CHAPTER 16.doc

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) Less: Book value of interest acquired Excess Investment cost Parent’s share of subsidiary’s CI Dividends received from subsidiary Amortization of allocated excess (P60,000/20) Investment account balance, Dec. 31, 2013

16-5:

P500,000 480,000 P 60,000 Cost Method P500,000 P500,000

a 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%) NCI balance, December 31, 2013

16-6:

P 90,000 (16,000) 40,000 P114,000

a Puno’s CI Dividend income (P40,000 x 90%) Puno’s CI from own operations Salas’ CI from own operations Consolidated CI

16-7:

Equity Method P500,000 120,000 ( 48,000) ( 3,000) P569,000

P 145,000 ( 36,000) 109,000 120,000 P 229,000

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

P1,000,000 200,000 1,200,000 40,000 P1,160,000

68

16-8:

a

Investment in Son, Jan. 1 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 P648,600 16-9:

2011 P310,000 150,000 ( 60,000)

2012 P396,200 180,000 (60,000)

( 3,800) ( 3,800) P396,200

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

a Sy’s CI Amortization of allocated excess Adjusted CI of Sy

P300,000 ( 60,000) P240,000

NCI in CI of subsidiary (P240,000 x 10%)

P 24,000

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 Consolidated retained earnings, Dec. 31, 2013

216,000 ( 50,000) P666,000

16-12: c Price price Less book value of interest acquired: Excess Allocation due to undervaluation of net assets Goodwill

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

16-13: d NCI, January 2, 2013 [(P975,000/80%) x 20%] NCI in subsidiary dividends (P125,000 x20%) NCI in adjusted CI of subisidiary (P190,000 – P10,000) x 20% NCI, December 32, 2013

P243,750 (25,000) 36,000 P182,750

69

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%) Consolidated CI attributable to parent

P140,000 57,000 ( 5,700) P191,300

16-15: b Investment in Siso Company (at date of acquisition)

P600,000

Dividend income (P30,000 x 5%)

P 1,500

16-16 d Consolidated CI: Pepe’s CI from own operations Sison’s adjusted CI: CI -2013 Amortization of allocated excess to equipment (P20,000 / 5) Consolidated CI

P210,000 P67,000 4,000

Consolidated retained earnings: Pepe’s retained earnings, Jan.2, 2012 Consolidated CI attributable to parent– 2012 Pepe’s CI from own operations P185,000 Sison’s adjusted CI; CI – 2012 P40,000 Amortization -2012 4,000 36,000 NCI in Sison’s CI (P36,000 x 30%) (10,800) Dividends paid ,2012 - Pepe Pepe’s retained earnings, Jan. 2, 2013 Consolidated CI attributable to parent– 2013: Consolidated CI (see above) P273,000 NCI in Sison’s CI (P63,000 x 30%) ( 18,900) Dividends paid, 2013 – Pepe Consolidated retained earnings, Dec. 31, 2013

63,000 P273,000 P701,000

210,200 ( 50,000) P861,200 254,100 ( 60,000) P1,055,300

16-17: a Price paid NCI, June 30, 2013 [(P700,000/70%) x 30%} Total Less book value of Susy’s net assets (P650,000 + P250,000) Excess, allocated to building Amortization (P100,000 / 10) x 2/12

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

70

16-17, continued:

Consolidated retained earnings Retained earnings, Jan. 1, 2013 – Pepe P550,000 Consolidated CI attributable to parent: CI – Precy P275,000 Adjusted CI of Susy: CI of Susy P100,000 Amortization (P100,000 / 10) ÷ 2 ( 5,000) 95,000 NCI in Susy’s CI (P95,000 x 30%) (28,500) 341,500 Dividends paid – Precy ( 70,000) Consolidated retained earnings, Dec. 31, 2013 P821,500 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

P300,000 -028,500 P328,500

16-18: a Goodwill Price paid Less: Book value of interest acquired (P1,320,000 – P320,000) Goodwill (not impaired)

P1,200,000 1,000,000 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 parent

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

16-20: c Consolidated net income – 2013 CI – Ponce Dividend income (P15,000 x 60%) Solis’ CI NCIin Solis’ CI (P40,000 x 40%) Consolidated CI attributable to parent – 2013

