Chapt

er4
Consol
i
dat
edFi
nanci
alSt
atement
s(Par
t1)

PROBLEM 1:TRUEORFALSE
1. FALSE-cont rol
2. FALSE–The20x1consol idat
edpr ofi
tincl
udesonlytheprofi
t
ofEntit
yBf rom November1t oDecember31, 20x1.
3. FALSE – Ateach r eport
ing date,goodwil
li smeasured at
acquisi
ti
on-datef ai
rv al
ue less accumul ated i
mpair
ment
losses.
4. TRUE–200x10%=20
5. TRUE( 1,
000+90*shar eofEnt i
tyAint henetchangeinEnti
ty
B’snetassets)=1,090
*(200–100)=100netchangex90%=90

6. FALSE
7. TRUE
8. TRUE
9. TRUE(200+100)=300
10.TRUE[200+(
80%of100)]=280
PROBLEM 2:FORCLASSROOM DI
SCUSSI
ON

1. Sol
uti
on:
Heal
thGr
oup
Consol
idat
edst
atementoff
inanci
alposi
ti
on
AsofJanuar
y1,
20x1

Cash(
100K+20K)
120,
000
Account
srecei
vabl
e(120K+20Kf
airv
alue)
140,
000
I
nvent
ory(
400K+100K)
500,
000
I
nvest
menti
nsubsi
diar
y(el
imi
nat
ed) -
Pr
epai
dasset
s(30K+10K) 40,
000
Bui
l
ding,
net(
1.2M +540Kf
airv
alue)
1,
740,
000
Goodwi
l
l(seecomput
ati
onsbel
ow)
140,000
Tot
alasset
s 2,680,
000

Account
spay
abl
e(70K+90K)
160,
000
Shar
ecapi
tal
(Par
entonl
y)
1,
000,
000
Shar
epr
emi
um (
Par
entonl
y)
350,
000
Ret
ainedear
nings(
Par
entonl
y)
990,
000
NCI(
seecomput
ati
onsbel
ow)
180,000
Tot
all
i
abi
l
iti
esandequi
ty 2,680,
000

Consi
der
ati
ont
ransf
err
ed(
equalt
oInv
est
menti
n
subsi
diar
y) 560,000
(
a)
NCI(600K x30%) 180,000
Previ
ouslyhel
dequi
tyint
erest -
Total 740,000
Fairval
ueofneti
denti
fi
ableasset
sacqui
red(a) (
600,000)
Goodwi
ll 140,
000

(
a)
Shar
ecapi
tal 200,
000
Sharepremi
um 50,
000
Retai
nedear
nings 230,
000
Netasset
satcar
ryi
ngamount
480,
000
Fai
rval
ueadj
ust
ment(
20K+540K-40K-400K)
120,
000
Fai
rval
ueofneti
dent
if
iabl
easset
sacqui
red 600,
000

2. Sol
uti
on:

St
ep1:Anal
ysi
sofsubsi
diar
y’snetasset
s
Jan.1, Dec.31, Net
Fl
oydCo.
20x1 20x1 change
Netassetsatcar
ryi
ngamount 480,000 568,000*
Fai
rvalueadj
ustments(
FVA) 120, 000(a) 000(b)
88,
Netassetsatfai
rval
ue 600,000 656,000 56,000
*(200Kshar
ecapi
tal+50Kshar
epr
emi
um +318Kr
etai
nedear
nings)=568Kt
otal
equi
tyon12/
31/
x1

(
a)
FVAatacquisi
ti
ondat
e
Car r
ying Fair Fairvalue
amount value adj
ust ment(FVA)
I
nventor
y 100,
000 110,000 10,
000
Bui
ldi
ng,net 400,
000 510,000 110,000
Total
s 500,
000 620,000 120,000
(
b)
FVAatacquisi
tiondatel
esssubsequentdepreciat
ion.
  FVA, 1/1/x1 Usef
ulli
fe Depr eci
ation FVA, 12/31/x1
I
nv ent
ory 10,000 N/A* 10,000 -
Equipment 110, 000 5yrs. 22,000 88,000
Totals 120, 000 32,000 88,000
*Theent
ir
einv
ent
oryi
sassumedt
ohav
ebeensol
ddur
ingt
hey
ear
.

Step2:Goodwillcomputation
Consi
derat
iont
ransfer
red(equalt
oInv
est
menti
n
subsi
diar
y) 560,
000
NCI(
600Kx10%) 60,
000
Pr
evi
ouslyheldequi
tyi
nter
est -
Tot
al 620,000
Fai
rval
ueofneti
dent
if
iabl
easset
sacqui
red (
600,000)
Goodwi
ll 20,000

St
ep3:Non-
cont
rol
li
ngi
nter
esti
nnetasset
s
Subsi
diar
y'
snetasset
satf
airv
alue–Dec.31,
20x1(
see
St
ep1) 656,
000
Mult
ipl
yby:NCIpercent
age 10%
Non-
contr
oll
ingint
eresti
nnetasset
s–Dec.31,
20x1 65,600

St
ep4:Consol
i
dat
edr
etai
nedear
nings
Parent'
sr et
ainedear ni
ngs–Dec.31,20x1 1,
260,
000
Parent'
sshar einthenetchangeinsubsidi
ary'
snet
assets(d) 50,400
Consolidatedretainedearni
ngs–Dec.31, 20x1 1,
310,400

(
d)
Netchangei
nFl
oyd’
snetasset
s(SeeSt
ep1)
56,
000
Mult
ipl
yby:Pi
nk’
sint
eresti
nFloyd 90%
Pi
nk’sshar
einthenetchangeinFl
oyd’
snetasset
s 50,
400

St
ep5:Consol
i
dat
edpr
ofi
torl
oss
Prof
itsofPink&Floy
d( 270K+88K) 358,000
Depreci
ati
onofFVA( seeStep1) (32,
000)
Consoli
datedprof
it 326,000

Ownersofparent NCI Consoli

dated
Parent'
sprof
itbef
oreFVA 270,000 N/ A 270,000
ShareinFl
oyd'spr
ofi
tbef
oreFVA
(
e)
79,
200 8, 800 88,
000
Depreci
atonofFVA(f)
i (28,
800) (
3,200) (
32,000)
Total
s 320,400 5,600 326,000
(
e)
88Kx90%=79,
( 200)
;(88Kx10%=8,
800)
.
(
f)
32Kx90%=28,
( 000)
;(32Kx10%=3,
200)
.
 PinkGr
oup
Consol
idatedst
atementoff
inanci
alposi
ti
on
AsofDecember31,20x1
ASSETS
Cash( 620,000+120,000) 740,
000
Account sr eceivable(170,
000+100,000) 270,
000
I
nv ent
or y( 200,
000+80,000+0FVAnet ,St
ep1) 280,
000
Prepaidasset s(10,
000+8,000) 18,
000
I
nv est
menti nsubsidiary(Eli
minat
ed)
Buildi
ng, net( 1,
100,
000+350,000+88,000FVAnet
,St
ep
1,
538,
000
1)
Goodwi
l
l(St
ep2) 20,
000
TOTALASSETS 2,
866,
000
   

