Professional Documents
Culture Documents
Problem I
1. Journal entry to record sale:
Cash
Accumulated Depreciation
Equipment
Gain on Sale of Equipment
Record the sale of equipment:
P84,000 = P150,000 - P80,000 + P14,000
P80,000 = (P150,000 / 15 years) x 8 years
2.
3.
84,000
12,000
150,000
14,000
84,000
12,000
Equipment
Gain on Sale of Equipment
Depreciation Expense
Accumulated Depreciation
Eliminate unrealized profit on equipment.
Adjustment to equipment
Amount paid by WW to acquire building
Amount paid by LL on intercompany sale
Adjustment to buildings and equipment
Adjustment to depreciation expense
Depreciation expense recorded by Lance
Corporation (P84,000 / 7 years)
Depreciation expense recorded by WW
Corporation (P150,000 / 15 years)
Adjustment to depreciation expense
Adjustment to accumulated depreciation
Amount required (P10,000 x 9 years)
Amount reported by LL (P12,000 x 1 year)
Required adjustment
4.
84,000
80,000
66,000
14,000
2,000
78,000
P150,000
(84,000)
P 66,000
P 12,000
(10,000)
P 2,000
P 90,000
(12,000)
P 78,000
Problem II
1. Eliminating entry, December 31, 20x8:
E(1)
Truck
Gain on Sale of Truck
Depreciation Expense
Accumulated Depreciation
Computation of gain on sale of truck:
Price paid by Minnow
Cost of truck to Frazer
P300,000
Accumulated depreciation
(P300,000 / 10 years) x 3 years
( 90,000)
Gain on sale of truck
55,000
35,000
P245,000
(210,000)
P 35,000
5,000
85,000
P120,000
(35,000)
P 85,000
Truck
Retained Earnings
Depreciation Expense
Accumulated Depreciation
55,000
30,000
5,000
80,000
P150,000
(70,000)
P 80,000
Problem III
a. Eliminating entry, December 31, 20x8:
E(1)
Truck
Gain on Sale of Truck
Accumulated Depreciation
90,000
30,000
P300,000
(120,000)
120,000
P210,000
(180,000)
P 30,000
Truck
Retained Earnings, January 1
Depreciation Expense
Accumulated Depreciation
90,000
30,000
5,000
115,000
P150,000
(35,000)
P115,000
Problem IV
1
Equipment
Beginning R/E Prince (P100,000 .80)
Noncontrolling Interest (P100,000 .20)
Accumulated Depreciation
Accumulated Depreciation (P100,000/4) 2
Depreciation Expense
Beginning R/E Prince (P25,000 .80)
Noncontrolling Interest (P25,000 .20)
540,000
80,000
20,000
640,000
50,000
25,000
20,000
5,000
P3,270,000
parties
845,000
.8
4.
676,000
P3,946,000
P820,000
25,000
P845,000
P169,000
NCI-CNI (No. 3)
CI-CNI (No. 2)
CNI
P 169,000
3,946,000
P4,115,000
or,
Consolidated Net Income for 20x5
P Companys net income from own/separate operations.
Realized gain on sale of equipment (downstream sales) through depreciation
P Companys realized net income from separate operations...
S Companys net income from own operations.
Realized gain on sale of equipment (upstream sales) through depreciation*
Son Companys realized net income from separate operations*...
Total
Less: Amortization of allocated excess
Consolidated Net Income for 20x5
Less: Non-controlling Interest in Net Income* *
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent 20x5..
P3,270,000
0
P3,270,000
P 820,000
25,000
P 845,000
845,000
P4,115,000
0
P4,115,000
169,000
P3,946,000
Or, alternatively
Consolidated Net Income for 20x5
P Companys net income from own/separate operations.
Realized gain on sale of equipment (downstream sales) through depreciation
P Companys realized net income from separate operations...
S Companys net income from own operations.
Realized gain on sale of equipment (upstream sales) through depreciation
S Companys realized net income from separate operations...
Total
Less: Non-controlling Interest in Net Income* *
Amortization of allocated excess
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent..
Add: Non-controlling Interest in Net Income (NCINI)
Consolidated Net Income for 20x5
**Non-controlling Interest in Net Income (NCINI) for 20x5
S Companys net income of Subsidiary Company from its own operations
(Reported net income of S Company)
Realized gain on sale of equipment (upstream sales) through depreciation
S Companys realized net income from separate operations
Less: Amortization of allocated excess
Multiplied by: Non-controlling interest %..........
Non-controlling Interest in Net Income (NCINI) partial goodwill
1/1/20x4:
Selling price of equipment
Less: BV of equipment
Cost
Less: Accumulated depreciation:
P1,280,000 / 8 years x 4 years*
Unrealized gain on sales 1/1/20x4
P3,270,000
0
P3,270,000
P820,000
25,000
P 845,000
P 169,000
0
845,000
P4,115,000
169,000
P3,946,000
_169,000
P4,115,000
P 820,000
25,000
P 845,000
0
P845,000
20%
P 169,000
P 740,000
P1,280,000
640,000
640,000
P 100,000
Equipment
Beginning R/E Prince
Accumulated Depreciation
540,000
100,000
640,000
50,000
25,000
25,000
P3,270,000
25,000
P3,295,000
P820,000
.8
656,000
P3,951,000
P820,000
P164,000
P 164,000
3,951,000
P4,115,000
or,
Consolidated Net Income for 20x5
P Companys net income from own/separate operations.
Realized gain on sale of equipment (downstream sales) through depreciation
P Companys realized net income from separate operations...
S Companys net income from own operations.
Realized gain on sale of equipment (upstream sales) through depreciation*
S Companys realized net income from separate operations*...
Total
Less: Amortization of allocated excess
Consolidated Net Income for 20x5
Less: Non-controlling Interest in Net Income* *
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent 20x5..
P3,270,000
____25,000
P3,295,000
P 820,000
0
P 820,000
820,000
P4,115,000
0
P4,115,000
164,000
P3,951,000
Or, alternatively
Consolidated Net Income for 20x5
P Companys net income from own/separate operations.
Realized gain on sale of equipment (downstream sales) through depreciation
P Companys realized net income from separate operations...
S Companys net income from own operations.
Realized gain on sale of equipment (upstream sales) through depreciation
S Companys realized net income from separate operations...
Total
Less: Non-controlling Interest in Net Income* *
Amortization of allocated excess
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent..
Add: Non-controlling Interest in Net Income (NCINI)
Consolidated Net Income for 20x5
**Non-controlling Interest in Net Income (NCINI) for 20x5
S Companys net income of Subsidiary Company from its own operations
(Reported net income of S Company)
Realized gain on sale of equipment (upstream sales) through depreciation
S Companys realized net income from separate operations
Less: Amortization of allocated excess
Multiplied by: Non-controlling interest %..........
Non-controlling Interest in Net Income (NCINI) partial goodwill
Problem V
Requirements 1 to 4
P3,270,000
25,000
P3,295,000
P820,000
0
P 820,000
P 164,000
0
820,000
P4,115,000
164,000
P3,951,000
_169,000
P4,115,000
P 820,000
0
P 820,000
0
P820,000
20%
P 164,000
P 372,000
P 192,000
96,000
P
P 4,800
5,760
76,800
( 19,200)
3,840
288,000
84,000
72,000
P 12,000
S Co.
Book value
P 24,000
48,000
84,000
168,000
(120,000)
P 204,000
S Co.
Fair value
P 30,000
55,200
180,000
144,000
( 115,200)
P 294,000
(Over) Under
Valuation
P 6,000
7,200
96,000
(24,000)
4,800
P 90,000
The buildings and equipment will be further analyzed for consolidation purposes as follows:
Equipment..................
Less: Accumulated depreciation..
Net book value...
S Co.
Book value
180,000
96,000
84,000
S Co.
Fair value
180,000
180,000
Increase
(Decrease)
0
( 96,000)
96,000
Buildings................
Less: Accumulated depreciation..
Net book value...
S Co.
Book value
360,000
1992,000
168,000
S Co.
Fair value
144,000
144,000
(Decrease)
( 216,000)
( 192,000)
( 24,000)
Over/
Under
P 6,000
Life
1
96,000
(24,000)
4,800
8
4
4
Annual
Amount
P 6,000
Current
Year(20x4)
P 6,000
20x5
P
-
12,000
( 6,000)
1,200
P 13,200
12,000
( 6,000)
1,200
P 13,200
12,000
(6,000)
1,200
P 7,200
The goodwill impairment loss of P3,750 based on 100% fair value would be allocated to the
controlling interest and the NCI based on the percentage of total goodwill each equity interest
received. For purposes of allocating the goodwill impairment loss, the full-goodwill is computed
as follows:
Fair value of Subsidiary (100%)
Consideration transferred: Cash (80%)
Fair value of NCI (given) (20%)
Fair value of Subsidiary (100%)
Less: Book value of stockholders equity of S (P360,000 x 100%)
Allocated excess (excess of cost over book value)..
Add (deduct): (Over) under valuation of assets and liabilities
(P90,000 x 100%)
Positive excess: Full-goodwill (excess of cost over
fair value)...
P 372,000
93,000
P 465,000
__360,000
P 105,000
90,000
P
15,000
In this case, the goodwill was proportional to the controlling interest of 80% and non-controlling
interest of 20% computed as follows:
Value
P12,000
3,000
P15,000
% of Total
80.00%
20.00%
100.00%
Value
P 3,000
% of Total
80.00%
750
20.00%
P 3,750
100.00%
The unrealized and gain on intercompany sales for 20x4 are as follows:
Date
of Sale
4/1/20x4
1/2/20x4
Seller
P Co.
S Co.
Selling
Price
P90,000
60,000
Book
Value
P75,000
28,800
Unrealized*
Gain on sale
P15,000
31,200
Remaining
Life
5 years
8 years
Realized gain
depreciation**
P3,000/year
P3,900/year
20x4
P2,250
P3,900
January 1, 20x4:
(1) Investment in S Company
Cash..
Acquisition of S Company.
January 1, 20x4 December 31, 20x4:
(2) Cash
Dividend income (P36,000 x 80%).
Record dividends from S Company.
372,000
372,000
28,800
28,800
No entries are made on the parents books to depreciate, amortize or write-off the portion of the
allocated excess that expires during 20x4, and unrealized profits in ending inventory.
Consolidation Workpaper Year of Acquisition
(E1) Common stock S Co
Retained earnings S Co
Investment in S Co
Non-controlling interest (P360,000 x 20%)..
240,000
120.000
288,000
72,000
(E2) Inventory.
Accumulated depreciation equipment..
Accumulated depreciation buildings..
Land.
Discount on bonds payable.
Goodwill.
Buildings..
Non-controlling interest (P90,000 x 20%)..
Investment in S Co.
6,000
96,000
192,000
7,200
4,800
12,000
216,000
18,000
84,000
6,000
6,000
6,000
1,200
3,000
6,000
12,000
1,200
3,000
Inventory sold
Equipment
Buildings
Bonds payable
Totals
Cost of
Goods
Sold
P 6,000
Depreciation/
Amortization
Expense
Amortization
-Interest
P 12,000
( 6,000)
_______
P 6,000
P 1,200
P1,200
_______
P 6,000
Total
13,200
28,800
7,200
36,000
15,000
30,000
45,000
31,200
12,000
43,200
2,250
2,250
3,900
3,900
10,140
10,140
P 91,200
( 31,200)
3,900
P 63,900
13,200
P 50,700
20%
P
10,140
Subsidiary accounts are adjusted to full fair value regardless on the controlling interest
percentage or what option used to value non-controlling interest or goodwill.
Worksheet for Consolidated Financial Statements, December 31, 20x4.
Cost Model (Partial-goodwill)
80%-Owned Subsidiary
December 31, 20x4 (First Year after Acquisition)
Income Statement
Sales
Gain on sale of equipment
P Co
P480,000
15,000
S Co.
P240,000
31,200
Dividend income
Total Revenue
28,800
P523,800
P271,200
Dr.
(5) 15,000
(6) 31,200
(4) 28,800
Cr.
