CHAPTER 15

1&2. Book of Paradise

Year 1 Equity Method Cost Method
Investment in Seashore 26,000,000 Investment in Seashore 26,000,000
Cash 26,000,000 Cash 26,000,000

Investment in Seashore 800,000 No entry.

Income over Subsidiary 800,000

Cash 480,000 Cash 480,000

Investment in Seashore 480,000 Dividend Income 480,000

Investment Balance 26,320,000 Investment Balance 26,000,000

Year 2
Investment in Seashore 400,000 No entry
Income over Subsidiary 400,000

Cash 480,000 Cash 480,000

Investment in Seashore 480,000 Dividend Income 480,000

Investment Balance 26,240,000 Investment Balance 26,000,000

Working paper adjustment and Elimination entries:

Year 1
Income over Subsidiary 800,000 Dividend Income 480,000
Dividend, Seashore 480,000 Dividend, Seashore 480,000
Investment in Seashore 320,000

Share Capital , Seashore 16,000,000 Same Entry

Retained Earnings, Seashore 8,000,000
Goodwill 2,500,000
Investment in Seashore 26,000,000
Share of NCI in Goodwill 500,000

Share Capital, Seashore 4,000,000 Same Entry

Retained Earnings, Seashore 2,000,000
Share of NCI in Goodwill 500,000
Non Controlling Interest 6,500,000

Year 2
Income over Subsidiary 400,000 Dividend Income 480,000
Investment in Seashore 80,000 Dividends, Seashore 480,000
Dividends, Seashore 480,000

Investment in Seashore 320,000

Retained Earnings 320,000
(700000-480000)

Share Capital, Seashore 16,000,000 Same entry

Retained Earnings, Seashore 8,320,000
(10400000x80%)
Goodwill 2,500,000
Investment in Seashore 26,320,000
Share of NCI in Goodwill 500,000

Share Capital, Seashore 4,000,000 Same Entry

Retained Earnings, Seashore 2,080,000
Share of NCI in Goodwill 500,000 6,580,000

33
3. Davao Co., & Subsidiary Cebu Co.
Working Paper for Consolidation
For the year ended Dec. 31, 2010
NCI
Davao Cebu Adjust / Elim. Consolidated
Income Statement
Sales 1,050,000 400,000 1,450,000
Inventory, Jan. 1 150,000 80,000
Purchases 900,000 200,000
Inventory, Dec. 31 ( 200,000) ( 100,000)
Cost of Sales 850,000 180,000 1,030,000
Gross profit 200,000 220,000 420,000
Expenses 100,000 80,000 180,000
Net Income from Operation 100,000 140,000 240,000
Dividend Income 30,000 _______ 1)30,000 ______
Net Income 130,000 140,000
Consolidated Net Income 240,000
Share of NCI _______ _______ 56,000 ( 56,000)
NI to Retained Earnings 130,000 140,000 56,000 184,000

Statement of Retained Earnings

Balance, Jan. 1: Davao 400,000 400,000
Cebu 100,000 2)60,000 40,000
Net Income forwarded 130,000 140,000 56,000 184,000
Total 530,000 240,000 96,000 584,000
Dividends, D Co. 100,000 100,000
C Co. ______ 50,000 1)30,000 ( 20,000) ______
Balance, Dec. 31 to BS 430,000 190,000 76,000 484,000

Statement of Financial Position

Cash 70,000 50,000 120,000
Accounts Receivable 140,000 160,000 300,000
Dividend Receivable 30,000 4)30,000
Advances to Cebu 40,000 3)40,000
Inventory 200,000 100,000 300,000
Other Assets 570,000 480,000 1,050,000
Investment in Cebu 480,000 2)480,000
Goodwill _______ _______ 2)200,000 _______ 200,000
Total 1530,000 790,000 1,970,000

Accounts Payable 50,000 10,000 60,000

Dividends Payable 50,000 4)30,000 20,000
Other Liabilities 50,000 50,000
Advances from Davao 40,000 3)40,000
Share Capital, Davao 1.000,000 1,000,000
Retained Earnings, Davao 430,000 484,000
Capital Stock, Cebu 500,000 2) 300,000 200,000
Retained Earnings Cebu ______ 190,000 76,000
Share of NCI in Goodwill 2) 80,000 80,000
Total 153,000 790,000 356,000 356,000
1,970,000

