AA2 ch3 Sol 2014

AA2 - CHAPTER 3
SUGGESTED ANSWERS
EXERCISES
Exercise 3 -1
1. Investment in Stun Corp.
Consideration transferred (800 shares @ P200)
Book value of interest acquired as of July 1, 2014
Ordinary Share Capital (1,000 shares x P100 x 80%)
Retained Earnings [(P50,000 + 1/2 of P30,000) 80%]
Goodwill
2.
Investment in Star Corp.

Consideration transferred (900 shares @ P100)
Book value of interest acquired as of July 1, 2014
Ordinary Share Capital (1,000 shares x P100 x 90%)
Retained Earnings [(P15,000 + 1/2 of P5,000) 90%]
Goodwill
P160,000
P80,000
52,000
132,000
P 28,000
P 90,000
P90,000
( 15,750)
74,250
P 15,750
Exercise 3 - 2
Cost Method
a.
Investment in Stark Co. 1,500/2,000 = 75%
Cash
b.
no entry
c.
Cash P30,000 x 75%

Dividend Revenue P30,000 x 6/12 = P15,000 x 75%
Investment in Stark Co.
d.
2.
240,000
240,000
22,500
11,250
11,250
no entry
Ordinary Share Capital

APIC
RE [P20,000 + (P30,000 x 1/2)]
Total shareholders equity on date of acquisition
P200,000
50,000
35,000
P285,000
x 75%
P213,750
Book value of interest acquired

Exercise 3 3
1. Investment in Saturn Co.
Cash
Cash P80,000 x 80%
Dividend Revenue
2.
Original cost of investment P800,000
3.
Non-controlling interest net income = P200,000 x 20% = P40,000
800,000
800,000
64,000
64,000
Chapter 3 AA2 (2014 edition)
4.
page 2
Non-controlling interest, December 31, 2014:

Ordinary Share Capital
Retained Earnings = P500,000 + P200,000 P80,000
Total
Non-controlling interest percentage
Non-controlling interest
500,000
620,000
P1,120,000
x 20%
P 224,000
Exercise 3 4
a.
Investment in Saloon Corp.

Cash
750 shares @ P90 = P67,500
67,500
67,500
b.
No entry
c.
Received 75 shares from Saloon Corp. as share capital dividend.

825 shares.
d.
Cash
Dividend Revenue
825 shares @ P5 = P4,125
e.
Shares now owned and held are

4,125
4,125
No entry
Exercise 3 5
2013
2014
2015
P90,000 x 60%
P180,000 x 60%
P135,000 x 60%
P 54,000
P108,000
P 81,000
Exercise 3 - 6
Net income (loss) from own operations:
Pastel Corp.
Sly Corp. (90%-owned)
Sty Corp. (70%-owned)
Depreciation:
Excess of cost over book value of
investment in Sly (P9,000/90%/5 yrs.)
Excess of book value over cost of
investment in Sty (P3,500/70%/5 yrs.)
Consolidated net income
Case A
Case B
Case C
P 80,000
(13,500)
31,500
P(20,000)
45,000
49,000
P40,000
27,000
24,500
( 2,000)
________
P 98,000
Exercise 3 7
1. a.
Investment in Sat Co.
Retained Earnings, Pat Co.
To record the share of Pat in the net increase
in the retained earnings of Sat.
________
P 74,000
1,000
P90,500
16,000
16,000
page 3
(P70,000 - P50,000) 80% = P16,000

b.
c.
Ordinary Share Capital, Sat Co.

Retained Earnings , Sat Co.
Assets
Investment in Sat Co. P208,000 + P16,000
Non-controlling Interest P280,000 x 20%
To eliminate shareholders equity balances and
establishing non-controlling interest.
208,000 (250,000 x 80%) = 8,000/80% = 10,000
200,000
70,000
10,000
224,000
56,000
Operating Expenses
Retained Earnings, Pat Co.
Assets
To record depreciation of adjustment for prior
years and current year at P1,000 per year.
2.
1,000
2,000
3,000
Pat and Subsidiary Sat Co.

