CHAPTER 5 – DAYAG - MCS

103. c
Cliff reported income P225,000
Less: Intercompany gain on truck 45,000
Plus: Piecemeal recognition of gain = P45,000/10
years ___4,500
Cliff’s adjusted income P184,500
Majority percentage 90%
Income from Cliff P166,050
104. c

Pied Imperial-Pigeon’s share of Roger’s income = (P320,000 x 90%) = P288,000

Less: Profit on intercompany sale (P130,000 - P80,000) x 90% = 45,000
Add: Piecemeal recognition of deferred profit ($50,000/4 years)90% = 11,250
Income from Offshore P254,250

105 c
P30,000 - (1/4 x P30,000) = P 22,500

106. d - P60,000 – P48,000)/4 years = P3,000

107. a
Simon, 4/1/20x4
Selling price P68,250
Less: Book value, 4/1/20x4
Cost, 1/1/20x4 P50,000
Less: Accumulated depreciation : P50,000/10 years x 3/12 __1,250 48,750
Unrealized gain on sale of equipment P19,500
Realized gain – depreciation: P19,500/9.75 years P 2,000

108. c – P2,000 x 9/12 (April 1, 20x4 – December 31, 20x4) = P1,500

109. c – P19,500 / 9.75 years = P2,000
110. c – P19,500 / 9.75 years = P2,000
111. d
20x4
Share in subsidiary net income (100,000 x 90%) 90,000
Unrealized gain on sale of equipment (downstream sales) ( 19,500)
Realized gain on sale of equipment (downstream sales) through depreciation
P2,000 x 9/12 (April 1, 20x4 – December 31, 20x4) = P1,500 _ 1,500
Net 72,000

112. b
20x5
Share in subsidiary net income (120,000 x 90%) 108,000
Realized gain on sale of equipment (downstream sales) through depreciation _ 2,000
Net 110,000

113. d
20x6
Share in subsidiary net income (130,000 x 90%) 117,000
Realized gain on sale of equipment (downstream sales) through depreciation _ 2,000
Net 119,000

114. c
Smeder, 1/1/20x4
Selling price P84,000
Less: Book value, 1/1/20x4
Cost, 1/1/20x4 P120,000
Less: Accumulated depreciation __48,000 72,000
Unrealized gain on sale of equipment P12,000
Realized gain – depreciation: P12,000/6 years P 2,000
115. b
20x4
Share in subsidiary net income (28,000 x 80%) 22,400
Unrealized gain on sale of equipment (upstream sales); 12,000 x 80% ( 9,600)
Realized gain on sale of equipment (upstream sales) through depreciation
P2,000 x 80% _ 1,600
Net 14,400

116. c
20x5
Share in subsidiary net income (32,000 x 80%) 25,600
Realized gain on sale of equipment (upstream sales) through depreciation
P2,000 x 80% _ 1,600
Net 27,200

117. d
Eliminating entries:
1/1/20x4: date of acquisition
Restoration of BV and eliminate unrealized gain
Equipment 36,000
Gain 12,000
Accumulated depreciation 48,000

Parent – Smeder Subsidiary - Collins

Cash 84,000 Equipment 84,000
Accumulated depreciation 48,000 Cash 84,000
Equipment 120,000
Gain 12,000

Smeder, 1/1/20x4
Selling price P84,000
Less: Book value, 1/1/20x4
Cost, 1/1/20x4 P120,000
Less: Accumulated depreciation __48,000 72,000
Unrealized gain on sale of equipment P12,000
Realized gain – depreciation: P12,000/6 years P 2,000

Eliminating entries:
12/31/20x4: subsequent to date of acquisition
Realized Gain – depreciation
Accumulated depreciation 2,000
Depreciation expense 2,000
P12,000 / 6 years or P14,000 – P12,000

“Should be in CFS” Parent – Smeder “Recorded as” Subsidiary - Collins

Depreciation expense Depreciation expense
(P72,000 /6 years) 12,000 (P84,000 / 6 years) 14,000
Acc. Depreciation 12,000 Acc. depreciation 14,000

Combining the eliminating entries for 1/1/20x4 and 12/31/200x4, the net effect of accumulated depreciation would be a net
credit of P46,000 (P48,000 – P2,000).