Ramon Magsaysay Technological University College of Accountancy and Business Administration Iba, Zambales Midterm Examination Name: Encircle

the correct answer. 1.Espana Branch was billed by Home Office for merchandise at 140% of cost, at the end of its first month, Espana branch submitted among other things, the following data: Merchandise from Home Office (at billed price) P98,000 Merchandise purchased locally by Branch P40,000 Inventory, December 31 of which P7,000 are of 28,000 local purchase Net sales for month 180,000 The branch inventory at cost and the gross profit of the branch as far the home office is concerned are: Gross Profit a. P22,000 b. 92,000 c. 70,000 d. 90,000 Ending Inventory of Branch at Cost P92,000 22,000 22,000 20,000 Date:

2. The Manila branch of the Great Company is billed for merchandise by the home office at 20% above cost. The branch in turn prices for sales purposes at 25% above billed price. On February 16 all of the branch merchandise is destroyed by fire. No insurance was maintained. Branch accounts show the following information: Merchandise inventory, January 1 (at billed price) Shipments from home office (Jan.1 Feb.16) Sales Sales returns Sales allowances P26,400 20,000 15,000 2,000 1,000

What was the cost of the merchandise destroyed by fire? a. b. c. d. P36,000 30,667 36,800 30,000

3. The home office bills its Aklan branch at 125% of cost. During the year 2011, goods costing P30,000 were shipped to the branch. The account allowance for overvaluation of branch inventory ,after adjustment, shows a balance of P14,000 at the end of the year. Compute the amount of ending inventory at: Cost a. P56,000 b. 3000,000 c. 56,000 d. 70,000 Billed Price P56,000 375,000 70,000 56,000

4.Lacoste Philippines has two merchandise outlets, its main store in manila and its Cebu City branch. For control purposes, all purchase are made by the main store, and shipments to the Cebu City branch are at the cost plus 10% On January 1, 2011, the inventories of the main store and the Cebu City branch were P13,600 and P3,960, respectively. During 2011, the main store purchased merchandise costing P40,000 and shipped 40% of these to the Cebu City branch.

At December 31,2011, the following journal entry was made to prepare the Cebu Cty branch books for the next accounting period: Sales Inventory Inventory Shipments from main store Expenses Main Store 32,000 4,840 3,960 17,600 10,480 4,800

(1) What was the actual branch income of 2011 on a cost basis, assuming the use of the provisions of the PAS, and (2) If the main store has P11,200 worth of inventory on hand at the end of 2011, the total inventory that should appear on the combined balance sheet at December 31, 2011. a. (1) P4,800 ; (2) P15,600 b. (1) P6,320 ; (2) P15,160 c. (1) P6,320 ; (2) P15,600 d. (1) P6,480 ; (2) P16,040 5. The best Co. bills merchandise shipments in its Cavite City branch at 125% of cost. The branch, in turn, sells the merchandise it receives from the home office at 25% above the billing price. On August 1, 2011, all of the branchs merchandise stock was destroyed by fire. The branch records that were recovered showed the following: Inventory, January 1, 2011 (at billed price) P 165,000 Shipments received from home office, January to P110,000 July (at billed price) Purchases, at cost from outside sources, all re-sold P7,500 at a 20% mark-up Sales P169,000 Sales returns and allowances P3,750 The best Co. will file an insurance claim. How much is the estimated cost of the merchandise destroyed by the fire? a. b. c. d. P120,000 P130,000 P140,000 P150,000

6. On August 31,2012, a fire destroyed totally the rented bodega or stockroom of Isabela Company. The following are some of the data of the company: Merchandise Inventory, Dec.31,2011 for the P110,000 period Jan.1 Aug. 31,2012 Purchases P560,500 Freight in P5,600 Purchase returns P10,200 Sales P695,000 Sales returns and allowances P7,500 Using a 20% gross profit rate, the cost of the merchandise lost in the fire was: a. b. c. d. P90,700 P115,900 P88,400 P63,200

7. Lobster Trading bills its Iloilo City branch for shipments of goods at 25% above cost. At the close of business on October 31,2011, a fire gutted at the branch warehouse and destroyed 60%of the merchandise stock stored therein. Thereafter, the following data were gathered:

