PROBLEM 1

On January 1, 2020, Parent Company acquired 70% of subsidiary's ordinary shares for Php1,400,000 by the issuance of bon
payable. At acquisition date, the retained earnings of the subsidiary amounted to Php 1,000,000 while its other
comprehensive income in the Shareholder's Equity section in the separate Statement of Financial Position has a balance
of Php80,000 respectively.

The acquisition date fair value and book value differences of Subsidiary's net assets and liabilites are shown below:

Inventory, all sold in 2022

Equipment, 5-year useful life depreciated using SYD
Land, half is sold in 2023

Selected information about the Parent and Subsidiary in 2023 are shown below:

Sales
Cost of sales
Gain (loss) on sale of fixed asset
Dividend income
Expenses
Unrealized gain (loss) from change in FAFVOCI
Dividends paid

The shareholders' equity of the Parent and Subsidiary on December 31, 2025 are as follows:

Ordinary shares
Share premium
Retained earnings
Other comprehensive income
Ordinary treasury shares
Shareholder's equity

Compute the following:

Controlling interest in the 2023 consolidated net income
Noncontrolling interest in the 2023 consolidated comprehensive income
Consolidated Retained Earnings, 12/31/2025
Noncontrolling interest in the net assets of subsidiary, 12/31/2025
Controlling interest in the net assets of subsidiary, 12/31/2025
Controlling interest's shareholder's equity, 12/31/2025

ACQUISITION ANALYSIS
CI NCI Total
70% 30% 100%
Acquisition cost 1,400,000 600,000 2,000,000
Book value of net assets (756,000) (324,000) (1,080,000)
Allocated excess 644,000 276,000 920,000
Net valuation
Inventory (35,000) (15,000) (50,000)
Equipment 210,000 90,000 300,000
 Land (84,000) (36,000) (120,000)
Total 91,000 39,000 130,000
Goodwill (Bargain purchase gain) 735,000 315,000 1,050,000

2023
Parent Subsidiary Conso
Sales 3,000,000 1,200,000 4,200,000
Cost of sales (1,200,000) (480,000) (1,680,000)
Gross profit 1,800,000 720,000 2,520,000
Operating expenses (1,300,000) (520,000) (1,820,000)
Gain (loss) on sale of equipment 50,000 20,000 70,000
Dividend income 140,000 56,000 196,000
Net income, per books 690,000 276,000 966,000
Intercompany transaction - Dividends (98,000) (98,000)
Amortization (20,000) (20,000)
Net income, for consolidation purposes 592,000 256,000 848,000
Share of NCI (76,800) (76,800)
Share of CI 592,000 179,200 771,200

Unrealized gain (loss) (40,000) 15,000 (25,000)

Investment income 10,500 10,500
OCI, per books (29,500) 15,000 (14,500)
Elimination (10,500) (10,500)
OCI, for consolidation purposes (40,000) 15,000 (25,000)
Share of NCI (4,500) (4,500)
Share of CI (40,000) 10,500 (29,500)

2025
Subsidiary
Ordinary shares 700,000
Share premium 1,750,000
Retained earnings 2,500,000
Other comprehensive income 150,000
Ordinary treasury shares (10,000)
Shareholder's equity 5,090,000

01/01/2020 Subs. RE
Controlling interest in subsidiary's net assets 1,400,000 1,750,000
NCI in subsidiary's net assets 600,000 750,000
Net assets of subsidiary for consolidation purposes 2,000,000 2,500,000
 12 pts
for Php1,400,000 by the issuance of bonds Percent of ownership acquired
hp 1,000,000 while its other Acquisition cost
nt of Financial Position has a balance Retained earnings - Subsidiary
Other comprehensive income

s and liabilites are shown below:

Under (Over) valuation
50,000
(300,000) 5
120,000 0.50

Parent Subsidiary
3,000,000 1,200,000
1,200,000 480,000
50,000 20,000
140,000 56,000
1,300,000 520,000
(40,000) 15,000
100,000 140,000

Parent Subsidiary
1,000,000 700,000
2,000,000 1,750,000
4,000,000 2,500,000
300,000 150,000
(20,000) (10,000)
7,280,000 5,090,000

771,200
81,300
4,000,000
1,395,000
3,255,000
7,280,000

2020 2021 2022 2023 2024 2025

- - (50,000) - - -
100,000 80,000 60,000 40,000 20,000 -
 - - - (60,000) - -
100,000 80,000 10,000 (20,000) 20,000 -

Subs. OCI 12/31/2025

105,000 3,255,000
45,000 1,395,000
150,000 4,650,000
 70%
1,400,000
1,000,000
80,000
PROBLEM 2
On December 31, 2015, Bebe acquired for cash, 80% of Boo Boo's outstanding ordinary shares for P552,000.
Noncontrolling interest has a fair value of P138,000.

