Page|

Chapter1
Busi
nessCombinati
ons(
Par
t1)
PROBLEM 1:TRUEORFALSE
1. FALSE–“ busi
ness”and“ contr
ol”
2. FALSE–acqui si
tionmethod
3. FALSE-acquirer
4. TRUE
5. FALSE – f ai
rv al
ue orNCI ’
s pr oport
ionate shar
ei nt
he
acqui
ree’
snetidentifi
abl
eassets
6. TRUE
7. FALSE–r ecognizedinprofi
torlossafterreassessment
8. TRUE
9. FALSE–f ai
rvaluelesscoststosell
10.TRUE

PROBLEM 2:TRUEORFALSE
1. FALSE-₱20
2. TRUE{ 100+[(200–120)x10%] }–(200–120)=28
3. FALSE( 100+10)–( 200–120)=30
4. FALSE100–( 200-120)=20
5. TRUE100–( 200-120)=20( t
heliqui
dat i
oncostsarei
gnor
ed
becausethesearepost-combinati
onexpenses)
6. FALSE100–( 200+5i ntangi
bleasset-120)=15
7. TRUE100–( 200+30- 120)=( 10)
8. TRUE100–( 200-120–30cont i
ngentliabi
li
ty)=50
9. FALSE100–( 200-120–15DTL* )=35

*(
200CAf
orfi
nanci
alr
epor
ti
ng–150t
axbase)=50TTD;
50x30%=15DTL

10.TRUE100–( 120)=20Thet
200- r
adesecr
etprocessesar
e
not‘
consi
der
ati
ont
ransf
err
ed’
toEnt
it
yB’
sformerowners.
 Page|
2

PROBLEM 3:FORCLASSROOM DI
SCUSSI
ON
1. D
2. D

3. Solution:
Considerati
ontr
ansferr
ed 1,
800,
000
Non-control
li
ngint
eresti
nt heacqui
ree -
Previ
ouslyheldequi
tyinter
estintheacquir
ee -
Total 1,
800,
000
Fairval
ueofnetidenti
fi
ableassetsacquir
ed
(
2.37M –20Kgoodwi
l
l–700Kl
i
abi
l
iti
es) (
1,650,000)
Goodwi
ll 150,000

4. Solution:
Considerati
ontransfer
red 2,000,000
NCI[(
4M –1.6M)x25%] 600,000
Previ
ouslyheldequityint
eresti
ntheacquir
ee -
Total 2,600,000
Fairv
alueofneti denti
fi
ableasset
sacquir
ed(4M –1.
6M) (
2,400,000)
Goodwi l
l 200,000

5. Solution:
Considerati
ontr
ansfer
red 2,000,000
NCI 540,000
Previ
ouslyheldequi
tyint
eresti
ntheacquir
ee -
Total 2,540,000
Fairv
alueofnetidenti
fi
ableasset
sacquir
ed(4M –1.
6M) (
2,400,000)
Goodwi l
l 140,000

6. Solution:
Considerati
ontr
ansferr
ed(18,
000sh.x₱100) 1,
800,
000
Non-control
li
ngint
eresti
nt heacquire -
Previ
ouslyheldequi
tyinter
estintheacqui r
ee -
Total 1,
800,
000
Fairval
ueofnetidenti
fi
ableassetsacqui r
ed(3.
8M
–1.
9M) (
1,900,
000)
Gai
nonbar
gai
npur
chase (100,
000)

The ₱36,000 stock issuance costs ar

e deducted fr
om share
premi
um.The₱60, 000f i
nder’sfeesareexpensed.The₱280,000
l
iqui
dati
oncost sarepost -combinat
ionexpenses.Allofthesedo
notaf
fectthecomput ati
onofgoodwi ll
.
 Page|
3

7. Solution:
Considerati
ontr
ansferr
ed 2,
800,
000
Non-control
li
ngint
eresti
nt heacqui
re -
Previ
ouslyheldequi
tyinter
estintheacquir
ee -
Total 2,
800,
000
Fairval
ueofnetidenti
fi
ableassetsacquir
ed
(
4M +100Kpatent+160KR&D+40Ki
ntangi
bleasseton
oper
ati
ngleasew/favor
abl
eter
ms–1.
6M) (
2,700,000)
Goodwi
ll 100,000

8. Sol uti
on:
Considerationtransfer
red 1,
800,
000
NCI(2.2M ‘
seebel
ow’x25%) 550,
000
Previ
ouslyhel dequityint
eresti
ntheacquir
ee -
Total 2,
350,
000
Fairvalueofneti denti
fi
ableasset
sacquir
ed
(
4M –1.
6M –200Kcont
ingentl
iabi
li
ty) (
2,200,000)
Goodwi
ll 150,000