January 1 inventory, at billed price Shipments from home office to Oct.31 Not sales to October 31

P50,000 P130,000 P225,000

If undamaged merchandise recovered are marked to sell for P30,000, the estimated cost of the merchandise destroyed by the fire was: a. b. c. d. P14,400 P21,600 P24,000 27,500

8. Trial balances for the home office and the branch of the Tony Co. show the following accounts before adjustments. On December 31, 2011. The home office policy of billing the branch for merchandise is 20% above cost. Home Office Unrealized intercompany P10,800 inventory profit Shipments to branch P24,000 Purchase (Outsiders) Shipments from home office Merchandise inventory, December 1, 2011 Branch

P7,500 P28,800 P45,000

What part of the branch inventory ass of December 1, 2011 represent purchases from outsiders and what part represents goods acquired from the home office? Outsiders a. P12,000 b. P16,500 c. P15,000 d. 9,000 Home Office P33,000 P28,500 P30,000 P36,000

9. Masaya Commercial Corp. maintains a branch in Iloilo City. Selected account balances taken from the books of Masaya and its Iloilo branch as of December 31, 2011 are as follows: Home Office Merchandise Inventory, Jan. 1, P12,000 2011 Purchases P150,000 Shipments from Home Office Shipments to branch P75,000 Branch Inventory Allowance P19,750 Sales P115,000 Merchandise Inventory Dec. 31, P14,000 2011 Branch P8,000 P30,000 P93,750

P176,500 P10,350

10. Selected balances from the Legaspi Companys Branch A and Branch B are as follows: Inventory, Jan. 1, 2011 Imprest Branch Fund Inventory Dec.31, 2011 A/ Receivable, Jan. 1, 2011 Merchandise from Home Office A/Receivable, Dec. 31, 2011 Cash Collections Sales Cash Expenses Branch A P21,000 P2,000 P19,000 P55,000 P61,000 P70,000 P85,000 P100,000 P21,000 Branch B P19,000 P1,500 P12,000 P43,500 P47,000 P53,500 P70,000 P80,000 P14,300

All sales, collections, anf expenses are handled at the branch. All cash received from sales and collections are sent directly to the Home Office. Expenses are paid by the branch from the imprest funf immediately reimbursed by the Home Office and credited to the Home Office account. All expenses paid by the branch are recorded in the books of the branch. Compute the balance of the Home Office account on January 1, 2011. Branch A Books a. P78,000 b. 75,000 c. P64,000 d. 78,000 Branch B Books P67,000 P64,000 P78,000 P64,000

11. The Dumaguete City branch Silliman Enterprises, Negros, was billed for merchandise shipments from home office at cost plus 25% in 2011 and cost plus 20% in 2012. Other pertinent data for 2012 show: Sales Inventory, beginning At cost At billed price Purchases Inventory transfers To Dumaguete, at cost From Negros, at billed price Inventory, end At cost At billed price Expenses Dumaguete Branch P63,000 Home Office P212,000 P23,000 P8,900 P164,000 P42,000 P50,400 P28,500 P11,700 P20,300 P76,400

Compute the (1) net income (loss) of Dumaguete City per branch books and (2) The combined net income (loss) of Siliman Enterprises. a. b. c. d. (1) P(4,900); (2) P18,740 (1) P(4,900); (2) P22,430 (1) P3,330; (2)P22,430 (1)P8,230; (2)P25,270

12. The Quezon City branch of Assers Enterprises, Manila, was billed for merchandise shipments from home office at cost plus 25% in 2011 and cost plus 20% in 2012. Other pertinent data for 2012 show: Sales Inventory, beginning At cost At billed price Purchases Inventory transfers To Quezon City, at cost From Manila, at billed price Inventory, end At cost At billed price Expenses Quezon City Branch P63,000 Home Office P212,000 P23,000 P8,900 P164,000 P42,000 P50,400 P28,500 P11,700 P20,300 P76,400

