Chapter 16 (1)

CHAPTER 16 MULTIPLE CHOICES COMPUTATIONAL 16-1:

c, [(P260,000/80%) x 20%]

16-2:

d, consolidated CI will decrease by P6,000 due to amortization of the allocated excess (P60,000 / 10 years).

16-3:

a, because there is no NCI in a wholly owned subsidiary.

16-4:

c Investment cost (price paid)

P500,000 480,000 P 60,000

Less: Book value of interest acquired Excess Investment cost

16-5:

Parent’s share of subsidiary’s CI Dividends received from subsidiary Amortization of allocated excess (P60,000/20) Investment account balance, Dec. 31, 2013 a

Cost Method P500,000 P500,00 0

NCI, January 2, 2013 [(P270,000/75%) x 25%] NCI in S Company dividends [(P60,000/75%) x 25%] NCI in S Company CI (P160,000 x 25%) 16-6:

NCI balance, December 31, 2013 a Puno’s CI

16-7:

Dividend income (P40,000 x 90%) Puno’s CI from own operations Salas’ CI from own operations Consolidated CI b Peter’s CI from own operations Seller’s CI from own operations Consolidated CI Attributable to NCI (P200,000 x 20%) Attributable to parent

16-8:

Equity Method P500,000 120,000 ( 48,000) ( 3,000) P569,000 P 90,000 (16,000) 40,000 P114,00 0 P 145,000 ( 36,000) 109,000 120,000 P 229,000 P1,000,000 200,000 1,200,000 40,000 P1,160,00 0

a

68

Investment in Son, Jan. 1

2011 P310,000

2012 P396,200

150,000 ( 60,000) ( 3,800) P396,200

180,000 (60,000) ( 3,800) P512,400

Pop’s share of Son’s CI (100%) Dividends received (100%) Amortization of allocated excess to Equipment (P38,000 / 10) Investment in Son, Dec. 31 16-9:

2013 P512,400 200,000 ( 60,000) ( 3,800) P648,600

a Sy’s CI

P300,000 ( 60,000)

Amortization of allocated excess Adjusted CI of Sy P240,000 NCI in CI of subsidiary (P240,000 x P 24,000 10%) 16-10: a. Under the equity method consolidated retained earnings is equal to the retained earnings of the parent company. 16-11: c Retained earnings, Jan. 2, 2013 – Puzon Consolidated CI attributable to parent: CI – Puzon CI – Suarez Dividend income (P20,000 x 80%) NCI in Suarez CI (P40,000 x 20%)

P500,000 P200,000 40,000 (16,000) ( 8,000)

Dividends paid – Puzon 16-12: c Consolidated retained earnings, Dec. 31, Price 2013 price Less book value of interest acquired: Excess Allocation due to undervaluation of net assets Goodwill 16-13: d

216,000 ( 50,000) P666,000

P1,700,000 1,260,000 P 440,000 ( 40,000) P 400,000

NCI, January 2, 2013 [(P975,000/80%) x 20%] NCI in subsidiary dividends (P125,000 x20%)

P243,750 (25,000)

NCI in adjusted CI of subisidiary (P190,000 – P10,000) x 20% NCI, December 32, 2013

36,000 P182,75 0

16-14: b Presto’s CI from own operations Stork’s CI – March to December (P80,000 – P23,000) NCI share in Stork’s CI (P57,000 x 10%)

P140,000 57,000 ( 5,700)

69

Consolidated CI attributable to parent 16-15: b P191,300 Investment in Siso Company (at date of acquisition) Dividend P600,000 income (P30,000 x 5%)

P 1,500

16-16 d Consolidated CI:

P210,000

Pepe’s CI from own operations Sison’s adjusted CI:

P67,000

CI -2013

4,000

Amortization of allocated excess to equipment (P20,000 / 5) Consolidated retained earnings: Pepe’s retainedCIearnings, Jan.2, 2012 Consolidated

63,000 P273,00 0 P701,000

Consolidated CI attributable to parent– 2012 Pepe’s CI from own operations Sison’s adjusted CI; CI – 2012 Amortization -2012

P185,000 P40,000 4,000 36,000

NCI in Sison’s CI (P36,000 x 30%) Dividends paid ,2012 - Pepe

210,200 ( 50,000) P861,200

(10,800) 254,100 ( 60,000)