* Consolidated net income for the year ended December 31, 2019 amounted to P80,000.
* Consolidated gross profit ratio is 40%.
* The net profit ratio (net income / sales) of Bebe and Boo Boo in their separate books are 15% and 15%, respectively.
* The sales of Bebe for the year is three times larger than Boo Boo's.
* Bebe received cash dividends of P9,000 from Boo Boo.
* As of acquisition date, the book values of Boo Boo's assets and liabilities approximate their fair values, except inventory
which is undervalued by P5,000, and an overvalued equipment by P10,000 which has a remaining 5 year life.
* Since acquisition date, Boo Boo's retained earnings has increased by P42,000 as of December 31, 2019. There were
no changes for the rest of shareholders' equity accounts since acquisition date.

Required:
Compute the noncontrolling interest as of 12/31/2018.
Compute the income attributable to noncontrolling interest in 2019.
Compute the income attributable to controlling interest in 2019.
Net income per books of Bebe in 2019
Net income per books of Boo Boo in 2019

ACQUISITION ANALYSIS
CI NCI Total
80% 20% 100%
Acquisition cost/FV of NCI/FV of subsidiary 552,000 138,000 690,000
Book value of net assets acquired
Allocated excess
Net valuation
Inventory (5,000)
Equipment 10,000
Total

2019
Gross profit ratio 40%
Net profit ratio 15% 15%
Parent Subsidiary Conso
Sales 464,000 116,000 580,000
Cost of sales (278,400) (69,600) (348,000)
Gross profit 185,600 46,400 232,000
Operating expenses (125,000)
Dividend income 9,000
Net income, per books 69,600 17,400 87,000
Intercompany transaction - Dividends (9,000) (9,000)
Amortization 2,000 2,000
Net income, consolidated 60,600 19,400 80,000
Share of NCI (3,880) (3,880)
Share of CI 60,600 15,520 76,120
NONCONTROLLING INTEREST - 12/31/2018
Increase in subsidiary's retained earnings for 2019 42,000
Less: Net income of subsidiary, 2019 17,400
Add: Dividends paid 11,250
Subsidiary's retained earnings, 12/31/2018 35,850
x % of NCI 20%
Share in chages of subsidiary's retained earnings 7,170

Amortization, 2018 - 2020 6,000

Overall amortization 5,000
Difference 1,000
x % of NCI 20%
Share in amortization 200

NCI, acquisition date 138,000

Share in changes of subsidiary's retained earnings 7,170
Share in amortization 200
NCI, as of 12/31/2018 145,370
 10 pts
es for P552,000.

% and 15%, respectively.

r fair values, except inventory

ining 5 year life.
ber 31, 2019. There were

2 pts 145,370
2 pts 3,880
2 pts 76,120
2 pts 69,600
2 pts 17,400

2016 2017 2018 2019 2020

(5,000) - - - -
2,000 2,000 2,000 2,000 2,000
(3,000) 2,000 2,000 2,000 2,000
PROBLEM 3
On April 1, 2020, Parent Company issued its own shares to acquire 80% of Subsidiary Company's 100,000
outstanding ordinary shares, which were all originally issued for Php40 per share upon incorporation of Subsidiary.
At acquisition date, Subsidiary's equipment (5 year remaining life) and land are both overvalued by Php40,000. On
the same date, the goodwill recognized in the consolidated financial statement applying partial goodwill approach
amounted to Php96,000.