Compute the (1) realized inventory profit from branch sales(or overvaluation of cost of goods sold, and (2) The ending inventory that should be presented in the combined income statement. a. (1) P8,230; (2) P40,200 b. (1) P8,230; (2) P38,250

c. (1)P7,933; (2) P38,250 d. (1)P9,520; (2) P 37,860 13. Selected accounts from the December 31, 2011 trial balances of Betty Star Co. and its branch follow: Inventory, Jan.1 Branch Current Purchases Shipments from home office Freight in Expenses Home Office Current Sales Shipments to branch Branch merchandise markup 5 - Star P46,000 P116,600 P380,000 P104,000 (P310,000) (P200,000) (P22,000) Branch P23,100 P209,000 P10,450 P58,100 (P106,600) (280,000) -

As of December 31, 2011, a shipment with a billing price P11,000 was in transit to the branch. Freight cost, typically 5% of the billing price, is inventoriable. Merchandise on hand at year-end were: at home office, P64,000 at cost; at branch. P33,000 at billing price. Compute the (1) branch net income in so far as home office is concerned, and (2) the combined for 2011: a. b. c. d. (1) P40,900; (2) P84,900 (1) P32,100; (2) P76,100 (1) P32,000; (2) P76,000 (1) P33,000; (2) P77,000

14. The Kester Store operates a branch in Cebu. Operating data for the home office and the branch for 2011 are as follows: Sales Shipments to branch Purchases from outsiders Advertising expenses Salaries & commission expense Rent Expense Miscellaneous expense Shipment from home office Inventories, Jan.: Home Office Branch: Acquired from outsiders Acquired from office at billed price which is 20% above cost Inventories, Dec.31: Home Office Branch: Acquired from outsider Acquired from home office at 2011 billed price Home Office P365,000 P90,000 P220,000 P13,700 P35,000 P10,000 P3,3000 Branch P174,500 P35,000 P2,500 P9,500 P2,000 P500 P112,500

P85,000 P9,500 P42,000

P65,000 P6,500 P30,000

Compute the combined net income of Kester Store: a. b. c. d. P111,000 P63,000 P250,500 P174,000

15. The Iloilo Co. operates a branch in Davao. There are shipments in transit from home office to the branch. The home office ship merchandise to branch at 125% of cost in year 2011. Profit and loss data for the home office and branch for 2011 follows: Sales Purchases from outsiders Shipments to branch: Cost to Home Office Billing price to branch Expenses Inventories, Jan. 1, 2011 Home Office, acquired from outsiders, at cost Branch: acquired from outsiders, at cost Acquired from Home Office at billing price, which averaged 205 above cost Inventories, Dec. 31, 2011 Home Office, acquired from outsiders cost Branch: Acquired from Home Office, at 2011 billed price (physical count) Home Office P250,000 200,000 30,000 40,000 80,000 7,500 32,500 10,000 Branch P75,000 15,000

24,000

55,000 5,500 21,000

Compute the (1) amount of merchandise in transit, and (2) combined cost of goods sold. a. b. c. d. (1) P5,000; (2) P241,200 (1) 5,000; (2) 240,000 (1) P3,500; (2) P242,400 (1) 3,500; (2) 245,200

16. Betzier Company branch in Malate began operations on January 01,2011. During the first year of operations,the home office shipped merchandise to the Malate branch that cost P250,000 at a billed price of P300,000. One-fourth of the merchandise remained unsold at the end of 2011. The home office records the shipments to the branch at the P300,000 billed price at the time shipments are made. Freight-inof P2,000 on the shipments from the home office was paid by the branch. The home office should make an adjusting entry for freight-in as follows: a. b. c. d. A year-end adjusting entry debiting the branch account for P2,500 A year-end adjusting entry debiting the branch account for P2,000 A year-end adjusting crediting the branch account for P500 No year-end adjusting entry for the freight charge

17.Tagum Supply Company is engaged in merchandising both at its Home Office in manila and at its Branch in Davao City. Selected accounts taken from the trial balances of the Home office and the branch as of December 31, 2011 follow: Debits Inventory, January 1, 2011 Davao branch Purchases Freight in from Home Office Sundry Expenses Credits Home Office Sales Sales to branch Allowance for Overvaluation of branch inventory at Jan. 1, 2011 Manila P23,000 P58,000 P190,000 P52,000 PP155,000 P110,000 P1,000 Davao branch P11,550 P105,000 P5,500 P28,000 P53,300 P140,000 -