Consolidated
P 720,000
_________
P 720,000
P204,000
60,000
P138,000
24,000
(3)
(3)
6,000
6,000
Interest expense
Other expenses
Goodwill impairment loss
Total Cost and Expenses
Net Income
NCI in Net Income - Subsidiary
Net Income to Retained Earnings
48,000
P312,000
P211,800
P211,800
18,000
P180,000
P 91,200
P 91,200
(3)
1,200
(3)
3,000
(1) 120,000
211,800
P571,800
P120,000
91,200
P211,200
72,000
-
36,000
P499,800
P175,200
P 495,810
232,800
90,000
120,000
210,000
240,000
P 90,000
60,000
90,000
48,000
180,000
P 322,800
150,000
210,000
265,200
720,000
540,000
P 348,000
83,850
2,250
3,900
P
P
(
P
(9 10,140
P360,000
Buildings
Discount on bonds payable
Goodwill
Investment in S Co
207,810
P 567,810
(4)
(2)
6,000
(2)
7,200
(5) 30,000
(6) 12,000
372,000
Accumulated depreciation
- equipment
P1,984,800
P1,008,000
P 135,000
P 96,000
405,000
288,000
105,000
240,000
600,000
88,800
120,000
Accumulated depreciation
- buildings
Accounts payable
Bonds payable
Common stock, P10 par
Common stock, P10 par
Retained earnings, from above
Non-controlling interest
240,000
175,200
499,800
_________
P1,008,000
3)
36,000
72,000
________
6,000
(2) 216,000
4,800 (3) 1,200
12,000 (3) 3,000
(1) 288,000
(2) 84,000
(3) 96,000
(7) 2,250
(8) 3,900
(2) 192,000
(3)
6,000
462,000
1,044,000
3,600
9,000
P2,466,600
(3) 12,000
(5) 45,000
(6) 43,200
P229,050
495,000
193,800
360,000
600,000
(1) 240,000
495,810
(4)
_________
P1,984,800
1,200
66,000
3,000
502,050
217,950
10,140)
207,810
P 360,000
(2)
(2)
Total
Total
(7)
(8)
7,200
__________
P 834,450
(1 ) 72,000
(2) 18,000
(9) 10,140
P 834,450
P Co.
P 540,000
216,000
P 324,000
60,000
72,000
P 192,000
38,400
P 230,400
P 72,000
____92,940
P2,466,600
S Co.
P 360,000
192,000
P 168,000
24,000
54,000
P 90,000
P 90,000
P 48,000
38,400
On the books of S Company, the P48,000 dividend paid was recorded as follows:
38,400
Dividends paid
Cash
Dividends paid by S Co..
48,000
48,000
44,160
44,160
P175,200
120,000
P 55,200
80%
P 44,160
Entry (1) above is needed only for firms using the cost method to account for their investments in
the subsidiary. If the parent is already using the equity method, there is no need to convert to
equity.
(E2) Common stock S Co
Retained earnings S Co., 1/1/20x5
Investment in S Co (P415,200 x 80%)
Non-controlling interest (P415,200 x 20%)..
240,000
175,200
332,160
83,040
(E3) Inventory.
Accumulated depreciation equipment..
Accumulated depreciation buildings..
Land.
Discount on bonds payable.
Goodwill.
Buildings..
Non-controlling interest (P90,000 x 20%)
Investment in S Co.
6,000
96,000
192,000
7,200
4,800
12,000
216,000
18,000
84,000
Inventory sold
Equipment
Buildings
Bonds payable
Sub-total
(20x4)
Retained
earnings,
P 6,000
12,000
(6,000)
1,200
P13,200
Depreciation/
Amortization
expense
Amortization
-Interest
P 12,000
( 6,000)
________
P 6,000
P 1,200
P 1,200
13,560
2,640
6,000
12,000
1,200
6,000
24,000
2,400
3,000
Multiplied by:
To Retained earnings
Impairment loss
Total
80%
P 10,560
3,000
P 13,560
38,400
9,600
48,000
15,000
30,000
45,000
24,960
6,240
12,000
43,200
5,250
3,000
2,250
7,800
3,900
3,120
780
17,340
17,340
P 90,000
3,900
P 93,900
( 7,200)
P 86,700
20%
P 17,340
P Co
P540,000
38,400
P578,400
P216,000
S Co.
P360,000
P360,000
P192,000
Dr.
(5)
Cr.
38,400
Depreciation expense
60,000
24,000
(4)
6,000
Interest expense
Other expenses
72,000
54,000
(4)
1,200
(7)
3,000
(8)
3,900
Consolidated
P 900,000
___________
P 900,000
P 408,000
83,100
1,200
126,000
P348,000
P230,400
P230,400
P499,800
S Company
Net income, from above
Total
Dividends paid
P Company
S Company
Retained earnings, 12/31 to Balance
Sheet
Balance Sheet
Cash.
Accounts receivable..
Inventory.
Land.
Equipment
Buildings
Discount on bonds payable
Goodwill
Investment in S Co
Total
Accumulated depreciation
- equipment
Accumulated depreciation
- buildings
Accounts payable
Bonds payable
Common stock, P10 par
Common stock, P10 par
Retained earnings, from above
Non-controlling interest
Total
P270,000
P 90,000
P 90,000
P
P
(
P
(9) 17,340
(1)
(5)
(6)
(2)
13,560
15,000
24,960
175,200
(1) 44,160
(7) 2,250
(8) 3,120
618,300
281,700
17,340)
264,360
P 495,810
230,400
P730,200
P 175,200
__90,000
P265,200
72,000
-
48,000
P658,200
P217,200
P 688,170
265,200
180,000
216,000
210,000
240,000
P 102,000
96,000
108,000
48,000
180,000
P 367,200
276,000
324,000
265,200
720,000
540,000
P2,203,200
P1,074,000
P 150,000
P 102,000
450,000
306,000
105,000
240,000
600,000
88,800
120,000
___ _____
P2,203,200
(5)
(1)
6,000
(3)
7,200
(5) 30,000
(6) 12,000
(3)
(3)
(1)
372,000
658,200
264,360
P 760,170
240,000
217,200
_________
P1,074,000
4,800
12,000
44,160
(3) 96,000
(7) 5,250
(8) 7,800
(3) 192,000
(4) 12,000
(2)
48,000
6,000
(3) 216,000
(4) 2,400
(4) 3,000
(2) 332,160
(3) 84,000
(4)
(5)
(6)
24,000
45,000
43,200
72,000
________
462,000
1,044,000
2,400
9,000
P2,749,800
P 255,150
552,000
193,800
360,000
600,000
(2) 240,000
688,170
(4) 2,640
(5) 9,600
(6) 6,240
__________
P 979,350
(2 83,040
(3) 18,000
(8)
780
(9) 17,340
P 979,350
____100,680
P2,749,800
5. 1/1/20x4
a. On date of acquisition the retained earnings of parent should always be considered as
the consolidated retained earnings, thus:
Consolidated Retained Earnings, January 1, 20x4
Retained earnings - Parent Company, January 1, 20x4 (date of acquisition)
P360,000
b.
Non-controlling interest (partial-goodwill), January 1, 20x4
Common stock Subsidiary Company
Retained earnings Subsidiary Company.
Stockholders equity Subsidiary Company...
Adjustments to reflect fair value - (over) undervaluation of assets and liabilities
Fair value of stockholders equity of subsidiary, January 1, 20x4
Multiplied by: Non-controlling Interest percentage...
Non-controlling interest (partial goodwill),..
P 240,000
120,000
P 360,000
90,000
P 450,000
20
P 90,000
c.
Consolidated SHE:
Stockholders Equity
Common stock, P10 par
Retained earnings
Parents Stockholders Equity / CI SHE
NCI, 1/1/20x4
Consolidated SHE, 1/1/20x4
P 600,000
360,000
P 960,000
___90,000
P1,050,000
6.
Note: The goodwill recognized on consolidation purely relates to the parents share. NCI is
measured as a proportion of identifiable assets and goodwill attributable to NCI share is not
recognized.
12/31/20x4:
a. CI-CNI - P
Consolidated Net Income for 20x4
P Companys net income from own/separate operations.
Unrealized gain on sale of equipment (upstream sales)
Realized gain on sale of equipment (upstream sales) through depreciation
P Companys realized net income from separate operations*...
S Companys net income from own operations.
Unrealized gain on sale of equipment (upstream sales)
Realized gain on sale of equipment (upstream sales) through depreciation
S Companys realized net income from separate operations*...
Total
Less: Non-controlling Interest in Net Income* *
Amortization of allocated excess (refer to amortization above)
Goodwill impairment (impairment under partial-goodwill approach)
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent..
Add: Non-controlling Interest in Net Income (NCINI)
Consolidated Net Income for 20x4
*that has been realized in transactions with third parties.
P183,000
(15,000)
2,250
P170,250
P 91,200
( 31,200)
3,900
P 63,900
P 10,140
13,200
3,000
63,900
P234,150
26,340
P207,810
_ 10,140
P217,950
b. NCI-CNI P10,140
**Non-controlling Interest in Net Income (NCINI) for 20x4
S Companys net income of Subsidiary Company from its own operations
(Reported net income of S Company)
Unrealized gain on sale of equipment (upstream sales)
Realized gain on sale of equipment (upstream sales) through depreciation
S Companys realized net income from separate operations
Less: Amortization of allocated excess / goodwill impairment
(refer to amortization table above)
Multiplied by: Non-controlling interest %..........
Non-controlling Interest in Net Income (NCINI) partial goodwill
*that has been realized in transactions with third parties.
P 91,200
( 31,200)
3,900
P 63,900
13,200
P 50,700
20%
P 10,140
P360,000
207,810
P567,810
72,000
P495,810
e.
The goodwill recognized on consolidation purely relates to the parents share. NCI is
measured as a proportion of identifiable assets and goodwill attributable to NCI share is
not recognized. The NCI on January 1, 20x4 and December 31, 20x4 are computed as
follows:
Non-controlling interest (partial-goodwill), December 31, 20x4
Common stock Subsidiary Company, December 31, 20x4
Retained earnings Subsidiary Company, December 31, 20x4
Retained earnings Subsidiary Company, January 1, 20x4
Add: Net income of subsidiary for 20x4
Total
Less: Dividends paid 20x4
Stockholders equity Subsidiary Company, December 31, 20x4
Adjustments to reflect fair value - (over) undervaluation of assets and
liabilities, date of acquisition (January 1, 20x4)
Amortization of allocated excess (refer to amortization above) 20x4
Fair value of stockholders equity of subsidiary, December 31, 20x4
Unrealized gain on sale of equipment (upstream sales)
Realized gain on sale of equipment (upstream sales) through depreciation
Realized stockholders equity of subsidiary, December 31, 20x4
Multiplied by: Non-controlling Interest percentage...
Non-controlling interest (partial-goodwill)..
P 240,000
P120,000
91,200
P211,200
36,000
175,200
P 415,200
90,000
( 13,200)
P492,000
( 31,200)
3,900
P464,700
20
P 92,940
f.
Consolidated SHE:
Stockholders Equity
Common stock, P10 par
Retained earnings
Parents Stockholders Equity / CI SHE, 12/31/20x4
NCI, 12/31/20x4
Consolidated SHE, 12/31/20x4
P 600,000
495,810
P1,095,810
___92,940
P1,188,750
12/31/20x5:
a. CI-CNI P264,360
Consolidated Net Income for 20x5
P Companys net income from own/separate operations.
Realized gain on sale of equipment (downstream sales) through depreciation
P Companys realized net income from separate operations*...
S Companys net income from own operations.
Realized gain on sale of equipment (upstream sales) through depreciation
S Companys realized net income from separate operations*...
Total
Less: Amortization of allocated excess
Consolidated Net Income for 20x5
Less: Non-controlling Interest in Net Income* *
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent 20x5..
*that has been realized in transactions with third parties.
P192,000
3,000
P195,000
P 90,000
3,90
P 93,900
93,900
P288,900
7,200
P281,700
17,340
P264,360
Or, alternatively
Consolidated Net Income for 20x5
P Companys net income from own/separate operations.
Realized gain on sale of equipment (downstream sales) through depreciation
P Companys realized net income from separate operations*...
S Companys net income from own operations.
Realized gain on sale of equipment (upstream sales) through depreciation
S Companys realized net income from separate operations*...
Total
Less: Non-controlling Interest in Net Income* *
Amortization of allocated excess
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent..
Add: Non-controlling Interest in Net Income (NCINI)
Consolidated Net Income for 20x5
*that has been realized in transactions with third parties.
P192,000
3,000
P195,000
P 90,000
3,900
P 93,900
P 17,340
7,200
93,900
P288,900
24,540
P264,360
_ 17,340
P281,700
b. NCI-CNI P17,340
**Non-controlling Interest in Net Income (NCINI) for 20x5
S Companys net income of Subsidiary Company from its own operations
(Reported net income of Son Company)
Realized gain on sale of equipment (upstream sales) through depreciation
S Companys realized net income from separate operations
Less: Amortization of allocated excess
Multiplied by: Non-controlling interest %..........
Non-controlling Interest in Net Income (NCINI) partial goodwill
P 90,000
3,900
P 93,900
7,200
P 86,700
20%
P 17,340
P499,800
12,750
P487,050
P 175,200
120,000
P 55,200
13,200
27,300
P 14,700
80%
P 11,760
3,000
Or, alternatively:
Consolidated Retained Earnings, December 31, 20x5
Retained earnings - Parent Company, December 31, 20x5 (cost model)
Less: Downstream - net unrealized gain on sale of equipment prior to
12/31/20x5 (P15,000 P2,250 P3,000)
Adjusted Retained Earnings Parent 12/31/20x5 (cost model )
S Companys Retained earnings that have been realized in
transactions with third parties..
