Professional Documents
Culture Documents
Solution Chapter 17
Solution Chapter 17
Problem I
1.
P 460,000
0
(
0)
P 460,000
P 760,000
36,000
(_50,000)
P 746,000
460,000
P1,206,000
0
P1,206,000
92,000
P 1,114,000
Or, alternatively
2. 20x4
Sales
Sales
1,080,000
36,000
1,200,000
P 460,000
0
(
0)
P460,000
P 92,000
0
P 760,000
36,000
(_50,000)
P 746,000
460,000
P1,206,000
92,000
P1,114,000
_ 92,000
P 1,206,000
P460,000
0
(
0)
P460,000
_____0
P460,000
20%
P 92,000
1,080,000
36,000
1,200,000
50,000
36,000
50,000
36,000
Problem II
1.
P 600,000
40,000
( 51,00 0)
P 589,000
P 1,720,000
0
(_
0)
P 1, 720,000
589,000
P2,309,000
0
P2,309,000
58,900
P 2,250,100
Or, alternatively
2.
Sales
1,020,000
P 600,000
40,000
( 51,000)
P589,000
P 58,900
0
P 1,720,000
0
(________0)
P1,720,,000
589,000
P2,309,000
__58,900
P2,250,100
_ 58,900
P 2,309,000
P600,000
40,000
( 51,000)
P589,000
_____0
P589,000
10%
P 58,900
1,020,000
P3,900,000
66,000
63,000
( 57,000)
( 69,000)
P3,903,000
P 301,800
___239,400
P 3,600,000
54,000
(_ 45,00 0)
P 3,609,000
3,903,000
P7,512,000
0
P7,512,000
___541,200
P6,970,800
Or, alternatively
P3,900,000
66,000
63,000
( 57,000)
( 69,000)
P3,903,000
P 3,600,000
54,000
(___45,000)
P3,609,,000
3,903,000
P7,512,000
P 301,800
239,400
0
__541,200
P6,970,800
_541,200
P 7,512,000
**Salad
P1,500,000
66,000
( 57,000)
P1,509,000
_____0
P1,509,000
__
20%
P 301,800
**Tuna
4,000,000
250,000
84,000
21,000
P2,400,000
63,000
( 69,000)
P2,394,000
_____0
P2,394,000
10%
P 239,400
P54,000
66,000
63,000
P45,000
57,000
69,000
4,000,000
250,000
105,000
(1) .8(P105,000)
(2) .2(P105,000)
2/3.
4.
Problem V
P12,450,000
P7,755,000
1,800,000
9,555,000
2,895,000
197,500
P2,697,500
(a)
Reported Cost of Goods Sold
Less intercompany sales in 20x4
Plus unrealized profit in ending inventory (2/5 x (P1,350,000 - P900,000))
Less realized profit in beginning inventory (1/4 x (P1,800,000 - P1,500,000))
Corrected cost of goods sold
P9,000,000
(1,350,000)
180,000
(75,000)
P7,755,000
P190,000
0.1
Plus unrealized profit on subsidiary sales in 2013 that is considered realized in 20x4
(1/4 x (P1,800,000 - P1,500,000))
Less unrealized profit on subsidiary sales in 20x4 (there were no upstream sales in 20x4)
Income realized in transactions with third parties
P1,900,000
(b)
75,000
0
1,975,000
0.10
P197,500
Problem VIII
(Determine selected consolidated balances; includes inventory transfers and an outside ownership.)
Customer list amortization = P65,000/5 years = P13,000 per year
Intercompany Gross profit (P160,000 P120,000) ...............................................
Inventory Remaining at Year's End .........................................................................
Unrealized Intercompany Gross profit, 12/31 .............................................................
P40,000
20%
P8,000
Consolidated Totals:
Inventory = P592,000 (add the two book values and subtract the ending unrealized gross
profit of P8,000)
Sales = P1,240,000 (add the two book values and subtract the P160,000 intercompany
transfer)
Cost of Goods Sold = P548,000 (add the two book values and subtract the intercompany
transfer and add [to defer] ending unrealized gross profit)
Operating Expenses = P443,000 (add the two book values and the amortization expense for
the period)
Gross profit: P1,240,000 P548,000 = P692,000
Controlling Interest in CNI:
Gross profit ..................................................................................................... P692,000
Less: Operating expenses ........................................................................... 443,000
Consolidated Net Income ...........................................................................P249,000
Less: NCI-CNI ...................................................................................................
8,700
CI-CNI...............................................................................................................P240,300
or
P 50,000
0
( 8, 000)
P 220,000
0
(_
0)
P 220,000
P 42,000
42,000
P 262,000
13,000
P 249,000
8,700
P 240,300
Or, alternatively
Consolidated Net Income for 20x5
P Companys net income from own/separate operations.
Realized profit in beginning inventory of S Company (downstream sales)
Unrealized profit in ending inventory of S Company (downstream sales)
P Companys realized net income from separate operations*...
S Companys net income from own operations.
Realized profit in beginning inventory of P Company (upstream sales)
Unrealized profit in ending inventory of P Company (upstream sales)
S Companys realized net income from separate operations*...
Total
Less: Non-controlling Interest in Net Income* *
Amortization of allocated excess
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent..
Add: Non-controlling Interest in Net Income (NCINI)
Consolidated Net Income for 20x5
*that has been realized in transactions with third parties.
P 50,000
0
( 8,000)
P 42,000
P 8,700
13,000
42,000
P 262,000
21,700
P240,300
_ 8,700
P249,000
P 50,000
0
( 8,00 0)
P 42,000
13,000
P 29,000
30%
P 8,700
P 220,000
0
(_
0)
P 220,000
Noncontrolling Interest in Subsidiary's Net Income = P8,700 (30 percent of the reported
income after subtracting 13,000 excess fair value amortization and deferring P8,000 ending
unrealized gross profit) Gross profit is included in this computation because the transfer was
upstream from SS to PT.
Problem IX
Requirements 1 to 4:
Schedule of Determination and Allocation of Excess (Partial-goodwill)
Date of Acquisition January 1, 20x4
Fair value of Subsidiary (80%)
Consideration transferred..
Less: Book value of stockholders equity of Son:
Common stock (P240,000 x 80%).
Retained earnings (P120,000 x 80%)...
Allocated excess (excess of cost over book value)..
Less: Over/under valuation of assets and liabilities:
Increase in inventory (P6,000 x 80%)
Increase in land (P7,200 x 80%).
Increase in equipment (P96,000 x 80%)
Decrease in buildings (P24,000 x 80%).....
P 372,000
P 192,000
96,000
P 4,800
5,760
76,800
( 19,200)
288,000
84,000
3,840
72,000
P 12,000
S Co.
Book value
P 24,000
48,000
84,000
168,000
(120,000)
P 204,000
S Co.
Fair value
P 30,000
55,200
180,000
144,000
( 115,200)
P 294,000
(Over) Under
Valuation
P 6,000
7,200
96,000
(24,000)
4,800
P 90,000
The buildings and equipment will be further analyzed for consolidation purposes as follows:
Equipment ..................
Less: Accumulated depreciation..
Net book value...
S Co.
Book value
180,000
96,000
84,000
S Co.
Fair value
180,000
180,000
Increase
(Decrease)
0
( 96,000)
96,000
Buildings................
Less: Accumulated depreciation..
Net book value...
S Co.
Book value
360,000
192,000
168,000
S Co.
Fair value
144,000
144,000
(Decrease)
( 216,000)
( 192,000)
( 24,000)
Over/
Under
P 6,000
Life
1
96,000
(24,000)
48000
8
4
4
Annual
Amount
P 6,000
Current
Year(20x4)
P 6,000
20x5
P
-
12,000
( 6,000)
1,200
P 13,200
12,000
( 6,000)
1,200
P 13,200
12,000
(6,000)
1,200
P 7,200
The goodwill impairment loss of P3,750 based on 100% fair value would be allocated to the controlling
interest and the NCI based on the percentage of total goodwill each equity interest received. For
purposes of allocating the goodwill impairment loss, the full-goodwill is computed as follows:
Fair value of Subsidiary (100%)
Consideration transferred: Cash (80%)
P 372,000
93,000
P 465,000
__360,000
105,000
90,000
15,000
In this case, the goodwill was proportional to the controlling interest of 80% and non-controlling interest
of 20% computed as follows:
Value
P12,000
% of Total
80.00%
3,000
P15,000
20.00%
100.00%
Value
P 3,000
% of Total
80.00%
750
20.00%
P 3,750
100.00%
The unrealized profits on January 1, and on December 31, 20x5, resulting intercompany sales, are as
summarized below:
Downstream Sales:
Year
20x4
20x5
Sales of Parent to
Subsidiary
P150,000
120,000
Upstream Sales:
Year
20x4
20x5
Sales of Subsidiary
to Parent
P 50,000
62,500
Intercompany Merchandise
in 12/31 Inventory
of S Company
P150,000 x 60% = P90,000
P120,000 x 80% = P96,000
Unrealized Intercompany
Profit in Ending Inventory
P90,000 x 20% = P18,000
P96,000 x 25% = P40,000
Intercompany Merchandise
in 12/31 Inventory
of S Company
P100,000 x 50% = P25,000
P 62,500 x 40% = P25,000
Unrealized Intercompany
Profit in Ending Inventory
P25,000 x 40% = P10,000
P25,000 x 20% = P 5,000
372,000
28,800
372,000
28,800
No entries are made on the parents books to depreciate, amortize or write-off the portion of the
allocated excess that expires during 20x4, and unrealized profits in ending inventory.
Consolidation Workpaper Year of Acquisition
240,000
120.000
(E2) Inventory.
Accumulated depreciation equipment..
Accumulated depreciation buildings..
Land.
Discount on bonds payable.
6,000
96,000
192,000
7,200
4,800
288,000
72,000
Goodwill.
Buildings..
Non-controlling interest (P90,000 x 20%)..
Investment in Son Co.
12,000
6,000
6,000
6,000
1,200
3,000
Inventory sold
Equipment
Buildings
Bonds payable
Totals
Cost of
Goods
Sold
P 6,000
_______
P 6,000
Depreciation/
Amortization
Expense
Amortization
-Interest
P 12,000
( 6,000)
_______
P 2,000
P 1,200
P1,200
6,000
12,000
1,200
3,000
Total
13,200
28,800
7,200
(E5) Sales.
Cost of Goods Sold (or Purchases)
150,000
(E6) Sales.
Cost of Goods Sold (or Purchases)
60,000
18,000
12,000
216,000
18,000
84,000
P 60,000
6,960
36,000
150,000
60,000
18,000
12,000
6,960
( 12,000)
P 48,000
13,200
P 34,800
20%
P
6,960
P Co
P480,000
S Co.
P240,000
Dividend income
Total Revenue
Cost of goods sold
28,800
P508,800
P204,000
P240,000
P138,000
Depreciation expense
Interest expense
Other expenses
Goodwill impairment loss
Total Cost and Expenses
Net Income
NCI in Net Income - Subsidiary
Net Income to Retained Earnings
60,000
48,000
P312,000
P196,800
P196,800
24,000
18,000
P180,000
P 60,000
P 60,000
Sales
P432,000
236,160
P668,160
P144,000
72,000
P216,000
86,400
-
43,200
P581,760
Dr.
(5) 150,000
(6) 60,000
(4) 36,000
(3)
(7)
(8)
(3)
(3)
6,000
18,000
12,000
6,000
1,200
(3)
3,000
(9)
6,960
Cr.
Consolidated
P 510,000
_________
P 510,000
P 168,000
(5) 150,000
(6) 60,000
90,000
1,200
66,000
3,000
P328,200
P181,800
( 6,960)
P174,840
(1) 120,000
360,000
174,840
P538,840
72,000
________
P172,800
466,840
232,800
90,000
120,000
P 90,000
60,000
90,000
355,200
150,000
1210,000
240,000
720,000
48,000
180,000
540,000
372,000
P1,984,800
P1,008,000
P 135,000
405,000
P 96,000
288,000
120,000
240,000
600,000
120,000
120,000
(4)
(2)
6,000
(2)
7,200
(2)
(2)
4,800
12,000
(3)
(7)
(8)
36,000
6,000
18,000
12,000
(2) 216,000
(3) 12000
(3) 3,000
(1) 288,000
(2) 84,000
12,000
180,000
265,200
420,000
1,044,000
3,600
9,000
P2,394,600
P147,000
495,000
240,000
360,000
600,000
581,760
240,000
144,000
_________
P1,984,800
_________
P1,008,000
(1) 240,000
(4)
7,200
__________
P 983,160
(1 ) 72,000
(2) 18,000
(9) 6,960
P 983,160
P 60,000
( 12,000)
P 48,000
462,840
____89,760
P2,394,600
P168,000
( 18,000)
P150,000
P 6,960
13,200
3,000
48,000
P198,000
23,160
P174,840
_ 6,960
P181.800
P 60,000
( 12,000)
P 48,000
13,200
P 34,800
20%
P 6,960
Since NCI share of goodwill is not recognized, no adjustment is required for the impairment loss on
goodwill and impairment losses are not shared with NCI.
