Jun Zen Ralph Yap BSA – 3rd Year

Let’s Check

Activity 1. P Company owns 80 percent of the stock of S Company, which was acquired at underlying
book value on August 30, 2019. Summarized trial balance data for the companies as of December 31,
2019 are as follows:

On January 1, 2020, the inventory held by P Company contained merchandise purchased for P60,000
from S Company. S Company purchased the merchandise for P40,000. In 2020, S Company spent
P100,000 to purchase additional merchandise which it sold to P Company for P 150,000. By December
31, 2020 P Company sold all the merchandise that had been on hand on January 1, 2020, but continued
to hold in inventory P45,000 of the 2020 purchase from S Company.

Required:

a) Prepare all eliminating entries needed to complete a consolidation working paper for 2020.

1 Dividend Income 32,000

Non-Controlling Interest 8,000
Dividends declared - S Co. 40,000
To eliminate intercompany dividends

2 Common Stock - S Co. 90,000

Retained Earnings - S Co. 220,000
Investment in S Company 248,000
Non-Controlling Interest 62,000
To eliminate equity accounts against subsidiary account and recognize NCI

3 Non-Controlling Interest 4,000

 Retained Earnings, beg. - P Co. 16,000
Cost of Goods
Sold 20,000
To eliminate realized profit in beginning inventory

4 Sales 150,000
Cost of Goods
Sold 135,000
Inventory, Dec.
31 15,000
To eliminate intercompany sales and unrealized profit in ending inventory

5 NCI in net income of subsidiary 9,000

Non-Controlling Interest 9,000
To establish minority interest in net income of S Company

Solution:
Sales ₱ 200,000
Less: Cost and Expenses (140000+20000) ₱ 160,000
Net Income ₱ 40,000
Realized profit in beginning inventory - Upstream ₱ 20,000
Less: Unrealized profit in ending inventory - Upstream ₱ 15,000
Adjusted net income ₱ 45,000
Multiply: NCI proportionate share ₱ 0.20
NCI in net income of subsidiary ₱ 9,000

b) Compute consolidated CI for 2020.

P Company net income (250000 - 32000) ₱ 218,000

S Company adjusted net income ₱ 45,000
Consolidated Net Income ₱ 263,000

c) Compute the balance assigned to the non-controlling interest in the consolidated statement of
financial position as of December 31, 2020.

NCI, Aug. 30, 2019 (310000 x 20%) ₱ 62,000

Less:NCI in subsidiary dividends (40000 x 20%) ₱ 8,000
NCI in net income of subsidiary ₱ 9,000
NCI, end ₱ 63,000