Accounting 8b

Quiz (CH 18)

On January 1, 2018, Papa corporation acquired 90% of Mama company. Papa uses the cost method.
Analysis of data relative to this purchase indicates that goodwill of P100,000 was acquired in this
purchase. The goodwill is unimpaired.

On July 1, 2019, Mama sold a patent to Papa. The sale price was P200,000; Papa’s book value was
P100,000. Mama estimates that the patent has a life of 5 years and no salvage value. It will use straight
line depreciation.

For 2019, Papa’s net income from its own operations is P800,000. Mama had a net income of P200,000.

Compute the following:

1.) Mama’s adjusted net income 110,000
Selling price 200,000
BV 100,000
Gain 100,000/5 = 20,000 x 6/12 = 10,000 Realized gain in 2019

Subsidiary net income 200,000

Less: unrealized gain (100,000)
Add Realized gain 10,000
Adjusted SNI 110,000

2.) Non controlling interest in net income of subsidiary 11,000 (110,000 x 10%)
3.) Consolidated net income attributable to parent 899,000
PNI from own operations 800,000
Add: adjusted SNI 110,000
CNI 910,000
Less: NCICIS (11,000)
CNI attributable to parent 899,000

Several years ago Papa corporation acquired 80% of Mama company. Analysis of data relative to this
purchase indicates that goodwill of P120,000 was acquired in this purchase.

On October 1, 2018, Mama sold to Papa a use car for P64,000 in cash. Mama had originally paid
P110,000 for the car. On the day of the sale, the car had a book value of P46,000. Papa estimated the
remaining life of the car at 3 years.

Papa’ s net income from its own operations was P200,000 in 2018 and P150,000 in 2019.
Mama’ s net income amounted to 250,000 in 2018 and P310,000 in 2019.

Compute the following:

4.) Non controlling interest in net income of subsidiary in 2018 46,700
SNI 250,000
Less: unrealized gain (64,000-46,000) ( 18,000)
Add: realized gain 18,000/3 = 6,000 x 3/12 1,500
Adjusted SNI 233,500
% NCI 20%
NCICIS 46,700

5.) Consolidated net income in 2019 466,000

PNI from own operations 150,000
Add: Adj. SNI 310,000 +6,000 316,000
CNI 466,000
 6.) Adjusted net income of Subsidiary in 2019 316,000 as shown above
7.) Consolidated net income attributable to papa in 2019 402,800
CNI 466,000
Less: NCICIS 20% x 316,000 63,200
CNI attributable to parent 402,800

On January 1, 2018, Papa corporation sold equipment to Mama company, its wholly owned subsidiary,
for P1,360,000. Papa had paid P2,000,000 for this equipment, for which the depreciation to the date of
inter company sale totaled P720,000. Both companies uses the straight line method of depreciation for
their depreciable assets. The equipment had a 10-year life when purchased and an expected salvage
value of P200,000.

What amount should be included in the consolidated balance sheet at December 31, 2018, for

8.) The equipment cost 2,000,000 (the original cost)

9.) Accumulated depreciation 900,000 (the orig. accumulated plus current depreciation based on
original) 2,000,000-200,000=1,800,000/10 = 180,000 depreciation per year + 720,000 = 900,000
10.)Book value 1,100,000 (2,000,000 – 900,000)