20x5: Second Year after Acquisition
Sales
Less: Cost of goods sold
Gross profit
Less: Depreciation expense
Other expense
Net income from its own separate operations
Add: Dividend income
Net income
Dividends paid
P Co.
P 540,000
216,000
P 324,000
60,000
72,000
P 192,000
38,400
P 230,400
P 72,000
S Co.
P 360,000
192,000
P 168,000
24,000
54,000
P 90,000
P 90,000
P 48,000
38,400
On the books of S Company, the P48,000 dividend paid was recorded as follows:
38,400
Dividends paid
Cash
Dividends paid by S Co..
48,000
19,200
240,000
144.000
(E3) Inventory.
Accumulated depreciation equipment.. ....
Accumulated depreciation buildings.. ...
Land.
Discount on bonds payable.
Goodwill.
Buildings...........................
Non-controlling interest (P90,000 x 20%)............................
Investment in S Co.
6,000
96,000
192,000
7,200
4,800
12,000
Inventory sold
Depreciation/
Amortization
expense
19,200
P144,000
120,000
P 24,000
80%
P 19,200
(20x4)
Retained
earnings,
P 6,000
48,000
Amortization
-Interest
13,560
2,640
6,000
12,000
1,200
307,200
76,800
216,000
18,000
84,000
6,000
24,000
2,400
3,000
Equipment
Buildings
Bonds payable
Sub-total
Multiplied by:
To Retained earnings
Impairment loss
Total
12,000
(6,000)
1,200
P13,200
80%
P 10,560
3,000
P 13,560
P 12,000
( 6,000)
________
P 6,000
P 1,200
P 1,200
38,400
9,600
(E6) Sales.
Cost of Goods Sold (or Purchases)
120,000
(E7) Sales.
Cost of Goods Sold (or Purchases)
75,000
18,000
9,600
2,400
24,000
6,000
12,000
( 6,000)
P 96,000
7,200
P 88,800
20%
17,760
48,000
120,000
75,000
18,000
12,000
24,000
6,000
17,760
P Co
P540,000
S Co.
P360,000
Dividend income
Total Revenue
Cost of goods sold
38,400
P501,600
P216,000
P360,000
P192,000
Depreciation expense
Interest expense
Other expenses
Goodwill impairment loss
Total Cost and Expenses
Net Income
NCI in Net Income - Subsidiary
Net Income to Retained Earnings
60,000
72,000
P348,000
P230,400
P230,400
24,000
54,000
P270,000
P 90,000
P 90,000
P484,800
Sales
S Company
Net income, from above
Total
Dividends paid
P Company
S Company
Retained earnings, 12/31 to Balance
Sheet
Balance Sheet
Cash.
Accounts receivable..
Inventory.
Land.
Equipment
Buildings
Discount on bonds payable
Goodwill
Investment in S Co
Total
Accumulated depreciation
- equipment
Accumulated depreciation
- buildings
Accounts payable
Bonds payable
Common stock, P10 par
Common stock, P10 par
Retained earnings, from above
Non-controlling interest
Total
Dr.
(6) 120,000
(7) 75,000
(5) 38,400
Cr.
(10) 24,000
(11) 6,000
(6) 120,000
(7) 75,000
(8) 18,000
(9) 12,000
(4)
(4)
6,000
1,200
Consolidated
P 705,000
___________
P 705,000
213,000
P
P
(
P
(12) 17,760
(2) 13,560
(8) 18,000
(9) 9,600
(2) 144,000
(1) 19,200
90,000
1,200
126,000
430,200
274,800
17,760)
257,040
P 462,840
230,400
P715,200
P 144,000
90,000
P234,000
72,000
-
48,000
P643,200
P186,000
P 647,880
265,200
180,000
216,000
P 102,000
96,000
108,000
P 367,200
276,000
210,000
240,000
720,000
48,000
180,000
540,000
372,000
P2,203,200
P1,074,000
P 150,000
450,000
P 102,000
306,000
120,000
240,000
600,000
120,000
120,000
643,200
___ _____
2,203,200
240,000
186,000
_________
P1,074,000
257,040
P 719,880
(5)
(3)
7,200
(3)
7,200
(3)
(3)
(1)
4,800
12,000
19,200
(3) 96,000
(3) 192,000
(4) 12,000
48,000
(4) 7,200
(10) 24,000
(11) 6,000
(3) 216,000
(4) 2,400
(4) 3,000
(2) 307,200
(3) 84,000
(4)
24,000
72,000
________
294,000
265,200
420,000
1,044,000
2,400
9,000
P2,677,800
P180,000
552,000
240,000
360,000
600,000
(2) 240,000
(4)
2,640
(5)
9,600
(9)
2,400
__________
P1,077,360
647,880
(2 ) 76,800
(3) 18,000
(12) 17,760
P1,077,360
____97,920
P2,677,800
5. 1/1/20x4
a. On date of acquisition the retained earnings of parent should always be considered as the
consolidated retained earnings, thus:
Consolidated Retained Earnings, January 1, 20x4
Retained earnings P Company, January 1, 20x4 (date of acquisition)
b.
c.
6.
P360,000
P 240,000
120,000
P 360,000
90,000
P 450,000
20
P 90,000
Consolidated SHE:
Stockholders Equity
Common stock, P10 par
Retained earnings
Parents Stockholders Equity / CI - SHE
NCI, 1/1/20x4
Consolidated SHE, 1/1/20x4
P 600,000
360,000
P 960,000
___90,000
P1,050,000
Note: The goodwill recognized on consolidation purely relates to the parents share. NCI is
measured as a proportion of identifiable assets and goodwill attributable to NCI share is not
recognized.
12/31/20x4:
a. CI-CNI P174,840
P 60,000
( 12,000)
P 48,000
P 6,960
13,200
3,000
48,000
P198,000
23,160
P174,840
_ 6,960
P181.800
b. NCI-CNI P6,960
P168,000
( 18,000)
P150,000
P 60,000
( 12,000)
P 48,000
13,200
P 34,800
20%
P 6,960
P360,000
174,840
P534,840
72,000
P462,840
e. The goodwill recognized on consolidation purely relates to the parents share. NCI is measured
as a proportion of identifiable assets and goodwill attributable to NCI share is not recognized.
The NCI on December 31, 20x4 are computed as follows:
Non-controlling interest (partial-goodwill), December 31, 20x4
Common stock Subsidiary Company, December 31, 20x4
Retained earnings Subsidiary Company, December 31, 20x4
Retained earnings Subsidiary Company, January 1, 20x4
Add: Net income of subsidiary for 20x4
Total
Less: Dividends paid 20x4
Stockholders equity Subsidiary Company, December 31, 20x4
Adjustments to reflect fair value - (over) undervaluation of assets and
liabilities, date of acquisition (January 1, 20x4)
Amortization of allocated excess (refer to amortization above) 20x4
Fair value of stockholders equity of subsidiary, December 31, 20x4
Less: Unrealized profit in ending inventory of P Company (upstream sales)
Realized stockholders equity of subsidiary, December 31, 20x4
Multiplied by: Non-controlling Interest percentage...
Non-controlling interest (partial-goodwill)..
f.
Consolidated SHE:
Stockholders Equity
Common stock, P10 par
Retained earnings
Parents Stockholders Equity / CI SHE, 12/31/20x4
NCI, 12/31/20x4
Consolidated SHE, 12/31/20x4
12/31/20x5:
a. CI-CNI
P 240,000
P120,000
6,000
P180,000
36,000
144,000
P 384,000
90,000
( 13,200)
P460,000
12,000
P448,800
20
P 89,760
P 600,000
462,840
P1,062,840
___89,760
P1,152,600
P 90,000
12,000
( 6,000)
P 96,000
P192,000
18,000
(_24,000)
P186,000
96,000
P282,000
7,200
P274,800
17,760
P257,040
Or, alternatively
P 90,000
12,000
( 6,000)
P 96,000
P 17,760
7,200
P192,000
18,000
(_24,000)
P186,000
96,000
P282,000
24,960
P257,040
_ 17,760
P274,800
b. NCI-CNI
P 90,000
12,000
( 6,000)
P 96,000
7,200
P 88,800
20%
P 17,760
P484,800
18,000
P466,800
P 144,000
120,000
P 24,000
13,200
12,000
(P 1,200)
80%
(P 960)
3,000
Or, alternatively:
e.
f.
Consolidated SHE:
Stockholders Equity
Common stock, P10 par
Retained earnings
Parents Stockholders Equity / CI SHE, 12/31/20x4
NCI, 12/31/20x4
Consolidated SHE, 12/31/20x4
Problem X
Requirements 1 to 4:
Schedule of Determination and Allocation of Excess
Date of Acquisition January 1, 20x4
P643,200
24,000
P619,200
P 186,000
120,000
P 66,000
20,400
P
P
6,000
39,600
80%
31,680
3,000
28,680
P647,880
P 240,000
P144,000
90,000
P234,000
48,000
186,000
P 426,000
90,000
P 13,200
7,200
( 20,400)
P 495,600
6,000
P489,600
20
P 97,920
of P - 20x5 amounting to P10,000 is
P 600,000
647,880
P1,247,880
___97,920
P1,345,800
P 372,000
93,000
P 465,000
P 240,000
120,000
360,000
P 105,000
6,000
7,200
96,000
( 24,000)
4,800
90,000
P 15,000
Over/
under
P 6,000
Life
1
96,000
(24,000)
4,800
8
4
4
Annual
Amount
P 6,000
Current
Year(20x4)
P 6,000
20x5
P
-
12,000
( 6,000)
1,200
P 13,200
12,000
( 6,000)
1,200
P 13,200
12,000
(6,000)
1,200
P 7,200
January 1, 20x4:
(1) Investment in S Company
Cash..
Acquisition of S Company.
January 1, 20x4 December 31, 20x4:
(2) Cash
Dividend income (P36,000 x 80%).
Record dividends from Son Company.
372,000
28,800
372,000
28,800
On the books of Son Company, the P36,000 dividend paid was recorded as follows:
Dividends paid
Cash.
Dividends paid by S Co..
36,000
36,000
No entries are made on the parents books to depreciate, amortize or write-off the portion of the
allocated excess that expires during 20x4.
Consolidation Workpaper First Year after Acquisition
240,000
120.000
(E2) Inventory.
6,000
288,000
72,000
96,000
192,000
7,200
4,800
15,000
21,000
84,000
6,000
6,000
6,000
1,200
3,750
Inventory sold
Equipment
Buildings
Bonds payable
Totals
Cost of
Goods
Sold
P 6,000
Depreciation/
Amortization
Expense
Amortization
-Interest
P12,000
( 6,000)
_______
P 6,000
P 1,200
P1,200
_______
P 6,000
28,800
7,200
(E5) Sales.
Cost of Goods Sold (or Purchases)
150,000
(E6) Sales.
Cost of Goods Sold (or Purchases)
60,000
18,000
12,000
216,000
6,210
6,000
12,000
1,200
3,750
36,000
150,000
60,000
18,000
12,000
Non-controlling interest ..
6,210
P 60,000
( 12,000)
P 48,000
13,200
P 34,800
20%
P 6,960
750
P
6,210
P Co
P480,000
S Co.
P240,000
Dividend income
Total Revenue
Cost of goods sold
28,800
P451,200
P204,000
P240,000
P138,000
Depreciation expense
Interest expense
Other expenses
Goodwill impairment loss
Total Cost and Expenses
Net Income
NCI in Net Income - Subsidiary
Net Income to Retained Earnings
60,000
48,000
P312,000
P196,800
P196,800
24,000
18,000
P180,000
P 60,000
P 60,000
Sales
P360,000
196,800
P556,800
P120,000
60,000
P180,000
72,000
-
36,000
P484,800
Dr.
(5) 150,000
(6) 60,000
(4) 28,800
(3)
(7)
(8)
(3)
(3)
6,000
18,000
12,000
6,000
1,200
(3)
3,750
(9)
6,210
Cr.
Consolidated
P 510,000
_________
P 510,000
P 168,000
(5) 150,000
(6) 60,000
90,000
1,200
66,000
3,750
P328,950
P181,050
( 6,210)
P174,840
(1) 120,000
360,000
174,840
P534,840
72,000
________
P144,000
462,840
232,800
90,000
120,000
P 90,000
60,000
90,000
322,800
150,000
210,000
240,000
720,000
48,000
180,000
540,000
(4)
(2)
6,000
(2)
7,200
(2)
(2)
4,800
15,000
(3)
(7)
(8)
36,000
6,000
18,000
12,000
(2) 216,000
(3) 1,200
(3) 3,750
180,000
265,200
420,000
1,044,000
3,600
11,250
Investment in S Co
372,000
Total
Accumulated depreciation
- equipment
Accumulated depreciation
- buildings
Accounts payable
Bonds payable
Common stock, P10 par
Common stock, P10 par
Retained earnings, from above
Non-controlling interest
Total
P1,984,800
P1,008,000
P 135,000
405,000
P 96,000
288,000
120,000
240,000
600,000
120,000
120,000
484,800
240,000
144,000
_________
P1,984,800
_________
P1,008,000
(3) 288,000
(4) 84,000
P2,396,850
12,000
P147,000
495,000
240,000
360,000
600,000
(1) 240,000
(4)
7,200
P 986,160
(1 ) 72,000
(2) 21,000
(9) 6,210
P 986,160
Perfect Co.
