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Chapter 15 - Consolidated Financial Statements (IFRS 10) -

Subsequent to Date of Purchase Type of Business
Combination
Bachelor of Science in Accountancy (University of Caloocan City)

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CHAPTER 15

MULTIPLE CHOICES - COMPUTATIONAL

15-1: c, [(P260,000/80%) x 20%]

15-2: d, consolidated CI will decrease by P6,000 due to amortization of the allocated excess
(P60,000 / 10 years).

15-3: a, because there is no NCI in a wholly owned subsidiary.

15-4: c

Investment cost (price paid) P500,000

Less: Book value of interest acquired 480,000
Excess P 60,000

Cost Method Equity Method

Investment cost P500,000 P500,000
Parent’s share of subsidiary’s CI - 120,000
Dividends received from subsidiary - ( 48,000)
Amortization of allocated excess (P60,000/20) - ( 3,000)
Investment account balance, Dec. 31, 2017 P500,000 P569,000

15-5: a

NCI, January 2, 2013 [(P270,000/75%) x 25%] P 90,000

NCI in S Company dividends [(P60,000/75%) x 25%] (16,000)
NCI in S Company CI (P160,000 x 25%) 40,000
NCI balance, December 31, 2017 P114,000

15-6: a

Puno’s CI P 145,000
Dividend income (P40,000 x 90%) ( 36,000)
Puno’s CI from own operations 109,000
Salas’ CI from own operations 120,000
Consolidated CI P 229,000

15-7: b

Peter’s CI from own operations P1,000,000

Seller’s CI from own operations 200,000
Consolidated CI 1,200,000
Attributable to NCI (P200,000 x 20%) 40,000
Attributable to parent P1,160,000

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15-8: a

Sy’s CI P300,000
Amortization of allocated excess ( 60,000)
Adjusted CI of Sy P240,000

NCI in CI of subsidiary (P240,000 x 10%) P 24,000

15-9: a. P1,600,000. Under the equity method consolidated retained earnings is equal to the
retained earnings of the parent company.

15-10: c

Retained earnings, Jan. 2, 2017 – Puzon P500,000

Consolidated CI attributable to parent:
CI – Puzon P200,000
CI – Suarez 40,000
Dividend income (P20,000 x 80%) (16,000)
NCI in Suarez CI (P40,000 x 20%) ( 8,000) 216,000

Dividends paid – Puzon ( 50,000)

Consolidated retained earnings, Dec. 31, 2017 P666,000

15-11: c

Price price P1,700,000

Less book value of interest acquired: 1,260,000
Excess P 440,000
Allocation due to undervaluation of net assets ( 40,000)
Goodwill P 400,000

15-12: d

NCI, January 2, 2013 [(P975,000/80%) x 20%] P243,750

NCI in subsidiary dividends (P125,000 x20%) (25,000)
NCI in adjusted CI of subisidiary (P190,000 – P10,000) x 20% 36,000
NCI, December 32, 2017 P182,750

15-13: b

Presto’s CI from own operations P140,000

Stork’s CI – March to December (P80,000 – P23,000) 57,000
NCI share in Stork’s CI (P57,000 x 10%) ( 5,700)
Consolidated CI attributable to parent P191,300

15-14: b

Investment in Siso Company (at date of acquisition) P600,000

Dividend income (P30,000 x 5%) P 1,500

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15-15: d

Consolidated CI:
Pepe’s CI from own operations P210,000
Sison’s adjusted CI:
CI -2017 P67,000
Amortization of allocated excess
to equipment (P20,000 / 5) 4,000 63,000
Consolidated CI P273,000

Consolidated retained earnings:

Pepe’s retained earnings, Jan.2, 2016 P701,000
Consolidated CI attributable to parent– 2016
Pepe’s CI from own operations P185,000
Sison’s adjusted CI;
CI – 2016 P40,000
Amortization -2016 4,000 36,000
NCI in Sison’s CI (P36,000 x 30%) (10,800) 210,200
Dividends paid ,2016 - Pepe ( 50,000)
Pepe’s retained earnings, Jan. 2, 2017 P861,200
Consolidated CI attributable to parent– 2017:
Consolidated CI (see above) P273,000
NCI in Sison’s CI (P63,000 x 30%) ( 18,900) 254,100