Pepe’s retained earnings, Jan. 2, 2013 Consolidated CI attributable to parent– 2013: P273,000 16-17: a Consolidated CI (see above) NCI in Sison’s CI (P63,000 x 30%) ( 18,900) Price paid Dividends paid, 2013 – Pepe NCI, June 30, 2013 [(P700,000/70%) x 30%} Total Consolidated retained earnings, Dec. 31, 2013 Less book value of Susy’s net assets (P650,000 + P250,000) Excess, allocated to building Amortization (P100,000 / 10) x 2/12

P1,055,300 P 700,000 300,000 1,000,000 900,000 P 100,000 5,000

16-17, continued:

Consolidated retained earnings Retained earnings, Jan. 1, 2013 – Pepe Consolidated CI attributable to parent: CI – Precy Adjusted CI of Susy: CI of Susy

P550,000 P275,000 P100,000

70

Amortization (P100,000 / 10) ÷ 2 NCI in Susy’s CI (P95,000 x 30%)

( 5,000)

95,000 (28,500)

341,500 ( 70,000)

Dividends paid – Precy Consolidated retained earnings, Dec. 31, 2013 Non-controlling interest NCI, June 30, 2013 NCI in Susy’s dividends, July 1 to December 31 NCI in Susy’s CI (P100,000 – P5,000) x 30% NCI, December 31, 2013

P821,500 P300,000 -028,500 P328,50 0

16-18: a Goodwill Price paid

P1,200,000 1,000,000

Less: Book value of interest acquired (P1,320,000 – P320,000) Goodwill (not impaired) P 200,000 Consolidated retained earnings under the equity method is equal to the retained earnings of the parent company, P1,240,000. 16-19: b CI – Pablo Dividend income (P40,000 x 70%) Sito’s CI NCI in Sito’s CI (P70,000 x 30%) Consolidated CI attributable to 16-20: c parent Consolidated net income – 2013 CI – Ponce Dividend income (P15,000 x 60%) Solis’ CI

P130,000 (28,000) 70,000 (21,000) P151,000

P 90,000 (9,000) 40,000 (16,000) P105,000

NCIin Solis’ CI (P40,000 x 40%) Consolidated CI attributable to parent – 2013

16-20, continued:

Consolidated retained earnings – 2013 Retained earnings, Jan. 2, 2012- Ponce Consolidated CI attributable to parent– 2012 CI – Ponce Dividend income (P30,000 x 60%) Solis’ CI NCI in Solis’s CI (P35,000 x 40%) Dividends paid, 2012– Ponce Consolidated retained earnings, Dec. 31, 2012 Consolidated CI attributable to parent– 2013

P 400,000 P70,000 (18,000) 35,000 ( 14,000)

75,000 (25,000) P450,000 105,000

71

Dividends paid. 2013 – Ponce 21.

(30,000) P525,000

Consolidated retained earnings, Dec. 31, b2013 Price paid, January 2, 2013

P216,000 54.000 270,000 220,000 50,000

NCI, January 2, 2013 {(P216,000/80%) x 20%] Total Less book value of Seed’s net assets (P80,000 + P140,000) Excess Allocated to:

10,000

Depreciable assets (40,000)Consolidated CI, December 31, 2013: Polo CI from own corporation Goodwill Seed CI from own operation: CI Amortization (40,000 ÷ 10%) GW impairment lost 23,000

P 95,000 35,000 (4,000) (8,000) P118.00 0

16-22: cTotal Retained earnings 1/1/013 – Polo Consolidated CI attributed to parent: Consolidated CI 113,400Total

NCI in Seed’s adjusted CI (23,000x 20%)

Dividends paid- Polo 16-23: b, P4,600 (see 16-22) Consolidated retained earnings 12/31/013

P520,000 118,000 (4,600) 633,400 (46,000) P587,400

16-24: c NCI, January 2, 2013 NCI ins Seed’s dividends (P15,000 x 20%) NCI in Seed’s CI 16-25: cNCI, (seeDecember no. 16-22)31, 2013

P 54,000 (3,000) 4,600 P 55,600

16-26: a

72

Price paid, January 1, 2012

P231,000

NCI, January 1, 2012 [(P231,000/70%) x 30%] Total 330,000

99,000

Less book value of Sisa’s net assets Excess 50,000 Allocated to depreciable assets (10 years remaining life) Retained earnings, 1/1/13-Sisa company P230,000 Retained earnings, 1/1/12-Sisa company (squeeze) 155,000 Increase

280,000 (50,000)