P 540,000
216,000
P 324,000
60,000
72,000
P 192,000
38,400
P 230,400
P 72,000
Sales
Less: Cost of goods sold
Gross profit
Less: Depreciation expense
Other expense
Net income from its own separate operations
Add: Dividend income
Net income
Dividends paid
462,840
____92,010
P2,396,850
Son Co.
P 360,000
192,000
P 168,000
24,000
54,000
P 90,000
P 90,000
P 48,000
38,400
38,400
On the books of S Company, the P48,000 dividend paid was recorded as follows:
Dividends paid
Cash
Dividends paid by S Co..
48,000
48,000
19,200
P144,000
120,000
P 24,000
80%
P 19,200
240,000
19,200
144.000
(E3) Inventory.
Accumulated depreciation equipment..
Accumulated depreciation buildings..
Land.
Discount on bonds payable.
Goodwill.
Buildings..
Non-controlling interest (P90,000 x 20%) + [(P15,000, full
P12,000, partial goodwill)]
Investment in S Co.
6000
96,000
192,000
7,200
4,800
15,000
13,560
3,390
6,000
12,000
1,200
Inventory sold
Equipment
Buildings
Bonds payable
Impairment loss
Totals
Multiplied by: CI%....
To Retained earnings
(20x4)
Retained
earnings,
P 6,000
12,000
(6,000)
1,200
3,750
P 16,950
80%
P13,560
Depreciation/
Amortization
expense
P
6,000
24,000
2,800
3,750
Amortization
-Interest
12,000
( 6,000)
P 6,000
P 1,200
P1,200
38,400
9,600
(E6) Sales.
Cost of Goods Sold (or Purchases)
120,000
(E7) Sales.
Cost of Goods Sold (or Purchases)
75,000
216,000
21,000
84,000
307,200
76,800
48,000
120,000
75,000
18,000
9,600
2,400
24,000
6,000
17,760
18,000
12,000
24,000
6,000
17,760
P 90,000
12,000
( 6,000)
P 96,000
7,200
P 88,800
20%
P 17,760
P Co
P540,000
S Co.
P360,000
Dividend income
Total Revenue
Cost of goods sold
38,400
P574,800
P216,000
P360,000
P192,000
Depreciation expense
Interest expense
Other expenses
Goodwill impairment loss
Total Cost and Expenses
Net Income
60,000
72,000
P348,000
P230,400
24,000
54,000
P270,000
P 90,000
Sales
Dr.
(6) 120,000
(7) 75,000
(5) 38,400
Cr.
(10) 24,000
(11) 6,000
(6) 120,000
(7) 90,000
(8) 21,600
(9) 14,400
(4)
(4)
6,000
1,200
Consolidated
P 705,000
___________
P 705,000
P 213,000
90,000
1,200
126,000
P 430,200
P 274,800
P230,400
P484,800
S Company
Net income, from above
Total
Dividends paid
P Company
S Company
Retained earnings, 12/31 to Balance
Sheet
Balance Sheet
Cash.
Accounts receivable..
Inventory.
Land.
Equipment
Buildings
Discount on bonds payable
Goodwill
Investment in S Co
Total
Accumulated depreciation
- equipment
Accumulated depreciation
- buildings
Accounts payable
Bonds payable
Common stock, P10 par
Common stock, P10 par
Retained earnings, from above
Non-controlling interest
Total
P 90,000
(12) 17,760
(3) 13,560
(8) 18,000
(9) 96000
(5) 144,000
( 17,760)
P 257,040
(4) 19,200
P 462,840
230,400
P715,200
P 144,000
90,000
P234,000
72,000
-
48,000
P643,200
P186,000
P 647,880
265,200
180,000
216,000
P 102,000
96,000
108,000
P 367,200
276,000
210,000
240,000
720,000
48,000
180,000
540,000
372,000
P2,203,200
P1,074,000
P 150,000
450,000
P 102,000
306,000
120,000
240,000
600,000
120,000
120,000
643,200
___ _____
P2,203,200
240,000
186,000
_________
P1,074,000
257,040
P 719,880
(5)
(6)
6,000
(3)
7,200
(3)
(3)
(1)
4,800
15,000
19,200
(3) 96,000
(3) 192,000
(4) 12,000
48,000
(4) 6,000
(10) 24,000
(11) 6,000
(3) 216,000
(4) 2,400
(4) 3,750
(2) 307,200
(3) 84,000
(4)
24,000
72,000
________
294,000
265,200
420,000
1,044,000
2,400
11,250
P2,680,050
P180,000
552,000
240,000
360,000
600,000
(2) 240,000
(4)
3,390
(8)
9,600
(9)
2,400
__________
P1,081,110
647,880
(2 ) 76,800
(3) 21,000
(12) 17,760
P1,081,110
____100,170
P2,680,050
5. 1/1/20x4
a. On date of acquisition the retained earnings of parent should always be considered as the
consolidated retained earnings, thus:
Consolidated Retained Earnings, January 1, 20x4
Retained earnings - Parent Company, January 1, 20x4 (date of acquisition)
b.
P360,000
P 240,000
120,000
P 360,000
90,000
P 450,000
20
P 90,000
3,000
P 93,000
c.
6.
Consolidated SHE:
Stockholders Equity
Common stock, P10 par
Retained earnings
Parents Stockholders Equity / CI - SHE
NCI, 1/1/20x4
Consolidated SHE, 1/1/20x4
P 600,000
360,000
P 960,000
___93,000
P1,053,000
Note: The goodwill recognized on consolidation purely relates to the parents share. NCI is
measured as a proportion of identifiable assets and goodwill attributable to NCI share is not
recognized.
12/31/20x4:
a. CI-CNI P174,840
Consolidated Net Income for 20x4
P Companys net income from own/separate operations.
Unrealized profit in ending inventory of S Company (downstream sales)
Perfect Companys realized net income from separate operations*...
S Companys net income from own operations.
Unrealized profit in ending inventory of S Company (upstream sales)
Son Companys realized net income from separate operations*...
Total
Less: Non-controlling Interest in Net Income
Amortization of allocated excess (refer to amortization above)
Goodwill impairment (impairment under full-goodwill approach)
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent..
Add: Non-controlling Interest in Net Income (NCINI)
Consolidated Net Income for 20x4
*that has been realized in transactions with third parties.
P 60,000
( 12,000)
P 48,000
P 6,1210
13,200
3,750
P168,000
( 18,000)
P150,000
48,000
P198,000
23,160
P174,840
_ 6,210
P181.050
b. NCI-CNI P6,210
**Non-controlling Interest in Net Income (NCINI) for 20x4
S Companys net income of Subsidiary Company from its own operations
(Reported net income of S Company)
Unrealized profit in ending inventory of P Company (upstream sales)
S Companys realized net income from separate operations
Less: Amortization of allocated excess
Multiplied by: Non-controlling interest %..........
Non-controlling Interest in Net Income (NCINI) partial
Less: Non-controlling interest on impairment loss on full-goodwill (P3,750 x
20%) or (P3,750 impairment on full-goodwill less P3,000, impairment on
partial- goodwill)
Non-controlling Interest in Net Income (NCINI)
*that has been realized in transactions with third parties.
P 60,000
( 12,000)
P 48,000
13,200
P 34,800
20%
P 6,960
750
6,210
e.
P360,000
174,840
P534,840
72,000
P462,840
f.
Consolidated SHE:
Stockholders Equity
Common stock, P10 par
Retained earnings
Parents Stockholders Equity / CI - SHE
NCI, 1/1/20x4
Consolidated SHE, 1/1/20x4
P 240,000
P120,000
60,000
P180,000
36,000
144,000
P 384,000
90,000
( 13,200)
P460,800
12,000
P448,800
20
P 89,760
2,250
P 92,010
P 600,000
462,840
P1,062,840
___92,010
P1,154,840
12/31/20x5:
a. CI-CNI P257,040
P 90,000
12,000
( 6,000)
P 96,000
P192,000
18,000
(_24,000)
P186,000
96,000
P282,000
7,200
P274,800
17,760
P257,040
Or, alternatively
P 90,000
12,000
( 6,000)
P 96,000
P 17,760
7,200
P192,000
18,000
(_24,000)
P186,000
96,000
P282,000
24,960
P257,040
_ 17,760
P274,800
b. NCI-CNI P16,560
P 90,000
12,000
( 6,000)
P 96,000
7,200
P 88,800
20%
P 17,760
0
P 17,760
P484,800
18,000
P466,800
P 144,000
120,000
P 24,000
13,200
12,000
(P 1,200)
80%
(P 960)
Or, alternatively:
P643,200
24,000
P619,200
e.
f.
Consolidated SHE:
Stockholders Equity
Common stock, P10 par
Retained earnings
Parents Stockholders Equity / CI - SHE
NCI, 1/1/20x4
Consolidated SHE, 12/31/20x5
P 186,000
120,000
P 66,000
20,400
P
P
6,000
39,600
80%
31,680
3,000
28,680
P647,880
P 240,000
P144,000
90,000
P234,000
48,000
186,000
P 426,000
90,000
P 13,200
7,200
( 20,400)
P 495,600
6,000
P489,600
20
P 97,920
2,250
P 100,170
of P - 20x5 amounting to P10,000 is
P 600,000
647,880
P1,247,880
___100,170
P1,348,050
Problem XI
(Compute selected balances based on three different intercompany asset transfer scenarios)
1.
Consolidated Cost of Goods Sold
PPs cost of goods sold ......................................................................................
P290,000
SWs cost of goods sold .....................................................................................
197,000
Elimination of 20x5 intercompany transfers ...................................................
(110,000)
Reduction of beginning Inventory because of
20x4unrealized gross profit (P28,000/1.4 = P20,000
cost; P28,000 transfer price less P20,000
cost = P8,000 unrealized gross profit) .......................................................
(8,000)
12,000
P381,000
P346,000
110,000
(12,000)
P444,000
P 58,000
0
(
0)
P 58,000
2.
P 200,000
8,000
(_ 12,000)
P 196,000
58,000
P 254,000
____0
P 254,000
11,600
P 242,200
P 58,000
0
(
0)
P 58,000
____0
P 58,000
20%
P 11,600
P290,000
197,000
(80,000)
(6,000)
10,000
P411,000
P346,000
110,000
(10,000)
P446,000
P58,000
6,000
(10,000)
P54,000
20%
P10,800
P 200,000
(_
0)
P 200,000
P 58,000
6,000
( 10,000)
P 54,000
54,000
P 254,000
____0
P 254,000
10,800
P 243,200
P 58,000
6,000
( 10,000)
P 54,000
____0
P 54,000
20%
P 10,800
Problem XIII
1. (Computation of selected consolidation balances as affected by downstream inventory transfers)
UNREALIZED GROSS PROFIT, 12/31/x4: (downstream transfer)
Intercompany gross profit (P120,000 P72,000) ..........................................................
Inventory remaining at year's end .......................................................................................
Unrealized Intercompany Gross profit, 12/31/x4 ...............................................................
P48,000
30%
P14,400
Sales = P1,150,000 (add the two book values and eliminate intercompany sales of P250,000)
Noncontrolling interest in consolidated income: (impact of transfers is not included because they
were downstream)
Broadway reported income for 20x5 ...........................................................................
P100,000
Intangible amortization ...................................................................................................
(10,000)
Broadway adjusted income ...........................................................................................
90,000
Outside ownership ...........................................................................................................
30%
Noncontrolling interest in Broadways earnings..........................................................
P 27,000
or,
P 100,000
0
(
0)
P 100,000
P 165,000
14,400
(_10,000)
P 169,400
100,000
P 269,400
__10,000
P 259,400
27,000
P 232,400
P 100,000
0
(
0)
P 100,000
__10,000
P 90,000
30%
P 27,000
Inventory = P988,000 (add the two book values less the P10,000 ending unrealized gross profit)
Noncontrolling interest in subsidiary, 12/31/x5 = P385,500
30% beginning P950,000 book value .........................................................................
P285,000
Excess January 1 intangible allocation (30% P295,000) ......................................
88,500
Noncontrolling Interest in Broadways earnings..............................................................
27,000
Dividends (30% P50,000)...................................................................................................
(15,000)
Total noncontrolling interest at 12/31/x5...................................................................
P385,500
P48,000
30%
P14,400
P50,000
20%
P10,000
CONSOLIDATED TOTALS
Sales = P1,150,000 (add the two book values and eliminate the Intercompany transfer)
P 100,000
14,400
( 10,000)
P 104,400
P 165,000
0
(_
0)
P 165,000
104,400
P 269,400
__10,000
P 259,400
28,320
P 231,080
P 100,000
14,400
( 10,000)
P 104,400
__10,000
P 94,400
30%
P 28,320
Inventory = P988,000 (add the two book values and defer the P10,000 ending unrealized gross profit)
Noncontrolling interest in subsidiary, 12/31/x5 = P382,500
30% beginning book value less P14,400
unrealized gross profit (30% P935,600).............................................................