Dividends paid, 2017 – Pepe ( 60,000)

Consolidated retained earnings, Dec. 31, 2017 P1,055,300

15-16: a

Price paid P 700,000

NCI, June 30, 2013 [(P700,000/70%) x 30%} 300,000
Total 1,000,000
Less book value of Susy’s net assets (P650,000 + P250,000) 900,000
Excess, allocated to building P 100,000
Amortization (P100,000 / 10) x 2/12 5,000

Consolidated retained earnings

Retained earnings, Jan. 1, 2017 – 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, 2017 P821,500

Non-controlling interest
NCI, June 30, 2017 P300,000
NCI in Susy’s dividends, July 1 to December 31 -0-

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NCI in Susy’s CI (P100,000 – P5,000) x 30% 28,500

NCI, December 31, 2017 P328,500

15-17: a

Goodwill
Price paid P1,200,000
Less: Book value of interest acquired (P1,320,000 – P320,000) 1,000,000
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.

15-18: b

CI – Pablo P130,000
Dividend income (P40,000 x 70%) (28,000)
Sito’s CI 70,000
NCI in Sito’s CI (P70,000 x 30%) (21,000)
Consolidated CI attributable to parent P151,000

15-19: c

Consolidated net income – 2017

CI – Ponce P 90,000
Dividend income (P15,000 x 60%) (9,000)
Solis’ CI 40,000
NCIin Solis’ CI (P40,000 x 40%) (16,000)
Consolidated CI attributable to parent – 2017 P105,000

15-20, continued:
Consolidated retained earnings – 2017
Retained earnings, Jan. 2, 2016- Ponce P 400,000
Consolidated CI attributable to parent– 2016
CI – Ponce P70,000
Dividend income (P30,000 x 60%) (18,000)
Solis’ CI 35,000
NCI in Solis’s CI (P35,000 x 40%) ( 14,000) 75,000
Dividends paid, 2016– Ponce (25,000)
Consolidated retained earnings, Dec. 31, 2016 P450,000
Consolidated CI attributable to parent– 2017 105,000
Dividends paid. 2017 – Ponce (30,000)
Consolidated retained earnings, Dec. 31, 2017 P525,000

15-20. b

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Price paid, January 2, 2017 P216,000

NCI, January 2, 2017 {(P216,000/80%) x 20%] 54.000
Total 270,000
Less book value of Seed’s net assets (P80,000 + P140,000) 220,000
Excess 50,000
Allocated to:
Depreciable assets (40,000)
Goodwill 10,000

Consolidated CI, December 31, 2017:

Polo CI from own corporation P 95,000
Seed CI from own operation:
CI 35,000
Amortization (40,000 ÷ 10%) (4,000)
GW impairment lost (8,000) 23,000
Total P118.000

15-21: c

Retained earnings 1/1/017 – Polo P520,000

Consolidated CI attributed to parent:
Consolidated CI 118,000
NCI in Seed’s adjusted CI (23,000x 20%) (4,600) 113,400
Total 633,400
Dividends paid- Polo (46,000)
Consolidated retained earnings 12/31/017 P587,400

15-22: b, P4,600 (see 16-22)

15-23: c

NCI, January 2, 2017 P 54,000

NCI ins Seed’s dividends (P15,000 x 20%) (3,000)
NCI in Seed’s CI 4,600
NCI, December 31, 2017 P 55,600

15-24: c (see no. 15-21)

15-25: a

Price paid, January 1, 2016 P231,000

NCI, January 1, 2016 [(P231,000/70%) x 30%] 99,000
Total 330,000
Less book value of Sisa’s net assets 280,000
Excess 50,000
Allocated to depreciable assets (10 years remaining life) (50,000)

Retained earnings, 1/1/17-Sisa company P230,000

Retained earnings, 1/1/16-Sisa company (squeeze) 155,000
Increase 75,000

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Amortization- prior years (50,000 ÷ 10 years) (5,000)