9. Solution:
Considerati
ontr
ansferr
ed 4,
000,
000
Non-control
li
ngint
eresti
nt heacqui
ree -
Previ
ouslyheldequi
tyinter
estintheacquir
ee -
Total 4,
000,
000
Fairval
ueofnetidenti
fi
ableassetsacquir
ed
(
6.1M +60KDTA–2.
3M –90KDTL) (
3,770,000)
Goodwi
ll 230,000

Car
ryi
ngamt.-f
in'
l
.rept
g. Taxbase TTD(DTD)
Asset
s 6,
100,
000 5,
800,
000 300,
000
Li
abil
i
ties 2,
300,
000 2,
100,
000 (200,
000)

Taxabl
etempor
arydi
ff
erence 300,
000
Mul
ti
plyby
:Taxr
ate 30%
Def
err
edt
axl
i
abi
l
ity 90,
000

Deduct
ibl
etempor
arydi
ff
erence 200,
000
 Page|
4

Mul
ti
plyby
:Taxr
ate 30%
Def
err
edt
axasset 60,
000

10.Solution:
Considerati
ontr
ansferr
ed(2.8M –280Kdi
vi
dendson) 2,
520,
000
Non-control
li
ngint
eresti
nt heacqui r
ee -
Previ
ouslyheldequi
tyinter
estint heacquir
ee -
Total 2,
520,
000
Fairval
ueofnetidenti
fi
ableasset sacquir
ed
(
4M –1.
6M) (
2,400,000)
Goodwi
ll 120,000

PROBLEM 4:EXERCI SES

1. Solution:
Considerati
ontr
ansferr
ed 1,
200,
000
Non-control
li
ngint
eresti
nt heacqui
ree -
Previ
ouslyheldequi
tyinter
estintheacquir
ee -
Total 1,
200,
000
Fairval
ueofnetidenti
fi
ableassetsacquir
ed
(
1.7M –50Kgoodwi
l
l–390Kl
i
abi
l
iti
es) (
1,260,
000)
Gai
nonbar
gai
npur
chase (60,
000)

2. Sol uti
on:
Considerati
ontransfer
red 1,200,000
NCI[(
1.7M –.
4M)x20%] 260,000
Previ
ouslyheldequityint
eresti
ntheacquir
ee -
Total 1,460,000
Fairv
alueofneti denti
fi
ableasset
sacquir
ed(1.
7M –.
4M) (
1,300,000)
Goodwi ll 160,000

3. Solution:
Considerati
ontr
ansfer
red 1,200,000
NCI 300,000
Previ
ouslyheldequi
tyint
eresti
ntheacquir
ee -
Total 1,500,000
Fairv
alueofnetidenti
fi
ableasset
sacquir
ed(1.
7M –.
4M) (
1,300,000)
Goodwi l
l 200,000

4. Sol
uti
on:
Consi
der
ati
ontr
ansf
err
ed(
10,
000sh.x₱100) 1,
000,
000
 Page|
5

Non-contr
oll
ingint
eresti
ntheacquir
e -
Previ
ouslyheldequi
tyint
eresti
ntheacquir
ee -
Total 1,000,000
Fairval
ueofnetidenti
fi
ableasset
sacquir
ed(1.
8M –.
9M) (900,000)
Goodwill 100,000

5. Solution:
Considerati
ontr
ansferr
ed 1,
500,
000
Non-control
li
ngint
eresti
nt heacqui
re 800,
000
Previ
ouslyheldequi
tyinter
estintheacquir
ee -
Total 2,
300,
000
Fairval
ueofnetidenti
fi
ableassetsacquir
ed
(
5M +80Kcustomerl
ist–2.8M –30Kl
iabi
li
tyonoper
ati
ng
l
easewit
hunfavor
abl
et er
ms) (
2,250,000)
Goodwi
ll 50,000

6. Solution:
Considerati
ontr
ansferr
ed 1,
600,
000
Non-control
li
ngint
eresti
nt heacqui
re -
Previ
ouslyheldequi
tyinter
estintheacquir
ee -
Total 1,
600,
000
Fairval
ueofnetidenti
fi
ableassetsacquir
ed
(
3.5M +120KDTA–1.
9M –100Kcont
ingentl
iabi
li
ty–30KDTL) (
1,590,000)
Goodwi
ll 10,000
 Page|
6

Carr
yingamt.-fi
n'l
.rept
g. Taxbase TTD(DTD)
Asset
s 3,500,
000 3, 000 (
800, 300,
000)
Li
abil
it
ies 1,900,
000 2, 000 100,
000, 000
Conti
ngentl
i
abili
ty 100,000 - (100,
000)

