Scribd Logo
Upload

Welcome to Scribd!

  • 818 views

    Intermediate Accounting Exam 2

    Uploaded by

    BLACKPINKLisaRoseJisooJennie
    This document provides instructions and questions for an intermediate accounting exam. It begins with general instructions to read questions carefully and show work. It then warns that cheating will not be tolerated. The first question provides a scenario where a business is purchasing a competitor. It asks the student to calculate goodwill based on the competitors past earnings and current asset value. It provides the calculations to arrive at a proposed purchase price that includes goodwill. The remaining questions are multiple choice that test understanding of concepts related to impairment of assets, including recoverable amount definitions and recognition and measurement of impairment losses.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    Intermediate Accounting Exam 2

    Uploaded by

    BLACKPINKLisaRoseJisooJennie
    818 views1 page
    This document provides instructions and questions for an intermediate accounting exam. It begins with general instructions to read questions carefully and show work. It then warns that cheating will not be tolerated. The first question provides a scenario where a business is purchasing a competitor. It asks the student to calculate goodwill based on the competitors past earnings and current asset value. It provides the calculations to arrive at a proposed purchase price that includes goodwill. The remaining questions are multiple choice that test understanding of concepts related to impairment of assets, including recoverable amount definitions and recognition and measurement of impairment losses.

    Original Title

    INTERMEDIATE ACCOUNTING EXAM 2

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    This document provides instructions and questions for an intermediate accounting exam. It begins with general instructions to read questions carefully and show work. It then warns that cheating will not be tolerated. The first question provides a scenario where a business is purchasing a competitor. It asks the student to calculate goodwill based on the competitors past earnings and current asset value. It provides the calculations to arrive at a proposed purchase price that includes goodwill. The remaining questions are multiple choice that test understanding of concepts related to impairment of assets, including recoverable amount definitions and recognition and measurement of impairment losses.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    818 views1 page

    Intermediate Accounting Exam 2

    Uploaded by

    BLACKPINKLisaRoseJisooJennie
    This document provides instructions and questions for an intermediate accounting exam. It begins with general instructions to read questions carefully and show work. It then warns that cheating will not be tolerated. The first question provides a scenario where a business is purchasing a competitor. It asks the student to calculate goodwill based on the competitors past earnings and current asset value. It provides the calculations to arrive at a proposed purchase price that includes goodwill. The remaining questions are multiple choice that test understanding of concepts related to impairment of assets, including recoverable amount definitions and recognition and measurement of impairment losses.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    You are on page 1of 1

    INTERMEDIATE ACCOUNTING EXAM 2

    General Rule: Please, read all the questions properly, observe carefully the problems, and answer the following
    with intelligence. You must put your solutions at the back of the paper, which is written clearly and readable.
    WARNING! Cheating is not allowed, being caught on act of cheating that person/s will face a great consequence. (20
    Points)

    1. Let us assume that a buyer is planning to buy the business of a competitor. The cumulative net earnings for the past 5
    years were P18,000,000. The current value of net assets of the seller was P10,000,000 only. Meaning if the buyer is able
    to acquire the assets and assume the liabilities at fair value, the purchase price would only be P10,000,000. But let us say
    that buyer will account for the past performance of the seller and determine it as a contributor to additional income in the
    future from the purchase of the seller’s business. Goodwill is determined by the following assuming a 20 percent rate of
    return and a 25% capitalization rate.

    Average earnings (18M / 5) P3,600,000


    Less: Normal earnings (10M x 20%) 2,000,000
    Excess earnings or earnings from goodwill 1,600,000
    Capitalized at 25% or divided by 25%
    Goodwill P6,400,000

    • The purchase price will then be P16,400,000 which is the price at fair
    value plus the goodwill added to the fair value.

    Average earnings (18M / 5) P3,600,000


    Capitalized at 25% or divided by 25%
    Purchase price 14,400,000

    1.The recoverable amount of an impaired asset is equal to its


    a. fair value less cost to sell
    b. fair value less cost to sell or value in use, whichever is lower.
    c. value in use.
    d. fair value less cost to sell or value in use, whichever is higher.

    2.Which of the following statements pertaining to the recognition and measurement of an impairment loss is/are valid?
    I. An impairment loss is the amountby which the carrying amount of an asset exceeds its recoverable amount.
    II. After the recognition of an impairment loss, depreciation of theasset for the future periods should be equal to the
    revised carryingamount less its residual value allocated on a systematic basis overits original life.
    III. An impairment loss shall be recognized in profit or lossimmediately.
    IV. If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset shall be reduced
    to its recoverable amount.
    a. I, II, III and IV
    b. I, III and IV
    c. I, II andIV
    d. II only

    You might also like