CHAPTER 17.doc

CHAPTER 17 MULTIPLE CHOICES - COMPUTATIONAL 17-1:

b Consolidated sales Sales – Papa Sales – San Elimination of inter-company sales Consolidated sales

P 900,000 500,000 ( 50,000) P 1,350,000

Consolidated cost of goods sold Cost of goods sold – Papa Cost of goods sold – San Eliminations: Realized profit in beginning inventory Unrealized profit in ending inventory Intercompany purchases Consolidated cost of goods sold 17-2:

P 490,000 190,000 ( 4,000) 10,000 ( 50,000) P 636,000

c Comprehensive income – Sisa Unrealized profit in ending inventory – upstream Adjusted CI – Sisa NCI proportionate share NCI in CI of subsidiary

17-3:

60,000 ( 10,000) P 50,000 20% P 10,000

d CI from own operation – Pat Adjusted CI of Susan: CI – Susan Realized profit in beginning inventory (P112,000 x 50%/150%) Unrealized profit in ending inventory (P33,000 x 50%/150%) Consolidated CI Attributable to NCI (P226,500 x 30%) Attributable to parent

17-4:

P

P 200,000 P200,000 37,500 (11,000)

226,500 P 426,500 67,950 P 358,550

b CI from own operations- Patton Unrealized profit in ending inventory – DS (P200,000 x .25) Adjusted CI for own operations – Patton Solis net loss from own operations Consolidated CI

P 300,000 (50,000) 250,000 (150,000) P 100,000

90

17-5:

d Pardo’s share of Santos’ CI (P300,000 x 75%) Unrealized profit in ending inventory – Upstream (P200,000 x 25%/125%) x 75% Realized profit in beginning inventory – Upstream (P150,000 x 25%/125%) x 75% Investment income account balance, Dec. 31, 2013

17-6:

17-7:

d CI from own operation – Puzon Suazon’s adjusted CI from own operations: CI Unrealized profit in ending inventoryUpstream (P25,000 x 40%) Consolidated CI Attributable to NCI (P100,000 x 25%) Attributable to parent

( 30,000) 22,500 P 217,500 P 200,000

P110,000 ( 10,000)

100,000 P 300,000 (25.000) P 275,000

2012 P 500,000

2013 P 550,000

b CI from own operation – Pat Unrealized profit in ending inventory: 2012 (P20,000 x .40) 2013 (P30,000 x .50) Realized profit in beginning inventory Realized CI Sun CI Consolidated CI

17-8:

P 225,000

(8,000) 492,000 200,000 P 692,000

(15,000) 8,000 543,000 225,000 P 768,000

a CI from own operation – Pip Adjusted CI from own operation - Sol CI P 250,000 Realized profit in beginning inventoryUpstream (P40,000 x 40%) 16,000 Unrealized profit in ending inventoryUpstream (P70,000 x 30%) ( 21,000) Consolidated CI – 2013

P 400,000

245,000 P 645,000

91

17-9:

a CI from own operations – Popo Unrealized profit in ending inventory – Downstream Realized CI from own operation – Popo Adjusted CI from own operations - Sotto CI P 360,000 Realized profit in beginning inventoryUpstream 10,000 Consolidated CI Attributable to NCI (P370,000 x 5%) Attributable to parent

17-10: d CI – Sand Company Realized profit in beg. Inventory (P120,000 x .20) Unrealized profit in ending inventory (P360,000 x .20) Amortization of allocated excess P1.000,000 / 5) Adjusted net loss – Sand Company NCI (P48,000 x 40%) 17-11: d Gross profit rate – Short (P110,000 / P200,000) Inventories Inventory from outsiders – Power Inventory from outsiders – Short Power’s inventory acquired from Short – at cost: [P5,000 – (P5,000 x 55%)} Consolidated ending inventories Investment income Power’s share of Short’s CI (P50,000 x 75%) Unrealized profit in ending inventory – upstream (P5,000 x 55%) x 75% Realized profit in beginning inventory – upstream (P10,000 x 55%) x 75% Investment income, Dec. 31, 2013