LI
ABI LI
TIESANDEQUI TY  
Accountspay able(50,000+90, 000) 140,
000
Totalli
abi
lit
ies 140,
000
Sharecapital( Parentonly) 1,
000,
000
Sharepremi um ( Parentonly) 350,
000
Retai
nedear ni ngs( Parentonly–Step4) 1,
310,
400
Owner sofpar ent 2,
660,
400
Non-control
lingi nterest( St
ep3) 65,
600
Totalequity 2,
726,
000
TOTALLI ABI LITIESANDEQUI TY 2,
866,
000
   

PinkGr
oup
St
atementofprofi
torl
oss
 
Fort
heyearendedDecember31,20x1  

Sal
es(600,
000+200,
000) 800,
000
Costofgoodssol d(200K+60K+10Kdep’
n.ofFVAon
i
nvent
ory
) (
270,000)
Grossprofit 530,000
Depreci
ationexpense( 100K+50K+22Kdep’
n.ofFVAonbl
dg.
) (
172,000)
Di
stri
butioncosts(30,
000+2,000) (
32,000)
Profi
tfortheyear 326,000
 

Pr
ofi
tatt
ri
butablet
o:
Ownersoftheparent(St
ep5) 320,
400
Non-
contr
olli
nginter
ests(St
ep5) 5,
600
  326,
000
 
 

3. Sol
uti
on:
St
ep1:Anal
ysi
sofsubsi
diar
y’snetasset
s(Sameas#2)
Jan.1, Dec.31, Net
Fl
oydCo.
20x1 20x1 change
Netassetsatcar
ryi
ngamount 480,000 568,000*
Fai
rvalueadj
ustments(
FVA) 120, 000(a) 000(b)
88,
Netassetsatfai
rval
ue 600,000 656,000 56,000
*(200Kshar
ecapi
tal+50Kshar
epr
emi
um +318Kr
etai
nedear
nings)=568Kt
otal
equi
tyon12/
31/
x1

(
a)
FVAatacquisi
ti
ondat
e
Car r
ying Fair Fairvalue
amount value adj
ust ment(FVA)
I
nventor
y 100,
000 110,000 10,
000
Bui
ldi
ng,net 400,
000 510,000 110,000
Total
s 500,
000 620,000 120,000
(
b)
FVAatacquisi
tiondatel
esssubsequentdepreciat
ion.
  FVA, 1/1/x1 Usef
ulli
fe Depr eci
ation FVA, 12/31/x1
I
nv ent
ory 10,000 N/A* 10,000 -
Equipment 110, 000 5yrs. 22,000 88,000
Totals 120, 000 32,000 88,000
*Theent
ir
einv
ent
oryi
sassumedt
ohav
ebeensol
ddur
ingt
hey
ear
.

Step2:Goodwillcomputation
Consi
derat
iont
ransfer
red(equalt
oInv
est
menti
n
subsi
diar
y) 560,
000
Previ
ouslyheldequityint
eresti
ntheacquir
ee -
Total 560,
000
Less:Parent’
sproporti
onateshareinthenetasset
s
ofsubsidiar
y( 000x90%)–St
600, ep1 (
540,000)
Goodwillatt
ri
butabletoowner softheparent 20,000
Fairval
ueofNCI 65,000
Less:NCI’spropor
tionatesharei
nthenetassets
ofsubsidiar
y( 000x10%)–St
600, ep1 (
60,000)
Goodwillatt
ri
butabletoNCI 5,000
Goodwill–Dec.31, 20x1 25,000

Reconci
l
iat
ionusi
ngr
egul
arf
ormul
a:
Consi
der
ati
ont
ransf
err
ed(
equalt
oInv
est
menti
n
subsi
diar
y) 560,
000
NCI 65,
000
Pr
evi
ousl
yhel
dequi
tyi
nter
est -
Tot
al 625,000
Fai
rval
ueofneti
dent
if
iabl
easset
sacqui
red (
600,000)
Goodwi
ll 25,000

St
ep3:Non-
cont
rol
li
ngi
nter
esti
nnetasset
s
Subsidi
ary
'snetassetsatfairv
alue–Dec.31,20x1(St
ep1) 656,
000
Multi
plyby:NCIpercentage 10%
Total 65,600
Add:Goodwi l
lat
tri
butablet
oNCI( St
ep2) 5,000
Non-contr
oll
ingint
erestinnetassets–Dec.31,20x1 70,600

St
ep4:Consol
i
dat
edr
etai
nedear
nings(
Sameas#2)
Parent'
sr et
ainedear ni
ngs–Dec.31,20x1 1,
260,
000
Parent'
sshar einthenetchangeinsubsidi
ary'
snet
assets(d) 50,400
Consolidatedretainedearni
ngs–Dec.31, 20x1 1,
310,400

(
d)
Netchangei
nFl
oyd’
snetasset
s(SeeSt
ep1)
56,
000
Mult
ipl
yby:Pi
nk’
sint
eresti
nFloyd 90%
Pi
nk’sshar
einthenetchangeinFl
oyd’
snetasset
s 50,
400

St
ep5:Consol
i
dat
edpr
ofi
torl
oss(
Sameas#2)
Prof
itsofPink&Floy
d( 270K+88K) 358,000
Depreci
ati
onofFVA( seeStep1) (32,
000)
Consoli
datedprof
it 326,000

Ownersofparent NCI Consoli

dated
Parent'
sprof
itbef
oreFVA 270,000 N/ A 270,000
ShareinFl
oyd'spr
ofi
tbef
oreFVA
(
e)
79,
200 8, 800 88,
000
Depreci
atonofFVA(f)
i (28,
800) (
3,200) (
32,000)
Total
s 320,400 5,600 326,000
(
e)
88Kx90%=79,
( 200)
;(88Kx10%=8,
800)
.
(
f)
32Kx90%=28,
( 000)
;(32Kx10%=3,
200)
.

PinkGr
oup
Consol
idatedst
atementoff
inanci
alposi
ti
on
AsofDecember31,20x1
ASSETS
Cash( 620,000+120,000) 740,
000
Account sr eceivable(170,
000+100,000) 270,
000
I
nv ent
or y( 200,
000+80,000+0FVAnet ,St
ep1) 280,
000
Prepaidasset s(10,
000+8,000) 18,
000
I
nv est
menti nsubsidiary(Eli
minat
ed)
Buildi
ng, net( 1,
100,
000+350,000+88,000FVAnet
,St
ep
1,
538,
000
1)
Goodwi l
l(St
ep2) 25,
000
TOTALASSETS 2,
871,
000
   
LI
ABI LI
TIESANDEQUI TY  
Accountspay able(50,000+90, 000) 140,
000
Totalli
abi
liti
es 140,
000
Sharecapi t
al( Parentonly) 1,
000,
000
Sharepremi um ( Parentonly) 350,
000
Retai
nedear ni ngs( Parentonly–Step4) 1,
310,
400
Owner sofpar ent 2,
660,
400
Non-controll
ingi nterest( St
ep3) 70,
600
Totalequity 2,
731,
000
TOTALLI ABI LITIESANDEQUI TY 2,
871,
000
   

PinkGr
oup
St
atementofprofi
torl
oss
Fort
heyearendedDecember31,20x1
   

Sal
es(600,
000+200,
000) 800,
000
Costofgoodssol d(200K+60K+10Kdep’
n.ofFVAon
i
nvent
ory
) (
270,000)
Grossprofit 530,000
Depreci
ationexpense( 100K+50K+22Kdep’
n.ofFVAonbl
dg.
) (
172,000)
Di
stri
butioncosts(30,
000+2,000) (
32,000)
Profi
tfortheyear 326,000
 

