diff --git a/R/derive_merged.R b/R/derive_merged.R
index 7fbe55ab61..5a767b83a4 100644
--- a/R/derive_merged.R
+++ b/R/derive_merged.R
@@ -385,18 +385,26 @@ derive_vars_merged <- function(dataset,
       select(!!!by_vars_right, !!!replace_values_by_names(new_vars))
   }
 
+  if (!is.null(exist_flag)) {
+    add_data <- mutate(
+      add_data,
+      !!exist_flag := TRUE
+    )
+  }
+
   if (!is.null(missing_values)) {
-    exist_flag_var <- get_new_tmp_var(add_data, prefix = "tmp_exist_flag")
+    missing_values_var <- get_new_tmp_var(add_data, prefix = "tmp_missing_flag")
   } else {
-    exist_flag_var <- exist_flag
+    missing_values_var <- missing_values
   }
-
-  if (!is.null(exist_flag_var)) {
+  if (!is.null(missing_values_var)) {
     add_data <- mutate(
       add_data,
-      !!exist_flag_var := true_value
+      !!missing_values_var := TRUE
     )
   }
+
+
   # check if there are any variables in both datasets which are not by vars
   # in this case an error is issued to avoid renaming of varibles by left_join()
   common_vars <-
@@ -420,20 +428,22 @@ derive_vars_merged <- function(dataset,
   }
   dataset <- left_join(dataset, add_data, by = vars2chr(by_vars))
 
-  if (!is.null(missing_values)) {
+  if (!is.null(missing_values_var)) {
     update_missings <- map2(
       syms(names(missing_values)),
       missing_values,
-      ~ expr(if_else(is.na(!!exist_flag_var), !!.y, !!.x))
+      ~ expr(if_else(is.na(!!missing_values_var), !!.y, !!.x))
     )
     names(update_missings) <- names(missing_values)
     dataset <- dataset %>%
       mutate(!!!update_missings)
   }
-  if (!is.null(exist_flag_var)) {
+
+  if (!is.null(exist_flag)) {
     dataset <- dataset %>%
-      mutate(!!exist_flag_var := ifelse(is.na(!!exist_flag_var), false_value, !!exist_flag_var))
+      mutate(!!exist_flag := ifelse(is.na(!!exist_flag), false_value, true_value))
   }
+
   dataset %>%
     remove_tmp_vars()
 }
diff --git a/tests/testthat/test-derive_merged.R b/tests/testthat/test-derive_merged.R
index 337a2fc3ef..fe2ab77dac 100644
--- a/tests/testthat/test-derive_merged.R
+++ b/tests/testthat/test-derive_merged.R
@@ -193,8 +193,36 @@ test_that("derive_vars_merged Test 7: expressions for new_vars and missing_value
   )
 })
 
-## Test 8: use new variables in filter_add and order ----
-test_that("derive_vars_merged Test 8: use new variables in filter_add and order", {
+
+## Test 8: expressions for new_vars and missing_values and exist_flags ----
+test_that("derive_vars_merged Test 8: expressions for new_vars and missing_values and exist_flags", {
+  actual <- derive_vars_merged(
+    adsl,
+    dataset_add = advs,
+    by_vars = exprs(USUBJID),
+    order = exprs(AVISIT),
+    new_vars = exprs(LASTVIS = str_to_upper(AVISIT)),
+    mode = "last",
+    missing_values = exprs(LASTVIS = "UNKNOWN"),
+    exist_flag = matched,
+    true_value = "Yes",
+    false_value = "No"
+  )
+
+  expected <- adsl %>%
+    mutate(LASTVIS = c("WEEK 2", "BASELINE", "WEEK 4", "UNKNOWN"),
+           matched = c("Yes", "Yes", "Yes", "No"))
+
+
+  expect_dfs_equal(
+    base = expected,
+    compare = actual,
+    keys = "USUBJID"
+  )
+})
+
+## Test 9: use new variables in filter_add and order ----
+test_that("derive_vars_merged Test 9: use new variables in filter_add and order", {
   expected <- tibble::tribble(
     ~USUBJID, ~TRTSDT,      ~TRTSSEQ,
     "ST42-1", "2020-12-14",        2,
@@ -232,8 +260,8 @@ test_that("derive_vars_merged Test 8: use new variables in filter_add and order"
   )
 })
 