Consolidated Working Paper
For the Year Ended December 31, 2014
Debits
Cash & Other Assets
Investment in Sat
Cost of Sales
Operating Exp.
Total
Credits
Liabilities
OSC, P100par
Ret. Earnings
Sales
Pat Co.
452,000
208,000
300,000
90,000
1,050,000
Sat Co.
440,000
150,000
300,000
120,000
200,000
100,000
70,000
500,000
1,050,000
300,000
690,000
200,000
50,000
690,000
Adj. & Eliminations

Debit
Credit
b. 10,000 c. 3,000
a. 16,000 b. 224,000
c.
Non-cont
Interest
Cons.
SFP
899,000
500,000
141,000
1,000
899,000
270,000
300,000
b. 200,000
b. 70,000
c. 2,000
a. 16,000
114,000
(800,000)
Consolidated NI
159,000
9,800
149,200
Non-cont. int. NI
NI attrib. to parent
Non-cont. int.
Total
Cons.
IS
b.
245,000
56,000
245,000
9,800
56,000
149,200
65,800
899,000
NCI net income (300,000 -200,000-50,000-1,000) x 20% = 9,800
3.
Pat Co. and Subsidiary Sat Co.
Consolidated Income Statement
Sales (P500,000 + P300,000)
Cost of Sales (P300,000 + P200,000)
Gross Profit
Operating Expenses (P90,000 + P50,000 + P1,000)
P800,000
500,000
P300,000
141,000
page 4
Consolidated Net Income

Less Non-controlling Interest net income
Net Income Attributable to Pat Co.
P159,000
9,800
P149,200
4.
Pat Co. and Subsidiary Sat Co.
Consolidated Statement of Financial Position
December 31, 2014
Assets
Liabilities and Shareholders Equity
Cash and Other Assets
P899,000
Liabilities
P270,000
Ordinary Share Capital, P100 par
300,000
Retained Earnings
263,200
Non-controlling Interest
65,800
Total liabilities and shareholders Equity
Total Assets
P899,000
P899,000
Exercise 3 - 8
a.
Advances from Pallet Co.
Advances to Stall Co.
15,000
b.
Notes Receivable Discounted

Notes Receivable from Pallet Co.
10,000
Note Payable to Stall Co.

Note Receivable from Pallet Co.
5,000
Dividends Payable
Dividends Receivable
1,600
c.
d.
15,000
10,000
5,000
1,600
PROBLEMS
Problem 3 1
1.
Investment in Stow Co.
Cash
280,000
280,000
Consideration transferred
Book value of interest acquired :
Ordinary Share Capital (P100,000 x 80%)
Retained Earnings (P50,000 x 80%)
Excess of cost over book value
Allocation of excess:
Plant and equipment
Inventory
Goodwill
Expenses on the adjustment
Plant and equipment (P50,000/5 yrs.)
Goodwill impairment
Inventories
Total
P280,000
P 80,000
40,000
P 50,000
20,000
2014
P10,000
5,000
20,000
P35,000
2. Working paper elimination entries:

2014
a.
Ordinary Share Capital, Slow Co.
Retained Earnings, Slow Co.
70,000x 80%
2015
P10,000
4,000
---__
P14,000
100,000
50,000
120,000
P160,000
56,000
P104,000
page 5
Inventories
Plant and Equipment
Goodwill
Investment in Slow Co.
100,000 +50,000+50,000+20,000 x 20% = 44,000
c.
2015
a.
b.
3.
20,000
50,000
104,000
280,000
44,000
Cost of Sales
Operating Expenses
Plant and Equipment
Goodwill
Inventory
20,000
15,000
10,000
5,000
20,000
Ordinary Share Capital, Slow Co.

Retained Earnings, Slow Co.
Inventory
Plant and Equipment
Goodwill
Investment in Slow Co.
100,000
50,000
20,000
50,000
104,000
280,000
44,000
Retained Earnings, Plow Co.