Pr
ofi
tatt
ri
butablet
o:
Ownersoftheparent(St
ep5) 320,
400
Non-
contr
olli
nginter
ests(St
ep5) 5,
600
  326,
000
 
 
PROBLEM 3:EXERCI
SES

1. Sol
uti
on:
SunnyGroup
Consol
idat
edstat
ementoffinanci
alposi
ti
on
AsofJanuar
y1,20x1
ASSETS
Cash( 80,000+50, 000) 130,
000
Invent ory( 400,000+80, 000f ai
rvalue) 480,
000
Invest menti nsubsi diary( El
iminated)
Land( 600,000+250, 000f airval
ue) 850,
000
Goodwi l
l (
seecomput ati
onsbel ow) 120,
000
TOTALASSETS 1,
580,
000
   
LIABI LITI ESANDEQUI TY  
Account spay able(200,000+80, 000) 280,
000
Totall iabilit
ies 280,
000
Sharecapi tal( Parentonly) 1,
000,
000
Retainedear ni ngs( Parentonly) 180,
000
Owner sofpar ent 1,
180,
000
Non- cont rol
lingi nterest( seecomput at
ionsbel
ow) 120,
000
Totalequi ty 1,
300,
000
TOTALLI ABI LITIESANDEQUI TY 1,
580,
000
   

Consi
der
ati
ont
ransf
err
ed(
equalt
oInv
est
menti
n
subsi
diar
y) 300,000
NCI(300Kx40%) 120,000
Previ
ouslyheldequi
tyint
erest -
Total 420,000
Fairval
ueofnetidenti
fi
ableasset
s(250K+50K) (
300,000)
Goodwi l
l 120,000

2. Sol
uti
on:

HammerGr oup
Consol
idat
edstat
ementoff i
nancial
posi
ti
on
AsofJanuar
y1, 20x1
ASSETS
Cash( 160,
000+10, 000) 170,
000
Account sr ecei vabl e( 200,000+110, 000) 310,
000
I
nvent ory( 400,000+100, 000f ai
rvalue) 500,
000
I
nvest menti nsubsi di ary( Eli
minated)
Buil
ding( 1,000,000+400, 000f airv
alue) 1,
400,
000
Goodwi l
l(seecomput at i
onsbel ow) 40,
000
TOTALASSETS 2,
420,
000
   
LI
ABI LITIESANDEQUI TY  
Account spay able(100, 000+20, 000) 120,
000
Totalliabili
ties 120,
000
Sharecapi tal( Parentonl y) 1,
000,
000
Sharepr emi um ( Par entonl y) 300,
000
Retai
nedear ni ngs( Par entonly) 880,
000
Owner sofpar ent 2,
180,
000
Non-cont rollingi nter est( seecomput ati
onsbel
ow) 120,
000
Totalequi ty 2,
300,
000
TOTALLI ABI LITIESANDEQUI TY 2,
420,
000
   

Consi
der
ati
ont
ransf
err
ed(
equalt
oInv
est
menti
n
subsi
diar
y) 520,000
NCI(600Kx20%) 120,000
Previ
ouslyheldequi
tyint
erest -
Total 640,000
Fairval
ueofnetidenti
fi
abl s(a)
easset (
600,000)
Goodwi l
l 40,000

(
a)
(
200Kshar
ecap.+100Kshar
epr
em.+180Kr
et.ear
nings+20KFVAoni
nvent
ory+
100KFVAonbuil
ding)=600K

3. Sol
uti
on:
St
ep1:Analysi
sofsubsi
diar
y’snetasset
s
Jan.1, Dec.31, Net
Wal
kCo.
20x1 20x1 change
Netassetsatcar
ryi
ngamount 480,000 568,000*
Fai
rvalueadj
ustments(
FVA) 120, 000(a) 000(b)
90,
Netassetsatfai
rval
ue 600,000 658,000 58,000
*(200Kshar
ecapi
tal+100Kshar
epr
emi
um +268Kr
etai
nedear
nings)=568Kt
otal
equi
tyon12/
31/
x1
(
a)
FVAatacquisi
ti
ondat
e
Car r
ying Fair Fairvalue
amount value adj
ust ment(FVA)
I
nventor
y 80,000 100,000 20,
000
Bui
ldi
ng,net 300,
000 400,000 100,000
Total
s 380,
000 500,000 120,000
(
b)
FVAatacquisi
tiondatel
esssubsequentdepreciat
ion.
  FVA, 1/1/x1 Usef
ulli
fe Depr eci
ation FVA, 12/31/x1
I
nv ent
ory 20,000 N/A* 20,000 -
Equipment 100, 000 10y r
s. 10,000 90,000
Totals 120, 000 30,000 90,000
*Theent
ir
einv
ent
oryi
sassumedt
ohav
ebeensol
ddur
ingt
hey
ear
.

Step2:Goodwillcomputation
Consi
derat
iont
ransfer
red(equalt
oInv
est
menti
n
subsi
diar
y) 520,000
NCI(600Kx20%) 120,000
Previ
ouslyheldequi
tyint
erest -
Total 640,000
Fairval
ueofnetidenti
fi
ableasset
sacqui
red (
600,000)
Goodwi l
l 40,000

St
ep3:Non-
cont
rol
li
ngi
nter
esti
nnetasset
s
Subsi
diar
y'
snetasset
satf
airv
alue–Dec.31,
20x1(
seeSt
ep 658,
00
1) 0
Mul
ti
plyby
:NCIper
cent
age 20%
131,
60
Non-
cont
rol
li
ngi
nter
esti
nnetasset
s–Dec.31,
20x1 0

St
ep4:Consol
i
dat
edr
etai
nedear
nings
1,
300,
00
Par
ent
'sret
ainedear
nings–Dec.31,20x1 0
Par
ent
'ssharei henetchangei
nt nsubsidi
ary
'snetasset
s
(
d)
46,
400
1,
346,
40
Consol
idat
edr
etai
nedear
nings–Dec.31,
20x1 0

(
d)
Netchangei
nWal
k’
snetasset
s(SeeSt
ep1)
58,
000
Mult
ipl
yby
:Run’
sint
eresti
nWalk 80%
Run’
sshar
einthenetchangei
nWal
k’
snetasset
s 46,
400

St
ep5:Consol
i
dat
edpr
ofi
torl
oss
Prof
itsofRun&Walk(420K+88K) 508,000
Depreci
ati
onofFVA(seeSt
ep1) (30,
000)
Consoli
datedpr
ofi
t 478,000

Owner sofpar ent NCI Consolidat

ed
420,00
Parent'
sprof
itbef
oreFVA 0 N/A 420,000
17,60
ShareinWalk'
sprofi
tbef
oreFVA(e) 70,
400 0 88,000
(
24,000 ( 6,
000
Depreci
atonofFVA(f)
i ) ) (
30,000)
466,40 11, 60
Total
s 0 0 478,000
(
e)
88Kx80%=70,
( 400)
;(88Kx20%=17,
600)
.
(
f)
30Kx80%=24,
( 000)
;(30Kx20%=6,
000)
.