P280,680
Excess intangible allocation (30% P295,000).....................................................
(88,500)
Noncontrolling Interest in Broadways earnings ..................................................
28,320
Dividends (30% P50,000)...............................................................................................
(15,000)
Total noncontrolling interest at 12/31/x5...............................................................
P382,500
Problem XIV
Amortization of equipment: P20,000 / 10 years = P2,000
RPBI of S (downstream sales):..................................................... ... P15,000
RPBI of P (upstream sales)....................................................... 10,000
UPEI of S (downstream sales)... 20,000
UPEI of P (upstream sales). 5,000
Consolidated Net Income for 2014
P Companys net income from own/separate operations (P724,000 P24,000
Realized profit in beginning inventory of S Company (downstream sales)
P700,000
15,0000
P 90,000
10,000
( 5,000)
P 95,000
(20,00 0)
P695,000
95,000
P790,000
2,000
P788,000
18,600
P769,400
Or, alternatively
P 90,000
10,000
( 5,000)
P 95,000
P 18,600
2,000
P700,000
15,0000
(20,00 0)
P695,000
95,000
P790,000
20,600
P769,400
_ 18,600
P788,000
P 90,000
10,000
( 5,000)
P 95,000
2,000
P 93,000
20%
P 18,600
0
P 18,600
x: Controlling Interests
RE P, 12/31/2014 (equity method) = CRE, 12/31/2014.
80%
125,600
P 3,605,600
Or, compute first the RE P on January 1, 2014 (use work back approach),
Retained earnings Parent, 1/1/2014 (cost)
(P3,500,000 plus P25,000 Div of P less P724,000 NI of P).
P2,801,000
-: UPEI of S (down) 2013 or RPBI of S (down) 2014...
15,000
Adjusted Retained earnings Parent, 1/1/2014 (cost)
P2,786.000
Retroactive Adjustments to convert Cost to Equity for
purposes of consolidation / Parents share of adjusted
net increase in subsidiarys retained earnings:
Retained earnings Subsidiary, 1/1/2011P 150,000
Less: Retained earnings Subsidiary, 1/1/2014 260,000
Increase in Retained earnings since acquisition
(cumulative net income cumulative dividends)P110,000
Accumulated amortization (1/1/2011 1/1/2014):
P 2,000 x 3 years. ( 6,000)
UPEI of P (up) 2013 or RPBI of P (up) 2014... ( 10,000)
P 94,000
X: Controlling Interests 80% 75,200
RE P, 1/1/2014 (equity method) = CRE, 1/1/2014..P2,861,200
+: CI CNI or Profit Attributable to Equity Holders of Parent.. 769,400
-: Dividends P..
25,000
RE P, 12/31/2014 (equity method) = CRE, 12/31/2014..P3,605,600
P
S
Intercompany sales - downstream
Intercompany sales - upstream
RPBI of S (downstream sales)*
RPBI of P (upstream sales)***
UPEI of S (downstream sales)**
UPEI of P (upstream sales)****
Consolidated
Sales
Cost of Sales
P2,500,000
P1,250,000
1,200,000
875,000
( 320,000)
( 320,000)
( 290,000)
( 290,000)
( 15,000)
( 10,000)
20,000
_________
5,000
P3,090,000
P1,515,000
P21,000
30%
P30,000
30%
P9,000
P50,000
50%
P40,000
50%
P20,000
P50,000
20,000
10,000
10,000
10,000
20,000
P70,000
6,000
46,000
6,000
52,000
CONSOLIDATED BALANCES
Sales = P1,000,000 (add the two book values and subtract P100,000 in intercompany transfers)
Cost of Goods Sold = P571,000 (add the two book values and subtract P100,000 in intercompany purchases.
Subtract P9,000 because of the previous year unrealized gross profit and add P20,000 to defer the current
year unrealized gross profit.)
Operating Expenses = P206,000 (add the two book values and include the P10,000 excess amortization
expenses but remove the P4,000 in excess depreciation expense [P10,000 P6,000] created by building
transfer)
Investment Income = P0 (the intercompany balance is removed so that the individual revenue and expense
accounts of the subsidiary can be shown)
Inventory = P280,000 (add the two book values and subtract the P20,000 ending unrealized gross profit)
Equipment (net) = P292,000 (add the two book values and include the P60,000 allocation from the acquisitiondate fair value less three years of excess amortizations)
Buildings (net) = P528,000 (add the two book values and subtract the P20,000 unrealized gain on the transfer
after two years of excess depreciation [P4,000 per year])
Problem XVI
Requirements 1 to 4:
Schedule of Determination and Allocation of Excess (Partial-goodwill)
Date of Acquisition January 1, 20x4
Fair value of Subsidiary (80%)
Consideration transferred..
Less: Book value of stockholders equity of Son:
Common stock (P240,000 x 80%).
Retained earnings (P120,000 x 80%)...
Allocated excess (excess of cost over book value)..
Less: Over/under valuation of assets and liabilities:
Increase in inventory (P6,000 x 80%)
Increase in land (P7,200 x 80%).
Increase in equipment (P96,000 x 80%)
Decrease in buildings (P24,000 x 80%).....
Decrease in bonds payable (P4,800 x 80%)
Positive excess: Partial-goodwill (excess of cost over
fair value)...
P 372,000
P 192,000
96,000
P 4,800
5,760
76,800
( 19,200)
3,840
288,000
84,000
72,000
P 12,000
S Co.
Book value
P 24,000
48,000
84,000
168,000
(120,000)
P 204,000
S Co.
Fair value
P 30,000
55,200
180,000
144,000
( 115,200)
P 294,000
(Over) Under
Valuation
P 6,000
7,200
96,000
(24,000)
4,800
P 90,000
The buildings and equipment will be further analyzed for consolidation purposes as follows:
Equipment ..................
Less: Accumulated depreciation..
Net book value...
S Co.
Book value
180,000
96,000
84,000
S Co.
Fair value
180,000
180,000
Buildings................
Less: Accumulated depreciation..
Net book value...
S Co.
Book value
360,000
192,000
168,000
S Co.
Fair value
144,000
144,000
Increase
(Decrease)
0
( 96,000)
96,000
(Decrease)
( 216,000)
( 192,000)
( 24,000)
Over/
Under
P 6,000
Life
1
96,000
(24,000)
48000
8
4
4
Annual
Amount
P 6,000
Current
Year(20x4)
P 6,000
20x5
P
-
12,000
( 6,000)
1,200
P 13,200
12,000
( 6,000)
1,200
P 13,200
12,000
(6,000)
1,200
P 7,200
The goodwill impairment loss of P3,750 based on 100% fair value would be allocated to the controlling
interest and the NCI based on the percentage of total goodwill each equity interest received. For
purposes of allocating the goodwill impairment loss, the full-goodwill is computed as follows:
Fair value of Subsidiary (100%)
Consideration transferred: Cash (80%)
P 372,000
93,000
P 465,000
__360,000
105,000
90,000
15,000
In this case, the goodwill was proportional to the controlling interest of 80% and non-controlling interest
of 20% computed as follows:
Goodwill applicable to parent
Goodwill applicable to NCI..
Total (full) goodwill..
Value
P12,000
3,000
P15,000
% of Total
80.00%
20.00%
100.00%
Value
P 3,000
% of Total
80.00%
750
20.00%
P 3,750
100.00%
The unrealized profits on January 1, and on December 31, 20x5, resulting intercompany sales, are as
summarized below:
Downstream Sales:
Year
20x4
20x5
Sales of Parent to
Subsidiary
P150,000
120,000
Upstream Sales:
Year
20x4
20x5
Sales of Subsidiary
to Parent
P 50,000
62,500
Intercompany Merchandise
in 12/31 Inventory
of S Company
P150,000 x 60% = P90,000
P120,000 x 80% = P96,000
Unrealized Intercompany
Profit in Ending Inventory
P90,000 x 20% = P18,000
P96,000 x 25% = P40,000
Intercompany Merchandise
in 12/31 Inventory
of S Company
P100,000 x 50% = P25,000
P 62,500 x 40% = P25,000
Unrealized Intercompany
Profit in Ending Inventory
P25,000 x 40% = P10,000
P25,000 x 20% = P 5,000
January 1, 20x4:
(1) Investment in S Company
Cash..
Acquisition of S Company.
372,000
372,000
(2) Cash
Investment in S Company (P36,000 x 80%).
28,800
48,000
28,800
48,000
13,560
13,560
18,000
9,600
18,000
9,600
Thus, the investment balance and investment income in the books of P Company is as follows:
Cost, 1/1/x4
NI of S
(60,000 x 80%)
Balance, 12/31/x4
Amortization &
impairment
UPEI of S (P18,000 x 100%)
UPEI of P (P12,000 x80%)
Investment in S
372,000
28,800
48,000
13,560
18,000
9,600
48,000
NI of S
(P60,000 x 80%)
6,840
Balance, 12/31/x4
350,040
Investment Income
13,560
18,000
9,600
240,000
120.000
(E2) Inventory.
Accumulated depreciation equipment..
Accumulated depreciation buildings..
Land.
Discount on bonds payable.
Goodwill.
Buildings..
Non-controlling interest (P90,000 x 20%)..
Investment in S Co.
6,000
96,000
192,000
7,200
4,800
12,000
288,000
72,000
216,000
18,000
84,000
6,000
6,000
6,000
1,200
3,000
6,000
12,000
1,200
3,000
Inventory sold
Equipment
Buildings
Bonds payable
Totals
Cost of
Goods
Sold
P 6,000
_______
P 6,000
Depreciation/
Amortization
Expense
Amortization
-Interest
P 12,000
( 6,000)
_______
P 7,200
P 1,200
P1,200
Total
14,400
6,840
21,960
7,200
36,000
After
Investment in S
NI of S
28,800
(60,000
x 80%). 48,000
13,560
18,000
9,600
21,960
Dividends - S
Amortization &
impairment
UPEI of S
UPEI of P
Investment Income
Amortization
impairment
UPEI of S
UPEI of P
13,560
18,000
9,600
48,000
NI of S
(50,000
x 80%)
the
6,840
eliminating entries are posted in the investment account, it should be observed that from consolidation
point of view the investment account is totally eliminated. Thus,
Investment in S
372,000
28,800
Cost, 1/1/x4
NI of S
(60,000 x 80%)
Balance, 12/31/x4
(E4) Investment Income
and dividends
(E5) Sales.
Cost of Goods Sold (or Purchases)
48,000
350,040
21,960
372,000
13,560
18,000
9,600
288,000
84,000
372,000
150,000
(E6) Sales.
60,000
150,000
60,000
18,000
12,000
18,000
12,000
6,960
6,960
P 60,000
( 12,000)
P 48,000
( 13,200)
P 34,800
20%
P
6,960
Subsidiary accounts are adjusted to full fair value regardless on the controlling interest percentage or
what option used to value non-controlling interest or goodwill.
Worksheet for Consolidated Financial Statements, December 31, 20x4.
Equity Method (Partial-goodwill)
80%-Owned Subsidiary
December 31, 20x4 (First Year after Acquisition)
Income Statement
P Co
P480,000
S Co.
P240,000
Investment income
Total Revenue
6,840
P486,840
P240,000
P204,000
P138,000
Depreciation expense
Interest expense
Other expenses
Goodwill impairment loss
Total Cost and Expenses
Net Income
NCI in Net Income - Subsidiary
Net Income to Retained Earnings
60,000
48,000
P312,000
P174,840
P174,840
24,000
18,000
P180,000
P 60,000
P 60,000
Sales
P360,000
174,840
P414,840
72,000
P120,000
60,000
P180,000
Dr.
(5) 150,000
(6) 60,000
(4) 6,840
(3)
(7)
(8)
(3)
(3)
6,000
18,000
12,000
6,000
1,200
(3)
3,000
(9)
6,960
(1) 120,000
Cr.
Consolidated
P 510,000
_________
P 510,000
P 168,000
(5)
150,000
(6)
60,000
90,000
1,200
66,000
3,000
P328,200
P181,800
( 6,960)
P174,840
360,000
174,840
P414,840
72,000
S Company
Retained earnings, 12/31 to Balance
Sheet
Balance Sheet
Cash.
Accounts receivable..
Inventory.
Land.
Equipment
Buildings
Discount on bonds payable
Goodwill
Investment in S Co
Total
Accumulated depreciation
- equipment
Accumulated depreciation
- buildings
Accounts payable
Bonds payable
Common stock, P10 par
Common stock, P10 par
Retained earnings, from above
Non-controlling interest
Total
36,000
P462,840
________
P144,000
642,840
232,800
90,000
120,000
P 90,000
60,000
90,000
387,360
150,000
210,000
220,000
720,000
48,000
180,000
540,000
350,040
P1,635,700
P1,006,000
P 135,000
405,000
P 96,000
288,000
120,000
240,000
600,000
120,000
120,000
462,840
240,000
144,000
_________
P1,962,840
_________
P1,008,000
(4)
(1)
5,000
(2)
7,200
(2)
4,800
(2) 12,000
(4) 21,960
(2) 96,000
(2) 192,000
(3)
6,000
(3)
(7)
(8)
36,000
6,000
18,000
12,000
(2) 216,000
(3) 1,200
(3) 3,000
(2) 288,000
(2) 84,000
(3)
12,000
180,000
265,200
380,000
1,044,000
3,600
9,000
P2,394,600
P 147,000
495,000
240,000
360,000
600,000
(1) 240,000
(4)
7,200
__________
P 983,160
(1 ) 72,000
(2) 18,000
(5) 6,960
P 983,160
P Co.
