Consolidated FS – Subsequent to Date of Acquisition

PROBLEM 1
JELAI Corporation purchased 70% of the outstanding capital stock of TONI Corporation on April 1,
2020 at book value. TONI reported net income of P477,000 for the year ended December 31, 2020 and
declared and paid P23,000 cash dividends on December 31. 2020. JELAI reported income of P350,000
from its own operations in 2020.

Compute for the following:

1. Consolidated net income for 2020
2. Consolidated net income attributable to the controlling interest for 2020
3. Consolidated net income attributable to the non-controlling interest for 2020

Solution:
70% 30%
TOTAL CI% NCI%
NET INCOME-OWN OPERATIONS-JELAI 350,000.00 350,000.00

NET INCOME-TONI, APRIL-DEC 2020

(477,000 x 9/12) 357,750.00 250,425.00 107,325.00
CONSOLIDATED NET INCOME 707,750.00 600,425.00 107,325.00

(1) (2) (3)

PROBLEM 2
On January 2, 2021 POPO purchased 80% of SOCO’s outstanding stock for P648,000. Of the total
excess, P30,000 is attributable to total goodwill and the balance is for equipment with estimated
remaining useful life of 10 years. NCI is measured using the fair value. On that date, the following
information is available.

ORDINARY SHARES RETAINED EARNINGS

POPO P 1,050,000 P1,560,000
SOCO 240,000 420,000

On December 31, 2021, SOCO’s net income was P105,000 and declared a dividend of P36,000 for POPO
but paid only P30,000. POPO reported income of P285,000 from its own operation, DIVIDEND paid of
P138,000. Goodwill has been impaired and should be reported at P24,000 on December 31, 2021.

Compute for the following:

1. Consolidated Net Income attributable to NCI for the year 2021
2. Consolidated Net Income attributable to Parent for the year 2021
3. Consolidated Retained Earnings, December 31, 2021
4. NCI, December 31, 2021

Solution:
100% 80% 20%
 COST OF INVESTMENT 810,000.00 648,000.00 162,000.00
BV NA SUB 660,000.00 528,000.00 132,000.00
EXCESS:EQUIPMENT 120,000.00 96,000.00 24,000.00
GOODWILL 30,000.00 24,000.00 6,000.00

100% C.I. (80%) NCI (20%)

NET INCOME-POPO-OWN
OPERATION 285,000.00 285,000.00  

NET INCOME-SOCO 105,000.00 84,000.00 21,000.00

AMORT-EXCESS (12,000.00) (9,600.00) (2,400.00)
NET INCOME-SOCO-ADJUSTED 93,000.00 74,400.00 18,600.00
GOODWILL IMPAIRMENT (6,000.00) (4,800.00) (1,200.00)
CONSOLIDATED NET INCOME 372,000.00 354,600.00 17,400.00
(2) (1)

R/E-POPO, 1/2/21 1,560,000.00

CONSO NI CONTROLLING -2021 354,600.00
DIVIDENDS (138,000.00)
CONSO R/E, 12/31/21 1,776,600.00 (3)

NCI, DATE OF ACQUISITION 162,000.00

NCI-NET INCOME 17,400.00
NCI-DIVIDEND (36,000*20/80) (9,000.00)
NCI, END OF 2021 170,400.00 (4)

PROBLEM 3
On January 2, 2021, Domus Corporation purchased 80% of the outstanding shares of Caritate Company
for a consideration of P19 MILLION including the control premium in the amount of P500,000.
Acquisition-related costs paid amount to P45,000. NCI is measured at fair value. On the same date,
Caritate had P16,000,000 of ordinary shares outstanding and retained earnings of P6,400,000. Caritate
also had equipment with a remaining life of 5 years with a book value of P9,000,000 and a fair value of
P10,520,000. The remaining assets had book values equal to their fair values. All intangibles, except
goodwill, are expected to have remaining lives of 8 years.

The income and dividend figures for both Domus and Caritate are as follows: Net income of Domus for
2021 was P3,600,000 and for 2022 was P4,400,000. Net income of Caritate for 2021 was P1,360,000 and
for 2022 was P2,040,000. Dividends declared by Domus during 2021 was P880,000 and for 2022 was
P1,560,000. Dividends declared by Caritate during 2021 was P280,000 and for 2022 was P520,000.
Domus' retained earnings balance at the date of acquisition was P13,800,000.

