ACC 113 Week 1 (Questionnaire)

WEEK 1 ONLINE ASSESSMENT
ACC 113 | BUSINESS COMBINATION

By: Ronnie M. Enriquez, CPA
MULTIPLE CHOICE QUESTIONS

1. This type of acquisition refers its acquirer as parent and its acquiree as subsidiary.
a. Asset Acquisition
b. Liability Acquisition
c. Net Asset Acquisition
d. Shares Acquisition
2. Food Panda Corporation is a growing company. One of its competitors, Grab Food, is bought by Food Panda
Corp. This type of combination is also called
a. Horizontal Combination
b. Conglomerate
c. Vertical Combination
d. None of the above
3. Which among the following formula does not represent Merger

a. Z + X = Z
b. F + D = F
c. Z + X = X
d. Z + X = Y
4. Which of the following assets of the acquired company is not recognized in combination of accounts of acquirer
and acquiree?
a. Patent
b. Research and Development
c. Goodwill
d. Cash
5. The assets and liabilities of Acquiree are remeasured at _________ before acquisition and combining of accounts.
a. Realizable value
b. Historical value
c. Face value
d. Fair value
6. In a Net Asset Acquisition/Merger, which of the following modes of consideration is not usually used?
a. Payment through Acquirer’s Cash
b. Transfer of Acquirer’s Property
c. Acquisition of Acquiree’s Shares
d. Issuance of shares for Acquiree
7. Which of the following Acquisition-related cost are charged to Share Premium instead of Retained Earnings?
a. Attorney’s fees
b. Accounting services expense
c. Marketing Expense
d. Share issuance cost
8. In the acquirer’s separate financial statement, what account is debited when there is a shares acquisition?
a. Goodwill
b. Investment Property
c. Investment in Subsidiary
d. Patent
9. Contingent costs are included as part of consideration or cost of acquisition if the following conditions are
achieved, except
a. The amount is measurable
b. The amount is probable
c. The amount recognizable
d. None of the above
10. The sum of cash given, property transferred, or equity instruments issued, contingent costs, and direct cost if
the acquirer is an SME is also called
a. Cost of Business Combination
b. Accounting for Business Combination
c. Business Combination
d. Total Assets, Liabilities and Equity
11. In the terms of PFRS 3 Business Combinations, if Z Co. bought a second-hand iPhone for P30,000 from X Co.
which the latter formerly bought for P20,000. If Y Co. is willing to buy the iPhone for P40,000 and yet X Co. still
sold it to Z Co. The P10,000 difference, assuming it is a business combination, is called
a. Goodwill
b. Positive Goodwill
c. Loss on Bargain Purchase
d. Gain on Bargain Purchase
12. Based on the preceding number, if Y Co. and others is only willing to buy the iPhone for P25,000 and still X Co.
sold it to Z Co., how much is goodwill?
a. No goodwill
b. P5,000
c. P10,000
d. P15,000
13. The Assets in the Balance Sheet after merger combination/net asset acquisition are computed from
a. Acquirer + Acquiree
b. Acquirer only
c. Acquiree only
d. Acquirer - Acquiree
14. The Liability in the Balance Sheet after merger combination/net asset acquisition are computed from
b. Acquirer only
c. Acquiree only
15. The Equity in the Balance Sheet after merger combination/net asset acquisition are computed from
b. Acquirer only
c. Acquiree only
16. During net asset acquisition, before merger combination, the Acquirer’s assets are measured at
a. Realizable value
b. Carrying Value
c. Face Value
d. Fair Value
17. What is the method used in accounting for business combinations?

a. Purchase method
b. Acquirer’s method
c. Pooling of interest method
d. Acquiree’s method
18. Assume that Cute Co. acquires 60% interest of Ako Co. for P80,000. Ako Co. has 100,000 total outstanding shares.
If outside investors are only willing to buy Ako Co. shares for P1.20/share, how much is the control premium?
a. P20,000
b. P16,000
c. P10,000
d. P8,000
19. Based on the preceding number, instead of P1.20/share, outside investors are willing to buy P1.50/share. How
much is the control discount?
a. P20,000
b. P16,000
c. P10,000
d. P8,000
20. A company acquired 80% interest of another company to gain control. Based on PFRS 3, 20% interest of the
acquired company is called?
a. Minority interest
b. Non-controlling interest
c. Affiliate interest
d. Love interest
OPEN-ENDED PROBLEMS
Problem No. 1
Listed below are the balance sheets at December 31, 2023 of RICCI Company and ANDREA Enterprises, respectively
before the business combination. On December 31, 2023, RICCI acquires the asset and liabilities (net assets) of
ANDREA for P150,000 cash.
RICCI ANDREA
Cash 189,000 30,000
Accounts Receivable 67,000 18,000
Land 124,000 52,000
Buildings, net 234,000 160,000
Equipment, net 201,000 156,000
Total Assets 815,000 416,000
Accounts Payable 78,000 89,000

Bonds Payable 125,000 182,000
Share Capital, P10 par 360,000 80,000
Share Premium 123,000 16,000
Retained Earnings 129,000 49,000
Total Liabilities and Equity 815,000 416,000
RICCI and ANDREA agreed to assess the fair values of the ANDREA’s net assets, and the following are what is
gathered:
Accounts Receivable, P3,000 overstated
Buildings, net, P10,000 understated
Equipment, net, P3,000 overstated
Bonds Payable, P2,000 understated
In connection with the acquisition, RICCI also paid out-of-pocket costs: P2,100 for direct acquisition cost and P1,300
for indirect acquisition cost.
Answer the following questions:

21. Compute the Goodwill/(Gain on Bargain Purchase)
22. Combined Total Assets
23. Combined Total Liabilities
24. Combined Total Equity
Problem No. 2
Based on the preceding number, assume all relevant information are the same aside from the following information:
Instead of P150,000 cash, RICCI decided to issue its own shares to acquire ANDREA. 4,600 new shares are issued in
consideration thereof. The issued shares have a market value of P35 each. Upon issuance, RICCI incurred P8,600 share
issuance and registration cost.

25. Compute the Goodwill/(Gain on Bargain Purchase)
26. Combined Total Assets
27. Combined Total Liabilities
28. Combined Total Equity
29. RICCI Total Outstanding Shares
Problem No. 3
ALBANY COMPANY acquired 80% of the issued share capital of BUTCHER ENTERPRISES on December 31, 2020 for a
total consideration of P1,440,000 (at P17.60 per share plus control premium). At this date, the identifiable net assets
of BUTCHER ENTERPRISES which were carried in its books at P1,200,000, were deemed to have a fair value of
P1,600,000. Share capital of BUTCHER ENTERPRISES comprised 100,000 shares, which were traded at the stock
exchange on 31 December 2020 at P17.60 per share.

I. Using the Fair Value Method, compute the following:
30. Control Premium
31. Non-controlling Interest
32. Goodwill attributable to Parent/Acquirer
33. Goodwill attributable to Subsidiary/NCI/Acquiree
II. Using the Proportionate Share Method, compute the following:
34. Non-controlling Interest
35. Goodwill attributable to Parent/Acquirer
36. Goodwill attributable to Subsidiary/NCI/Acquiree

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WEEK 1 ONLINE ASSESSMENT

ACC 113 | BUSINESS COMBINATION

MULTIPLE CHOICE QUESTIONS

3. Which among the following formula does not represent Merger

17. What is the method used in accounting for business combinations?

Accounts Payable 78,000 89,000

Answer the following questions:

Answer the following questions:

Answer the following questions:

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