Adjustment to convert from cost model to equity method for purposes of
consolidation or to establish reciprocity:/Parents share in adjusted net
increased in subsidiarys retained earnings:
Retained earnings Subsidiary, December 31, 20x5
Less: Retained earnings Subsidiary, January 1, 20x4
Increase in retained earnings since date of acquisition
Less: Accumulated amortization of allocated excess
20x4 and 20x5 (P11,000 + P6,000)
Upstream - net unrealized gain on sale of equipment prior to
12/31/20x5 (P31,200 P3,900 P3,900)
P658,200
9,750
P648,450
P 217,200
120,000
P 97,200
20,400
P
Multiplied by: Controlling interests %...................
P
Less: Goodwill impairment loss
Consolidated Retained earnings, December 31, 20x5
23,400
53,400
80%
42,720
3,000
39,720
P688,170
e.
Non-controlling interest (partial-goodwill), December 31, 20x5
Common stock Subsidiary Company, December 31, 20x5
Retained earnings Subsidiary Company, December 31, 20x5
Retained earnings Subsidiary Company, January 1, 20x5
Add: Net income of subsidiary for 20x5
Total
Less: Dividends paid 20x5
Stockholders equity Subsidiary Company, December 31, 20x5
Adjustments to reflect fair value - (over) undervaluation of assets and
liabilities, date of acquisition (January 1, 20x4)
Amortization of allocated excess (refer to amortization above) :
20x4
20x5
Fair value of stockholders equity of subsidiary, December 31, 20x5
Less: Upstream - net unrealized gain on sale of equipment prior to 12/31/20x5
(P31,200 P3,900 P3,900)
Realized stockholders equity of subsidiary, December 31, 20x5.
Multiplied by: Non-controlling Interest percentage...
Non-controlling interest (partial goodwill)..
P 240,000
P175,200
90,000
P 265,200
48,000
217,200
P 457,200
90,000
P 13,200
7,200
( 20,400)
P 526,800
23,400
P503,400
20
P 100,680
f.
Consolidated SHE:
Stockholders Equity
Common stock, P10 par
Retained earnings
Parents Stockholders Equity / CI SHE, 12/31/20x5
NCI, 12/31/20x5
Consolidated SHE, 12/31/20x5
Problem VI
Requirements 1 to 4
Schedule of Determination and Allocation of Excess
Date of Acquisition January 1, 20x4
P 600,000
688,170
P1,288,170
__100,680
P1,188,850
P 372,000
93,000
P 465,000
P 240,000
120,000
360,000
P 105,000
6,000
7,200
96,000
( 24,000)
4,800
90,000
P 15,000
Over/
under
P 6,000
Life
1
96,000
(24,000)
4,800
8
4
4
Annual
Amount
P 6,000
Current
Year(20x4)
P 6,000
20x5
P
-
12,000
( 6,000)
1,200
P 13,200
12,000
( 6,000)
1,200
P 13,200
12,000
(6,000)
1,200
P 7,200
January 1, 20x4:
(1) Investment in S Company
Cash..
Acquisition of S Company.
January 1, 20x4 December 31, 20x4:
(2) Cash
Dividend income (P36,000 x 80%).
Record dividends from S Company.
372,000
372,000
28,800
28,800
On the books of S Company, the P36,000 dividend paid was recorded as follows:
Dividends paid
Cash.
Dividends paid by S Co..
36,000
36,000
No entries are made on the parents books to depreciate, amortize or write-off the portion of the
allocated excess that expires during 20x4.
Consolidation Workpaper First Year after Acquisition
(E1) Common stock S Co
Retained earnings S Co
Investment in S Co
Non-controlling interest (P360,000 x 20%)..
240,000
120.000
288,000
72,000
(E2) Inventory.
Accumulated depreciation equipment..
Accumulated depreciation buildings..
Land.
Discount on bonds payable.
Goodwill.
Buildings..
Non-controlling interest (P90,000 x 20%) + [(P15,000, full
P12,000, partial goodwill)]
Investment in S Co.
To allocate excess of cost over book value of identifiable assets
acquired, with remainder to goodwill; and to establish noncontrolling interest (in net assets of subsidiary) on date of acquisition.
6,000
96,000
192,000
7,200
4,800
15,000
216,000
21,000
84,000
Since the set-up entry in (E2) NCI at fair value, non-controlling interests have a share of entity
goodwill and hence is exposed to impairment loss on goodwill. PAS 36 requires the impairment
loss to be pro-rated between the parent and NCI on the same basis as that on which profit or
loss is allocated. In other words, the impairment loss is not pro-rated in accordance with the
proportion of goodwill recognized by parent and NCI.
(E3) Cost of Goods Sold.
Depreciation expense..
Accumulated depreciation buildings..
Interest expense
Goodwill impairment loss.
Inventory..
Accumulated depreciation equipment..
Discount on bonds payable
Goodwill
6,000
6,000
6,000
1,200
3,750
6,000
12,000
1,200
3,750
Inventory sold
Equipment
Buildings
Bonds payable
Totals
Cost of
Goods
Sold
P 6,000
_______
P 6,000
Depreciation/
Amortization
Expense
Amortization
-Interest
P12,000
( 6,000)
_______
P 6,000
P 1,200
P1,200
28,800
7,200
36,000
15,000
30,000
45,000
31,200
12,000
43,200
2,250
2,250
3,900
3,900
P 91,200
( 31,200)
3,900
9,390
9,390
separate operations
Less: Amortization of allocated excess [(E3)].
Multiplied by: Non-controlling interest %..........
Non-controlling Interest in Net Income (NCINI)
partial goodwill
Less: Non-controlling interest on impairment
loss on full-goodwill (P3,750 x 20%) or
(P3,750 impairment on full-goodwill less
P3,000, impairment on partial-goodwill)
Non-controlling Interest in Net Income (NCINI)
P 63,900
13,200
P 50,700
20%
P
10,140
750
9,390
P Co
P480,000
15,000
S Co.
P240,000
31,200
Dividend income
Total Revenue
Cost of goods sold
Depreciation expense
28,800
P523,800
P204,000
60,000
P271,200
P138,000
24,000
Interest expense
Other expenses
Goodwill impairment loss
Total Cost and Expenses
Net Income
NCI in Net Income - Subsidiary
Net Income to Retained Earnings
48,000
P312,000
P211,800
P211,800
Total
Dr.
Cr.
Consolidated
P 720,000
(5) 15,000
(6) 31,200
(4) 28,800
_________
P 720,000
P 348,000
83,850
(3)
(3)
6,000
6,000
18,000
P180,000
P 91,200
P 91,200
(3)
1,200
(3)
3,750
(9)
9,390
(1) 120,000
211,800
P571,800
P120,000
91,200
P211,200
72,000
-
36,000
P499,800
P175,200
P 495,810
232,800
90,000
120,000
210,000
240,000
P 90,000
60,000
90,000
48,000
180,000
P 322,800
150,000
210,000
265,200
720,000
540,000
(7)
(8)
2,250
3,900
1,200
66,000
3,750
P 502,800
P 217,200
( 9,390)
P 207,810
P360,000
P 360,000
207,810
P 567,810
(4)
(2)
6,000
(2)
7,200
(5) 30,000
(6) 12,000
(2)
(2)
4,800
15,000
372,000
P1,984,800
P1,008,000
P 135,000
P 96,000
405,000
288,000
105,000
240,000
600,000
88,800
120,000
499,800
240,000
175,200
(2) 80,000
(7) 2,250
(8) 3,900
(2) 192,000
(3) 6,000
_________
P1,008,000
6,000
(2) 216,000
(3) 1,200
(3) 3,750
(1) 288,000
(2) 84,000
(3) 10,000
(5) 45,000
(6) 43,200
72,000
________
462,000
1,044,000
3,600
11,250
P2,468,850
P229,050
495,000
193,800
360,000
600,000
(1) 240,000
495,810
(3)
_________
P1,984,800
3)
36,000
7,200
__________
P 843,690
(1 ) 72,000
(2) 21,000
(9) 9,390
P 843,690
____95,190
P2,468,850
P Co.
P 540,000
216000
P 324,000
60,000
72,000
P 192,000
38,400
P 230,400
P 72,000
Sales
Less: Cost of goods sold
Gross profit
Less: Depreciation expense
Other expense
Net income from its own separate operations
Add: Dividend income
Net income
Dividends paid
S Co.
P 360,000
192,000
P 168,000
24,000
54,000
P 90,000
P 90,000
P 48,000
38,400
38,400
On the books of S Company, the P48,000 dividend paid was recorded as follows:
Dividends paid
Cash
Dividends paid by S Co..
48,000
48,000
44,160
44,160
P175,200
120,000
P 55,200
80%
P 44,160
240,000
175,200
332,160
83,040
(E3) Inventory.
Accumulated depreciation equipment..
Accumulated depreciation buildings..
Land.
Discount on bonds payable.
Goodwill.
Buildings..
Non-controlling interest (P90,000 x 20%) + [(P15,000, full
P12,000, partial goodwill)]
Investment in S Co.
6,000
96,000
192,000
7,200
4,800
15,000
216,000
21,000
84,000
13,560
3,390
6,000
12,000
1,200
6,000
24,000
2,400
3,750
Inventory sold
Equipment
Buildings
Bonds payable
Sub-total
Multiplied by:
To Retained earnings
Impairment loss
Total
(20x4)
Retained
earnings,
P 6,000
12,000
(6,000)
1,200
P13,200
80%
P 10,560
3,000
P 13,560
Depreciation/
Amortization
expense
Amortization
-Interest
P 12,000
( 6,000)
________
P 6,000
P 1,200
P 1,200
38,400
9,600
48,000
15,000
30,000
45,000
24,960
6,240
12,000
43,200
5,250
3,000
2,250
7,800
3,900
3,120
780
P 90,000
3,900
P 93,900
( 7,200)
P 86,700
20%
P 17,340
17,340
17,340
P Co
P540,000
38,400
P578,400
P216,000
Depreciation expense
S Co.
P360,000
P360,000
P192,000
Dr.
(5)
38,400
60,000
24,000
(4)
6,000
Interest expense
Other expenses
Goodwill impairment loss
Total Cost and Expenses
Net Income
NCI in Net Income - Subsidiary
Net Income to Retained Earnings
72,000
P348,000
P230,400
P230,400
54,000
P270,000
P 90,000
P 90,000
(4)
1,200
P499,800
(2) 13,560
(6) 15,00
(7) 24,960
P 175,200 (1) 175,200
90,000
P265,200
S Company
Net income, from above
Total
Dividends paid
P Company
S Company
Retained earnings, 12/31 to Balance
Sheet
Balance Sheet
Cash.
Accounts receivable..
Inventory.
Land.
Equipment
Buildings
Discount on bonds payable
Goodwill
Investment in S Co
Total
Accumulated depreciation
- equipment
Accumulated depreciation
- buildings
Accounts payable
Bonds payable
Common stock, P10 par
Common stock, P10 par
Retained earnings, from above
Non-controlling interest
Total
230,400
P730,200
Cr.
(8)
3,000
(9)
3,900
Consolidated
P 900,000
___________
P 900,000
P 408,000
83,100
P
P
(
P
(10) 17,340
(1) 44,160
(8) 2,250
(9) 3,120
1,200
126,000
618,300
281,700
17,340)
264,360
P 495,810
264,360
P 760,170
72,000
-
48,000
P658,200
P217,200
P 688,170
265,200
180,000
216,000
210,000
240,000
P 102,000
96,000
108,000
48,000
180,000
P 367,200
276,000
324,000
265,200
720,000
540,000
P2,203,200
P1,074,000
P 150,000
P 102,000
450,000
306,000
105,000
240,000
600,000
88,800
120,000
___ _____
P2,203,200
(3)
(3)
(6)
(7)
(3)
(3)
(1)
372,000
658,200
(5)
240,000
217,200
_________
P1,074,000
6,000
7,200
30,000
12,000
4,800
15,000
44,160
(3) 96,000
(8) 5,250
(9) 7,800
(3) 192,000
(4) 12,000
(4)
48,000
6,000
(3) 216,000
(4) 2,400
(4) 3,750
(2) 332,160
(3) 90,000
(4)
(6)
(7)
24,000
45,000
43,200
72,000
________
462,000
1,044,000
2,400
11,250
P2,752,050
P 255,150
552,000
193,800
360,000
600,000
(2) 240,000
688,170
(4) 3,390
(5) 9,600
(7) 6,240
__________
P 983,100
(2 ) 83,040
(3) 21,000
(9)
780
(10) 17,340
P 983,100
____102,930
P2,752,050
5. 1/1/20x4
a. On date of acquisition the retained earnings of parent should always be considered as
the consolidated retained earnings, thus:
Consolidated Retained Earnings, January 1, 20x4
Retained earnings - Parent Company, January 1, 20x4 (date of acquisition)
P360,000
b.