RunGroup
Consol
idatedst
atementoff
inanci
alposi
ti
on
AsofDecember31,20x1
ASSETS
Cash( 750,000+258, 000) 1,
008,
000
Account sr ecei vabl e(260,000+50,000) 310,
000
I
nvent ory( 200,000+20, 000+0FVAnet ,St
ep1) 220,
000
I
nvest menti nsubsi diary( Eli
minat
ed)
Buil
ding, net( 950,000+250, 000+90, 000FVAnet
,St
ep1) 1,
290,
000
Goodwi l
l(Step2) 40,
000
TOTALASSETS 2,
868,
000
   
LI
ABI LITIESANDEQUI TY  
Account spay able(80,000+10, 000) 90,
000
Totalliabili
ties 90,
000
Sharecapi tal( Parentonly) 1,
000,
000
Sharepr emi um ( Parentonly) 300,
000
Retai
nedear ni ngs( Parentonly–Step4) 1,
346,
400
Owner sofpar ent 2,
646,
400
Non-cont rollingi nterest( Step3) 131,
600
Tot
alequi
ty 2,
778,
000
TOTALLIABILI
TIESANDEQUI
TY 2,
868,
000
   

RunGroup
St
atementofprofi
torl
oss
Fort
heyearendedDecember31,20x1
   

Sales(800,
000+200,
000) 1,000,000
Costofgoodssol d(200K+60K+20Kdep’n.ofFVAoninventory) (280,000)
Grosspr ofi
t 720,000
Depreciati
onexpense( 50K+50K+10Kdep’n.ofFVAonbldg.) (110,000)
Distr
ibuti
oncost s(130,
000+2,000) (132,000)
Profi
tforthey ear 478, 000
 

Pr
ofi
tatt
ri
butablet
o:
Ownersoftheparent(St
ep5) 466,
400
Non-
contr
olli
nginter
ests(St
ep5) 11,
600
  478,
000
 
 

4. Sol
uti
on:
St
ep1:Analysi
sofsubsi
diar
y’snetasset
s(Sameas#3)
Net
Jan.1,
Wal
kCo. Dec.31,
20x1 chang
20x1 e
Netassetsatcar
ryi
ngamount 480,
000 568,
000*
Fai
rvalueadj
ustments(
FVA) 120,000(a) 000(b)
90,
Netassetsatfai
rval
ue 600,
000 658,
000 58,000
*(200Kshar
ecapi
tal+100Kshar
epr
emi
um +268Kr
etai
nedear
nings)=568Kt
otal
equi
tyon12/
31/
x1

(
a)
FVAatacquisi
ti
ondat
e
Car r
ying Fair Fairvalue
amount value adj
ust ment(FVA)
I
nventor
y 80,000 100,000 20,
000
Bui
ldi
ng,net 300,
000 400,000 100,000
Total
s 380,
000 500,000 120,000
(
b)
FVAatacquisi
tiondatel
esssubsequentdepreciat
ion.
  FVA, 1/1/x1 Usef
ulli
fe Depr eci
ation FVA, 12/31/x1
I
nv ent
ory 20,000 N/A* 20,000 -
Equipment 100, 000 10y r
s. 10,000 90,000
Totals 120, 000 30,000 90,000
*Theent
ir
einv
ent
oryi
sassumedt
ohav
ebeensol
ddur
ingt
hey
ear
.

St
ep2:Goodwi
llcomput
ati
on

Consi
der
ati
ont
ransf
err
ed(
equalt
oInv
est
menti
n
subsi
diar
y) 520,
000
Previ
ouslyheldequityint
eresti
ntheacquir
ee -
Total 520,
000
Less:Parent’
sproporti
onateshareinthenetasset
s
ofsubsidiar
y( 000x80%)–St
600, ep1 (
480,000)
Goodwillatt
ri
butabletoowner softheparent 40,000
Fairval
ueofNCI 130,000
Less:NCI’spropor
tionatesharei
nthenetassets
ofsubsidiar
y( 000x20%)–St
600, ep1 (
120,000)
Goodwillatt
ri
butabletoNCI 10,000
Goodwill–Dec.31, 20x1 50,000

Reconci
l
iat
ionusi
ngr
egul
arf
ormul
a:
Consi
der
ati
ont
ransf
err
ed(
equalt
oInv
est
menti
n
subsi
diar
y) 520,000
NCI 130,000
Previ
ousl
yheldequi
tyint
erest -
Total 650,000
Fairv
alueofneti
denti
fi
ableasset
sacqui
red (
600,000)
Goodwill 50,000

St
ep3:Non-
cont
rol
li
ngi
nter
esti
nnetasset
s
658,00
Subsi
diary
'snetassetsatf
airv
alue–Dec.31,
20x1(
Step1) 0
Multi
plyby:NCIpercent
age 20%
131,60
Total 0
Add:Goodwi
l
lat
tri
but
abl
etoNCI(
Step2) 10,000
141,60
Non-
cont
rol
li
ngi
nter
esti
nnetasset
s–Dec.31,
20x1 0

St
ep4:Consol
i
dat
edr
etai
nedear
nings(
Sameas#3)
1,
300,
00
Par
ent
'sret
ainedear
nings–Dec.31,20x1 0
Par
ent
'ssharei henetchangei
nt nsubsidi
ary
'snetasset
s
(
d)
46,
400
 1,
346,
40
Consol
idat
edr
etai
nedear
nings–Dec.31,
20x1 0

(
d)
Netchangei
nWal
k’
snetasset
s(SeeSt
ep1)
58,
000
Mult
ipl
yby
:Run’
sint
eresti
nWalk 80%
Run’
sshar
einthenetchangei
nWal
k’
snetasset
s 46,
400

St
ep5:Consol
i
dat
edpr
ofi
torl
oss(
Sameas#3)
Prof
itsofRun&Walk(420K+88K) 508,000
Depreci
ati
onofFVA(seeSt
ep1) (30,
000)
Consoli
datedpr
ofi
t 478,000

Owner sofpar ent NCI Consolidat

ed
420,00
Parent'
sprof
itbef
oreFVA 0 N/A 420,000
17,60
ShareinWalk'
sprofi
tbef
oreFVA(e) 70,
400 0 88,000
(
24,000 ( 6,
000
Depreci
atonofFVA(f)
i ) ) (
30,000)
466,40 11, 60
Total
s 0 0 478,000
(
e)
88Kx80%=70,
( 400)
;(88Kx20%=17,
600)
.
(
f)
30Kx80%=24,
( 000)
;(30Kx20%=6,
000)
.
 RunGroup
Consol
idatedst
atementoff
inanci
alposi
ti
on
AsofDecember31,20x1
ASSETS
Cash( 750,000+258, 000) 1,
008,
000
Account sr ecei vabl e(260,000+50,000) 310,
000
I
nvent ory( 200,000+20, 000+0FVAnet ,St
ep1) 220,
000
I
nvest menti nsubsi diary( Eli
minat
ed)
Buil
ding, net( 950,000+250, 000+90, 000FVAnet
,St
ep1) 1,
290,
000
Goodwi l
l(Step2) 50,
000
TOTALASSETS 2,
878,
000
   
