CMPC Quiz 1

On January 2, 2018, Peter Corporation acquired 80 percent of Soc Company’s
P10 par ordinary shares for P1,365,000. On this date, the book value of Soc’s net
assets was P1,400,000. The fair value of Soc’s identifiable assets and liabilities
were the same as their carrying amounts except for plant assets (10-year life),
which were P140,000 in excess of the carrying amount. For the year ended
December 31, 2018, Soc had net income of P266,000 and paid cash dividends
totaling P175,000. In the December 31, 2018 consolidated statement of financial
position, Non-controlling interest in Net Assets of Subsidiary should be
reported at:
 P323,400
P330,400
P326,200
P308,000
On April 1, 20x5, Arlene Inc. paid P2,125,000 for all the issued and outstanding
ordinary shares of Bianca Corporation. On that date, the total cost and total fair
value of Bianca’s net assets are P1,575,000 and P1,625,000 respectively. In
Arlene’s March 31, 20x6 consolidated statement of financial position, what is the
amount of goodwill that should be reported as a result of this business
combination?
P550,000
P536,250
 P500,000
P487,500
The non-controlling interest account:

should be shown in the consolidated statement of financial position in a separate
section between liabilities and equity.
deduction from goodwill, if any.
must be reported by means of a note to consolidated financial statements.
 should be shown in the consolidated statement of financial position as an
element of shareholders’ equity.
Consolidated statements worksheet elimination entries are posted in:
 neither the parent company’s nor the subsidiary’s accounting records.
the parent company’s accounting records only.
both the parent company’s and the subsidiary’s accounting records.
the subsidiary’s accounting records only.
In a share acquisition business combination resulting in a parent-subsidiary

relationship, the parent company’s Investment in Subsidiary Stock account
balance is:
displayed among non-current assets in the consolidated statement of financial position.
used as a basis for adjusting the subsidiary’s asset and liability account balances in the
subsidiary’s books to current fair values.
allocated to individual asset and liability accounts in a parent company journal entry.
 eliminated through a consolidated statements worksheet elimination entry
When subsidiary financial statements are consolidated,

its financial records are merged with those of the parent company
 its financial records are combined with those of the parent company
All of the above are true
the subsidiary is liquidated combined
According to the entity theory, in an allocation schedule prepared for a stock

acquisition to be consolidated, any undervalued subsidiary assets are:
consolidated at fair value only if the consideration given is greater than the fair value of
the subsidiary’s net identifiable assets
consolidated at fair value
 consolidated at fair value only if the consideration given is greater than the book
value of the subsidiary’s net identifiable assets
consolidated at book value plus the controlling interest share of the excess of fair value
over book value
Consolidated financial statements are prepared when a parent-subsidiary
relationship exists in recognition of the accounting principle or concept of:
Going Concern
Materiality
 Entity
Reliability
Aviene Corporation acquired 90 percent of the ordinary shares of Shelly

Company on March 31, 20x6, at book value. Shelly reported net income of
P112,000 for the year 20x6 and paid no dividends. Prior to the acquisition by
Aviene, Shelly had 20x6 revenues of P133,000 and expenses of P100,800. Aviene
reported income of P196,000 from its own operations for 20x6. Consolidated net
income for 20x6 is:
P216,160
P267,820
P308,000
 P275,800
On the date of acquisition under a share acquisition business combination, the

difference between the fair values and book values of the subsidiary’s
identifiable net assets are:
recognized in the applicable asset and liability accounts of the subsidiary.
accounted for in some other manner.
recognized in the applicable asset and liability accounts of the parent.
 included in the consolidated statements worksheet elimination.
In a share acquisition business combination resulting in a parent–subsidiary

relationship, the difference between current fair values and book values of the
subsidiary’s identifiable net assets on acquisition date are:
Accounted for in appropriately titled ledger accounts in the parent company’s
accounting records
disregarded
entered in the accounting records of the subsidiary.
 provided in a consolidated statement worksheet elimination
Consolidated financial statements are intended primarily for the use of:
Taxing authorities
Management of the parent company
 Shareholders of the parent company
Creditors of the parent company
In an allocation schedule prepared for stock acquisition to be consolidated, any

direct acquisition costs:
are included in the price paid for the acquisition
are deducted from parent company’s share premium
are debited to a goodwill account
 are accounted for as acquisition expense by the parent company
On January 2, 2014, Mau Corporation acquired 70 percent of the ordinary shares

of Krista Company for P825,000. At that date, Krista had P862,500 of ordinary
shares outstanding and accumulated profits of P277,500. Equipment with a
remaining life of 5 years had a book value of P420,000 and a fair value of
P450,000. Krista’s remaining assets had book values equal to their fair values.
All intangibles except goodwill are expected to have remaining lives of 10 years.
The income and dividend figures for both Mau and Krista are as follows:
P409,500 and P1,711,500 respectively

 P409,500 and P1,699,500 respectively
On January 2, 20x6, Shane Corporation acquired an 80% investment in Dave
Company. The acquisition cost was equal to Shane’s equity in Dave’s net assets
at that date. On January 2, 20x6, Shane and Dave had accumulated profits of
P625,000 and P125,000 respectively. During 20x6, (1) Shane had net income of
P250,000, which included its equity in Dave’s earnings, and declared dividends
of P62,500; (2) Dave had net income of P50,000 and declared dividends of
P25,000; and (3) there were no other intercompany transactions. On December
31, 20x6, the consolidated accumulated profits should be:
P812,500
P822,500
 P832,500
P852,500

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On January 2, 2018, Peter Corporation acquired 80 percent of Soc Company’s

The non-controlling interest account:

In a share acquisition business combination resulting in a parent-subsidiary

When subsidiary financial statements are consolidated,

According to the entity theory, in an allocation schedule prepared for a stock

Aviene Corporation acquired 90 percent of the ordinary shares of Shelly

On the date of acquisition under a share acquisition business combination, the

In a share acquisition business combination resulting in a parent–subsidiary

In an allocation schedule prepared for stock acquisition to be consolidated, any

On January 2, 2014, Mau Corporation acquired 70 percent of the ordinary shares

P409,500 and P1,711,500 respectively

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