Non-controlling interest (partial-goodwill), January 1, 20x4
Common stock Subsidiary Company
Retained earnings Subsidiary Company.
P 240,000
120,000
P 360,000
90,000
P 450,000
20
P 90,000
3,000
P 93,000
c.
Consolidated SHE:
Stockholders Equity
Common stock, P10 par
Retained earnings
Parents Stockholders Equity / CI SHE
NCI, 1/1/20x4
Consolidated SHE, 1/1/20x4
P 600,000
360,000
P 960,000
___93,000
P1,053,000
6.
Note: The goodwill recognized on consolidation purely relates to the parents share. NCI is
measured as a proportion of identifiable assets and goodwill attributable to NCI share is not
recognized.
12/31/20x4:
a. CI-CNI P207,810
Consolidated Net Income for 20x4
P Companys net income from own/separate operations.
Unrealized gain on sale of equipment (upstream sales)
Realized gain on sale of equipment (upstream sales) through depreciation
P Companys realized net income from separate operations*...
S Companys net income from own operations.
Unrealized gain on sale of equipment (upstream sales)
Realized gain on sale of equipment (upstream sales) through depreciation
S Companys realized net income from separate operations*...
Total
Less: Non-controlling Interest in Net Income* *
Amortization of allocated excess (refer to amortization above)
Goodwill impairment (impairment under partial-goodwill approach)
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent..
Add: Non-controlling Interest in Net Income (NCINI)
Consolidated Net Income for 20x4
*that has been realized in transactions with third parties.
P183,000
(15,000)
2,250
P170,250
P 91,200
( 31,200)
3,900
P 63,900
P 10,140
13,200
3,000
63,900
P234,150
26,340
P207,810
10,140
P217,950
b. NCI-CNI P10,140
**Non-controlling Interest in Net Income (NCINI) for 20x4
S Companys net income of Subsidiary Company from its own operations
(Reported net income of S Company)
Unrealized gain on sale of equipment (upstream sales)
Realized gain on sale of equipment (upstream sales) through depreciation
S Companys realized net income from separate operations
Less: Amortization of allocated excess / goodwill impairment
(refer to amortization table above)
Multiplied by: Non-controlling interest %..........
Non-controlling Interest in Net Income (NCINI) partial goodwill
Less: Non-controlling interest on impairment loss on full-goodwill (P3,750 x
20%) or (P3,750mpairment on full-goodwill less P3,000, impairment on
partial- goodwill)
Non-controlling Interest in Net Income (NCINI) full goodwill
*that has been realized in transactions with third parties.
P 91,200
( 31,200)
3,900
P 63,900
13,200
P 50,700
20%
P 10,140
750
P 9,390
P360,000
207,810
P567,810
72,000
P495,810
e.
Non-controlling interest (partial-goodwill), December 31, 20x4
Common stock Subsidiary Company, December 31, 20x4
Retained earnings Subsidiary Company, December 31, 20x4
Retained earnings Subsidiary Company, January 1, 20x4
Add: Net income of subsidiary for 20x4
Total
Less: Dividends paid 20x4
Stockholders equity Subsidiary Company, December 31, 20x4
Adjustments to reflect fair value - (over) undervaluation of assets and
liabilities, date of acquisition (January 1, 20x4)
Amortization of allocated excess (refer to amortization above) 20x4
Fair value of stockholders equity of subsidiary, December 31, 20x4
Unrealized gain on sale of equipment (upstream sales)
Realized gain on sale of equipment (upstream sales) through depreciation
Realized stockholders equity of subsidiary, December 31, 20x4
Multiplied by: Non-controlling Interest percentage...
Non-controlling interest (partial-goodwill)..
Add: Non-controlling interest on full goodwill , net of impairment loss, 12/31/x4:
[(P15,000 full P12,000, partial = P3,000) P750 impairment loss
Non-controlling interest (full-goodwill)..
P 240,000
P120,000
91,200
P211,200
36,000
175,200
P 415,200
90,000
( 13,200)
P492,000
( 31,200)
3,900
P464,700
20
P 92,940
2,250
P 95,190
f.
Consolidated SHE:
Stockholders Equity
Common stock, P10 par
Retained earnings
Parents Stockholders Equity / CI SHE, 12/31/20x4
NCI, 12/31/20x4
Consolidated SHE, 12/31/20x4
P 600,000
495,810
P1,095,810
___95,190
P1,191,000
12/31/20x5:
a. CI-CNI P281,700
Consolidated Net Income for 20x5
P Companys net income from own/separate operations.
Realized gain on sale of equipment (downstream sales) through depreciation
P Companys realized net income from separate operations*...
S Companys net income from own operations.
Realized gain on sale of equipment (upstream sales) through depreciation
S Companys realized net income from separate operations*...
Total
Less: Amortization of allocated excess
Consolidated Net Income for 20x5
Less: Non-controlling Interest in Net Income* *
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent 20x5..
*that has been realized in transactions with third parties.
P192,000
3,000
P195,000
P 90,000
3,900
P 93,900
93,900
P288,900
7,200
P281,700
17,340
P264,360
Or, alternatively
Consolidated Net Income for 20x5
P Companys net income from own/separate operations.
Realized gain on sale of equipment (downstream sales) through depreciation
P Companys realized net income from separate operations*...
S Companys net income from own operations.
Realized gain on sale of equipment (upstream sales) through depreciation
S Companys realized net income from separate operations*...
Total
Less: Non-controlling Interest in Net Income* *
Amortization of allocated excess
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent..
Add: Non-controlling Interest in Net Income (NCINI)
Consolidated Net Income for 20x5
*that has been realized in transactions with third parties.
P192,000
3,000
P195,000
P 90,000
3,900
P 93,900
P 17,340
7,200
24,540
P264,360
_ 17,340
P281,700
b. NCI-CNI P17,340
**Non-controlling Interest in Net Income (NCINI) for 20x5
S Companys net income of Subsidiary Company from its own operations
(Reported net income of S Company)
Realized gain on sale of equipment (upstream sales) through depreciation
S Companys realized net income from separate operations
93,900
P288,900
P 90,000
3,900
P 93,900
7,200
P 86,700
20%
P 17,340
0
P 17,340
P499,800
12,750
P487,050
P 175,200
120,000
P 55,200
13,200
27,300
P 14,700
80%
P 11,760
3,000
Or, alternatively:
Consolidated Retained Earnings, December 31, 20x5
Retained earnings - Parent Company, December 31, 20x5 (cost model)
Less: Downstream - net unrealized gain on sale of equipment prior to
12/31/20x5 (P15,000 P2,250 P3,000)
Adjusted Retained Earnings Parent 12/31/20x5 (cost model )
S Companys Retained earnings that have been realized in
transactions with third parties..
Adjustment to convert from cost model to equity method for purposes of
consolidation or to establish reciprocity:/Parents share in adjusted net
increased in subsidiarys retained earnings:
Retained earnings Subsidiary, December 31, 20x5
Less: Retained earnings Subsidiary, January 1, 20x4
Increase in retained earnings since date of acquisition
Less: Accumulated amortization of allocated excess
20x4 and 20x5 (P13,200 + P7,200)
Upstream - net unrealized gain on sale of equipment prior to
12/31/20x5 (P31,200 P3,900 P3,900)
P658,200
9,750
P648,450
P 217,200
120,000
P 97,200
20,400
P
Multiplied by: Controlling interests %...................
P
Less: Goodwill impairment loss (full-goodwill)
Consolidated Retained earnings, December 31, 20x5
23,400
53,400
80%
42,720
3,000
39,720
P688,170
e.
Non-controlling interest, December 31, 20x5
Common stock Subsidiary Company, December 31, 20x5
Retained earnings Subsidiary Company, December 31, 20x5
Retained earnings Subsidiary Company, January 1, 20x5
Add: Net income of subsidiary for 20x5
Total
Less: Dividends paid 20x5
Stockholders equity Subsidiary Company, December 31, 20x5
Adjustments to reflect fair value - (over) undervaluation of assets and
liabilities, date of acquisition (January 1, 20x4)
P 240,000
P175,200
90,000
P 265,200
48,000
217,200
P 457,200
90,000
P 13,200
7,200
( 20,400)
P 526,800
23,400
P503,400
20
P 100,680
2,250
P 102,930
f.
Consolidated SHE:
Stockholders Equity
Common stock, P10 par
Retained earnings
Parents Stockholders Equity / CI SHE, 12/31/20x5
NCI, 12/31/20x5
Consolidated SHE, 12/31/20x5
P 600,000
688,170
P1,288,170
__102,930
P1,391,100
Problem VII
20x4
20x5
1.
Noncontrolling interest in P 7,000 (1)
Consolidated net income
P 46,200 (2)
Controlling interest in
290,500 (3)
Consolidated net income
279,300 (4)
(1)
(2)
(3)
(4)
2015
2.
Noncontrolling interest in P 28,000 (5)
P 42,000 (6)
Consolidated income
Controlling interest in
269,500 (7)
283,500 (8)
Consolidated net income
(5) .4(P70,000) = P28,000
(6) .4(P105,000) = P42,000
(7) (P280,000 P63,000 + P10,500) + .6(P70,000) = P269,500
(8) (P210,000 + P10,500) + .6(P105,000) = P283,500
Problem VIII
(Determine consolidated net income when an intercompany transfer of equipment occurs.
Includes an outside ownership)
a. IncomeST ..........................................................................................................
IncomeBB...........................................................................................................
Excess amortization for unpatented technology ..........................................
Remove unrealized gain on equipment ........................................................
(P120,000 P70,000)
Remove excess depreciation created by
inflated transfer price (P50,000 5) ..........................................................
Consolidated net income .................................................................................
P220,000
90,000
(8,000)
(50,000)
P262,000
10,000
P262,000
(8,200)
P253,800
P262,000
P257,800
P240,000
100,000
(8,000)
10,000
P342,000
Problem IX
1.
Consolidated net income as reported
Less: P10,000 deferred gain
Plus: NCI portion of the gain
Plus: Deferred gain
Corrected consolidated net income
2.
Land account as reported
Less: Intercompany profit
Restated land account
20x4
P 750,000
-10,000
3,000
20x5
P 600,000
20x6
P 910,000
P 743,000
P 600,000
7,000
P 917,000
20x4
P 200,000
-10,000
P 190,000
20x5
P 240,000
-10,000
P 230,000
20x6
P 300,000
P 300,000
3.
Final sales price outside the entity minus the original cost to the combined entity equals
P102,000 minus P72,000 = P30,000
Problem X
1. On the consolidated balance sheet, the machine must be reported at its original cost
when Tool purchased it on January 1, 20x1, which is P120,000. Since the elimination entry
debited the machine account for P22,000 which must be the amount needed to bring the
machine account up to P120,000, Buzzard must have recorded the machine at P98,000.
Since the remaining useful life is seven years, Buzzard will record P14,000 of depreciation
expense each year.
2. The correct balances on the consolidated balance sheet for the Machine and
Accumulated Depreciation accounts are the balances that would be in the accounts if
there had been no sale. The balance in the machine account would be the original
purchase price to Tool or P120,000. The balance in the Accumulated Depreciation account
will be the original amount of annual depreciation, (P12,000) times the number of years the
machine has been depreciated (4), or P48,000.
3.
The non-controlling interest income will be 30% of Tool adjusted net income. Tool reported
net income of P60,000 is reduced by the P14,000 unrealized gain on the sale of the
machine and is increased by the piecemeal recognition of the gain, which is P2,000. The
net result of P48,000 is then multiplied by 30% to calculate a P14,400 income for the noncontrolling interest.
Problem XI
1.
Consolidated net income for 20x9:
Operating income reported by BW
Net income reported by TW
Amount of gain realized in 20x9
(P30,000 / 12 years)
Realized net income of TW
Consolidated net income
2.
3.
P40,000
2,500
30,000
20,000
5,000
P100,000
42,500
P142,500
2,500
52,500
P300,000
(270,000)
P 30,000
P 30,000
(5,000)
P 25,000
x
.80
P 20,000
P 25,000
x
P
.20
5,000
P 22,500
(20,000)
P 2,500
P120,000
(67,500)
P 52,500
Problem XII
1.
The gain on the sale of the land in 20x5 was equal to the sales price minus the original cost of
the land when it was first acquired by the combined entity. In this case the gain was P150,000
- P90,000, or P60,000.
2.
3.