LI
ABI LITIESANDEQUI TY  
Account spay able(80,000+10, 000) 90,
000
Totalliabili
ties 90,
000
Sharecapi tal( Parentonly) 1,
000,
000
Sharepr emi um ( Parentonly) 300,
000
Retai
nedear ni ngs( Parentonly–Step4) 1,
346,
400
Owner sofpar ent 2,
646,
400
Non-cont rollingi nterest( Step3) 141,
600
Totalequi ty 2,
788,
000
TOTALLI ABI LITIESANDEQUI TY 2,
878,
000
   

RunGroup
St
atementofprofi
torl
oss
Fort
heyearendedDecember31,20x1
   

Sales(800,
000+200,
000) 1,000,000
Costofgoodssol d(200K+60K+20Kdep’n.ofFVAoninventory) (280,000)
Grosspr ofi
t 720,000
Depreciati
onexpense( 50K+50K+10Kdep’n.ofFVAonbldg.) (110,000)
Distr
ibuti
oncost s(130,
000+2,000) (132,000)
Profi
tforthey ear 478, 000
 

Pr
ofi
tatt
ri
butablet
o:
Ownersoftheparent(St
ep5) 466,
400
Non-
contr
olli
nginter
ests(St
ep5) 11,
600
  478,
000
 
 

5. Sol
uti
on:

St
ep1:Anal
ysi
sofsubsi
diar
y’snetasset
s
 Net
Jan.1,
Axi
onCo. Dec.31,
20x1 chang
20x1 e
Netassetsatcar
ryi
ngamount 290,000* 310,000
Fai
rvalueadj
ustments(
FVA) 10,000(a) 000(b)
40,
Netassetsatfai
rval
ue 300,000 350,
000 50,000
*(
250Kshar
ecapi
tal
+40Kr
etai
nedear
nings)

(
a)
FVAatacquisi
ti
ondat
e
Car r
ying Fair Fai
rval
ue
amount value adj
ustment(
FVA)
I
nventor
y 120,
000 80,000 (
40,
000)
Bui
ldi
ng,net 200,
000 250,000 50,
000
Total
s 320,
000 330,000 10,
000
(
b)
FVAatacqui
sit
iondatel
esssubsequentdepreciat
ion.
  FVA,1/1/x1 Usefull
if
e Depr eci
ation FVA, 12/31/x1
I
nv ent
ory (
40,000) N/A (
40,000) -
Equipment 50, 000 5y r
s. 10,000 40,000
Totals 10,000 (
30,000) 40,000

Step2:Goodwi llcomput ation

Considerat
iontransferr
ed 300,000
NCI(300Kx40%) 120,000
Previ
ouslyheldequi t
yinterest -
Total 420,000
Fairval
ueofneti denti
fi
ableassetsacqui
red(
Step1) (
300,000)
Goodwi l
l 120,000

St
ep3:Non-
cont
rol
li
ngi
nter
esti
nnetasset
s
Subsi
diar
y'
snetasset
satf
airv
alue–Dec.31,
20x1(
seeSt
ep 350,
00
1) 0
Mul
ti
plyby
:NCIper
cent
age 40%
140,
00
Non-
cont
rol
li
ngi
nter
esti
nnetasset
s–Dec.31,
20x1 0

St
ep4:Consol
i
dat
edr
etai
nedear
nings
Parent
'sret
ainedear ni
ngs–Dec.31,20x1 243,
000
Parent
'sshareinthenetchangeinsubsidi
ary'
snetasset
s
(
d)
30,
000
Consoli
datedretainedearni
ngs–Dec.31, 20x1 273,
000
(
d)
Netchangei
nAxi
on’
snetasset
s(SeeSt
ep1)
50,
000
Mult
ipl
yby: 60%
Joy
’sshar
eint
henetchangei
nAxi
on’
snetasset
s 30,
000

St
ep5:Consol
i
dat
edpr
ofi
torl
oss
Prof
itsofJoy&Axi
on( 63K+20K) 83,
000
Depreci
ati
onofFVA(seeStep1) 30,
000
Consoli
datedpr
ofi
t 113,000

Ownersofparent NCI Consol

idat
ed
63,
00
Parent'
sprofi
tbef
oreFVA 0 N/A 63,
000
12,
00
ShareinAxion'
sprof
itbef
oreFVA(e) 0 8,000 20,
000
18,
00 12, 00
Depreci
atonofFVA(f)
i 0 0 30,
000
93,
00 20, 00
Total
s 0 0 113,
000
(
e)
20Kx60%=12,
( 000)
;(20Kx40%=8,
000)
.
(
f)
(
-30Kx60%=18,
000)
;(30Kx40%=12,
- 000)
.

JoyGroup
Consol
idatedst
atementoff
inanci
alposi
ti
on
AsofDecember31,20x1
ASSETS
Cash( 143,000+60, 000) 203,
000
I
nvent ory( 440,
000+160, 000+0FVAnet ,St
ep1) 600,
000
I
nvest menti nsubsi diary( El
imi
nated)
Buil
ding, net( 560,000+160, 000+40, 000FVAnet
,St
ep1) 760,
000
Goodwi l
l(Step2) 120,
000
TOTALASSETS 1,
683,
000
   
LI
ABI LITIESANDEQUI TY  
Account spay abl e(200,000+70, 000) 270,
000
Totalliabili
ties 270,
000
Sharecapi tal( Parentonly) 1,
000,
000
Retai
nedear nings( Parentonly–Step4) 273,
000
Owner sofpar ent 1,
273,
000
Non-
contr
oll
i
nginter
est(
Step3) 140,
000
Tot
alequi
ty 1,
413,
000
TOTALLIABILI
TIESANDEQUI TY 1,
683,
000
   

JoyGroup
St
atementofprofi
torl
oss
Fort
heyearendedDecember31,20x1
   

Sales(300,
000+120,
000) 420,000
Costofgoodssol d(165K+72K-40Kdep’
n.ofFVAoninv
entory) (
197,000)
Grosspr ofi
t 223,000
Depreciati
onexpense( 40K+10K+10Kdep’
n.ofFVAonbldg.
) (
60,000)
Distr
ibuti
oncost s(32,
000+18,000) (
50,000)
Profi
tforthey ear 113,000
 

Pr
ofi
tatt
ri
butablet
o:
Ownersoftheparent(St
ep5) 93,
000
Non-
contr
olli
nginter
ests(St
ep5) 20,
000
  113,
000
 
 

6. Sol
uti
on:
St
ep1:Analysi
sofsubsi
diar
y’snetasset
s(Sameas#5)
Net
Jan.1,
Axi
onCo. Dec.31,
20x1 chang
20x1 e
Netassetsatcar
ryi
ngamount 290,000* 310,000
Fai
rvalueadj
ustments(
FVA) 10,000(a) 000(b)
40,
Netassetsatfai
rval
ue 300,000 350,
000 50,000
*(
250Kshar
ecapi
tal
+40Kr
etai
nedear
nings)

(
a)
FVAatacquisi
ti
ondat
e
Car r
ying Fair Fai
rval
ue
amount value adj
ustment(
FVA)
I
nventor
y 120,
000 80,000 (
40,
000)
Bui
ldi
ng,net 200,
000 250,000 50,
000
Total
s 320,
000 330,000 10,
000
(
b)
FVAatacqui
sit
iondatel
esssubsequentdepreciat
ion.
  FVA,1/1/x1 Usefull
if
e Depr eci
ation FVA, 12/31/x1
I
nv ent
ory (
40,000) N/A (
40,000) -
Equipment 50, 000 5y r
s. 10,000 40,000
Tot
als 10,
000 (
30,
000) 40,
000