Additional Information: The davao City branch gets all of its merchandise from the home office. The home office bills the goods at cost plus a 10% mark up. At December 31, 2011 a shipment with a billed value of P5,000 was still in transit. Freight on its shipment was P250 and is to be treated as part of the inventory. Inventories on December 31, 2011, excluding the shipment in transit, follow: Home office, at costP30,000 Branch, at billed price (excluding freight of P520) P10,400 Compute the (1) net income of the home office from own operations, and (2) the net income of the branch in so far as home office is concerned. a. b. c. d. (1) P30,470;(2) P 870 (1) 20,000;(2) 10, 470 (1) P20, 000;(2) P870 (1) 30,470; (2) 10,470

18. The Brazil Corporation operates a branch in Mactan, Cebu.Trial balance of the Home Office and Mactan Branch at December 31, 2011 is reproduced below; Brazil Corporation Home Office and Branch Trial Balance December 31, 2011 Home Office Dr. Cash Accounts receivable Branch current Allowance for over-valuation In branch merchandise. Fixed assets (net) Accounts payable Home Office, Current Capital stock Retained earnings Sales Purchases Shipments from Home Office Shipments to branch Operating expences 28,000 16,000 8,000 89,800 P 2,800 2,0000 100,000 5,000 110,000 80,000 24,000 10,000 P243,800 P243,800 P46,800 P46,800 P1,400 8,000 37,400 Mactan Branch Dr. Cr P 3,400 7,000 5,000

Cr. P 12,000

Home Office inventory at December 31, 2011 was P20,000: while the composition of the Branch inventory was: From Home Office Outside Purchased Total January 1, 2011 P4,400 P600 P5,000 December 31, 2011 3,960 540 4,500 Shipments to branch are billed at 10% mark-up. The combined net income of the Home Office and branch for the year ended December 31,2011: a. P55,940 b. 53,500 c. 53,140 d. 48,000 19. Swift Corporation, operates a number of branches in Metro Manila. On june 30, 2011, its Sn. Lorenzo branch showed a Home Office Account balance of P27,350 and the home office books showed a Sn. Lorenzo branch account balance of P25,550. The following information may help in reconciling both accounts:

1. A P12,000 shipment, charged by Home Office to Sn. Lorenzo branch, was actually sent to and retained by Sto. Tomas branch 2. A P15,000 shipment, intended and charged to Sn. Jose branch was shipped to Sn. Lorenzo branch and trained by the latter. 3. A P2,000 emergency cash transfer from Sto. Tomas branch was not taken up in the Home Office books. 4. Home office collect a Sn Lorenzo branch accounts receivable of P3,600 and fails notify the branch. 5. Home office was charged for P1,200 for merchandise returned by Sn. Lorenzo branch on June 28.The merchandise is in transit. Home office erroneously recorded Sn. Lorenzos net income for May ,2011 at P16,275. The Branch reported a net income of P12,675. What is the reconciled amount of the Home Office and Sn. Lorenzo branch reciprocal accounts? a. P21,750 b. 23,750 c. 27,350 d. 20,150 20.On December 31, 2011, the Investment in Branch account on the home offices books has a balance of P102,00. In analyzing the activity in each of these accounts for December, you find the following differences: 1. A P12,000 branch remittance to the home office initiated on December 27, 2011, was recorded on the home office books on January 3, 2012. 2. A home office inventory shipment to the branch on December 28, 2011, was recorded by the branch on January 4,2012;the billing of P24,000 was at cost. The home office incurred P14,400 of advertisement expenses and allocated P6,000 of this amount to the branch on December 15,2011.The branch has not recorded this transaction. 3. A branch customer erroneously remitted P3,600 to the home office. The home office recorded this cash collection on December 23,2011. Meanwhile, back at the branch, no entry has been made yet. 4. Inventory costing P51,600 was sent to the branch by the home office on December 10, 2011. The billing was at cost, but the branch recorded the transaction at P40,800. Compute the balances as of December 31,2011: Unadjusted Balance Of the Home Office Account a. P 76,800 b. 52,800 c. 151,200 d. 52,800 Adjusted Balance of the Reciprocal Account P 114,00 93,600 139,200 90,000