P 500,000 ( 15,000) P 485,000

370,000 P 855,000 18,500 P 836,500 P200,000 24,000 (72,000) (200,000) P(48,000) P(19,200)

55% P 5,000 25,000 2,250 P 32,250 P 37,500 ( 2,063) 4,125 P 39,562

Investment in Short Company Acquisition cost (P80,000 x 80%) Unrealized profit in ending inventory Realized profit in beginning inventory Investment in Short Company, Dec. 31, 2013

P 60,000 ( 2,063) 4,125 P 62,062

NCI in Short company’s CI Short’s CI from own operations Realized profit in beginning inventory (P10,000 x 55%) Unrealized profit in ending inventory (P5,000 x 55%) Adjusted CI from own operations NCI proportionate share NCI in Short’s CI

P 50,000 5,500 ( 2,750) P 52,750 25% P 13,187.50

92

17-12: b Gross profit rate of Sit (P200,000 / P500,000)

40%

CI from own operations – Pit Adjusted CI of Sit: CI P 75,000 Realized profit in beginning inventoryUpstream (P40,000 x 40%) 16,000 Unrealized profit in ending inventoryUpstream (P25,000 x 40%) ( 10,000) Consolidated CI Attributable to NCI (P81,000 x 10%) Attributable to parent

P 200,000

81,000 P 281,000 ( 8,100) P 272,900

17-13: b Gross profit of Sir (P120,000 / P400,000)

30%

Consolidated cost of sales Cost of sales – Pig Cost of sales – Sir Eliminations: Realized profit in beginning inventory (P70,000 x 30%) Unrealized profit in ending inventory (P60,000 x 30%) Intercompany purchases Consolidated cost of sales Consolidated CI CI from own operations – Pig Sir’s adjusted CI: CI Realized profit in beginning inventory Unrealized profit in ending inventory Consolidated CI Attributable to NCI (P83,000 x 10%) Attributable to parent

P 600,000 280,000 ( 21,000) 18,000 (200,000) P 677,000 P 200,000

P 80,000 21,000 (18,000)

83,000 283,000 (8,300) P 274,700

93

17-14: a 2011 Pal Corp CI 150,000 Intercompany profit in ending inventory: 2011 (14,000) 2012 2013 Pal CI from own operation 136,000 Solo CI from own operation 100,000 Consolidated CI 236,000 Attributable to NCI 2011(100,000 – 14,000) x 40% 34,400 2012(90,000 +14,000 – 21,000) 40% 2013(160,000 + 21,000 – 24,000) 40% Attributable to Parent 201,600

2012 240,000 14,000 (21,000) 233,000 90,000 323,000

2013 300,000 21,000 ( 24,000) 297,000 160,000 427,000

33,200 289,800

62,800 394,200

17-15: a Total sales Intercompany sales (30,000 + 80,000) Consolidated sales

600,000 (110,000) 490,000

17-16: c Total cost of goods sold (250,000 +120,000) 370,000 Adjustments due to intercompany sale: COGS charged for intercompany sale (20,000 + 50,000) 70,000 COGS charged by: Star (30,000 – 6,000) 24,000 Polo (80,000 – 20,000) 60,000 Total 154,000 Cost of goods sold for consolidated entity: 20,000 x (24,000/30,000) (16,000) 50,000 x (60,000/80,000) (37,500) (100,500) Consolidated cost of goods sold 269,500 17-17: c Polo Corp. CI from own operation (105,000 – 25,000) Unrealized profit in ending inventory-DS (6,000 x 10/30) (2,000) Adjusted Polo Corp. CI from own operation Star Corp. CI from own operation: CI 45,000 Unrealized profit in EI-US (20,000 x 30/80) (7,500) Amortization (20,000/10 years) (2,000) Consolidated CI Attributable to NCI (35,500 x 40%) Attributable to Parent

