Professional Documents
Culture Documents
Chapter 17
Chapter 17
Problem I
1.
Consolidated Net Income for 20x5
P Companys net income from own/separate operations. P 760,000
Realized profit in beginning inventory of S Company (downstream sales) 36,000
Unrealized profit in ending inventory of S Company (downstream sales) (_50,000)
P Companys realized net income from separate operations*... P 746,000
S Companys net income from own operations. P 460,000
Realized profit in beginning inventory of P Company (upstream sales) 0
Unrealized profit in ending inventory of P Company (upstream sales) ( 0)
S Companys realized net income from separate operations*... P 460,000 460,000
Total P1,206,000
Less: Amortization of allocated excess 0
Consolidated Net Income for 20x5 P1,206,000
Less: Non-controlling Interest in Net Income* * 92,000
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent 20x5.. P
1,114,000
*that has been realized in transactions with third parties.
Beginning inventory: P1,080,000 x 1/5 = P216,000 x 20/120 = P36,000 profit
Ending inventory: P1,200,000 x = P300,000 x 20/120 = P50,000 profit
Or, alternatively
Consolidated Net Income for 20x5
P Companys net income from own/separate operations. P 760,000
Realized profit in beginning inventory of S Company (downstream sales) 36,000
Unrealized profit in ending inventory of S Company (downstream sales) (_50,000)
P Companys realized net income from separate operations*... P 746,000
S Companys net income from own operations. P 460,000
Realized profit in beginning inventory of P Company (upstream sales) 0
Unrealized profit in ending inventory of P Company (upstream sales) ( 0)
S Companys realized net income from separate operations*... P460,000 460,000
Total P1,206,000
Less: Non-controlling Interest in Net Income* * P 92,000
Amortization of allocated excess 0 92,000
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent.. P1,114,000
Add: Non-controlling Interest in Net Income (NCINI) _ 92,000
Consolidated Net Income for 20x5 P
1,206,000
*that has been realized in transactions with third parties.
2. Books of Puma
(a) Cost Method
20x4
Dividend Smarte Company:
None, since, there is no amount given
20x5
Dividend Smarte Company:
None, since, there is no amount given
Dividend Smarte
Cash/Dividends receivable 0
Investment in Smarte 0
Amortization of Allocated excess:
Equity in Subsidiary Income 0
Investment in Smarte 0
Dividend Smarte
Cash/Dividends receivable 0
Investment in Smarte 0
**100% UPEI of S:
Cost of Sales (Ending Inventory in Income Statement)
[216,000 (216,000/1.20)].... 36,000
Inventory (Ending Inventory in Balance Sheet).. 36,000
20x5
100% Interscompany Sales
Sales.1,200,000
Purchases (Cost of Goods Sold).. 1,200,000
Downstream Sales:
*100% RPBI of S:
Retained Earnings P, beginning..... 36,000
Cost of Sales (Beginning Inventory in Income Statement).. 36,000
**100% UPEI of S:
Cost of Sales (Ending Inventory in Income Statement)
[300,000 (300,000/1.20)].... 15,000
Inventory (Ending Inventory in Balance Sheet).. 15,000
Problem II
1.
Consolidated Net Income for 20x5
P Companys net income from own/separate operations. P
1,720,000
Realized profit in beginning inventory of S Company (downstream sales) 0
Unrealized profit in ending inventory of S Company (downstream sales) (_ 0)
P Companys realized net income from separate operations*... P 1,
720,000
S Companys net income from own operations. P 600,000
Realized profit in beginning inventory of P Company (upstream sales) 40,000
Unrealized profit in ending inventory of P Company (upstream sales) ( 51,00 0)
Son Companys realized net income from separate operations*... P 589,000 589,000
Total P2,309,000
Less: Amortization of allocated excess 0
Consolidated Net Income for 20x5 P2,309,000
Less: Non-controlling Interest in Net Income* * 58,900
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent 20x5.. P
2,250,100
*that has been realized in transactions with third parties.
Beginning inventory: P800,000 x 1/4 = P200,000 x 25/125 = P40,000 profit
Ending inventory: P1,020,000 x = P255,000 x 25/125 = P51,000 profit
Or, alternatively
Consolidated Net Income for 20x5
P Companys net income from own/separate operations. P
1,720,000
Realized profit in beginning inventory of S Company (downstream sales) 0
Unrealized profit in ending inventory of S Company (downstream sales) (________0)
P Companys realized net income from separate operations*... P1,720,,00
0
S Companys net income from own operations. P 600,000
Realized profit in beginning inventory of P Company (upstream sales) 40,000
Unrealized profit in ending inventory of P Company (upstream sales) ( 51,000)
S Companys realized net income from separate operations*... P589,000 589,000
Total P2,309,000
Less: Non-controlling Interest in Net Income* * P 58,900
Amortization of allocated excess 0 __58,900
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent.. P2,250,100
Add: Non-controlling Interest in Net Income (NCINI) _ 58,900
Consolidated Net Income for 20x5 P
2,309,000
*that has been realized in transactions with third parties.
**Non-controlling Interest in Net Income (NCINI) for 20x5
S Companys net income of Subsidiary Company from its own operations
(Reported net income of Son Company) P600,000
Realized profit in beginning inventory of P Company (upstream sales) 40,000
Unrealized profit in ending inventory of P Company (upstream sales) ( 51,000)
Son Companys realized net income from separate operations P589,000
Less: Amortization of allocated excess _____0
P589,000
Multiplied by: Non-controlling interest %.......... 10%
Non-controlling Interest in Net Income (NCINI) P 58,900
2. Books of Pinta
(a) Cost Method
20x4
Dividend Simplex Company:
None, since, there is no amount given
20x5
Dividend Simplex Company:
None, since, there is no amount given
Dividend Simplex
Cash/Dividends receivable 0
Investment in Simplex 0
Problem III
1.
Non-controlling Interest in Net Income (NCINI) for 20x4
S Companys net income of Subsidiary Company from its own operations
(Reported net income of Son Company) P3,000,000
Realized profit in beginning inventory of P Company (upstream sales): P525,000 x 105,000
25/125
Unrealized profit in ending inventory of P Company (upstream sales): P1,250,000 x ( 250,000)
25/125
Son Companys realized net income from separate operations P
2,855,000
Less: Amortization of allocated excess _____0
P3,055,00
0
Multiplied by: Non-controlling interest %.......... 20%
Non-controlling Interest in Net Income (NCINI) P 571,000
Problem IV
Requirements 1 to 4:
Schedule of Determination and Allocation of Excess (Partial-goodwill)
Date of Acquisition January 1, 20x4
The buildings and equipment will be further analyzed for consolidation purposes as follows:
S Co. S Co. Increase
Book value Fair value (Decrease)
Equipment .................. 180,000 180,000 0
Less: Accumulated
depreciation.. 96,000 - ( 96,000)
Net book
value... 84,000 180,000 96,000
S Co. SCo.
Book value Fair value (Decrease)
Buildings................ 360,000 144,000 ( 216,000)
Less: Accumulated
depreciation.. 192,000 - ( 192,000)
Net book
value... 168,000 144,000 ( 24,000)
In this case, the goodwill was proportional to the controlling interest of 80% and non-
controlling interest of 20% computed as follows:
Value % of Total
Goodwill applicable to parent P12,000 80.00%
Goodwill applicable to NCI.. 3,000 20.00%
Total (full) goodwill.. P15,000 100.00%
The unrealized profits on January 1, and on December 31, 20x5, resulting intercompany sales,
are as summarized below:
Downstream Sales:
Intercompany Merchandise
Year Sales of Parent to in 12/31 Inventory Unrealized Intercompany
Subsidiary of S Company Profit in Ending Inventory
20x P150,000 P150,000 x 60% = P90,000 P90,000 x 20% = P18,000
4
20x 120,000 P120,000 x 80% = P96,000 P96,000 x 25% = P40,000
5
Upstream Sales:
Intercompany Merchandise
Year Sales of in 12/31 Inventory Unrealized Intercompany
Subsidiary to of S Company Profit in Ending Inventory
Parent
20x P 50,000 P100,000 x 50% = P25,000 P25,000 x 40% = P10,000
4
20x 62,500 P 62,500 x 40% = P25,000 P25,000 x 20% = P 5,000
5
January 1, 20x4:
(1) Investment in S Company 372,000
372,000
Cash..
Acquisition of S Company.
(E2) 6,000
Inventory.
Accumulated depreciation equipment.. 96,000
Accumulated depreciation buildings.. 192,000
7,200
Land.
Discount on bonds 4,800
payable.
Goodwill. 12,000
Buildings.. 216,000
Non-controlling interest (P90,000 x 20%) 18,000
..
Investment in Son 84,000
Co.
To allocate excess of cost over book value of identifiable assets
acquired, with remainder to goodwill; and to establish non-
controlling interest (in net assets of subsidiary) on date of acquisition.
Cost of Depreciation/
Goods Amortization Amortizatio
Sold Expense n Total
-Interest
Inventory sold P
6,000
Equipment P 12,000
Buildings ( 6,000)
Bonds payable _______ _______ P 1,200
Totals P 6,000 P 2,000 P1,200 13,20
0
Balance Sheet
P
Cash. 232,800 P 90,000 P 355,200
Accounts receivable.. 90,000 60,000 150,000
(3)
6,000
(2) (7)
Inventory. 120,000 90,000 6,000 18,000
(8)
12,000 180,000
(2)
Land. 210,000 48,000 7,200 265,200
Equipment 240,000 180,000 420,000
(2)
Buildings 720,000 540,000 216,000 1,044,000
(2) (3)
Discount on bonds payable 4,800 12000 3,600
(2) (3)
Goodwill 12,000 3,000 9,000
Investment in S Co 372,000 (1) 288,000
(2) 84,000 -
P1,008,0
Total P1,984,800 00 P2,394,600
Since NCI share of goodwill is not recognized, no adjustment is required for the impairment
loss on goodwill and impairment losses are not shared with NCI.
On the books of S Company, the P48,000 dividend paid was recorded as follows:
Dividends paid 48,000
Cash 48,000
Dividends paid by S Co..
(E3) 6,000
Inventory.
Accumulated depreciation equipment.. .... 96,000
Accumulated depreciation buildings.. ... 192,000
7,200
Land.
Discount on bonds 4,800
payable.
Goodwill. 12,000
216,000
Buildings...........................
Non-controlling interest (P90,000 x 18,000
20%)............................
Investment in S Co. 84,000
To allocate excess of cost over book value of identifiable assets
acquired, with remainder to goodwill; and to establish non-
controlling interest (in net assets of subsidiary) on January 1, 20x5.
(20x4) Depreciation/
Retaine Amortization Amortizatio
d expense n
earnings -Interest
,
Inventory sold P
6,000
Equipment 12,000 P 12,000
Buildings (6,000) ( 6,000)
Bonds payable 1,20 ________ P 1,200
0
Sub-total P13,200 P 6,000 P 1,200
Multiplied by: 80%
To Retained earnings P
10,560
Impairment loss 3,00
0
Total P
13,560
Balance Sheet
P P
Cash. 265,200 102,000 P 367,200
Accounts receivable.. 180,000 96,000 276,000
Inventory. 216,000 108,000 (3) 7,200 (4) 7,200
(10) 24,000
(11) 6,000 294,000
(3)
Land. 210,000 48,000 7,200 265,200
Equipment 240,000 180,000 420,000
Buildings 720,000 540,000 (3) 216,000 1,044,000
(3)
Discount on bonds payable 4,800 (4) 2,400 2,400
(3)
Goodwill 12,000 (4) 3,000 9,000
Investment in S Co 372,000 (1)
19,200 (2) 307,200
(3) 84,000 -
P1,074,0
Total P2,203,200 00 P2,677,800
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.
Non-controlling interest (partial-goodwill), January 1, 20x4
Common stock Subsidiary Company P 240,000
Retained earnings Subsidiary Company. 120,000
Stockholders equity Subsidiary Company... P 360,000
Adjustments to reflect fair value - (over) undervaluation of assets and liabilities 90,000
Fair value of stockholders equity of subsidiary, January 1, 20x4 P 450,000
Multiplied by: Non-controlling Interest percentage... 20
Non-controlling interest (partial) P 90,000
c.
Consolidated SHE:
Stockholders Equity
Common stock, P10 par P 600,000
Retained earnings 360,000
Parents Stockholders Equity / CI - SHE P 960,000
NCI, 1/1/20x4 ___90,000
Consolidated SHE, 1/1/20x4 P1,050,000
6.