P 540,000
216,000
P 324,000
60,000
72,000
P 192,000
65,040
P 257,040
P 72,000
462,840
____89,760
P2,394,600
S Co.
P 360,000
192,000
P 168,000
24,000
54,000
P 90,000
P 90,000
P 48,000
38,400
72,000
5,760
38,400
72,000
5,760
24,000
24,000
18,000
18,000
4,800
4,800
9,600
9,600
Thus, the investment balance and investment income in the books of P Company is as follows:
Cost, 1/1/x5
NI of Son
(90,000 x 80%)
RPBI of S (P18,000 x 100%)
RPBI of P (P12,000 x 80%)
Balance, 12/31/x5
Investment in S
350,040
38,400
5,760
72,000
24,000
18,000
4,800
9,600
376,680
Investment Income
5,760
24,000
72,000
4,800 18,000
9,600
65,040
NI of S
(P90,000 x 80%)
RPBI of S (P18,000 x 100%)
RPBI of P(P12,000 x 80%)
Balance, 12/31/x5
240,000
144.000
84,000
198,000
7,200
3,600
9,000
307,200
76,800
216,000
15,360
70,440
6,000
6,000
1,200
12,000
1,200
Inventory sold
Equipment
Buildings
Bonds payable
Totals
Depreciation/
Amortization
Expense
Amortization
-Interest
P 12,000
( 6,000)
_______
P 6,000
P 1,200
P1,200
Total
P7,200
65,040
9,600
48,000
26,640
Investment in S
38,400
Dividends S
Amortization
72,000
5,760
(P7,200 x 80%)
18,000
24,000
UPEI of S
9,600
4,800
UPEI of P
26,640
Investment Income
Amortization
(P7,200 x 80%)
UPEI of S
UPEI of P
5,760
24,000
4,800
(E6) Sales.
Cost of Goods Sold (or Purchases)
120,000
(E7) Sales.
Cost of Goods Sold (or Purchases)
75,000
18,000
9,600
2,400
72,000
18,000
9,600
65,040
NI of S
(90,000
x 80%)
RPBI of S
RPBI of P
120,000
75,000
18,000
12,000
After the eliminating entries are posted in the investment account, it should be observed that from
consolidation point of view the investment account is totally eliminated. Thus,
Cost, 1/1/x5
NI of S
(90,000 x 80%)
Investment in S
350,040
38,400
72,000
5,760
18,000
9,600
376,680
18,000
9,600
24,000
4,800
307,200
70,440
26,640
336,900
404,280
24,000
6,000
24,000
6,000
17,760
17,760
P 90,000
12,000
(
P
(
P
6,000)
96,000
7,200)
88,800
20%
P Co
P540,000
S Co.
P360,000
Investment income
Total Revenue
Cost of goods sold
65,040
P605,040
P216,000
P360,000
P192,000
Depreciation expense
Interest expense
Other expenses
Goodwill impairment loss
Total Cost and Expenses
Net Income
NCI in Net Income - Subsidiary
Net Income to Retained Earnings
60,000
72,000
P348,000
P257,040
P257,040
24,000
54,000
P270,000
P 90,000
P 90,000
P462,840
Sales
Dr.
(6) 120,000
(7) 75,000
(4) 65,040
Cr.
(10) 24,000
(11) 6,000
(6) 120,000
(7) 75,000
(8) 18,000
(9) 12,000
(3)
(3)
(5)
6,000
1,200
17,760
Consolidated
P 705,000
___________
P 705,000
P 213,000
P
P
(
P
90,000
1,200
126,000
430,200
274,800
17,760)
257,040
P 462,840
S Company
Net income, from above
Total
Dividends paid
P Company
S Company
Retained earnings, 12/31 to Balance
Sheet
Balance Sheet
Cash.
Accounts receivable..
Inventory.
Land.
Equipment
Buildings
Discount on bonds payable
Goodwill
Investment in S Co
Total
Accumulated depreciation
- equipment
Accumulated depreciation
- buildings
Accounts payable
Bonds payable
Common stock, P10 par
Common stock, P10 par
Retained earnings, from above
Non-controlling interest
Total
257,040
P719,880
P144,000
90,000
P234,000
72,000
-
48,000
P777,456
P223,200
P 777,456
265,200
180,000
216,000
P 102,000
96,000
108,000
P 367,200
276,000
210,000
240,000
720,000
48,000
180,000
540,000
376,680
P2,207,880
P1,074,000
P 150,000
450,000
P 102,000
306,000
120,000
240,000
600,000
120,000
120,000
647,880
___ _____
P2,207,880
240,000
186,000
_________
P1,074,000
(1) 144,000
257,040
P 719,880
(4)
(2)
7,200
(2)
(2)
(8)
(9)
3,600
9,000
18,000
9,600
(2)
84,000
(2) 198,000
(3) 6,000
48,000
(10) 24,000
(11) 6,000
(3) 216,000
(3) 1,200
(1) 307,200
(2) 70,440
(4) 26,640
(3)
9,600
2,400
__________
P1,046,400
72,000
________
294,000
265,200
420,000
1,044,000
2,400
9,000
P2,677,800
12,000
P180,000
552,000
240,000
360,000
600,000
(1) 240,000
(4)
(9)
647,880
(2 ) 76,800
(2) 15,360
(5) 17,760
P1,046,400
____97,920
P2,677,800
P 372,000
93,000
P 465,000
P 240,000
120,000
P
6,000
7,200
96,000
( 24,000)
360,000
P 105,000
4,800
90,000
P 15,000
Over/
under
P 6,000
Life
1
96,000
(24,000)
4,800
8
4
4
Annual
Amount
P 6,000
Current
Year(20x4)
P 6,000
20x5
P
-
12,000
( 6,000)
1,200
P 13,200
12,000
( 6,000)
1,200
P 13,200
12,000
(6,000)
1,200
P 7,200
January 1, 20x4:
(1) Investment in S Company
Cash..
372,000
Acquisition of S Company.
28,800
48,000
372,000
28,800
48,000
13,560
13,560
*this procedure would be more appropriate, instead of multiplying the full-goodwill impairment loss of P3,125 by 80%. There might
be situations where the controlling interests on goodwill impairment loss would not be proportionate to NCI acquired (refer to
Illustration 15-6).
18,000
9,600
18,000
9,600
Thus, the investment balance and investment income in the books of P Company is as follows
Cost, 1/1/x4
NI of S
(60,000 x 80%)
Investment in S
372,000
28,800
48,000
13,560
18,000
9,600
Balance, 12/31/x4
324,000
Amortization &
impairment
UPEI of S (P18,000 x 100%)
UPEI of P (P12,000 x80%)
Investment Income
13,560
18,000
9,600
48,000
NI of S
(P60,000 x 80%)
6,840
Balance, 12/31/x4
240,000
120.000
(E2) Inventory.
Accumulated depreciation equipment..
Accumulated depreciation buildings..
Land.
Discount on bonds payable.
Goodwill.
Buildings..
Non-controlling interest (P90,000 x 20%) + [(P15,000, full
P12,000, partial goodwill)]
Investment in Son Co.
6,000
96,000
192,000
7,200
4,800
15,000
Inventory sold
Equipment
Buildings
Bonds payable
Totals
Cost of
Goods
Sold
P 6,000
_______
P 6,000
Depreciation/
Amortization
Expense
Amortization
-Interest
P 12,000
( 6,000)
_______
P 7,200
P 1,200
P1,200
Total
14,400
216,000
21,000
84,000
288,000
72,000
6,000
6,000
6,000
1,200
3,750
6,000
12,000
1,200
3,750
6,840
21,960
7,200
36,000
After
Investment in S
NI of S
28,800
Dividends - S
(60,000
Amortization &
x 80%). 48,000
13,560
impairment
18,000
UPEI of S
9,600
UPEI of P
21,960
Investment Income
Amortization
impairment
UPEI of S
UPEI of P
13,560
18,000
9,600
NI of S
(50,000
x 80%)
48,000
6,840
the
eliminating entries are posted in the investment account, it should be observed that from consolidation
point of view the investment account is totally eliminated. Thus,
Investment in S
372,000
28,800
Cost, 1/1/x4
NI of S
(60,000 x 80%)
Balance, 12/31/x4
(E4) Investment Income
and dividends
48,000
350,040
21,960
372,000
13,560
18,000
9,600
288,000
84,000
372,000
(E5) Sales.
Cost of Goods Sold (or Purchases)
150,000
(E6) Sales.
Cost of Goods Sold (or Purchases)
60,000
18,000
12,000
6,210
P 60,000
( 12,000)
P 48,000
( 13,200)
P 34,800
20%
P 6,960
150,000
60,000
18,000
12,000
6,210
partial goodwill
Less: Non-controlling interest on impairment
loss on full-goodwill (P3,750 x 20%) or
(P3,750 impairment on full-goodwill less
P3,000, impairment on partial-goodwill)*
750
Non-controlling Interest in Net Income (NCINI)
full goodwill
P 6210
*this procedure would be more appropriate, instead of multiplying the fullgoodwill impairment loss of P3,750 by 20%. There might be situations where the
NCI on goodwill impairment loss would not be proportionate to NCI acquired
(refer to Illustration 15-6).
P Co
P480,000
S Co.
P240,000
Investment income
Total Revenue
6,840
P486,840
P240,000
P204,000
P138,000
Depreciation expense
Interest expense
Other expenses
Goodwill impairment loss
Total Cost and Expenses
Net Income
NCI in Net Income - Subsidiary
Net Income to Retained Earnings
60,000
48,000
P312,000
P174,840
P174,840
24,000
18,000
P150,000
P 50,000
P 50,000
Sales
P360,000
Dr.
(5) 150,000
(6) 60,000
(4)
6,840
(3)
(7)
(8)
(3)
(3)
6,000
18,000
12,000
6,000
1,200
(3)
3,750
(9)
5,175
Cr.
Consolidated
P 510,000
_________
P 510,000
P 168,000
(5)
150,000
(6)
60,000
360,000
174,840
414,840
72,000
________
174,840
P414,840
P120,000
60,000
P180,000
72,000
-
36,000
P462,840
P144,000
462,840
232,800
90,000
120,000
P 90,000
60,000
90,000
322,800
150,000
210,000
240,000
720,000
48,000
180,000
540,000
350,040
P1,635,700
P1,008,000
P 135,000
P 96,000
(1) 120,000
90,000
1,200
66,000
3,750
P274,125
P150,875
( 5,175)
P145,700
(4)
(2)
6,000
(2)
7,200
(2)
4,800
(2) 15,000
(4) 21,960
(2)
96,000
(3)
(7)
(8)
36,000
6,000
18,000
12,000
(2) 216,000
(3) 1,200
(3) 3,750
(2) 288,000
(2) 84,000
(3)
12,000
180,000
265,200
420,000
1,044,000
3,600
11,250
P2,396,850
P 147,000
Accumulated depreciation
- buildings
Accounts payable
Bonds payable
Common stock, P10 par
Common stock, P10 par
Retained earnings, from above
Non-controlling interest
Total
405,000
288,000
120,000
240,000
600,000
120,000
120,000
(2) 192,000
(3)
6,000
462,840
240,000
144,000
(1) 240,000
_________
P1,962,840
_________
P1,008,000
__________
P 986,160
(4)
7,200
495,000
240,000
360,000
600,000
(1 ) 72,000
(2) 21,000
(9) 6,210
P 986,160
Perfect Co.
P 540,000
216,000
P 324,000
60,000
72,000
P 192,000
65,040
P 257,040
P 72,000
462,840
____92,010
P2,396,850
Son Co.
P 360,000
192,000
P 168,000
24,000
54,000
P 90,000
P 90,000
P 48,000
38,400
72,000
5,760
24,000
18,000
4,800
38,400
72,000
5,760
24,000
18,000
4,800
9,600
9,600
Thus, the investment balance and investment income in the books of Perfect Company is as follows:
Cost, 1/1/x5
NI of Son
(90,000 x 80%)
RPBI of (P18,000 x 100%)
RPBI of P (P12,000 x 80%)
Balance, 12/31/x5
Investment in S
350,040
38,400
5,760
72,000
24,000
18,000
4,800
9,600
376,680
Investment Income
5,760
24,000
72,000
4,800 18,000
9,600
65,040
NI of S
(P90,000 x 80%)
RPBI of S (P18,000 x 100%)
RPBI of P (P12,000 x 80%)
Balance, 12/31/x5
240,000
144.000
84,000
198,000
7,200
3,600
11,250
307,200
76,800
216,000
17,610
70,440
Amortization
6,000
6,000
1,200
12,000
1,200
Inventory sold
Equipment
Buildings
Bonds payable
Totals
Expense
-Interest
P 12,000
( 6,000)
_______
P 6,000
Total
P 1,200
P1,200
P7,200
65,040
9,600
48,000
26,640
Investment in S
38,400
Dividends S
Amortization
72,000
5,760
(P7,200 x 80%)
18,000
24,000
UPEI of S
9,600
4,800
UPEI of P
26,640
Investment Income
Amortization
(P7,200 x 80%)
UPEI of S
UPEI of P
5,760
24,000
4,800
(E6) Sales.
