Professional Documents
Culture Documents
Problem I
1
Equipment
Beginning R/E Prince (P100,000 .80)
Noncontrolling Interest (P100,000 .20)
Accumulated Depreciation
540,000
80,000
20,000
3.
50,000
640,000
25,000
20,000
5,000
P3,270,000
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,
P 820,000
25,000
P 845,000
P3,270,000
0
P3,270,000
845,000
P4,115,000
0
P4,115,000
169,000
P3,946,000
Or, alternatively
P3,270,000
0
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
P820,000
25,000
P 845,000
P 169,000
0
P3,270,000
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
50,000
25,000
25,000
P3,270,000
P820,000
.8
640,000
P820,000
P164,000
25,000
P3,295,000
656,000
P3,951,000
NCI-CNI
CI-CNI
CNI
P 164,000
3,951,000
P4,115,000
or,
P 820,000
0
P 820,000
P3,270,000
____25,000
P3,295,000
820,000
P4,115,000
0
P4,115,000
164,000
P3,951,000
Or, alternatively
Problem II
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.
84,000
80,000
84,000
12,000
P820,000
0
P 820,000
P 164,000
0
P3,270,000
25,000
P3,295,000
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
150,000
14,000
84,000
Accumulated Depreciation
3.
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.
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 III
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
Accumulated depreciation adjustment:
Required [(P300,000 / 10 years) x 4 years]
Reported [(P245,000 / 7 years) x 1 year]
Required increase
2.
12,000
55,000
35,000
P245,000
(210,000)
P 35,000
P120,000
(35,000)
P 85,000
5,000
85,000
E(1)
Truck
Retained Earnings
Depreciation Expense
Accumulated Depreciation
55,000
30,000
5,000
80,000
P150,000
(70,000)
P 80,000
Problem IV
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 V
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%)
Increase in land (P7,200 x 80%).
Increase in equipment (P96,000 x 80%)
Decrease in buildings (P24,000 x 80%).....
Decrease in bonds payable (P4,800 x 80%)
Positive excess: Partial-goodwill (excess of cost over
fair value)...
P 372,000
P 192,000
96,000
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:
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%
Interest
Goodwill applicable to NCI..
Goodwill impairment loss based on 100% fair value or fullGoodwill
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
28,800
372,000
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
240,000
120.000
(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
6,000
6,000
6,000
1,200
3,000
288,000
72,000
216,000
18,000
84,000
6,000
12,000
1,200
3,000
28,800
7,200
15,000
30,000
31,200
12,000
2,250
3,900
P 91,200
( 31,200)
3,900
P 63,900
13,200
P 50,700
20%
P
10,140
10,140
36,000
45,000
43,200
2,250
3,900
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
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
Cr.
(5) 15,000
(6) 31,200
(4) 28,800
Consolidated
P 720,000
_________
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)
3,000
211,800
P571,800
P120,000
91,200
P211,200
(1) 120,000
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
P360,000
Dr.
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
(7)
(8)
2,250
3,900
P
P
(
P
(9 10,140
P 360,000
207,810
P 567,810
(4)
(2)
6,000
(2)
7,200
(5) 30,000
(6) 12,000
(2)
(2)
499,800
240,000
175,200
(1) 240,000
_________
P1,984,800
_________
P1,008,000
__________
P 834,450
(4)
3)
36,000
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
7,200
1,200
66,000
3,000
502,050
217,950
10,140)
207,810
(3) 12,000
(5) 45,000
(6) 43,200
72,000
________
462,000
1,044,000
3,600
9,000
P2,466,600
P229,050
495,000
193,800
360,000
600,000
(1 ) 72,000
(2) 18,000
(9) 10,140
P 834,450
495,810
____92,940
P2,466,600
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
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
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
(E3) Inventory.
Accumulated depreciation equipment..
Accumulated depreciation buildings..
Land.
Discount on bonds payable.
6,000
96,000
192,000
7,200
4,800
332,160
83,040
Goodwill.
Buildings..
Non-controlling interest (P90,000 x 20%)
Investment in S Co.
12,000
13,560
2,640
6,000
12,000
1,200
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
15,000
30,000
24,960
6,240
12,000
5,250
216,000
18,000
84,000
6,000
24,000
2,400
3,000
48,000
45,000
43,200
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
(5)
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
Depreciation expense
S Company
Net income, from above
Total
Dividends paid
P Company
S Company
Retained earnings, 12/31 to Balance
Sheet
230,400
P730,200
P 175,200
__90,000
P265,200
72,000
-
48,000
P658,200
P217,200
Dr.
Cr.
38,400
(7)
3,000
(8)
3,900
Consolidated
P 900,000
___________
P 900,000
P 408,000
83,100
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
1,200
126,000
618,300
281,700
17,340)
264,360
P 495,810
264,360
P 760,170
(5)
48,000
72,000
________
P 688,170
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
265,200
180,000
216,000
210,000
240,000
P 102,000
96,000
108,000
48,000
180,000
720,000
540,000
372,000
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
658,200
240,000
217,200
___ _____
P2,203,200
_________
P1,074,000
(1)
6,000
(3)
7,200
(5) 30,000
(6) 12,000
(3)
(3)
(1)
4,800
12,000
44,160
(3) 96,000
(7) 5,250
(8) 7,800
(3) 192,000
(4) 12,000
(2)
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
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
(4) 2,640
(5) 9,600
(6) 6,240
__________
P 979,350
P 367,200
276,000
324,000
265,200
(2 83,040
(3) 18,000
(8)
780
(9) 17,340
P 979,350
688,170
____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:
b.
c.
6.
Consolidated SHE:
Stockholders Equity
Common stock, P10 par
Retained earnings
Parents Stockholders Equity / CI SHE
NCI, 1/1/20x4
Consolidated SHE, 1/1/20x4
P360,000
P 240,000
120,000
P 360,000
90,000
P 450,000
20
P 90,000
P 600,000
360,000
P 960,000
___90,000
P1,050,000
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.
