PROBLEM 1:
On December 2026, Killua Ltd. acquired all the assets and liabilities of Gon Ltd. with Killua Ltd. issuing
100,000 shares to acquire these net assets. The fair value of Gon Ltd. 's assets and liabilities at this date
were:
Cash P50,000
Furniture and Fittings 20,000
Accounts Receivable 5,000
Plant 125,000
Accounts Payable 15,000
Current Tax Liability 8,000
Provision for annual leave 2,000
The financial year for Killua Ltd. is January-December.
The fair value of each Killua Ltd. share at acquisition date is 1.90. At acquisition date, the acquirer could
only determine a provisional fair value for the plant. On March 1, 2026, Killua Ltd, received the final
value from the independent appraisal, the fair value at acquisition date being P131, 000. Assuming the
plant had a further five year life from the acquisition date.
The amount of goodwill arising from the business combination at December 1, 2025?
PROBLEM 2:
On January 1, 20x1, Pea Co. acquired all the assets and assumed all the liabilities of Nuts Co. for
1,600,000. Nuts Co.'s assets and liabilities as of this date are as follows:
Carrying amount Fair value
Petty cash fund 80,000 80,000
Held for trading securities 120,000 132,000
Inventory 200,000 220,000
Land 60,000 144,000
Buildings, net 300,000 576,000
Equipment, net 160,000 290,000
Goodwill 50,000
Total Assets 970,000
Accounts payable 50,000 50,000
Bonds payable 200,000 208,000
Share capital (P1 par) 500,000
Share premium 80,000
Retained earnings 140,000
Total liabilities and equity 970,00
Additional information:
Nuts Co. incurred legal fees of P50,000 on the acquisition.
Nuts Co. has an unrecorded patent with a fair value of P250,000 and an unrecorded warranty
liability with a fair value of P24,000.
PROBLEM 3:
On January 1, 20x1, KNAVE acquired 80% of the equity interests of RASCAL, Inc. in exchange for cash.
Because the former owners of RASCAL needed to dispose of their investments in RASCAL by a specified
date, they did not have sufficient time to market RASCAL to multiple potential buyers.
As January 1, 20x1, RASCAL’s identifiable assets and liabilities have fair values of 2,400,000 and 800,000,
respectively.
KNAVE Co. elects the option to measure non-controlling interest at fair value. A value of ₱250,000 is
assigned to the 20% non-controlling interest in RASCAL, Inc. [(₱2M ÷80%) x 20% = 500,000]. If KNAVE Co.
paid ₱2,000,000 cash as consideration for the 80% interest in RASCAL, Inc., how much is the goodwill
(gain on bargain purchase) on the business combination?
PROBLEM 4:
On July 1, 20x1, SUV Co. acquired all the identifiable assets and assumed all the liabilities of Pickup, Inc.
for P800,000. On acquisition date, Pickup's identifiable assets and liabilities have fair values of
P1,200,000 and P300,000, respectively.
Additional information:
Pickup has an unrecognized intangible asset for secret processes. SUV Co. assigned a provisional
amount of P200,000 for this asset because its fair value is not readily determinable on
acquisition date. The provisional amount is included in the total valuation of the assets acquired.
The intangible asset was initially assigned a useful of 10 years. SUV uses the straight line method
and records amortization only at each year-end.
On February 1, 20x2, an independent consultant determined that the intangible asset's fair value
on acquisition date was P20,000 and that the useful life was 4 years.
How much is the goodwill (gain on bargain purchase) on the business combination?
PROBLEM 5:
On January 1, 2022, Joy, Co. and Sadness, Inc. combined. As of this date, the book values
of the assets, liabilities and equity of Joy and Sadness before the business combination are
as follows:
JOY CO. SADNESS, INC.
Asset
Petty Cash Fund 10,000.00 10,000.00
Cash In bank 700,000.00 800,000.00
Receivables 490,000.00 250,000.00
Inventory 500,000.00 150,000.00
Investment held for Trading Securities 450,000.00
Building 1,300,000.00 850,000.00
Goodwill 250,000.00 140,000.00
Total Assets 3,700,000.00 2,200,000.00
Liability and Equity
Liabilities 750,000.00 350,000.00
Share Capital 1,900,000.00 1,000,000.00
Share Premium 650,000.00 530,000.00
Retained Earnings 400,000.00 320,000.00
Total Liability and Equity 3,700,000.00 2,200,000.00
INFORMATION:
Last year, on July 1, 2021, Joy, Co. acquired 45% ownership interest in Sadness, Inc.
for P 450,000.00. Joy classified the investment as ‘Held for Trading Securities’ (FVPL).
Now, January 1, 2022, Joy, Co. paid P250,000.00 cash from the bank in exchange for an
additional 10% ownership interest in Sadness, Inc. The following relevant Information follows:
a. The previously held interest of Joy are currently quoted at 20% higher than its book
value.
b. The assets and liabilities of Sadness are all equivalent to their market values.
c. Joy elected to measure NCI at ‘proportionate share’.
Answer the following:
1. How much is the consideration Transferred?
2. How much is the Non-Controlling Interest?
3. How much is the Fair Value of previously held equity interest in the acquiree?
4. How much is the unrealized gain in Profit and Loss?
5. How much is the fair value of the net identifiable assets acquired?
6. How much is the goodwill (gain on bargain purchase) on the business
combination?
7. How much is the total Goodwill in the books of Joy, Co. after the business
combination?
8. How much is the Investment in Subsidiary account in the books of Joy, Co. after
the business combination?
9. How much is the total assets of Joy, Co. after the business combination?