Operating Expenses
Plant and Equipment
Inventory
Goodwill
35,000
14,000
20,000
20,000
9,000
Computation of consolidated net income

2014
Net income from own operations:
Plow Co.
Slow Co.
Impairment / depreciation / amortization
Problem 3 - 2
Book value of interest acquired:
Ordinary Share Capital (P1,000,000 x 80%)
Retained Earnings (P1,600,000 x 80%)
Goodwill
P70,000
60,000
( 35,000)
P95,000
P 80,000
50,000
( 14,000)
P 116,000
P2,280,000
P 800,000
1,280,000
Peach Co. and Subsidiary Silver Co.

Adj. and Eliminations
Peach Co.
Silver Co.
Debit
Credit
Income Statement
2015
2,080,000
P 200,000
Non-cont
Interest
Consolidated
St. of FP
Sales
Cost of sales
Gross profit
Operating expenses
Operating income
page 6
4,000,000
1,600,000
2,400,000
1,560,000
840,000
2,000,000
1,200,000
800,000
440,000
360,000
c.
72,000
72,000
72,000
6,000,000
1,118,000
72,000
24,000
48,000
7,118,000
800,000
6,318,000
10,000
Non-cont. interest NI
NI-carried forward
6,000,000
2,800,000
3,200,000
2,010,000
1,190,000
72,000
1,118,000
840,000
360,000
6,000,000
840,000
96,000
6,936,000
800,000
6,136,000
1,600,000
360,000
1,960,000
120,000
1,840,000
a.
96,000
600,000
400,000
800,000
1,200,000
800,000
2,456,000
2,280,000
200,000
400,000
600,000
d.
10,000
Retained Earnings St.
Bal. January 1
NI brought forward
Dividend fr. Subsidiary
Total
Less Div. declared
Balance, Dec. 31
b. 1,600,000
a.
96,000
St. of Financial Position
Cash
Accounts Receivable
Inventories
Land
Building (net of AD)
Equipment (net of AD)
Inv. in Silver Co.

Goodwill
Total
AP and accrued exp.
Bonds payable
OS - Peach Co. P100 par
8,536,000
604,000
196,000
1,000,000
OS - Silver Co. P20 par
APIC
RE-brought forward
Non-cont. Interest
Total
800,000
790,000
1,400,000
1,200,000
800,000
4,456,000
2,000,000
b.
200,000
3,200,000
360,000
d.
10,000
1,000,000
b. 1,000,000
600,000
6,136,000
1,840,000
8,536,000
3,200,000
2,916,000
b. 2,280,000
c.
10,000
b. 520,000
2,916,000
190,000
9,636,000
954,000
196,000
1,000,000
48,000
520,000
568,000

Sales
Cost of Sales
Gross Profit
Operating Expenses
Non-controlling Interest net income
Net Income Attributable to Peach Co.
December 31, 2014
P6,000,000
2,800,000
P3,200,000
2,010,000
P1,190,000
P 72,000
P1,118,000
600,000
6,318,000
568,000
9,636,000
page 7
Assets
Cash
Accounts Receivable
Inventories
Land
Building (net of accumulated depreciation)
Equipment (net of accumulated depreciation)
Goodwill
Total Assets
P 800,000
790,000
1,400,000
1,200,000
800,000
4,456,000
190,000
P9,636,000