75,000

Amortization- prior years (50,000 ÷ 10 years) (5,000) Adjusted increase in earnings of Sisa (21,000/30% ) P70,000 16-27: a P520,000 Retained earnings 1/1/13- Pepe 230,000 Retained earnings 1/1/13- Sisa Adjustment and elimination: (155,000) (21,000) Date of acquisition Undistributed earnings to NCI (5,000) 49,000 Amortization- prior year P569,000 16-28: a Consolidated retained earnings P120,000 1/1/13 Pepe company CI, 2013 25,000 Sisa company CI, 2013 (7,000) (5,000) Dividend income (10,000 x 70%), 2013 Amortization- 2013 P133,000 16-29: aConsolidated CI Consolidated retained earnings 1/1/13(see 16 – 27) Consolidated CI attributable to parent: Consolidated CI (see 16-28)

P569,000 133,000 (6,000)

NCI in Sisa CI (25,000 – 5,000) 30% Dividend paid- Pepe company

127,000 ( 50,000)

P646,000

Consolidated retained earnings 12/31/13 16-30: a Cash Proceeds Fair value of retained NCI (40%) Carrying amount of NCI before deconsolidation Total Less carrying value of Simon Company net assets Gain on sale to profit or loss 16-31: c The gain is computed as follows: Cash proceeds Carrying value of interest sold (P2,400,000 x 10%)

P3,000,000 1,750,000 500,000 5,250,000 5,000,000 P 250,000

P280,000 240,000

73

Gain to APIC

P 40,000

Since the APIC is only P30,000 on the date of sale, the remaining P10,000 is to be credited to retained earnings account.

PROBLEMS Problem 16-1 1.

Determination and Allocation of Excess Schedule: Implied Fair Value Fair value of subsidiary

P 312,500

Parent Price (80%)

NCI Value (20%)

P 250,000

P 62,500

Less book value of interest acquired Capital stock

P 100,000

74

Retained earnings

150,000

Total equity

P 250,000

P 250,000

P 250,000

80%

20%

P200,000

P 50,000

P 50,000

P 12,500

Interest acquired Book value P 62,500

Excess Allocation to:

62,500

Fixed assets

2.

Working Paper Elimination Entries: a.

Eliminate dividends declared by the subsidiary against dividend income and NCI: Dividend income 4,000 NCI 1,000

b.

c

– Sulu against the investment account and Eliminate equityDividends accounts declared of the subsidiary the NCI account. 5,000 Common stock – Sulu 100,00 Retained earnings – Sulu 0 150,00 200,00 Investment in Sulu 0 0 Company NCI 50,000 Allocate excess to fixed assets: Fixed assets

d.

62,500

Investment in Sulu Company NCI Amortized fixed assets (P62,500 / 10) Expenses

e.

50,000 12,500 6,250

Fixed assets net income: Recognize NCI in subsidiary 6,250 NCI in subsidiary CI

3,750

NCI Probem 16-1 3,750 concluded 3. Pedro Company Consolidated Statement of CI Year Ended December 31, 2013 Sales Expenses Consolidated CI

P250,000 191,250 P 58,750

75

Attributable to NCI

3,750 P 55,000

Attributable to controlling interest 4.

Pedro Company Statement of Retained Earnings Year Ended December 31, 2013 Retained earnings, January 1 – Pedro Company Consolidated CI attributable to controlling interest Retained earnings, December 31, 2011

5.

P200,000 55,000 P255,000

Pedro Company Consolidated Statement of Financial Position December 31, 2013 Assets Current assets

P190,000

Non-current assets

530,250 P720,250

Fixed assets (P662,500 – P132,250) Total assets Liabilities and Stockholders’ Equity Current liabilities

P100,000

Stockholders’ Equity: Controlling interest: Common stock Retained earnings Total

P300,000 255,000 P555,000

Non-controlling interest (P62,500 – P1,000 + P3,750) Total liabilities and equity

620,250 P720,250

65,250

Problem 16-2 1.

Eliminations and adjustments: a to c are the same as in Problem 16-1: d.

Depreciate the fixed asset for the current year and one prior year: Retained earnings, Jan. 1 – Sulu (prior year) 6,250 Expenses (current year) 6,250

76

Fixed assets e.

Recognize NCI in subsidiary CI: 12,500 NCI in subsidiary CI

e.

1,750

NCI Assign to the NCI their share of the increase in the subsidiary’s Adjusted1,750 undistributed earnings of prior year: Retained earnings, January 1Sulu NCI

2,750

Retained earnings, January 1, 2013 Retained earnings, January 2, 2012 Increase in undistributed earnings Amortization in prior years Adjusted undistributed earnings NCI %

0 P170,000 150,000 P 20,000 6,250 P 13,750 20%

NCI 2.