Parent Company 2020 2021 2022

Operating income 500,000 510,000 480,000
Dividends paid, October 60,000 61,200 57,600

Subsidiary Company 2020 2021 2022

Operating income 200,000 204,000 192,000
Dividends paid, October 24,000 24,500 23,000

Full goodwill is impaired by Php5,000 and Php7,000 in 2020 and 2022. The subsidiary's land was sold to outside
parties in 2023. The retained earnings of Parent and Subsidiary in their separate financial statements at acquisition
date amounted to Php200,000 and Php70,000, respectively. On January 1, 2020, the shareholders' equity of Parent
Company is Php4,930,000.

Compute the following: Cost Method Equity Method

2022 Net income of Parent per books
Parent's Retained earnings, 12/31/2023
Noncontrolling interest, 12/31/2023
Consolidated Shareholders' Equity, 12/31/2021
Consolidated Retained earnings, 12/31/2022
Investment in subsidiary, 12/31/2022
 20 pts
80% 20%
n of Subsidiary.
Php40,000. On
dwill approach

2023
550,000
66,000

2023
220,000
26,400

old to outside
s at acquisition
quity of Parent

Equity Method
100%
PROBLEM 4
The consolidated statement of changes in shareholders' equity of Shelby Group of Company, a year after Shelby Company
Company in January 1, 2016, is shown below:

Common
Stock Share Retained
P2 par Premium Earnings
Beg. Balance, 01-01-2016 1,000 750 2,000
Issuance of shares in the
acquisition of Shelbie Company 500 40
Acquisition of shares, P1/share
Consolidated net income 1,350
Unrealized gain in OCI
Dividends declared (120)
End. Balance, 12-31-2016 1,500 790 3,230

The separate income statement of each company for the year 2016 is as follows:

Shelby Shelbie
Sales 5,000 2,000
Cost of sales (2,000) (800)
Gross profit 3,000 1,200
Total expenses (2,100) (840)
Net operating income 900 360
Dividend income 60 15
Net income 960 375

Additional information:
* Shelby Company has no equity investment from other companies.
* Amortization of excess is to be made in 10 years on a straight line basis.
* Full goodwill is presented in the consolidated balance sheet at P400 and is not impaired as of December 31, 2
* Shelby's acquisition cose does not include control premium nor discount.
* Shelby's acquisition costs include payment of cash and issuance of its own share.

Answer the following questions: (2 points each)

60% 1. What is the percentage of ownership acquired from Shelbie Company?
600 2. How much is the acquisition cost?
750 3. How much is the Shelbie's net income for consolidation purposes?
375 4. How much of the excess of cost is amortized in 2016?
5. How much goodwill is presented in the consolidated financial statements if Shelby uses Proportional
240
approach?
60 6. How much of the acquisition cost represents cash paid by Shelby?
7. If Shelby uses equity method in accounting for its investment in subsidiary, how much is the
990
investment in subsidiary in its separate financial statements as of December 31, 2016?
1,760 8. How much is the consolidated comprehensive income?

ACQUISITION ANALYSIS
 CI NCI Total
60% 40% 100%
Acquisition cost 600 400 1,000
Book value of net assets (2,610) (1,740) (4,350)
Allocated excess (2,010) (1,340) (3,350)
Net valuation 2,250 1,500 3,750
Goodwill (Bargain purchase gain) 240 160 400

Parent Subsidiary Conso

Net income, per books 960 375 1,335
Intercompany transaction (60) (60)
Amortization 375 375
Net income, for consolidation purposes 900 750 1,650
Share of NCI (300) (300)
Share of CI 900 450 1,350

Parent Subsidiary Conso

OCI, beginning balance 90 - 90
Unrealized gain (loss) 110 - 110
OCI, ending balance 200 - 200

Equity Cost
Investment in subsidiary, beginning 600 600
Investment income 450
Dividends received (60)
Investment in subsidiary, ending 990 600
 16 pts
a year after Shelby Company acquired Shelbie

Other
Comprehensive Treasury Noncontrolling
Income Shares Interest
90 400

(50)
300
110
(40)
200 (50) 660

mpaired as of December 31, 2016

ts if Shelby uses Proportional

iary, how much is the

ber 31, 2016?
PROBLEM 5
On December 31, 2015, Bebe acquired for cash, 80% of Boo Boo's outstanding ordinary shares for P308,000.
Noncontrolling interest has a fair value of P77,000. The statement of financial position of both companies are
as follows:

12/31/2015 12/31/2016
Bebe Total assets 1,900,000 1,957,000
Total liabilities 1,140,000 1,175,000
Boo Boo Total assets 800,000 824,000
Total liabilities 480,000 495,000

There were no transactions affecting equity from 2015 to 2017, except profit or loss.

