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ACP312 - 2nd Exam (Theories)

The document outlines key distinctions and accounting principles related to business combinations, including mergers and consolidations. It emphasizes the acquisition method for accounting, the treatment of expenses, and the implications of goodwill and non-controlling interests in financial statements. Additionally, it addresses misconceptions about control and the requirements for recognizing business combinations.

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barba.mari2020
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10 views2 pages

ACP312 - 2nd Exam (Theories)

The document outlines key distinctions and accounting principles related to business combinations, including mergers and consolidations. It emphasizes the acquisition method for accounting, the treatment of expenses, and the implications of goodwill and non-controlling interests in financial statements. Additionally, it addresses misconceptions about control and the requirements for recognizing business combinations.

Uploaded by

barba.mari2020
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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1.

​ A merger is different from consolidation because


-​ A merger dissolves one of the combining entities, but consolidation
dissolves all of the combining entities.
2.​ An entity shall account for each business combination by applying:
-​ Acquisition method only
3.​ Which of the following is not included in the price paid in an acquisition type
business combination?
-​ Investment banker’s finder’s fee for the combination
4.​ Working paper eliminations are entered in:
-​ Neither the parent company’s nor the subsidiary’s accounting records
5.​ The date the acquirer obtains control of the acquiree and the date of transfer
of consideration always coincide.
-​ False
6.​ In a business combination, a transfer of consideration by the acquirer is
required.
-​ False
7.​ P Company paid P10,000 to its accountant in acquiring S Company. P
Company shall record the P10,000 as:
-​ An expense
8.​ In stock acquisition resulting in a parent-subsidiary relationship, differences
between current fair values and book values of the subsidiary’s identifiable net
assets on the date of acquisition are:
-​ Provided in a working paper elimination.
9.​ The acquirer should not carry or record the contra-accounts of the acquiree’s
receivable, loans, and PPE.
-​ True
10.​To be able to direct an entity’s operating and financial policies shows that you
have significant influence over the entity.
-​ False
11.​Which of the following is an example PFRS 3 Business combination?
-​ None of the choices.
12.​If the impairment of the value of the goodwill is seen to have reversed, the
entity shall:
-​ Not reverse the impairment change.
13.​Under the acquisition of net assets method, the Statement of Financial
Position of the acquirer at the date of acquisition includes all the assets,
liabilities, and equity of the acquiree.
-​ False
14.​The measurement period is the period prior to the acquisition date when the
fair value of the net assets of the acquired entity is determined.
-​ False
15.​The preparation of consolidated financial statements is done because in form
and substance the acquirer and acquiree are one entity.
-​ False
16.​In a business combination through stock acquisition, the result of the business
combination is shown in the books of the acquirer.
-​ False
17.​An acquirer should purchase more than 50% of the common stocks of the
acquiree in order to gain control.
-​ False
18.​The fair value of the goodwill reported in the books of the acquiree should be
ignored in the calculation of goodwill of the new acquisition.
-​ True
19.​The non-controlling interest is included in total as a component of
shareholders’ equity in consolidated financial statement.
-​ True
20.​An acquirer may not be required to be identified for all business combination.
-​ False

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