21. Lakers Trading Co. operates a branch in Dagupan City. At close of business on December 31, 2011, Dagupan Branch account in the home office books showed a debit balance of P225,770. The interoffice accounts were in agreement at the beginning of the year. For purposes of reconciling the interoffice accounts, the following facts were ascertained: 1. An office equipment costing the home office P3,500 was picked up by the branch as P350. 2. Insurance premium of P675 charged by the home office was taken up twice by the branch. 3. Freight charge on merchandise made by the home office for P1,125 was recorded in the branch books as P1,215. 4. Home office credit memo representing a discount on merchandise for P800 was not recorded by the branch. 5. The branch failed to take up a P700 debit memo from the home office representing the share of the branch in advertising. 6. The home office inadvertently recorded a remittance for P3,000 from its Cebu branch as a remittance from its Dagupan branch. Compute he balance as of December 31,2011. Unadjusted Balance Of the Home Office Account a. P226,485 b. 228,485 Adjusted Balance Of the reciprocal account P225,770 228,770

c. d.

225,770 226,485

226,485 228,770

22. Company Z acquires 80% of Company Y for P10,000,000., carrying value of Company Y net assets at time of acquisition being P6,000,000 and fair value of these net identifiable assets being P8,000,000. Goodwill arising on consolidation is to be valued on the proportionate basis or Partial Goodwill: a. b. c. d. P1,600,000 P2,000,000 P3,600,000 P4,500,000

23. Using the same information in No.1, the amount of non-controlling interest arising on consolidation is to be valued on the proportionate basis or Partial Goodwill: a. b. c. d. P1,200,000 P1,600,000 P2,500,000 P3,000,000

24. Using the same information in No. 1, the amount of goodwill arising on consolidation is to be valued on the full (fair value) basis or Full/Gross-up Goodwill: a. b. c. d. P1,600,000 P2,000,000 P3,600,000 P4,500,000

25.Using the same information in No.1, the amount of non-controlling interest arising on consolidation is to be valued on the full (fair value) basis or Full/Gross-up Goodwill: a. b. c. d. P1,200,000 P1,600,000 P2,500,000 P3,000,000

26.Entity Subsidiary has 40% of its share publicly traded on an exchange. Entity Parent purchases the 60% non publicly traded shares in one transactions paying P6,300,000. Based on the trading price of the shares of Entity Subsidiary at the date of gaining control a value of P4,000,000 assigned to the 40% non-controlling interest (or fair value of non-controlling interest), indicating that Entity Subsidiaryhas paid as control premium of P300,000. The fair value of P5,000,000. Goodwill arising on consolidation is to be valued on the proportionate basis or Partial Goodwill: a. b. c. d. P2,000,000 P2,800,000 P4,000,000 P4,120,000

27. Using the same information in No.5, the amount of goodwill arising on consolidation is to be valued on the full (fair value) basis or Full/Gross-up Goodwill: a. b. c. d. P1,200,000 2,100,000 P3,300,000 P4,120,000

28. Using the same information in No.5, the amount of non-controlling interest arising on consolidation is to be valued on the full (fair value) basis or Full/Gross-up Goodwill: a. b. c. d. P2,000,000 P2,800,000 P4,000,000 P4,120,000

29. On September 1, 2011, Company P acquires 75% (750,000 ordinary shares) of Company S for P7,500,000 (P10 per share). In yhe period around the acquisition date,Company Ss shares are trading at about P8 per share. Company P pays a premium over market because of the synergies it believes it will get. Its it therefore reasonable to conclude that the fair value of Company Ss as a whole may not be P10,000. In fact, an independent valuation shows that the value of Company S is P9,700 (fair value of Company S). Assuming that the fair value of the net identifiable assets is P8,000,000 (carrying value is P6,000,000) Goodwill arising on consolidation is to be valued on the proportionate basis or Partial Goodwill; a. b. c. d. P200,000 P1,500,000 P1,700,000 P2,000,000