Accounts Payable and Accrued Expenses
Bonds Payable (face amount - P200,000)
Additional Paid-in Capital
Retained Earnings
Total Liabilities and Shareholders Equity
Problem 3 3
Requirement No. 1
Book value of interest acquired:
1,400,000 x 80%
Excess of cost over book value of acquired investment
Allocation of excess:
Inventories
P 60,000
Land
100,000
Building
200,000
Equipment
(150,000)
Patent
80,000
Goodwill
P 954,000
196,000
1,000,000
600,000
6,318,000
568,000
P9,636,000
P1,512,000
1,120,000
P 392,000
290,000 x 80%
232,000
P 160,000
Requirement No. 2
Prose Co. and Subsidiary Slope Co.
Debits
Cash
Accounts Receivable
Inventories
Land
Buildings
Equipment
Inv. in Slope Co.
Cost of sales
Expenses
Prose
Co.
400,000
300,000
200,000
1,400,000
1,512,000
800,000
720,000
Slope
Adj. & Eliminations
IS
Co.
Debit
Credit
Dr. (Cr.)
200,000
100,000
80,000 b. 60,000 c.
60,000
300,000 b. 100,000
520,000 b. 260,000
940,000
b. 156,670
b. 1,512,000
300,000 c. 60,000
1,160,000
400,000 c.
8,000
1,238,000
d. 110,000
Non-cont
Interest
Consolidated
St. of FP
600,000
400,000
280,000
400,000
780,000
2,183,330

Dividends paid
200,000
page 8
100,000
5,532,000
2,940,000
200,000
72,000
155,000
5,070,330
248,000
380,000
120,000
628,000
210,000
Patents
Goodwill
b. 80,000
b. 160,000
a.
c.
c.
80,000
8,000
5,000
(20,000)
Credits
AP & accrued exp.
AD - Bldg.
AD - Equipt.
804,000
OS - P100 par
OS - P20 par
APIC
400,000
RE - Prose Co.
RE - Slope Co.
Sales
Dividend fr. Sub
NCI Net Income
NI attr. to Prose
Non-cont. Int.
40,000
b.
6,670
c. 15,000
600,000
b. 600,000
b.
c.
d.
d.
60,000
10,000
20,000
90,000
912,330
400,000
800,000
1,200,000
2,000,000
80,000
800,000
1,200,000
800,000
1,000,000
b. 800,000
(3,000,000)
a. 80,000
47,400
554,600
Totals
5,637,600 2,940,000
2,339,670
NCI 600,000 + 800,000+290,000 x 20% = 338,000
b. 338,000
2,339,670
Charges to expense for asset adjustments:

Inventories
Building
Equipment
Patent
Goodwill
Total
Adjustments to Building and equipment:
Building (increase is 50%)
Cost (P520,000 x 50% )
AD (P120,000 x 50% )
Net amount
Equipment (decrease is 16.67%)
Cost (P940,000 x 16.67% )
AD (P 40,000 x 16.67%)
Net amount
Current year depreciation based on book value:

Building = (P520,000 P120,000) / 20 yrs. = P20,000
Equipment = (P940,000 P40,000) / 10 yrs. = P90,000
Requirement No. 3
47,400
338,000
P60,000
10,000
( 15,000)
8,000
5,000
P68,000
P260,000
60,000
P200,000
P156,670
6,670
P150,000
554,600
365,400
5,070,000
page 9
Sales
Cost of sales
Gross Profit
Expenses
Non-controlling Interest net income
Net Income Attributable to Prose
P3,000,000
1,160,000
P1,840,000
1,238,000
P 602,000
P 47,400
P 554,600

December 31, 2014
Assets
Cash
Accounts Receivable
Inventories
Land
Buildings
P 780,000
Less Accumulated Depreciation
210,000
Equipment
P2,183,330
Less Accumulated Depreciation
912,330
Patents
Goodwill
Total Assets
Accounts Payable and Accrued Expenses
Additional Paid-in Capital
Retained Earnings (P1,200,000 + P554,600 - P200,000)
Total Liabilities and Shareholders Equity
Problem 3 - 4
1. a.
Notes Payable - Palma Corp.
Notes Receivable - Salman Co.
b.
2.
P 600,000
400,000
280,000
400,000
570,000
1,271,000
72,000
155,000
P3,748,000
P628,000
400,000
800,000
1,554,600
365,400
P3,748,000
10,000
Accrued Interest on Notes Payable