P183,000
P 91,200
( 31,200)
3,900
P 63,900
P 10,140
13,200
3,000
(15,000)
2,250
P170,250
63,900
P234,150
26,340
P207,810
_ 10,140
P217,950
b. NCI-CNI P10,140
P 91,200
( 31,200)
3,900
P 63,900
13,200
P 50,700
20%
P 10,140
e.
P360,000
207,810
P567,810
72,000
P495,810
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
P 90,000
3,90
P 93,900
P192,000
3,000
P195,000
93,900
P288,900
7,200
P281,700
17,340
P264,360
Or, alternatively
P 90,000
3,900
P 93,900
P 17,340
7,200
P192,000
3,000
P195,000
93,900
P288,900
24,540
P264,360
_ 17,340
P281,700
b. NCI-CNI P17,340
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:
e.
P658,200
9,750
P648,450
P 217,200
120,000
P 97,200
20,400
P
P
23,400
53,400
80%
42,720
3,000
39,720
P688,170
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
f.
20
P 100,680
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
__100,680
P1,188,850
Problem VI
Requirements 1 to 4
Schedule of Determination and Allocation of Excess
Date of Acquisition January 1, 20x4
P 372,000
93,000
P 465,000
P 240,000
120,000
P
6,000
7,200
96,000
( 24,000)
4,800
Over/
under
P 6,000
Life
1
96,000
(24,000)
4,800
8
4
4
90,000
P 15,000
360,000
P 105,000
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
28,800
On the books of S Company, the P36,000 dividend paid was recorded as follows:
Dividends paid
36,000
372,000
28,800
Cash.
Dividends paid by S Co..
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
240,000
120.000
(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
288,000
72,000
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
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
6,000
12,000
1,200
3,750
36,000
15,000
30,000
31,200
12,000
2,250
3,900
9,390
45,000
43,200
2,250
3,900
9,390
P 91,200
( 31,200)
3,900
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
Dr.
Cr.
(5) 15,000
(6) 31,200
(4) 28,800
(3)
(3)
6,000
6,000
(7)
2,250
Consolidated
P 720,000
_________
P 720,000
P 348,000
83,850
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
Accumulated depreciation
- equipment
(3)
3,750
(9)
9,390
211,800
P571,800
P120,000
91,200
P211,200
(1) 120,000
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
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
Total
1,200
372,000
Total
499,800
240,000
175,200
_________
P1,984,800
_________
P1,008,000
3,900
(3)
P360,000
(8)
18,000
P180,000
P 91,200
P 91,200
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
(2) 80,000
(7) 2,250
(8) 3,900
(2) 192,000
(3) 6,000
1,200
66,000
3,750
P 502,800
P 217,200
( 9,390)
P 207,810
3)
36,000
6,000
(2) 216,000
(3) 1,200
(3) 3,750
(1) 288,000
(2) 84,000
72,000
________
462,000
1,044,000
3,600
11,250
P2,468,850
(3) 10,000
(5) 45,000
(6) 43,200
P229,050
495,000
193,800
360,000
600,000
(1) 240,000
(3)
7,200
__________
P 843,690
(1 ) 72,000
(2) 21,000
(9) 9,390
P 843,690
P Co.
P 540,000
216000
P 324,000
60,000
72,000
P 192,000
38,400
P 230,400
P 72,000
495,810
____95,190
P2,468,850
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
44,160
48,000
44,160
P175,200
120,000
P 55,200
80%
P 44,160
240,000
175,200
(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
332,160
83,040
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
15,000
30,000
24,960
6,240
12,000
5,250
7,800
P 90,000
3,900
P 93,900
( 7,200)
17,340
48,000
45,000
43,200
3,000
2,250
3,900
3,120
780
17,340
P 86,700
Multiplied by: Non-controlling interest %..........
20%
Non-controlling Interest in Net Income (NCINI
P 17,340
Less: NCI on goodwill impairment loss on fullGoodwill
0
Non-controlling Interest in Net Income (NCINI)
P 17,340
*from separate transactions that has been realized in transactions
with third persons.
P Co
P540,000
38,400
P578,400
P216,000
S Co.
P360,000
P360,000
P192,000
(5)
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
Depreciation expense
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
230,400
P730,200
Dr.
Cr.
38,400
(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
372,000
P2,203,200
P1,074,000
P 150,000
P 102,000
450,000
306,000
105,000
240,000
88,800
120,000
(5)
(3)
(3)
(6)
(7)
6,000
7,200
30,000
12,000
(3)
(3)
(1)
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
Total
600,000
658,200
240,000
217,200
___ _____
P2,203,200
_________
P1,074,000
600,000
(2) 240,000
(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
688,170
____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:
b.
c.
6.
P360,000
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 240,000
120,000
P 360,000
90,000
P 450,000
20
P 90,000
3,000
P 93,000
P 600,000
360,000
P 960,000
___93,000
P1,053,000
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 (downstream sales)
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 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.
b. NCI-CNI P10,140
P 91,200
( 31,200)
3,900
P 63,900
P 10,140
13,200
3,000
P183,000
(15,000)
2,250
P170,250
63,900
P234,150
26,340
P207,810
10,140
P217,950
P 91,200
( 31,200)
3,900
P 63,900
13,200
P 50,700
20%
P 10,140
750
P 9,390
e.
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
P360,000
207,810
P567,810
72,000
P495,810
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
P 600,000
495,810
P1,095,810
___95,190
P1,191,000
12/31/20x5:
a. CI-CNI P281,700
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
P 90,000
3,900
P 93,900
P 17,340
7,200
P192,000
3,000
P195,000
93,900
P288,900
24,540
P264,360
_ 17,340
P281,700
b. NCI-CNI P17,340
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
__ 8,760
P495,810
Or, alternatively:
e.
f.