Note: The goodwill recognized on consolidation purely relates to the parents share. NCI is
measured as a proportion of identifiable assets and goodwill attributable to NCI share is
not recognized.
12/31/20x4:
a. CI-CNI P174,840
Consolidated Net Income for 20x4
P Companys net income from own/separate operations. P168,000
Unrealized profit in ending inventory of S Company (downstream sales) ( 18,000)
P Companys realized net income from separate operations*... P150,000
S Companys net income from own operations. P 60,000
Unrealized profit in ending inventory of S Company (upstream sales) ( 12,000)
S Companys realized net income from separate operations*... P 48,000 48,000
Total P198,000
Less: Non-controlling Interest in Net Income* * P 6,960
Amortization of allocated excess (refer to amortization above) 13,200
Goodwill impairment (impairment under partial-goodwill approach) 3,000 23,160
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent.. P174,840
Add: Non-controlling Interest in Net Income (NCINI) _ 6,960
Consolidated Net Income for 20x4 P181.800
*that has been realized in transactions with third parties.
b. NCI-CNI P6,960
**Non-controlling Interest in Net Income (NCINI) for 20x4
S Companys net income of Subsidiary Company from its own operations P 60,000
(Reported net income of S Company)
Unrealized profit in ending inventory of P Company (upstream sales) ( 12,000)
S Companys realized net income from separate operations P 48,000
Less: Amortization of allocated excess 13,200
P 34,800
Multiplied by: Non-controlling interest %.......... 20%
Non-controlling Interest in Net Income (NCINI) partial goodwill P 6,960
*that has been realized in transactions with third parties.
e. The goodwill recognized on consolidation purely relates to the parents share. NCI is
measured as a proportion of identifiable assets and goodwill attributable to NCI share
is not recognized. The NCI on December 31, 20x4 are computed as follows:
Non-controlling interest (partial-goodwill), December 31, 20x4
Common stock Subsidiary Company, December 31, 20x4 P 240,000
Retained earnings Subsidiary Company, December 31, 20x4
Retained earnings Subsidiary Company, January 1, 20x4 P120,000
Add: Net income of subsidiary for 20x4 6,000
Total P180,000
Less: Dividends paid 20x4 36,000 144,000
Stockholders equity Subsidiary Company, December 31, 20x4 P 384,000
Adjustments to reflect fair value - (over) undervaluation of assets and
liabilities, date of acquisition (January 1, 20x4) 90,000
Amortization of allocated excess (refer to amortization above) 20x4 ( 13,200)
Fair value of stockholders equity of subsidiary, December 31, 20x4 P460,000
Less: Unrealized profit in ending inventory of P Company (upstream sales) 12,000
Realized stockholders equity of subsidiary, December 31, 20x4 P448,800
Multiplied by: Non-controlling Interest percentage... 20
Non-controlling interest (partial-goodwill).. P 89,760
f.
Consolidated SHE:
Stockholders Equity
Common stock, P10 par P 600,000
Retained earnings 462,840
Parents Stockholders Equity / CI SHE, 12/31/20x4 P1,062,840
NCI, 12/31/20x4 ___89,760
Consolidated SHE, 12/31/20x4 P1,152,600
12/31/20x5:
a. CI-CNI
Consolidated Net Income for 20x5
P Companys net income from own/separate operations. P192,000
Realized profit in beginning inventory of S Company (downstream sales) 18,000
Unrealized profit in ending inventory of S Company (downstream sales) (_24,000)
P Companys realized net income from separate operations*... P186,000
S Companys net income from own operations. P 90,000
Realized profit in beginning inventory of P Company (upstream sales) 12,000
Unrealized profit in ending inventory of P Company (upstream sales) ( 6,000)
Son Companys realized net income from separate operations*... P 96,000 96,000
Total P282,000
Less: Amortization of allocated excess 7,200
Consolidated Net Income for 20x5 P274,800
Less: Non-controlling Interest in Net Income* * 17,760
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent 20x5.. P257,040
*that has been realized in transactions with third parties.
Or, alternatively
Consolidated Net Income for 20x5
P Companys net income from own/separate operations. P192,000
Realized profit in beginning inventory of S Company (downstream sales) 18,000
Unrealized profit in ending inventory of S Company (downstream sales) (_24,000)
P Companys realized net income from separate operations*... P186,000
S Companys net income from own operations. P 90,000
Realized profit in beginning inventory of P Company (upstream sales) 12,000
Unrealized profit in ending inventory of P Company (upstream sales) ( 6,000)
S Companys realized net income from separate operations*... P 96,000 96,000
Total P282,000
Less: Non-controlling Interest in Net Income* * P 17,760
Amortization of allocated excess 7,200 24,960
Controlling Interest in Consolidated Net Income or Profit attributable toequity
holders of parent.. P257,040
Add: Non-controlling Interest in Net Income (NCINI) _ 17,760
Consolidated Net Income for 20x5 P274,800
*that has been realized in transactions with third parties.
b. NCI-CNI
**Non-controlling Interest in Net Income (NCINI) for 20x5
S Companys net income of Subsidiary Company from its own operations P 90,000
(Reported net income of S Company)
Realized profit in beginning inventory of P Company (upstream sales) 12,000
Unrealized profit in ending inventory of P Company (upstream sales) ( 6,000)
S Companys realized net income from separate operations P 96,000
Less: Amortization of allocated excess 7,200
P 88,800
Multiplied by: Non-controlling interest %.......... 20%
Non-controlling Interest in Net Income (NCINI) partial goodwill P 17,760
e.
Non-controlling interest (partial-goodwill), December 31, 20x5
Common stock Subsidiary Company, December 31, 20x5 P 240,000
Retained earnings Subsidiary Company, December 31, 20x5
Retained earnings Subsidiary Company, January 1, 20x5* P144,000
Add: Net income of subsidiary for 20x5 90,000
Total P234,000
Less: Dividends paid 20x5 48,000 186,000
Stockholders equity Subsidiary Company, December 31, 20x5 P 426,000
Adjustments to reflect fair value - (over) undervaluation of assets and
liabilities, date of acquisition (January 1, 20x4) 90,000
Amortization of allocated excess (refer to amortization above) :
20x4 P
13,200
20x5 7,200 ( 20,400)
Fair value of stockholders equity of subsidiary, December 31, 20x5 P 495,600
Less: Unrealized profit in ending inventory of P Company (upstream
sales) 20x5 (UPEI of P 20x5) or Realized profit in beginning
inventory 6,000
of P Company (upstream sales) 20x6 (RPBI of P - 20x6
Realized stockholders equity of subsidiary, December 31, 20x5. P489,600
Multiplied by: Non-controlling Interest percentage... 20
Non-controlling interest (partial goodwill).. P 97,920
* the realized profit in beginning inventory of P Company (upstream sales) 20x5 (RPBI of P - 20x5 amounting
to P10,000 is already included in the beginning retained earnings of S Company.
f.
Consolidated SHE:
Stockholders Equity
Common stock, P10 par P 600,000
Retained earnings 647,880
Parents Stockholders Equity / CI SHE, 12/31/20x4 P1,247,880
NCI, 12/31/20x4 ___97,920
Consolidated SHE, 12/31/20x4 P1,345,800
Problem V
Requirements 1 to 4:
Schedule of Determination and Allocation of Excess
Date of Acquisition January 1, 20x4
Fair value of Subsidiary (80%)
Consideration transferred (80%).. P 372,000
Fair value of NCI (given) (20%).. 93,000
Fair value of Subsidiary (100%). P 465,000
Less: Book value of stockholders equity of Son:
Common stock (P240,000 x 100%)
. P 240,000
Retained earnings (P120,000 x 100%)... 120,000 360,000
Allocated excess (excess of cost over book value)
.. P 105,000
Less: Over/under valuation of assets and liabilities:
Increase in inventory (P6,000 x 100%)
P 6,000
Increase in land (P7,200 x 100%)
. 7,200
Increase in equipment (P96,000 x 100%) 96,000
Decrease in buildings (P24,000 x 100%)
..... ( 24,000)
Decrease in bonds payable (P4,800 x 100%)
4,800 90,000
Positive excess: Full-goodwill (excess of cost over
fair value)... P 15,000
On the books of Son Company, the P36,000 dividend paid was recorded as follows:
No entries are made on the parents books to depreciate, amortize or write-off the portion of
the allocated excess that expires during 20x4.
(E2) 6,000
Inventory.
Accumulated depreciation equipment.. 96,000
Accumulated depreciation buildings.. 192,000
7,200
Land.
Discount on bonds 4,800
payable.
Goodwill. 15,000
Buildings.. 216,000
Non-controlling interest (P90,000 x 20%) + [(P15,000,
full 21,000
P12,000, partial goodwill)]
Investment in Son 84,000
Co.
To allocate excess of cost over book value of identifiable assets
acquired, with remainder to goodwill; and to establish non-
controlling interest (in net assets of subsidiary) on date of acquisition.
Cost of Depreciation/
Goods Amortization Amortizatio
Sold Expense n
-Interest
Inventory sold P
6,000
Equipment P12,000
Buildings ( 6,000)
Bonds payable _______ _______ P 1,200
Totals P 6,000 P 6,000 P1,200
Balance Sheet
P
Cash. 232,800 P 90,000 P 322,800
Accounts receivable.. 90,000 60,000 150,000
Inventory. 120,000 90,000 (2) (3) 180,000
6,000 6,000
(7)
18,000
(8)
12,000
(2)
Land. 210,000 48,000 7,200 265,200
Equipment 240,000 180,000 420,000
(2)
Buildings 720,000 540,000 216,000 1,044,000
(2) (3)
Discount on bonds payable 4,800 1,200 3,600
(2) (3)
Goodwill 15,000 3,750 11,250
Investment in S Co 372,000 (3) 288,000
(4) 84,000 -
P1,008,0
Total P1,984,800 00 P2,396,850
307,200
Non-controlling interest (P384,000 x 20%)..
76,800
To eliminate intercompany investment and equity accounts
of subsidiary and to establish non-controlling interest (in net assets of
subsidiary) on January 1, 20x5.
(E3) Inventory.
6000
Land.
7,200
Goodwill.
15,000
Buildings..
216,000
Non-controlling interest (P90,000 x 20%) + [(P15,000, full
P12,000, partial goodwill)]
21,000
Investment in S Co.
84,000
To allocate excess of cost over book value of identifiable assets
acquired, with remainder to goodwill; and to establish non-
controlling interest (in net assets of subsidiary) on January 1, 20x5.
13,560
Depreciation expense..
6,000
Interest expense
1,200
Inventory..
6,000
Accumulated depreciation equipment..
24,000
Discount on bonds payable
2,800
Goodwill
3,750
To provide for years 20x4 and 20x5 depreciation and amortization on
differences between acquisition date fair value and book value of
Sons identifiable assets and liabilities as follows:
Year 20x4 amounts are debited to Perfects retained earnings
and NCI.
Year 20x5 amounts are debited to respective nominal accounts..
(20x4)
Retained earnings,
Depreciation/
Amortization
expense
Amortization
-Interest
Inventory sold
P 6,000
Equipment
12,000
P 12,000
Buildings
(6,000)
( 6,000)
Bonds payable
1,200
P 1,200
Impairment loss
3,750
Totals
P 16,950
P 6,000
P1,200
To Retained earnings
P13,560
Dividends paid S
48,000
To eliminate intercompany dividends and non-controlling interest
share of dividends.
Balance Sheet
P P
Cash. 265,200 102,000 P 367,200
Accounts receivable.. 180,000 96,000 276,000
Inventory. 216,000 108,000 (6) 6,000 (4) 6,000
(10) 24,000
(11) 6,000 294,000
(3)
Land. 210,000 48,000 7,200 265,200
Equipment 240,000 180,000 420,000
Buildings 720,000 540,000 (3) 216,000 1,044,000
(3)
Discount on bonds payable 4,800 (4) 2,400 2,400
(3)
Goodwill 15,000 (4) 3,750 11,250
Investment in S Co 372,000 (1)
19,200 (2) 307,200
(3) 84,000 -
P1,074,0
Total P2,203,200 00 P2,680,050
5. 1/1/20x4
a. On date of acquisition the retained earnings of parent should always be considered as
the consolidated retained earnings, thus:
Consolidated Retained Earnings, January 1, 20x4
Retained earnings - Parent Company, January 1, 20x4 (date of acquisition) P360,000
b.