2,75

P 2,750

Pedro Company Consolidated Statement of CI Year Ended December 31, 2013 Sales

P300,000 251,250

Expenses (P245,000 + P6,250) Consolidated CI

P 48,750 1,750

Attributable to NCI

P 47,000

Attributable to controlling interest

Problem 16-3 Amortization Schedule Annual Accounts Adjustments

Life

Amount

2010

1

P 6,250

P 6,250

Investments

3

5,000

Buildings

20

12,500

Inventory

2011

2012

2013

5,000

5,000

5,000

5,000

12,500

12,500

12,500

12,500

Amortization:

77

Equipment

5

34,500

34,500

34,500

34,500

34,500

Patent

10

2,250

2,250

2,250

2,250

2,250

Trademark

10

2,000

2,000

2,000

2,000

2,000

Discount on bonds payable

5

2,500

2,500

2,500

2,500

2,500

P 65,000

P 65,000

Total

P 58,750 P 58,750

P58,750

Problem 16-4 Allocation Schedule Price paid

P206,000 140,000 P 66,000

Less: Book value of interest acquired Excess Allocation: Equipment Buildings

P(40,000) 10,000

(30,000) P 36,000

Goodwill (not impaired) a. Investment in Stag Company – 12/31/13 (at acquisition cost)

P 206,000

b.

Non-controlling interest

P -0-

c.

Consolidated CI CI from own operations – Pony (P310,000 – P198,000) CI from own operations – Stag (P104,000 – P74,000) Amortization: Equipment (P40,000/8) P5,000

d.

Buildings (P10,000/20) Consolidated CI Consolidated Equipment Total book value (P320,000 + P50,000) Allocation Amortization (P5,000 x 3 years) Total

Problem 16-4 concluded e. Consolidated Buildings Total book value Allocation Amortization (P500 x 3 years) Total f.

Consolidated Goodwill (not impaired)

(500)

P 112,000 30,000

( 4,500) P 137,500 P 370,000 40,000 (15,000) P 395,000

P 288,000 ( 10,000) 1,500 P 279,500 P 36,000

78

g.

Consolidated Common Stock (Pony)

h.

Consolidated Retained Earnings

P 290,000

Retained earning, Dec. 31, 2013 – Pony Add: Pony’s share of Stag’s adjusted increase in earnings Net earnings – 2013 (P30,000 – P20,000) Amortization

P

a.

5,500 415,500

P10,000 ( 4,500)

Retained earnings, December 31, 2013 Problem 16-5

410,000

P

Working Paper Elimination Entries, Dec. 31, 2013 (1)

(2)

Dividend income Dividends declared – Short To eliminate intercompany dividends. Common stock – Short Retained earnings – Short Investment in Short Company To eliminate equity accounts of Short at date of acquisition

(3)

(4)

10,00 0

10,00 0

100,00 0 50,000

Depreciable asset

150,00 0

30,00 0

Investment in Short Company To allocate excess Depreciation expense Depreciable asset

30,00 0

5,00 0

5,00 0

To amortize allocatedexcess

Problem 16-5 concluded b.

Pony Corporation and Subsidiary Consolidation Working Paper December 31, 2013 Pony

Short

Adjustments

& Eliminations

Consoli-

Corporation

Company

Debit

Credit

dated

Statement of CI

79

Sales Dividend income Total

200,000

120,000

10,000

320,000 (1) 10,000

-

210,000

120,000

25,000

15,000

Other expenses

105,000

75,000

180,000

Total

130,000

90,000

225,000

80,000

30,000

95,000

230,000

50,000

80,000

30,000

95,000

310,000

80,000

325,000

40,000

10,000

270,000

70,000

285,000

Cash

15,000

5,000

20,000

Accounts receivable

30,000

40,000

70,000

Inventory

70,000

60,000

130,000

Depreciable asset (net)

325,000

225,000

Investment in Short company

180,000

Depreciation

CI carried forward

320,000 (3)

5,000

45,000

Retained Earnings Retained earnings, Jan. 1 CI from above Total Dividends declared

(2) 50,000

230,000

(1) 10,000

40,000

Retained earnings, Dec. 31 Carried forward

Statement of FP

(3) 30,000

(4)

5,000

(2)150,000

575,000 -

(3) 30,000 Total

Accounts payable Notes payable

620,000

330,000

795,000

50,000

40,000

90,000

100,000

120,000

220,000

Common stock Pony

200,000

Short Retained earnings, Dec. 31 From above

200,000 100,000

270,000

70,000

(2)100,000 285,000

80

Total

620,000

330,000

195,000

195,000

795,000

Problem 16-6 a.