Step2:Goodwi llcomput ation

Considerati
ontransf erred 300,
000
Previ
ouslyheldequi tyinteresti
nt heacquir
ee -
Total 300,
000
Less:Parent’
spr opor t
ionateshareint henetasset
s
ofsubsidiary(300,000x60%)–Step1 (
180,000)
Goodwi l
lattr
ibutablet oowner soft heparent 120,000
Fairval
ueofNCI 132,000
Less:NCI ’
sproportionat eshareinthenetassets
ofsubsidiary(300,000x40%)–Step1 (
120,000)
Goodwi l
lattr
ibutablet oNCI 12,000
Goodwi l
l–Dec.31, 20x1 132,000

Reconci
l
iat
ionusi
ngr
egul
arf
ormul
a:

Considerat
iontr
ansfer
red 300,000
NCI 132,000
Previ
ouslyheldequi
tyint
erest -
Total 432,000
Fairv
alueofnetidenti
fi
ableasset
sacqui
red(
Step1) (
300,000)
Goodwi l
l 132,000
St
ep3:Non-
cont
rol
li
ngi
nter
esti
nnetasset
s
350,00
Subsi
diary
'snetassetsatf
airv
alue–Dec.31,
20x1(
Step1) 0
Multi
plyby:NCIpercent
age 40%
140,00
Total 0
Add:Goodwi
l
lat
tri
but
abl
etoNCI(
Step2) 12,000
152,00
Non-
cont
rol
li
ngi
nter
esti
nnetasset
s–Dec.31,
20x1 0

St
ep4:Consol
i
dat
edr
etai
nedear
nings(
Sameas#5)
Parent
'sret
ainedear ni
ngs–Dec.31,20x1 243,
000
Parent
'sshareinthenetchangeinsubsidi
ary'
snetasset
s
(
d)
30,
000
Consoli
datedretainedearni
ngs–Dec.31, 20x1 273,
000

(
d)
Netchangei
nAxi
on’
snetasset
s(SeeSt
ep1)
50,
000
Mult
ipl
yby: 60%
Joy
’sshar
eint
henetchangei
nAxi
on’
snetasset
s 30,
000

St
ep5:Consol
i
dat
edpr
ofi
torl
oss(
Sameas#5)
Prof
itsofJoy&Axi
on( 63K+20K) 83,
000
Depreci
ati
onofFVA(seeStep1) 30,
000
Consoli
datedpr
ofi
t 113,000

Ownersofparent NCI Consol

idat
ed
63,
00
Parent'
sprofi
tbef
oreFVA 0 N/A 63,
000
12,
00
ShareinAxion'
sprof
itbef
oreFVA(e) 0 8,000 20,
000
18,
00 12, 00
Depreci
atonofFVA(f)
i 0 0 30,
000
93,
00 20, 00
Total
s 0 0 113,
000
(
e)
20Kx60%=12,
( 000)
;(20Kx40%=8,
000)
.
(
f)
(
-30Kx60%=18,
000)
;(30Kx40%=12,
- 000)
.
 JoyGroup
Consol
idatedst
atementoff
inanci
alposi
ti
on
AsofDecember31,20x1
ASSETS
Cash( 143,000+60, 000) 203,
000
I
nvent ory( 440,000+160, 000+0FVAnet ,St
ep1) 600,
000
I
nvest menti nsubsi diary( Eli
minat
ed)
Buil
ding, net( 560,000+160, 000+40, 000FVAnet
,St
ep1) 760,
000
Goodwi l
l(Step2) 132,
000
TOTALASSETS 1,
695,
000
   
LI
ABI LITIESANDEQUI TY  
Account spay able(200,000+70, 000) 270,
000
Totalliabili
ties 270,
000
Sharecapi tal( Parentonly) 1,
000,
000
Retai
nedear ni ngs( Parentonly–Step4) 273,
000
Owner sofpar ent 1,
273,
000
Non-cont rollingi nterest( Step3) 152,
000
Totalequi ty 1,
425,
000
TOTALLI ABI LITIESANDEQUI TY 1,
695,
000
   

JoyGroup
St
atementofprofi
torl
oss
Fort
heyearendedDecember31,20x1
   

Sales(300,
000+120,
000) 420,000
Costofgoodssol d(165K+72K-40Kdep’
n.ofFVAoninv
entory) (
197,000)
Grosspr ofi
t 223,000
Depreciati
onexpense( 40K+10K+10Kdep’
n.ofFVAonbldg.
) (
60,000)
Distr
ibuti
oncost s(32,
000+18,000) (
50,000)
Profi
tforthey ear 113,000
 

Pr
ofi
tatt
ri
butablet
o:
Ownersoftheparent(St
ep5) 93,
000
Non-
contr
olli
nginter
ests(St
ep5) 20,
000
  113,
000
 
 

PROBLEM 4:MICROSOFTEXCEL
NOTE:Thisact
ivi
tyi
sOPTIONALasthelearnerwi
llneedt
ohav e
accesstoaCOMPUTER wi t
haMi crosoftExcel® appl
icat
ion
i
nstall
edi
nit
.
1. OpenaMi
crosof
tExcel
®Wor
ksheetandcopyt
hef
oll
owi
ng:

 Toplacecommasontheamountsori
ncr
ease/
decr
ease
deci
malpl
aces,
uset
hesebut
tons.

2. Makey
ourt
abl
elookl
i
ket
his:
*
Theshor
tcutf
orbol
disCTRL+B,
whi
l
etheshor
t ori
cutf tal
i
cisCTRL+I
.
③ Toi
nser
trows,
placey
ourcur
soronar
ow(
li
ket
his)
…..

…r
ightcl
i
ck,
adr
opdownl
i
stappear
s,sel
ect‘
I
nser
t’f
rom t
hatl
i
st.

④ Togett hetotalofParent’
sassets,y oucando anyoft
he
f
oll
owing:
a. SelectcellB8t henlef
tcli
ck“Aut oSum”(locat
edont
he
“Home”tab, “Edi
ti
ng”menubar)-thisone;
or

b. Sel
ectcel
lB8t
hent
ypet
hef
oll
owi
ngf
ormul
a=sum(
B2:
B7)
 Tocheckaf ormula,selectthecel lwit
ht hef or
mul a(e.g.
,cell
B8)thenpr essthe‘F2’keyont hekeyboard.
 Togett het otalofSubsi diary’
sasset s,y oucancopyt he
formulaincellB8andpast ei toncellC8,f orexampl e,select
cellB8thenpr essCTRL+C( shor t
cutforcopy )
,selectcellC8
thenpressCTRL+V( shortcutforpaste).
 Gett he total
s ofPar ent’s and Subsi diar
y ’
sliabil
it
ies and
equity
.

CONSOLIDATI ONPROCEDURES
St
ep1:Eliminatet heinvest
menti nsubsidi
aryaccountby:
a. Measuringt hesubsidi
ary’
sasset sandl i
abil
it
iesatthei
r
acquisi
tion-datefai
rvalues;
b. Recognizingt hegoodwill
;and
c. Replaci
ngt hesubsi
diar
y ’
sequityaccountswiththeNCIin
netasset s.
Additionali
nfor
mat ion:
 Subsi di
ary’
s asset s and l iabi
l
iti
es approxi
mate t
hei
r
acqui si
ti
on-datefai
rval
ues,
exceptforthef
oll
owi
ng:
-Inventor
y,₱5,000
-Land, ₱300,000
 Thegoodwi l
l i
s₱30,000.
 TheNCIi s₱50,000.