Consolidated net income:
Osprey separate income (not including Income
from Branch)= P153,000 - P55,000 =
Income from Branch
Plus: Deferred gain on land
Plus: Piecemeal recognition of gain on equipment
sale: P35,000 gain/4 years =
Consolidated net income
P 98,000
20,000
50,000
8,750
P176,750
Problem XIII
Quail Corporation and Subsidiary
Consolidated Income Statement
for the year ended December 31, 20x5
Sales
Gain on land (P20,000 + P25,000)
Cost of sales
Other expenses (see below)
Consolidated Net Income
NCI-CNI (see below)
Consolidated net income
1,100,000
45,000
560,000 )
320,000 )
265,000
20,000 )
245,000
(
(
P
(
P
Other expenses:
P265,000 + P60,000 - P5,000 piecemeal recognition of gain on
equipment
320,000
20,000
2.
10,000
10,000
10,000
10,000
6,000
4,000
10,000
10,000
10,000
Problem XVII
1.
2.
45,000
31,500
13,500
30,000
Problem XVIII
1.
Downstream sale of land:
20x4
P 90,000
(25,000)
P 65,000
60,000
P125,000
(15,000)
P60,000
(25,000)
45,000
45,000
30,000
20x5
P110,000
P110,000
40,000
P150,000
P110,000
(10,000)
P140,000
20x4
P 90,000
20x5
P110,000
35,000
P125,000
40,000
P150,000
(8,750)
P116,250
(10,000)
P140,000
Problem XIX
1.
Consolidated net income for 20x4 will be greater than PP Company's income from
operations plus SS's reported net income. The eliminating entries at December 31, 20x4, will
result in an increase of P16,000 to consolidated net income.
2.
As a result of purchasing the equipment at less than Parent's book value, depreciation
expense reported by SS will be P2,000 (P16,000 / 8 years) below the amount that would
have been recorded by PP. Thus, depreciation expense must be increased by P2,000 when
eliminating entries are prepared at December 31, 20x5. Consolidated net income will be
decreased by the full amount of the P2,000 increase in depreciation expense.
Problem XX
1.
Eliminating entry, December 31, 20x9:
E(1) Buildings and Equipment
Loss on Sale of Building
Accumulated Depreciation
Eliminate unrealized loss on building.
2.
156,000
36,000
120,000
P 15,000
P125,000
4.
36,000
51,000
P176,000
(15,300)
P160,700
156,000
4,000
124,000
25,200
10,800
P300,000
(144,000)
P156,000
P 20,000
P
(16,000)
4,000
P140,000
(16,000)
P124,000
P36,000
x
.70
P25,200
P36,000
x
.30
P10,800
P150,000
P40,000
(4,000)
36,000
P186,000
(10,800)
P175,200
Problem XXI
Requirements 1 to 4
Schedule of Determination and Allocation of Excess (Partial-goodwill)
Date of Acquisition January 1, 20x4
Fair value of Subsidiary (80%)
Consideration transferred..
Less: Book value of stockholders equity of S:
Common stock (P240,000 x 80%).
Retained earnings (P120,000 x 80%)...
Allocated excess (excess of cost over book value)..
Less: Over/under valuation of assets and liabilities:
Increase in inventory (P6,000 x 80%)
P 372,000
P 192,000
96,000
P
P 4,800
288,000
84,000
5,760
76,800
( 19,200)
3,840
72,000
P 12,000
S Co.
Book value
P 24,000
48,000
84,000
168,000
(120,000)
P 204,000
S Co.
Fair value
P 30,000
55,200
180,000
144,000
( 115,200)
P 294,000
(Over) Under
Valuation
P 6,000
7,200
96,000
(24,000)
4,800
P 90,000
The buildings and equipment will be further analyzed for consolidation purposes as follows:
Equipment..................
Less: Accumulated depreciation..
Net book value...
S Co.
Book value
180,000
96,000
84,000
S Co.
Fair value
180,000
180,000
Buildings................
Less: Accumulated depreciation..
Net book value...
S Co.
Book value
360,000
1992,000
168,000
S Co.
Fair value
144,000
144,000
Increase
(Decrease)
0
( 96,000)
96,000
(Decrease)
( 216,000)
( 192,000)
( 24,000)
Over/
Under
P 6,000
Life
1
96,000
(24,000)
4,800
8
4
4
Annual
Amount
P 6,000
Current
Year(20x4)
P 6,000
20x5
P
-
12,000
( 6,000)
1,200
P 13,200
12,000
( 6,000)
1,200
P 13,200
12,000
(6,000)
1,200
P 7,200
The goodwill impairment loss of P3,750 based on 100% fair value would be allocated to the
controlling interest and the NCI based on the percentage of total goodwill each equity interest
received. For purposes of allocating the goodwill impairment loss, the full-goodwill is computed
as follows:
Fair value of Subsidiary (100%)
Consideration transferred: Cash (80%)
Fair value of NCI (given) (20%)
Fair value of Subsidiary (100%)
Less: Book value of stockholders equity of S (P360,000 x 100%)
Allocated excess (excess of cost over book value)..
Add (deduct): (Over) under valuation of assets and liabilities
(P90,000 x 100%)
Positive excess: Full-goodwill (excess of cost over
fair value)...
P 372,000
93,000
P 465,000
__360,000
P 105,000
90,000
P
15,000
In this case, the goodwill was proportional to the controlling interest of 80% and non-controlling
interest of 20% computed as follows:
Goodwill applicable to parent
Goodwill applicable to NCI..
Total (full) goodwill..
Value
P12,000
3,000
P15,000
% of Total
80.00%
20.00%
100.00%
Value
P 3,000
% of Total
80.00%
750
20.00%
P 3,750
100.00%
The unrealized and gain on intercompany sales for 20x4 are as follows:
Date
of Sale
4/1/20x4
1/2/20x4
Seller
P
S
Selling
Price
P90,000
60,000
Book
Value
P75,000
28,800
Unrealized*
Gain on sale
P15,000
31,200
Remaining
Life
5 years
8 years
Realized gain
depreciation**
P3,000/year
P3,900/year
20x4
P2,250
P3,900
P Co.
P 480,000
204,000
P 276,000
60,000
48,000
P 168,000
15,000
P 183,000
24,810
P 207,810
S Co.
P 240,000
138,000
P 102,000
24,000
18,000
P 60,000
31,200
P 91,200
P 91,200
January 1, 20x4:
(1) Investment in S Company
Cash..
372,000
372,000
Acquisition of S Company.
28,800
28,800
72,960
72,960
13,560
13,560
15,000
15,000
24,960
24,960
2,250
2,250
3,120
3,120
Thus, the investment balance and investment income in the books of P Company is as follows:
Cost, 1/1/x4
NI of Son
(91,200 x 80%)
Realized gain downstream sale
Realized gain upstream sale
Balance, 12/31/x4
Investment in S
372,000
28,800
72,960
2,250
3,120
368,010
13,560
15,000
24,960
Investment Income
Amortization &
impairment
Unrealized gain downstream sale
Unrealized gain upstream sale
13,560
15,000
24,960
NI of S
(91,200 x 80%)
Realized gain downstream sale
Realized gain upstream sale
Balance, 12/31/x4
72,960
2,250
3,120
24,810
240,000
120,000
288,000
72,000
(E2) Inventory.
Accumulated depreciation equipment..
Accumulated depreciation buildings..
Land.
Discount on bonds payable.
Goodwill.
Buildings..
Non-controlling interest (P90,000 x 20%)..
Investment in S Co.
6,000
96,000
192,000
7,200
4,800
12,000
216,000
18,000
84,000
6,000
6,000
6,000
1,200
3,000
6,000
12,000
1,200
3,000
Inventory sold
Equipment
Buildings
Bonds payable
Totals
Cost of
Goods
Sold
P 6,000
_______
P 6,000
Depreciation/
Amortization
Expense
Amortization
-Interest
P 12,000
( 6,000)
_______
P 6,000
P 1,200
P1,200
Total
14,400
24,810
3,990
7,200
36,000
Investment in S
NI of S
28,800 Dividends - S
(91,200
Amortization &
x 80%). 72,960 13,560
impairment
Realized gain* 2,250 15,000 Unrealized gain *
Realized gain** 3,120 24,960 Unrealized gain **
3,990
*downstream sale (should be multiplied by 100%)
**upstream sale (should be multiplied by 80%)
Investment Income
Amortization
impairment
13,560
Unrealized gain * 15,000
Unrealized gain **24,960
72,960
2,250
3,120
24,810
NI of S
(91,200
x 80%)
Realized gain*
Realized gain**
After the eliminating entries are posted in the investment account, it should be observed that
from consolidation point of view the investment account is totally eliminated. Thus,
Cost, 1/1/x4
NI of S
(91,200 x 80%)
Realized gain downstream sale
Realized gain upstream sale
Balance, 12/31/x4
(E4) Investment Income
and dividends
Investment in S
372,000
28,800
72,960
2,250
3,120
368,010
3,990
372,000
13,560
15,000
24,960
288,000
84,000
372,000
15,000
30,000
45,000
31,200
12,000
43,200
2,250
2,250
3,900
3,900
10,140
P 91,200
( 31,200)
3,900
P 63,900
13,200
P 50,700
20%
P
10,140
10,140
Income Statement
Sales
Gain on sale of equipment
P Co
P480,000
15,000
S Co.
P240,000
31,200
Investment income
Total Revenue
Cost of goods sold
24,810
P519,810
P204,000
P271,200
P138,000
60,000
48,000
P312,000
P207,810
P207,810
Dr.
Cr.
(5) 15,000
(6) 31,200
(4) 28,800
Interest expense
Other expenses
Goodwill impairment loss
Total Cost and Expenses
Net Income
NCI in Net Income - Subsidiary
Net Income to Retained Earnings
Statement of Retained Earnings
Retained earnings, 1/1
P Company
S Company
Net income, from above
Total
Dividends paid
P Company
S Company
Retained earnings, 12/31 to Balance
Sheet
Balance Sheet
Cash.
Accounts receivable..
Inventory.
Land.
Equipment
6,000
24,000
(3)
6,000
18,000
P180,000
P 91,200
P 91,200
(3)
1,200
(3)
3,000
(1) 120,000
207,810
P567,810
P120,000
91,200
P211,200
72,000
-
36,000
P495,810
P175,200
P 495,810
232,800
90,000
120,000
210,000
240,000
P 90,000
60,000
90,000
48,000
180,000
P 322,800
150,000
210,000
265,200
720,000
540,000
(9)
2,250
(8)
3,900
P
P
(
P
10,140
P360,000
Buildings
Discount on bonds payable
Goodwill
Investment in S Co
207,810
P567,810
(4)
(2)
6,000
(2)
7,200
(5) 30,000
(6) 12,000
4,800
12,000
368,010
Accumulated depreciation
- equipment
P1,980,810
P1,008,000
P 135,000
P 96,000
405,000
288,000
105,000
240,000
600,000
88,800
120,000
Accumulated depreciation
- buildings
Accounts payable
Bonds payable
Common stock, P10 par
Common stock, P10 par
Retained earnings, from above
Non-controlling interest
240,000
175,200
495,810
(2) 96,000
(7) 2,250
(8)
3,900
(2) 192,000
(3)
6,000
_________
P1,008,000
(3)
36,000
5,000
(2) 216,000
(3) 1,200
(3) 3,000
(1) 288,000
(2) 84,000
72,000
________
462,000
1,044,000
3,600
9,000
P2,466,600
(3) 12,000
(5) 45,000
(6) 43,200
P229,050
495,000
193,800
360,000
600,000
(1) 240,000
495,810
(4)
_________
P1,980,810
1,0200
66,000
3,000
502,050
217,950
10,140)
207,810
P 360,000
(2)
(2)
Total
Total
_________
P 720,000
P 348,000
83,850
(3)
(7)
Depreciation expense
Consolidated
P 720,000
7,200
__________
P 840,690
(1 ) 72,000
(2) 18,000
(9) 10,140
P 840,690
P Co.
P 540,000
216,000
P 324,000
60,000
72,000
P 192,000
72,360
P 264,360
P 72,000
92,940
P2,466,600
S Co.