Adjusted increase in earnings of Sisa (21,000/30% ) P70,000

15-26: a
Retained earnings 1/1/17- Pepe P520,000
Retained earnings 1/1/17- Sisa 230,000
Adjustment and elimination:
Date of acquisition (155,000)
Undistributed earnings to NCI (21,000)
Amortization- prior year (5,000) 49,000
Consolidated retained earnings 1/1/17 P569,000

15-27: a
Pepe company CI, 2017 P120,000
Sisa company CI, 2017 25,000
Dividend income (10,000 x 70%), 2017 (7,000)
Amortization- 2017 (5,000)
Consolidated CI P133,000

15-28: a
Consolidated retained earnings 1/1/17(see 15– 27) P569,000
Consolidated CI attributable to parent:
Consolidated CI (see 16-28) 133,000
NCI in Sisa CI (25,000 – 5,000) 30% (6,000) 127,000
Dividend paid- Pepe company ( 50,000)
Consolidated retained earnings 12/31/17 P646,000

15-29: a

Cash Proceeds P3,000,000

Fair value of retained NCI (40%) 1,750,000
Carrying amount of NCI before deconsolidation 500,000
Total 5,250,000
Less carrying value of Simon Company net assets 5,000,000
Gain on sale to profit or loss P 250,000

15-30: c

The gain is computed as follows:

Cash proceeds P280,000
Carrying value of interest sold (P2,400,000 x 10%) 240,000
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.

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PROBLEMS

Problem 15-1

1. Determination and Allocation of Excess Schedule:

Implied Parent Price NCI Value

Fair Value (80%) (20%)

Fair value of subsidiary P 312,500 P 250,000 P 62,500

Less book value of interest acquired
Capital stock P 100,000
Retained earnings 150,000
Total equity P 250,000 P 250,000 P 250,000
Interest acquired 80% 20%
Book value P200,000 P 50,000
Excess P 62,500 P 50,000 P 12,500
Allocation to:
Fixed assets 62,500

2. Working Paper Elimination Entries:

a. Eliminate dividends declared by the subsidiary against dividend income and NCI:

Dividend income 4,000

NCI 1,000
Dividends declared – Sulu 5,000

b. Eliminate equity accounts of the subsidiary against the investment account and
the NCI account.

Common stock – Sulu 100,000

Retained earnings – Sulu 150,000
Investment in Sulu Company 200,000
NCI 50,000

c Allocate excess to fixed assets:

Fixed assets 62,500

Investment in Sulu Company 50,000
NCI 12,500

d. Amortized fixed assets (P62,500 / 10)

Expenses 6,250
Fixed assets 6,250

e. Recognize NCI in subsidiary net income:

NCI in subsidiary CI 3,750
NCI 3,750

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Problem 15-1 concluded

3. Pedro Company
Consolidated Statement of CI
Year Ended December 31, 2017

Sales P250,000
Expenses 191,250
Consolidated CI P 58,750
Attributable to NCI 3,750
Attributable to controlling interest P 55,000

4. Pedro Company
Statement of Retained Earnings
Year Ended December 31, 2017

Retained earnings, January 1 – Pedro Company P200,000

Consolidated CI attributable to controlling interest 55,000
Retained earnings, December 31, 2017 P255,000

5. Pedro Company
Consolidated Statement of Financial Position
December 31, 2017

Assets
Current assets P190,000
Non-current assets
Fixed assets (P662,500 – P132,250) 530,250
Total assets P720,250

Liabilities and Stockholders’ Equity

Current liabilities P100,000
Stockholders’ Equity:
Controlling interest:
Common stock P300,000
Retained earnings 255,000
Total P555,000
Non-controlling interest (P62,500 – P1,000 + P3,750) 65,250 620,250
Total liabilities and equity P720,250

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Problem 15-2

1. Eliminations and adjustments:

a to c are the same as in Problem 15-1:

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
Fixed assets 12,500

e. Recognize NCI in subsidiary CI:

NCI in subsidiary CI 1,750

NCI 1,750

e. Assign to the NCI their share of the increase in the subsidiary’s

Adjusted undistributed earnings of prior year:

Retained earnings, January 1- Sulu 2,750

NCI 2,750
Retained earnings, January 1, 2017 P170,000
Retained earnings, January 2, 2016 150,000
Increase in undistributed earnings P 20,000
Amortization in prior years 6,250
Adjusted undistributed earnings P 13,750
NCI % 20%
NCI P 2,750

2. Pedro Company
Consolidated Statement of CI
Year Ended December 31, 2017

Sales P300,000
Expenses (P245,000 + P6,250) 251,250
Consolidated CI P 48,750
Attributable to NCI 1,750
Attributable to controlling interest P 47,000

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Problem 15-3

Amortization Schedule

Annual
Accounts Adjustments Life Amount 2010 2011 2012 2013
Inventory 1 P 6,250 P 6,250

Amortization:
Investments 3 5,000 5,000 5,000 5,000 5,000
Buildings 20 12,500 12,500 12,500 12,500 12,500
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
Total P 65,000 P 65,000 P 58,750 P 58,750 P58,750

Problem 15-4

Allocation Schedule
Price paid P206,000
Less: Book value of interest acquired 140,000
Excess P 66,000
Allocation:
Equipment P(40,000)
Buildings 10,000 (30,000)
Goodwill (not impaired) P 36,000

a. Investment in Stag Company – 12/31/17 (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) P 370,000
Allocation 40,000
Amortization (P5,000 x 3 years) (15,000)
Total P 395,000

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Problem 15-4 concluded

e. Consolidated Buildings
Total book value P 288,000
Allocation ( 10,000)
Amortization (P500 x 3 years) 1,500
Total P 279,500

f. Consolidated Goodwill (not impaired) P 36,000

g. Consolidated Common Stock (Pony) P 290,000

h. Consolidated Retained Earnings

Retained earning, Dec. 31, 2017 – Pony P 410,000
Add: Pony’s share of Stag’s adjusted increase in earnings
Net earnings – 2017 (P30,000 – P20,000) P10,000
Amortization ( 4,500) 5,500
Retained earnings, December 31, 2017 P 415,500

Problem 15-5

a. Working Paper Elimination Entries, Dec. 31, 2017

(1) Dividend income 10,000

Dividends declared – Short 10,000
To eliminate intercompany dividends.

(2) Common stock – Short 100,000

Retained earnings – Short 50,000
Investment in Short Company 150,000
To eliminate equity accounts of Short at
date of acquisition

(3) Depreciable asset 30,000

Investment in Short Company 30,000
To allocate excess

(4) Depreciation expense 5,000

Depreciable asset 5,000
To amortize allocatedexcess

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Problem 15-5 concluded

b. Pony Corporation and Subsidiary

Consolidation Working Paper
December 31, 2017

Pony Short Adjustments & Eliminations Consoli-

Corporation Company Debit Credit dated
Statement of CI
Sales 200,000 120,000 320,000
Dividend income 10,000 (1) 10,000 -
Total 210,000 120,000 320,000
Depreciation 25,000 15,000 (3) 5,000 45,000
Other expenses 105,000 75,000 180,000
Total 130,000 90,000 225,000
CI carried forward 80,000 30,000 95,000

Retained Earnings
Retained earnings, Jan. 1 230,000 50,000 (2) 50,000 230,000
CI from above 80,000 30,000 95,000
Total 310,000 80,000 325,000
Dividends declared 40,000 10,000 (1) 10,000 40,000
Retained earnings, Dec. 31
Carried forward 270,000 70,000 285,000

Statement of FP
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 (3) 30,000 (4) 5,000 575,000
Investment in Short company 180,000 (2)150,000 -
(3) 30,000
Total 620,000 330,000 795,000

Accounts payable 50,000 40,000 90,000

Notes payable 100,000 120,000 220,000
Common stock
Pony 200,000 200,000
Short 100,000 (2)100,000
Retained earnings, Dec. 31
From above 270,000 70,000 285,000
Total 620,000 330,000 195,000 195,000 795,000