Working Paper Elimination Entries (1)

(2)

(3)

b.

Dividend income NCI

8,000 2,000 10,000

Dividends declared – CommonSisa stock – Sisa Retained earnings – Sisa

100,000 50,000 120,000 30,000

Investment in Sisa stock NCI NCI in CI of subsidiary

6,000

NCI Popo Corporation and Subsidiary Consolidated Working Paper December 31, 2013

6,000

Popo

Sisa

Adjustments

& Eliminations

Consoli-

Corporation

Company

Debit

Credit

dated

Statement of CI Sales Dividend income

200,000

120,000

8,000

320,000 (1)

8,000

-

208,000

120,000

320,000

25,000

15,000

40,000

Other expenses

105,000

75,000

180,000

Total expenses

130,000

90,000

220,000

78,000

30,000

100,000

Total revenue Depreciation expense

CI NCI in CI of Sub. CI carried forward

(3) 78,000

30,000

6,000

( 6,000) 94,000

81

Retained Earnings Retained earnings, 1/1

230,000

50,000 (2) 50,000

230,000

78,000

30,000

94,000

308,000

80,000

324,000

40,000

10,000

268,000

70,000

284,000

Current assets

173,000

105,000

278,000

Depreciable assets

500,000

300,000

800,000

Investment in Sisa Company

120,000

Total

793,000

405,000

1,078,000

Accumulated depreciation

175,000

75,000

250,000

50,000

40,000

90,000

Long-term debt

100,000

120,000

220,000

Common stock

200,000

100,000 (2)100,000

200,000

Retained earnings , 12/31 From above

268,000

CI from above Total Dividends declared Retained earnings, 12/31 Carried forward

(1) 10,000

40,000

Statement of FP

Current liabilities

(2)120,000

70,000

NCI

284,000 (1)

Total

793,000

405,000

-

2,000

(2) 30,000 (3) 6,000

34,000

166,000

166,000

1,078,000

Problem 16-6 - Concluded c.

Consolidated Financial Statements Popo Corporation and Subsidiary Consolidated Statement of Financial Position December 31, 2013 Assets Current assets Depreciable assets Less: Accumulated depreciation Total assets Liabilities and Stockholders’ Equity Current liabilities

P800,000 250,000

P278,000 550,000 P828,000

P 90,000

82

Long-term debt Total liabilities Stockholders’ Equity Common stock

220,000 P310,000 P200,000 284,000 34,000

Retained earnings, 12/31

518,000 P828,000

Minority interest in net assets of subsidiary Total liabilities and stockholders’ equity Popo Corporation and Subsidiary Consolidated Statement of CI Year Ended December 31, 2013 Sales Expenses:

P320,000 P 40,000 180,000 P100,000

Depreciation expense Other expenses

220,000 6,000

Consolidated CI

P 94,000

NCI in CI of subsidiary Popo Corporation and Subsidiary Attributable to parent Consolidated Retained Earnings Year Ended December 31, 2013 Retained earnings, Jan. 1 – Popo Consolidated CI attributable to parent Total

P230,000 94,000 P324,000 40,000 P284,000

Dividends paid – Popo Consolidated retained earnings, Dec. 31

Problem 16-7 a.

Palo Corporation and Subsidiary Consolidation Working Paper December 31, 2013 Palo

Sebo

Adjustments

& Eliminations

Consoli-

Corporation

Company

Debit

Credit

dated

300,000

150,000

Statement of CI Sales Investment Income Total revenues

19,000 319,000

450,000 (1) 19,000

150,000

450,000

83

Cost of goods sold

210,000

85,000

295,000

Depreciation expense

25,000

20,000

45,000

Other expenses

23,000

25,000

48,000

258,000

130,000

388,000

61,000

20,000

62,000

230,000

50,000

61,000

20,000

62,000

291,000

70,000

292,000

20,000

10,000

271,000

60,000

272,000

Cash

37,000

20,000

57,000

Accounts receivable

50,000

30,000

80,000

70,000 300,000

60,000 240,000

130,000 540,000

Total cost and expenses CI carried forward Retained Earnings Retained earnings, Jan. 1 CI from above Total Dividends declared Retained earnings, Dec. 31 carried forward