P 360,000
192,000
P 168,000
24,000
54,000
P 90,000
P 90,000
P 48,000
38,400
38,400
72,000
72,000
5,760
5,760
3,000
3,000
3,120
3,120
Thus, the investment balance and investment income in the books of P Company is as follows:
Cost, 1/1/x5
NI of Son
(90,000 x 80%)
Realized gain downstream sale
Realized gain upstream sale
Balance, 12/31/x5
Investment in S
368,010
38,400
5,760
72,000
3,000
3,120
401,970
Investment Income
5,760
NI of S
72,000
(90,000 x 80%)
3,000
Realized gain downstream sale
3,120
Realized gain upstream sale
72,360
Balance, 12/31/x5
240,000
175,200
332,160
83,040
84,000
198,000
6,000
3,600
9,000
180,000
15,360
70,440
6,000
6,000
1,200
12,000
1,200
Inventory sold
Equipment
Buildings
Bonds payable
Totals
Depreciation/
Amortization
Expense
Amortization
-Interest
P 12,000
( 6,000)
_______
P 6,000
P 1,200
P1,200
Total
P7,200
72.360
9,600
48,000
33,960
Investment Income
Amortization
(P7,200 x 80%)
5,760
72,000
3,000
3,120
72,360
NI of S
(90,000
x 80%)
Realized gain*
Realized gain**
15,000
30,000
45,000
24,960
6,240
12,000
43,200
5,250
3,000
2,250
7,800
3,900
3,120
780
P 90,000
3,900
P 93,900
( 7,200)
P 86,700
Multiplied by: Non-controlling interest %..........
20%
Non-controlling Interest in Net Income (NCINI
P 17,340
*from separate transactions that has been realized in transactions
with third persons.
17,340
17,340
P Co
P540,000
72,360
P612,360
P216,000
Depreciation expense
Interest expense
Other expenses
Goodwill impairment loss
Total Cost and Expenses
Net Income
NCI in Net Income - Subsidiary
Net Income to Retained Earnings
Statement of Retained Earnings
Retained earnings, 1/1
P Company
S Company
Net income, from above
Total
Dividends paid
P Company
S Company
Retained earnings, 12/31 to Balance
Sheet
Balance Sheet
Cash.
Accounts receivable..
Inventory.
Land.
Equipment
Buildings
Discount on bonds payable
Goodwill
Investment in Son Co
Total
Accumulated depreciation
- equipment
Accumulated depreciation
- buildings
Accounts payable
Bonds payable
Common stock, P10 par
Common stock, P10 par
Retained earnings, from above
Non-controlling interest
Total
S Co.
P360,000
P360,000
P192,000
Dr.
(4)
Cr.
72,360
(7)
3,000
(8)
3,900
Consolidated
P 900,000
___________
P 900,000
P 408,000
83,100
60,000
24,000
(3)
6,000
72,000
P348,000
P264,360
P264,360
54,000
P270,000
P 90,000
P 90,000
(3)
1,200
(1) 175,200
_264,360
P760,170
P 175,200
90,000
P265,200
72,000
-
48,000
P688,170
P217,200
P 688,170
265,200
180,000
216,000
210,000
240,000
P 102,000
96,000
108,000
48,000
180,000
P 367,200
276,000
324,000
265,200
720,000
540,000
P
P
(
P
(9) 17,340
P495,810
P495,810
264,360
P 760,170
(5)
(2)
(5)
(6)
(2)
(2)
(5)
(6)
401,970
P2,233,170
P1,074,000
P 150,000
P 102,000
450,000
306,000
105,000
240,000
600,000
88,800
120,000
688,170
240,000
217,200
_________
P1,074,000
48,000
7,200
30,000
12,000
3,600
9,000
15,000
24,960
(2) 84,000
(7) 5,250
(8) 7,800
(2) 198,000
(3)
6,000
(2) 216,000
(3) 1,200
(1) 332,160
(2) 70,440
(4) 33,960
(7) 2,250
(8) 3,120
(3)
(5)
(6)
12,000
45,000
43,200
72,000
________
462,000
1,044,000
2,400
9,000
P2,749,800
P 255,150
552,000
193,800
360,000
600,000
(1) 240,000
688,170
(4)
(6)
___ _____
P2,233,170
1,200
126,000
618,300
281,700
17,340)
264,360
9,600
6,240
__________
P 930,750
(1) 69,200
(2) 15,360
(8)
780
(9) 17,340
P 930,750
____100,680
P2,749,800
P 372,000
93,000
P 465,000
P 240,000
120,000
360,000
P 105,000
6,000
7,200
96,000
( 24,000)
4,800
90,000
P 15,000
Over/
under
P 6,000
Life
1
96,000
(24,000)
4,800
8
4
4
Annual
Amount
P 6,000
Current
Year(20x4)
P 6,000
20x5
P
-
12,000
( 6,000)
1,200
P 13,200
12,000
( 6,000)
1,200
P 13,200
12,000
(6,000)
1,200
P 7,200
P Co.
P 480,000
204,000
P 276,000
60,000
48,000
P 168,000
15,000
P 183,000
24,810
P 207,810
S Co.
P 240,000
138,000
P 102,000
24,000
18,000
P 60,000
31,200
P 91,200
P 91,200
January 1, 20x4:
(1) Investment in S Company
Cash..
372,000
372,000
Acquisition of S Company.
28,800
28,800
72,960
72,960
13,560
13,560
15,000
15,000
24,960
24,960
2,250
2,250
3,120
3,120
Thus, the investment balance and investment income in the books of Perfect Company is as
follows:
Cost, 1/1/x4
NI of Son
(91,200 x 80%)
Realized gain downstream sale
Realized gain upstream sale
Balance, 12/31/x4
Investment in S
372,000
28,800
72,960
2,250
3,120
368,010
13,560
15,000
24,960
Investment Income
Amortization &
impairment
Unrealized gain downstream sale
Unrealized gain upstream sale
13,560
15,000
24,960
72,960
2,250
3,120
24,810
NI of S
(76,000 x 80%)
Realized gain downstream sale
Realized gain upstream sale
Balance, 12/31/x4
240,000
120.000
288,000
72,000
(E2) Inventory.
Accumulated depreciation equipment..
Accumulated depreciation buildings..
Land.
Discount on bonds payable.
Goodwill.
Buildings..
Non-controlling interest (P90,000 x 20%) + [(P15,000 full
P12,000, partial goodwill)]
Investment in S Co.
6,000
96,000
192,000
7,200
4,800
15,000
216,000
21,000
84,000
6,000
6,000
6,000
1,200
3,750
6,000
12,000
1,200
3,750
Inventory sold
Equipment
Buildings
Bonds payable
Totals
Cost of
Goods
Sold
P 6,000
Depreciation/
Amortization
Expense
Amortization
-Interest
P 12,000
( 6,000)
_______
P 6,000
P 1,200
P1,200
_______
P 6,000
Total
14,400
24,810
3,990
7,200
36,000
Investment Income
Amortization
impairment
13,560
Unrealized gain * 15,000
Unrealized gain **24,960
72,960
2,250
3,120
24,810
NI of S
(91,200
x 80%)
Realized gain*
Realized gain**
After the eliminating entries are posted in the investment account, it should be observed that
from consolidation point of view the investment account is totally eliminated. Thus,
Cost, 1/1/x4
NI of S
(91,200 x 80%)
Realized gain downstream sale
Realized gain upstream sale
Balance, 12/31/x4
(E4) Investment Income
and dividends
Investment in S
372,000
28,800
72,960
2,250
3,120
368,010
13,560
15,000
24,960
288,000
84,000
3,990
372,000
372,000
15,000
30,000
45,000
31,200
12,000
43,200
2,250
2,250
3,900
3,900
9,390
9,390
P 91,200
( 31,200)
3,900
P 63,900
13,200
P 50,700
20%
P
10,140
750
P
9,390
P Co
P480,000
15,000
S Co.
P240,000
31,200
Investment income
Total Revenue
Cost of goods sold
24,810
P519,810
P204,000
P271,200
P138,000
60,000
48,000
P312,000
P207,810
P207,810
Dr.
Cr.
(5) 15,000
(6) 31,200
(4) 28,800
Interest expense
Other expenses
Goodwill impairment loss
Total Cost and Expenses
Net Income
NCI in Net Income - Subsidiary
Net Income to Retained Earnings
Statement of Retained Earnings
Retained earnings, 1/1
P Company
S Company
Net income, from above
Total
Dividends paid
P Company
S Company
Retained earnings, 12/31 to Balance
Sheet
Balance Sheet
Cash.
Accounts receivable..
Inventory.
Land.
Equipment
Buildings
Discount on bonds payable
Goodwill
Investment in S Co
Total
Accumulated depreciation
- equipment
Accumulated depreciation
- buildings
Accounts payable
Bonds payable
Common stock, P10 par
_________
P 720,000
P 348,000
83,850
(3)
6,000
24,000
(3)
6,000
18,000
P180,000
P 91,200
P 91,200
(3)
1,200
(3)
3,750
(9)
9,390
(1) 120,000
207,810
P567,810
P120,000
91,200
P211,200
72,000
-
36,000
P495,810
P175,200
P 495,810
232,800
90,000
120,000
210,000
240,000
P 90,000
60,000
90,000
48,000
180,000
P 322,800
150,000
210,000
265,200
720,000
540,000
(7)
Depreciation expense
Consolidated
P 720,000
2,250
(8)
3,900
1,200
66,000
3,750
P 502,800
P 217,200
( 9,390)
P 207,810
P360,000
P 360,000
207,810
P 567,810
(4)
(2)
6,000
(2)
6,000
(5) 30,000
(6) 12,000
(2)
(2)
4,800
15,000
368,010
P1,980,810
P1,008,000
P 135,000
P 96,000
405,000
288,000
105,000
240,000
600,000
88,800
120,000
(2) 96,000
(7) 2,250
(8) 3900
(2) 192,000
(3) 6,000
(3)
36,000
6,000
(2) 216,000
(3) 1,200
(3) 3,750
(1) 288,000
(2) 84,000
(3) 12,000
(5) 45,000
(6) 43,200
72,000
________
462,000
1,044,000
3,600
11,250
P2,468,850
P229,050
495,000
193,800
360,000
600,000
(1) 240,000
495,810
(4)
_________
P1,980,810
Total
240,000
175,200
495,810
_________
P1,008,000
7,200
__________
P 843,690
(1 ) 72,000
(2) 21,000
(9) 9,390
P 843,690
____95,190
P2,468,850
Perfect Co.
P 540,000
1216,000
P 324,000
60,000
72,000
P 192,000
72,360
P 264,360
P 72,000
Son Co.
P 360,000
192,000
P 168,000
24,000
54,000
P 90,000
P 90,000
P 48,000
38,400
38,400
72,000
72,000
5,760
5,760
3,000
3,000
3,120
3,120
Thus, the investment balance and investment income in the books of P Company is as follows:
Cost, 1/1/x5
NI of S
(90,000 x 80%)
Realized gain downstream sale
Realized gain upstream sale
Balance, 12/31/x5
Investment in S
368,010
38,400
5,760
72,000
3,000
3,120
401,970
Investment Income
5,760
NI of S
72,000
(90,000 x 80%)
3,000
Realized gain downstream sale
3,120
Realized gain upstream sale
72,360
Balance, 12/31/x5
240,000
175.200
332,160
83,040
84,000
198,000
7,200
3,600
11,250
216,000
17,610
70,440
6,000
6,000
1,200
12,000
1,200
Inventory sold
Equipment
Buildings
Bonds payable
Totals
Depreciation/
Amortization
Expense
Amortization
-Interest
P 12,000
( 6000)
_______
P 6,000
P 1,200
P1,200
Total
P7,,200
72,360
9,600
48,000
33,960
Investment Income
Amortization
(P7,200 x 80%)
5,760
72,000
3,000
3,120
72,360
NI of S
(75,000
x 80%)
Realized gain*
Realized gain**
15,000
30,000
45,000
24,960
6,240
12,000
43,200
5,250
3,000
2,250
7,800
3,900
3,120
780
17,340
17,340
P 90,000
3,900
P 93,900
( 7,200)
P 86,700
20%
P Co
P540,000
72,360
P612,360
P216,000
Depreciation expense
Interest expense
Other expenses
Goodwill impairment loss
Total Cost and Expenses
Net Income
NCI in Net Income - Subsidiary
Net Income to Retained Earnings
Statement of Retained Earnings
Retained earnings, 1/1
P Company
S Company
Net income, from above
Total
Dividends paid
P Company
S Company
Retained earnings, 12/31 to Balance
Sheet
Balance Sheet
Cash.
Accounts receivable..
Inventory.
Land.
Equipment
S Co.
P360,000
P360,000
P192,000
Dr.
(4)
Cr.