Consolidated SHE:
Stockholders Equity
Common stock, P10 par
Retained earnings
Parents Stockholders Equity / CI SHE, 12/31/20x5
NCI, 12/31/20x5
P658,200
9,750
P648,450
P 217,200
120,000
P 97,200
20,400
P
P
23,400
53,400
80%
42,720
3,000
39,720
P688,170
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
P 600,000
688,170
P1,288,170
__102,930
Problem VII
1.
20x4
20x5
P 46,200 (2)
Controlling interest in
290,500 (3)
Consolidated net income
279,300 (4)
(1)
(2)
(3)
(4)
2.
P1,391,100
2015
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
P262,000
10,000
P262,000
(8,200)
P253,800
P257,800
P240,000
100,000
(8,000)
10,000
P342,000
Problem IX
1.
2.
Land account as reported
Less: Intercompany profit
Restated land account
3.
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
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
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)
P100,000
42,500
P142,500
2,500
52,500
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.
Problem XIII
P 98,000
20,000
50,000
8,750
P176,750
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
10,000
Land
2.
10,000
10,000
10,000
6,000
4,000
10,000
10,000
10,000
Problem XVI
1.
2.
45,000
31,500
13,500
30,000
Problem XVII
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)
(P40,000 x .25)
Income to controlling interest
P116,250
(10,000)
P140,000
Problem XVIII
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 XIX
1.
Eliminating entry, December 31, 20x9:
E(1) Buildings and Equipment
Loss on Sale of Building
Accumulated Depreciation
Eliminate unrealized loss on building.
2.
36,000
120,000
3.
156,000
P 15,000
36,000
156,000
4,000
P300,000
(144,000)
P156,000
P 20,000
P
(16,000)
4,000
P125,000
51,000
P176,000
(15,300)
P160,700
124,000
25,200
10,800
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 XX
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%)
Increase in land (P7,200 x 80%).
Increase in equipment (P96,000 x 80%)
Decrease in buildings (P24,000 x 80%).....
Decrease in bonds payable (P4,800 x 80%)
Positive excess: Partial-goodwill (excess of cost over
fair value)...
P 372,000
P 192,000
96,000
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:
S Co.
Book value
S Co.
Fair value
Increase
(Decrease)
Equipment..................
Less: Accumulated depreciation..
Net book value...
180,000
96,000
84,000
180,000
180,000
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:
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
P
S
Seller
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
P Co.
Realized gain
depreciation**
P3,000/year
P3,900/year
S Co.
20x4
P2,250
P3,900
Sales
Less: Cost of goods sold
Gross profit
Less: Depreciation expense
Other expenses
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
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
Acquisition of S Company.
28,800
72,960
28,800
72,960
13,560
13,560
372,000
15,000
24,960
2,250
3,120
15,000
24,960
2,250
3,120
Thus, the investment balance and investment income in the books of P Company is as follows:
Cost, 1/1/x4
Investment in S
372,000
28,800
NI of Son
(91,200 x 80%)
72,960
13,560
Realized gain downstream sale
2,250
15,000
Realized gain upstream sale
3,120
24,960
Investment
Income
Balance, 12/31/x4
368,010
Amortization
&
impairment
13,560
72,960
Unrealized gain downstream sale 15,000
2,250
Unrealized gain upstream sale
24,960
3,120
24,810
Amortization &
impairment
Unrealized gain downstream sale
Unrealized gain upstream sale
NI of S
(91,200 x 80%)
Realized gain downstream sale
Realized gain upstream sale
Balance, 12/31/x4
240,000
120,000
(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
6,000
6,000
6,000
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
288,000
72,000
216,000
18,000
84,000
6,000
12,000
1,200
3,000
Total
14,400
24,810
3,990
7,200
36,000
follows:
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
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
31,200
12,000
2,250
3,900
P 91,200
10,140
45,000
43,200
2,250
3,900
10,140
(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 [(E3)].
( 31,200)
3,900
P 63,900
13,200
P 50,700
20%
P
10,140
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
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 S Co
Total
Accumulated depreciation
- equipment
Accumulated depreciation
- buildings
Cr.
(5) 15,000
(6) 31,200
(4) 28,800
Consolidated
P 720,000
_________
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)
3,000
(9)
10,140
207,810
P567,810
P120,000
91,200
P211,200
(1) 120,000
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
P360,000
Dr.
368,010
P1,980,810
P1,008,000
P 135,000
P 96,000
405,000
288,000
(7)
P
P
(
P
(2)
(2)
4,800
12,000
(2) 96,000
(7) 2,250
(8)
3,900
(2) 192,000
(3)
6,000
1,0200
66,000
3,000
502,050
217,950
10,140)
207,810
P 360,000
207,810
P567,810
(4)
(2)
6,000
(2)
7,200
(5) 30,000
(6) 12,000
2,250
(8)
3,900
(3)
36,000
5,000
(2) 216,000
(3) 1,200
(3) 3,000
(1) 288,000
(2) 84,000
(3) 12,000
(5) 45,000
(6) 43,200
72,000
________
462,000
1,044,000
3,600
9,000
P2,466,600
P229,050
495,000
Accounts payable
Bonds payable
Common stock, P10 par
Common stock, P10 par
Retained earnings, from above
Non-controlling interest
Total
105,000
240,000
600,000
88,800
120,000
495,810
240,000
175,200
(1) 240,000
_________
P1,980,810
_________
P1,008,000
__________
P 840,690
(4)
7,200
193,800
360,000
600,000
(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
Sales
Less: Cost of goods sold
Gross profit
Less: Depreciation expense
Other expense
Net income from its own separate operations
Add: Investment income
Net income
Dividends paid
495,810
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
72,000
5,760
3,000
3,120
38,400
72,000
5,760
3,000
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
84,000
198,000
6,000
3,600
9,000
6,000
6,000
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
180,000
15,360
70,440
12,000
1,200
Total
P7,200
72.360
9,600
332,160
83,040
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
24,960
6,240
12,000
5,250
7,800
17,340
45,000
43,200
3,000
2,250
3,900
3,120
780
17,340
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.