(2) 50,000

230,000

(1) 10,000

20,000

Statement of FP

Inventory Buildings and equipment Investment in Sebo Company

229,000

(1)

9,000

-

(2)200,000 (3) 20,000 Goodwill

(3) 20,000

20,000

Total

686,000

350,000

827,000

Accumulated depreciation

105,000

65,000

170,000

Accounts payable

40,000

20,000

60,000

Taxes payable

70,000

55,000

125,000

Common stock

200,000

150,000

(2)150,000

271,000 686,000

60,000 350,000

239,000

Retained earnings, Dec. 31 from above Total

200,000

239,000

272,000 827,000

84

Problem 16-7 - Concluded

b. Consolidated Financial Statements Palo Corporation and Subsidiary Consolidated Statement of CI Year Ended December 31, 2013 Sales

P450,000 295,000 155,000

Cost of goods sold Gross profit Expenses:

P45,000 48,000

Depreciation expenses Other expenses

93,000 P 62,000

Palo Corporation Consolidated CI and Subsidiary Consolidated Retained Earnings Year Ended December 31, 2013 Retained earnings, January 1 – Palo Consolidated CI

P230,000 62,000 292,000 20,000 P272,000

Total Dividends paid – Palo Palo Corporation and Subsidiary Retained earnings, December 31 Consolidated Statement of Financial Position December 31, 2013 Assets Cash Accounts receivable Inventory Buildings and equipment Less: Accumulated depreciation Goodwill Liabilities and Stockholders’ Equity Total Accounts payable Taxes payable Common stock Retained earnings, Dec. 31 Total

P 57,000 80,000 130,000 P540,000 170,000 370,000 20,000 P657,000 P 60,000 125,000 200,000 272,000 P657,000

85

Problem 16-8 1.

Determination and Allocation of Excess Schedule:

Fair value of subsidiary

Company Value Estimated FV

Parent Price

NCI

(80%)

(20%)

P945,000

P756,000

P189,000

700,000

700,000

80%

20%

560,000

140,000

196,000

49,000

Less book value of interest acquired: Common stock – S Company

300,000

Retained earnings – S Company

400,000

Total equity

700,000

Interest acquired Book value Excess of fair value over book value

245,000

Allocations: Inventory

(30,000)

Land

(50,000) (100,000)

Building Equipment

75,000

Patent

(40,000)

Total

145,000

P 100,000

Goodwill

Working Paper Elimination Entries - December 31, 2013(not required) (1) 94,800 NCI

(2)

Common stock – S

(3)

Retained earnings, Jan. 1 – S Investment in S Company NCI Inventories Land Building Patents Goodwill Equipment

Investment income 10,000 Dividends declared – S Company 50,000 Investment in S Company 54,800 300,000 400,000 560,000 140,000 30,000 50,000 100,000 40,000 100,000 75,000

86

Investment in S Company NCI (4)

196,000 49,000

Cost of goods sold

30,000

Inventory

30,000 Equipment (P75,000 / 10) 7,500 Expenses (amortization) 1,500

(5)

Buildings (P100,000 / 20) 5,000 Patents (P40,000 / 10) 23,700 4,000 NCI 23,700 To recognize NCI in subsidiary CI (P150,000 – 31,500)x 20% NCI in CI of subsidiary

Problem 16-8, Concluded 2.

P Company and Subsidiary Consolidated Working Paper Year Ended December 31, P 2013

S

Adjustments

& Eliminations

Consoli-

Company

Company

Debit

Credit

dated

1,000,000

500,000

Cost of sales

400,000

150,000

Gross profit

600,000

350,000

Expenses

360,000

200,000

Operating income

240,000

150,000

Statement of CI Sales

Investment income Net /consolidated income

94,800

-

334,800

150,000

NCI in CI of Subsidiary CI carried forward

1,500,000 (4) 30,000

580,000 920,000

(4)

1,500

561,500 358,500

(1) 94,800

358,500

(5) 23,700

(23,700)

334,800

150,000

334,800

Retained earnings, 1/1

600,000

400,000

CI from above Total

334,800

150,000

334,800

934,800

550,000

934,800

Dividends declared

100,000

50,000

Retained earnings, 12/31 Carried forward

834,800

500,000

Retained earnings (2)400,000

600,000

(1) 50,000

100,000 834,800

87

Statement of FP Cash

200,000

100,000

300,000

Accounts receivable

150,000

50,000

200,000

Inventories

100,000

40,000

(3) 30,000

Land

150,000

(3) 50,000

Buildings (net)