4. a) Investment in Cebu Equity in Subsidiary Earnings

Acqn Cost 480,000 Dividends Share in NI
Equity in Sub. (500,00 x 60%) 30,000 (140000 x 60%) 84,000
Earnings 84,000
534,000 84,000

34
 Davao Co., & Subsidiary Cebu Co.
Working Paper for Consolidation
For the year ended Dec 31, 2010

Davao Cebu Adjust / Elim. NCI Consolidated

Income Statement
Sales 1050,000 400,000 1,450,000
Cost of Sales 850,000 180,000 1,030,000
Gross Profit 200,000 220,000 420,000
Expenses 100,000 80,000 180,000
Net Operating Profit 100,000 140,000 240,000
Equity in Subsidiary Earnings 84,000 _______ 1)84,000
Total 184,000 140,000
Share of Minority _______ _______ 56,000 56,000
Net Income Forwarded 184,000 140,000 56.000 184,000

Statement of Retained Earnings

Balance, Jan. 1: D Co. 400,000 400,000
C Co. 100,000 2)60,000 40,000
Net Income forwarded 184,000 140,000 56,000 184,000
Total 584,000 240,000 96,000 584,000
Dividends, Davao Co. 100,000 100,000
Cebu Co. ______ 50,000 1)30,000 20,000 ______
Dec. 31, balance Forwarded 484,000 190,000 76,000 484,000
Financial Position
Cash 70,000 50,000 120,000
Accounts Receivable 140,000 160,000 300,000
Dividend Receivable 30,000 4)30,000
Advances to Cebu 40,000 3)40,000
Inventory 200,000 100,000 300,000
Investment in Cebu 534,000 1)54,000
2)480,000
Other Assets 570,000 480,000 1050,000
Goodwill 2)200,000 200,000
Total 1,594,000 790,000 1,970,000

Accounts Payable 50,000 10,000 60,000

Dividends Payable 50,000 5)30,000 20,000
Other Liabilities 50,000 50,000
Advances from Davao 40,000 4)40,000
Capital Stock, Davao 1000,000 1,000,000
Retained Earnings, Davao 484,000 484,000
Capital Stock, Cebu 500,000 2)300,000 200,000
Retained Earnings Cebu 190,000 76,000
Share of NCI in Goodwill ________ _______ 2) 80,000 80,000
Total 1,594,000 790,000 356,000 356,000
1,970,000
5 & 6. a) Entries in Paco books for 2010 & 2011:

2005 Cash 10,500

Dividend Income (15,000 x 70%) 10,500

Equity over Subsidiary Income 10,500

Investment in Stocks 10,500

2006 Cash 28,000

Dividend Income 28,000
(40,000 x 70%)
Adjustments
b) At 70% At 30% 12/31/10 12/31/11
Implied Value and Consideration 1,642,857 1,150,000 492,857
Subsidiary Interest: CS (600,000) 420,000 (180,000)
RE (400,000) 280,000 (120,000)
Excess of Cost 642,857 450,000 192,857
Revaluation:
Plant & Equipment (500,000) 350,000 (150,000) 100,000 100,000
Inventories (50,000) 35,000 (15,000) 50,000
50,000 x 70%
Goodwill 92,857 65,000 27,857 _______ ________
P150,000 P 100,000

35
 2010 2011
c) Books of Parent: Investment in Sweet 1,150,000
Cash 1,150,000

Cash 105,000 280,000

Dividend Income 105,000 280,000
Working Paper: Dividend Income 105,000 280,000
Dividends, S Co 105,000 280,000

Investment in S Co 35,000
Retained Earnings 35,000

Share Capital, S co 420,000 420,000

Retained Earnings, S Co 280,000 420,000
Plant & Equipment 500,000 400,000
Inventories 50,000
Goodwill 92,857 92,857
Investment in S Co 1,150,000 1,185,000
Share of NCI in AR andGW 192,857 147,857

Share Capital, S co 180,000 180,000

Retained Earnings, S Co 120,000 180,000
Share of NCI in AR and GW 192,857 147,857
NCI 492,857 507,857