P Co
P540,000
72,360
P612,360
P216,000
S Co.
P360,000
P360,000
P192,000
Dr.
(4)
Depreciation expense
60,000
24,000
(3)
6,000
Interest expense
Other expenses
72,000
54,000
(3)
1,200
Cr.
72,360
(7)
3,000
(8)
3,900
Consolidated
P 900,000
___________
P 900,000
P 408,000
83,100
1,200
126,000
P348,000
P264,360
P264,360
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
P495,810
P270,000
P 90,000
P 90,000
P
P
(
P
(9) 17,340
618,300
281,700
17,340)
264,360
P495,810
_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
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
(1) 175,200
264,360
P 760,170
(5)
(2)
(5)
(6)
7,200
30,000
12,000
(2)
(2)
(5)
(6)
3,600
9,000
15,000
24,960
(2) 84,000
(7) 5,250
(8) 7,800
(2) 198,000
(3)
6,000
688,170
240,000
217,200
(1) 240,000
___ _____
P2,233,170
_________
P1,074,000
__________
P 930,750
(4)
(6)
9,600
6,240
48,000
(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) 69,200
(2) 15,360
(8)
780
(9) 17,340
P 930,750
688,170
____100,680
P2,749,800
P 372,000
93,000
P 465,000
P 240,000
120,000
P
6,000
7,200
96,000
( 24,000)
4,800
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
90,000
P 15,000
360,000
P 105,000
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
Acquisition of S Company.
28,800
72,960
372,000
28,800
72,960
13,560
13,560
15,000
24,960
2,250
3,120
15,000
24,960
2,250
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
Amortization &
impairment
Unrealized gain downstream sale
Unrealized gain upstream sale
Investment in S
372,000
28,800
72,960
2,250
3,120
368,010
13,560
15,000
24,960
Investment Income
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
(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
288,000
72,000
216,000
21,000
84,000
6,000
6,000
6,000
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
6,000
12,000
1,200
3,750
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
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
2,250
3,900
9,390
3,900
9,390
( 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
-
Interest expense
Other expenses
Goodwill impairment loss
Total Cost and Expenses
Net Income
NCI in Net Income - Subsidiary
2,250
P 91,200
Depreciation expense
43,200
Dr.
Cr.
(5) 15,000
(6) 31,200
(4) 28,800
(3)
6,000
24,000
(3)
6,000
18,000
P180,000
P 91,200
-
(3)
1,200
(3)
3,750
(9)
9,390
(7)
2,250
(8)
3,900
Consolidated
P 720,000
_________
P 720,000
P 348,000
83,850
1,200
66,000
3,750
P 502,800
P 217,200
( 9,390)
P207,810
P360,000
Accumulated depreciation
- equipment
P 360,000
207,810
P567,810
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
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
Accumulated depreciation
- buildings
Accounts payable
Bonds payable
Common stock, P10 par
Common stock, P10 par
Retained earnings, from above
Non-controlling interest
Total
P 207,810
P120,000
91,200
P211,200
Buildings
Discount on bonds payable
Goodwill
Investment in S Co
Total
P 91,200
495,810
240,000
175,200
_________
P1,980,810
_________
P1,008,000
(1) 120,000
207,810
P 567,810
(4)
(2)
6,000
(2)
6,000
(5) 30,000
(6) 12,000
(2)
(2)
4,800
15,000
(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
72,000
________
462,000
1,044,000
3,600
11,250
P2,468,850
(3) 12,000
(5) 45,000
(6) 43,200
P229,050
495,000
193,800
360,000
600,000
(1) 240,000
(4)
7,200
__________
P 843,690
(1 ) 72,000
(2) 21,000
(9) 9,390
P 843,690
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
495,810
____95,190
P2,468,850
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
5,760
3,000
3,120
72,000
5,760
3,000
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
84,000
198,000
7,200
3,600
11,250
332,160
83,040
216,000
17,610
70,440
6,000
6,000
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
12,000
1,200
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
24,960
6,240
12,000
5,250
7,800
45,000
43,200
3,000
2,250
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
S Co.
P360,000
P360,000
P192,000
(4)
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
_264,360
P760,170
P 175,200
90,000
P265,200
(1) 175,200
72,000
-
48,000
P688,170
P217,200
P 688,170
265,200
180,000
P 102,000
96,000
P 367,200
276,000
P495,810
Dr.
Cr.
72,360
(7)
3,000
(8)
3,900
Consolidated
P 900,000
___________
P 900,000
P 408,000
83,100
P
P
(
P
(9) 17,340
1,200
126,000
618,300
281,700
17,340)
264,360
P495,810
264,360
P 760,170
(5)
48,000
72,000
________
Inventory.
Land.
Equipment
216,000
210,000
240,000
108,000
48,000
180,000
Buildings
Discount on bonds payable
Goodwill
Investment in S Co
720,000
540,000
Total
Accumulated depreciation
- equipment
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
324,000
265,200
(2)
(5)
(6)
7,200
30,000
12,000
(2)
(2)
(5)
(6)
3,600
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
688,170
240,000
217,200
(1) 240,000
___ _____
P2,233,170
_________
P1,074,000
__________
P 933,000
(4)
(6)
9,600
6,240
(2) 216,000
(3) 1,200
(3)
(5)
(6)
12,000
45,000
43,200
462,000
1,044,000
2,400
11,250
P2,752,050
P 255,150
552,000
193,800
360,000
600,000
(1) 83,040
(2) 17,610
(8)
780
(9) 17,340
P 933,000
688,170
____102,930
P2,752,050
3. a
P1,050,000
25,000
P1,025,000
P 250,000
5,000
P 245,000
Original cost of
P1,100,000
P 250,000
____50,000
P 300,000
P650,000
__30,000
P620,000
P195,000
___3,000
P192,000
4. 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.