Non-controlling interest (partial-goodwill), January 1, 20x4
Common stock Subsidiary Company P 240,000
Retained earnings Subsidiary Company. 120,000
Stockholders equity Subsidiary Company... P 360,000
Adjustments to reflect fair value - (over) undervaluation of assets and liabilities 90,000
Fair value of stockholders equity of subsidiary, January 1, 20x4 P 450,000
Multiplied by: Non-controlling Interest percentage... 20
Non-controlling interest (partial).. P 90,000
Add: Non-controlling interests on full goodwill, 1/1/20x4 (P12,500, full-goodwill P10,000,
partial 3,000
goodwill)
Non-controlling interest (full-goodwill) P 93,000
c.
Consolidated SHE:
Stockholders Equity
Common stock, P10 par P 600,000
Retained earnings 360,000
Parents Stockholders Equity / CI - SHE P 960,000
NCI, 1/1/20x4 ___93,000
Consolidated SHE, 1/1/20x4 P1,053,000
6.
Note: The goodwill recognized on consolidation purely relates to the parents share. NCI is
measured as a proportion of identifiable assets and goodwill attributable to NCI share is
not recognized.
12/31/20x4:
a. CI-CNI P174,840
Consolidated Net Income for 20x4
P Companys net income from own/separate operations. P168,000
Unrealized profit in ending inventory of S Company (downstream sales) ( 18,000)
Perfect Companys realized net income from separate operations*. P150,000
..
S Companys net income from own operations. P 60,000
Unrealized profit in ending inventory of S Company (upstream sales) ( 12,000)
Son Companys realized net income from separate operations*... P 48,000 48,000
Total P198,000
Less: Non-controlling Interest in Net Income P 6,1210
Amortization of allocated excess (refer to amortization above) 13,200
Goodwill impairment (impairment under full-goodwill approach) 3,750 23,160
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent.. P174,840
Add: Non-controlling Interest in Net Income (NCINI) _ 6,210
Consolidated Net Income for 20x4 P181.050
*that has been realized in transactions with third parties.
b. NCI-CNI P6,210
**Non-controlling Interest in Net Income (NCINI) for 20x4
S Companys net income of Subsidiary Company from its own operations P 60,000
(Reported net income of S Company)
Unrealized profit in ending inventory of P Company (upstream sales) ( 12,000)
S Companys realized net income from separate operations P 48,000
Less: Amortization of allocated excess 13,200
P 34,800
Multiplied by: Non-controlling interest %.......... 20%
Non-controlling Interest in Net Income (NCINI) partial P 6,960
Less: Non-controlling interest on impairment loss on full-goodwill (P3,750
x
20%) or (P3,750 impairment on full-goodwill less P3,000, 750
impairment on
partial- goodwill)
Non-controlling Interest in Net Income (NCINI) P 6,210
*that has been realized in transactions with third parties.
12/31/20x5:
a. CI-CNI P257,040
Consolidated Net Income for 20x5
P Companys net income from own/separate operations. P192,000
Realized profit in beginning inventory of S Company (downstream sales) 18,000
Unrealized profit in ending inventory of S Company (downstream sales) (_24,000)
P Companys realized net income from separate operations*... P186,000
S Companys net income from own operations. P 90,000
Realized profit in beginning inventory of P Company (upstream sales) 12,000
Unrealized profit in ending inventory of P Company (upstream sales) ( 6,000)
S Companys realized net income from separate operations*... P 96,000 96,000
Total P282,000
Less: Amortization of allocated excess 7,200
Consolidated Net Income for 20x5 P274,800
Less: Non-controlling Interest in Net Income* * 17,760
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent 20x5.. P257,040
*that has been realized in transactions with third parties.
Or, alternatively
Consolidated Net Income for 20x5
P Companys net income from own/separate operations. P192,000
Realized profit in beginning inventory of S Company (downstream sales) 18,000
Unrealized profit in ending inventory of S Company (downstream sales) (_24,000)
P Companys realized net income from separate operations*... P186,000
S Companys net income from own operations. P 90,000
Realized profit in beginning inventory of P Company (upstream sales) 12,000
Unrealized profit in ending inventory of P Company (upstream sales) ( 6,000)
Son Companys realized net income from separate operations*... P 96,000 96,000
Total P282,000
Less: Non-controlling Interest in Net Income* * P 17,760
Amortization of allocated excess 7,200 24,960
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent.. P257,040
Add: Non-controlling Interest in Net Income (NCINI) _ 17,760
Consolidated Net Income for 20x5 P274,800
*that has been realized in transactions with third parties.
b. NCI-CNI P16,560
**Non-controlling Interest in Net Income (NCINI) for 20x5
S Companys net income of Subsidiary Company from its own operations P 90,000
(Reported net income of S Company)
Realized profit in beginning inventory of P Company (upstream sales) 12,000
Unrealized profit in ending inventory of P Company (upstream sales) ( 6,000)
S Companys realized net income from separate operations P 96,000
Less: Amortization of allocated excess 7,200
P 88,800
Multiplied by: Non-controlling interest %.......... 20%
Non-controlling Interest in Net Income (NCINI) partial goodwill P 17,760
Less: NCI on goodwill impairment loss on full goodwill 0
Non-controlling Interest in Net Income (NCINI) full goodwill P 17,760
Or, alternatively:
Consolidated Retained Earnings, December 31, 20x5
Retained earnings - Parent Company, December 31, 20x5 (cost model P643,200
Less: Unrealized profit in ending inventory of S Company (downstream
sales)
20x5 (UPEI of S 20x5) or Realized profit in beginning inventory of 24,000
S Company (downstream sales) 20x6 (RPBI of S - 20x6).
Adjusted Retained Earnings Parent 12/31/20x5 (cost model (
S Companys Retained earnings that have been realized in
transactions with third parties.. P619,200
Adjustment to convert from cost model to equity method for purposes of
consolidation or to establish reciprocity:/Parents share in adjusted
net
increased in subsidiarys retained earnings:
Retained earnings Subsidiary, December 31, 20x5 P 186,000
Less: Retained earnings Subsidiary, January 1, 20x4 120,000
Increase in retained earnings since date of acquisition P 66,000
Less: Accumulated amortization of allocated excess
20x4 and 20x5 (P13,200 + P7,200) 20,400
Unrealized profit in ending inventory of P Company
(upstream
sales) 20x5 (UPEI of P 20x5) or Realized profit in beginning 6,000
inventory of P Company (upstream sales) 20x6 (RPBI of P -
20x6)
P 39,600
Multiplied by: Controlling interests %................... 80%
P 31,680
Less: Goodwill impairment loss (full-goodwill), net (P3,750 P750)*
or 3,000 28,680
(P3,750 x 80%)
Consolidated Retained earnings, December 31, 20x5 P647,880
e.
Non-controlling interest, December 31, 20x5
Common stock Subsidiary Company, December 31, 20x5 P 240,000
Retained earnings Subsidiary Company, December 31, 20x5
Retained earnings Subsidiary Company, January 1, 20x5* P144,000
Add: Net income of subsidiary for 20x5 90,000
Total P234,000
Less: Dividends paid 20x5 48,000 186,000
Stockholders equity Subsidiary Company, December 31, 20x5 P 426,000
Adjustments to reflect fair value - (over) undervaluation of assets and
liabilities, date of acquisition (January 1, 20x4) 90,000
Amortization of allocated excess (refer to amortization above) :
20x4 P
13,200
20x5 7,200
( 20,400)
Fair value of stockholders equity of subsidiary, December 31, 20x5 P 495,600
Less: Unrealized profit in ending inventory of P Company (upstream
sales) 20x5 (UPEI of P 20x5) or Realized profit in beginning
inventory 6,000
of P Company (upstream sales) 20x6 (RPBI of P - 20x6
Realized stockholders equity of subsidiary, December 31, 20x5. P489,600
Multiplied by: Non-controlling Interest percentage... 20
Non-controlling interest (partial goodwill).. P 97,920
Add: Non-controlling interest on full goodwill , net of impairment loss
[(P15,000 full P12,000, partial = P3,000) P750 impairment loss 2,250
Non-controlling interest (full-goodwill).. P 100,170
* the realized profit in beginning inventory of P Company (upstream sales) 20x5 (RPBI of P - 20x5 amounting
to P10,000 is already included in the beginning retained earnings of S Company.
f.
Consolidated SHE:
Stockholders Equity
Common stock, P10 par P 600,000
Retained earnings 647,880
Parents Stockholders Equity / CI - SHE P1,247,880
NCI, 1/1/20x4 ___100,170
Consolidated SHE, 12/31/20x5 P1,348,050
Problem VI
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.. P 372,000
Less: Book value of stockholders equity of Son:
Common stock (P240,000 x 80%)
. P 192,000
Retained earnings (P120,000 x 80%)
... 96,000 288,000
Allocated excess (excess of cost over book value)
.. P 84,000
Less: Over/under valuation of assets and liabilities:
Increase in inventory (P6,000 x 80%)
P 4,800
Increase in land (P7,200 x 80%)
. 5,760
Increase in equipment (P96,000 x 80%) 76,800
Decrease in buildings (P24,000 x 80%) ( 19,200)
.....
Decrease in bonds payable (P4,800 x 80%)
3,840 72,000
Positive excess: Partial-goodwill (excess of cost over
fair value)... P 12,000
The buildings and equipment will be further analyzed for consolidation purposes as follows:
S Co. S Co.
Book Fair Increase
value value (Decrease)
Equipment .................. 180,000 180,000 0
Less: Accumulated
depreciation.. 96,000 - ( 96,000)
Net book
value... 84,000 180,000 96,000
S Co. S Co.
Book Fair
value value (Decrease)
Buildings................ 360,000 144,000 ( 216,000)
Less: Accumulated
depreciation.. 192,000 - ( 192,000)
Net book
value... 168,000 144,000 ( 24,000)
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:
In this case, the goodwill was proportional to the controlling interest of 80% and non-
controlling interest of 20% computed as follows:
Value % of Total
Goodwill applicable to parent P12,000 80.00%
Goodwill applicable to NCI.. 3,000 20.00%
Total (full) goodwill.. P15,000 100.00%
Value % of Total
Goodwill impairment loss attributable to parent or controlling P 3,000 80.00%
Interest
Goodwill applicable to NCI.. 750 20.00%
Goodwill impairment loss based on 100% fair value or full-
Goodwill P 3,750 100.00%
The unrealized profits on January 1, and on December 31, 20x5, resulting intercompany sales,
are as summarized below:
Downstream Sales:
Intercompany Merchandise
Year Sales of Parent to in 12/31 Inventory Unrealized Intercompany
Subsidiary of S Company Profit in Ending Inventory
20x P150,000 P150,000 x 60% = P90,000 P90,000 x 20% = P18,000
4
20x 120,000 P120,000 x 80% = P96,000 P96,000 x 25% = P40,000
5
Upstream Sales:
Intercompany Merchandise
Year Sales of in 12/31 Inventory Unrealized Intercompany
Subsidiary to of S Company Profit in Ending Inventory
Parent
20x P 50,000 P100,000 x 50% = P25,000 P25,000 x 40% = P10,000
4
20x 62,500 P 62,500 x 40% = P25,000 P25,000 x 20% = P 5,000
5
20x4: First Year after Acquisition
Parent Company Cost Model Entry
January 1, 20x4:
(1) Investment in S Company 372,000
372,000
Cash..
Acquisition of S Company.
(E2) 6,000
Inventory.
Accumulated depreciation equipment.. 96,000
Accumulated depreciation buildings.. 192,000
7,200
Land.
Discount on bonds 4,800
payable.
Goodwill. 12,000
Buildings.. 216,000
Non-controlling interest (P90,000 x 20%) 18,000
..
Investment in S Co. 84,000
To eliminate investment on January 1, 20x4 and allocate excess of
cost over book value of identifiable assets acquired, with
remainder
to goodwill; and to establish non- controlling interest (in net
assets of
subsidiary) on date of acquisition.
Cost of Depreciation/
Goods Amortization Amortizatio
Sold Expense n Total
-Interest
Inventory sold P
6,000
Equipment P 12,000
Buildings ( 6,000)
Bonds payable _______ _______ P 1,200
Totals P 6,000 P 7,200 P1,200 14,40
0
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.