Expenses 100,000 100,000

Cost of Sales 50,000
Plant and Equipment 100,000 100,000
Inventories 50,000

2010 2011
NI of Sweet 350,000 600,000
Less Adjustments 150,000 100,000
200,000 500,000
NI of Paco 500,000 800,000
Consolidated NI 700,000 1,300,000
Share of NCI 60,000 150,000
Share of Parent P640,000 P1,150,000

NCI, Jan 1 P492,857 P 507,857

Share in Consolidated NI 60,000 150,000
Share in Dividends (45,000) (120,000)
NCI, Dec 31 P507,857 P537,857

Retained Earnings, 1/1 P1,000,000 P1,440,000

Net Income 640,000 1,150,000
Dividends (200,000) ( 500,000)
Retained Earnings, 12/31 P1,440,000 P2,090,000

7. Equity Method: 2010 2011

a) Update Investment:
Investment in Sweet Co 245,000 420,000
Income from Subsidiary 245,000 420,000

Cash 105,000 280,000

Investment 105,000 280,000

Income from Subsidiary 105,000 70,000

Investment in Sweet Co 105,000 70,000

b) Working Paper entries the same except no. 1

Income from Sweet 95,000 320,000
Investment in Sweet 10,000
Dividends 105,000 280,000
Investment in Sweet 40,000

c) Net Income from Operation 500,000 800,000

Income from Subsidiary 140,000 350,000
Net Income of Parent P640,000 P1,150,000

NCI & Consolidated Retained Earnings same as in ex. 5 and ex. 6

8. Adjust. & Elimination

Income Statement Paul Co. Sister Co Debit Credit NCI Consolidated
Sales 1,000,000 500,000 1,500,000
Cost of Sales ( 400,000) (150,000) c) 30,000 ( 580,000)
Gross Profit 600,000 350,000 920,000
Expenses (360,000) (200,000) c) 10,000 (570,000)
36
 Net Operating Income 240,000 150,000 350,000
Equity in Sub. Income 88,000 a) 88,800 ________
Net Income 328,000 350,000
Share, Minority Int. _______ _______ 22,000 ( 22,000)
NI carried forward 328,000 150,000 22,000 328,000

Retained Earnings
Bal., beg. Paul 600,000 600,000
Sister 400,000 b) 320,000 80,000
NI carried forward 328,000 150,000 22,000 328,000
Dividends (100,000) ( 50,000) a) 40,000 ( 10,000) (100,000)
Balance, end 828,000 500,000 92,000 828,000

Financial Position
Cash 200,000 50,000 250,000
Accounts Receivable 150,000 50,000 200,000
Inventory 100,000 60,000 b) 30,000 c) 30,000 160,000
Land 150,000 150,000
Building 360,000 b) 50,000 410,000
Equipment 700,000 490,000 b) 25,000 1,215,000
Patent 40,000 b) 50,000 c) 5,000 85,000
Investment 804,000 a) 48,800
b)756,000
Goodwill ????? ________ ________ c) 90,000 90,000
1,954,800 1,200,000 2,560,000

Liabilities 124,000 250,000 374,000

Accum. Depn. Bldg. 90,000 c) 2,500 92,500
Accum. Depn. Equip. 402,000 60,000 c) 2,500 464,500
Common Stock-Paul 200,000 200,000
Sister 300,000 c) 240,000 60,000
APIC 400,000 400,000
RE, carried forward 828,000 500,000 92,000 828,000
Share of MI in Asset Rev b) 49,000 49,000
Minority Interest ________ ________ ________ ________ 201,000 201,000
1,954,000 1,200,000 876,000 876,000 2,560,000

80%
a. Investment Cost 756,000
Equity (700,000 x 80%) 560,000
196,000
Asset Revaluation:
Inventory (70-40 = 30) 80% 24,000
Building (250-200 = 50) 80% 40,000
Equipment (475-450 = 25) 80% 20,000
Patent (90-40 = 50/155) 80% 40,000 124,000
Goodwill 72,000
Total Goodwill (72,000/80%) 90,000

Adjustments: 2010 2011

Inventory 30,000
Building (50,000 / 20) 50/20 2,500 2,500
Equipment (25,000 / 10) 25/10 2,500 2,500
Patent (40,000 / 10) 50/10 5,000 5,000
Total 40,000 10,000