5.
6. e
7. d
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.
Original cost of
P 50,000
___10,000
P 60,000
Sales price
Less: Book value
Cost
Less: Accumulated depreciation (50% x P100,000)
Unrealized gain on sale
Less: Realized gain - depreciation (P30,000 / 5 years)
Net unrealized gain, 12/31/20x6
P 80,000
P100,000
__50,000
8. e
Eliminating entries:
12/31/20x6: subsequent to date of acquisition
Realized Gain depreciation
Accumulated depreciation
Depreciation expense
[P80,000 - (P100,000 - {P100,000 x 50%])] = P30,000 / 5 years or
P15,000 P8,000 = P7,000
Should be in CFS Parent Pylux
Depreciation expense
(P50,000 /5 years)
Acc. Depreciation
10,000
100,000
__50,000
P 30,000
___6,000
P 24,000
6,000
6,000
Depreciation expense
(P80,000 / 5 years)
Acc. depreciation
9. d
Unrealized gain on sales of equipment (downstream sales)
Realized gain on sale of equipment (downstream sales) through depreciation
P90,000 / 10 years
Net
10. d
Unrealized gain on sale of equipment (downstream sales)
Realized gain on sale of equipment (downstream sales) through depreciation
P150,000 / 10 years
Net
11. 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
16,000
16,000
20x4
( 90,000)
20x5
___9,000
( 81,000)
9,000
9,000
20x4
( 150,000)
20x5
___15,000
( 135,000)
20x4
( 20,000)
___4,000
-0-
-0-
15,000
15,000
20x5
-0-
__4,000
Net
( 16,000)
__4,000
12. e
Original cost of
P 40,000
___20,000
P 70,000
P 48,000
P100,000
__40,000
14. a
Eliminating entries:
12/31/20x7: subsequent to date of acquisition
Realized Gain depreciation
Depreciation expense
Accumulated depreciation
[P48,000 - (P100,000 - P40,000) = P(12,000) / 6 years or P10,000
P8,000 = P2,000
Depreciation expense
(P60,000 /6 years)
Acc. Depreciation
100,000
__60,000
P(12,000)
___4,000
P( 8,000)
2,000
2,000
Depreciation expense
(P48,000 / 6 years)
Acc. depreciation
8,000
15. c
Original cost of
P 100,000
8,000
P 80,000
____8,000
P 88,000
P 45,000
P100,000
__80,000
5,000
__20,000
P 25,000
__10,000
P 15,000
5,000
Depreciation expense
(P20,000 /5 years)
Acc. Depreciation
4,000
Depreciation expense
(P45,000 / 5 years)
Acc. depreciation
9,000
9,000
18. c
19. b
20. c (P20,000/20 years = P1,000), the eliminating entry to recognize the gain depreciation would be as
follows:
Accumulated depreciation 1,000
Depreciation expenses..
1,000
21. a
The truck account will be debited for P3,000 in the eliminating entry:
Truck
3,000
Gain
15,000
Accumulated depreciation
18,000
Seller
Cash
Accumulated
Truck
Gain
50,000
18,000
53,000
15,000
Truck
Cash
Buyer
50,000
50,000
22. b
Correction: On January 1, 20x3 instead of 20x4
P 55,000
(15,000)
5,000
P 45,000
P 98,000
___0
P 98,000
45,000
P143,000
0
P143,000
18,000
P125,000
Or, alternatively
P 55,000
(15,000)
5,000
P 45,000
P 18,000
____0
P 98,000
___0
P 98,000
45,000
P143,000
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
23.
24.
25.
26.
27.
P40,000
10,000
P50,000
(3,000)
P47,000
P 84,000
60,000
P144,000
__ 4,375
P139,625
20x6
( 56,000)
___7,000
Net
( 49,000)
Selling price
Less: Book value, 1/1/20x6
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
P 392,000
P420,000
84,000
336,000
P 56,000
P 7,000
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.
39.
40.