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

71

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 Dividends paid. 2013 – Ponce Consolidated retained earnings, Dec. 31, 2013

P 400,000 P70,000 (18,000) 35,000 ( 14,000) 75,000 (25,000) P450,000 105,000 (30,000) P525,000

16.21 b Price paid, January 2, 2013 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: Depreciable assets Goodwill Consolidated CI, December 31, 2013: Polo CI from own corporation Seed CI from own operation: CI Amortization (40,000 ÷ 10%) GW impairment lost Total

P216,000 54.000 270,000 220,000 50,000 (40,000) 10,000 P 95,000

35,000 (4,000) (8,000)

23,000 P118.000

16-22: c Retained earnings 1/1/013 – Polo Consolidated CI attributed to parent: Consolidated CI NCI in Seed’s adjusted CI (23,000x 20%) Total Dividends paid- Polo Consolidated retained earnings 12/31/013

P520,000 118,000 (4,600)

113,400 633,400 (46,000) P587,400

16-23: b, P4,600 (see 16-22)

72

16-24: c NCI, January 2, 2013 NCI ins Seed’s dividends (P15,000 x 20%) NCI in Seed’s CI NCI, December 31, 2013

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

16-25: c (see no. 16-22) 16-26: a Price paid, January 1, 2012 NCI, January 1, 2012 [(P231,000/70%) x 30%] Total Less book value of Sisa’s net assets Excess Allocated to depreciable assets (10 years remaining life)

P231,000 99,000 330,000 280,000 50,000 (50,000)

Retained earnings, 1/1/13-Sisa company Retained earnings, 1/1/12-Sisa company (squeeze) Increase Amortization- prior years (50,000 ÷ 10 years) Adjusted increase in earnings of Sisa (21,000/30% )

P230,000 155,000 75,000 (5,000) P70,000

16-27: a Retained earnings 1/1/13- Pepe Retained earnings 1/1/13- Sisa Adjustment and elimination: Date of acquisition Undistributed earnings to NCI Amortization- prior year Consolidated retained earnings 1/1/13

P520,000 230,000 (155,000) (21,000) (5,000)

16-28: a Pepe company CI, 2013 Sisa company CI, 2013 Dividend income (10,000 x 70%), 2013 Amortization- 2013 Consolidated CI 16-29: a Consolidated retained earnings 1/1/13(see 16 – 27) Consolidated CI attributable to parent: Consolidated CI (see 16-28) 133,000 NCI in Sisa CI (25,000 – 5,000) 30% (6,000) Dividend paid- Pepe company Consolidated retained earnings 12/31/13

49,000 P569,000 P120,000 25,000 (7,000) (5,000) P133,000 P569,000 127,000 ( 50,000) P646,000

73

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

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

16-31: c The gain is computed as follows: Cash proceeds Carrying value of interest sold (P2,400,000 x 10%) Gain to APIC

P280,000 240,000 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.

74

PROBLEMS Problem 16-1 1.

Determination and Allocation of Excess Schedule:

Fair value of subsidiary Less book value of interest acquired Capital stock Retained earnings Total equity Interest acquired Book value Excess Allocation to: Fixed assets

2.

Implied Fair Value

Parent Price (80%)

NCI Value (20%)

P 312,500

P 250,000

P 62,500

P 250,000 80% P200,000 P 50,000

P 250,000 20% P 50,000 P 12,500

P 100,000 150,000 P 250,000 P 62,500 62,500

Working Paper Elimination Entries: a.

Eliminate dividends declared by the subsidiary against dividend income and NCI: Dividend income NCI Dividends declared – Sulu

b.

e.

100,000 150,000 200,000 50,000

Allocate excess to fixed assets: Fixed assets Investment in Sulu Company NCI

d.

5,000

Eliminate equity accounts of the subsidiary against the investment account and the NCI account. Common stock – Sulu Retained earnings – Sulu Investment in Sulu Company NCI

c

4,000 1,000

Amortized fixed assets (P62,500 / 10) Expenses Fixed assets

62,500 50,000 12,500 6,250 6,250

Recognize NCI in subsidiary net income: NCI in subsidiary CI 3,750

75

NCI

3,750

Probem 16-1 concluded 3.