80,000 78,000

35,500 113,500 (14,200) 99,300

94

17-18: a Pepsi CI from own operation Sarsi CI Unrealized profit in EI (45,000 x 60/180) Consolidated CI Attributable to NCI (75,000 x 30%) Attributable to Parent-2013

160,000 90,000 (15,000)

75,000 235,000 (22,500) 212,500

17-19: a Inventory-Pepsi Less: unrealized profit in books of Sarsi: (135,000 – 90,000) x (30,000/135,000) Inventory-Sarsi Less: unrealized profit in books of Pepsi: (280,000 – 140,000) x (110,000/280,000) Consolidated inventory 12/31/13

P 30,000 (10,000) P110,000

20,000

(55,000)

55,000 75,000

17-20: a Cost of goods sold on sale of inventory on hand-1/1/12: [45,000 x (120,000/180,000)] Cost of goods sold on purchases from Sarsi- 2012 [(135,000 – 30,000) x (90,000/135,000)] Cost of goods sold on purchases from Pepsi- 2012 [(280,000 – 110,000) x (140,000/280,000)] Consolidated cost of goods sold-2013

30,000 70,000 85,000 185,000

17-21: b Pepsi CI Sarsi CI Realized profit in beginning inventory - 2011 Unrealized profit in ending inventory- Sarsi Unrealized profit in ending inventory- Pepsi Consolidated CI – 2013

220,000 85,000 15,000 (10,000) (55,000) 255,000

95

17-22: b CI from own operations – P Company S Co. adjusted CI: CI – S Unrealized profit in ending inventory – Upstream (P9,000 x 50/150) Realized profit in beginning inventoryUpstream (P6,000 x 50/150) Consolidated CI

P200,000 P30,000 (3,000) 2,000

Attributable to NCI (P29,000 x 30%) Attributable to parent

29,000 229,000 8,700 P220,300

17-23: b NCI, December 31, 2012[(P245,000/70%) x 30%] NCI in subsidiary dividends (P20,000 x 30%) -2013 NCI in CI of subsidiary NCI in S Company, December 31, 2013

P105,000 ( 6,000) 8,700 P107,700

17-24: c P Company (P400,000 x 20%) S Company: Sales Cost of goods sold (P400,000 x 80%) Add write down of ending inventory Gross profit 17.25

P 80,000 P416,000 P320,000 10,000

330,000 P 86,000

a Sales Consolidated cost of goods sold Gross profit

P416,000 256,000* P160,000

* Purchases at cost (P400,000 x 80%) Less ending inventory at cost (P80,000 x 80%) Consolidated cost of goods sold

P320,000 64,000 P256,000

Note that cost is lower than market

96

17-26: a Sales Cost of goods sold Gross profit Other income Other expenses Consolidated CI Attributable to NCI Attributable to controlling interest

P270,000 (1) 171,250 (2) 98,750 (3) 47,000 (4) 51,750 3,350 (5) P 48,400

Supporting computations: (1) Sales: Pablo Company Sally Company Intercompany sales Consolidated sales

P220,000 120,000 (70,000) P270,000

(2) Consolidated cost of goods sold: Pablo Company Sally Company Intercompany sales Realized profit in beginning inventory (P15,000 x 25%) Unrealized profit in ending inventory (P20,000 x 25%) Consolidated costs of goods sold

P150,000 90,000 ( 70,000)6 ( 3,750) 5.000 P171,250

(3) Other income: Pablo Company Computer services : (4) Other expenses: Pablo Company Sally Company Computer services Consolidated other expenses (5) NCI in CI of Sally CI Realized profit in beginning inventory (upstream) Unrealized profit in ending inventory (upstream) Adjusted CI NCI proportionate share NCI