P15,000
(5,000)
P 85,000
45,000
P130,000
(10,000)
P120,000
41. b
Eliminating entries:
12/31/20x5: date of acquisition
Restoration of BV and eliminate unrealized gain
Equipment
Gain
Accumulated depreciation
Parent Books Mortar
390,000
160,000
400,000
150,000
(10,000)
P 35,000
x
.40
P 14,000
Cash
Accumulated depreciation
Equipment
Gain
P 45,000
10,000
150,000
Equipment
Cash
160,000
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
P390,000
P400,000
160,000
240,000
P 150,000
390,000
P 25,000
Depreciation expense
(P400,000 / 10 years)
Acc. Depreciation
40,000
40,000
25,000
Depreciation expense
(P390,000 / 6 years)
Acc. depreciation
45. c
Eliminating entries:
12/31/20x6: subsequent to date of acquisition
Equipment
Retained earnings (150,000 25,000)
Accumulated depreciation (P160,000 P25,000)
350,000
120,000
50,000
70,000
400,000
70,000
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
65,000
135,000
120,000
Equipment
Cash
350,000
Mortar
Depreciation expense
(P400,000 / 10 years)
65,000
10,000
100,000
46. a
Eliminating entries:
1/1/20x5: date of acquisition
Restoration of BV and eliminate unrealized gain
Equipment
Gain
Accumulated depreciation
Cash
Accumulated depreciation
Equipment
Gain
25,000
350,000
P350,000
P400,000
120,000
280,000
P 70,000
P 10,000
10,000
10,000
Depreciation expense
(P350,000 / 7 years)
50,000
Acc. Depreciation
40,000
Acc. depreciation
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
60,000
110,000
Or, alternatively
P 30,000
20,000
(
0)
P 50,000
P 140,000
___0
P 140,000
50,000
P190,000
P 15,000
____0
15,000
P175,000
_ 15,000
P190,000
P 30,000
(
20,000
0)
P 50,000
0
P 50,000
30%
P 15,000
0
52. b
P 15,000
P 45,000
( 5,000)
P 40,000
P 162,000
___0
P 162,000
40,000
P202,000
0
P202,000
7,500
P194,500
Or, alternatively
P 45,000
( 5,000)
P 40,000
P 7,500
____0
33,000
11,250
7,500
P 30,000
( 5,000)
P 25,000
0
P 25,000
30%
P 7,500
0
P 7,500
Cash
Accumulated depreciation
Building
40,000
P202,000
P194,500
_ _ 7,500
P202,000
53. d
Eliminating entries:
1/1/20x5: date of acquisition
Restoration of BV and eliminate unrealized gain
Building
Gain
Accumulated depreciation
P 162,000
___0
P 162,000
3,000
8,250
11,250
36,000
Building
Cash
33,000
33,000
Gain
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
Depreciation expense
(P24,750 / 5.5 x years)
Acc. Depreciation
2,250
Depreciation expense
(P33,000 / 5.5 years x yrs)
Acc. depreciation
2,250
750
56. 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
(P24,750 / 5.5 years)
Acc. Depreciation
750
3,000
1,500
3,000
1,500
57. d
Eliminating entries:
1/1/20x5: subsequent to date of acquisition
Building
Retained earnings (8,250 750)
Accumulated depreciation (P11,250 P750)
Depreciation expense
(P33,000 / 5.5 years)
Acc. depreciation
6,000
3,000
7,500
6,000
10,500
58.
59.
60.
61.
62.
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.
65.
66.
67.
68.
69.
d
a
b
b at its original cost or book value.
b
20x4: Any intercompany gain should be eliminated in the CFS.
20x5
Selling price unrelated party
Less: Original Book value, 9/26/20x5
Accumulated depreciation, 9/26/20x5
Selling price
Less: Book value
Gain
S (Nectar)
P 50,000
_30,000
P 20,000
Selling price
Less: Book value
Gain
Selling price
Less: Book value: Cost
P2,000,000
Accumulated ___200,000
Unrealized gain on sale of
equipment
Realized Gain depreciation
(P180,000/9 x 6 yrs)
Net unrealized gain, 1/1/20x9
Gain on sale
*P1,980,000/ 9 x 6 years = P1,320,000
**P1,800,000/9 x 6 years = P1,200,000
S
P1,980,000
1,800,00
40,000
P 70,000
P (Lorikeet)
P 110,000
__50,000
P 60,000
Consolidated
P 110,000
_30,000
P 80,000
P 1,800,000
**1,200,000
660,000
120,000
P 60,000
P 60,000
P 780,000
Consolidated
P1,440,000
__600,000
S
P 990,000
__900,000
P990,000
*440,000
P 840,000
P 100,000
P1,000,000
100,000
Consolidated
P 180,000
Selling price
Less: Book value
Gain
74. c
P
P1,440,000
P1,980,000
*1,320,000
Selling price
Less: Book value : Cost
Accumulated
Unrealized gain on sale of
Equipment,1/1/20x4
Realized Gain depreciation
(P90,000/9 x 4 yrs)
Net unrealized gain, 1/1/20x8
Gain on sale
*P990,000/ 9 x 4 years = P440,000
**P900,000/9 x 4 years = P400,000
P 30,000
72. d
P 100,000
__60,000
P 40,000
P
P720,000
550,000
Consolidated
50,000
P 900,000
**400,000
P 150,000
Consolidated
P 720,000
__500,000
P 90,000
40,000
P 50,000
P 50,000
__________
P 170,000
___________
P 220,000
P 14,000
P20,000
10,000
10,000
77. b
Selling price
Less: Book value : Cost
Accumulated
Unrealized gain on sale of
Equipment, 12/30/20x3
Realized Gain depreciation
(P10,000/6 x 3 yrs)
Net unrealized gain, 12/31/20x6
Gain on sale
*P100,000/6 x 3 years = P48,000
***P90,000/6 x 3 years = P45,000
P 120,000
__30,000
P 4,000
Sort
P 100,000
__90,000
P100,000
**50,000
Fort
P 65,000
50,000
P 90,000
**45,000
Consolidated
P 65,000
__45,000
P 10,000
__ 5,000
P 5,000
P 5,000
__________
P 15,000
_________
P 20,000
78. b
Depreciation expense: (P50,000 - P40,000) / 10 years = P1,000 over depreciation
79. b
80. a
P 135,000
(
0)
P 135,000
0
P 135,000
20%
P 27,000
0
P 27,000
81. a
P2,000,000
( 100,000)
10,000
P1,910,000
_
0
P1,910,000
__40%
P 764,000
__
0
P 764,000
P 135,000
(
0)
P 135,000
P 200,800
_ 8,000
P 208,800
135,000
P343,800
0
P343,800
27,000
P316,800
Prout
P1,475,000
942,000
145,000
__187,200
P 200,800
____80,000
P 280,800
Sexton
P1,110,000
795,000
90,000
____90,000
P 135,000
P 135,000
P360,000
P400,000
160,000
240,000
P120,000
P 8,000
Or, alternatively
P 135,000
(
0)
P 135,000
P 27,000
____0
P 200,800
_ 8,000
P 208,800
135,000
P343,800
27,000
P316,800
_ _27,000
P343,800
P1,300,000
112,000
P1,188,000
P 800,000
1,040,000
P 240,000
0
0
P 240,000
80%
P192,000
0
_192,000
P1,380,000
316,800
P1,696,800
120,000
P1,576,8000
Or, alternatively:
84. c
P1,460,800
104,000
P1,356,800
P 1,075,000
800,000
P 275,000
0
_______0
P 275,000
80%
P 220,000
_____0
220,000
P1,576,800
P 1,200,000
P1,040,000
135,000
P1,175,000
100,000
1,075,000
P 2,275,200
0
0
P2,275,200
_____)0
P 2,275,00
_
20
P 455,000
85. c
Additional information: Gain or loss to outsiders on 1/1/20y3 in the books of Sexton.