Balance Sheet
P
Cash. 232,800 P 90,000 P 387,360
Accounts receivable.. 90,000 60,000 150,000
(3)
6,000
(7)
Inventory. 120,000 90,000 (1) 5,000 18,000
(8)
12,000 180,000
(2)
Land. 210,000 48,000 7,200 265,200
Equipment 220,000 180,000 380,000
(2)
Buildings 720,000 540,000 216,000 1,044,000
(2) (3)
Discount on bonds payable 4,800 1,200 3,600
(2) (3)
Goodwill 12,000 3,000 9,000
Investment in S Co 350,040 (2)
(4) 21,96 288,000
0 (2)
84,000
-
P1,006,0
Total P1,635,700 00 P2,394,600
Thus, the investment balance and investment income in the books of P Company is as
follows:
Investment in S
Cost, 1/1/x5 38,400 Dividends S (48,000x
350,040 80%)
NI of Son 5,760 Amortization (7,200 x 80%)
(90,000 x 80%) 24,000 UPEI of Son (P24,000 x
72,000 100%)
RPBI of S (P18,000 x 100%) 4,800 UPEI of Perfect (P6,000 x
18,000 80%)
RPBI of P (P12,000 x 80%) 9,600
Balance, 12/31/x5 Investment Income
Amortization
376,680 (7,200 x 805) NI of S
5,760
UPEI of S (P24,000 x 100%) 72,000 (P90,000 x 80%)
24,000
UPEI of P (P6,000 x 80%) 4,800 18,000 RPBI of S (P18,000 x 100%)
9,600 RPBI of P(P12,000 x 80%)
65,040 Balance, 12/31/x5
Consolidation Workpaper Second Year after Acquisition
The schedule of determination and allocation of excess presented above provides complete
guidance for the worksheet eliminating entries:
(E1) Common stock S Co 240,000
Retained earnings S Co, 1/1/x5. 144.000
Investment in SCo (P384,000 x 80%) 307,200
Non-controlling interest (P384,000 x 20%) 76,800
..
To eliminate investment on January 1, 20x5 and equity accounts
of subsidiary on date of acquisition; and to establish non-
controlling interest (in net assets of subsidiary) on 1/1/20x5.
Depreciation/
Amortization Amortizatio
Expense n Total
-Interest
Inventory
sold
Equipment P 12,000
Buildings ( 6,000)
Bonds _______ P 1,200
payable
Totals P 6,000 P1,200 P7,20
0
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,
Investment in S
Cost, 1/1/x5 38,400 Dividends S (40,000x
350,040 80%)
NI of S Amortization
(90,000 x 80%) 5,760 (6,000 x 80%)
72,000
RPBI of S (P18,000 x 100%) 24,000 UPEI of S (P20,000 x
(E10) Cost of18,000
Goods Sold (Ending Inventory Income100%) 24,000
Statement)RPBI of P(P12,000 x 80%) 9,600 4,800 UPEI of P (P5,000 x 80%)
Balance,
Inventory 12/31/x5
Balance Sheet 307,200 (E1) Investment, 1/1/20x5
24,000
To defer 376,680
the downstream sales - unrealized profit in ending
inventory (E8) RPBI of S 18,000 70,440 (E2) Investment, 1/1/20x5
until it is sold(E9) RPBI of P
to outsiders. 9,600 26,640 (E4) Investment Income
and dividends
336,900 404,280
(E11) Cost of Goods Sold (Ending Inventory Income 6,000
Statement)
Inventory Balance Sheet 6,000
To defer the upstream sales - unrealized profit in ending
inventory
until it is sold to outsiders.
Balance Sheet
P P
Cash. 265,200 102,000 P 367,200
Accounts receivable.. 180,000 96,000 276,000
(10)
Inventory. 216,000 108,000 24,000
(11) 6,000 294,000
(2)
Land. 210,000 48,000 7,200 265,200
Equipment 240,000 180,000 420,000
Buildings 720,000 540,000 (3) 216,000 1,044,000
(2)
Discount on bonds payable 3,600 (3) 1,200 2,400
(2)
Goodwill 9,000 9,000
Investment in S Co 376,680 (8) (1) 307,200
18,000 (2) 70,440
(9) 9,600 (4)
26,640 -
P1,074,0
Total P2,207,880 00 P2,677,800
(2)
Accumulated depreciation P 84,000 (3)
- equipment P 150,000 102,000 12,000 P180,000
(2)
Accumulated depreciation 450,000 306,000 198,000
- buildings (3) 6,000 552,000
Accounts payable 120,000 120,000 240,000
Bonds payable 240,000 120,000 360,000
Common stock, P10 par 600,000 600,000
(1)
Common stock, P10 par 240,000 240,000
Retained earnings, from above 647,880 186,000 647,880
Non-controlling interest (4) 9,600
(9) 2,400 (2 ) 76,800
___ (2) 15,360
_____ _________ __________ (5) 17,760 ____97,920
P1,074,0 P1,046,40 P1,046,40
Total P2,207,880 00 0 0 P2,677,800
Problem VII
Requirements 1 to 4:
Schedule of Determination and Allocation of Excess
Date of Acquisition January 1, 20x4
Fair value of Subsidiary (80%)
Consideration transferred (80%).. P 372,000
Fair value of NCI (given) (20%).. 93,000
Fair value of Subsidiary (100%). P 465,000
Less: Book value of stockholders equity of Son:
Common stock (P240,000 x 100%)
. P 240,000
Retained earnings (P120,000 x 100%)... 120,000 360,000
Allocated excess (excess of cost over book value)
.. P 105,000
Less: Over/under valuation of assets and liabilities:
Increase in inventory (P6,000 x 100%)
P 6,000
Increase in land (P7,200 x 100%)
. 7,200
Increase in equipment (P96,000 x 100%) 96,000
Decrease in buildings (P24,000 x 100%)
..... ( 24,000)
Decrease in bonds payable (P4,800 x 100%)
4,800 90,000
Positive excess: Full-goodwill (excess of cost over
fair value)... P 15,000
A summary or depreciation and amortization adjustments is as follows:
Account Adjustments to be Over/ Annual Current
amortized under Life Amount Year(20x4) 20x5
P P P
Inventory 6,000 1 6,000 P 6,000 -
Subject to Annual Amortization
Equipment (net)......... 96,000 8 12,000 12,000 12,000
(24,00
Buildings (net) 0) 4 ( 6,000) ( 6,000) (6,000)
4,80 1,20 1,20
Bonds payable 0 4 0 1,200 0
P
13,200 P 13,200 P 7,200
*this procedure would be more appropriate, instead of multiplying the full-goodwill impairment loss of P3,125 by 80%.
There might be situations where the controlling interests on goodwill impairment loss would not be proportionate to
NCI acquired (refer to Illustration 15-6).
Thus, the investment balance and investment income in the books of P Company is as follows
Investment in S
Cost, 1/1/x4 28,800 Dividends S (36,000x
372,000 80%)
NI of S Amortization &
(60,000 x 80%) 13,560 impairment
48,000
18,000 UPEI of S (P18,000 x 100%)
9,600 UPEI of P (P12,000 x80%)
Balance, 12/31/x4
324,000
Investment Income
Amortization & NI of S
impairment 48,000 (P60,000 x 80%)
13,560
UPEI of S (P18,000 x 100%)
18,000
UPEI of P (P12,000 x80%) 9,600
6,840 Balance, 12/31/x4
Consolidation Workpaper First Year after Acquisition
(E1) Common stock S Co 240,000
Retained earnings S Co 120.000
Investment in S Co 288,000
Non-controlling interest (P360,000 x 20%) 72,000
..
To eliminate investment on January 1, 20x4 and equity accounts
of subsidiary on date of acquisition; and to establish non-
controlling interest (in net assets of subsidiary) on date of
acquisition.
(E2) 6,000
Inventory.
Accumulated depreciation equipment.. 96,000
Accumulated depreciation buildings.. 192,000
7,200
Land.
Discount on bonds 4,800
payable.
Goodwill. 15,000
Buildings.. 216,000
Non-controlling interest (P90,000 x 20%) + [(P15,000,
full 21,000
P12,000, partial goodwill)]
Investment in Son 84,000
Co.
To eliminate investment on January 1, 20x4 and allocate excess of
cost over book value of identifiable assets acquired, with
remainder
to goodwill; and to establish non- controlling interest (in net
assets of
subsidiary) on date of acquisition.
Cost of Depreciation/
Goods Amortization Amortizatio
Sold Expense n Total
-Interest
Inventory sold P
6,000
Equipment P 12,000
Buildings ( 6,000)
Bonds payable _______ _______ P 1,200
Totals P 6,000 P 7,200 P1,200 14,40
0
Balance Sheet
P
Cash. 232,800 P 90,000 P 322,800
Accounts receivable.. 90,000 60,000 150,000
(3)
6,000
(7)
Inventory. 120,000 90,000 (2) 6,000 18,000
(8)
12,000 180,000
(2)
Land. 210,000 48,000 7,200 265,200
Equipment 240,000 180,000 420,000
(2)
Buildings 720,000 540,000 216,000 1,044,000
(2) (3)
Discount on bonds payable 4,800 1,200 3,600
(2) (3)
Goodwill 15,000 3,750 11,250
Investment in S Co 350,040 (2)
(4) 288,000
21,960 (2)
84,000
-
P1,008,0
Total P1,635,700 00 P2,396,850
Thus, the investment balance and investment income in the books of Perfect Company is as
follows:
Investment in S
Cost, 1/1/x5 38,400 Dividends S (48,000x
350,040 80%)
NI of Son 5,760 Amortization (7,200 x 80%)
(90,000 x 80%) 24,000 UPEI of S (P24,000 x 100%)
72,000
RPBI of (P18,000 x 100%) 4,800 UPEI of P (P6,000 x 80%)
18,000
RPBI of P (P12,000 x 80%) 9,600
Balance, 12/31/x5
376,680
Investment Income
Amortization (7,200 x 805) NI of S
5,760
UPEI of S (P24,000 x 100%) 72,000 (P90,000 x 80%)
24,000
UPEI of P (P6,000 x 80%) 4,800 18,000 RPBI of S (P18,000 x 100%)
9,600 RPBI of P (P12,000 x 80%)
65,040 Balance, 12/31/x5
Consolidation Workpaper Second Year after Acquisition
The schedule of determination and allocation of excess presented above provides complete
guidance for the worksheet eliminating entries.
(E1) Common stock S Co 240,000
Retained earnings S Co, 1/1/x5. 144.000
Investment in SCo (P384,000 x 80%) 307,200
Non-controlling interest (P384,000 x 20%) 76,800
..
To eliminate investment on January 1, 20x5 and equity accounts
of subsidiary on date of acquisition; and to establish non-
controlling interest (in net assets of subsidiary) on 1/1/20x5.
Depreciation/
Amortization Amortizatio
Expense n Total
-Interest
Inventory
sold
Equipment P 12,000
Buildings ( 6,000)
Bonds _______ P 1,200
payable
Totals P 6,000 P1,200 P7,20
0
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,
Investment in S
Cost, 1/1/x5 38,400 Dividends S (48,000x
350,040 80%)
NI of Son Amortization
(90,000 x 80%) 5,600 (7,000 x 80%)
72,000
RPBI of S (P18,000 x 100%) 24,000 UPEI of S (P24,000 x
18,000 100%)
RPBI of P (P18,000 x 80%) 9,600 4,800 UPEI of P (P6,000 x 80%)
Balance, 12/31/x5 307,200 (E1) Investment, 1/1/20x5
376,680
(E8) RPBI of S 70,440 (E2) Investment, 1/1/20x5
18,000
(E10) Cost of(E9)
GoodsRPBI of P(Ending Inventory Income 26,640
Sold (E4) Investment
24,000 Income
Statement)9,600 and dividends
404,280 404,280
Inventory Balance Sheet 24,000
To defer the downstream sales - unrealized profit in ending
inventory
until it is sold to outsiders.