200,000

(3)100,000

(4)

5,000

295,000

298,000

450,000

(4)

(3) 75,000

680,500

-

-

Equipment (net) Patent Investment in S Company

7,500

(3) 40,000

810,800

(4) 30,000

140,000 200,000

(4)

4,000

36,000

(1) 54,800

-

(2)560,000 (3)196,000 Goodwill Total

(3) 100,000

100,000 1,951,500

1,558,800

1,090,000

Accounts payable

124,000

190,000

Common stock

200,000

300,000

Additional paid-in capital

400,000

-

400,000

Retained earnings, 12/31 from above

834,800

500,000

834,800

NCI

314,000 (2)300,000

(1) 10,000

200,000

(2)140,000

2022,700

(3) 49,000 (5) 23,700 Total

1,558,800

1,090,000

486,200

486,200

1,951,500

Problem 16-9 a.

Investment in Sally Products Co. Cash To record acquisition of 80% stock of Sally. Cash

160,000 160,00 0 8,000

Dividend income 8,000 To record dividends received from Sally (P10,000 x 80%)

88

b. 2011

Working Paper Eliminating Entries – Dec. 31, (1)

Dividend income NCI

8,000 2,000 10,000

(2)

Dividends declared – CommonSally stock – Sally

(3)

Retained earnings, 1/1/08 –Sally Investment in Sally Products NCI Building and equipment

(4)

100,000 50,000 120,000 30,000 50,000

Investment in Sally Products NCI Retained earnings, 1/1 – Sally (prior year) Depreciation expense (current year)

(5)

Accumulated depreciation – Bldg Accounts payables

(6)

Cash and NCI in CIreceivables of subsidiary

(7)

NCI (P30,000 – P5,000) x 20% Retained earnings, 1/1 – Sally

40,000 10,000

5,000 5,000 10,000 10,000

10,000

5,000 5,000 7,000

NCI To recognize NCI in subsidiary’s prior year earnings

7,000

[(P50,000 – P90,000) – P5,000] x 20%

Problem 16-9, Concluded c.

Pilar Corporation and Subsidiary Consolidation Working Paper December 31, 2013 Pilar Corporation

Sally Wood Products

200,000

100,000

Adjustments

& Eliminations

Consoli-

Debit

Credit

dated

Statement of CI Sales Dividend income Total revenue

8,000 208,000

300,000 (1)

100,000

8,000

300,000

89

Cost of goods sold

120,000

50,000

Depreciation expense

25,000

15,000

Inventory losses

15,000

5,000

20,000

160,000

70,000

235,000

48,000

30,000

65,000

Total cost and expenses Net /consolidated CI

170,000 (4)

5,000

45,000

NCI in CI of subsidiary CI carried forward

(6)

5,000

(5,000)

48,000

30,000

60,000

298,000

90,000

48,000

30,000

60,000

346,000

120,000

386,000

30,000

10,000

316,000

110,000

81,000

65,000

260,000

90,000

350,000

80,000

80,000

160,000

Buildings and equipment

500,000

150,000

Investment in Sally

160,000

Retained earnings statement

Retained earnings, 1/1

CI from above Total Dividends declared Retained earnings, 12/31 carried forward

(2) 50,000 (4) 5,000 (7) 7,000

326,000

(1) 10,000

30,000 356,000

Statement of FP Cash and receivables Inventory Land

(5) 10,000

(3) 50,000

136,000

700,000 (2)120,000

-

(3) 40,000 Total

1,081,000

385,000

1,346,000

Accumulated depreciation

205,000

105,000

Accounts payable Notes payable

60,000 200,000

20,000 50,000

(5) 10,000

Common stock

300,000

100,000

(2)100,000

(4)

10,000

300,000 70,000 250,00 0 300,000

90

Retained earnings from above

316,000

110,000

NCI

356,000 (1)

Total

1,081,000

385,000

2,000

(2) 30,000 (3) 10,000 (6) 5,000 (7) 7,000

242,000

242,000

50,000

1,346,000

Problem 16-10 Determination and Allocation of Excess Schedule (not required) Price paid

P220,000

Less book value of interest acquired: Common stock – Star Company

P150,000 50,000

200,000

P 20,000

Retained earnings, 1/1 – Star Company Goodwill a. Eliminating entries: E(1)

Dividend Income

20,00 0

Dividends Declared E(2)

E(3)