Selling price
Less: Book value : Cost
Accumulated
Unrealized gain on sale of
Equipment, 1/1/20y1
Realized Gain depreciation
(P120,000/15 x 2 yrs)
Net unrealized gain, 1/1/20y3
Gain on sale
*P400,000/25 x 10 years = P160,000
**P360,000/15 x 2 years = P48,000
***P240,000/15 x 2years = P400,000
P 400,000
*160,000
Prout
P 360,000
__240,000
P360,000
**48,000
Sexton
P300,000
312,000
P 240,000
***32,000
Consolidated
P 300,000
_208,000
P 120,000
__16,000
P 104,000
P 104,000
__________
P( 12,000)
_________
P 92,000
Cost
P400,000
360,000
P 40,000
Accumulated
Depreciation
P160,000
_______
P160,000
Carrying Value
P240,000
360,000
P120,000
Remaining
Life
Depreciation
15 yr
P 16,000
15 yr
24,000
P 8,000
192,000
(2) Equipment
Beginning Retained Earnings - Prout
Accumulated Depreciation
40,000
120,000
192,000
160,000
To reduce beginning consolidated retained earnings by amount of unrealized profit at the beginning of the year, to restate
property and equipment to its book value to Prout Company on the date of the intercompany sale.
16,000
80,000
8,000
8,000
To reverse amount of excess depreciation recorded during current year and recognize an equivalent amount of
intercompany profit as realized
1,040,000
1,200,000
Entry analysis:
Journal Entry on the books of Sexton to record the sale
Cash
Accumulated Depreciation - Fixed Assets (P360,000/15) x 2 years)
Loss on Sale of Equipment
Plant and Equipment
300,000
48,000
12,000
80,000
1,792,000
448,000
360,000
Workpaper eliminating entry on December 31, 20y3 consolidated statement necessary to prepare consolidated
statements:
Beginning Retained Earnings Prout(P120,000 - P16,000)
104,000
Loss on Sale of Equipment
12,000
Gain on Sale of Equipment
92,000
Cost to the Affiliated Companies
Accumulated Depreciation Based on Original Cost ((12/25)x P400,000)
Book Value, 1/1/y3
Proceeds from Sale to Non-affiliate
Gain from consolidated point of view
P400,000
192,000
P 208,000
(300,000)
P 92,000
Note: As of Dec. 31, 20y3, the amount of profit recorded by the affiliates on their books (P120,000 - P12,000 =
P108,000) is equal to the amount of profit considered realized in the consolidated financial statements
(P8,000 + P8,000 + P92,000) = P108,000.
90. d
P 300,000
P 150,000
(30,000)
4,500
P 124,500
34,125
P 265,875
124,500
P390,375
3,000
P387,375
24,300
P363,075
Or, alternatively
P 300,000
P 150,000
(30,000)
4,500
P 124,500
P 24,300
3,000
34,125
P 265,875
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
Sales price
Less: Cost
Unrealized (loss) gain
S3
145,000
160,000
( 15,000)
P100,000
70,000
95,000
15,000
( 52,000)
( 23,000)
P205,000
P 200,000
___0
P 200,000
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
P100,000
70,000
95,000
15,000
( 52,000)
( 23,000)
P205,000
P 35,600
____0
P 200,000
___0
P 200,000
205,000
P405,000
_ 35,600
P369,400
_ _35,600
P405,000
101. b
S3
P 100,000
15,000
P 115,000
0
P 115000
20%
P 23,000
0
P 23,000
S2
S1
70,000
( 52,000)
P 18,000
0
P 18,000
30%
P
5,400
0
P 5,400
P 95,000
( 23,000)
P 72,000
0
P 72,000
10%
P 7,200
0
P 7,200
P 40,000
1,100
P 41,100
0
P 41,100
20%
P 8,220
0
P 8,220
P225,000
45,000
___4,500
P184,500
90%
P166,050
104. c
105 c
P288,000
45,000
11,250
P254,250
P 22,500
Selling price
Less: Book value, 4/1/20x4
Cost, 1/1/20x4
Less: Accumulated depreciation : P50,000/10 years x 3/12
Unrealized gain on sale of equipment
Realized gain depreciation: P19,500/9.75 years
P68,250
P50,000
__1,250
48,750
P19,500
P 2,000
20x4
90,000
( 19,500)
_ 1,500
72,000
112. b
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
20x6
117,000
_ 2,000
119,000
113. d
114. c
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
115. b
20x4
22,400
( 9,600)
_ 1,600
14,400
116. c
20x5
25,600
117. d
Eliminating entries:
1/1/20x4: date of acquisition
Restoration of BV and eliminate unrealized gain
Equipment
Gain
Accumulated depreciation
Parent Smeder
Cash
Accumulated depreciation
Equipment
Gain
84,000
48,000
120,000
12,000
Eliminating entries:
12/31/20x4: subsequent to date of acquisition
Realized Gain depreciation
Accumulated depreciation
_ 1,600
27,200
36,000
12,000
Equipment
Cash
48,000
Subsidiary - Collins
84,000
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
72,000
P12,000
P 2,000
P84,000
P120,000
__48,000
72,000
P12,000
P 2,000
2,000
84,000
Depreciation expense
P12,000 / 6 years or P14,000 P12,000
Should be in CFS Parent Smeder
Depreciation expense
(P72,000 /6 years)
Acc. Depreciation
12,000
2,000
Recorded as Subsidiary - Collins
12,000
Depreciation expense
(P84,000 / 6 years)
Acc. depreciation
14,000
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).