Balance Sheet
P P
Cash. 265,200 114,000 P 367,200
Accounts receivable.. 180,000 96,000 276,000
(10)
Inventory. 216,000 108,000 24,000
(11) 6,000 294,000
(2)
Land. 210,000 48,000 7,200 265,200
Equipment 240,000 180,000 420,000
(3)
Buildings 720,000 540,000 216,000 1,044,000
(2)
Discount on bonds payable 3,600 (3) 1,200 2,400
(2)
Goodwill 11,250 11,250
Investment in S Co 376,680 (8)
18,000 (1) 307,200
(9) (3) 70,440
9,600 (4)
26,640 -
P1,074,0
Total P2,207,880 00 P2,680,050
(2)
Accumulated depreciation P 84,000 (3)
- equipment P 150,000 102,000 12,000 P180,000
(2)
Accumulated depreciation 450,000 306,000 198,000
- buildings (3) 6,000 552,000
Accounts payable 120,000 120,000 240,000
Bonds payable 240,000 120,000 360,000
Common stock, P10 par 600,000 600,000
(1)
Common stock, P10 par 240,000 240,000
Retained earnings, from above 647,880 186,000 647,880
Non-controlling interest (4) 9,600
(9) 2,400 (1 ) 76,800
___ ______ (2) 17,610
_____ ___ __________ (14)17,760 ____100,170
P1,074,0 P1,048,65 P1,048,65
Total P2,207,880 00 0 0 P2,680,050
Problem VIII
1. (Computation of selected consolidation balances as affected by downstream inventory
transfers)
UNREALIZED GROSS PROFIT, 12/31/x4: (downstream transfer)
Intercompany gross profit (P120,000 P72,000)........................................... P48,000
Inventory remaining at year's end ..................................................................... 30%
Unrealized Intercompany Gross profit, 12/31/x4 ................................................. P14,400
UNREALIZED GROSS PROFIT, 12/31/x5: (downstream transfer)
Intercompany gross profit (P250,000 P200,000) ........................................ P50,000
Inventory remaining at year's end ..................................................................... 20%
Unrealized intercompany gross profit, 12/31/x5 ................................................. P10,000
CONSOLIDATED TOTALS
Sales = P1,150,000 (add the two book values and eliminate intercompany sales of
P250,000)
Cost of goods sold:
Benson's book value .................................................................................... P535,000
Broadway's book value ................................................................................. 400,000
Eliminate intercompany transfers ................................................................. (250,000)
Realized gross profit deferred in 20x4 .......................................................... (14,400)
Deferral of 20x5 unrealized gross profit ....................................................... 10,000
Cost of goods sold .................................................................................. P680,600
Operating expenses = P210,000 (add the two book values and include intangible
amortization for current year)
Dividend income = -0- (intercompany transfer eliminated in consolidation)
Noncontrolling interest in consolidated income: (impact of transfers is not included because
they were downstream)
Broadway reported income for 20x5 ............................................................ P100,000
Intangible amortization................................................................................. (10,000)
Broadway adjusted income........................................................................... 90,000
Outside ownership ....................................................................................... 30%
Noncontrolling interest in Broadways earnings............................................. P 27,000
or,
Consolidated Net Income for 20x5
P Companys net income from own/separate operations (P800-P535-P100) P 165,000
Realized profit in beginning inventory of S Company (downstream sales) 14,400
Unrealized profit in ending inventory of S Company (downstream sales) (_10,000)
P Companys realized net income from separate operations*... P 169,400
S Companys net income from own operations (P600 P400 P100) P
100,000
Realized profit in beginning inventory of P Company (upstream sales) 0
Unrealized profit in ending inventory of P Company (upstream sales) ( 0)
S Companys realized net income from separate operations*... P 100,000
100,000
Total P 269,400
Less: Amortization of allocated excess __10,000
Consolidated Net Income for 20x5 P 259,400
Less: Non-controlling Interest in Net Income* * 27,000
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent 20x5.. P 232,400
CONSOLIDATED TOTALS
Sales = P1,150,000 (add the two book values and eliminate the Intercompany transfer)
Cost of goods sold:
Benson's COGS book value ........................................................................... P535,000
Broadway's COGS book value ....................................................................... 400,000
Eliminate intercompany transfers ................................................................. (250,000)
Realized gross profit deferred in 20x4 .......................................................... (14,400)
Deferral of 20x5 unrealized gross profit ....................................................... 10,000
Consolidated cost of goods sold ............................................................. P680,600
Operating expenses = P210,000 (add the two book values and include intangible
amortization for current year)
Dividend income = -0- (interco. transfer eliminated in consolidation)
Noncontrolling interest in consolidated income: (impact of transfers is included because they
were upstream)
Problem IX
(Compute selected balances based on three different intercompany asset transfer scenarios)
1.
Consolidated Cost of Goods Sold
PPs cost of goods sold ...................................................................... P290,000
SWs cost of goods sold .................................................................... 197,000
Elimination of 20x5 intercompany transfers ...................................... (110,000)
Reduction of beginning Inventory because of
20x4unrealized gross profit (P28,000/1.4 = P20,000
cost; P28,000 transfer price less P20,000
cost = P8,000 unrealized gross profit) ......................................... (8,000)
Reduction of ending inventory because of
20x5 unrealized gross profit (P42,000/1.4 = P30,000
cost; P42,000 transfer price less P30,000
cost = P12,000 unrealized gross profit) ....................................... 12,000
Consolidated cost of goods sold ............................................ P381,000
Consolidated Inventory
PP book value .............................................................................. P346,000
SW book value ............................................................................. 110,000
Eliminate ending unrealized gross profit (see above) .................. (12,000)
Consolidated Inventory ............................................................... P444,000
or
Consolidated Net Income for 20x5
P Companys net income from own/separate operations (P640-P290-P150) P 200,000
Realized profit in beginning inventory of S Company (downstream sales) 8,000
Unrealized profit in ending inventory of S Company (downstream sales) (_ 12,000)
P Companys realized net income from separate operations*... P 196,000
S Companys net income from own operations (P360 P197 P105) P 58,000
Realized profit in beginning inventory of P Company (upstream sales) 0
Unrealized profit in ending inventory of P Company (upstream sales) ( 0)
S Companys realized net income from separate operations*... P 58,000 58,000
Total P 254,000
Less: Amortization of allocated excess ____0
Consolidated Net Income for 20x5 P 254,000
Less: Non-controlling Interest in Net Income* * 11,600
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent 20x5.. P 242,200
2.
Consolidated Cost of Goods Sold
PP book value ................................................................................... P290,000
SW book value .................................................................................. 197,000
Elimination of 20x5 intercompany transfers ...................................... (80,000)
Reduction of beginning inventory because of
20x4 unrealized gross profit (P21,000/1.4 = P15,000
cost; P21,000 transfer price less P15,000
cost = P6,000 unrealized gross profit) ......................................... (6,000)
Reduction of ending inventory because of
20x5 unrealized gross profit (P35,000/1.4 = P25,000
cost; P35,000 transfer price less P25,000
cost = P10,000 unrealized gross profit) ....................................... 10,000
Consolidated cost of goods sold ........................................................ P411,000
Consolidated Inventory
PP book value ................................................................................... P346,000
SW book value .................................................................................. 110,000
Eliminate ending unrealized gross profit (see above) ........................ (10,000)
Consolidated inventory ................................................................ P446,000
Non-controlling Interest in Subsidiary's Net income
Since all intercompany sales are upstream, the effect on Snow's income must be
reflected in the non-controlling interest computation:
SW reported income ......................................................................... P58,000
20x4 unrealized gross profit realized in 20x5 (above) ....................... 6,000
20x5 unrealized gross profit to be realized in 20x6 (above) .............. (10,000)
SW realized income ........................................................................... P54,000
Outside ownership percentage ......................................................... 20%
Non-controlling interest in SWs income ...................................... P10,800
or
Consolidated Net Income for 20x5
P Companys net income from own/separate operations (P640-P290-P150) P 200,000
Realized profit in beginning inventory of S Company (downstream sales)
Unrealized profit in ending inventory of S Company (downstream sales) (_ 0)
P Companys realized net income from separate operations*... P 200,000
S Companys net income from own operations (P360 P197 P105) P 58,000
Realized profit in beginning inventory of P Company (upstream sales) 6,000
Unrealized profit in ending inventory of P Company (upstream sales) ( 10,000)
S Companys realized net income from separate operations*... P 54,000 54,000
Total P 254,000
Less: Amortization of allocated excess ____0
Consolidated Net Income for 20x5 P 254,000
Less: Non-controlling Interest in Net Income* * 10,800
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent 20x5.. P 243,200
Problem X
Consolidated Net Income for 20x4
P Companys net income from own/separate operations. P
3,600,000
Realized profit in beginning inventory of S Company (downstream sales) 54,000
Unrealized profit in ending inventory of S Company (downstream sales) (_ 45,00 0)
P Companys realized net income from separate operations*... P
3,609,000
S Companys net income from own operations (P1,500,000 + P2,400,000) P3,900,00
0
Realized profit in beginning inventory of P Company (upstream sales) 66,000
Salad
Realized profit in beginning inventory of P Company (upstream sales)- 63,000
Tuna
Unrealized profit in ending inventory of P Company (upstream sales) ( 57,000)
Salad
Unrealized profit in ending inventory of P Company (upstream sales) ( 69,000)
Tuna
S Companys realized net income from separate operations*... P3,903,00 3,903,000
0
Total P7,512,000
Less: Amortization of allocated excess 0
Consolidated Net Income for 20x4 P7,512,000
Less: Non-controlling Interest in Net Income* *- Salad P
301,800
Non-controlling Interest in Net Income* *- Tuna ___239,40 ___541,200
0
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent 20x4.. P6,970,800
*that has been realized in transactions with third parties.
Or, alternatively
Consolidated Net Income for 20x4
P Companys net income from own/separate operations. P
3,600,000
Realized profit in beginning inventory of S Company (downstream sales) 54,000
Unrealized profit in ending inventory of S Company (downstream sales) (___45,000)
P Companys realized net income from separate operations*... P3,609,,00
0
S Companys net income from own operations (P1,500,000 + P2,400,000) P3,900,00
0
Realized profit in beginning inventory of P Company (upstream sales) 66,000
Salad
Realized profit in beginning inventory of P Company (upstream sales)- 63,000
Tuna
Unrealized profit in ending inventory of P Company (upstream sales) ( 57,000)
Salad
Unrealized profit in ending inventory of P Company (upstream sales) ( 69,000)
Tuna
S Companys realized net income from separate operations*... P3,903,00 3,903,000
0
Total P7,512,000
Less: Non-controlling Interest in Net Income* * - Salad P 301,800
Non-controlling Interest in Net Income* * - Tuna 239,400
Amortization of allocated excess 0 __541,20
0
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent.. P6,970,800
Add: Non-controlling Interest in Net Income (NCINI) _541,200
Consolidated Net Income for 20x4 P
7,512,000
*that has been realized in transactions with third parties.
**Salad
Non-controlling Interest in Net Income (NCINI) for 20x4
S Companys net income of Subsidiary Company from its own operations
(Reported net income of S Company) P1,500,000
Realized profit in beginning inventory of P Company (upstream sales) 66,000
Unrealized profit in ending inventory of P Company (upstream sales) ( 57,000)
Son Companys realized net income from separate operations P1,509,000
Less: Amortization of allocated excess _____0
P1,509,00
0
Multiplied by: Non-controlling interest %.......... __
20%
Non-controlling Interest in Net Income (NCINI) P 301,800
**Tuna
Non-controlling Interest in Net Income (NCINI) for 20x4
S Companys net income of Subsidiary Company from its own operations
(Reported net income of S Company) P2,400,000
Realized profit in beginning inventory of P Company (upstream sales) 63,000
Unrealized profit in ending inventory of P Company (upstream sales) ( 69,000)
Son Companys realized net income from separate operations P2,394,000
Less: Amortization of allocated excess _____0
P2,394,00
0
Multiplied by: Non-controlling interest %.......... 10%
Non-controlling Interest in Net Income (NCINI) P 239,400
Problem XI
(Determine selected consolidated balances; includes inventory transfers and an outside
ownership.)
Consolidated Totals:
Inventory = P592,000 (add the two book values and subtract the ending
unrealized gross profit of P8,000)
Sales = P1,240,000 (add the two book values and subtract the P160,000
intercompany transfer)
Cost of Goods Sold = P548,000 (add the two book values and subtract the
intercompany transfer and add [to defer] ending unrealized gross profit)
Operating Expenses = P443,000 (add the two book values and the amortization
expense for the period)
Gross profit: P1,240,000 P548,000 = P692,000
Controlling Interest in CNI:
Or, alternatively
Problem XII
Amortization of equipment: P20,000 / 10 years = P2,000
RPBI of S (downstream sales):........................................................