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Problem 15-6

a. Working Paper Elimination Entries

(1) Dividend income 8,000
NCI 2,000
Dividends declared – Sisa 10,000

(2) Common stock – Sisa 100,000

Retained earnings – Sisa 50,000
Investment in Sisa stock 120,000
NCI 30,000

(3) NCI in CI of subsidiary 6,000

NCI 6,000

b. Popo Corporation and Subsidiary

Consolidated Working Paper
December 31, 2017
Popo Sisa Adjustments & Eliminations Consoli-
Corporation Company Debit Credit dated
Statement of CI
Sales 200,000 120,000 320,000
Dividend income 8,000 (1) 8,000 -
Total revenue 208,000 120,000 320,000
Depreciation expense 25,000 15,000 40,000
Other expenses 105,000 75,000 180,000
Total expenses 130,000 90,000 220,000
CI 78,000 30,000 100,000
NCI in CI of Sub. (3) 6,000 ( 6,000)
CI carried forward 78,000 30,000 94,000

Retained Earnings
Retained earnings, 1/1 230,000 50,000 (2) 50,000 230,000
CI from above 78,000 30,000 94,000
Total 308,000 80,000 324,000
Dividends declared 40,000 10,000 (1) 10,000 40,000
Retained earnings, 12/31
Carried forward 268,000 70,000 284,000

Statement of FP
Current assets 173,000 105,000 278,000
Depreciable assets 500,000 300,000 800,000
Investment in Sisa Company 120,000 (2)120,000 -
Total 793,000 405,000 1,078,000

Accumulated depreciation 175,000 75,000 250,000

Current liabilities 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 70,000 284,000
NCI (1) 2,000 (2) 30,000 34,000
(3) 6,000

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Total 793,000 405,000 166,000 166,000 1,078,000

Problem 15-6 - Concluded

c. Consolidated Financial Statements

Popo Corporation and Subsidiary

Consolidated Statement of Financial Position
December 31, 2017

Assets
Current assets P278,000
Depreciable assets P800,000
Less: Accumulated depreciation 250,000 550,000
Total assets P828,000

Liabilities and Stockholders’ Equity

Current liabilities P 90,000
Long-term debt 220,000
Total liabilities P310,000
Stockholders’ Equity
Common stock P200,000
Retained earnings, 12/31 284,000
Minority interest in net assets of subsidiary 34,000 518,000
Total liabilities and stockholders’ equity P828,000

Popo Corporation and Subsidiary

Consolidated Statement of CI
Year Ended December 31, 2017

Sales P320,000
Expenses:
Depreciation expense P 40,000
Other expenses 180,000 220,000
Consolidated CI P100,000
NCI in CI of subsidiary 6,000
Attributable to parent P 94,000

Popo Corporation and Subsidiary

Consolidated Retained Earnings
Year Ended December 31, 2017

Retained earnings, Jan. 1 – Popo P230,000

Consolidated CI attributable to parent 94,000
Total P324,000
Dividends paid – Popo 40,000
Consolidated retained earnings, Dec. 31 P284,000

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Problem 15-7

a. Palo Corporation and Subsidiary

Consolidation Working Paper
December 31, 2017

Palo Sebo Adjustments & Eliminations Consoli-

Corporation Company Debit Credit dated
Statement of CI
Sales 300,000 150,000 450,000
Investment Income 19,000 (1) 19,000 -
Total revenues 319,000 150,000 450,000
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
Total cost and expenses 258,000 130,000 388,000
CI carried forward 61,000 20,000 62,000

Retained Earnings
Retained earnings, Jan. 1 230,000 50,000 (2) 50,000 230,000
CI from above 61,000 20,000 62,000
Total 291,000 70,000 292,000
Dividends declared 20,000 10,000 (1) 10,000 20,000
Retained earnings, Dec. 31
carried forward 271,000 60,000 272,000