118. c
20x4
( 12,000)
___2,000
( 10,000)
119. d
Eliminating entries:
5/1/20x4: date of acquisition
Restoration of BV and eliminate unrealized gain
Cash
Loss
Cash
Loss
Land
Parent Stark
80,000
5,000
85,000
Selling price
Less: Book value, 5/1/20x4
Unrealized gain on sale of equipment
5,000
Land
Cash
5,000
Subsidiary - Parker
85,000
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
122. e
85,000
5,000
20x4
180,000
_ 4,500
184,500
20x4
180,000
_ 4,500
184,500
123. d
124. 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
20x6
198,000
_ ( 4,500)
193,500
Quiz XVIII
1. a
2. b
UNREALIZED GAIN
Transfer Price ........................................................................................................
Book Value (cost after two years of depreciation) .....................................
Unrealized Gain ...................................................................................................
P280,000
240,000
P40,000
EXCESS DEPRECIATION
Annual Depreciation Based on Cost (P300,000/10 years)...........................
Annual Depreciation Based on Transfer Price
(P280,000/8 years) ........................................................................................
Excess Depreciation ...........................................................................................
P30,000
35,000
P5,000
P(40,000)
5,000
P(35,000)
100,000
P 60,000
____8,000
P 68,000
P 75,000
P100,000
__60,000
7,000
__40,000
P 35,000
___7,000
P 28,000
7,000
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
Depreciation expense
(P40,000 /5 years)
Acc. Depreciation
8,000
Depreciation expense
(P75,000 / 5 years)
Acc. depreciation
15,000
15,000
P 120,000
0
( 15,000)
P 105,000
0
P 105,000
10%
P 10,500
0
P 10,500
23. P364,500
P 300,000
P 120,000
(
15,000)
P 105,000
( 30,000)
P 270,000
105,000
P375,000
0
P375,000
10,500
P364,500
Or, alternatively
P 300,000
P 120,000
(
15,000)
P 105,000
P 10,500
____0
( 30,000)
P 270,000
105,000
P375,000
10,500
P364,500
_ 10,500
P375,000
P 180,000
(
0)
50,000
P 230,000
0
P 230,000
20%
P 46,000
0
P 46,000
26. P434,000
P 400,000
P 180,000
(
0)
50,000
P 230,000
( 150,000)
P 250,000
230,000
P480,000
____0
P480,000
46,000
P334,000
Or, alternatively
P 400,000
P 180,000
(
0)
50,000
P 230,000
P 46,000
____0
( 150,000)
P 250,000
230,000
P480,000
46,000
P434,000
_ 46,000
P480,000
P1,80 0,000
150,000
P1,650,000
P 640,000
300,000
P 340,000
0
150,000
P 190,000
80%
P 152,000
_____0
Parent
P180,000
152,000
P1,802,000
Subsidiary
P250,000
P 30,000
P 25,000
29. P165,000
For 20x6: Not determinable since data are incomplete.
For 20x7: P110,000 + P55,000 = P165,000
**NCI-CNI - Sloch
P 360,000
25,000
( 40,000)
( 75,000)
___5,000
P 275,000
0
P 275,000
40%
P 110,000
0
P 110,000
**NCI-CNI - Zeek
P 275,000
0
P 275,000
20%
P 55,000
0
P 55,000
Fixed Assets:
Unrealized (loss) gain:
20x5
20x7
Realized gain
P300,000/25 years
P75,000/15 years
Bowen to Zeek
(downstream)
Sloch to Bowen
(upstream)
300,000
12,000/year
Inventory
75,000
5,000/year
P31,000
P25,000
P35,000
P40,000
30. P943,000
For 20x6: Not determinable since data are incomplete.
For 20x7: P943,000
P360,000
275,000
25,000
( 40,000)
( 75,000)
___5,000
P550,000
P 550,000
12,000
31,000
(_ _35,000)
P 558,000
550,000
P1,108,000
__
0
P1,108,000
110,000
___55,000
P
943,000
Or, alternatively
P 360,000
275,000
25,000
( 40,000)
( 75,000)
___5,000
P 550,000
P165,000
____0
P 550,000
12,000
31,000
(_ _35,000)
P 558,000
_ 550,000
P1,108,000
_ _165,000
P 943,000
_ _165,000
P1,108,000
P1,020,000
31,000
__276,000
P 713,000
P330,000
525,000
P195,000
0
25,000
________0
P170,000
60%
P102,000
0
P575,000
875,000
P300,000
_____ 0
P300,000
80%
P240,000
0
102,000
240,000
P1.055,000
943,000
P1,998,000
500,000
P1,498,000
Or, alternatively:
P1,270,000
35,000
__264,000
P 971,000
P 330,000
685,000
P 355,000
0
40,000
__70,000
P 245,000
60%
P 147,000
____0
P 575,000
1,050,000
P 475,000
______ 0
P 475,000
_
80%
P 380,000
__
0
147,000
380,000
P1,498,000
___19,200
403,200
Theories
1.
2.
3.
4.
5.
d
c
d
d
b
6.
7.
8.
9.
10,
c
c
a
a
c
11.
12.
13.
14.
15,
c
c
d
b
d
16.
17.
18.
19.
20.
b
a
a
c
a
21.
22.
23.
24.
25.
b
d
c
c
b
26.
27.
28.
29.
30.
b
c
b
c
c
31