Pedro Company Consolidated Statement of CI Year Ended December 31, 2013 Sales Expenses Consolidated CI Attributable to NCI Attributable to controlling interest

4.

P250,000 191,250 P 58,750 3,750 P 55,000

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 Non-current assets Fixed assets (P662,500 – P132,250) Total assets Liabilities and Stockholders’ Equity Current liabilities Stockholders’ Equity: Controlling interest: Common stock Retained earnings Total Non-controlling interest (P62,500 – P1,000 + P3,750) Total liabilities and equity

P190,000 530,250 P720,250 P100,000 P300,000 255,000 P555,000 65,250

620,250 P720,250

76

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) Expenses (current year) Fixed assets

e.

1,750 1,750

Assign to the NCI their share of the increase in the subsidiary’s Adjusted undistributed earnings of prior year: Retained earnings, January 1- Sulu NCI Retained earnings, January 1, 2013 Retained earnings, January 2, 2012 Increase in undistributed earnings Amortization in prior years Adjusted undistributed earnings NCI % NCI

2.

12,500

Recognize NCI in subsidiary CI: NCI in subsidiary CI NCI

e.

6,250 6,250

2,750 2,750 P170,000 150,000 P 20,000 6,250 P 13,750 20% P 2,750

Pedro Company Consolidated Statement of CI Year Ended December 31, 2013 Sales Expenses (P245,000 + P6,250) Consolidated CI Attributable to NCI Attributable to controlling interest

P300,000 251,250 P 48,750 1,750 P 47,000

77

Problem 16-3 Amortization Schedule Accounts Adjustments Inventory Amortization: Investments Buildings Equipment Patent Trademark Discount on bonds payable Total

Life 1 3 20 5 10 10 5

Annual Amount P 6,250

2010 P 6,250

2011

2012

2013

5,000 12,500 34,500 2,250 2,000 2,500 P 65,000

5,000 12,500 34,500 2,250 2,000 2,500 P 65,000

5,000 12,500 34,500 2,250 2,000 2,500 P 58,750

5,000 12,500 34,500 2,250 2,000 2,500 P 58,750

5,000 12,500 34,500 2,250 2,000 2,500 P58,750

Problem 16-4 Allocation Schedule Price paid Less: Book value of interest acquired Excess Allocation: Equipment Buildings Goodwill (not impaired)

P206,000 140,000 P 66,000 P(40,000) 10,000

(30,000) P 36,000

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) P 112,000 CI from own operations – Stag (P104,000 – P74,000) 30,000 Amortization: Equipment (P40,000/8) P5,000 Buildings (P10,000/20) (500) ( 4,500) Consolidated CI P 137,500

d.

Consolidated Equipment Total book value (P320,000 + P50,000) Allocation Amortization (P5,000 x 3 years) Total

P 370,000 40,000 (15,000) P 395,000

78

Problem 16-4 concluded e.

Consolidated Buildings Total book value Allocation Amortization (P500 x 3 years) Total

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

f.

Consolidated Goodwill (not impaired)

P

g.

Consolidated Common Stock (Pony)

P 290,000

h.

Consolidated Retained Earnings Retained earning, Dec. 31, 2013 – Pony P 410,000 Add: Pony’s share of Stag’s adjusted increase in earnings Net earnings – 2013 (P30,000 – P20,000) P10,000 Amortization ( 4,500) 5,500 Retained earnings, December 31, 2013 P 415,500

36,000

Problem 16-5 a.

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

(2)

(3)

(4)

Dividend income Dividends declared – Short To eliminate intercompany dividends.

10,000

Common stock – Short Retained earnings – Short Investment in Short Company To eliminate equity accounts of Short at date of acquisition

100,000 50,000

Depreciable asset Investment in Short Company To allocate excess Depreciation expense Depreciable asset To amortize allocatedexcess

10,000

150,000

30,000 30,000 5,000 5,000

79

Problem 16-5 concluded b.