Statement of FP
Cash 37,000 20,000 57,000
Accounts receivable 50,000 30,000 80,000
Inventory 70,000 60,000 130,000
Buildings and equipment 300,000 240,000 540,000
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)150,000 200,000
Retained earnings, Dec. 31
from above 271,000 60,000 272,000
Total 686,000 350,000 239,000 239,000 827,000

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Problem 15-7 - Concluded

b. Consolidated Financial Statements

Palo Corporation and Subsidiary

Consolidated Statement of CI
Year Ended December 31, 2017

Sales P450,000
Cost of goods sold 295,000
Gross profit 155,000
Expenses:
Depreciation expenses P45,000
Other expenses 48,000 93,000
Consolidated CI P 62,000

Palo Corporation and Subsidiary

Consolidated Retained Earnings
Year Ended December 31, 2017

Retained earnings, January 1 – Palo P230,000

Consolidated CI 62,000
Total 292,000
Dividends paid – Palo 20,000
Retained earnings, December 31 P272,000

Palo Corporation and Subsidiary

Consolidated Statement of Financial Position
December 31, 2017

Assets
Cash P 57,000
Accounts receivable 80,000
Inventory 130,000
Buildings and equipment P540,000
Less: Accumulated depreciation 170,000 370,000
Goodwill 20,000
Total P657,000

Liabilities and Stockholders’ Equity

Accounts payable P 60,000
Taxes payable 125,000
Common stock 200,000
Retained earnings, Dec. 31 272,000
Total P657,000

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Problem 15-8

a. Investment in Sally Products Co. 160,000

Cash 160,000
To record acquisition of 80% stock of Sally.

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

b. Working Paper Eliminating Entries – Dec. 31, 2017

(1) Dividend income 8,000

NCI 2,000
Dividends declared – Sally 10,000

(2) Common stock – Sally 100,000

Retained earnings, 1/1/08 –Sally 50,000
Investment in Sally Products 120,000
NCI 30,000

(3) Building and equipment 50,000

Investment in Sally Products 40,000
NCI 10,000

(4) Retained earnings, 1/1 – Sally (prior year) 5,000

Depreciation expense (current year) 5,000
Accumulated depreciation – Bldg 10,000

(5) Accounts payables 10,000

Cash and receivables 10,000

(6) NCI in CI of subsidiary 5,000

NCI 5,000
(P30,000 – P5,000) x 20%

(7) Retained earnings, 1/1 – Sally 7,000

NCI 7,000
To recognize NCI in subsidiary’s prior year earnings
[(P50,000 – P90,000) – P5,000] x 20%

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Problem 15-8, Concluded

c. Pilar Corporation and Subsidiary
Consolidation Working Paper
December 31, 2017

Pilar Sally Wood Adjustments & Eliminations Consoli-

Corporation Products Debit Credit dated
Statement of CI
Sales 200,000 100,000 300,000
Dividend income 8,000 (1) 8,000 -
Total revenue 208,000 100,000 300,000

Cost of goods sold 120,000 50,000 170,000

Depreciation expense 25,000 15,000 (4) 5,000 45,000
Inventory losses 15,000 5,000 20,000
Total cost and expenses 160,000 70,000 235,000
Net /consolidated CI 48,000 30,000 65,000

NCI in CI of
subsidiary (6) 5,000 (5,000)

CI carried forward 48,000 30,000 60,000

Retained earnings statement

Retained earnings, 1/1 298,000 90,000 (2) 50,000 326,000
(4) 5,000
(7) 7,000
CI from above 48,000 30,000 60,000
Total 346,000 120,000 386,000
Dividends declared 30,000 10,000 (1) 10,000 30,000
Retained earnings, 12/31
carried forward 316,000 110,000 356,000

Statement of FP
Cash and receivables 81,000 65,000 (5) 10,000 136,000
Inventory 260,000 90,000 350,000
Land 80,000 80,000 160,000
Buildings and equipment 500,000 150,000 (3) 50,000 700,000
Investment in Sally 160,000 (2)120,000 -
(3) 40,000
Total 1,081,000 385,000 1,346,000