Cost of Goods Sold (or Purchases)
120,000
(E7) Sales.
Cost of Goods Sold (or Purchases)
75,000
18,000
9,600
2,400
72,000
18,000
9,600
65,040
NI of S
(90,000
x 80%)
RPBI of S
RPBI of P
120,000
75,000
18,000
12,000
After the eliminating entries are posted in the investment account, it should be observed that from
consolidation point of view the investment account is totally eliminated. Thus,
Cost, 1/1/x5
NI of Son
(90,000 x 80%)
RPBI of S (P18,000 x 100%)
RPBI of P (P18,000 x 80%)
Balance, 12/31/x5
(E8) RPBI of S
(E9) RPBI of P
Investment in S
350,040
38,400
72,000
18,000
9,600
376,680
18,000
9,600
5,600
24,000
4,800
307,200
70,440
26,640
404,280
404,280
24,000
24,000
6,000
6,000
17,760
17,760
P 90,000
12,000
(
P
(
P
6,000)
96,000
7,200)
88,000
20%
P 17,760
P Co
P540,000
S Co.
P360,000
Investment income
Total Revenue
Cost of goods sold
65,040
P605,040
P216,000
P360,000
P192,000
Depreciation expense
Interest expense
Other expenses
Goodwill impairment loss
Total Cost and Expenses
Net Income
NCI in Net Income - Subsidiary
Net Income to Retained Earnings
60,000
72,000
P348,000
P257,040
P257,040
24,000
54,000
P270,000
P 90,000
P 90,000
(3)
(3)
P144,000
90,000
P234,000
(1) 144,000
Sales
P462,840
257,040
P719,880
Dr.
(6) 120,000
(7) 75,000
(4) 65,040
Cr.
(10) 24,000
(11) 6,000
(6) 120,000
(7) 75,000
(8) 18,000
(9) 12,000
(5)
6,000
1,200
17,760
Consolidated
P 705,000
___________
P 705,000
P 213,000
P
P
(
P
90,000
1,200
126,000
430,200
274,800
17,760)
308,448
P 462,840
257,040
P 719,880
Dividends paid
P Company
S Company
Retained earnings, 12/31 to Balance
Sheet
Balance Sheet
Cash.
Accounts receivable..
Inventory.
Land.
Equipment
Buildings
Discount on bonds payable
Goodwill
Investment in S Co
Total
Accumulated depreciation
- equipment
Accumulated depreciation
- buildings
Accounts payable
Bonds payable
Common stock, P10 par
Common stock, P10 par
Retained earnings, from above
Non-controlling interest
Total
72,000
-
48,000
P647,880
P186,000
P 647,880
265,200
180,000
216,000
P 114,000
96,000
108,000
P 367,200
276,000
210,000
240,000
720,000
48,000
180,000
540,000
376,680
P2,207,880
P1,074,000
P 150,000
450,000
P 102,000
306,000
120,000
240,000
600,000
120,000
120,000
240,000
186,000
647,880
___ _____
P2,207,880
_________
P1,074,000
(4)
(2)
7,200
48,000
(10) 24,000
(11) 6,000
(2)
(2)
(8)
(9)
(3) 216,000
3,600 (3) 1,200
11,250
18,000 (1) 307,200
9,600 (3) 70,440
(4) 26,640
(2)
84,000
(2) 198,000
(3) 6,000
(3)
12,000
9,600
2,400
__________
P1,048,650
72,000
________
294,000
265,200
420,000
1,044,000
2,400
11,250
P2,680,050
P180,000
552,000
240,000
360,000
600,000
(1) 240,000
(4)
(9)
647,880
(1 ) 76,800
(2) 17,610
(14)17,760
P1,048,650
____100,170
P2,680,050
P20,000
__8,000
P12,000
Cost of Sales
67,000
_63,000
130,000
90,000
__6,900
46,900
Sales
Less: Cost of goods sold Parent
Subsidiary (90,000 x 70%)
Gross profit
Ending inventory (90,000 x 30%)
8. a
Parent
90,000
67,000
______
23,000
P23,000
0
(
6,900 )
P16,100
Subsidiary
100,000
63,000
37,000
27,000
P 37,000
0
(_
0)
P 37,000
16,100
P 53,100
0
P 53,100
1,610
P 51,490
Or, alternatively
P23,000
0
(
6,900 )
P16,100
P 1,610
0
P 37,000
0
(_
0)
P 37,000
16,100
P 53,100
1,610
P 51,490
_ 1,610
P 53,100
P 23,000
0
( 6,900)
P 16,100
0
P 16,100
10%
P 1,610
0
P 1,610
10. b P120,000, the amount of sales to outsiders is the amount of sales presented in the consolidated
income statement.
11. a the cost of inventory produced by the parent (downstream sales)
12. c
P3 0,000
0
(
)
P30,000
P 28,000
0
(_
0)
P 28,000
30,000
P 58,000
0
P 58,000
3,000
P 55,000
Or, alternatively
13. c
P Company
S Company
Total
Less: Intercompany sales upstream sales
Add: Unrealized profit in EI of S Co.
[P60,000 x 30% = P18,000 x (10 7.5)/10]
Consolidated
P3 0,000
0
(
)
P30,000
P 28,000
0
(_
0)
P 28,000
30,000
P 58,000
P 3,000
0
3,000
P 55,000
_ 3,000
P 58,000
P 30,000
(
0
0)
P 30,000
0
P 30,000
10%
P 3,000
0
P 3,000
Sales
10,000,000
__200,000
10,200,000
60,000
Cost of Sales
7,520,000
_160,000
7,680,000
60,000
________
10,140,000
__ 4,500
7,604,500
14. No requirement
15. d refer to No. 13 for computation
16. c
Sales
10,000,000
__200,000
10,200,000
60,000
P Company
S Company
Total
Less: Intercompany sales downstream sales
Add: Unrealized profit in EI of S Co.
[P60,000 x 30% = P18,000 x (10 7.5)/10]
Consolidated
17. a (P40,000 x 140% = P56,000)
18. a (P56,000 P40,000 = P16,000)
19. a
20x5
P Company
S Company
Total
Less: Intercompany sales
Realized profit in BI of S Co.
[P240,000 x 1/2 = P120,000 x (240-192)/240]
Add: Unrealized profit in EI of S Co.
[P375,000 x 40% = P150,000 x (375-300)/375]
Consolidated
________
10,140,000
Sales
1,800,000
__900,000
2,700,000
375,000
Cost of Sales
1,440,000
_750,000
2,190,000
375,000
24,000
________
2.325,000
__30,000
1,821,000
P 90,000
(
15,000 )
P 75,000
P 225,000
0
(_
0)
P225,000
75,000
P 300,000
_
0
P 300,000
15,000
P 285,000
P 90,000
0
( 15,000)
P 75,000
0
P 75,000
20%
P 15,000
0
P 15,000
26.
Consolidated sales
Cost of goods sold
Consolidated net income
Income to Dressers noncontrolling
interest:
Sales
Reported cost of sales
Report income
Portion realized
Realized net income
Portion to Noncontrolling
Interest
Income to noncontrolling
Interest
Income to controlling interest
P120,000
(45,000)
P 75,000
x
.80
P 60,000
P140,000
(60,000)
P 80,000
P120,000
(75,000)
P 45,000
x
.80
P 36,000
x
.30
(10,800)
P 69,200
P 24,000
(9,000)
P 15,000
27. c
Sales
500,000
_350,000
850,000
100,000
150,000
600,000
P Company
S Company
Total
Less: Intercompany sales to Dundee
Intercompany sales to Perth
Consolidated
28. a
29.
30. a
Selling price
Less: Cost of sales
Original unrealized profit
Unsold percentage
Unrealized profit
Consolidated Net Income for 20x4
P Companys net income from own/separate operations
Unrealized profit in ending inventory of S Company (downstream sales)
P Companys realized net income from separate operations*...
S Companys net income from own operations.
Total
32,727
_23,846
56,573
P
50,000
_40,000
10,000
__30%
P
_3,000
P180,000
( 3,000)
P 177,000
76,000
P253,000
31.
32.
0
P253,000
1,025,000
0
1,025,000
P 480,000
0
(
3,000)
________0
P 477,000
33. d
Cost of Sales
5,400,000
_1,200,000
6,600,000
1,000,000
P Company
S Company
Total
Less: Intercompany sales
Realized profit in BI of S Co.
[P625,000 x 12% = P75,000 x (625 - 425)/625]
Add: Unrealized profit in EI of S Co.
[P1,000,000 x 10% = P100,000 x (1,000 - 800)/1,000]
Consolidated
24,000
__20,000
5,596,000
34. b
Cost of Sales
690,000
195,000
885,000
200,000
Bates Company
Sam Company
Total
Less: Intercompany sales
Realized profit in BI of Bates Co.
[P40,000 x 20%]
Add: Unrealized profit in EI of Bates Co.
[P15,000 x 20%]
Consolidated
35. b
Net Income from own operations:
X-Beams (parent) Kent (subsidiary), 70%:30%
Unrealized Profit in EI of Parent (X-Beams):
P180,000x 20% = P36,000 x (180-100/180) = P16,000,
70%:30%
Non-controlling Interest in Kents Net Income
36. d
8,000
__3,000
680,000
Parent
Subsidiary
210,000
90,000
( 11,200)
( 4,800)
85,200
20x5
P 400,000
(
20,000)
P 380,000
20x6
P 480,000
20,000
0
P 500,000
0
P380,000
20%
P 76,000
0
P 76,000
37. a
a
a Selling price
Less: Cost of sales
Unrealized profit
Unsold fraction
Credit to Inventory
3,000)
3,000)
0
P( 3,000)
10%
P( 300)
0
P( 300)
P
(
Subsidiary 1
60,000
60,000
______
0
Sales
Intercompany
Parent
Subsidiary 1
Add: Cost of EI in S2 Co.
[P15,000 x (48/60]
Amount to be eliminated
*or, P60,000 + P60,000 [P15,000 x (60-48/60]
60,000
48,000 )
12,000
1/3
4,000
Parent
60,000
48,000
______
12,000
0
0
(
P(
38.
39.
0
P500,000
20%
P100,000
0
P100,000
Subsidiary 2
67,000
45,000
22,000
15,000
Cost of Sales
60,000
60,000
60,000
45,000
________
120,000
__12,000
*117,000
P150,000
P 225,000
0
(_
0)
P225,000
46. c
0
(
17,500 )
P132,500
P135,000
132,500
P 357,500
_
0
P357,500
P360,000
0
(_
0)
P360,000
17,500
( 26,250 )
P126,250
126,250
P 486,250
_
0
P486,250
1,610
P 51,490
Or, alternatively
P135,000
P360,000
0
(_
0)
P360,000
17,500
( 26,250 )
P126,250
P 37,875
0
126,250
P 486,250
37,875
P 448,375
_37,875
P 486,250
P 135,000
17,500
( 26,250)
P 126,250
0
P126,250
30%
P 37,875
0
P 37,875
P 450,000
P240,000
0
(_
0)
P450,000
26,250
(
30,000 )
P236,250
236,250
P 686,250
_
0
P686,750
70,875
P 615,375
Or, alternatively
P240,000
P 450,000
0
(_
0)
P450,000
26,250
(
30,000 )
P236,250
P 70,875
0
236,250
P 686,250
70,875
P 615,375
__70,875
P 686,250
P 240,000
26,250
( 30,000)
P 236,250
0
P 236,250
30%
P 70.875
0
P 70,875
Sales
420,000
280,000
700,000
140,000
560,000
Operating
Expenses
P Company
S Company
Total
Add: Undervalued equipment (P35,000/7 years)
Consolidated
28,000
14,000
42,000
_5,000
49,000
52. c
Cost of Sales
196,000
_112,000
308,000
140,000
P Company
S Company
Total
Less: Intercompany sales
Add: Unrealized profit in EI of S Co.
[P140,000 x 60% = P84,000 x (140 - 112)/140]
Consolidated
53. a
_16,800
184,900
P 140,000
P210,000
154,000
P364,000
0
364,000
P 504,000
35,000
( 5,000)
P 534,000
20
P 106,800
14,000
P 120,800
Partial-goodwill
P 364,000
P 112,000
168,000
280,000
84,000
___28,000
P 56,000
Full-goodwill
P 455,000
__350,000
P 105,000
35,000
P
70,000
54. d
Equipment
616,000
420,000
1,036,000
35,000
7,000
1,064,000
P Company
S Company
Total
Add: Undervalued equipment
Less: Depreciation on undervalued equipment (P35,000/7 years)
Consolidated
55. d
P Company
S Company
Total
Less: Unrealized profit in EI: [P140,000 x 60% = P84,000 x (140 - 112)/140]
Consolidated
Inventory
210,000
154,000
364,000
16,800
347,200
56. d
Add the two book values and remove P100,000 intercompany transfers.