P15,000
RPBI of P (upstream sales).......................................................
10,000
UPEI of S (downstream sales)... 20,000
UPEI of P (upstream sales). 5,000
Consolidated Net Income for 2014
P Companys net income from own/separate operations (P724,000 P700,000
P24,000
Realized profit in beginning inventory of S Company (downstream sales) 15,000
Unrealized profit in ending inventory of S Company (downstream sales) (20,00 0)
P Companys realized net income from separate operations*... P695,000
S Companys net income from own operations. P 90,000
Realized profit in beginning inventory of P Company (upstream sales) 10,000
Unrealized profit in ending inventory of P Company (upstream sales) ( 5,000)
S Companys realized net income from separate operations*... P 95,000 95,000
Total P790,000
Less: Amortization of allocated excess 2,000
Consolidated Net Income for 2014 P788,000
Less: Non-controlling Interest in Net Income* * 18,600
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent 2014.. P769,400
*that has been realized in transactions with third parties.
Or, alternatively
Consolidated Net Income for 2014
P Companys net income from own/separate operations P700,000
Realized profit in beginning inventory of S Company (downstream sales) 15,0000
Unrealized profit in ending inventory of S Company (downstream sales) (20,00 0)
P Companys realized net income from separate operations*... P695,000
S Companys net income from own operations. P 90,000
Realized profit in beginning inventory of P Company (upstream sales) 10,000
Unrealized profit in ending inventory of P Company (upstream sales) ( 5,000)
Son Companys realized net income from separate operations*... P 95,000 95,000
Total P790,000
Less: Non-controlling Interest in Net Income* * P 18,600
Amortization of allocated excess 2,000 20,600
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent.. P769,400
Add: Non-controlling Interest in Net Income (NCINI) _ 18,600
Consolidated Net Income for 2014 P788,000
*that has been realized in transactions with third parties.
Or, compute first the RE P on January 1, 2014 (use work back approach),
Retained earnings Parent, 1/1/2014 (cost)
(P3,500,000 plus P25,000 Div of P less P724,000 NI of P).
P2,801,000
-: UPEI of S (down) 2013 or RPBI of S (down) 2014...
15,000
Adjusted Retained earnings Parent, 1/1/2014 (cost) P2,786.000
Retroactive Adjustments to convert Cost to Equity for
purposes of consolidation / Parents share of adjusted
net increase in subsidiarys retained earnings:
Retained earnings Subsidiary, 1/1/2011P 150,000
Less: Retained earnings Subsidiary, 1/1/2014 260,000
Increase in Retained earnings since acquisition
(cumulative net income cumulative dividends)P 110,000
Accumulated amortization (1/1/2011 1/1/2014):
P 2,000 x 3 years. ( 6,000)
UPEI of P (up) 2013 or RPBI of P (up) 2014... ( 10,000)
P 94,000
X: Controlling Interests 80% 75,200
RE P, 1/1/2014 (equity method) = CRE, 1/1/2014..P2,861,200
+: CI CNI or Profit Attributable to Equity Holders of Parent.. 769,400
-: Dividends P.. 25,000
RE P, 12/31/2014 (equity method) = CRE, 12/31/2014.P3,605,600
2. c
20x4: (P84,000 x 80%) = P67,200 (P1,440 x 30% x 80%) = P66,854.40
20x5: (P102,000 x 80%) + (P1,440 x 30% x 80%) - (P4,800 x 30% x 80%) = P80,793.60
20x6: (P112,800 x 80%) + (P4,800 x 30% x 80%) (P3,600 x 30% x 80%) = P90,258.00
3. No requirement.
7.c
Investment in Leisure
Cost, 1/1/x3 4,000 Dividends Lei (5,000x
109,070 80%)
NI of Leisure 4,800 Amortization (6,000 x 80%)
(13,000 x 80%) 850 Impairment (1,000 x 85%)*
10,400
RPBI of LP (350 x 80%) 336 UPEI of LP (420 x 80%)
280
Investment Income
Amortization
Balance, 12/31/x3 NI of Leisure
4,800
109,764
Impairment* 10,400 (13,000 x 80%)
850
UPEI of LP (420 x 80%)) 280 RPBI of LP (350 x 80%)
336
RPBI of
4,694 Balance, 12/31/x4
LP: P1,350 x
35/135 = P350
UPEI of LP: P1,620 x 35/135 = P420
Partial
Fair value of Subsidiary (80%)
Consideration P
transferred . . . . . . . . . . . . . . . . . . . . . . 100,000
Less: Book value of stockholders equity of LP
(P10,000 x 80%)
... ____8,000
Allocated excess (excess of cost over book value) . . P
. 92,000
Less: Over/under valuation of assets and liabilities:
Increase in favorable leases (P30,000 x 80%) .
.... ___24,000
Positive excess: Partial-goodwill (excess of cost over
fair
value) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 68,000
Full
Fair value of Subsidiary (100%)
Consideration transferred P
(80%). . . . . . . . . . . . . . . . . . 100,000
Fair value of NCI (given) (20%)
.. ___20,000
Fair value of Subsidiary (100%) P
. 120,000
Less: Book value of stockholders equity of LP
(P10,000 x 100%)
. ___10,000
Allocated excess (excess of cost over book value) . . P
. 110,000
Less: Over/under valuation of assets and liabilities:
Increase in favorable leases (P30,000 x 100%)
.... ___30,000
Positive excess: Partial-goodwill (excess of cost over
fair
value) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 80,000
Or, alternatively
Consolidated Net Income for 20x3
Parent Companys net income from own/separate operations
(P400,000 P250,000 P130,000) P 20,000
Subsidiary Companys net income from own operations
(P200,000 P120,000 P67,000) P 13,000
Realized profit in beginning inventory of P Company (upstream sales) . . . . 350
...
Unrealized profit in ending inventory of P Company (upstream sales) . . . . . ( 420)
...
Son Companys realized net income from separate P12,930 12,930
operations* . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 32,930
.........
Less: Non-controlling Interest in Net Income* * . . . . . . . . . . . . . . . . . . . . . . P 1,236
.....
Impairment of 1,000
goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of allocated 6,000 8,236
excess . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of P 24,694
parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add: Non-controlling Interest in Net Income _ _ 1,236
(NCINI) . . . . . . . . . . . . . . . . . . . . . .
Consolidated Net Income for 20x3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P25,930
......
*that has been realized in transactions with third parties.
Or, alternatively
9. b
Retained earnings of Parent Company (under equity method) /
Consolidated Retained earnings , January 1, P 40,000
20x3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add: Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent for 24,694
20x5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 64,694
..........
Less: Dividends paid Parent Company for 10,000
20x4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings of Parent Company (under equity method) /
Consolidated Retained Earnings, December 31, P 54,694
20x4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Therefore, regardless of the method used in the separate financial statement of parent, the consolidated balance
(which is under equity method) is always the same.
10. Ignore, there are some missing figures particularly the details of subsidiarys stockholders
equity since the date of acquisition.
11. d
Non-controlling Interest in Net Income (NCINI) for 20x4:
S Companys net income of Subsidiary Company from its own operations
(Reported net income of S Company) P 137,000
Realized profit in beginning inventory of P Company (upstream sales) 40,000
Unrealized profit in ending inventory of P Company (upstream sales) ( 25,000)
S Companys realized net income from separate operations P 152,000
Less: Amortization of allocated excess _ 0
P 152,000
Multiplied by: Non-controlling interest %.......... 30%
Non-controlling Interest in Net Income (NCINI) partial goodwill P 45,600
Less: NCI on goodwill impairment loss on full goodwill 0
Non-controlling Interest in Net Income (NCINI) full goodwill P 45,600
13. d
Cost method: P40,000 x 70% = P28,000, dividend income
Equity Method: (P115,000 x 70%) - P26,250 = P54,250, equity in subsidiary
income
15. b
Cost method: P60,000 x 80% = P48,000
Equity Method: (P120,000 x 80%) (P200,000 x 50% = P100,000 x 20% =
P20,000)=P76,000
17. c
Share in net income (P120,000 x 60%) P72,000
Less: Unrealized profit in ending inventory of S {P189,000 x 1/3 = P63,000 x (P189- __18,000
135)/P189]
Intercompany profit to be eliminated P54,000
18. b
Share in net income (P200,000 x 60%) P120,000
Less: Unrealized profit in ending inventory of S {P315,000 x 1/3 = P105,000 x (P315- __30,000
P225)/P315]
Intercompany profit to be eliminated P 90,000
20. a
Beginning inventory profit = P825,000 - P825,000/1.25 = P165,000
Ending inventory profit = P750,000 - P750,000/1.25 = P150,000
Downstream sales only affect equity in net income. P165,000 - P150,000 = P15,000
increase.
22. b
23. a
24. c P400,000 x 1/4 = P100,000 x 30% = P30,000
25. c
Ending inventory at selling price: P300,000 x 1/3 = P100,000 x (300,000 P20,000
240,000)/300,000
Less: Inventory write-down (P100,000 P92,000) __8,000
Intercompany profit to be eliminated P12,000
Parent Subsidiary
Sales 90,000 100,000
Less: Cost of goods sold Parent 67,000
Subsidiary (90,000 x 70%) ______ 63,000
Gross profit 23,000 37,000
Ending inventory (90,000 x 30%) 27,000
29. a
Consolidated Net Income for 20x4
P Companys net income from own/separate operations
[P100,000 (P90,000 x 70%)] P 37,000
Realized profit in beginning inventory of S Company (downstream sales) 0
Unrealized profit in ending inventory of S Company (downstream sales) (_0)
P Companys realized net income from separate operations*... P 37,000
S Companys net income from own operations (P90,000 P67,000) P23,000
Realized profit in beginning inventory of P Company (upstream sales) 0
Unrealized profit in ending inventory of P Company (upstream sales)
[P90,000 x 30% = P27,000 x (90-67/90)] ( 6,900 )
S Companys realized net income from separate operations*... P16,100 16,100
Total P 53,100
Less: Amortization of allocated excess 0
Consolidated Net Income for 20x4 P 53,100
Less: Non-controlling Interest in Net Income* * 1,610
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent 20x4.. P 51,490
*that has been realized in transactions with third parties.
Or, alternatively
Consolidated Net Income for 20x4
P Companys net income from own/separate operations
[P100,000 (P90,000 x 70%)] P 37,000
Realized profit in beginning inventory of S Company (downstream sales) 0
Unrealized profit in ending inventory of S Company (downstream sales) (_0)
P Companys realized net income from separate operations*... P 37,000
S Companys net income from own operations (P90,000 P67,000) P23,000
Realized profit in beginning inventory of P Company (upstream sales) 0
Unrealized profit in ending inventory of P Company (upstream sales)
[P90,000 x 30% = P27,000 x (90-67/90)] ( 6,900 )
S Companys realized net income from separate operations*... P16,100 16,100
Total P 53,100
Less: Non-controlling Interest in Net Income* * P 1,610
Amortization of allocated excess 0 1,610
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent.. P 51,490
Add: Non-controlling Interest in Net Income (NCINI) _ 1,610
Consolidated Net Income for 20x4 P 53,100
*that has been realized in transactions with third parties.
Or, alternatively
Consolidated Net Income for 20x4
P Companys net income from own/separate operations (P90,000 P 28,000
P62,000)
Realized profit in beginning inventory of S Company (downstream sales) 0
Unrealized profit in ending inventory of S Company (downstream sales) (_0)
P Companys realized net income from separate operations*... P 28,000
S Companys net income from own operations (P120,000 P90,000) P3 0,000
Realized profit in beginning inventory of P Company (upstream sales) 0
Unrealized profit in ending inventory of P Company (upstream sales ()
S Companys realized net income from separate operations*... P30,000 30,000
Total P 58,000
Less: Non-controlling Interest in Net Income* * P 3,000
Amortization of allocated excess 0 3,000
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent.. P 55,000
Add: Non-controlling Interest in Net Income (NCINI) _ 3,000
Consolidated Net Income for 20x4 P 58,000
*that has been realized in transactions with third parties.
