QQQQ 1111
QQQQ 1111
QQQQ 1111
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11/25/22, 1:03 PM QUIZ 1 - Accounting for Business Combinations (1st Sem SY2223)
SECTION *
BSA 3-4
BSA 3-5
BSA 3-6
BSA 3-7
BSA 3-8
BSA 3-11
BSMA 3-6
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11/25/22, 1:03 PM QUIZ 1 - Accounting for Business Combinations (1st Sem SY2223)
* (1 Point)
Ratio of the market value per share of the issuing company’s share capital to the market value
per share of the acquiree’s share capital
Ratio of the number of shares of the issuing company’s share capital to be exchanged for
each share of the acquiree’s share capital on the date of combination
Ratio of the total market value of the share capital issued to the total market value of share
capital received
Ratio of the number of shares of the acquiree’s share capital to be exchanged for each share
of the acquirer’s share capital
* (1 Point)
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11/25/22, 1:03 PM QUIZ 1 - Accounting for Business Combinations (1st Sem SY2223)
* (1 Point)
The entity whose equity interest are acquired (the legal acquiree) must be the acquirer for ac‐
counting purposes for the transaction to be considered a reverse acquisition.
In a reverse acquisition, the legal acquirer usually issues no consideration for the acquiree.
The accounting acquirer must meet the definition of a business for the transaction to be ac‐
counted as a reverse acquisition.
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11/25/22, 1:03 PM QUIZ 1 - Accounting for Business Combinations (1st Sem SY2223)
On the same date, the fair value of Acquirer’s identifiable assets and liabilities
assumed was P5,800 and P2,100 respectively while the fair value of Acquiree’s
net assets was the same as the carrying value.
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11/25/22, 1:03 PM QUIZ 1 - Accounting for Business Combinations (1st Sem SY2223)
* (1 Point)
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11/25/22, 1:03 PM QUIZ 1 - Accounting for Business Combinations (1st Sem SY2223)
The net assets of Acquiree are reflected at their fair values except for the
following:
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11/25/22, 1:03 PM QUIZ 1 - Accounting for Business Combinations (1st Sem SY2223)
10
On July 2, 2022, Acquirer issued 150,000 of its shares with a market value of
P120 per share for the assets and liabilities of Acquiree, and Acquiree was
dissolved. On the same day, Acquirer paid P50,000 for indirect cost and
P100,000 for SEC registration of equity securities.
How much is the total stockholders’ equity of Acquirer after the combination? *
(2 Points)
11
* (1 Point)
Indirect costs are charged against the fair value of the shares issued.
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12
* (1 Point)
13
Statement I. PFRS for SMEs should be applied to companies that are in the
process of filing financial statements for the purpose of issuing any class of
instruments in the public market.
* (1 Point)
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14
15
* (1 Point)
Recognize as an intangible asset and impairment test when a trigger event occurs
Recognize as an intangible asset and annual impairment test (or more frequently if impair‐
ment is indicated)
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16
Acquirer determined that the fair values of the assets acquired and liabilities
assumed approximated their book values. Acquirer also incurred and paid legal
and brokerage fees of P25,000 for business combination, share issue cost of
P15,000 and indirect acquisition costs of P10,000.
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11/25/22, 1:03 PM QUIZ 1 - Accounting for Business Combinations (1st Sem SY2223)
17
Acquirer Company issued 100,000 shares of its P5 par value ordinary share
capital with market value P510,000 for all the outstanding shares of Acquiree
Company on July 1, 2021. Acquirer also incurred legal fees of P35,000 and cost
of issuing and registering new shares of P15,000. On this date, the fair value of
the net asset of Acquiree was P450,000. The journal entry to record the business
combination should include:
* (1 Point)
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11/25/22, 1:03 PM QUIZ 1 - Accounting for Business Combinations (1st Sem SY2223)
18
Acquirer Company issued 80,000 new shares of its P5 par value ordinary shares
valued at P12 per share in exchange for 100,000 outstanding shares (P2 par
value) of Acquiree Company on March 31, 2022. The fair value and book value
of Acquiree’s identifiable assets and liabilities were the same except Inventory
which was overstated by P50,000 and Equipment which was understated by
P100,000. The financial statements of both companies were (see image below).
Acquirer also agreed to pay P500,000 one year after the acquisition date if the
net income of Acquiree will exceed P10,000,000. The fair value of the contingent
consideration is P300,000. Acquirer incurred the following costs: Finder’s Fee -
20,000; Professional Fee - 60,000; Other Indirect Cost - 10,000 and Printing and
Registration of Shares - 5,000.
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11/25/22, 1:03 PM QUIZ 1 - Accounting for Business Combinations (1st Sem SY2223)
19
On the same date, the fair value of Acquirer’s identifiable assets and liabilities
assumed was P5,800 and P2,100 respectively while the fair value of Acquiree’s
net assets was the same as the carrying value.
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20
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11/25/22, 1:03 PM QUIZ 1 - Accounting for Business Combinations (1st Sem SY2223)
21
The fair value and book value of Acquiree Company’s identifiable assets and
liabilities were the same except Equipment which was undervalued by P250,000
and Inventory which was overvalued by P100,000. Assuming that Acquirer
Company is an SME.
* (2 Points)
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22
The net assets of Acquiree are reflected at their fair values except for the
following:
How much is the total assets of Acquirer after the merger? * (2 Points)
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Statement I. The acquisition date should be the same as the date when the
acquirer legally transfers the consideration, acquires the assets and assumes the
liability.
Statement II. According to PFRS for SMEs, the acquirer measures non-
controlling interest (NCI) in the acquiree using either fair value or proportionate
share based on the accounting policy choice.
