Chapter 17

Multiple Choice Problems

73. c
Cost of Sales
P Company 196,000
S Company _112,000
Total 308,000
Less: Intercompany sales 140,000
Add: Unrealized profit in EI of S Co.
[P140,000 x 60% = P84,000 x (140 - 112)/140] _16,800
Consolidated 184,800

74. a or e - if full goodwill method.

Non-controlling interest (partial-goodwill), December 31, 20x4
Common stock – S Company, December 31, 20x4…… P 140,000
Retained earnings – S Company, December 31, 20x4
Retained earnings – S Company, January 1, 20x4 P210,000
Add: Net income of S for 20x4 154,000
Total P364,000
Less: Dividends paid – 20x4 0 364,000
Stockholders’ equity – S Company, December 31, 20x4 P 504,000
Adjustments to reflect fair value - (over) undervaluation of assets and
liabilities, date of acquisition (January 1, 20x4) 35,000
Amortization of allocated excess (refer to amortization above) :
20x5 (P35,000/7 years) ( 5,000)
Fair value of stockholders’ equity of S, December 31, 20x5…… P 534,000
Multiplied by: Non-controlling Interest percentage…………... 20
Non-controlling interest (partial goodwill)………………………………….. P 106,800
Add: NCI on full-goodwill (P70,000 – P56,000) 14,000
Non-controlling interest (full- goodwill)………………………………….. P 120,800

Partial-goodwill
Fair value of Subsidiary (80%)
Consideration transferred……………………………….. P 364,000
Less: Book value of stockholders’ equity of S:
Common stock (P140,000 x 80%)……………………. P112,000
Retained earnings (P210,000 x 80%)………………... 168,000 280,000
Allocated excess (excess of cost over book value)….. P 84,000
Less: Over/under valuation of assets and liabilities:
Increase in equipment (P35,000 x 80%) ___28,000
Positive excess: Partial-goodwill (excess of cost over
fair value)………………………………………………... P 56,000
Full-goodwill
Fair value of Subsidiary (100%)
Consideration transferred: Cash (P364,000/80%) P 455,000
Less: Book value of stockholders’ equity of S (P350,000 x 100%) __350,000
Allocated excess (excess of cost over book value)….. P 105,000
Add (deduct): (Over) under valuation of assets and liabilities
Increase in equipment P35,000 x 100% 35,000
Positive excess: Full-goodwill (excess of cost over
fair value)………………………………………………... P 70,000
75. d
Equipment
P Company 616,000
S Company 420,000
Total 1,036,000
Add: Undervalued equipment 35,000
Less: Depreciation on undervalued equipment (P35,000/7 years) 7,000
Consolidated 1,064,000