Accumulated depreciation 205,000 105,000 (4) 10,000 300,000

Accounts payable 60,000 20,000 (5) 10,000 70,000
Notes payable 200,000 50,000 250,000
Common stock 300,000 100,000 (2)100,000 300,000
Retained earnings from above 316,000 110,000 356,000
NCI (1) 2,000 (2) 30,000 50,000
(3) 10,000
(6) 5,000
(7) 7,000

Total 1,081,000 385,000 242,000 242,000 1,346,000

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Problem 15-9

Determination and Allocation of Excess Schedule (not required)

Price paid P220,000

Less book value of interest acquired:
Common stock – Star Company P150,000
Retained earnings, 1/1 – Star Company 50,000 200,000
Goodwill P 20,000

a. Eliminating entries:

E(1) Dividend Income 20,000

Dividends Declared
20,000
Eliminate dividend income from subsidiary.

E(2) Common Stock – Star Company 150,000

Retained Earnings, January 1 50,000
Investment in Star Company Stock
200,000
Eliminate subsidiary equity accounts.

E(3) Goodwill 8,000

Retained Earnings, January 1 12,000
Investment in Star Company
20,000
Assign excess at beginning of year

Porno Corporation and Star Company

Consolidated Working Paper
December 31, 2017

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. 1 262,000 60,000 (2) 50,000
(3) 12,000 260,000
CI, from above 54,000 35,000 20,000 69,000
316,000 95,000 329,000
Dividends declared (20,000) (20,000) ___ - (1) 20,000 (20,000)

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Retained earnings, Dec. 31,

carry forward 296,000 75,000 82,000 20,000 309,000

Problem 15-9, Concluded

Statement of FP
Cash 46,000 30,000 76,000
Accounts receivable 55,000 40,000 95,000
Inventory 75,000 65,000 140,000
Buildings and equipment 300,000 240,000 540,000
Investment in Star Company 220,000 (2)200,000
(3) 20,000
Goodwill - - (3) 8,000 8,000
Debits 696,000 375,000 859,000

Accumulated depreciation 130,000 85,000 215,000

Accounts payable` 20,000 30,000 50,000
Taxes payable 50,000 35,000 85,000
Common stock
Light Corporation 200,000 200,000
Star Company 150,000 (2)150,000
Retained earnings, from above 296,000 75,000 82,000 20,000 309,000
Credits 696,000 375,000 240,000 240,000 859,000

Problem 15-10

(1) Determination and Distribution of Excess Schedule:

Company Parent NCI

Implied Price Value
Fair Value (90%) (10%)
Fair value of subsidiary P465,000 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
Excess of fair value over book value P115,000 P103,500 P11,500

Adjustments: Amortization Life

Equipment P115,000 P5,750/yr 20 yrs.

(2) Entries:

Investment in Venus Company 195,300

Retained earnings* 137,475
Investment income** 57,825
To adjust the investment to its carrying amount (equity method)

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

Equipment depreciation (3 x 90% x P5,750) = P137,475.

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** Investment income = 90% x (P70,000 - P5,750 equipment depreciation) = P57,825.

Problem 15-10 continued:

Cash 700,000
Investment in Venus Company (8/9 x P418,500 cost
+ P195,300 adjustment) 545,600
Gain on sale of investment 154,400
To record the sale of the 8,000 shares of Venus stock.

Problem 15-11

Entries on Pluto’s books, January 1, 2017:

Investment in Saturn Company 2,960*

Retained earnings – Pluto 2,960
To adjust investment carrying amount of shares sold (equity
method). Remaining shares remain at cost, because they will be
consolidated.

Cash 40,000
Investment in Saturn Company 10,960
Additional paid-in capital – Pluto 29,040
To record sale of shares. Investment eliminated =
[(2,000 ÷ 40,000) x P160,000 original cost] plus P2,960
equity adjustment.

Determination and Allocation of Excess Schedule:

Company Parent NCI

Implied Price Value
Fair Value (80%) (20%)
Fair value of subsidiary P200,000 P160,000 P40,000
Less book value of interest acquired:
Total equity 150,000 120,000 30,000
Excess of fair value over book value P50,000 P40,000 P10,000

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

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