Accrued Interest on Notes Receivable
Sales
Interest revenue
Expenses
Interest expense
Consolidated Net income
Non-controlling Interest net income [(P20,000 - P17,000 - P600) x 10%]
Net income attributable to Palma Corp.
10,000
600
600
P 70,000
600
( 53,000)
(
600)
P 17,000
(
240)
P 16,760
Problem 3 5
1.
Non-controlling interest net income (400,000-240,000-60,000 x 20%)
P 20,000
2.
Consolidated net income 800,000+400,000-500,000-240,000-100,000-60,000-6,000
P294,000
3.
Current assets of Pentium and Stadium
P470,000
page 10
Less Dividends receivable (P20,000 x 80%)

Current assets
16,000
P454,000
4.
Book value of interest acquired 500,000 x 80%
Goodwill
P560,000
400,000
P160,000
5.
None, since the dividend revenue received from Stadium is closed to RE.
6.
Beginning retained earnings of Pentium

Net income attributable to parent 294,000 -20,000
Pentium dividends for 2015
Consolidated retained earnings at December 31, 2015
7.
P1,000,000 the share capital of Pentium.
8.
600,000+100,000-50,000 x 20%
9.
None, since the investment account is eliminated.
10.
Goodwill
Less impairment loss for 2014 and 2015
Goodwill as of December 31, 2015
P260,000
274,000
(120,000)
P414,000
P130,000
P160,000
16,000
P144,000
MULTIPLE CHOICE
Change 3-A No. 20 from 30% to 70%
3-A
1.
2.
3.
4.
C
B
B
A
3-B
1.
Excess of BV over cost
BV of interest acquired
P290,000
14,000
P304,000
2.
P58,400 20%
P292,000
3.
Consolidated working capital (P726,000 P300,000)

Poles working capital (P436,000 P166,000)
Soles working capital
P426,000
270,000
P156,000
Net income from own operations of Parker Co.100,000 - 8,500

Starter Co. net income
P 91,500
40,000
P131,500
Net income from own operations of Pentium

(P1,000,000 - P600,000 - P180,000)
Systems NI [P600,000 - P400,000 - P100,000]
Depreciation of excess of cost over BV of investment
P220,000
100,000
3-C
3-D
1.
5.
6.
7.
8.
C
A
C
A
9. A
10. C
11. D
12. C
13.
14.
15.
16.
B
D
B
C
17. B
18. C
19. B
20. A
(P416,000 - P400,000) / 80%/10 years

3-E
( 2,000)
P 318,000
1.
60,000-50,000+36,000 x 80%
P 36,800
2.
Liquidating Dividends
(P60,000 + P36,000 P50,000 P50,000) x 80%
Investment balance, December 31, 2015
P756,000
60,000 x 10%
P 6,000
3-F
3-G
Consideration transferred, Jan. 1, 2011

Book value of interest acquired (P800,000 x 80%)
Excess of cost over BV
1.
2.
Equipment with 10-year life (P180,000 / 80% = 225,000/10 = 22,500

D
RE Singson, Dec. 31, 2013
RE Singson, Jan. 1, 2011
Depreciation on the excess allocated to equipment
P225,000 / 10 years x 3 years
Net increase in Retained Earnings of Singson
Pingsons share on the increase
Amount needed to convert the investment to equity basis
B
Pingsons separate net income
Singsons net income 160,000 22,500
3,200
P752,800
P820,000
640,000
P180,000
P400,000
( 200,000)
(67,500)
P132,500
X 80%
P106,000
P500,000
137,500
P637,500
3.
Shareholders equity of Singson, January 1, 2014

Net income for 2014
Dividends for 2014
Adjustment in assets
Depreciation 22,500 x 4
Shareholders equity of Singson, December 31, 2014
Non-controlling interest percentage
Non-controlling interest, December 31, 2014
P1,000,000
160,000
( 100,000)
225,000
( 90,000)
P1,195,000
x 20%
P 239,000
4.
P 100,000 x 20%
Total shareholders equity on acquisition

