,293,300
27.2016ConsolidatedRetainedEarnings
A.P4,183,600
B.P6,434,400
C.P4,045,400
D.P6,077,400
23.2017ConsolidatedRetainedEarnings
A.P5,013,800
B.P7,402,800
C.P7,045,800
D.P5,152,000
B.P65,100
24.2016NCINAS
A.P569,100
B.P926,100
C.P591,900
D.P948,900
25.2017NCINAS
A.P971,700
B.P611,100
C.P660,300
D.P990,900
PROBLEM 14. Lawrence Company acquires 25% of Kent Company's common stock for
P190,000 cash and carries the investment using the cost method. After three
months, Lawrence purchases another 60% of Kent's common stock for P540,000. On
this date, Kent reports identifiable net assets with carrying value of P720,000
andfairvalueofP920,000.TheliabilitiesofKenthasabookandfairvalueof
P280,000. Lawrence paid a control premium of P6,000 for this acquisition. A
contingent payment of P16,500 will be paid if Kent generates cash flows from
operationsofP27,000ormoreinthenextyear.Lawrenceestimatesthatthereisa
95%probabilitythatKentwillgenerateatleastP27,000nextyear.Thefairvalue
ofthecontingentconsiderationis120%ofthecontrolpremium.Thefairvalueof
the15%noncontrollinginterestisP125,000.
26.HowmuchistheFairValueoftheSubsidiary?
A.P778,200
B.P910,200
C.P772,200
D.P916,200
27.Howmuchisthegoodwill(gain)fromtheacquisition?
A.(P147,800)
B.(P9,800)
C.(P3,800)
D.(P141,800)
PROBLEM15.OnJanuary1,2016,MaeCompanyacquired80%ofEyreCompany'scommon
stock for P280,000. At that date, Eyre reported common stock outstanding of
P200,000andretainedearningsofP100,000,andthefairvalueofnoncontrolling
interest was P70,000. The book values and fair value of Eyre's assets and
liabilitieswereequal,exceptforotherintangibleassetswhichhasafairvalue
P50,000 greater than book value and an eightyear remaining life. Eyre reported
thefollowingdatafor2016and2017
YEAR
NETINCOME
COMPREHENSIVEINCOME
DIVIDENDSPAID
2016
P25,000
P30,000
P5,000
2017
P35,000
P45,000
P10,000
Mae reported separate net income of P100,000 and paid dividends of P30,000 for
bothyears.
28.Whatisthegoodwillfromtheacquisition?
A.P121,493
B.P92,297
C.0
D.P121,896
29.Whatistheamountofconsolidatedcomprehensiveincomereportedfor2016?
A.P125,000
B.P119,000
C.P118,750
D.P123,750
30.What is the amount of comprehensive income attributable to the controlling
interestin2017?
A.P138,750
B.P128,750
C.P131,000
D.P135,000
31.WhatistheamountofNCICNIS?
A.P7,570
B.P7,750
C.P9,000
D.P10,250
PROBLEM 16. Christine Company acquired 70% interest in the Rona Company for
P1,420,000whenthefairvalueofRona'sidentifiableassetsandliabilitieswas
P1,200,000.Christineacquired65%interestinBlessylCompanyforP300,000when
the fair value of Blessyl's identifiable assets and liabilities was P640,000.
Christinemeasuresnoncontrollinginterestattherelevantshareofidentifiable
netassetsattheacquisitiondate.
32.Whatisthegoodwillfromtheacquisition?
A.P580,000
B.P116,000
C.0
D.P464,000
33.Whatisthegainfromtheacquisition?
A.P580,000
B.P116,000
C.0
D.P464,000
PROBLEM17.You'reNotMyTypeJudeCompanyhasgainedcontrolovertheoperations
ofDanielleCorporationonMay1,2016byacquiring85%ofitsoutstandingcapital
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.
You'reNotMyTypeJude
Danielle
Cash
P3,541,500
P128,000
AccountsReceivable
300,000
325,000
Inventories
550,000
360,000
PrepaidExpenses
148,500
125,000
Land
2,350,000
879,000
Building
1,560,000
558,000
Equipment
300,000
185,000
Goodwill
300,000
TotalAssets
P8,750,000
P2,860,000
AccountsPayable
P675,000
P253,000
NotesPayable
1,400,000
730,000
Capitalstock,P50par
3,400,000
800,000
SharePremium
1,575,000
600,000
RetainedEarnings
1,700,000
477,000
TotalLiabilityandEquity
P8,750,000
P2,860,000
The value of receivables and equipment has decreased by P25,000 and P14,000,
respectively.ThefairvalueofinventoriesisnowP436,000whereasthevalueof
landandbuildinghasincreasedbyP471,000andP107,000,respectively.Therewas
anunrecordedaccountspayableamountingtoP27,000andthefairvalueofnotesis
P738,000.Theremaininglifeoftheequipmentistwoyears,however,thebuilding
stillhassixyears.ThenetincomeofYou'reNot My TypeJudeisP100,616and
Danielle'sisP92,297fromthedateofacquisition.Goodwill,ifany,shouldbe
written down to P772,384. Dividends declared by You're Not My Type Jude and
DanielleattheendoftheyearamountedtoP20,000andP15,000,respectively.
Computeforthefollowingbalances:
34.Goodwillorgainfromtheacquisition
A.P873,000
B.P878,300
C.P887,300
D.P837,000
35.Consolidatedassetsonthedateofacquisition
A.P11,925,000
B.P10,093,000
C.P10,218,000
D.P12,798,000
36.Consolidatedshareholder'sequityonthedateofacquisition
A.P6,550,000
B.P6,675,000
C.P7,000,000
D.P7,500,000
37.Consolidatedprofit(loss)
A.(P7,285)
B.(P679,053)
C.(P3,675)
D.(P665,182)
38.NCINASattheendoftheyear
A.P433,997
B.P434,538
C.P332,714
D.P343,515
39.Consolidatedretainedearningsatyearend
A.P1,689,537
B.P1,686,567
C.P1,115,983
D.P1,119,053
40.Consolidatedshareholder'sequityatyearend
A.P6,973,534
B.P6,974,075
C.P6,400,520
D.P7,099,075