**Non-controlling Interest in Net Income (NCINI) for 20x4
S Companys net income of Subsidiary Company from its own operations P 30,000
(Reported net income of S Company)
Realized profit in beginning inventory of P Company (upstream sales) 0
Unrealized profit in ending inventory of P Company (upstream sales) ( 0)
S Companys realized net income from separate operations P 30,000
Less: Amortization of allocated excess 0
P 30,000
Multiplied by: Non-controlling interest %.......... 10%
Non-controlling Interest in Net Income (NCINI) partial goodwill P 3,000
Less: NCI on goodwill impairment loss on full goodwill 0
Non-controlling Interest in Net Income (NCINI) full goodwill P 3,000
34. c
Sales Cost of Sales
P Company 10,000,000 7,520,000
S Company __200,000 _160,000
Total 10,200,000 7,680,000
Less: Intercompany sales upstream sales 60,000 60,000
Add: Unrealized profit in EI of S Co.
[P60,000 x 30% = P18,000 x (10 7.5)/10] ________ __ 4,500
Consolidated 10,140,000 7,604,500
Sales P120,000
Reported cost of sales (75,000)
Report income P 45,000
Portion realized x .80
Realized net income P 36,000
Portion to Noncontrolling
Interest x .30
Income to noncontrolling
Interest (10,800)
Income to controlling interest P 69,200
49. a
Ending inventory of Perth from Dundee (P36,000 / 110%) 32,727
Ending inventory of Dundee from Perth (P31,000 / 130%) _23,846
Total 56,573
51. a
Consolidated Net Income for 20x4
P Companys net income from own/separate operations P180,000
Unrealized profit in ending inventory of S Company (downstream sales) ( 3,000)
P Companys realized net income from separate operations*. P 177,000
..
S Companys net income from own 76,000
operations.
Total P253,000
Less: Amortization of allocated excess 0
Consolidated Net Income for 20x5 P253,000
52. a
Combined 20x5 sales (P580,000 + P445,000) P 1,025,000
Less: 20x5 intercompany sales 0
Consolidated sales P 1,025,000
53. d
Combined cost of sales P 480,000
Less: 20x5 intercompany sales 0
Less: Unrealized profit in the 20x5 beginning inventory
from 20x4 (3,000)
Add: Unrealized profit in 20x5 ending inventory ________0
Consolidated cost of sales P 477,000
54. d
Cost of Sales
P Company 5,400,000
S Company _1,200,000
Total 6,600,000
Less: Intercompany sales 1,000,000
Realized profit in BI of S Co.
[P625,000 x 12% = P75,000 x (625 - 425)/625] 24,000
Add: Unrealized profit in EI of S Co.
[P1,000,000 x 10% = P100,000 x (1,000 - 800)/1,000] __20,000
Consolidated 5,596,000
55. b
Cost of Sales
Bates Company 690,000
Sam Company 195,000
Total 885,000
Less: Intercompany sales 200,000
Realized profit in BI of Bates Co.
[P40,000 x 20%] 8,000
Add: Unrealized profit in EI of Bates Co.
[P15,000 x 20%] __3,000
Consolidated 680,000
56. b
Parent Subsidiar
y
Net Income from own operations:
X-Beams (parent)Kent (subsidiary), 70%:30% 210,000 90,000
Unrealized Profit in EI of Parent (X-Beams):
P180,000x 20% = P36,000 x (180-100/180)= P16,000,
70%:30% ( 11,200) ( 4,800)
Non-controlling Interest in Kents Net Income 85,200
57. d
Non-controlling Interest in Net Income (NCINI) for 20x5 20x6
S Companys net income of Subsidiary Company from its own
operations P 400,000 P 480,000
(Reported net income of S Company)
Realized profit in beginning inventory of P Company (upstream sales) 20,000
Unrealized profit in ending inventory of P Company (upstream sales) ( 20,000) 0
S Companys realized net income from separate operations P 380,000 P 500,000
Less: Amortization of allocated excess 0 0
P380,000 P500,000
Multiplied by: Non-controlling interest %.......... 20% 20%
Non-controlling Interest in Net Income (NCINI) partial goodwill P 76,000 P100,000
Less: NCI on goodwill impairment loss on full goodwill 0 0
Non-controlling Interest in Net Income (NCINI) full goodwill P 76,000 P100,000
58. a
**Non-controlling Interest in Net Income (NCINI) for 20x6
S Companys net income of Subsidiary Company from its own operations
(Reported net income of S Company) P 0
Realized profit in beginning inventory of P Company (upstream sales) 0
Unrealized profit in ending inventory of P Company (upstream sales)
(P100,000 x 10% = P10,000 x 30%) ( 3,000)
S Companys realized net income from separate operations P( 3,000)
Less: Amortization of allocated excess 0
P( 3,000)
Multiplied by: Non-controlling interest %.......... 10%
Non-controlling Interest in GP P(300)
Less: NCI on goodwill impairment loss on full goodwill 0
Non-controlling Interest in GP P( 300)
59. a
60 a Selling price P 60,000
.
Less: Cost of sales ( 48,000 )
Unrealized profit 12,000
Unsold fraction 1/3
Credit to Inventory P 4,000
61. a the cost from parent of P48,000 x 45/60 = P36,000
Parent Subsidiary 1 Subsidiary 2
Sales 60,000 60,000 67,000
Less: Cost of goods sold P and S1 48,000 60,000
Subsidiary (60,000 x 45/60) ______ ______ 45,000
Gross profit 12,000 0 22,000
Ending inventory (60,000 x 15/60) 15,000
67. c
Consolidated Net Income for 20x4
P Companys net income from own/separate operations P360,000
Realized profit in beginning inventory of S Company (downstream sales) 0
Unrealized profit in ending inventory of S Company (downstream sales) (_0)
P Companys realized net income from separate operations*... P360,000
S Companys net income from own operations P135,000
Realized profit in beginning inventory of P Company (upstream sales)
[P105,000 x 20/120) 17,500
Unrealized profit in ending inventory of P Company (upstream sales)
[P157,500 x 20/120) ( 26,250
)
S Companys realized net income from separate operations*... P126,250 126,250
Total P 486,250
Less: Amortization of allocated excess _0
Consolidated Net Income for 20x4 P486,250
Less: Non-controlling Interest in Net Income* * 1,610
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent 20x4.. P 51,490
*that has been realized in transactions with third parties.
Or, alternatively
Consolidated Net Income for 20x4
P Companys net income from own/separate operations P360,000
Realized profit in beginning inventory of S Company (downstream sales) 0
Unrealized profit in ending inventory of S Company (downstream sales) (_0)
P Companys realized net income from separate operations*... P360,000
S Companys net income from own operations ( P135,000
Realized profit in beginning inventory of P Company (upstream sales)
[P105,000 x 20/120) 17,500
Unrealized profit in ending inventory of P Company (upstream sales)
[P157,500 x 20/120) ( 26,250
)
S Companys realized net income from separate operations*... P126,250 126,250
Total P 486,250
Less: Non-controlling Interest in Net Income* * P 37,875
Amortization of allocated excess 0 37,875
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent.. P 448,375
Add: Non-controlling Interest in Net Income (NCINI) _37,875
Consolidated Net Income for 20x4 P 486,250
*that has been realized in transactions with third parties.
72. b
Operating
Expenses
P Company 28,000
S Company 14,000
Total 42,000
Add: Undervalued equipment (P35,000/7 years) _5,000
Consolidated 47,000
73. c
Cost of Sales
P Company 196,000
S Company _112,000
Total 308,000
Less: Intercompany sales 140,000
Add: Unrealized profit in EI of S Co.
[P140,000 x 60% = P84,000 x (140 - 112)/140] _16,800
Consolidated 184,800
Partial-goodwill
Fair value of Subsidiary (80%)
P
Consideration transferred.. 364,000
Less: Book value of stockholders equity of S:
Common stock (P140,000 x 80%). P112,000
168,0 280,00
Retained earnings (P210,000 x 80%)... 00 0
P
Allocated excess (excess of cost over book value).. 84,000
Less: Over/under valuation of assets and liabilities:
Increase in equipment (P35,000 x 80%) ___28,000
Positive excess: Partial-goodwill (excess of cost over
fair value)... P 56,000
Full-goodwill
Fair value of Subsidiary (100%)
P
Consideration transferred: Cash (P364,000/80%) 455,000
Less: Book value of stockholders equity of S (P350,000 x 100%) __350,000
P
Allocated excess (excess of cost over book value).. 105,000
Add (deduct): (Over) under valuation of assets and liabilities
Increase in equipment P35,000 x 100% 35,000
Positive excess: Full-goodwill (excess of cost over P
fair value)... 70,000
75. d
Equipment
P Company 616,000
S Company 420,000
Total 1,036,000
Add: Undervalued equipment 35,000
Less: Depreciation on undervalued equipment (P35,000/7 years) 7,000
Consolidated 1,064,000
76. d
Inventory
P Company 210,000
S Company 154,000
Total 364,000
Less: Unrealized profit in EI: [P140,000 x 60% = P84,000 x (140 - 16,800
112)/140]
Consolidated 347,200
77. d Add the two book values and remove P100,000 intercompany transfers.
78. c Intercompany gross profit (P100,000 - P80,000) ..................................... P20,000
Inventory remaining at year's end .......................................................... 60%
Unrealized intercompany gross profit ..................................................... P12,000
Annual Excess
Life Amortizations
Excess fair value assigned to undervalued assets:
Equipment........................................................ 25,000
5 years..................................................P5,000
Secret Formulas .............................................. 50,000
20 years............................................... 2,500
Total ................................................................... P -0- P7,500
Consolidated Expenses = P37,500 (add the two book values and include current year
amortization expense)
80. a
Partial-goodwill
Fair value of Subsidiary (80%)
P
Consideration transferred.. 260,000
Less: Book value of stockholders equity of S:
Common stock (P100,000 x 80%). P 80,000
120,0 200,0
Retained earnings (P150,000 x 80%)... 00 00
P
Allocated excess (excess of cost over book value).. 60,000
Less: Over/under valuation of assets and liabilities:
Increase in equipment (P25,000 x 80%) 20,000
Increase in secret formulas: P50,000 x 80% 40,000
Full-goodwill
Fair value of Subsidiary (100%)
P
Consideration transferred: Cash (80%) 260,000
FV of NCI (20%) ___65,000
P
Fair value of Subsidiary (100%) 325,000
Less: BV of stockholders equity of S (P100,000 + P150,000) x
100% __250,000
P
Allocated excess (excess of cost over book value).. 75,000
Add (deduct): (Over) under valuation of assets and liabilities 25,00
Increase in equipment P25,000 x 100% 0
P
Increase in secret formulas: P50,000 x 100% 50,000
Amortization:
Equipment: P25,000 / 5 years = P 5,000
Secret formulas: P50,000 / 20 years = 2,500
Total amortization of allocated P 7,500
81. c Add the two book values plus the original allocation (P25,000) less one year of excess
amortization expense (P5,000).
82. b Add the two book values less the ending unrealized gross profit of P12,000.
Intercompany Gross profit (P100,000 P80,000) .................................... P20,000
Inventory Remaining at Year's End ........................................................ 60%
Unrealized Intercompany Gross profit, 12/31 .......................................... P12,000
83. b
20x3 20x4 20x5
Share in net income
20x3: P70,000 x 90% P 63,000
20x4: P85,000 x 90% P 76,500
20x5: P94,000 x 90% P 84,600
Less: Unrealized profit in ending inventory of P
20x3: P1,200 x 25% = P300 x 90% ( 270) 270
20x4: P4,000 x 25% = P1,000 x 90% ( 900) 900
20x5: P3,000 x 25% = P750 x 90% ________ ________ __( 675)
Income from S P 62,730 P 75,870 P 84,825
It should be noted that PAS 27 allow the use of cost model in accounting for investment
in subsidiary in the books of parent company but not the equity method.
Or, alternatively
Consolidated Net Income for 20x5
P Companys net income from own/separate operations P 100,000
Realized profit in beginning inventory of S Company (downstream sales) 1,050
Unrealized profit in ending inventory of S Company (downstream sales) (_ 3,600)
P Companys realized net income from separate operations*... P 97,450
S Companys net income from own operations P 30,000
Realized profit in beginning inventory of P Company (upstream sales) 1,000
Unrealized profit in ending inventory of P Company (upstream sales) ( 2,400 )
S Companys realized net income from separate operations*... P 28,600 28,600
Total P 126,050
Less: Non-controlling Interest in Net Income* * P 5,320
Amortization of allocated excess 2,000 7,320
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent.. P118,730
Add: Non-controlling Interest in Net Income (NCINI) __ 5,320
Consolidated Net Income for 2012 P124,050
*that has been realized in transactions with third parties.