30. Using the same information in No. 33, the amount of non-controlling interest arising on consolidation is to be valued on the proportionate basis or Partial Goodwill a. b. c. d. P1,500,000 P1,875,000 P2,000,000 P2,200,000

31. Using the same information in No. 33, the amount of goodwill arising on consolidation is to be valued on the full (fair value) basis or Full/Gross-Up Goodwill; a. b. c. d. P200,000 P1,500,000 P1,7000,000 P2,000,000

32. using the same information in No. 33, the amount f non-controlling interest arising on consolidation is to be valued on the full(fair value) basis or Full Gross-Up Goodwill a. b. c. d. P1,500,000 P1,875,000 P2,000,000 P2,200,000

33. All the issued and outstanding common stock of Manila Company were bought by Makati Company on October 01,2011 for P700,000.The assets and liabilities of Manila Company are; Cash P50,000 Accts. Receivable (net of P25,000 allowance for 250,000 doubtful accounts) Inventory 150,000 Property and Equipment (net of P100,000 300,000 allowance for depreciation) Accounts/Notes Payable 130,000 On October 01,2011 the fair value of the following assets were as follows: Accts. Receivable (net) Inventory Property And equipment (net) P235,000 130,000 400,000

There is an unrecorded warranty liability on prior-product sales estimated P20,000 discounted cash flow based on estimated future cash flows: The amount of goodwill as a result of the business combination should be: a. b. c. d. P -035,000 65,000 100,000

34. Using the same information in No. 37, the amont of goodwill recorded in the books of Makati Co. as a result in the business combination should be: a. b. c. d. P0 35,000 65,000 100,000

35. On January 01,2011, Gold Rush Company acquires 80% ownership in California Corporation for P200,000. The fair value of non-controlling interest at that time is determined to be P50,000. It reports net assets with a bookvalue of P200,000 and fair value of P230,000. Gold Rush Company reports net assets with a book value of P600,000 and a fair value of P650,000 at that time, excluding its investment in California. What will be the amount of goodwill that would be reported immediately after the combination under current accounting practice if the option of full-goodwill method is used? a. b. c. d. P50,000 P40,000 P30,000 P20,000

36. The Lampara Company acquired a 70% interestin The Oak Company for P1,960,000 when the fair value of Oaks identifiable assets and liabilities was P700,000 and elected to measure the non-controlling interest at its share of the identifiable net assets. Annual impairment reviews of goodwill have not resulted in any impairment losses being recognized. Oaks current statement of financial position shows share capital of P100,000, a revaluation reserve of P300,000 and retained earnings of P1,400,000 Under PFRS 3 Business combinations, what figure in respect of goodwill should now be carried in Lamparas consolidated statement of financial position? a. b. c. d. P1,470,000 1,260,000 700,000 160,000

37. The Natural Company acquired 80% of The Loco Company for a consideration transferred of P100million. The consideration was estimated to include a control premium of P24million. Locos net assets were P85 million at the acquisition date. Are the following statements true or false,according to PFRS 3 Business combinations? (1) Goodwill should be measured at P32million if the non-controlling interest is measured at its share of Locals net assets. (2) Goodwill should be measured at P34million if the non-controlling interest is measured at fair value. Statement (1) a. false b. false Statement (2) False True Statement (1) c. True d. True Statement (2) False true

38. The Moon Company acquired a 70% interest in The Swan Company for P1,420,000 when the fair value of Swans identifiable assets and liabilities was P1,200,000. Moon acquired a 65% interest in The Homer Company for P300,000 when the fair value of Homers identifiable assets and liabilities was P640,000. Moon measures non-controlling interests at the relevant share of the identifiable net assets at the acquisition date.Neither Swan nor Homer had any contingent liabilities at the acquisition date and the above fair values were the same as the carrying amounts in their financial statements. Annual impairment reviews have not resulted in any impairment losses being recognized. Under PFRS 3 Business combinations, what figures in respect of goodwill and of gains on bargain purchases should be included n Moons consolidated statement in financial position? a. Goodwill: P580,000; Gains on the bargain purchases: P116,000 b. Goodwill: Nil or zero; Gains on the bargain purchases: P116,000