P 5,000 (5,000) P 40,000 12,000 (5,000) P 47,000 P 35,000 3,750 (5,000) P 16,750 20% P 3,350

97

PROBLEMS

Problem 17-1 The computation of the selected consolidation balances are affected by the inter-company profit in downstream intercompany sales as computed below: Unrealized profit in ending inventory, Dec. 31, 2012 – Downstream Intercompany profit (P120,000 – P72,000) Inventory left at year end Unrealized profit, Dec. 31, 2012

P 48,000 x 30% P 14,400

Unrealized profit in ending inventory, Dec. 31, 2013 – Downstream Intercompany profit (P250,000 – P200,000) Inventory left at year end Unrealized profit, Dec. 31, 2013

P 50,000 x 20% P 10,000

a.

b.

c.

Consolidated Sales Apo Bicol Intercompany sales – 2013 Total Cost of goods sold Apo’s book value Bicol’s book value Intercompany sales-2013 Realized profit in beginning inventory – 2013 Unrealized profit in ending inventory – 2013 Consolidated cost of goods sold Operating expenses Apo Bicol Total

P800,000 600,000 (250,000) P1,150,000 P 535,000 400,000 (250,000) ( 14,400) 10,000 P 680,600 P 100,000 100,000 P 200,000

d.

Dividend Income – 0 (eliminated)

e.

NCI in CI of Subsidiary (P100,000 x 20%)

P 20,000

f.

Inventory Apo Bicol Unrealized profit in ending inventory, Dec. 31, 2013 Consolidated inventory

P 298,000 700,000 (10,000) P 988,000

98

Problem 17-1, continued: g. NCI NCI, December 31, 2012 [ (P902,000/80%) x 20%] NCI in dividends paid by Bicol (P50,000 x 20%) NCI in CI of subsidiary (P100,000 x 20%) Total NCI, 12/31/13

P225,500 (10,000) 20,000 P235,500

Problem 17-2 P Company and Subsidiary Consolidated Statement of Comprehensive Income Year Ended December 31, 2013 Sales (P2,000,000 + P1,000,000 – P600,000) Cost of goods sold (Schedule 1) Gross profit Expenses Income before income tax Provision for income tax Consolidated CI after income tax Attributable to NCI (Schedule 2) Attributable to parent

P2,400,000 704,000 1,696,000 600,000 1,096,000 440,000 656,000 44,000 P 612,000

Schedule 1: Cost of sales – P Company Purchases from S Company Intercompany profit in beginning inventory (P60,000 x 25%) Intercompany profit in ending inventory (P76,000 x 25%) Total Cost of sales – S Company Consolidated cost of sales Schedule 2: CI – S Company Realized profit in beginning inventory – Upstream Unrealized profit in ending inventory – Upstream Adjusted CI NCI proportionate share NCI in CI of subsidiary

P 800,000 (600,000) ( 15,000) 19,000 P 204,000 500,000 P 704,000

P

P 180,000 15,000 (19,000) P 176,000 x 25% 44,000

Problem 17-3 a.

Working Paper Eliminating Entries (1)

Dividend income NCI (20%) Dividends declared- D (P32,000 / 80%)

32,000 8,000 40,000

99

To eliminate intercompany dividends. Problem 17-3, Continued (2)

(3)

(4)

Common stock – S Retained earnings – S Investment in S Co. stock NCI To eliminate equity accounts of S on the date of acquisition.

90,000 220,000

NCI Retained earnings, Jan. 1 Cost of goods sold To eliminate realized profit in beginning inventory

4,000 16,000

Sales

150,000

248,000 62,000

20,000

Cost of goods sold Inventory, Dec. 31 (P45,000 x 33.33%) To eliminated intercompany sales and unrealized profit in ending inventory. (5)

b.

c.