110. b
Consolidated Stockholders Equity, 12/31/20x2:
Controlling Interest / Parents Interest / Parents Portion /
Equity Holders of Parent SHE, 12/31/20x2:
Common stock P (P only)..
P1,000,000
Retained Earnings P (equity method), 12/31/20x2..
809,680
Controlling Interest / Parents Stockholders Equity.
P1,809,680
Non-controlling interest, 12/31/20x2 (partial).
96,320
Consolidated Stockholders Equity, 12/31/20x2
P1,906,000
111. a
Consolidated Stockholders Equity, 12/31/20x2:
Controlling Interest / Parents Interest / Parents Portion /
Equity Holders of Parent SHE, 12/31/20x2:
Common stock P (P only)..
P1,000,000
Retained Earnings P (equity method), 12/31/20x2..
809,680
Controlling Interest / Parents Stockholders Equity.
P1,809,680
Non-controlling interest, 12/31/20x2 (full)...
101,320
Consolidated Stockholders Equity, 12/31/20x2
P1,911,000
112. c
Non-controlling interest , December 31, 20x1
Common stock Subsidiary Company, December 31, 20x1 P 10,000
Retained earnings Subsidiary Company, December 31, 20x1 8,600
Stockholders equity Subsidiary Company, December 31, 20x4 P 18,600
Adjustments to reflect fair value - (over) undervaluation of assets and
liabilities, date of acquisition (January 1, 20x4) 0
Amortization of allocated excess (refer to amortization above) 20x4 ( 0)
Fair value of stockholders equity of subsidiary, December 31, 20x4 P 18,600
Less: Unrealized profit in ending inventory of P Company (upstream sales)
P3,000 x 40% 1,200
Realized stockholders equity of subsidiary, December 31, 20x4 P 17,400
Multiplied by: Non-controlling Interest percentage... 20
Non-controlling interest. December 31, 20x1 .. P 3,480
113. a
Realized profit in BI of Bates Co. [P40,000 x 20%] P 8,000
Unrealized profit in EI of Bates Co. [P15,000 x 20%] __3,000
Net realized profit in intercompany sales of inventory P 5,000
Multiplied by: NCI% ___40%
NCI share in net realized profit P 2,000
114. c
RPBI of P (upstream sales).... 45,000
UPEI of P (upstream sales):
EI of Paque GP% of Subsidiary
P75,000 x 20%...................................... 15,000
Or, alternatively
Consolidated Net Income for 20x5
P Companys net income from own/separate operations (P103,500 P 49,500
P54,000)
Realized profit in beginning inventory of S Company (downstream sales) 0
Unrealized profit in ending inventory of S Company (downstream sales) (_ 0)
P Companys realized net income from separate operations*... P 49,500
S Companys net income from own operations P 71,250
Realized profit in beginning inventory of P Company (upstream sales) 45,000
Unrealized profit in ending inventory of P Company (upstream sales) ( 15,000
)
S Companys realized net income from separate operations*... P 101,250
101,250
Total P 150,750
Less: Non-controlling Interest in Net Income* * P 10,125
Amortization of allocated excess ___0 10,125
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent.. P140,625
Add: Non-controlling Interest in Net Income (NCINI) __ 10,125
Consolidated Net Income for 2012 P150,750
*that has been realized in transactions with third parties.
(Not required)
Analysis of workpaper entries
(1) Investment in Segal (0.90 (P180,000 P150,000)) 27,000
Beginning Retained Earnings-Paque Co.
27,000
To establish reciprocity as of 1/1/20x8
115. c
Preferred Solution - since what is given is the RE P, 1/1/20x8 -
Retained earnings Parent, 1/1/20x8 (cost).. P 598,400
-: UPEI of S (down) 20x7 or RPBI of S (down) 20x8...
25,000
Adjusted Retained earnings Parent, 1/1/20x8 (cost) P 573.400
Retroactive Adjustments to convert Cost to Equity for
purposes of consolidation / Parents share of adjusted
net increase in subsidiarys retained earnings:
Retained earnings Subsidiary, 1/1/20x4P 95,000
Less: Retained earnings Subsidiary, 1/1/20x8.. 144,000
Increase in Retained earnings since acquisition
(cumulative net income cumulative dividends)P 49,000
Accumulated amortization (1/1/20x4 1/1/20x8). 0
UPEI of P (up) 20x7 or RPBI of P (up) 20x8... ( 0)
P 49,000
X: Controlling Interests 90% 44,100
RE P, 1/1/20x8 (equity method) = CRE, 1/1/20x8.. P
617,500
+: CI CNI or Profit Attributable to Equity Holders of Parent
203,700
-: Dividends P.. 110,000
RE P, 12/31/2014 (equity method) = CRE, 12/31/2014.. P
711,200
Or, alternatively
Consolidated Net Income for 20x8
P Companys net income from own/separate operations P132,000
Realized profit in beginning inventory of S Company (downstream sales) 25,000
Unrealized profit in ending inventory of S Company (downstream sales) (10,000)
P Companys realized net income from separate operations*... P147,000
S Companys net income from own operations. P 63,000
Realized profit in beginning inventory of P Company (upstream sales) 0
Unrealized profit in ending inventory of P Company (upstream sales) ( 0)
S Companys realized net income from separate operations*... P 63,000 63,000
Total P210,000
Less: Non-controlling Interest in Net Income* * P 6,300
Amortization of allocated excess _____0 6,300
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent.. P203,700
Add: Non-controlling Interest in Net Income (NCINI) _ 6,300
Consolidated Net Income for 20x8 P210,000
*that has been realized in transactions with third parties.
Or, alternatively(compute the RE-P end of the year under the cost model)
Retained earnings Parent, 1/1/20x8 (cost).. P
598,400
Add: NI of Parent as reported 20x8 under cost model
163,500
Less: Dividend of Parent 20x8..
110,000
Retained earnings Parent, 12/31/20x8 (cost).. P
651,900
-: UPEI of S (down) 20x8 or RPBI of S (down) 20x9....
10,000
Adjusted Retained earnings Parent, 12/31/20x8 (cost model).. P
641,900
Retroactive Adjustments to convert Cost to Equity for
purposes of consolidation / Parents share of adjusted
net increase in subsidiarys retained earnings:
Retained earnings Subsidiary, 1/1/20x4 P 95,000
Less: Retained earnings Subsidiary, 12/31/20x8
Retained earnings Subsidiary , 1/1/20x8.. P144,000
Add: NI of Subsidiary 20x8 63,000
Less: Dividend of Subsidiary 20x8... 35,000 172,000
Increase in Retained earnings since acquisition
(cumulative net income cumulative dividends) P 97,000
Accumulated amortization (1/1/20x4 12/31/20x8)..( 0)
UPEI of P (up) 20x8 or RPBI of P (up) 20x9........( 0)
P 97,000
x: Controlling Interests 90%
69,300
RE P, 12/31/20x8 (equity method) = CRE, 12/31/20x8 P
711,200
(Not required)
Analysis of workpaper entries
(1) Investment in Sedbrook Company (0.90(P144,000 P95,000)) 44,100
Beginning Retained Earnings - Pruitt Co. 44,100
To establish reciprocity/convert to equity as of 1/1/x8
116. P941,000.
Fair value of consideration givenP1,360,000
Less: Book value of SHE - Subsidiary):
(P1,000,000 + P450,000) x 80%................... 1,160,000
Allocated Excess..P 200,000
Less: Over/Undervaluation of Assets & Liabilities
Increase in franchise (P250,000 x 80%).. 200,000 / 80% = P250,000
P 0
Or, alternatively
Consolidated Net Income for 2014
P Companys net income from own/separate operations P700,000
Realized profit in beginning inventory of S Company (downstream sales) 30,000
Unrealized profit in ending inventory of S Company (downstream sales) ( 5,000)
P Companys realized net income from separate operations*... P725,000
S Companys net income from own operations. P270,000
Realized profit in beginning inventory of P Company (upstream sales) 20,000
Unrealized profit in ending inventory of P Company (upstream sales) ( 10,000)
S Companys realized net income from separate operations*... P280,000 280,000
Total P1,005,000
Less: Non-controlling Interest in Net Income* * P 54,000
Amortization of allocated excess 10,000 64,000
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent.. P 941,000
Add: Non-controlling Interest in Net Income (NCINI) __ _ 54,000
Consolidated Net Income for 2014 P 995,000
*that has been realized in transactions with third parties.
(Not required)
Analysis of workpaper entries
(1) Sales 120,000
Purchases (Cost of Goods Sold) 120,000
To eliminate intercompany sales (P50,000 + P70,000)
117. P1,863,000
Retained earnings Parent, 12/31/20x4 (cost).. P
1,500,000
-: UPEI of S (down) 20x4 or RPBI of S (down) 20x5....
5,000
Adjusted Retained earnings Parent, 12/31/20x4 (cost model).. P
1,495,000
Retroactive Adjustments to convert Cost to Equity for
purposes of consolidation / Parents share of adjusted
net increase in subsidiarys retained earnings:
Retained earnings Subsidiary, 1/1/20x1.P 450,000
Less: Retained earnings Subsidiary, 12/31/20x4 960,000
Increase in Retained earnings since acquisition
(cumulative net income cumulative dividends) P 510,000
Accumulated amortization (1/1/20x1 12/31/20x4)..( 40,000)
UPEI of P (up) 20x4 or RPBI of P (up) 20x5........ ( 10,000)
P 460,000
x: Controlling Interests 80%
368,000
RE P, 12/31/20x4 (equity method) = CRE, 12/31/20x4
P1,863,000
Partial-goodwill
Fair value of Subsidiary (80%)
P7,500,00
Consideration transferred.. 0
Less: Book value of stockholders equity of S:
Common stock (P1,000,000 x 80%). P 800,000
4,000,00 4,800,00
Retained earnings (P5,000,000 x 80%)... 0 0
P2,700,00
Allocated excess (excess of cost over book value).. 0
Less: Over/under valuation of assets and liabilities:
Add (deduct): (Over) under valuation of assets and liabilities P( 120,000
Decrease in inventory: P(150,000 x 80%) )
Increase in building: P450,000 x 80% ___360,000 240,000
Positive excess: Partial-goodwill (excess of cost over P2,460,00
fair value)... 0
Amortization schedule
Balance at Remaining
acquisition Amortization Amortization at
Dec. 31/X2 20X3 20X4 Dec.31/X4
Inventory P(150,000) P(150,000) 0 P 0
Building (15 years) 450,000 30,000 P30,000 390,000
Goodwill 3,075,000 _________0 ______0 3,075,000
Total P3,375,000 P(120,000) P30,000 P3,465,000
120. a
Non-controlling interest is 20% 9,375,000 (fair value of subsidiary, 12/31/20x2) = P1,875,000
Or, alternatively:
121. d P2,393,800
Or, alternatively:
Balance of NCI on acquisition December 31, 20x2 P1,875,000
Add: NCI's share of the adjusted change in retained earnings to 12/ 31/20x4
Jane's retained earnings, December 31, 20x4 P7,524,000
Jane's retained earnings at December 31, 20x2 ( 5,000,000)
Change in carrying value P2,524,000
Adjustments:
Amortization of fair value increments to date 90,000
Unrealized upstream profit 20x4 ( 20,000)
Adjusted change in retained earnings of Jane since
acquisition P2,594,000
Multiplied by: NCI's share at 20% 518,800
Ending balance of NCI on December 31, 20x4 P2,393,800
122. b
Retained earnings Parent, 12/31/20x4 (cost)..
P11,900,000
-: UPEI of S (down) 20x4 or RPBI of S (down) 20x5....
0
Adjusted Retained earnings Parent, 12/31/20x4 (cost model)..
P11,900,000
Retroactive Adjustments to convert Cost to Equity for
purposes of consolidation / Parents share of adjusted
net increase in subsidiarys retained earnings:
Retained earnings Subsidiary, 12/31/20x2..P5,000,000
Less: Retained earnings Subsidiary, 12/31/20x4 7,524,000
Increase in Retained earnings since acquisition
(cumulative net income cumulative dividends).P2,524,000
Accumulated amortization (1/1/20x1 12/31/20x4).. 90,000
UPEI of P (up) 20x4 or RPBI of P (up) 20x5.....( 20,000)
P2,594,000
x: Controlling Interests 80%
2,075,200
RE P, 12/31/20x4 (equity method) = CRE, 12/31/20x4
P13,975,200
Theories
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