72,360
(7)
3,000
(8)
3,900
Consolidated
P 900,000
___________
P 900,000
P 408,000
83,100
60,000
24,000
(3)
6,000
72,000
P348,000
P264,360
P264,360
54,000
P270,000
P 90,000
P 90,000
(3)
1,200
(1) 175,200
_264,360
P760,170
P 175,200
90,000
P265,200
72,000
-
48,000
P688,170
P217,200
P 688,170
265,200
180,000
216,000
210,000
240,000
P 102,000
96,000
108,000
48,000
180,000
P 367,200
276,000
324,000
265,200
462,000
P
P
(
P
(9) 17,340
P495,810
1,200
126,000
618,300
281,700
17,340)
264,360
P495,810
264,360
P 760,170
(5)
(2)
(5)
7,200
30,000
48,000
72,000
________
(6)
Buildings
Discount on bonds payable
Goodwill
Investment in S Co
Total
Accumulated depreciation
- equipment
720,000
(2)
(2)
(5)
(6)
401,970
P2,233,170
P1,074,000
P 150,000
P 102,000
450,000
306,000
105,000
240,000
600,000
88,800
120,000
Accumulated depreciation
- buildings
Accounts payable
Bonds payable
Common stock, P10 par
Common stock, P10 par
Retained earnings, from above
Non-controlling interest
Total
540,000
688,170
240,000
217,200
_________
P1,074,000
(2) 216,000
3,600 (3) 1,200
11,250
15,000 (1) 332,160
24,960 (2) 70,440
(4) 33,960
(7) 2,250
(8) 3,120
(2) 84,000
(7) 5,250
(8) 7,800
(2) 198,000
(3)
6,000
(3)
(5)
(6)
12,000
45,000
43,200
1,044,000
2,400
11,250
P2,752,050
P 255,150
552,000
193,800
360,000
600,000
(1) 240,000
688,170
(4)
(6)
___ _____
P2,233,170
12,000
9,600
6,240
__________
P 933,000
(1) 83,040
(2) 17,610
(8)
780
(9) 17,340
P 933,000
____102,930
P2,752,050
Buyer
50,000
18,000
Truck
Cash
53,000
15,000
50,000
50,000
8. b
Consolidated Net Income for 20x5
P Companys net income from own/separate operations.
Realized gain on sale of equipment (downstream sales) through depreciation
P Companys realized net income from separate operations*...
S Companys net income from own operations.
Unrealized gain on sales of equipment (upstream sales)
Realized gain on sale of equipment (upstream sales) through depreciation
(P15,000 / 5 years)
S Companys realized net income from separate operations*...
Total
Less: Amortization of allocated excess
Consolidated Net Income for 20x5
Less: Non-controlling Interest in Net Income* *
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent 20x5..
*that has been realized in transactions with third parties.
P 98,000
___0
P 98,000
P 55,000
(15,000)
3,000
P 45,000
45,000
P143,000
0
P143,000
18,000
P125,000
Or, alternatively
Consolidated Net Income for 20x5
P Companys net income from own/separate operations.
Realized gain on sale of equipment (downstream sales) through depreciation
P Companys realized net income from separate operations*...
S Companys net income from own operations.
Unrealized gain on sales of equipment (upstream sales)
Realized gain on sale of equipment (upstream sales) through depreciation
(P15,000 / 3 years)
S Companys realized net income from separate operations*...
Total
Less: Non-controlling Interest in Net Income* *
Amortization of allocated excess
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent..
Add: Non-controlling Interest in Net Income (NCINI)
Consolidated Net Income for 20x5
*that has been realized in transactions with third parties.
**Non-controlling Interest in Net Income (NCINI) for 20x5
S Companys net income of Subsidiary Company from its own operations
(Reported net income of S Company)
Unrealized gain on sales of equipment (upstream sales)
Realized gain on sale of equipment (upstream sales) through depreciation
S Companys realized net income from separate operations
Less: Amortization of allocated excess
Multiplied by: Non-controlling interest %..........
Non-controlling Interest in Net Income (NCINI) - partial goodwill
Less: NCI on goodwill impairment loss on full-goodwill . . . . . . . . . . . . . . . . . . . . .
Non-controlling Interest in Net Income (NCINI) full goodwill . . . . . . . . . . . . .
P 98,000
___0
P 98,000
P 55,000
(15,000)
5,000
P 45,000
45,000
P143,000
P 18,000
____0
18,000
P125,000
_ 18,000
P143,000
P 55,000
( 15,000)
5,000
P 45,000
0
P 45,000
40%
P 18,000
0
P 18,000
10. a
11. a
Combined equipment amounts
Less: gain on sale
Consolidated equipment balance
P1,050,000
25,000
P1,025,000
P 250,000
5,000
P 245,000
12. Incomplete data - It should be noted that PAS 27 allow the use of cost model in accounting
for investment in subsidiary in the books of parent company but not the equity method.
Since, the cost model is presumed to be the method used and there is no available data for
dividends paid/declared by Cliff therefore, the requirement cannot be properly
addressed.
The requirement and available choices in the problem are on the assumption of the use of
equity method. So, the answer then would be (c) computed as follows:
Cliff reported income
P225,000
45,000
___4,500
P184,500
90%
P166,050
P650,000
__30,000
P620,000
P195,000
___3,000
P192,000
13. a
P 30,000
Consolidated
40,000
P 70,000
15. Incomplete data - It should be noted that PAS 27 allow the use of cost model in accounting
for investment in subsidiary in the books of parent company but not the equity method.
Since, the cost model is presumed to be the method used and there is no available data for
dividends paid/declared by Cliff therefore, the requirement cannot be properly
addressed.
The requirement and available choices in the problem are on the assumption of the use of
equity method. So, the answer then would be (c) computed as follows:
Pied Imperial-Pigeons share of Rogers income = (P320,000 x 90%) =
Less: Profit on intercompany sale (P130,000 - P80,000) x 90% =
Add: Piecemeal recognition of deferred profit ($50,000/4 years)90% =
Income from Offshore
P288,000
45,000
11,250
P254,250
S (Nectar)
P 50,000
_30,000
P 20,000
P (Lorikeet)
P 110,000
__50,000
P 60,000
Consolidated
P 110,000
_30,000
P 80,000
17. No answer available No effect. It should be noted that PAS 27 allow the use of cost model
in accounting for investment in subsidiary in the books of parent company but not the
equity method.
The requirement and available choices in the problem are on the assumption of the use of
equity method. So, the answer then would be (c) computed as follows:
P30,000 - (1/4 x P30,000) =
P 22,500
18. b
**Non-controlling Interest in Net Income (NCINI) for 20x4
S Companys net income of Subsidiary Company from its own operations
(Reported net income of S Company)
Unrealized gain on sales of equipment (upstream sales) (P700,000 P600,000)
Realized gain on sale of equipment (upstream sales) through depreciation (P100,000/10)
S Companys realized net income from separate operations
Less: Amortization of allocated excess
Multiplied by: Non-controlling interest %..........
Non-controlling Interest in Net Income (NCINI) - partial goodwill
Less: NCI on goodwill impairment loss on full-goodwill . . . . . . . . . . . . . . . . . . . . .
Non-controlling Interest in Net Income (NCINI) full goodwill . . . . . . . . . . . . .
P2,000,000
( 100,000)
10,000
P1,910,000
_
0
P1,910,000
__40%
P 764,000
__
0
P 764,000
19. d
Unrealized gain on sales of equipment (downstream sales)
Realized gain on sale of equipment (downstream sales) through depreciation
20x4
( 90,000)
20x5
-0-
P90,000 / 10 years
Net
___9,000
( 81,000)
9,000
9,000
S
P1,980,000
1,800,00
P
P1,440,000
P1,980,000
*1,320,000
Consolidated
P1,440,000
P 1,800,000
**1,200,000
660,000
__600,000
P 180,000
120,000
P 60,000
P 60,000
P 780,000
P 840,000
21. a
22. b
Eliminating entries:
Restoration of BV and eliminate unrealized gain
Gain
Land
50,000
50,000
Subsidiary
Parent
Cash
Land
Gain
xxx
xxx
50,000
Land
Cash
xxx
xxx
23. It should be noted that PAS 27 allow the use of cost model in accounting for investment in
subsidiary in the books of parent company but not the equity method.
The requirement and available choices in the problem are on the assumption of the use of
equity method. So, the answer then would be (d) (P60,000 P48,000)/4 years = P3,000
24. d (P100,000 + P50,000 = P150,000)
S
Selling price
Less: Book value
Gain
P 100,000
Consolidated
50,000
P 150,000
20x4
( 150,000)
___15,000
( 135,000)
20x5
-015,000
15,000
S
P 990,000
P1,000,000
100,000
__900,00
P
P720,000
P990,000
*440,000
550,000
Consolidated
P 720,000
P 900,000
**400,000
__500,000
P 90,000
40,000
P 50,000
P 50,000
__________
P 170,000
___________
P 220,000
28. It should be noted that PAS 27 allow the use of cost model in accounting for investment in
subsidiary in the books of parent company but not the equity method.
The requirement equity from subsidiary income and available choices in the problem are
on the assumption of the use of equity method. So, the answer then would be (c)
computed as follows:
20x4
720,000
( 144,000)
___28,800
604,800
29 d (P30,000 + P15,000)
30. d the entry under the cost model would be as follows ;
Accumulated depreciation. 10,000
Depreciation expenses (current year) P15,000/3 years..
5,000
Retained earnings (prior year 20x5)..
5,000
31. a
32. b
33. a
Unrealized gain on sale of equipment (upstream sales) : 50,000 30,000
Realized gain on sale of equipment (upstream sales) through depreciation
P20,000 / 5 years
Net
20x4
( 20,000)
___4,000
( 16,000)
20x5
-0__4,000
__4,000
34. a
Original cost of
P1,100,000
P 250,000
____50,000
P 300,000
35. c
Selling price unrelated party
Less: Original Book value, 12/31/20x5
Book value, 1/1/20x4
Less: Depreciation for 20x4 and 20x5: P20,000/4 years x 2 years
Accumulated depreciation, 12/31/20x4
P 14,000
P20,000
10,000
10,000
P 4,000
P 100,000
__60,000
P 40,000
40.
20x4
480,000
( 96,000)
___19,200
403,200
P40,000
10,000
P50,000
(3,000)
P47,000
41.
When only retained earnings is debited, and not the non-controlling interest, a gain
has been recorded in a prior period on the parent's books.
42.
The costs incurred by BB to develop the equipment are research and development
costs and must be expensed as they are incurred. Transfer to another legal entity
does not cause a change in accounting treatment within the economic entity.
43.
44.
TLK Corporation will record the purchase at P39,000, the amount it paid. GG
Company had the equipment recorded at P40,000; thus, a debit of P1,000 will raise
the equipment balance back to its original cost from the viewpoint of the
consolidated entity.
45.
46.
P15,000
(5,000)
P 45,000
(10,000)
P 35,000
x
.40
P 14,000
P 85,000
45,000
P130,000
(10,000)
P120,000
47. d
48. a
49. b
50. a the amount of land that will be presented in the presented in the CFS is the original cost
of P416,000 + P256,000 = P672,000.
51. e
Depreciation expense:
Parent
P 84,000
Subsidiary
60,000
Total
P144,000
Less: Over-depreciaton due to realized gain:
[P115,000 (P125,000 P45,000)] = P35,000/8 years
__ 4,375
Consolidated net income
P139,625
52. c
Unrealized gain on sale of equipment
Realized gain on sale of equipment (upstream sales) through depreciation
Net
Selling price
Less: Book value, 1/1/20x6
20x6
( 56,000)
___7,000
( 49,000)
P 392,000
Cost, 1/1/20x2
Less: Accumulated depreciation: P420,000/10 years x 2 years
Unrealized gain on sale of equipment
Realized gain depreciation: P56,000/8 years
P420,000
84,000
53. b
Eliminating entries:
12/31/20x5: date of acquisition
Restoration of BV and eliminate unrealized gain
Equipment
Gain
Accumulated depreciation
10,000
150,000
160,000
336,000
P 56,000
P 7,000
390,000
160,000
Equipment
Cash
390,000
390,000
400,000
150,000
Mortar
Selling price
Less: Book value, 12/31/20x5
Cost, 1/1/20x2
Less: Accumulated depreciation : P400,000/10 years x 4 years
Unrealized gain on sale of equipment
Realized gain depreciation: P150,000/6 years
P390,000
P400,000
160,000
240,000
P 150,000
P 25,000
25,000
25,000
Depreciation expense
(P400,000 / 10 years)
Acc. Depreciation
Depreciation expense
(P390,000 / 6 years)
Acc. depreciation
40,000
40,000
57. c
Eliminating entries:
12/31/20x6: subsequent to date of acquisition
Equipment
Retained earnings (150,000 25,000)
Accumulated depreciation (P160,000 P25,000)
58. a
Eliminating entries:
1/1/20x5: date of acquisition
Restoration of BV and eliminate unrealized gain
Equipment
Gain
Accumulated depreciation
65,000
65,000
10,000
100,000
135,000
50,000
70,000
120,000
350,000
120,000
Equipment
Cash
350,000
350,000
400,000
70,000
Mortar
Selling price
Less: Book value, 12/31/20x5
Cost, 1/1/20x2
Less: Accumulated depreciation : P400,000/10 years x 3 years
Unrealized gain on sale of equipment
Realized gain depreciation: P70,000/7 years
P350,000
P400,000
120,000
280,000
P 70,000
P 10,000
10,000
10,000
Depreciation expense
(P400,000 / 10 years)
Acc. Depreciation
Depreciation expense
(P350,000 / 7 years)
Acc. depreciation
40,000
40,000
Eliminating entries:
12/31/20x6: subsequent to date of acquisition
Equipment
Retained earnings (70,000 10,000)
Accumulated depreciation (P120,000 P10,000)
50,000
50,000
50,000
60,000
110,000
63. a
Consolidated Net Income for 20x9
P Companys net income from own/separate operations.