NCI in net income of subsidiary NCI To establish NCI in CI of S Co. computed as follows: Sales Cost and expenses (P140,000 +P20,000) CI Realized profit in beginning inventory – Upstream Unrealized profit in ending inventory – Upstream Adjusted CI NCI proportionate share NCI in CI of subsidiary

135,000 15,000

9,000 9,000 P200,000 160,000 40,000 20,000 (15,000) P 45,000 x 20% P 9,000

Consolidated CI P Company CI from own operations (P250,000 – P32,000) S Company adjusted CI Consolidated CI

P 218,000 45,000 P 263,000

Non-controlling Interest NCI, August 30, 2013 [(P248,000/80%) x 20%] NCI in subsidiary dividends [(P32,000/80%) x 20%] NCI in CI of subsidiary NCI

P 62,000 ( 8,000) 9,000 P 63,000

100

Problem 17-4 a.

b.

Consolidated Sales Reported total sales (P600,000 + P510,000) Intercompany sales (P140,000 + P240,000) Consolidated sales

P1,170,000 (380,000) P 790,000

Consolidated Cost of Goods Sold Cost of goods sold: Pato (P660,000 / 140%) Sales (P510,000 / 120% Amount to be eliminated (P128,000 + P232,000) see entry below Total

P 471,429 425,000 ( 360,000) P 536,429

Elimination of intercompany sales and intercompany profit in inventory: Downstream Sales Sales Inventory (P42,000 x 40/140) Cost of goods sold Upstream Sales Sales Inventory (P48,000 x 20/120) Cost of goods sold c.

d.

140,000 12,000 128,000 240,000

Consolidated Comprehensive Income CI from own operations – Pato Unrealized profit in ending inventory – Downstream Adjusted CI – Pato Adjusted CI of Sales Co. CI P20,000 Unrealized profit in ending inventory – Upstream (8,000) Consolidated CI Consolidated Inventory, Dec. 31, 2013 Inventory reported – Pato Inventory reported – Sales Unrealized profit in ending inventory (P8,000 + P12,000) Consolidated inventory

8,000 232,000 P 70,000 (12,000) P 58,000 12,000 P 70,000 P 48,000 42,000 (20,000) P 70,000

101

Problem 17-5 P Company and Subsidiary S Company Consolidation Working Paper Year Ended December 31, 2013 P Company

S Company

Eliminations Debit

Statement of CI Sales Dividend income Total revenue Cost of goods sold Operating expenses Total cost and expenses

12,000,000 210,000 12,210,000 7,000,000 4,210,000 11,210,000

1,300,000

CI to retained earnings

1,000,000

500,000

Statement of Retained Earnings Retained earnings, January 1 CI from above Total Dividends declared Retained earnings,12/31 to BS

5,500,000 1,000,000 6,500,000 6,500,000

2,200,000 500,000 2,700,000 210,000 2,490,000

Statement of FP Cash Accounts receivable Inventory Property, plant and equipment Investment in S Company

810,000 425,000 600,000 4,000,000 3,200,000

170,000 445,000 275,000 2,300,000

Total assets

9,035,000

3,1900,000

Accounts payable Common stock Additional paid in capital Retained earnings from above

35,000 1,000,000 1,500,000 6,500,000

100,000 400,000 200,000 2,490,000

(6) 25,000 (2) 400,000 (2) 200,000

9,035,000

3,190,000

3,905,000

1,300,000 750,000 50,000 800,000

Adjustments Credit

(5) 400,000 (1) 210,000 (7) (4)

30,000 40,000

(5) 400,000

Consolidated 12,900,000 12,900,000 7,380,000 4,300,000 11,680,000 1,220,000

(2)2,200,000 (1) 210,000

(3) 400,000

(6) 25,000 (7) 30,000 (4) 40,000 (2)2,800,000 (3) 400,000

5,500,000 1,220,000 6,720,000 6,720,000 980,000 845,000 845,000 6,660,000 9,330,000 110,000 1,000,000 1,500,000 6,720,000

3,905,000

9,330,000

Eliminations and Adjustments (1) Eliminate intercompany dividends (2) Eliminate subsidiary’s equity balances (3) Allocate excess to equipment (4) Amortize allocated excess to equipment (5) Eliminate intercompany sale of P400,000 (6) Eliminate intercompany trade balances of P25,000 (7) Eliminate intercompany profit (30%) applicable to P100,000 (P400,000 – P300,000) of intercompany goods in P Company.