Net Income
Dividends P2,000 x 20
Adjustment in Plant assets P208,500 P187,500 = P21,000/75%
Differential Adjustment for Depreciation P28,000/10
Total shareholders equity December 31, 2014
P250,000
60,000
(40,000)
28,000
( 2,800)
P295,200
x 25%
P 73,800
3-H
3-I
3-J
page 11
1.
Zero, eliminated
TSE of Saddle Co., Jan. 1, 2014 (P70,000 / 20%)

Cumulative net income for 5 years
20,000
P350,000
( 200,000)
3-K
Dividends paid
TSE of Saddle Co., Jan. 1, 2009
Percentage of interest of Paddle
Book value of acquired investment
Excess of cost over book value of net assets
50,000
P200,000
x 80%
P160,000
50,000
P210,000
2.
50,000 12,500
P 37,500
1.
Ordinary Share Capital (P75,000 x 90%)

Retained earnings (P45,000 x 90%)
Book value of Slogan shares
P 67,500
40,500
P108,000
2.
Book value of interest acquired
Excess of cost over book value
P110,700
108,000
P 2,700/
90%
P 3,000
3.
P4,500 x 90%
P 4,050
4.
Change 3-K No. 4 choice B to P199,200

Retained earnings, January 1
Net income from own operations
Share in subsidiary income (P 4,500 300)
Dividends declared and paid
Consolidated RE (RE of parent), December 31, 2014
P180,000
45,000
4,200
( 30,000)
P199,200
3-L
3-M
page 12
Book value of interest acquired 900,000 x 80%
Goodwill
300,000 + (100,000 x 80%) 4,000 = P376,000
P 800,000
720,000
P 80,000
1.
80,000 -10,000 = 70,000 +35,000 5,000
P 100,000
2.
Total assets of Par

Total assets of Sub
Total
Adjustments and eliminations:
Investment in Sub
Excess of cost over BV of investment:
Cost
Book value (OS P30,000; APIC P100,000; RE P115,000)
Goodwill
Less Impairment loss
Consolidated total assets
P 1,110,000
350,000
P 1,460,000
3.
Retained earnings of parent company
( 300,000)
P300,000
245,000
P 55,000
5,000
50,000
P1,210,000
page 13
4.
P55,000 P5,000
P 50,000
5.
Total Stockholders equity of parent company
P980,000
3-N
TSE of Polo before the combination

FMV of OS issued by Polo (200,000 x P20)
Net income of Polo and Solo
Impairment loss
Dividends paid by Polo
Consolidated shareholders equity, Dec. 31, 2014
3-O
P3,000,000 X 7/10 = P2,100,000
3-P
Preston Expenses
Seldon Expenses
Differential adjustment:
(P800,000 P660,000)/10
Consolidated Total Expenses
3-Q
3-R
P 6,000,000
4,000,000
1,550,000
( 100,000)
( 450,000)
P 11,000,000
P 1,242,000
P 1,428,000
14,000
1,442,000
P 2,684,000
1.
P 6,500,000 + 630,000 @ 5
P 9,650,000
2.
P 4,400,000 + 630,000 @ 3
P 6,290,000
3.
Retained Earnings of Post
4.
Net income of Post (P 1,000,000 + P 1,100,000)

Adjusted Net income of Shaw:
Net income
Impairment loss on goodwill
P
P 500,000
5,100
2,100,000
494,900
P 2,594,900
P 9,450,000
X 40%
P3,780,000
5.
[(P9,000,000 + 300,000 + 500,000 350,000)
1.
2.
A
A
P1,000,000
P1,000,000
3.
P120,000 x 80% = P96,000
4.
Subsidiary net income

Differential adjustment P60,000 + P80,000/10
P240,000
14,000
P226,000
x 20%
P 45,200
5.
Ordinary share capital

Retained earnings Jan 1, 2013
P400,000
Net income P200,000 + P240,000 + P260,000 700,000
Dividends P80,000 + P100,000 + P120,000
(300,000)
Book value
Adjustment of Equipment and Building to fair value
Addl depreciation P140,000/10 = P14,000 x 3
P 600,000
800,000
P1,400,000
140,000
(42,000)
Goodwill P1,000,000/80% - P1,000,000 P140,000