-## Test 9: warning if not unique w.r.t the by variables and the order ----
-test_that("derive_vars_merged Test 9: warning if not unique w.r.t the by variables and the order", {
+## Test 10: warning if not unique w.r.t the by variables and the order ----
+test_that("derive_vars_merged Test 10: warning if not unique w.r.t the by variables and the order", {
   expect_warning(
     actual <- derive_vars_merged(advs,
       dataset_add = adsl2,
@@ -246,8 +274,8 @@ test_that("derive_vars_merged Test 9: warning if not unique w.r.t the by variabl
   )
 })
 
-## Test 10: error if not unique w.r.t the by variables and the order ----
-test_that("derive_vars_merged Test 10: error if not unique w.r.t the by variables and the order", {
+## Test 11: error if not unique w.r.t the by variables and the order ----
+test_that("derive_vars_merged Test 11: error if not unique w.r.t the by variables and the order", {
   expect_error(
     actual <- derive_vars_merged(advs,
       dataset_add = adsl2,
@@ -261,8 +289,8 @@ test_that("derive_vars_merged Test 10: error if not unique w.r.t the by variable
   )
 })
 
-## Test 11: error if variables in missing_values but not in new_vars ----
-test_that("derive_vars_merged Test 11: error if variables in missing_values but not in new_vars", {
+## Test 12: error if variables in missing_values but not in new_vars ----
+test_that("derive_vars_merged Test 12: error if variables in missing_values but not in new_vars", {
   expect_error(
     derive_vars_merged(
       adsl,
@@ -279,8 +307,8 @@ test_that("derive_vars_merged Test 11: error if variables in missing_values but
 })
 
 # derive_var_merged_exist_flag ----
-## Test 11: merge existence flag ----
-test_that("derive_var_merged_exist_flag Test 11: merge existence flag", {
+## Test 13: merge existence flag ----
+test_that("derive_var_merged_exist_flag Test 13: merge existence flag", {
   actual <- derive_var_merged_exist_flag(
     adsl,
     dataset_add = advs,
@@ -300,8 +328,8 @@ test_that("derive_var_merged_exist_flag Test 11: merge existence flag", {
   )
 })
 
-## Test 12: by_vars with rename ----
-test_that("derive_var_merged_exist_flag Test 12: by_vars with rename", {
+## Test 14: by_vars with rename ----
+test_that("derive_var_merged_exist_flag Test 14: by_vars with rename", {
   actual <- derive_var_merged_exist_flag(
     adsl,
     dataset_add = advs1,
@@ -322,8 +350,8 @@ test_that("derive_var_merged_exist_flag Test 12: by_vars with rename", {
 })
 
 # derive_vars_merged_lookup ----
-## Test 13: merge lookup table ----
-test_that("derive_vars_merged_lookup Test 13: merge lookup table", {
+## Test 15: merge lookup table ----
+test_that("derive_vars_merged_lookup Test 15: merge lookup table", {
   param_lookup <- tibble::tribble(
     ~VSTESTCD, ~VSTEST, ~PARAMCD, ~DESCRIPTION,
     "WEIGHT", "Weight", "WEIGHT", "Weight (kg)",
@@ -360,8 +388,8 @@ test_that("derive_vars_merged_lookup Test 13: merge lookup table", {
 
