Problem 4 Solution:

A (Parent) B (Subs) 40% Consolidated

60%
NI-P P75,250 - P75,250
NI-S 13,125 8,750 P21,875
WP adj.
Amortization - -
Impairment - -
Interco. div. (10,500) (10,500)
Gain on bargain
purchase
Upstream Sales:
RPBI (add) 420 280 700
UPEI (deduct) (756) (504) (1,260)

Downstream
sales:
RPBI
UPEI
Total 77,539 8,526 86,065

RPBI:
BI from B (17,500 x 20%) 3,500
GP rate (based on sales)
S 125%
COS 100%
GP 25%
*25/125 = 20% 20%
RPBI 700

UPEI:
EI from B (21,000 x 30%) 6,300
GP rate based on sales 20%
UPEI 1,260
NCINAS:
SHE, beg (Jan. 1, 2011) 150,000
NI 21,875
Div. declared (17,500)
SHE, end per books 154,375
WP adj.
FVA
Amort./Dep’n.
GW-total
Imp.
UPEI - Upstream (1,260)
153,115
X 40%
NCINAS, Dec. 31, 2011 61,246
*NO RPBI

Problem 5 Solution:

GG (Parent) 70% JJ (Subs) 30% Conso

NI-P 1,260,000 1,260,000
NI-S 205,800 88,200 294,000
WP adj.
Interco. div. (126,000) (126,000)
Upstream Sales:
RPBI (add)
UPEI (deduct) (18,865) (8,085) (26,950)

Downstream
sales:
RPBI 42,000 42,000
UPEI (12,600) (12,600)
Total 1,350,335 (3) 80,115 (4) 1,430,450

Conso Sales (2011):

Sales – GG (Parent) 3,850,000

Sales – JJ (Subs) 1,680,000
Deduct: Sales – interco.
480,000
437,500
4,612,500
WP journal entries:

Sales (JJ) 480,000

COGS (GG) 480,000

Sales (GG) 437,500

COGS (JJ) 437,500

A/P (GG) 480,000

A/R (JJ) 480,000

A/P (JJ) 437,500

A/R (GG) 437,500

Elimination of Interco. dividends

Dividend Income 126,000

RE 126,000

UPEI:
COGS 39,550
Inventory, end 39,550

RPBI:
RE, beg. 42,000
COGS 42,000

Conso COGS:

COGS – GG (Parent) 1,946,000

COGS – JJ (Subs) 1,176,000
WP adj.
(480,000)
(437,500)
39,550
(42,000)
2,202,050
Conso Ending Invty (EI):

EI – Parent x
EI – Subs x
WP adj. x / (x)

Problem 6 Solution:

P (Parent) 80% S (Subs) 20% Conso

NI – P 187,500 187,500
NI - S (20,000) (5,000) (25,000)
WP adj.
Amort.
Impairment
Interco. div.
Gain on bargain
purchase
Upstream sales:
U (G)/L 7,500 1,875 9,375
R G/(L) (1,500) (375) (1,875)
Dowstream sales
U (G)/L (31,250) (31,250)
R G/L 1,562.5 1,562.5
Total 143,812.5 (3,500) 140,312.5

NCINAS:

SHE, per books:

SHE, beg (775,000/80%) 968,750
OP. loss (25,000)
Div. (18,750)
SHE, end 925,000
WP adj.
Upstream sale of FA:
UL 9,375
RL (1,875)
932,500
X 20%
186,500
Journal Entries (in separate books):

Books of Selling Aff.

Cash 50T
A/D 40T
Equip. 70T
Gain 20T

Books of Buying Aff.

Equip. 50T
Cash 50T

Working Paper Entries:

(1) Equip. 20T

Gain 20T
A/D 40T

(2) Realized Gain:

A/D 5T
Dep’ Exp. 5T

Consolidated Equipment (net):

Equipment – Parent x
Equipment – Subsidiary x
WP entries (see sample above):
(1) Equip. – dr 20T
(1) A/D – cr (40T)
(2) A/D – dr 5T
x