c. Goodwill: Nil or zero; Gains on the bargain purchases: Nil or zero d. Goodwill: P580,000; Gains on the bargain purchases: Nil or zero 39. On October 01,212 The Ting Company acquired 100% of The Green Company when the fair value of Greens net assets was P116million & their carrying amount was P120million. The consideration transferred comprised P200million in cash transferred at the acquisition date, plus another P60million in cash to be transferred 11 months after the acquisition date there was only a low probability of the profit target being met, so the fair value of the additional consideration liability was P10million. In the event, the profit target was met & the P60million cash was transferred. a. b. c. d. P80 million P84 million P94 million P144 million

40. 100% of the equity share capital of the Rau Company was acquired by The Swift Company on June 30,2012. Swift issued 500,000 new P1 ordinary shares which had a fair value of P8 each at the acquisition date. In addition, the acquisition resulted in Swift incurring fees payable to external advisers of P200,000 & share issue costs of P180,000. In accordance with PFRS 3 Business combinations, goodwill at the acquisition date is measured by subtracting the identifiable assets acquired and the liabilities assumed from: a. b. c. d. P40 million P4.18 million P4.20 million P4.39 million

1. Janes Corporation issues 45,000 shares of previously unissued of P10 per value common stock with a fair market value of P32 per share for net assets of DunnCorporation. Janes pays the following costs and expenses related to the business combination: Registering and issuing securities Accountants and legal fees Salaries of Joness employees assigned to the implementation of the merger Cost of closing duplicate facilities Cost of closing shareholders meeting to vote on the merger The expenses amounted to : a. b. c. d. P21,000 33,000 41,000 56,000 P15,000 8,000 16,000 12,000 5,000

2. Parent Corporation issued 100,000 shares of P20 for common stock for all the outstanding stock of Subsidiary Corporation in a business combination was consummated. Out-of-pocket costs of the business combination were as follows: Finders Fee Accountants fee (advisory) Legal fees (advisory) Printing cost SEC registration costs and fees P50,000 10,000 20,000 5,000 12,000 P79,000 The fair value of the consideration transferred accounting will be: a. P3,097,000 b. 3,080,000 c. 3,017,000 d. 3,000,000 3. Padyak Companys owns 80,000 shares of Sirkulo Corporations 100,000 outstanding common shares, acquired at book value. The December 31,2011, consolidated balance sheet represented by Padyak and Sirkulo included net assets of Sirkulo in the amount of P600,000. On January 01,2012, Sirkulo issues 25,000 additional shares of common stock to unrelated parties for P175,000. The amount to be credited to additional paid-in capital/share premium account: a. Zero b. P16,000 c. 55,000 d. 104,000 4.Baning Inc. buys 60% of the outstanding stock of Gra Inc. in an acquisition that resulted in the acquisition of goodwill. Gra owns a piece of land that cost P200,000 but wwas worth P500,000 at the acquisition date. What value should be attributed to this land in a consolidated balance sheet at the date of takeover? a. P120,000 b. 300,000 c. 380,000 d. 500,000 5. Paro Company purchased 80% of the voting common stock of Sabon Company for P900,000. There are no liabilities. The following book and fair are available for Sabon: Book Value Fair Value Current Assets P150,000 P300,000 Land & Building 280,000 280,000 Machinery 400,000 700,000 Bonds Payable (300,000) (250,000) Goodwill 150,000 ?