102

Problem 17-5, Continued Determination and Allocation of Excess Schedule Price paid by the parent Less book value of interest acquired (100%) Common stock – S Company Additional paid in capital – S Company Retained earnings, Jan. 1 – S Company Excess allocated to equipment

P3,200,000 P 400,000 200,000 2.200,000

Amortization (P400,000/10)

2,800,000 P 400,000 P

40,000

Note: There is no NCI since this is a wholly-owned subsidiary.

Problem 17-6 Determination and Allocation of Excess Schedule: Price paid by the parent (80%) Non-controlling interest [(P425,000/80%) x 20%] Total Less book value of interest acquired: Common stock – So APIC – So Retained earnings Total equity Interest acquired Excess allocated to goodwill

P425,000 106,250 531,250 P200,000 100,000 100,000 P400,000 80%

320,000 P131,250

Fair Value Analysis:

Company fair value Fair value of net assets excluding goodwill Goodwill

Company Implied Fair Value

Parent Price (80%)

NCI Value (20%)

P531,250 400,000 P131,250

P425,000 320,000 P105,000

P106,250 80,000 P 26,250

103

Po Company and Subsidiary So Company Consolidation Working Paper Year Ended December 31, 2013 Po Company

So Company

Statement of CI Sales

880,000

Dividend income Total revenue Cost of goods sold

24,000 904,000 704,000

630,000 504,000

Other expenses Total cost and expenses CI NCI in CI of Subsidiary CI to retained earnings

130,000 834,000 70,000

81,000 585,000 45,000

70,000

45,000

Statement of Retained Earnings Retained earnings, January 1

1,105,000

140,000

CI from above Total Dividends declared Retained earnings,12/31 to BS

70,000 1,175,000 25,000 1,150,000

45,000 185,000 30,000 155,000

216,200 290,000 310,000

44,300 97,000 80,000

Pant assets (net) Investment in S Company

1,991,000 425,000

340,000

Goodwill Total assets

60,000 3,292,200

561,300

Accounts payable Common stock Additional paid in capital Retained earnings from above Non-controlling interest (NCI)

642,200 250,000 1,250,000 1,150,000

106,300 200,000 100,000 155,000

Statement of FP Cash Accounts receivable Inventory

630,000

Eliminations Debit

Adjustments Credit

(6) 32,000 (8) 30,000 (2) 24,000 (7) 1,320 (10) 750

1,448,000 1,448,000 (5) 1,350 (6) 32,000 (8) 700 (9) 30,000

(12) 8,990

(1) 8,000 (3)100,000 (5) 1,350 (8) 560 (2) 30,000

(11) 15,000 (7) 1,320 (10) 750 (3)320,000 (4)105,000 (4)131,250 (11) 15,000 (3)200,000 (3)100,000 (2) 6,000 (8) 140

3,292,200

561,300

659,360

Consolidated

1,146,020 211,000 1,357,020 90,980 (8,990) 81,990

1,135,090 81,990 1,217,080 25,000 1,192,080 260,500 372,000 387,930 2,331,000 191,250 3,542,680 733,500 250,000 1,250,000 1,192,080