3-S
page 14
110,000
P1,608,000
x 20%
P 321,600
Let x
= Net income of Port
x
= P84,080 + .70 of NI of Sort
NI of Sort = (P12,000) + .20x
x = P84,080 + .70 [(P12,000) + .20x]
x = P84,080 - P8,400 + .14x
x = P75,680 + .14x
x = P75,680/.86
x = P88,000
3-T
2,000,000 800,000 x 80%
P960,000
3-U
3,600,000 x 25%
P900,000
Net income from own operation:

Peter Corp.
Seller Co. P1,000,000 P800,000
Amortization
Non-controlling interest net income:
200,000 x 3/12 x 30%
P15,000
200,000 x 9/12 x 20%
30,000
Differential adjustment:
P12,000 x 3/12 x 30%
(900)
P12,000 x 9/12 x 20%
(1,800)
Consolidated net income attributable to controlling int.
3-V
1.
2.
P600,000
200,000
(12,000)
P788,000
42,300
P745,700

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AA2 ch3 Sol 2014

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AA2 - CHAPTER 3

Investment in Star Corp.

Cash P30,000 x 75%

Ordinary Share Capital

Book value of interest acquired

Original cost of investment P800,000

Non-controlling interest net income = P200,000 x 20% = P40,000

Chapter 3 AA2 (2014 edition)

Non-controlling interest, December 31, 2014:

Investment in Saloon Corp.

Received 75 shares from Saloon Corp. as share capital dividend.

Shares now owned and held are

Chapter 3 AA2 (2014 edition)

(P70,000 - P50,000) 80% = P16,000

Ordinary Share Capital, Sat Co.

Pat and Subsidiary Sat Co.

Cash & Other Assets

Adj. & Eliminations

NCI net income (300,000 -200,000-50,000-1,000) x 20% = 9,800

Chapter 3 AA2 (2014 edition)

Consolidated Net Income

Notes Receivable Discounted

Note Payable to Stall Co.

2. Working paper elimination entries:

Chapter 3 AA2 (2014 edition)

Ordinary Share Capital, Slow Co.

Retained Earnings, Plow Co.

Computation of consolidated net income

Peach Co. and Subsidiary Silver Co.

Chapter 3 AA2 (2014 edition)

Retained Earnings St.

St. of Financial Position

Inv. in Silver Co.

OS - Silver Co. P20 par

Peach Co. and Subsidiary Silver Co.

Chapter 3 AA2 (2014 edition)

Liabilities and Shareholders Equity

Chapter 3 AA2 (2014 edition)

Charges to expense for asset adjustments:

Current year depreciation based on book value:

Chapter 3 AA2 (2014 edition)

Prose Co. and Subsidiary Slope Co.

Accrued Interest on Notes Payable

Consolidated net income 800,000+400,000-500,000-240,000-100,000-60,000-6,000

Current assets of Pentium and Stadium

Chapter 3 AA2 (2014 edition)

Less Dividends receivable (P20,000 x 80%)

Beginning retained earnings of Pentium

P1,000,000 the share capital of Pentium.

None, since the investment account is eliminated.

Consolidated working capital (P726,000 P300,000)

Net income from own operations of Parker Co.100,000 - 8,500

Net income from own operations of Pentium

Chapter 3 AA2 (2014 edition)

(P416,000 - P400,000) / 80%/10 years

Consideration transferred, Jan. 1, 2011

Equipment with 10-year life (P180,000 / 80% = 225,000/10 = 22,500

Shareholders equity of Singson, January 1, 2014

Total shareholders equity on acquisition

TSE of Saddle Co., Jan. 1, 2014 (P70,000 / 20%)

Chapter 3 AA2 (2014 edition)

Ordinary Share Capital (P75,000 x 90%)

Change 3-K No. 4 choice B to P199,200