* (1 Point)
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11/25/22, 1:03 PM QUIZ 1 - Accounting for Business Combinations (1st Sem SY2223)
24
Acquirer Company issued 80,000 new shares of its P5 par value ordinary shares
valued at P12 per share in exchange for 100,000 outstanding shares (P2 par
value) of Acquiree Company on March 31, 2022. The fair value and book value
of Acquiree’s identifiable assets and liabilities were the same except Inventory
which was overstated by P50,000 and Equipment which was understated by
P100,000. The financial statements of both companies were (see image below).
Acquirer also agreed to pay P500,000 one year after the acquisition date if the
net income of Acquiree will exceed P10,000,000. The fair value of the contingent
consideration is P300,000. Acquirer incurred the following costs: Finder’s Fee -
20,000; Professional Fee - 60,000; Other Indirect Cost - 10,000 and Printing and
Registration of Shares - 5,000.
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11/25/22, 1:03 PM QUIZ 1 - Accounting for Business Combinations (1st Sem SY2223)
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* (1 Point)
All of the combining entities or businesses are ultimately controlled by the same party or
parties both before and after the business combination.
All of the combining entities transfer their net assets, or the owners of those entities transfer
their equity interests, to a newly formed entity.
26
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11/25/22, 1:03 PM QUIZ 1 - Accounting for Business Combinations (1st Sem SY2223)
27
Statement II. Under PFRS for SMEs, goodwill arising from business combination
is amortized over 10 years or its useful life whichever is longer.
* (1 Point)
28
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11/25/22, 1:03 PM QUIZ 1 - Accounting for Business Combinations (1st Sem SY2223)
29
* (1 Point)
If the initial accounting for a business combination is incomplete by the end of the reporting
period in which the combination occurs, the acquirer shall report in its financial statements
provisional amounts for the items for which the accounting is incomplete.
During the measurement period, the acquirer shall prospectively adjust the provisional
amounts recognized at the acquisition date to reflect new information obtained about facts
and circumstances that existed as of the acquisition date and, if known, would have affected
the measurement of the amounts recognized as of that date.
During the measurement period, the acquirer shall also recognize additional assets or liabilit‐
ies if new information is obtained about facts and circumstances that existed as of the acquisi‐
tion date and, if known, would have resulted in the recognition of those assets and liabilities
as of that date.
The measurement period ends as soon as the acquirer receives the information it was seeking
about facts and circumstances that existed as of the acquisition date or learns that more in‐
formation is not obtainable.
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* (1 Point)
Horizontal combination
Vertical combination
Conglomerate combination
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11/25/22, 1:03 PM QUIZ 1 - Accounting for Business Combinations (1st Sem SY2223)
31
* (1 Point)
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Acquirer determined that the fair values of the assets acquired and liabilities
assumed approximated their book values. Acquirer also incurred and paid legal
and brokerage fees of P25,000 for business combination, share issue cost of
P15,000 and indirect acquisition costs of P10,000.
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33
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11/25/22, 1:03 PM QUIZ 1 - Accounting for Business Combinations (1st Sem SY2223)
34
Acquirer paid P1,500,000 for the interest acquired plus P100,000 for costs
directly attributable to the acquisition and P20,000 for indirect costs. The
amount paid by Acquirer included a control premium of P50,000. Acquiree’s
carrying value of net assets is equal to their fair market values except of the
Inventory which was undervalued by 100,000 and Equipment which was
underdepreciated by P75,000.
35
* (1 Point)
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36
* (1 Point)
37
Statement II. Costs incurred in public offering of shares are charged to share
premium or retained earnings.
* (1 Point)
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11/25/22, 1:03 PM QUIZ 1 - Accounting for Business Combinations (1st Sem SY2223)
38
The fair value and book value of Acquiree Company’s identifiable assets and
liabilities were the same except Equipment which was undervalued by P250,000
and Inventory which was overvalued by P100,000. Assuming that Acquirer
Company is an SME.
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11/25/22, 1:03 PM QUIZ 1 - Accounting for Business Combinations (1st Sem SY2223)
39
Acquirer determined that the fair values of the assets acquired and liabilities
assumed approximated their book values. Acquirer also incurred and paid legal
and brokerage fees of P25,000 for business combination, share issue cost of
P15,000 and indirect acquisition costs of P10,000.
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40
Statement II. The acquirer shall measure the identifiable assets acquired and the
liabilities assumed at their reporting date fair value.
* (1 Point)
41
* (1 Point)
One corporation takes over the operations of another business entity and the acquired entity
is dissolved.
The acquired assets will be recorded at book values by the acquiring entity.
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11/25/22, 1:03 PM QUIZ 1 - Accounting for Business Combinations (1st Sem SY2223)
42
Acquirer Company issued 80,000 new shares of its P5 par value ordinary shares
valued at P12 per share in exchange for 100,000 outstanding shares (P2 par
value) of Acquiree Company on March 31, 2022. The fair value and book value
of Acquiree’s identifiable assets and liabilities were the same except Inventory
which was overstated by P50,000 and Equipment which was understated by
P100,000. The financial statements of both companies were (see image below).
Acquirer also agreed to pay P500,000 one year after the acquisition date if the
net income of Acquiree will exceed P10,000,000. The fair value of the contingent
consideration is P300,000. Acquirer incurred the following costs: Finder’s Fee -
20,000; Professional Fee - 60,000; Other Indirect Cost - 10,000 and Printing and
Registration of Shares - 5,000.
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11/25/22, 1:03 PM QUIZ 1 - Accounting for Business Combinations (1st Sem SY2223)
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