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

& Eliminations

Debit

Credit

Pony Corporation

Short Company

200,000 10,000 210,000 25,000 105,000 130,000 80,000

120,000 120,000 15,000 75,000 90,000 30,000

230,000 80,000 310,000 40,000

50,000 30,000 80,000 10,000

270,000

70,000

285,000

Statement of FP Cash Accounts receivable Inventory Depreciable asset (net) Investment in Short company

15,000 30,000 70,000 325,000 180,000

5,000 40,000 60,000 225,000

20,000 70,000 130,000 575,000 -

Total

620,000

330,000

795,000

Accounts payable Notes payable Common stock Pony Short Retained earnings, Dec. 31 From above Total

50,000 100,000

40,000 120,000

90,000 220,000

Statement of CI Sales Dividend income Total Depreciation Other expenses Total CI carried forward Retained Earnings Retained earnings, Jan. 1 CI from above Total Dividends declared Retained earnings, Dec. 31 Carried forward

320,000 320,000 45,000 180,000 225,000 95,000

(1) 10,000 (3) 5,000

(2) 50,000 (1) 10,000

(3) 30,000

(4) 5,000 (2)150,000 (3) 30,000

200,000 270,000 620,000

Consolidated

230,000 95,000 325,000 40,000

200,000 100,000

(2)100,000

70,000 330,000

195,000

195,000

285,000 795,000

80

Problem 16-6 a.

Working Paper Elimination Entries (1)

(2)

(3)

Dividend income NCI Dividends declared – Sisa

8,000 2,000 10,000

Common stock – Sisa Retained earnings – Sisa Investment in Sisa stock NCI

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

NCI in CI of subsidiary NCI

6,000 6,000

b.

Popo Corporation and Subsidiary Consolidated Working Paper December 31, 2013 Popo Corporation Statement of CI Sales 200,000 Dividend income 8,000 Total revenue 208,000 Depreciation expense 25,000 Other expenses 105,000 Total expenses 130,000 CI 78,000 NCI in CI of Sub. CI carried forward 78,000 Retained Earnings Retained earnings, 1/1 CI from above Total Dividends declared Retained earnings, 12/31 Carried forward Statement of FP Current assets Depreciable assets Investment in Sisa Company Total Accumulated depreciation Current liabilities Long-term debt Common stock Retained earnings , 12/31 From above NCI

Sisa Company

Adjustments

& Eliminations

Debit

Credit

120,000

Consolidated 320,000 320,000 40,000 180,000 220,000 100,000 ( 6,000) 94,000

(1) 8,000 120,000 15,000 75,000 90,000 30,000 (3) 6,000 30,000

230,000 78,000 308,000 40,000

50,000 30,000 80,000 10,000

(2) 50,000

268,000

70,000

284,000

173,000 500,000 120,000 793,000

105,000 300,000 405,000

278,000 800,000 1,078,000

175,000 50,000 100,000 200,000

75,000 40,000 120,000 100,000

250,000 90,000 220,000 200,000

268,000

70,000

(1) 10,000

(2)120,000

(2)100,000 (1) 2,000

(2) 30,000

230,000 94,000 324,000 40,000

284,000 34,000

81

Total

793,000

405,000

166,000

(3) 6,000 166,000

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 Long-term debt Total liabilities Stockholders’ Equity Common stock Retained earnings, 12/31 Minority interest in net assets of subsidiary Total liabilities and stockholders’ equity

P278,000 P800,000 250,000

550,000 P828,000 P 90,000 220,000 P310,000

P200,000 284,000 34,000

518,000 P828,000

Popo Corporation and Subsidiary Consolidated Statement of CI Year Ended December 31, 2013 Sales Expenses: Depreciation expense Other expenses Consolidated CI NCI in CI of subsidiary Attributable to parent

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

220,000 6,000 P 94,000

Popo Corporation and Subsidiary Consolidated Retained Earnings Year Ended December 31, 2013 Retained earnings, Jan. 1 – Popo Consolidated CI attributable to parent Total Dividends paid – Popo Consolidated retained earnings, Dec. 31

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

82

Problem 16-7 a.