1. What is the consolidated retained earnings attributable to controlling interest in as of December

31, 2022?
2. What is the consolidated profit for the year ended December 31, 2022?
3. What is the non-controlling interest in net assets as of December 31, 2022?
 4. What is the non-controlling interest in net income in 2021?
5. What is the resulting amount of the business combination? Indicate if goodwill or gain.

SOLUTIONS:
100% 80% 20%
COST OF INVESTMENT 23,784,000.00 19,000,000.00 4,784,000.00
BV NA SUB 22,400,000.00 17,920,000.00 4,480,000.00
EXCESS:EQUIPMENT 1,520,000.00 1,216,000.00 304,000.00
GOODWILL/(GAIN) (136,000.00) (136,000.00) -0-
(5)

2021 2022
80% 20%   80% 20%
  CI% NCI%   CI% NCI%
NET INCOME-DOMUS 3,600,000.00     4,400,000.00    
DIVIDEND INCOME (224,000.00)     (416,000.00)    

NET INCOME-OWN OPERATION 3,376,000.00 3,376,000.00   3,984,000.00 3,984,000.0  

NET INCOME-CARITATE 1,360,000.00 1,088,000.00 272,000.00 2,040,000.00 1,632,000.0 408,000.00
AMORT-EXCESS (304,000.00) (243,200.00) (60,800.00) (304,000.00) (243,200.00) (60,800.00)
ADJUSTED NET INCOME-CARITATES 1,056,000.00 844,800.00 211,200.00 1,736,000.00 1,388,800.0 347,200.00
GAIN ON ACQUISITION 136,000.00 136,000.00 -  .   - . - .  - .
CONSOLIDATED NET INCOME 4,568,000.00 4,356,800.00 211,200.00 5,720,000.00 5,372,800.0 347,200.00

(4) (2)

RETAINED EARNINGS-DOMUS BEG 2021 13,800,000.00

CNI-ATTRIBUTABLE TO PARENT 2021 4,356,800.00

DIVIDENDS DECLARED BY DOMUS (880,000.00)

CONSO RETAINED EARNINGS END 2021 17,276,800.00

NCINAS-DATE OF ACQUISITION 4,784,000.00

NCI-NET INCOME 211,200.00

NCI-DIVIDEND (56,000.00)

NCINAS-END 2021 4,939,200.00

RETAINED EARNINGS-DOMUS BEG 2022 16,520,000.00 ALTERNATIVE COMPUTATION OF CONSO RE, 12/31/22:
GAIN ON ACQUISITION 136,000.00 RETAINED EARNINGS-DOMUS END 2022 19,360,000.00
CI% IN UNDISTRIBUTED EARNINGS OF S 2021 620,800.00 GAIN ON ACQUISITION 136,000.00
CONSO RETAINED EARNINGS BEG 2022 17,276,800.00 CI% IN UNDISTRIBUTED EARNINGS 2021/2022 1,593,600.00
CNI-ATTRIB-PARENT 2022 5,372,800.00 CONSO RETAINED EARNINGS END 2022 21,089,600.00
DIVIDENDS 2022 (1,560,000.00)
CONSO RETAINED EARNINGS END 2022 21,089,600.00 (1)

NCI, DATE OF ACQUISITION 4,784,000.00

NCI% IN UNDISTRIBUTED EARNINGS 2021 155,200.00
NCI, BEG 2022 4,939,200.00
NCI-NET INCOME 2022 347,200.00
NCI-DIVIDEND 2022 (104,000.00)
NCINAS, END 2022 5,182,400.00 (3)

COMPUTATION OF UNDISTRIBUTED EARNINGS

2021 2022
RETAINED EARNINGS-SUB END OF CY 7,480,000.00 9,000,000.00
RETAINED EARNINGS-SUB DATE OF ACQUISITION (6,400,000.00) (6,400,000.00)
INCREASE IN RETAINED EARNINGS 1,080,000.00 2,600,000.00
CUMULATIVE AMORTIZATION (304,000.00) (608,000.00)
UNDISTRIBUTED EARNINGS CY 776,000.00 1,992,000.00

-END OF SHORT PROBLEMS-