Realized gain on sale of equipment (downstream sales) through depreciation
P Companys realized net income from separate operations*...
S Companys net income from own operations.
Unrealized loss on sale of equipment (upstream sales)
Realized loss on sale of equipment (upstream sales) through depreciation
P 140,000
___0
P 140,000
P 30,000
20,000
0)
P 50,000
50,000
P190,000
0
P190,000
15,000
P175,000
P180,000
P500,000
300,000
200,000
P( 20,000)
P( 5,000)
Or, alternatively
Consolidated Net Income for 20x9
P Companys net income from own/separate operations.
Realized gain on sale of equipment (downstream sales) through depreciation
P Companys realized net income from separate operations*...
S Companys net income from own operations.
Unrealized loss on sale of equipment (upstream sales)
Realized loss on sale of equipment (upstream sales) through depreciation
S Companys realized net income from separate operations*...
Total
Less: Non-controlling Interest in Net Income* *
Amortization of allocated excess
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent..
Add: Non-controlling Interest in Net Income (NCINI)
Consolidated Net Income for 20x9
*that has been realized in transactions with third parties.
P 140,000
___0
P 140,000
P 30,000
20,000
(
0)
P 50,000
50,000
P190,000
P 15,000
____0
15,000
P175,000
_ 15,000
P190,000
P 30,000
(
P
P
P
P
20,000
0)
50,000
0
50,000
30%
15,000
0
15,000
64. b
Consolidated Net Income for 20y0
P Companys net income from own/separate operations.
Realized gain on sale of equipment (downstream sales) through depreciation
P Companys realized net income from separate operations*...
S Companys net income from own operations.
Unrealized loss on sale of equipment (upstream sales)
Realized loss on sale of equipment (upstream sales) through depreciation
S Companys realized net income from separate operations*...
Total
Less: Amortization of allocated excess
Consolidated Net Income for 20y0
Less: Non-controlling Interest in Net Income* *
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent 20y0..
*that has been realized in transactions with third parties.
P 162,000
___0
P 162,000
P 45,000
( 5,000)
P 40,000
40,000
P202,000
0
P202,000
7,500
P194,500
Or, alternatively
Consolidated Net Income for 20y0
P Companys net income from own/separate operations.
Realized gain on sale of equipment (downstream sales) through depreciation
P Companys realized net income from separate operations*...
S Companys net income from own operations.
Unrealized loss on sale of equipment (upstream sales)
P 162,000
___0
P 162,000
P 45,000
( 5,000)
P 40,000
40,000
P202,000
P 7,500
____0
7,500
P194,500
_ _ 7,500
P202,000
P 30,000
( 5,000)
P 25,000
0
P 25,000
30%
P 7,500
0
P 7,500
Sales price
Less: Cost
Unrealized (loss) gain
S3
145,000
160,000
( 15,000)
P 200,000
___0
P 200,000
P100,000
70,000
95,000
15,000
( 52,000)
( 23,000)
P205,000
205,000
P405,000
0
P405,000
35,600
P369,400
S2
197,000
145,000
52,000
S1
220,000
197,000
23,000
Or, alternatively
Consolidated Net Income for 20x4
P Companys net income from own/separate operations.
Realized gain on sale of equipment (downstream sales) through depreciation
P Companys realized net income from separate operations*...
S3 Companys net income from own operations.
S2 Companys net income from own operations.
S1 Companys net income from own operations.
Unrealized loss on sale of equipment (upstream sales) S3
Unrealized gain on sale of equipment (upstream sales) S2
Unrealized gain on sale of equipment (upstream sales) - S1
S Companys realized net income from separate operations*
Total
Less: Non-controlling Interest in Net Income* * (P23,000 + P5,400 + P7,200)
Amortization of allocated excess
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent..
Add: Non-controlling Interest in Net Income (NCINI)
Consolidated Net Income for 20y0
*that has been realized in transactions with third parties.
**Non-controlling Interest in Net Income (NCINI)
S Companys net income of Subsidiary Company from its own
operations (Reported net income of S Company)
P 200,000
___0
P 200,000
P100,000
70,000
95,000
15,000
( 52,000)
( 23,000)
P205,000
P 35,600
____0
_ 35,600
P369,400
_ _35,600
P405,000
S3
P 100,000
205,000
P405,000
S2
P
70,000
S1
P 95,000
15,000
P 115,000
0
P 115000
20%
P 23,000
0
P 23,000
68. d
Eliminating entries:
1/1/20x5: date of acquisition
Restoration of BV and eliminate unrealized gain
Building
Gain
Accumulated depreciation
Parent Books Sky
Cash
Accumulated depreciation
Building
Gain
( 52,000)
18,000
0
P 18,000
30%
P
5,400
0
P 5,400
P
( 23,000)
P 72,000
0
P 72,000
10%
P 7,200
0
P 7,200
3,000
8,250
11,250
Subsidiary Books - Earth
33,000
11,250
Building
Cash
33,000
33,000
36,000
8,250
Sky, 7/1/20x4
Selling price
Less: Book value, 7/11/20x4
Cost, 1/1/20x2
Less: Accumulated depreciation : P36,000/8years x 2.5 years
Unrealized gain on sale of equipment
Realized gain depreciation: P8,250/5.5 years
P33,000
P36,000
11,250
24,750
P 8,250
P 1,500
750
750
2,250
2,250
71. c
Eliminating entries:
12/31/20x5: subsequent to date of acquisition
Realized Gain depreciation
Accumulated depreciation
Depreciation expense
P8,250 / 5.5 x years or P6,000 P4,500
Depreciation expense
(P33,000 / 5.5 years x yrs)
Acc. depreciation
3,000
3,000
1,500
1,500
4,500
4,500
Depreciation expense
(P33,000 / 5.5 years)
Acc. depreciation
72. d
Eliminating entries:
1/1/20x5: subsequent to date of acquisition
Building
Retained earnings (8,250 750)
Accumulated depreciation (P11,250 P750)
6,000
6,000
3,000
7,500
10,500
P68,250
P50,000
__1,250
48,750
P19,500
P 2,000
20x4
90,000
( 19,500)
_ 1,500
72,000
80. It should be noted that PAS 27 allow the use of cost model in accounting for investment in
subsidiary in the books of parent company but not the equity method.
The requirement share of income from Wilson and available choices in the problem are
on the assumption of the use of equity method. So, the answer then would be (b)
computed as follows:
Share in subsidiary net income (120,000 x 90%)
Realized gain on sale of equipment (downstream sales) through depreciation
Net
20x5
108,000
_ 2,000
110,000
81. It should be noted that PAS 27 allow the use of cost model in accounting for investment in
subsidiary in the books of parent company but not the equity method.
The requirement share of income from Wilson and available choices in the problem are
on the assumption of the use of equity method. So, the answer then would be (d)
computed as follows:
Share in subsidiary net income (130,000 x 90%)
Realized gain on sale of equipment (downstream sales) through depreciation
Net
20x6
117,000
_ 2,000
119,000
82. c
Smeder, 1/1/20x4
Selling price
Less: Book value, 1/1/20x4
P84,000
Cost, 1/1/20x4
Less: Accumulated depreciation
Unrealized gain on sale of equipment
Realized gain depreciation: P12,000/6 years
83.
P120,000
__48,000
72,000
P12,000
P 2,000
It should be noted that PAS 27 allow the use of cost model in accounting for investment in
subsidiary in the books of parent company but not the equity method.
The requirement share of income from Wilson and available choices in the problem are
on the assumption of the use of equity method. So, the answer then would be (b)
computed as follows:
20x4
22,400
( 9,600)
84.
_ 1,600
14,400
It should be noted that PAS 27 allow the use of cost model in accounting for investment in
subsidiary in the books of parent company but not the equity method.
The requirement share of income from Wilson and available choices in the problem are
on the assumption of the use of equity method. So, the answer then would be (c)
computed as follows:
20x5
25,600
_ 1,600
27,200
85. d
Eliminating entries:
1/1/20x4: date of acquisition
Restoration of BV and eliminate unrealized gain
Equipment
Gain
Accumulated depreciation
36,000
12,000
48,000
Parent Smeder
Cash
Accumulated depreciation
Equipment
Gain
Subsidiary - Collins
84,000
48,000
Equipment
Cash
84,000
84,000
120,000
12,000
Smeder, 1/1/20x4
Selling price
Less: Book value, 1/1/20x4
Cost, 1/1/20x4
Less: Accumulated depreciation
Unrealized gain on sale of equipment
Realized gain depreciation: P12,000/6 years
P84,000
P120,000
__48,000
Eliminating entries:
12/31/20x4: subsequent to date of acquisition
Realized Gain depreciation
Accumulated depreciation
Depreciation expense
P12,000 / 6 years or P14,000 P12,000
Should be in CFS Parent Smeder
Depreciation expense
(P72,000 /6 years)
12,000
72,000
P12,000
P 2,000
2,000
2,000
Recorded as Subsidiary - Collins
Depreciation expense
(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).
86. c
20x4
( 12,000)
___2,000
( 10,000)
87. d
Eliminating entries:
5/1/20x4: date of acquisition
Restoration of BV and eliminate unrealized gain
Cash
Loss
5,000
5,000
Parent Stark
Cash
Loss
Land
Subsidiary - Parker
80,000
5,000
Land
Cash
85,000
85,000
85,000
Selling price
Less: Book value, 5/1/20x4
Unrealized gain on sale of equipment
Stark
P 80,000
_85,000
P ( 5,000)
Parker
P 92,000
__80,000
P 12,000
Consolidated
P 92,000
_85,000
P 7,000
5,000
5,000
90. It should be noted that PAS 27 allow the use of cost model in accounting for investment in
subsidiary in the books of parent company but not the equity method.
The requirement income from Stark and available choices in the problem are on the
assumption of the use of equity method. So, the answer then would be (e) computed as
follows:
Share in subsidiary net income (200,000 x 90%)
Unrealized loss on sale of land (upstream sales): P5,000 x 90%
Net
20x4
180,000
_ 4,500
184,500
91. It should be noted that PAS 27 allow the use of cost model in accounting for investment in
subsidiary in the books of parent company but not the equity method.
The requirement income from Stark and available choices in the problem are on the
assumption of the use of equity method. So, the answer then would be (d) computed as
follows:
Share in subsidiary net income (200,000 x 90%)
20x4
180,000
_ 4,500
184,500
92. b
Selling price
Less: Book value, 5/1/20x4
Unrealized gain on sale of equipment
Stark
P 80,000
_85,000
P ( 5,000)
Parker
P 92,000
__80,000
P 12,000
Consolidated
P 92,000
_85,000
P 7,000
P 300,000
34,125
P 265,875
P 150,000
(30,000)
4,500
P 124,500
124,500
P390,375
3,000
P387,375
24,300
P363,075
Or, alternatively
Consolidated Net Income for 20x5
P Companys net income from own/separate operations.
Realized gain on sale of equipment (downstream sales) through depreciation
(P35,000 P875)
P Companys realized net income from separate operations*...
S Companys net income from own operations.
Unrealized gain on sales of equipment (upstream sales)
Realized gain on sale of equipment (upstream sales) through depreciation
S Companys realized net income from separate operations*...
Total
Less: Non-controlling Interest in Net Income* *
Amortization of allocated excess
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent..
Add: Non-controlling Interest in Net Income (NCINI)
Consolidated Net Income for 20x5
*that has been realized in transactions with third parties.
P 300,000
34,125
P 265,875
P 150,000
(30,000)
4,500
P 124,500
P 24,300
3,000
124,500
P390,375
27,300
P363,075
_ 24,300
P387,375
P 150,000
( 30,000)
4,500
P 124,500
3,000
P 121,500
20%
P 24,300
0
P 24,300
Theories
1.
2.
3.
4.
5.
d
c
d
d
b
6.
7.
8.
9.
10,
N/A
c
a
a
c
11.
12.
13.
14.
15,
b
c
d
b
c
16.
17.
18.
19.
20.
c
b
a
a
c
21.
22.
23.
24.
25.
a
b
d
c
c
26.
27.
28.
29.
30.
b
b
c
b
c
31
32.
33.
34.
35.
c
b
c
d