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

& Eliminations

Debit

Credit

Palo Corporation

Sebo Company

300,000 19,000 319,000 210,000 25,000 23,000 258,000 61,000

150,000

230,000 61,000 291,000 20,000

50,000 20,000 70,000 10,000

271,000

60,000

272,000

Statement of FP Cash Accounts receivable Inventory Buildings and equipment Investment in Sebo Company

37,000 50,000 70,000 300,000 229,000

20,000 30,000 60,000 240,000

57,000 80,000 130,000 540,000 -

Goodwill Total

686,000

350,000

20,000 827,000

105,000 40,000 70,000 200,000

65,000 20,000 55,000 150,000

(2)150,000

170,000 60,000 125,000 200,000

271,000 686,000

60,000 350,000

239,000

Statement of CI Sales Investment Income Total revenues Cost of goods sold Depreciation expense Other expenses 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

Accumulated depreciation Accounts payable Taxes payable Common stock Retained earnings, Dec. 31 from above Total

Consolidated 450,000 450,000 295,000 45,000 48,000 388,000 62,000

(1) 19,000 150,000 85,000 20,000 25,000 130,000 20,000 (2) 50,000 (1) 10,000

(1) 9,000 (2)200,000 (3) 20,000 (3) 20,000

239,000

230,000 62,000 292,000 20,000

272,000 827,000

83

Problem 16-7 - Concluded

b.

Consolidated Financial Statements Palo Corporation and Subsidiary Consolidated Statement of CI Year Ended December 31, 2013 Sales Cost of goods sold Gross profit Expenses: Depreciation expenses Other expenses Consolidated CI

P450,000 295,000 155,000 P45,000 48,000

93,000 P 62,000

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

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

Palo Corporation and Subsidiary Consolidated Statement of Financial Position December 31, 2013 Assets Cash Accounts receivable Inventory Buildings and equipment Less: Accumulated depreciation Goodwill Total Liabilities and Stockholders’ Equity 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

84

Problem 16-8 1.

Determination and Allocation of Excess Schedule:

Fair value of subsidiary Less book value of interest acquired: Common stock – S Company Retained earnings – S Company Total equity Interest acquired Book value Excess of fair value over book value Allocations: Inventory Land Building Equipment Patent Total

Company Estimated FV P945,000

Goodwill

Parent Price (80%) P756,000

NCI Value (20%) P189,000

700,000 80% 560,000 196,000

700,000 20% 140,000 49,000

300,000 400,000 700,000 245,000 (30,000) (50,000) (100,000) 75,000 (40,000) 145,000 P 100,000

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

(2)

(3)

(4)

Investment income NCI Dividends declared – S Company Investment in S Company

94,800 10,000 50,000 54,800

Common stock – S Retained earnings, Jan. 1 – S Investment in S Company NCI

300,000 400,000

Inventories Land Building Patents Goodwill Equipment Investment in S Company NCI

30,000 50,000 100,000 40,000 100,000

Cost of goods sold Inventory Equipment (P75,000 / 10) Expenses (amortization) Buildings (P100,000 / 20) Patents (P40,000 / 10)

560,000 140,000

75,000 196,000 49,000 30,000 30,000 7,500 1,500 5,000 4,000

85

(5)

NCI in CI of subsidiary 23,700 NCI To recognize NCI in subsidiary CI (P150,000 – 31,500)x 20%

Problem 16-8, Concluded 2. P Company and Subsidiary Consolidated Working Paper Year Ended December 31, 2013 P Company Statement of CI Sales 1,000,000 Cost of sales 400,000 Gross profit 600,000 Expenses 360,000 Operating income 240,000 Investment income 94,800 Net /consolidated income 334,800 NCI in CI of Subsidiary CI carried forward 334,800 Retained earnings Retained earnings, 1/1 CI from above Total Dividends declared Retained earnings, 12/31 Carried forward Statement of FP Cash Accounts receivable Inventories Land Buildings (net) Equipment (net) Patent Investment in S Company Goodwill Total Accounts payable Common stock Additional paid-in capital Retained earnings, 12/31 from above NCI Total

