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ACC 113 - SAS - Day - 20

ACC 113

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86 views3 pages

ACC 113 - SAS - Day - 20

ACC 113

Uploaded by

Princessanne Torillo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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ACC 113: Accounting for Business Combinations

Student Activity Sheet #20

Name: ______________________________________________________ Class number: ______


Section: ____________ Schedule: ________________________________ Date: _____________

Materials:
Student Activity Sheet; Columnar
notebook; calculator; textbook

QUIZ (Written Assessment) References:

Millan, Zeus Vernon B.;


Accounting for Business
Combinations; 2019 Edition;
Dayag, Antonio J.; Advanced
Financial Accounting and
Reporting, 2016 Edition

Instructions: Encircle the letter of choice that corresponds to your answer. Erasure is strictly not allowed.
1. Consolidated financial statements are typically prepared when one company has a controlling financial
interest in another unless:
a. The subsidiary is a finance company.
b. The fiscal year-ends of the two companies do not coincide.
c. The two companies are in unrelated industries, such as manufacturing and real estate.
d. The parent is in itself a subsidiary of another entity, its debt or equity instruments are not traded in a
public market, and its ultimate parent produces consolidated general-purpose financial statements that comply
with PFRSs.

2. If the impairment of the value of goodwill is seen to have reversed, then the company may
a. Reverse the impairment charge and credit income for the period.
b. Reverse the impairment charge and credit retained earnings.
c. Not reverse the impairment charge.
d. Reverse the impairment charge only if the original circumstances that led to the impairment no longer
exist and credit retained earnings.

3. When NCI is measured at proportionate share,


a. goodwill is attributed only to the owners of the parent.
b. goodwill is attributed to both the owners of the parent and NCI.
c. goodwill impairment is allocated to both the owners of the parent and NCI.
d. b and c

This document is the property of PHINMA EDUCATION


ACC 113: Accounting for Business Combinations
Student Activity Sheet #20

Name: ______________________________________________________ Class number: ______


Section: ____________ Schedule: ________________________________ Date: _____________

4. On January 1, 20x1, ABC Co. acquired 80% interest in XYZ, Inc. by issuing 5,000 shares with fair value
of ₱15 per share. On this date, XYZ’s total equity was ₱74,000. The investment in subsidiary is measured at
cost.

XYZ’s assets and liabilities approximate their fair values on January 1, 20x1 except for the following:
XYZ, Inc. Carrying amounts Fair values Fair value adjustments
Inventory 23,000 31,000 8,000
Equipment (4 yrs. remaining life) 40,000 48,000 8,000
Total 63,000 79,000 16,000

There were no intercompany transactions during 20x1. However, it was determined that goodwill is impaired
by ₱1,000.

How much is the goodwill attributable to NCI as of December 31, 20x1?


a. 550 b. 2,220 c. 620 d. 1,280

5. On January 1, 20x2, ABC Co. sells 60% out of its 80% interest in XYZ, Inc. for ₱100,000. ABC’s
remaining 20% interest in XYZ has a fair value of ₱25,000. This gives ABC significant influence over XYZ. The
statements of financial position immediately before the sale are shown below:

Statements of financial position


As at January 1, 20x2
ABC Co. XYZ, Inc. Consolidated
ASSETS
Cash 23,000 57,000 80,000
Accounts receivable 75,000 22,000 97,000
Inventory 105,000 15,000 120,000
Investment in subsidiary 75,000 - -
Equipment 200,000 50,000 260,000
Accumulated depreciation (60,000) (20,000) (84,000)
Goodwill - - 3,000
TOTAL ASSETS 418,000 124,000 476,000
LIABILITIES AND EQUITY
Accounts payable 43,000 30,000 73,000
Bonds payable 30,000 - 30,000
Total liabilities 73,000 30,000 103,000
Share capital 170,000 50,000 170,000
Share premium 65,000 - 65,000
Retained earnings 110,000 44,000 118,000
Non-controlling interest - - 20,000
Total equity 345,000 94,000 373,000
TOTAL LIAB. & EQTY. 418,000 124,000 476,000

This document is the property of PHINMA EDUCATION


ACC 113: Accounting for Business Combinations
Student Activity Sheet #20

Name: ______________________________________________________ Class number: ______


Section: ____________ Schedule: ________________________________ Date: _____________

How much is the gain (loss) on the disposal?


a. 38,000 b. 42,000 c. 62,000 d. 78,000

6. This type of group arises when a parent’s subsidiary has its own subsidiary (sometimes referred to as
‘sub-subsidiary’).
a. Vertical group b. Horizontal group c. Simple group d. D-shaped group

7. This type of group arises when a parent has a direct controlling interest in at least one subsidiary. In
addition, both the parent and the subsidiary together hold a controlling interest in another entity.
a. Vertical group b. Horizontal group c. Complex group d. D-shaped group

8. On January 1, 20x1, Subsidiary One acquires 60% interest in Subsidiary Two. On January 1, 20x3,
Parent acquires 80% interest in Subsidiary One. Identify the acquisition dates of Subsidiary One and
Subsidiary Two.
Subsidiary One Subsidiary Two
a. January 1, 20x1 January 1, 20x1
b. January 1, 20x3 January 1, 20x3
c. January 1, 20x1 January 1, 20x3
d. January 1, 20x3 January 1, 20x1

9. Parent acquires 80% interest in Subsidiary One on January 1, 20x1. Parent acquires 25% interest in
Subsidiary Two on January 1, 20x2. Subsidiary One acquires 30% interest in Subsidiary Two on January 1,
20x3.
Subsidiary One Subsidiary Two
a. January 1, 20x1 January 1, 20x1
b. January 1, 20x3 January 1, 20x3
c. January 1, 20x1 January 1, 20x3
d. January 1, 20x3 January 1, 20x1

10. Which of the following statements is true regarding push-down accounting?


a. The Philippine SEC requires push-down accounting if a subsidiary is “substantially wholly-owned,” i.e.,
parent’s ownership interest is at least 95%.
b. The Philippine SEC encourages push-down accounting if a parent’s ownership interest is 80% to less
than 95%.
c. The Philippine SEC prohibits push-down accounting if a parent’s ownership interest is less than 80%.
d. All of these are incorrect.

This document is the property of PHINMA EDUCATION

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