57. c
P20,000
60%
P12,000
P140,000
80,000
(100,000)
12,000
P132,000
58. c
P260,000
65,000
P325,000
(250,000)
P75,000
Life
25,000 5 years
50,000 20 years
P
-0-
Annual Excess
Amortizations
P5,000
2,500
P7,500
Consolidated Expenses = P37,500 (add the two book values and include current year
amortization expense)
59. a
P 100,000
P150,000
110,000
P260,000
0
260,000
P 360,000
75,000
( 7,500)
P 427,500
20
P 85,500
________0
P 85,500
Partial-goodwill
P 260,000
P 80,000
120,000
200,000
60,000
20,000
40,000
Full-goodwill
P 260,000
___65,000
P 325,000
__250,000
P 75,000
P
25,000
50,000
Amortization:
Equipment: P25,000 / 5 years
= P 5,000
Secret formulas: P50,000 / 20 years = 2,500
Total amortization of allocated
P 7,500
60. c Add the two book values plus the original allocation (P25,000) less one year of excess
amortization expense (P5,000).
61. b Add the two book values less the ending unrealized gross profit of P12,000.
Intercompany Gross profit (P100,000 P80,000) .................................................
Inventory Remaining at Year's End ........................................................................
Unrealized Intercompany Gross profit, 12/31 ......................................................
62. b
Share in net income
20x3: P70,000 x 90%
20x4: P85,000 x 90%
20x5: P94,000 x 90%
Less: Unrealized profit in ending inventory of P
20x3: P1,200 x 25% = P300 x 90%
20x4: P4,000 x 25% = P1,000 x 90%
20x5: P3,000 x 25% = P750 x 90%
Income from S
20x3
P 63,000
270)
________
P 62,730
20x4
P 76,500
270
(
900)
________
P 75,870
P20,000
60%
P12,000
20x5
P 84,600
900
__( 675)
P 84,825
It should be noted that PAS 27 allow the use of cost model in accounting for investment in
subsidiary in the books of parent company but not the equity method.
63. c refer to No. 62 for computation.
20x3
20x4
P 70,000
0
(
300)
P 69,700
0
P 69,700
10%
P 6,970
0
P 6,970
P 85,000
300
( 1,000)
P 84,300
0
P 84,300
10%
P 8,430
0
P 8,430
Full
P 25,000
20x5
P 94,000
1,000
(
750)
P 94,250
0
P 94,250
10%
P 9,425
0
P 9,425
P 30,000
1,000
( ,2,400 )
P28,600
P 100,000
1,050
(_ 3,600)
P 97,450
28,600
P 126,050
2,000
P124,050
5,320
P 118,730
Or, alternatively
P 30,000
1,000
( 2,400 )
P 28,600
P
5,320
2,000
P 100,000
1,050
(_ 3,600)
P 97,450
28,600
P 126,050
7,320
P118,730
__ 5,320
P124,050
P 30,000
1,000
( 2,400)
P 28,600
2,000
P 26,600
20%
P 5,320
0
P 5,320
P 150,000
320,000
P 470,000
20,000
( 6,000)
P 484,000
( 2,400)
P 481,600
_ 20%
P 96,320
5,000
P 101,320
89. b
90. a
91. c
92. a
93. c
P1,000,000
809,680
P1,809,680
96,320
P1,906,000
P1,000,000
809,680
P1,809,680
101,320
P1,911,000
P 10,000
8,600
P 18,600
(
1,200
P 17,400
20
P 3,480
P 8,000
__3,000
P 5,000
___40%
P 2,000
0
0)
P 18,600
45,000
15,000
P 71,250
45,000
( 15,000 )
P 101,250
P 49,500
0
(_
0)
P 49,500
101,250
P 150,750
____0
P150,750
10,125
P 140,625
Or, alternatively
P 71,250
45,000
( 15,000 )
P 101,250
P 10,125
___0
P 49,500
0
(_
0)
P 49,500
101,250
P 150,750
10,125
P140,625
__ 10,125
P150,750
P 71,250
45,000
( 15,000)
P 101,250
_0
P101,250
10%
P 10,125
0
P 10,125
(Not required)
27,000
300,000
15,000
40,500
4,500
54,000
27,000
300,000
15,000
45,000
54,000
180,000
750,000
94. c
Preferred Solution - since what is given is the RE P, 1/1/20x8 Retained earnings Parent, 1/1/20x8 (cost)..
P 598,400
-: UPEI of S (down) 20x7 or RPBI of S (down) 20x8...
25,000
Adjusted Retained earnings Parent, 1/1/20x8 (cost)
P 573.400
Retroactive Adjustments to convert Cost to Equity for
purposes of consolidation / Parents share of adjusted
net increase in subsidiarys retained earnings:
Retained earnings Subsidiary, 1/1/20x4P 95,000
Less: Retained earnings Subsidiary, 1/1/20x8.. 144,000
Increase in Retained earnings since acquisition
(cumulative net income cumulative dividends)P 49,000
Accumulated amortization (1/1/20x4 1/1/20x8).
0
UPEI of P (up) 20x7 or RPBI of P (up) 20x8... (
0)
P 49,000
X: Controlling Interests
90% 44,100
RE P, 1/1/20x8 (equity method) = CRE, 1/1/20x8..
P 617,500
+: CI CNI or Profit Attributable to Equity Holders of Parent
203,700
-: Dividends P..
110,000
RE P, 12/31/2014 (equity method) = CRE, 12/31/2014..
P 711,200
Consolidated Net Income for 20x8
P Companys net income from own/separate operations
Realized profit in beginning inventory of S Company (downstream sales)
Unrealized profit in ending inventory of S Company (downstream sales)
P Companys realized net income from separate operations*...
S Companys net income from own operations.
Realized profit in beginning inventory of P Company (upstream sales)
Unrealized profit in ending inventory of P Company (upstream sales)
S Companys realized net income from separate operations*...
Total
Less: Amortization of allocated excess
Consolidated Net Income for 20x8
Less: Non-controlling Interest in Net Income* *
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent 20x8..
*that has been realized in transactions with third parties.
P 63,000
0
(
0)
P 63,000
P132,000
25,000
(10,000)
P147,000
63,000
P210,000
0
P210,000
6,300
P203,700
Or, alternatively
P 63,000
0
(
0)
P 63,000
P 6,300
_____0
P132,000
25,000
(10,000)
P147,000
63,000
P210,000
6,300
P203,700
_ 6,300
P210,000
837,000
93,000
P 63,000
0
0)
P 63,000
0
P 63,000
10%
P 6,300
0
P 6,300
Pruitt Co.
P1,210,000
165,000
935,000
(220,000)
__880,000
P 330,000
198,000
Sedbrook
P 636,000
132,000
420,000
(144,000)
P 132,000
31,500
P 163,500
P 110,000
Or, alternatively(compute the RE-P end of the year under the cost model)
Retained earnings Parent, 1/1/20x8 (cost)..
P
Add: NI of Parent as reported 20x8 under cost model
Less: Dividend of Parent 20x8..
Retained earnings Parent, 12/31/20x8 (cost)..
P
-: UPEI of S (down) 20x8 or RPBI of S (down) 20x9....
Adjusted Retained earnings Parent, 12/31/20x8 (cost model)..
P
Retroactive Adjustments to convert Cost to Equity for
purposes of consolidation / Parents share of adjusted
net increase in subsidiarys retained earnings:
Retained earnings Subsidiary, 1/1/20x4
P 95,000
Less: Retained earnings Subsidiary, 12/31/20x8
Retained earnings Subsidiary , 1/1/20x8.. P144,000
Add: NI of Subsidiary 20x8
63,000
Less: Dividend of Subsidiary 20x8...
35,000 172,000
Increase in Retained earnings since acquisition
(cumulative net income cumulative dividends) P 97,000
Accumulated amortization (1/1/20x4 12/31/20x8)..(
0)
UPEI of P (up) 20x8 or RPBI of P (up) 20x9........ (
0)
P 97,000
x: Controlling Interests
90%
RE P, 12/31/20x8 (equity method) = CRE, 12/31/20x8
P
(Not required)
__408,000
P 228,000
165,000
P 63,000
P 63,000
P 35,000
598,400
163,500
110,000
651,900
10,000
641,900
69,300
711,200
44,100
(2) Sales
44,100
250,000
10,000
25,000
31,500
250,000
10,000
25,000
31,500
669,600
74,400
95. P941,000.
Additional information and correction:
In 20x4, Simon Company reported net income of P270,000 and declared dividends of P90,000.
Paul Company reported net income from independent operations in 20x4 in the amount of
P700,000 and retained earnings on December 31, 20x4, of P1,500,000.
Fair value of consideration givenP1,360,000
Less: Book value of SHE - Subsidiary):
(P1,000,000 + P450,000) x 80%................... 1,160,000
Allocated Excess..P 200,000
Less: Over/Undervaluation of Assets & Liabilities
Increase in franchise (P250,000 x 80%).. 200,000 / 80% = P250,000
P
0
Amortization of equipment: P250,000 / 25 years = P10,000
RPBI of S (downstream sales):........................................................ P 30,000
RPBI of P (upstream sales)....................................................... 20,000
UPEI of S (downstream sales)... 5,000
UPEI of P (upstream sales). 10,000
Consolidated Net Income for 20x4
P Companys net income from own/separate operations
Realized profit in beginning inventory of S Company (downstream sales)
Unrealized profit in ending inventory of S Company (downstream sales)
P Companys realized net income from separate operations*...
S Companys net income from own operations.
Realized profit in beginning inventory of P Company (upstream sales)
Unrealized profit in ending inventory of P Company (upstream sales)
S Companys realized net income from separate operations*...
Total
P270,000
20,000
( 10,000)
P280,000
P700,000
30,000
( 5,000)
P725,000
280,000
P1,005,000
10,000
P 995,000
54,000
P 941,000
Or, alternatively
P270,000
20,000
( 10,000)
P280,000
P 54,000
10,000
P700,000
30,000
( 5,000)
P725,000
280,000
P1,005,000
64,000
P 941,000
__ _ 54,000
P 995,000
P270,000
20,000
( 10,000)
P280,000
10,000
P270,000
20%
P 54,000
0
P 54,000
(Not required)
120,000
15,000
16,000
4,000
30,000
96. P1,863,000
120,000
15,000
20,000
30,000
P9,375,000
_6,000,000
P3,375,000
P( 150,000)
___450,000
___300,000
P3,075,000
Partial-goodwill
P7,500,000
P 800,000
4,000,000
P( 120,000)
___360,000
4,800,000
P2,700,000
240,000
P2,460,000
Amortization schedule
Inventory
Building (15 years)
Goodwill
Total
Balance at
acquisition
Dec. 31/X2
P(150,000)
450,000
3,075,000
P3,375,000
Amortization
20X3
P(150,000)
30,000
_________0
P(120,000)
Amortization
20X4
0
P30,000
______0
P30,000
Remaining
at
Dec.31/X4
P
0
390,000
3,075,000
P3,465,000
99. a
Non-controlling interest is 20% 9,375,000 (fair value of subsidiary, 12/31/20x2) = P1,875,000
Or, alternatively:
P1,000,000
5,000,000
P6,000,000
___300,000
P6,300,000
20
P 1,260,000
___615,000
P1,875,000
100. d P2,393,800
P1,000,000
7,524,000
P8,524,000
300,000
__90,000
P8,914,000
____20,000
P8,894,000
_ 20
P1,778,800
___615,000
P2,393,800
30,000
20,000
Or, alternatively:
Balance of NCI on acquisition December 31, 20x2
P1,875,000
Add: NCI's share of the adjusted change in retained earnings to 12/ 31/20x4
Jane's retained earnings, December 31, 20x4
P7,524,000
Jane's retained earnings at December 31, 20x2
( 5,000,000)
Change in carrying value
P2,524,000
Adjustments:
Amortization of fair value increments to date
90,000
Unrealized upstream profit 20x4
( 20,000)
djusted change in retained earnings of Jane since acquisition P2,594,000
Multiplied by: NCI's share at
20%
518,800
Ending balance of NCI on December 31, 20x4
P2,393,800
101. b
Retained earnings Parent, 12/31/20x4 (cost)..
P11,900,000
-: UPEI of S (down) 20x4 or RPBI of S (down) 20x5....
0
Adjusted Retained earnings Parent, 12/31/20x4 (cost model)..
P11,900,000
Retroactive Adjustments to convert Cost to Equity for
purposes of consolidation / Parents share of adjusted
net increase in subsidiarys retained earnings:
Retained earnings Subsidiary, 12/31/20x2..P5,000,000
Less: Retained earnings Subsidiary, 12/31/20x4 7,524,000
Increase in Retained earnings since acquisition
(cumulative net income cumulative dividends).P2,524,000
Accumulated amortization (1/1/20x1 12/31/20x4)..
90,000
UPEI of P (up) 20x4 or RPBI of P (up) 20x5.....( 20,000)
102.