Step1:Typezer
ofori
nvest
menti
nsubsi
diar
yi he‘
nt Consol
i
dat
ed’
column.

St
ep1(a)
:
 Selectcel
lD4t
hent
ype=B4+5000.Pressenter
.
 Selectcel
lD6t
hent
ype=B6+300000.Pressenter
.

St
ep1(
b):Ty
pe30000f
orgoodwi
l
li he‘
nt Consol
i
dat
ed’
col
umn.

St
ep1(
c):Ty
pe50000f
orNCIi
nthe‘
Consol
i
dat
ed’
col
umn.

Att
hispoi
nt,
yourt
abl
eshoul
dlookl
i
ket
his:
Step2:Add,li
nebyl ine,si
milaritemsofasset sandliabi
li
ti
esof
thecombini
ngentiti
es.
 SelectcellD2thentype=B2+C2.Pr essenter.
 Copyt heformulaincellD2( selectcellD2t henpressCTRL+C
onyourkeyboard).
 Got ocellD3andpast etheformul a( CTRL+V) .
 Got ocellD10andpr essCTRL+V.
 SelectcellD11thentype=B11.Pr essent er
.
 Copyt heformulaincellD11andpast eitoncellD12andcell
D13.
 Gett he total
s ofasset s and l iabil
it
ies and equit
yi nthe
‘
Consoli
dated’col
umns.Theseshoul dbeequal .

Yourt
abl
eshoul
dlookl
i
ket
his:

Pr
intt
hef
il
eandsubmi
titt
oyourt
eacherf
orgr
adi
ng.
PROBLEM 5:MULTI PLECHOI CE-THEORY
1. A
2. C
3. B
4. D
Expl
anat i
on:Onlyi nchoice( d)thatEnti
tyAhasalltheelement
sof
cont
rol:
1. Power–“ Entit
yAi st heulti
mat ebossofEnti
tyB.”
2. Variablereturn– Ent i
tyA “ earnsprof
itt
hemosti fEnti
tyB
earnspr of
it
, butsuffersthemosti fEnti
tyBincurs.
”
3. Abili
tyt o af f
ectr eturn– “ Enti
ty A makes allthe major
decisions.
”

5. D
6. A
Explanat
ion:Consolidati
on i
s applied prospecti
vely
.Therefore,
Entit
yB’spr ofi
twillbeconsolidatedst art
ingJanuar y1,20x 2.
Howev er
, Ent
it
yB’sstatementoffi
nancialpositi
onwi l
lbei
ncluded
i
nt heDecember31, 20x1consoli
datedfinancialst
atements.

7. B
8. D
9. B
10.A
PROBLEM 6:MULTI
PLECHOI
CE–COMPUTATI
ONAL

1. B
Sol
ution:
Tot
alassetsofpar ent(1,
296,
000+360,000) 1,656,000
Tot
alassetsofsubsi di
ary 444,000
I
nvestmentinsubsi di
ary (360,000)
Fai
rvalueadjust
ment s–net(310,000–348,000) (38,000)
Goodwil–net(
l seecomput at
ionbelow) 290,000
Consoli
datedtotalassets 1,992,000

Consi
der
ati
ont
ransf
err
ed(
equalt
oInv
est
menti
n
subsi
diar
y) 360,000
NCI 240,000
Previ
ousl
yheldequi
tyint
erest -
Total 600,000
Fairv
alueofneti
denti
fi
ableasset
sacqui
red (
310,000)
Goodwill 290,000

2. B
Sol
ution:
Tot
alassetsofpar ent 2,000,000
Tot
alassetsofsubsi di
ary 750,000
I
nvestmentinsubsi di
ary (430,000)
Fai
rvalueadjust
ment s–net 50,000
Goodwil–net(
l seecomput at
ionbel
ow) 110,000
Consoli
datedtotalassets 2,480,000

Consi
der
ati
ont
ransf
err
ed(
equalt
oInv
est
menti
n
subsi
diar
y) 430,
000
NCI(400Kx20%) 80,
000
Previ
ousl
yheldequi
tyint
erest -
Total 510,
000
Fairv
alueofneti
denti
fi
ableasset
sacqui
red
(310K+40K+50KFVA) (
400,000)
Goodwill 110,000

3. B
Sol
uti
on:
Ownersofpar
ent
:(1M shar
ecap.+250Kr
et.ear
nings)=1.
25M
NCI
:(seesol
uti
oni
npr
ecedi
ngquest
ion)

4. D
Solut
ion:
Step1:Anal
ysi
sofsubsi
diar
y’snetasset
s
Net
Jan.1,
Dec.31,
20x1 chang
20x1 e
Netassetsatcar
ryi
ngamount 296,
000 376,000
Fai
rvalueadj
ustments(
FVA) 000(a)
64, 000(b)
24,
Netassetsatfai
rval
ue 360,
000 400,
000 40,000

(
a)
FVAatacquisi
ti
ondat
e
Car r
ying Fair Fai
rval
ue
amount value adj
ustment(
FVA)
I
nventory 92,000 124,000 32,
000
Equipment,
net 160,
000 192,000 32,
000
Totals 252,
000 316,000 64,
000
(
b)
FVAatacqui
sit
i el
ondat esssubsequentdepr eciat
ion.
  FVA,1/1/
x1 Usefulli
fe Depr eciation FVA, 12/31/x1
I
nv ent
ory 32,000 N/A 32,000 -
Equipment 32, 000 4yrs. 8,000 24,000
Totals 64,000 40,000 24,000

5. A
Soluti
on:
Step2:Goodwi llcomput ation
Considerat
iontransfered(
r equalt
oinvest
.insubs.
) 300,000
NCI(360Kx20%) 72,000
Previ
ouslyheldequi t
yinterest -
Total 372,000
Fairval
ueofneti denti
fi
ableassetsacquied(
r Step1) (
360,000)
Goodwi l
l 12,000

6. D-NonebecauseNCIi
smeasur
edat‘
propor
ti
onat
eshar
e’.
7. C
Sol
ution:
Tot
alassetsofpar ent 1,672,000
Tot
alassetsofsubsi diar
y+ 496,000
I
nvestmentinsubsi di
ary (300,000)
Fai
rvalueadjust
ment s–net(SeeStep1abov
e) 24,000
Goodwil–net(
l SeeSt ep2above) 12,000
Consoli
datedtotalassets 1,904,000

8. B
Solut
ion:
Step3:Non-
cont
rol
li
ngi
nter
esti
nnetasset
s
Subsi
diar
y'
snetasset
satf
airv
alue–Dec.31,
20x1(
seeSt
ep 400,
00
1) 0
Mult
ipl
yby:NCIpercent
age 20%
Non-
contr
oll
ingint
eresti
nnetasset
s–Dec.31,
20x1 80,
000