Deduct
ibl
etempor
arydi
ff
erence(
DTD) 400,
000
Mul
ti
plyby
:Taxr
ate 30%
Def
err
edt
axasset 120,
000

Taxabl
etempor
arydi
ff
erence(
TTD) 100,
000
Mul
ti
plyby
:Taxr
ate 30%
Def
err
edt
axl
i
abi
l
ity 30,
000

PROBLEM 5:MULTI
PLECHOI
CE-THEORY
1. C
2. C
3. B
4. C
5. D
6. B
7. D
8. D
9. A
10.D
11.C
12.D
13.B
14.D
15.C

PROBLEM 6:MULTI PLECHOI

CE-COMPUTATI
ONAL
1. ASolut
ion:
Consi
der
ati
ontransf
err
ed
1M +(
200KxPVofor
dinar
yannui
tyof1@ 12%,
n=5) 1,
720,
955
 Page|
7

NCI(3.4M –1.
7M)x20% 340,
000
Previ
ouslyhel dequi
tyint
eresti
ntheacquir
ee -
Total 2,
060,
955
Fairvalueofnetidenti
fi
ableasset
sacquir
ed(3.
4M–
1.
7M) (
1,700,000)
Goodwi
ll 360,955

2. CSol uti
on:
Consider
ati
ontransfer
red 1,
200,
000
NCI(1.2M ÷80%)x20% 300,
000
Previ
ouslyhel
dequityint
eresti
ntheacquir
ee -
Total 1,
500,
000
Fairv
alueofnetidenti
fi
ableasset
sacquir
ed
(
3.3M –150Kcost
stosel
l–1.
7M) (
1,450,000)
Goodwi
ll 50,000

3. CSol ut
ion:
Consider
ati
ontransfer
red(2,
000sh.x₱500) 1,
000,
000
NCI -
Previ
ousl
yheldequityint
erestintheacquiree -
Total 1,
000,
000
Fairv
alueofnetidenti
fi
ableassetsacquired
(
2.8M –1.
6M) (
1,200,
000)
Gai
nonbar
gai
npur
chase (200,
000)

4. ASol ut
ion:
Consider
ati
ontransfer
red 2,
600,
000
NCI -
Previ
ousl
yheldequityint
eresti
ntheacquir
ee -
Total 2,
600,
000
Fairv
alueofnetidenti
fi
ableasset
sacquir
ed
(
5.9M +90Ki
nt.assetonopt
g.l
ease–3.
5M –10Kcont
.li
ab.
) (
2,480,000)
Goodwi
ll 120,000

5. BSol ut
ion:
Consider
ati
ontransfer
red 2,
400,
000
NCI -
Previ
ousl
yheldequityint
eresti
ntheacquir
ee -
Total 2,
400,
000
Fairv
alueofnetidenti
fi
ableasset
sacquir
ed
(
2.860M –20Krecor
dedgoodwi
ll+60KR&D+99KDTA
–.480M –78KDTL) (
2,441,
000)
Gai
nonbar
gai
npur
chase (41,
000)
 Page|
8

Fair Pr evi
ous
val
ues Car ry
ing
  (
CAf or amount s TTD(
DTD)
fi
nancial (TBf or
r
eporti
ng) taxati
on)
Cash 10,
000 10,000 -
Recei
vabl
es–net 280,
000 400,000 (
120,000)
Inv
entor
y 350,
000 480,000 (
130,000)
Land 2,200,
000 2,000,000 200,000
R&D 60,
000 - 60,000
Payabl
es 480,
000 400,000 (
80,000)

Taxabl
etempor
arydi
ff
erence(
200K+60K) 260,
000
Mul
ti
plyby
:Taxr
ate 30%
Def
err
edt
axl
i
abi
l
ity 78,
000

Deduct
ibl
etempor
arydi
ff
erence(
120K+130K+80K) 330,
000
Mul
ti
plyby
:Taxr
ate 30%
Def
err
edt
axasset 99,
000

PROBLEM 7:MULTI
PLECHOI
CE–PFRSf
orSMEs
1. C

2. B
Solut
ion:
Considerat
iontr
ansfer
red 1,000,000
NCIintheacquiree 200,000
Previ
ouslyheldequi
tyint
eresti
ntheacquir
ee -
Total 1,200,000
Fairv
alueofnetidenti
fi
ableasset
sacquir
ed (800,000)
Goodwi l
l 400, 000
 Page|
9

3. D
Sol
uti
on:
Purchasecost 1,
000,
000
Acquisi
ti
on-r
elat
edcosts 100,
000
Total 1,
100,
000
Int
eresti
nnetident
if
iabl
easset
sacqui
red
(
800Kx75%) (
600,000)
Goodwi
ll 500,000

4. A

5. C