Eliminate dividend income from Common Stock – Star Company subsidiary. Retained Earnings, January 1

150,00 0 50,000

Investment in Star Company Stock Eliminate subsidiary equity accounts. Goodwill

8,000 12,00 0

Retained Earnings, January 1 Investment in Star Company Porno Corporation and Star Company Assign excess Consolidated Working Paperat beginning of year December 31, 2013 _____Item_____ Statement of CI Sales Dividend income Credits Cost of goods sold Depreciation expense Other expenses Debits CI, carry forward

Porno

Star

Corporation 350,000 20,000

Company 200,000

370,000 270,000 25,000 21,000

20,00 0

200,00 0

20,00 0

Eliminations Debit -

Credit

(1) 20,000

200,000 135,000 20,000 10,000

(316,000) (165,000) __ 54,000 35,000 20,000

Consolidated 550,000 _______ 550,000 405,000 45,000 31,000

-

____ (481,000) 69,000

91

Retained Earnings Statement Retained earnings, Jan. 1 CI, from above

60,000

262,000 54,000

Dividends declared Retained earnings, Dec. 31, carry forward

35,000

316,000

95,000

(20,000)

(2) 50,000 (3) 12,000 20,000

(20,000) 75,000

69,000

(1) 20,000 ___82,00020,000

260,000 329,000 (20,000) 309,000

296,000

Problem 16-10, Concluded Statement of FP Cash Accounts receivable Inventory Buildings and equipment Investment Goodwill in Star Company Debits Accumulated depreciation Accounts payable` Taxes payable Common stock Light Corporation Star Company

46,000 55,000 75,000 300,000 220,000 696,000 130,000 20,000 50,000 200,000 296,000 696,000

30,000 40,000 65,000 240,000

76,000 95,000 140,000 540,000 (2)200,000 (3) 20,000

-

375,000

-

8,000 859,000

(3) 8,000

85,000 30,000 35,000 150,000 75,000 375,000

215,000 50,000 85,000 (2)150,000 82,000 240,000

200,000 20,000 240,000

309,000 859,000

Retained earnings, from above Credits Problem 16-11

(1)

Determination and Distribution of Excess Schedule:

Fair value of subsidiary

Company

Parent

NCI

Implied

Price

Fair Value P465,000

(90%)

Valu e (10%)

P418,600

P46,500

Less book value of interest acquired: Common stock (P10 Par)

100,000

Retained earnings

250,000

Total equity

350,000

315,000

35,000

P115,000

P103,500

P11,500

Amortization

Life

Excess of fair value over book value

Adjustments:

92

P115,000

Equipment

(2)

P5,750/yr

20 yrs.

Entries: Investment in Venus Company Retained earnings*

195,300

Investment income**

137,475 57,825

To the investment to its carrying (equity method)  adjust Retained earnings account = 90% amount x P170,000 change in retained earnings – 3 years of Equipment depreciation (3 x 90% x P5,750) = P137,475. ** Investment income = 90% x (P70,000 - P5,750 equipment depreciation) = P57,825.

Problem 16-11 continued: Cash

Investment in Venus Company (8/9 x P418,500 cost

700,000 545,600 154,400

+ P195,300 adjustment) Gain on sale of investment To record the sale of the 8,000 shares of Venus stock. Problem 16-12 Entries on Pluto’s books, January 1, 2014: Investment in Saturn Company

2,960*

Retained earnings – Pluto To adjust investment carrying amount of shares sold (equity

2,960

method). Remaining shares remain at cost, because they will be consolidated. Cash 40,000 Investment in Saturn Company Additional paid-in capital – Pluto

10,960 29,040

To record sale of shares. Investment eliminated = [(2,000and ÷ Allocation 40,000) x ofP160,000 Determination Excess original cost] plus P2,960 equity adjustment. Schedule:

Fair value of subsidiary

Company

Parent

NCI

Implied

Price

Fair Value P200,000

(80%)

Valu e (20%)

P160,000

P40,000

150,000

120,000

30,000

P50,000

P40,000

P10,000

Less book value of interest acquired: Total equity Excess of fair value over book value

93

Adjustment of identifiable accounts:

Adjustment

Amortization

Life

Machine

P20,000

P4,000/yr

5 yrs.

Goodwill

30,000

Total

P50,000

*Equity adjustment Income

P110,000

Amortization of excess (4 years x P4,000)

(16,000)

Dividends

(20,000)

Total

P74,000

Interest sold (2,000 ÷ 50,000) x P74,000

P2,960

94