 
 ## the lookup table
-## Test 14:  all by_vars have records in the lookup table ----
-test_that("derive_vars_merged_lookup Test 14:  all by_vars have records in the lookup table", {
+## Test 16:  all by_vars have records in the lookup table ----
+test_that("derive_vars_merged_lookup Test 16:  all by_vars have records in the lookup table", {
   param_lookup <- tibble::tribble(
     ~VSTESTCD, ~VSTEST, ~PARAMCD, ~DESCRIPTION,
     "WEIGHT", "Weight", "WEIGHT", "Weight (kg)",
@@ -396,8 +424,8 @@ test_that("derive_vars_merged_lookup Test 14:  all by_vars have records in the l
   )
 })
 
-## Test 15: by_vars with rename ----
-test_that("derive_vars_merged_lookup Test 15: by_vars with rename", {
+## Test 17: by_vars with rename ----
+test_that("derive_vars_merged_lookup Test 17: by_vars with rename", {
   param_lookup <- tibble::tribble(
     ~TESTCD, ~VSTEST, ~PARAMCD, ~DESCRIPTION,
     "WEIGHT", "Weight", "WEIGHT", "Weight (kg)",
@@ -433,8 +461,8 @@ test_that("derive_vars_merged_lookup Test 15: by_vars with rename", {
 
 
 # get_not_mapped ----
-## Test 16: not all by_vars have records in the lookup table ----
-test_that("get_not_mapped Test 16: not all by_vars have records in the lookup table", {
+## Test 18: not all by_vars have records in the lookup table ----
+test_that("get_not_mapped Test 18: not all by_vars have records in the lookup table", {
   param_lookup <- tibble::tribble(
     ~VSTESTCD, ~VSTEST, ~PARAMCD, ~DESCRIPTION,
     "WEIGHT", "Weight", "WEIGHT", "Weight (kg)",
@@ -472,8 +500,8 @@ test_that("get_not_mapped Test 16: not all by_vars have records in the lookup ta
 })
 
 # derive_var_merged_summary ----
-## Test 17: dataset == dataset_add, no filter ----
-test_that("derive_var_merged_summary Test 17: dataset == dataset_add, no filter", {
+## Test 19: dataset == dataset_add, no filter ----
+test_that("derive_var_merged_summary Test 19: dataset == dataset_add, no filter", {
   expected <- tibble::tribble(
     ~AVISIT,  ~ASEQ, ~AVAL, ~MEANVIS,
     "WEEK 1",     1,    10,       10,
@@ -499,8 +527,8 @@ test_that("derive_var_merged_summary Test 17: dataset == dataset_add, no filter"
   )
 })
 
-## Test 18: dataset != dataset_add, filter ----
-test_that("derive_var_merged_summary Test 18: dataset != dataset_add, filter", {
+## Test 20: dataset != dataset_add, filter ----
+test_that("derive_var_merged_summary Test 20: dataset != dataset_add, filter", {
   expected <- tibble::tribble(
     ~USUBJID, ~MEANPBL,
     "1",          13.5,
@@ -531,8 +559,8 @@ test_that("derive_var_merged_summary Test 18: dataset != dataset_add, filter", {
   )
 })
 
-## Test 19: by_vars with rename ----
-test_that("derive_var_merged_summary Test 19: by_vars with rename", {
+## Test 21: by_vars with rename ----
+test_that("derive_var_merged_summary Test 21: by_vars with rename", {
   expected <- tibble::tribble(
     ~AVISIT,  ~ASEQ, ~AVAL, ~MEANVIS,
     "WEEK 1",     1,    10,       10,
@@ -559,7 +587,8 @@ test_that("derive_var_merged_summary Test 19: by_vars with rename", {
   )
 })
 
-test_that("derive_var_merged_summary Test 19: deprecation warning", {
+## Test 22: deprecation warning ----
+test_that("derive_var_merged_summary Test 22: deprecation warning", {
   expected <- tibble::tribble(
     ~AVISIT,  ~ASEQ, ~AVAL, ~MEANVIS,
     "WEEK 1",     1,    10,       10,