103.
104.
105.
106.
107.
108. d
x: Controlling Interests
RE P, 12/31/20x4 (equity method) = CRE, 12/31/20x4
b - (P125,000 - P93,000) .8 = P25,600
c - (P125,000 - P93,000) .2 = P6,400
d
a - (P125,000 - P93,000) .7
c - (P125,000 - P93,000) .3
a - [P293,000 + (P125,000 - P93,000) .7] .2 = P63,080
P2,594,000
80% 2,075,200
P13,975,200
109.
P 160,000
110,000
P 137,000
40,000
( 25,000)
P 152,000
_ 0
P 152,000
30%
P 45,600
0
P 45,600
26,250
P 76,250
110. a
(P115,000 x 70%) - P26,250
= P 54,250
The requirement Ps income from S is a term normally used under the equity method, but, in
some cases it may also refer to the term dividend income under the cost model depending on
how the problem was described and presented.
Since there are no data available to arrive at the dividend income under the cost model for
reason that dividend declared or paid by subsidiary is not given, so the term Ps income from S
may mean Income from subsidiary which is computed under the equity method,
It should be noted that PAS 27 allow the use of cost model in accounting for investment in
subsidiary in the books of parent company but not the equity method.
111. a - P720,000 = P500,000 + P400,000 - P200,000 +P 20,000
112. b
(P120,000 x 80%) (P200,000 x 50% = P100,000 x 20% = P20,000) = P76,000
113. d Downstream situation
S Companys net income from own/separate operations
P120,000
x: NCI %
20%
P 24,000
114. c
115. b
P72,000
__18,000
P54,000
P120,000
__30,000
P 90,000
Quiz - XVII
1. Overstated by P320
It will be overstated by the amount of the NC interests share of the P1,600 of profit margin in
the P9,600 of materials carried over to 20x5 (20% x P1,600 = P320
2. P20,000 - Inventory remaining P100,000 50% = P50,000 Unrealized gross profit (based on LL's
markup as the seller) P50,000 40% = P20,000. The ownership percentage has no impact on
this computation
3. (downstream sales) Sales, P1,400,000; Cost of Sales, P966,00
1,120,000
420,000
1,540,000
( 140,000)
1,400,000
840,000
252,000
1,092,000
( 140,000)
14,000
966,000
Note: The only change here from No. 3 is the markup percentage which would now be 40
percent*
Note: The problem is quite intriguing because of the statement Pot had established the
transfer price base on its normal markup. It should be noted that Parent Company
established the transfer price based on its normal price (in this case it is assumed that th e
mark-up of the parent which is 25% is also the normal transfer price). So, if is assumed to be
of the same markup with parent company, then the answer would be as follows:
Sales Pot (parent)
- Skillet (subsidiary)
Total
1,120,000
420,000
1,540,000
( 140,000)
1,400,000
840,000
252,000
1,092,000
( 140,000)
14,000
966,000
5. P522,500
Grebe plus Swamps separate cost of goods sold =
P400,000 + P320,000 =
Less: Intercompany sales
=
Add: Profit +12,500 - 10,000 =
Consolidated COGS
=
P 720,000
200,000
____2,500
P 522,500
6. P10,000
Ending inventory of Grebe (1/2 x P100,000)
x: GP% of Parent (P100,000 P80,00)/P100,000
Unrealized profit in ending inventory
P
P
50,000
20%
10,000
Sales
2,250,000
1,125,000
3,375,000
468,000
Cost of Sales
1,800,000
_937,500
2,737,500
468,000
30,000
________
2.907,000
__37,200
2,276,700
P120,000
P 300,000
0
(_
0)
P300,000
20,000 )
P100,000
P 380,000
P 120,000
0
( 20,000)
P 100,000
0
P 100,000
20%
P 20,000
0
P 20,000
Sales
2,250,000
1,200,000
3,450,000
468,000
100,000
P 400,000
_
0
P 400,000
20,000
Cost of Sales
1,800,000
_1,000,000
2,800,000
468,000
30,000
________
2.982,000
__37,200
2,339,200
P 90,000
0
( 15,000)
P 75,000
P225,000
0
(_
0)
P225,000
75,000
P300,000
0
P300,000
15,000
P285,000
Or, alternatively
P 90,000
0
( 15,000)
P 75,000
P 15,000
0
P225,000
0
(_
0)
P225,000
75,000
P300,000
15,000
P285,000
_ 15,000
P290,000
P 90,000
0
( 15,000)
P 75,000
0
P 75,000
20%
P 15,000
0
P 15,000
P67,000
(20,000)
P47,000
Parent
Subsidiary
820,800
91,200
22,680
2,520
(27,000)
( 3,000)
90,720
P25,000
16%
P4,000
P24,000
35%
P8,400
_____16,000
P
84,000
_______10%
P
8,400
29. P8,200
UNREALIZED GROSS PROFIT, 12/31/x4
Ending inventory .................................................................................................
Markup (P33,000/P110,000) ...............................................................................
Unrealized intercompany gross profit, 12/31/x4 ...........................................
P 40,000
__ 30%
P 12,000
P 50,000
40%
P 20,000
Cost of Sales
400,000
_350,000
750,000
250,000
500,000
P 800,000
700,000
P1,500,000
(200,000)
(240,000)
P1,060,000
34. P115,000
35. P102,400 = P94,000 + (P115,000 - P94,000).4
36. P12,600 = (P115,000 - P94,000) .6
37. P6,300 = (P37,000 - P28,000) .7
38. P2,700 = (P37,000 - P28,000) .3
39. Zero
40. P5,400 = (P37,000 - P28,000) .6
41. P3,600 = (P37,000 - P28,000) .4
42. P56,820 = [P184,000 + (P37,000 - P28,000) .6] .3
43. P9,360 = [(P65,000 - P52,000) - (P65,000 - P52,000) .2] .9
44. P1,040 = [(P65,000 - P52,000) - (P65,000 - P52,000) .2] .1
45. Zero
46. P9,100 =(P65,000 - P52,000) .7
47. P32,110 = [P312,000 + (P65,000 - P52,000) .7] .1
48. P280,000
Full-goodwill
P1,600,000
_1,140,000
P 460,000
P( 40,000)
__220,000
__180,000
P 280,000
Partial-goodwill
P 960,000
P 360,000
_ 324,000
P( 24,000)
___132,000
_ 684,000
P 276,000
_108,000
P 168,000
Amortization/ Amortization/
Balance of
Amortization/ Impairment Impairment Allocated Excess
Allocated Amortizati Impairment
20x6
loss during remaining at end of
Asset
Excess on period per year
1 year
20x7
20x7
Inventory
(40)
1
(40)
0
Building
220
20
11
11
11
198
Goodwill
280
280
Total
460
(29)
11
478
49. P640,000
Non-controlling interest , 12/31/20x5 40% P1,600,000, fair value of subsidiary = P640,000
Or, alternatively:
Non-controlling interest, December 31, 20x5
Common stock S Company, December 31, 20x5
Retained earnings S Company, December 31, 20x5
Stockholders equity S Company, December 31, 20x5
Adjustments to reflect fair value - (over) undervaluation of assets and
liabilities, date of acquisition (December 31, 20x5)
Fair value of stockholders equity of S, December 31, 20x2
Multiplied by: Non-controlling Interest percentage...
Non-controlling interest (partial goodwill)..
Add: NCI on full-goodwill (P280,000 P168,000)
Non-controlling interest (full- goodwill)..
P 600,000
540,000
P1,140,000
___180,000
P1,320,000
40
P 528,000
___112,000
P 640,000
50. Since there was no impairment in goodwill reported in 20x6 and 20x7, the balance showing
for goodwill is P280,000.
51. P779,200
Non-controlling interest , December 31, 20x7
Common stock S Company, December 31, 20x7
Retained earnings S Company, December 31, 20x7
Stockholders equity S Company, December 31, 20x7
Adjustments to reflect fair value - (over) undervaluation of assets and
liabilities, date of acquisition (December 31, 20x5)
Amortization of allocated excess (refer to amortization above- 20x6 and
20x7 (P40,000 - P11,000) = P(29,000) + P11,000
Fair value of stockholders equity of S, December 31, 20x7
Less: UPEI of P (up) 20x7 or RPBI of P (up) 20x8
600,000
__935,000
P1,535,000
180,000
__18,000
P1,733,000
____65,000
P1,668,000
_ 40
P 667,200
___112,000
P 779,200
18,000
( 65,000)
P348,000
40% 139,200
P779,200
60,000
75,000
45,000
65,000
52. P1,780,400
Retained earnings Parent, 12/31/20x6 (cost)..
P 1,775,000
-: UPEI of S (down) 20x6 or RPBI of S (down) 20x7....
60,000
Adjusted Retained earnings Parent, 12/31/20x6 (cost model)..
P 1,715,000
Retroactive Adjustments to convert Cost to Equity for
purposes of consolidation / Parents share of adjusted
net increase in subsidiarys retained earnings:
Retained earnings Subsidiary, 12/31/20x5..P540,000
Less: Retained earnings Subsidiary, 12/31/20x6 695,000
Increase in Retained earnings since acquisition
(cumulative net income cumulative dividends).P155,000
Accumulated amortization - 20x6..
29,000
UPEI of P (up) 20x6 or RPBI of P (up) 20x7....( 75,000)
P 109,000
x: Controlling Interests
60%
65,400
RE P, 12/31/20x4 (equity method) = CRE, 12/31/20x4
P1,780,400
Or, alternatively:
Ending balance - Retained earnings separate entity - Paper
Less unrealized profit on downstream sale of inventory 20x6
Subtotal
Papers share of adjusted retained earnings - see Note 1 below:
60% P109,000
Ending consolidated retained earnings balance of Paper, 12/ 31/ 20x6
Note 1:
Retained earnings balance of Book at end of 20x6
Retained earnings balance of Book at date of acquisition
Change in carrying value of Book since acquisition
Adjustments:
Amortization of fair value increments
Unrealized profit on upstream sale of inventory in 20x6
Adjusted change in retained earnings since acquisition
Paper's s share 60% 109,000
P1,775,000
(60,000)
P1,715,000
65,400
P1,780,400
P695,000
(540,000)
P155,000
29,000
(75,000)
P109,000
P 65,400
53. P2,428,800
Retained earnings Parent, 12/31/20x7 (cost)..
-: UPEI of S (down) 20x7 or RPBI of S (down) 20x8....
Adjusted Retained earnings Parent, 12/31/20x6 (cost model)..
Retroactive Adjustments to convert Cost to Equity for
purposes of consolidation / Parents share of adjusted
net increase in subsidiarys retained earnings:
Retained earnings Subsidiary, 12/31/20x5..P540,000
Less: Retained earnings Subsidiary, 12/31/20x7 935,000
P 2,265,000
45,000
P 2,220,000
P2,265,000
(__45,000)
P2,220,000
208,800
P2,428,800
P935,000
(540,000)
P395,000
18,000
(65,000)
P348,000
P208,800
or alternatively:
Consolidated retained earnings, December 31, 20x6 (No. 52)
Controlling Interests in Consolidated Net income (refer to statement
of comprehensive income below)
Dividends declared paper
Retained earnings, December 31, 20x7
Incidentally, the
Eliminate intercompany transactions for 20X7
Intercompany transactions and balances
Accounts receivable/accounts payable still outstanding
Downstream sales by Paper
Upstream sales by Book
Dividends declared by Book
Paper's portion of dividends P250,000 X 60% = P150,000
P1,780,400
1,148,400
( 500,000)
P2,428,800
P 150,000
P1,000,000
P 650,000
P 250,000
Paper Co.
Consolidated Statement of Comprehensive Income
For the year ended December 31,20s7
Sales (2,520 + 2,400 - 1,000 - 650)
Management fees (250 - 250)
Dividend income (150 - 150)
3,270,000
0
0
3,270,000
325,000
1,006,000
0
595,000
1,926,000
1,344,000
Allocated as follows:
Non-controlling interests in CNI see below
Controlling Interest in CNI Owners of the parent
Consolidated Net Income
195,600
1,148,400
1,344,000
P490,000
75,000
( 65,000)
( 11,000)
P489,000
P195,600
Theories
1.
2.
3.
4.
5.
True
False
False
True
False
41.
42.
43.
44.
45.
b
c
a
c
d
6.
7.
8.
9.
10,
46.
47.
48.
49.
50,
True
False
False
True
False
c
b
c
a
d
51.
52.
53.
54.
55,
11.
12.
13.
14.
15,
a
c
c
d
c
True
False
False
True
True
16.
17.
18.
19.
20.
56.
57.
58.
59.
60.
c
b
c
b
c
False
False
True
True
False
61.
62.
63.
64.
65.
21.
22.
23.
24.
25.
a
a
b
c
a
True
False
b
e
a
66.
67.
68.
69.
70.
b
b
c
d
b
26.
27.
28.
29.
30.
71
72.
73.
74.
75.
e
e
c
d
a
b
a
a
a
c
31
32.
33.
34.
35.
76.
77.
78.
79.
80.
b
e
b
d
a
c
c
a
c
e
36.
37.
38.
39.
40.
a
b
e
d
d