9. C
Solut
ion:
Step4:Consol
i
dat
edr
etai
nedear
nings
Parent
'sret
ainedear ni
ngs–Dec.31,20x1 440,
000
Parent
'sshareinthenetchangeinsubsidi
ary'
snetasset
s
(
d)
32,
000
Consoli
datedretainedearni
ngs–Dec.31, 20x1 472,
000

(
d)
Netchangei
nsubsi
diar
y’snetasset
s(SeeSt
ep1)
40,
000
Multi
plyby: 80%
Parent
’ssharei
nthenetchangei
nSubsi
diar
y’snet
32,
000
assets

10.C
Soluti
on:
Sharecapit
al( Parentonl
y) 940,
000
Retai
nedearnings( Par
entonl
y–Step4) 472,
000
Owner sofparent 1,
412,
000
Non-contr
oll
ingi nterest(St
ep3) 80,
000
Totalequi
ty 1,
492,
000
11.C
Solut
ion:
Step5:Consol
i
dat
edpr
ofi
torl
oss
680,00
Pr
ofi
tsofpar
ent&subsi
diar
y(600K+80K) 0
(
40,000
Depr
eci
ati
onofFVA(
seeSt
ep1) )
640,00
Consol
idat
edpr
ofi
t 0

Ownersofpar ent NCI Consolidat

ed
600,00
Parent'
sprof
itbefor
eFVA 0 N/A 600,000
16,00
Shareinsub.
'sprofi
tbef
oreFVA(e) 64,
000 0 80,000
(
32,000 ( 8,
000
Depreci
atonofFVA(f)
i ) ) (
40,000)
632,00
Total
s 0 8,000 640, 000
(
e)
( 000x80%=64,
80, 000)
;(80Kx20%=16,
000)
(
f)
( 000x80%=32,
40, 000)
;(40Kx20%=8,
000)

12.BSeeSt
ep5

13.B
Solut
ion:
Step1:Anal
ysi
sofsubsi
diar
y’snetasset
s
Net
Jan.1,
Dec.31,
20x1 chang
20x1 e
Netassetsatcar
ryi
ngamount 348,000* 418,
000
(
a)
Fai
rvalueadj
ustments(
FVA) (38,000) 750(a)
8,
Netasset
satf
airval
ue 310,
000 426,
750 116,
750
*
300,
000shar
ecapi
tal
+48,
000r
etai
nedear
ningson1/
1/x1=348,
000car
ryi
ngamount

(
a)
  FVA– Useful FVA–
Dep’
n
1/
1/x1 li
fe 12/
31/x1
(
48,
000 -
I
nvent
ory(
96K–144K) (
48,
000) N/
A )
Bui
ldi
ng–net(250K– 8,
750
240K) 10,
000 8 1,
250
(
46,
750 8,
750
Tot
als (
38,
000) )

Step2:Goodwillcomputation
Consi
derat
iont
ransfer
red(equalt
oInv
est
menti
n
subsi
diar
y) 360,
000
Previ
ouslyheldequityint
eresti
ntheacquir
ee -
Total 360,
000
Less:Parent’
sproporti
onateshareinthenetasset
s
ofsubsidiar
y( 000x60%)–St
310, ep1 (
186,000)
Goodwillatt
ri
butabletoowner softheparent 174,000
Fairval
ueofNCI 240,000
Less:NCI’spropor
tionatesharei
nthenetassets
ofsubsidiar
y( 000x40%)–St
310, ep1 (
124,000)
Goodwillatt
ri
butabletoNCI 116,000
Goodwill–Dec.31, 20x1 290,000

Reconci
l
iat
ionusi
ngr
egul
arf
ormul
a:
Considerat
iontr
ansfer
red 360,000
NCI 240,000
Previ
ouslyheldequi
tyint
erest -
Total 600,000
Fairv
alueofnetidenti
fi
ableasset
sacqui
red(
Step1) (
310,000)
Goodwi l
l 290,000

14.C
Sol
ution:
Total
assetsofparent 1,
550,
000
Total
assetsofsubsidi
ary 550,
000
I
nvestmentinsubsidi
ary(
equalt
otheconsi
der
ati
on
t
ransf
err
ed) (
360,000)
Fai
rval
ueadjustment
s–net(
Step1) 8,750
Goodwi
ll–net(St
ep2) 290,000
Consol
idat
edt
otalasset
s 2,
038,
750

15.A
Solut
ion:
Step3:Non-
cont
rol
li
ngi
nter
esti
nnetasset
s
426,
75
Subsi
diary
'snetassetsatf
airv
alue–Dec.31,
20x1(
Step1) 0
Multi
plyby:NCIpercent
age 40%
170,
70
Tot
al 0
116,
00
Add:Goodwi
l
lat
tri
but
abl
etoNCI(
Step2) 0
286,
70
Non-
cont
rol
li
ngi
nter
esti
nnetasset
s–Dec.31,
20x1 0

16.A
Solut
ion:
Step4:Consol
i
dat
edr
etai
nedear
nings
Parent
'sret
ainedear ni
ngs–Dec.31,20x1 316,
000
Parent
'sshareinthenetchangeinsubsidi
ary'
snetasset
s
(
d)
70,
050
Consoli
datedretainedearni
ngs–Dec.31, 20x1 386,
050

(
d)
Netchangei
nsubsi
diar
y’snetasset
s(SeeSt
ep1)
116,
750
Mul
tipl
yby: 60%
Par
ent’
ssharei
nthenetchangei
nSub.
’
snetasset
s 70,
050

Sharecapi
tal(Par
entonl
y) 1,
200,
000
Retai
nedearni
ngs( Par
entonl
y–St
ep4) 386,
050
Ownersofparent 1,
586,
050

17.B
Sol
ution:
COSofpar ent&subsi
diar
y(200K+80K) 280,
000
Depreciat
ionofFVAoni nventory(
seeSt
ep
1) (
48,000)
Consol
idat
edcostofsal
es 232,000
Thedepreciat
ionofFVAisdeductedbecauset
hecarr
yingamount
exceededthef ai
rval
ue.Thi
sistheoppositeofthei
l
lustr
ati
onin
thetextwherethefai
rval
ueexceededt
hecarryi
ngamount.

18.A
Solut
ion:
Otheroper
ati
ngex
pensesofpar
ent&subsi
diar
y(400K+ 600,00
200K) 0
Depr
eci
ati
onofFVAonbui
l
ding(
seeSt
ep1) 1,250
601,25
Consol
idat
edot
heroper
ati
ngexpenses 0

19.A
Solut
ion:
Step5:Consol
i
dat
edpr
ofi
torl
oss
170,
00
Pr
ofi
tsofpar
ent&subsi
diar
y(100K+70K) 0

Depr
eci
ati
onofFVA(
seeSt
ep1) 46,
750
216,
75
Consol
idat
edpr
ofi
t 0

Ownersofpar
ent NCI Consoli
dat
ed
100,
00
Parent'
sprof
itbefor
eFVA 0 N/A 100,
000
28,
00
Shareinsub.
'sprofi
tbef
oreFVA(e) 42,
000 0 70,
000
18,
70
Depreci
atonofFVA(f)
i 28,
050 0 46,
750
170,
05 46,
70
Total
s 0 0 216,
750
(
e)
70Kx60%=42,
( 000)
;(70Kx40%=28,
000)
(
f)
( 750x60%=28,
46, 050)
;( 750x40%=18,
46, 700)

20.DSeeSt
ep5