S Company 500,000 150,000 350,000 200,000 150,000 150,000

23,700

Adjustments

& Eliminations

Debit

Credit

Consolidated 1,500,000 580,000 920,000 561,500 358,500 358,500

(4) 30,000 (4) 1,500 (1) 94,800 (5) 23,700

(23,700) 334,800

(2)400,000

600,000 334,800 934,800 100,000

150,000

600,000 334,800 934,800 100,000

400,000 150,000 550,000 50,000

834,800

500,000

834,800

200,000 150,000 100,000

100,000 50,000 40,000 150,000 200,000 450,000 -

300,000 200,000 140,000 200,000 295,000 680,500 36,000 -

298,000 810,800

(1) 50,000

(3) 30,000 (3) 50,000 (3)100,000 (4) 7,500 (3) 40,000

(4) 30,000 (4) 5,000 (3) 75,000 (4) 4,000 (1) 54,800 (2)560,000 (3)196,000

(3) 100,000 1,558,800

1,090,000

124,000 200,000 400,000

190,000 300,000 -

834,800

500,000

1,090,000

314,000 200,000 400,000

(2)300,000

(1) 10,000 1,558,800

100,000 1,951,500

486,200

(2)140,000 (3) 49,000 (5) 23,700 486,200

834,800 2022,700 1,951,500

86

Problem 16-9 a.

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

160,000 160,000

Cash

8,000

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

8,000

Working Paper Eliminating Entries – Dec. 31, 2011 (1)

(2)

(3)

(4)

(5)

(6)

(7)

Dividend income NCI Dividends declared – Sally

8,000 2,000 10,000

Common stock – Sally Retained earnings, 1/1/08 –Sally Investment in Sally Products NCI

100,000 50,000

Building and equipment Investment in Sally Products NCI

50,000

120,000 30,000 40,000 10,000

Retained earnings, 1/1 – Sally (prior year) Depreciation expense (current year) Accumulated depreciation – Bldg

5,000 5,000 10,000

Accounts payables Cash and receivables NCI in CI of subsidiary NCI (P30,000 – P5,000) x 20%

10,000 10,000 5,000

Retained earnings, 1/1 – Sally NCI To recognize NCI in subsidiary’s prior year earnings [(P50,000 – P90,000) – P5,000] x 20%

5,000 7,000 7,000

87

Problem 16-9, Concluded c. Pilar Corporation and Subsidiary Consolidation Working Paper December 31, 2013 Pilar Corporation

Sally Wood Products

Statement of CI Sales Dividend income Total revenue

200,000 8,000 208,000

100,000

Cost of goods sold Depreciation expense Inventory losses Total cost and expenses Net /consolidated CI

120,000 25,000 15,000 160,000 48,000

50,000 15,000 5,000 70,000 30,000

& Eliminations

Debit

Credit

100,000

170,000 45,000 20,000 235,000 65,000

(4) 5,000

(6) 5,000 48,000

30,000

Retained earnings, 1/1

298,000

90,000

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

48,000 346,000 30,000

30,000 120,000 10,000

316,000

110,000

81,000 260,000 80,000 500,000 160,000

65,000 90,000 80,000 150,000

1,081,000

385,000

205,000 60,000 200,000 300,000 316,000

105,000 20,000 50,000 100,000 110,000

Consolidated 300,000 300,000

(1) 8,000

NCI in CI of subsidiary CI carried forward

Adjustments

(5,000) 60,000

Retained earnings statement

Statement of FP Cash and receivables Inventory Land Buildings and equipment Investment in Sally Total Accumulated depreciation Accounts payable Notes payable Common stock Retained earnings from above NCI

Total

(2) 50,000 (4) 5,000 (7) 7,000 (1) 10,000

(5) 10,000 (3) 50,000 (2)120,000 (3) 40,000

385,000

60,000 386,000 30,000 356,000 136,000 350,000 160,000 700,000 1,346,000

(4) 10,000 (5) 10,000 (2)100,000 (1) 2,000

1,081,000

326,000

242,000

(2) 30,000 (3) 10,000 (6) 5,000 (7) 7,000 242,000

300,000 70,000 250,000 300,000 356,000 50,000

1,346,000

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Problem 16-10 Determination and Allocation of Excess Schedule (not required) Price paid Less book value of interest acquired: Common stock – Star Company Retained earnings, 1/1 – Star Company Goodwill a.

