Reference no: EM133295988
Questions
1. On January 1, 2021, Harrison Co. acquired all of the identifiable assets and assumed all of the liabilities of Plaza, Inc. by paying cash of ?4,000,000. On this date, the identifiable assets acquired and liabilities assumed have fair values of ?6,400,000 and ?3,600,000, respectively. As of January 1, 2021, Harrison holds a building and a patent which are being rented out to Plaza, Inc. under operating leases. Harrison has determined that the terms of the operating lease on the building compared with market terms are favorable. The fair value of the differential is estimated at ?80,000. How much is the goodwill (gain on bargain purchase)?
a. 1,080,000
b. 1,200,000
c. 1,280,000
d. 1,120,000
2. On January 1, 2021, Maligo Co. acquired all of the identifiable assets and assumed all of the liabilities of Malinis, Inc. by paying cash of ?4,000,000. On this date, the identifiable assets acquired and liabilities assumed have fair values of ?6,400,000 and ?3,600,000, respectively. Additional information: 1. Maligo intends to sell immediately a factory plant included in the identifiable assets of Malinis. All of the "held for sale" classification criteria under PFRS 5 are met. As of January 1, 2021, the factory plant has a fair value of ?1,200,000 and a carrying amount of ?1,000,000 in the books of Malinis. Costs to sell the factory plantis ?80,000. 2. Not included in the identifiable asset of Malinis is a research and development intangible asset that Maligo does not intend to use. The fair value of this asset is ?200,000. 3. Also, not included in the identifiable asset of Malinis is a customer list, with an estimated value of ?40,000, in the form of a database where the nature of the information is subject to national laws regarding confidentiality. How much is the goodwill (gain on bargain purchase)?
a. 1,280,000
b. 1,200,000
c. 1,040,000
d. 1,080,000
3. On January 1, 2021, Minie Co. acquired one-third equity interest in Anne Co. which resulted in Minie having significant influence over Anne Co. On July 1, 2024, Minie Co. acquired a further one-third equity interest in Anne Co. which resulted in Minie having a controlling interest over Anne. For financial reporting purposes, which of the following statements is correct?
a. Goodwill shall be computed both on January 1, 2021 and July 1, 2024 because the transactions are considered to constitute a 'step acquisition.'
b. Goodwill shall be computed only on January 1, 2021. The subsequent change in ownership interest which did not result to loss of control is accounted for directly in equity.
c. Goodwill shall be computed on July 1, 2024 and the one-third equity interest acquired in 2021 affects the goodwill computation.
d. Goodwill shall be computed on July 1, 2024 and the one-third equity interest acquired in 2021 does not affect the goodwill computation.
3. On January 1, 2021, Myday Co. acquired 90% of the identifiable assets and assumed all of the liabilities of Story, Inc. by paying cash of ?4,000,000. On this date, Story's identifiable assets and liabilities have fair values of ?6,400,000 and ?3,600,000, respectively. Non-controlling interest has a fair value of ?320,000. As of January 1, 2021, Story had the following which were not included in the acquisition-date fair value measurement of liabilities: 1. Story has an existing contract with a customer to deliver products at a specified future date. In accordance with the agreement, Story shall pay a penalty for failure to deliver the said goods. Myday determined that the fair value of the penalty is ?40,000. However, because Myday expects to comply with the agreement, it was assessed that payment of penalty is improbable. 2. Story has guaranteed a bank loan of a third party. Myday shall replace Story as the guarantor. If the third party defaults on the loan, Myday will be held liable for the guarantee. Myday determined that the fair value of the guarantee is ?120,000. However, both Story and Myday believe that the third party will not default on its loan from the bank. 3. There is a pending unresolved litigation filed by a third party against Story. Myday determined that the fair value of settling the litigation is ?200,000. However, because the legal counsels of both Myday and Story strongly believe that they will win the case, it was assessed that payment for the settlement of the litigation is improbable. How much is the goodwill (gain on bargain purchase)?
a. 1,880,000
b. 1,520,000
c. 1,200,000
d. 1,560,000