(1) 8,000 (3) 80,000 (4) 26,250 (12) 8,990 659,360

117,100 3,542,680

104

Eliminations and Adjustments (1) Recognize NCI in subsidiary’s increase in undistributed earnings (P40,000 x 20%) (2) Eliminate intercompany dividends. (3) Eliminate subsidiary’s equity at date of acquisition (4) Allocate excess to goodwill. (5) Eliminate realized profit in beginning inventory (P9,000 x 15%) = P1,350 (Downstream) (6) Eliminate intercompany downstream sales from April 1, 2012 to March 31, 2013, P32,000. (7) Eliminated unrealized profit in ending inventory (downstream), P6,000 x 22% = P1,320. (8) Eliminate realized profit in beginning inventory (upstream) P3,500 x 20% = P700. (9) Eliminate intecompany upstream sales on March 31, 2013, P30,000. (10) Eliminate unrealized profit in ending inventory (upstream), P3,000 x 25% = P750. (11) Eliminate intercompany payables and receivables ,P10,000 + P5,000 = P15,000. (12) Recognized non-controlling interest (NCI) in CI of subsidiary computed as follows: CI of So Company Realized profit in beginning inventory (upstream) Unrealized profit in ending inventory (upstream) Adjusted CI NCI share NCI in CI of subsidiary

P45,000 700 (750) P44,950 20% P 8,990

(2) Po Company and Subsidiary So Company Consolidated Statement of Comprehensive Income Fiscal Year Ended March 31, 2013 Sales Cost of goods sold Gross profit Expenses Consolidated CI Attributable to NCI Attributable to controlling interest

P1,448,000 1,146,020 301,980 211,000 P 90,980 8,990 P 81,990

105

Problem 17-7 a.

b.

c.

Unrealized Profit in Beginning Inventory Beginning inventory - Downstream Gross profit rate (P240,000/ P400,000) Unrealized profit in beginning inventory

P 100,000 x 60% P 60,000

Unrealized Profit in Ending Inventory Ending inventory – Downstream (P200,000 x 80%) Gross profit rate Unrealized profit in ending inventory

P 160,000 x 60% P 96,000

Intercompany Sales Sales – P Company Sales – S Company Intercompany sales – 2013 Consolidated sales

P2,000,000 1,000,000 (400,000) P2,600,000

Intercompany Cost of Sales Cost of sales – P Company Cost of sales – S Company Intercompany purchases Intercompany profit in beginning inventory Intercompany profit in ending inventory Consolidated cost of sales

P 800,000 600,000 (400,000) ( 60,000) 96,000 P1,036,000

Parent’s interest (40,000 shares / 50,000 shares) P Company Entries – 2013: (1) Investment in S Company stock Income from subsidiary To record P’s share of S Co. income (P120,000 x 80%) (2)

Cash

80% 96,000 96,000

48,000

Investment in S Company stock To record dividends received from S (P60,000 x 80%) (2)

Income from subsidiary 36,000 Investment in S Company To adjust income from subsidiary for intercompany profit in : Ending inventory (96,000) Beginning inventory 60,000 Net adjustment ( 36,000)

48,000

36,000

106

Problem 17-7, continued:

d.

Working Paper Eliminating Entries:

(1)

Income from subsidiary NCI (P60,000 x 20%) Dividends declared – S Investment in S Company To eliminate intercompany dividends.

(2)

(3)

(4)

(5)

(6)

60,000 12,000 60,000 12,000

Common stock – S Co. Retained earnings – S Co. Investment in S Company stock NCI To eliminate equity accounts of S Company as of beginning of year. Goodwill Investment in S Company To allocate excess to goodwill.

500,000 860,000 1,088,000 272,000

60,000 60,000

Retained earnings – Jan. 1 60,000 Cost of sales To eliminate realized profit in beginning inventoryDownstream. Cost of sales 96,000 Inventories To eliminate unrealized profit in ending inventoryDownstream. Sales

(8)

e.

400,000

Accounts payable 50,000 Accounts receivable To eliminate intercompany payables and receivables. NCI in CI of subsidiary NCI To recognize NCI share in S Company CI (P120,000 x 20%)

96,000

400,000

Cost of sales To eliminate intercompany sales. (7)

60,000

50,000

24,000

Consolidated Comprehensive Income CI from own operations – P Company (P480,000 – P60,000) Realized profit in beginning inventory Unrealized profit in ending inventory Adjusted CI – P Compay S Company CI

24,000

P420,000 60,000 ( 96,000) P384,000 120,000

107

Consolidated CI

P504,000

108