The following are the assets and liabilities of Boo Boo that have fair values different from book values at acquisition
date:

Book value
Inventory 40,000
Equipment (6 years original useful life) 120,000
Accumulated depreciation 40,000
Investment in bonds (4 years until maturity) 80,000
Bonds payable (4 years until maturity) 30,000
Premium on bonds payable 4,000

Required:
Compute the following: 12/31/2015 12/31/2016
Consolidated total assets 2 pts 2,456,000 2,538,750
Consolidated total liabilities 2 pts 1,619,000 1,669,250
Consolidated net income (loss) 2 pts 32,500

ACQUISITION ANALYSIS
CI
80%
Acquisition cost/FV of NCI/FV of subsidiary 308,000
Book value of net assets acquired (256,000)
Allocated excess 52,000
Net valuation FV BV
Inventory 38,000 40,000 1,600
Equipment 76,000 80,000 3,200
Investment in bonds 85,000 80,000 (4,000)
Bonds payable 33,000 34,000 (800)
Total net valuation -
Goodwill (Bargain purchase gain) 52,000

ACQUISITION ENTRY
Investment in subsidiary 308,000
Cash 308,000
ELIMINATING ENTRIES - AT ACQUISITION DATE
Shareholders' Equity 320,000
Investment in subsidiary 256,000
Noncontrolling interest 64,000

Investment in bonds 5,000

Bonds payable 1,000
Inventory 2,000
Equipment 4,000

Goodwill 65,000
Investment in subsidiary 52,000
Noncontrolling interest 13,000

2015
Bebe total assets 1,900,000
Boo Boo total assets 800,000
Cash (308,000)
Investment in bonds 5,000
Inventory (2,000)
Equipment (4,000)
Goodwill 65,000
2015 consolidated total assets 2,456,000

2016
Bebe total assets 1,957,000
Boo Boo total assets 824,000
Investment in bonds 3,750
Inventory -
Equipment (3,000)
Goodwill 65,000
Investment in subsidiary (308,000)
2016 consolidated total assets 2,538,750

Parent Subsidiary Conso

Net income per books 22,000 9,000 31,000
Elimination of intercompany transactions - P/S
Dividend income - - -
Amortization of excess over book value - Subs.
Over and under 1,500 1,500
Net income (loss), consolidated 22,000 10,500 32,500

2017
Bebe total assets 1,860,000
Boo Boo total assets 783,000
Investment in bonds 2,500
Inventory -
Equipment (2,000)
Goodwill 65,000
Investment in subsidiary (308,000)
2017 consolidated total assets 2,400,500

Parent Subsidiary Conso

Net income per books (38,000) (16,000) (54,000)
Elimination of intercompany transactions - P/S
Dividend income - - -
Amortization of excess over book value - Subs.
Over and under (500) (500)
Net income (loss), consolidated (38,000) (16,500) (54,500)
 16 pts
or P308,000.
ompanies are

12/31/2017
1,860,000
1,116,000
783,000
470,000

values at acquisition

Fair value
38,000
76,000

85,000
33,000

12/31/2017
2,400,500
1,585,500
(54,500)

NCI Total
20% 100%
77,000 385,000
(64,000) (320,000)
13,000 65,000
2016 2017
400 2,000 2,000 -
800 4,000 1,000 1,000
(1,000) (5,000) (1,250) (1,250)
(200) (1,000) (250) (250)
- - 1,500 (500)
13,000 65,000
Bebe total liabilities 1,140,000
Boo Boo total liabilities 480,000
Bonds payable (1,000)
2015 consolidated total liabilities 1,619,000

Bebe total liabilities 1,175,000

Boo Boo total liabilities 495,000
Bonds payable (750)
2016 consolidated total liabilities 1,669,250

Bebe total liabilities 1,116,000

Boo Boo total liabilities 470,000
Bonds payable (500)
2017 consolidated total liabilities 1,585,500