The bonds payable will appear on the consolidated balance sheet: a. At P300,000 (with no premium or discount shown) b. At P300,000 less a discount of $50,000 c. At P0; assets are recorded net of iabilities d. At P300,000 less a discount of P40,000 6. Chapel Hill Company had common stock of P350,000 and retained earnings of P490,000. Blue Town Inc. had common stock of P700,000 and retained earnings of P980,000. On January 01,2011, Blue Town issued 34,000 shares ofcommon stock with a P12 per value and a P35 fair value for all of Chapel Hill Companys outstanding common stock. This combination was accounted for as an acquisition. Immediately after the combination, what was the consolidated net asset? a. P2,870,000 b. 2,520,000 c. 1,680,000 d. 1,190,000 7. Pangasinan Branch of Malate Company, at the end of its first quarter of operations, submitted the following income statement: Sales Cost of Sales Shipments from Home Offices Local Purchase Total Inventory at the end Gross profit on sales Expenses Net Income P300,000 P280,000 P 30,000 P310,000 P 50,000

P260,000 P40,000 P35,000 P5,000

Shipments to the branch were billed at 140% of cost. The branch inventory at September 30 amounted to P50,000 of which P6,600 was locally purchased. Markup on local purchases, 20% over cost. Branch expenses incurred by Head Office amounted to P2,500 not yet recorded by the branch. Compute the (1) branch ending inventory that should be presented in the combined income statement, and (2) true branch net income. a. b. c. d. (1) P37,600 ; (2) P70,100 (1) P37,600 ; (2) P2,500 (1) P50,000 ; (2) P70,100 (1) P50,000 ; (2) P2,500

8. The income statement submitted by the Pampanga Branch to the Home Office for the month of December, 2011 is shown below. After effecting the necessary adjustments the true net income of the Branch was ascertained to be P156,000. Sales Cost of sales Inventory, December 1 Shipments from Home Office Local purchases Total available for sale Inventory, December 31 Gross margin Operating Expenses Net income for December, 2011 P600,000 P80,000 P350,000 P 30,000 P460,000 P100,000

P360,000 P240,000 P180,000 P60,000

The Branch inventories were: Merchandise from home offices Local purchases Total 12/01/2011 P70,000 P10,000 P80,000 12/31/2011 P84,000 P16,000 P100,000

(1) The billing price based on cost imposed by the home office to the branch, and (2) The balance allowance for overvaluation of branch December 31, 2011 after adjustment. a. (1) 140% ; (2) P10,000 b. (1) 140% ; (2) P24,000 c. (1) 40% ; (2) P24,000 d. (1) 40% ; (2)P16,000 9. The following information are extracted from the books and records of Rona Company and it branch. Te balances are at December 31, 2011 of the companys operations. Home Office Sales Shipments to branch P78,000 Shipments from home office Purchases Expenses Inventory, January 1, 2011 Allowance for overvaluation of P31,200 branch inventory Branch P260,000 P104,000 P39,000 P78,000 P26,000

However, no shipments in transit between the home office and the branch were made. Both shipments accounts are properly recorded. He ending inventory includes merchandise acquired from the home office in the amount of P26,000 and P7,800 acquired from outsiders for a total of P33,800. Compute the (1) realized inventory profit of home sales made by the branch, and (2) the amount of branch merchandise beginning inventory that was acquired from the home office? a. b. c. d. (1) P24,700 ; (2) P15,600 (1) P31,200 ; (2) P20,800 (1)P22,533 ; (2)P15,600 (1)P24,700 ; (2)P20,800

10. Best Buy Ventures operates a branch in Cebu City. Selected accounts taken from the May 31, 2012 statements of Best Buy and its branch follows: H/Office Branch Sales P380,000 P353,000 Shipments to branch P150,000 Shipments to branch loading P39,500 Inventory, June 1, 2011 P24,000 P16,000 Purchases P300,000 P60,000 Shipments from Home office P187,000 Inventory, May 31, 2012 P28,000 P20,700 The branch ending inventory included items costing P8,700 that were acquired from outside suppliers. The realized markup on branch merchandise that would be recognized by the home office is: a. b. c. d. P36,000 P36,700 P37,100 P37,500

11. The Bicol Corporation operates a branch in Naga City. The information from the December 31, 2011 trial balance are as follows: Sales Shipments to branch Purchases Shipments from Home office Inventory, January 1, 2011 Home Office P840,000 P280,000 P490,000 P140,000 Naga Branch P420,000

P350,000 P56,000

Inventory at December 31, Home Office P42,000; Branch P84,000 Compute the realized inventory profit of home office from sales made by the branch (the overvaluation of cost of goods sold? a. b. c. d. P56,000 P120,000 P64,400 P80,000