137 Wk2

Front

Goku Holdings purchases 100% of the shares of Piccolo Ltd. for ₱800 million in cash. Piccolo Ltd. continues to operate as a wholly-owned subsidiary. Goku Holdings appoints the entire board of Piccolo Ltd. and integrates Piccolo’s operations under its corporate strategy.

Question:
Who is the acquirer?
A) Piccolo Ltd.
B) Goku Holdings
C) A joint arrangement
D) Neither—it’s an asset purchase

Back

Answer: B) Goku Holdings
Explanation:
This is a clear business acquisition where Goku Holdings obtains control of Piccolo Ltd. through purchase of all equity, board appointment, and operational integration. PFRS 10 defines control, and PFRS 3.B14 confirms the acquirer as the entity that obtains control.

Front

Vegeta Corp. and Bulma Enterprises agree to merge into a new legal entity named Capsule Corp. Both Vegeta Corp. and Bulma Enterprises are dissolved. The shareholders of Vegeta Corp. receive 55% of Capsule Corp.’s voting shares, and Bulma’s shareholders receive 45%. The senior management team is primarily from Vegeta Corp.

Question:
Who is the acquirer in this merger?
A) Vegeta Corp.
B) Bulma Enterprises
C) Capsule Corp.
D) No acquirer—it’s a merger of equals

Back

Answer: A) Vegeta Corp.
Explanation:
Even though a new legal entity is formed, Vegeta Corp. is identified as the acquirer because its former shareholders hold the majority of voting rights and its management dominates the new entity (PFRS 3.B16–B18). IFRS 10 emphasizes control through power and returns.

Front

Frieza Group owns 80% of Cooler Ltd. and 60% of King Cold Inc. Both subsidiaries operate in the same industry. Frieza Group decides to consolidate them into a single reporting entity called Frieza Consolidated Corp., but Cooler Ltd. and King Cold Inc. remain separate legal entities under Frieza Group’s control.

Question:
In this consolidation, who is the acquirer?
A) Cooler Ltd.
B) King Cold Inc.
C) Frieza Group
D) Frieza Consolidated Corp.

Back

Answer: C) Frieza Group
Explanation:
This is a consolidation of existing subsidiaries under common control. No new acquisition occurs, but for accounting purposes, Frieza Group is considered the controlling entity (acquirer) of both subsidiaries under PFRS 10. PFRS 3 does not apply because it’s not a new business combination.

Front

SpongeBob Burgers Inc. acquires Patrick Starfish Ltd. for ₱800,000 cash. The fair value of Patrick’s net identifiable assets is ₱750,000. What is the goodwill recognized?
A) ₱50,000
B) ₱800,000
C) ₱750,000
D) ₱0

Back

Answer: A) ₱50,000
Calculation:
Goodwill = Consideration transferred − Fair value of net identifiable assets
= ₱800,000 − ₱750,000 = ₱50,000
Standard: PFRS 3.32

Front

Squidward Clarinet Corp. issues 10,000 shares (fair value ₱100/share) to acquire 100% of Sandy Cheeks Ltd. The fair value of Sandy’s net assets is ₱950,000. How much is the gain on bargain purchase (if any)?
A) ₱50,000 gain
B) ₱50,000 goodwill
C) ₱0
D) ₱1,000,000 goodwill

Back

Answer: A) ₱50,000 gain
Calculation:
Consideration = 10,000 × ₱100 = ₱1,000,000
Fair value of net assets = ₱950,000
Excess = ₱1,000,000 − ₱950,000 = ₱50,000 (Negative goodwill → Gain on bargain purchase)
Standard: PFRS 3.34

Front

Mr. Krabs Restaurants acquires Plankton Chum Bucket for ₱500,000 cash. Fair value of Plankton’s equipment is ₱300,000, patents ₱150,000, and liabilities assumed ₱80,000. What is the fair value of net identifiable assets?
A) ₱370,000
B) ₱450,000
C) ₱420,000
D) ₱500,000

Back

Answer: A) ₱370,000
Calculation:
Net identifiable assets = Assets − Liabilities
= (₱300,000 + ₱150,000) − ₱80,000 = ₱370,000
Standard: PFRS 3.18

Front

Gary Snails Ltd. acquires Pearl Krabs Co. for ₱2,000,000. The fair value of Pearl’s net assets is ₱1,850,000. Included in liabilities is a lawsuit contingency with a fair value of ₱100,000 (not recognized by Pearl before acquisition). What is the goodwill?
A) ₱150,000
B) ₱250,000
C) ₱50,000
D) ₱200,000

Back

Answer: A) ₱150,000
Calculation:
Net identifiable assets (₱1,850,000) already includes the effect of the lawsuit liability.
Goodwill = ₱2,000,000 − ₱1,850,000 = ₱150,000?
Actually, if the lawsuit was not previously recognized, net identifiable assets would be lower.
If net assets before lawsuit = ₱1,950,000, minus lawsuit ₱100,000 = ₱1,850,000.
Goodwill = ₱2,000,000 − ₱1,850,000 = ₱150,000.
But the question likely tests if you include the contingency in net assets. The answer remains ₱150,000.

Front

Karen Plankton Robotics acquires Computer Wife Ltd. for ₱1,500,000 cash plus contingent consideration of ₱200,000 if profits exceed ₱300,000 next year. FV of contingent consideration at acquisition date is ₱150,000. FV of net identifiable assets is ₱1,400,000. Compute goodwill.
A) ₱250,000
B) ₱300,000
C) ₱100,000
D) ₱200,000

Back

Answer: A) ₱250,000
Calculation:
Total consideration = Cash + FV of contingent consideration
= ₱1,500,000 + ₱150,000 = ₱1,650,000
Goodwill = ₱1,650,000 − ₱1,400,000 = ₱250,000
Standard: PFRS 3.37

Front

Mermaid Man & Barnacle Boy Ventures acquires Dirty Bubble Inc. on July 1, 2024. Provisional fair value of net assets is ₱900,000. Before the measurement period ends, new info shows net assets are actually ₱950,000. The adjustment is made on March 1, 2025. What is the corrected goodwill if consideration was ₱1,000,000?
A) ₱100,000
B) ₱50,000
C) ₱150,000
D) ₱0

Back

Answer: B) ₱50,000
Calculation:
Revised net assets = ₱950,000
Goodwill = ₱1,000,000 − ₱950,000 = ₱50,000
Adjustments are retrospective to acquisition date.
Standard: PFRS 3.45

Front

Larry the Lobster Gym acquires Mrs. Puff Boating School for ₱1,200,000. FV of Mrs. Puff’s net assets is ₱1,100,000, but a customer list (intangible) with FV ₱80,000 was not initially recognized. During measurement period, it is identified. What is the final goodwill?
A) ₱100,000
B) ₱20,000
C) ₱180,000
D) ₱80,000

Back

Answer: B) ₱20,000
Calculation:
Revised net assets = ₱1,100,000 + ₱80,000 = ₱1,180,000
Goodwill = ₱1,200,000 − ₱1,180,000 = ₱20,000
Standard: PFRS 3.45