Problem 1(Subsequent to Business Combination)

On January 1, 2020, Entity A acquired 70% of outstanding ordinary shares of Entity B at a price of
P210,000. On
the same date, the net assets of Entity B is reported at P260,000. On January 1, 2020 Entity A reported
retained
earnings of P2,000,000 while Entity B reported retained earnings of P200,000.
All the assets and liabilities of Entity B are fairly valued except machinery which is undervalued by P80,000
and
inventory which is overvalued by P10,000. The said machinery has remaining useful life of four years while
40%
of the said inventory remained unsold at the end of 2020.
For the year ended December 31, 2020, Entity A reported net income of P1,000,000 and declared dividends
of
P200,000 in its separate financial statements while Entity B reported net income of P150,000 and declared
dividends of P20,000 in its separate financial statements.
Entity A accounted its investment in Entity B using cost method in its separate financial statements.
1. What is the noncontrolling interest in net income for the year ended December 31, 2020?
2. What is the noncontrolling interest in net assets on December 31, 2020?
3. What is the consolidated net income attributable to parent’s shareholders for the year ended December
31, 2020?
4. What is the consolidated retained earnings on December 31, 2020?
Problem 1(Subsequent to Business Combination)
On January 1, 2020, Entity A acquired 70% of outstanding ordinary shares of Entity B at a price of
P210,000. On
the same date, the net assets of Entity B is reported at P260,000. On January 1, 2020 Entity A reported
retained
earnings of P2,000,000 while Entity B reported retained earnings of P200,000.
All the assets and liabilities of Entity B are fairly valued except machinery which is undervalued by P80,000
and
inventory which is overvalued by P10,000. The said machinery has remaining useful life of four years while
40%
of the said inventory remained unsold at the end of 2020.
For the year ended December 31, 2020, Entity A reported net income of P1,000,000 and declared dividends
of
P200,000 in its separate financial statements while Entity B reported net income of P150,000 and declared
dividends of P20,000 in its separate financial statements.
Entity A accounted its investment in Entity B using cost method in its separate financial statements.
1. What is the noncontrolling interest in net income for the year ended December 31, 2020?
2. What is the noncontrolling interest in net assets on December 31, 2020?
3. What is the consolidated net income attributable to parent’s shareholders for the year ended December
31, 2020?
4. What is the consolidated retained earnings on December 31, 2020?