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Consolidated FS (Comprehensive Income)
Consolidated FS (Comprehensive Income)
00
for each share acquired. This represented a premium of 20% over the market price of
Sact’s shares at that date. Sact’s shareholders’ funds (equity) as at 31 March Year 2 were:
The only fair value adjustment required to Sact’s net assets on consolidation was a
P20,000 increase in the value of its land. Pact’s policy is to value non-controlling
interests at fair value at the date of acquisition. For this purpose the market price of
Sact’s shares at that date can be deemed to be representative of the fair value of the
shares held by the non-controlling interest
How much is the profit attributable to the Controlling Interest?
Zuma Corporation and its subsidiary reported consolidated net income of P320,000 for
the year ended December 31, Year 1. Zuma owns 80 percent of the common shares of its
subsidiary, acquired at book value. Noncontrolling interest was assigned income of
P30,000 in the consolidated income statement for Year 1. What is the amount of separate
operating income reported by Zuma for the year? P170,000 P150,000 P120,000
P200,000
General Feedback
Zuma Corporation
Consolidated Income 320,000.00
Less: Adjusted Subsidiary Income
(30,000/20%) (150,000.00)
Parent company's adjusted separate income 170,000.00
Pact acquired 80% of the equity shares of Sact on 1 July Year 1, paying P3.00
for each share acquired. This represented a premium of 20% over the market price of
Sact’s shares at that date. Sact’s shareholders’ funds (equity) as at 31 March Year 2 were:
The only fair value adjustment required to Sact’s net assets on consolidation was a
P20,000 increase in the value of its land. Pact’s policy is to value non-controlling
interests at fair value at the date of acquisition. For this purpose the market price of
Sact’s shares at that date can be deemed to be representative of the fair value of the
shares held by the non-controlling interest. Sub Company sells all its output at 20 percent
above cost to Par Corporation. Par purchases all its inventory from Sub. The incomes
reported by the companies over the past three years are as follows:
Sub Company sold inventory for P300,000, P262,500 and P337,500 in the years Year 1,
Year 2, and Year 3 respectively. Par Company reported ending inventory of P105,000,
P157,500 and P180,000 for Year 1, Year 2, and Year 3 respectively. Par acquired 70
percent of the ownership of Sub on January 1, Year 1, at underlying book value. The fair
value of the noncontrolling interest at the date of acquisition was equal to 30 percent of
the book value of Sub Company.
Roland Company acquired 100 percent of Garros Company's voting shares in Year 1.
During Year 2, Garros purchased tennis equipment for P30,000 and sold them to Roland
for P55,000. Roland continues to hold the items in inventory on December 31, Year 2.
Sales for the two companies during Year 2 totaled P655,000, and total cost of goods sold
was P420,000. Which of the following observations will be true if no adjustment is made
to eliminate the intercorporate sale when a consolidated income statement is prepared for
Year 2? Sales would be overstated by P30,000 Cost of goods sold will be
understated by P25,000 Net income will be overstated by P25,000 Consolidated net
income will be unaffected
General Feedback
Roland Company
If NO adjustment is made for the inter-company
sales:
Statement A is
Overstatement in Sales 55,000.00 FALSE
Overstatement in Cost of Goods Statement B is
Sold 55,000.00 FALSE
Overstatement in Ending Inventory 25,000.00
Statement C is
Overstatement in Profit 25,000.00 TRUE
Pact acquired 80% of the equity shares of Sact on 1 July Year 1, paying P3.00
for each share acquired. This represented a premium of 20% over the market price of
Sact’s shares at that date. Sact’s shareholders’ funds (equity) as at 31 March Year 2 were:
The only fair value adjustment required to Sact’s net assets on consolidation was a
P20,000 increase in the value of its land. Pact’s policy is to value non-controlling
interests at fair value at the date of acquisition. For this purpose the market price of
Sact’s shares at that date can be deemed to be representative of the fair value of the
shares held by the non-controlling interest.
Parker Corp. owns 80% of Smith Inc.’s common stock. During 2017, Parker sold
Smith 250,000 of inventory on the same terms as sales made to third parties. Smith
sold all of the inventory purchased from Parker in 2017. The following information
pertains to Smith and Parker’s sales for 2017:
Parker Smith
Sales 1,000,000 700,000
Cost of sales 400,000 350,000
600,000 350,000
What amount should Parker report as cost of sales in it s 2017 consolidated income
statement?
750,000 680,000 500,000 430,000
General Feedback
500,000
Wilmslow acquired 80% of the equity shares of Zeta on 1 April Year 1 when Zeta’s
retained earnings were P200,000. During the year ended 31 March Year 2, Zeta
purchased goods from Wilmslow totalling P320,000. At 31 March Year 2, one quarter
of these goods were still in the inventory of Zeta. Wilmslow applies a mark-up on cost
of 25% to all of its sales. At 31 March Year 2, the retained earnings of Wilmslow and
Zeta were P450,000 and P340,000 respectively.
During 2017, Pard Corp. sold goods to its 80%-owned subsidiary, Seed Corp. At December 31,
2017, one-half of these goods were included in Seed’s ending inventory. Reported 2017 selling
expenses were 1,100,000 and 400,000 for Pard and Seed, respectively. Pard’s selling expenses
included 50,000 in freight-out costs for goods sold to Seed.
What amount of selling expenses should be reported in Pard’s 2017 consolidated income
statement?