M 206

The balance sheet of Salt Company, along with market values of its assets and liabilities, is as
follows: Salt Company Book value Market value Dr (Cr) Dr (Cr) Current assets P 2,000,000 P
1,500,000 Plant & equipment (net) 30,000,000 35,000,000 Patents 100,000 2,000,000 Completed
technology 0 10,000,000 Broader Customer base 0 16,000,000 Technically skilled workforce
3,000,000 Potentially profitable future contracts 2,000,000 Licensing agreements 0 4,000,000
Potential contracts with new customers 1,500,000 Advertising jingles 1,000,000 Future cost savings
1,800,000 Goodwill 200,000 700,000 Liabilities (28,000,000) (30,000,000) Common stock, P10 par
(1,000,000) Additional paid-in capital (5,000,000) Retained earnings 1,700,000 Now assume Pail
Company pays P10,000,000 in cash to acquire the assets and liabilities of Salt Company. Pail records
a bargain purchase gain on acquisition of:
Group of answer choices
P28,500,000
P12,500,000
P17,500,000
Zero
Pail paid P100,000,000 in cash for Salt. Three months later, Salt’s patents are determined to have
been worthless as of the date of acquisition. The entry to record this information includes
A debit to retained earnings of P2,000,000.
A debit to loss of P2,000,000.
A debit to patents of P2,000,000.
A debit to goodwill of P2,000,000.
On February 28, 2023, MER Company merged with GER Company. MER exchanged three of its
ordinary shares for each share of GER’s ordinary shares. The fair value of MER’s ordinary shares
was P10/share. Total consideration transferred by MER company amounted to P900,000. Acquisition
cost paid by MER related to the business combination amounted P30,000. The statement of financial
position accounts prior to the merger are presented below (all amounts are in Philippine Peso): GER
Co. MER Co. Book Value FMV Current Assets 120,000 80,000 110,000 Plant Assets 450,000
360,000 820,000 Goodwill 90,000 20,000 Current Liabilities 105,000 50,000 50,000 Notes Payable
120,000 Bonds Payable 300,000 280,000 Ordinary Shares (P1 par) 150,000 (P5 par) 225,000
Retained Earnings (Deficit) 210,000 (40,000) What is the amount of goodwill after the merger?
1
P 90,000
P390,000
Some other amount.
P300,000
On April 1, 2025, the Rado Company paid P600,000 for the net assets of Citizen Company in a
transaction properly accounted for as an acquisition. On this date, the assets and liabilities of Citizen
Company were Cash 60,000 Merchandise inventory 180,000 Plant assets (net) 360,000 Liabilities
135,000 Furthermore, it was determined that the merchandise inventory of Citizen Company had a
fair market value of P142,500 and the plant assets of P420,000. What should be the amount recorded
as goodwill by Rado Company as a result of the business combination?
None of the given
P112,500
P0
P 37,500
Octane Company and Bio Company have announced terms of an exchange agreement under which
Octane will issue 10,000 shares of its P5 par value ordinary shares to acquire all of Bio's assets.
Octane shares are trading at P28, and Bio's P10 par value shares are trading at P15. Historical cost
and fair value balance sheet data on January 1, 2016, are as follows: Octane Company Bio Company
Book Value Fair Value Book Value Fair Value Cash 125,000 125,000 25,000 40,000 Land 75,000
120,000 30,000 50,000 Buildings and Equipment 180,000 220,000 120,000 150,000 TOTAL
ASSETS 380,000 465,000 175,000 240,000 Ordinary Share Capital 150,000 100,000 Share Premium
60,000 20,000 Retained Earnings 170,000 55,000 TOTAL EQUITIES 380,000 175,000 Based on the
information provided, what amount of goodwill will be reported immediately following the business
combination in the combined company’s statement of financial position?
P0
P50,000
2
P40,000
P105,000
Pre-consolidation condensed statement of financial position data for constituent companies ME and
YOU follow (all amounts are in Philippine Peso): ME YOU Assets 212,000 150,000 Liabilities
62,500 50,000 Ordinary Shares, P100 par 100,000 62,500 Share Premium 12,500 25,000 Retained
Earnings 37,500 12,500 Liabilities and Equity 212,500 150,000 The shareholders of ME and YOU
agree to consolidate into a new corporation, MY Corporation. The shares of the new corporation are
to be exchanged for the shares of the constituent companies on 5-for-1 basis. The shares of MY
Corporation have a par value of P15/share. After the business combination, what is the total amount
of ordinary shares?
P 46,875
P162,500
P121,875
P 4,875
Prior to being united in a business combination, AA, Inc., and WS Corporation had the following
stockholders’ equity figures: AA WS Ordinary Shares, (P1 par value)………………… P 180,000 P
45,000 Share Premium…................…………………….. 90,000 20,000 Retained
earnings……………………………… 300,000 110,000 AA issues 51,000 new shares of its ordinary
shares valued at P3 per share for all of the outstanding stock of WS. Assume that AA acquires WS
immediately afterward. What are the Share Premium and Retained Earnings, respectively?
P192,000 and P300,000
P110,000 and P410,000
P212,000 and P410,000
P104,000 and P300,000

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The balance sheet of Salt Company, along with market values of its assets and liabilities, is as

Group of answer choices

Group of answer choices

A debit to retained earnings of P2,000,000.

A debit to loss of P2,000,000.

A debit to patents of P2,000,000.

A debit to goodwill of P2,000,000.

Some other amount.

Group of answer choices

None of the given

Group of answer choices

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