P220,000 P150,000 50,000

200,000 P 20,000

Eliminating entries: E(1)

Dividend Income Dividends Declared

20,000

20,000 Eliminate dividend income from subsidiary. E(2)

Common Stock – Star Company Retained Earnings, January 1 Investment in Star Company Stock

150,000 50,000

200,000 Eliminate subsidiary equity accounts. E(3)

Goodwill Retained Earnings, January 1 Investment in Star Company

8,000 12,000

20,000 Assign excess at beginning of year Porno Corporation and Star Company Consolidated Working Paper December 31, 2013 Porno Star Eliminations _____Item_____ Corporation Company Debit Credit Consolidated Statement of CI Sales 350,000 200,000 550,000 Dividend income 20,000 (1) 20,000 _______ Credits 370,000 200,000 550,000 Cost of goods sold 270,000 135,000 405,000 Depreciation expense 25,000 20,000 45,000 Other expenses 21,000 10,000 31,000 Debits (316,000) (165,000) __ ____ (481,000) CI, carry forward 54,000 35,000 20,000 69,000 Retained Earnings Statement Retained earnings, Jan. 1 CI, from above

262,000

54,000

60,000 35,000

316,000

95,000

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

260,000 69,000 329,000

89

Dividends declared Retained earnings, Dec. 31, carry forward

(20,000)

(20,000)

___

-

(1) 20,000

82,000

20,000

(20,000)

296,000

75,000

Statement of FP Cash Accounts receivable Inventory Buildings and equipment Investment in Star Company

46,000 55,000 75,000 300,000 220,000

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

Goodwill Debits

696,000

375,000

8,000 859,000

130,000 20,000 50,000

85,000 30,000 35,000

215,000 50,000 85,000

309,000

Problem 16-10, Concluded

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

Accumulated depreciation Accounts payable` Taxes payable Common stock Light Corporation Star Company Retained earnings, from above Credits

76,000 95,000 140,000 540,000 -

(3) 8,000

200,000 296,000 696,000

200,000 150,000 75,000 375,000

(2)150,000 82,000 240,000

20,000 240,000

309,000 859,000

Problem 16-11

(1)

Determination and Distribution of Excess Schedule:

Fair value of subsidiary Less book value of interest acquired: Common stock (P10 Par) Retained earnings Total equity Excess of fair value over book value Adjustments: Equipment

(2)

Company Implied Fair Value P465,000

Parent Price (90%) P418,600

NCI Value (10%) P46,500

100,000 250,000 350,000 P115,000

315,000 P103,500

35,000 P11,500

P115,000

Amortization P5,750/yr

Life 20 yrs.

Entries: Investment in Venus Company 195,300 Retained earnings* Investment income** To adjust the investment to its carrying amount (equity method) 

137,475 57,825

Retained earnings account = 90% x P170,000 change in retained earnings – 3 years of

90

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

700,000

Investment in Venus Company (8/9 x P418,500 cost + P195,300 adjustment) Gain on sale of investment To record the sale of the 8,000 shares of Venus stock.

545,600 154,400

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 method). Remaining shares remain at cost, because they will be consolidated. Cash

2,960

40,000

Investment in Saturn Company Additional paid-in capital – Pluto To record sale of shares. Investment eliminated = [(2,000 ÷ 40,000) x P160,000 original cost] plus P2,960 equity adjustment.

10,960 29,040

Determination and Allocation of Excess Schedule:

Fair value of subsidiary Less book value of interest acquired: Total equity Excess of fair value over book value Adjustment of identifiable accounts: Machine Goodwill Total *Equity adjustment Income Amortization of excess (4 years x P4,000) Dividends Total

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

Company Implied Fair Value P200,000

Parent Price (80%) P160,000

NCI Value (20%) P40,000

150,000 P50,000

120,000 P40,000

30,000 P10,000

Adjustment P20,000 30,000 P50,000

Amortization P4,000/yr

Life 5 yrs.

P110,000 (16,000) (20,000) P74,000

P2,960

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