Investment, Jan. 1 756,000 804,000

Equity (150,000-40,000) 80% 88,000 150,400 (198000-10000)80%
Dividends ( 40,000) ( 48,000)
Investment, Dec. 31 804,000 906,400

9. Paul Co. and Subsidiary Sister Co.

Working Paper for Consolidated Financial Statement
Dec. 31, 2011
Adjust. & Elimination Consolidated
Income Statement Paul Co. Sister Co. Debit Credit NCI Bal. Sheet
Sales 1,200,000 700,000 1,900,000
Cost of Sales 500,000 250,000 750,000
Gross Profit 700,000 450,000 1,150,000
Operating Expenses 400,000 252,000 c) 10,000 662,000
Net Operating Income 300,000 198,000 488,000
Equity in Sister Income 150,400 _______ a) 150,400 37,600 ( 37,600)
450,400 198,000 37,600 450,400
Ret. Earnings Statement
1/1 Balance 828,000 500,000 b) 400,000 100,000 528,800
NI brought forward 450,400 198,000 37,600 450,400
37
 978,400 698,000 137,600 978,400
Dividends ( 150,000) ( 60,000) a) 48,000 ( 12,000) ( 150,000)
12/31 Balance 1,128,400 638,000 125,600 828,400

Balance Sheet
Cash 233,000 48,000 281,000
Accounts Receivable 240,000 25,000 265,000
Inventories 150,000 80,000 230,000
Land 150,000 150,000
Building 260,000 b) 50,000 310,000
Equipment 800,000 633,000 b) 25,000 1,458,000
Patent 40,000 b) 45,000 c) 5,000 80,000
Investment In Sister 906,400 a) 102,400
b) 804,000
Goodwill ________ ________ b) 90,000 90,000
2,329,400 1,241,000 2,869,000

Liabilities 150,000 140,000 290,000

Acc. Depn. Bldg. 73,000 b) 2,500

c) 2,500 78,000

Acc. Depn. Equipt. 451,000 90,000 b) 2,500

c) 2,500 546,000
Common Stock 200,000 300,000 b) 240,000 60,000 200,000
APIC 400,000 400,000
Retained Earnings 1,128,400 638,000 125,600 1,128,400
Share of NCI in A/R & GW b) 41,000 41,000
Total NCI ________ ________ _______ 226,600 226,600
2,329,400 1,241,000 106,000 2,869,000

Income Statement Adjust. & Elimination

Consolidated
10. Income
Peter Co. Simon Co. Debit Credit NCI Statement
Sales 200,000 180,000 380,000
Cost of Sales 100,000 60,000 160,000
100,000 120,000 220,000
Expenses 50,000 80,000 130,000
Operating Income 50,000 40,000 90,000
Income from Investment 27,000 27,000
Dividend Income 18,000 18,000
NCI _______ _______ 4,000 (4,000)
Net Income 68,000 40,000 4,000 * 113,000

Investment Cost P180,000 Retained Earnings, 1/1 P 45,000

Subsidiary Interest (90% x 230,000) 207,000 Net Income 113,000
Income from Busi Combination P 27,000 Dividends 40,000
Consolidated Retained Earnings, 12/31 P118,000
* Operating Income P50,000
Equity over Subsidiary Income: SHE, Simon Jan 1 P230,000
Share In Net Income (90% x 40,000) 36,000 Net Income 40,000
Income from Bus.Combination 27,000 Dividends 20,000
Net Income of P Co. equity method) P113,000 SHE, Simon Dec 31 P250,000
Minority Interest P 25,000
11. b) 2011
Dividend Income 36,000
Dividend, Simon 36,000

Investment in Simon 45,000

Retained Earnings 45,000

Share Capital, Simon 135,000

Retained Earnings, Simon 90,000
Investment in Simon 225,000

Share Capital, Simon 15,000

Retained Earnings, Simon 10,000
NCI 25,000

c) NI (80,000+60,000) P 140,000
Dividend Income (36,000)
CNI P 104,000
d) Share of NCI (60,000 x 10%) 6,000
Share of Parent P 98,000
Retained Earnings Beg. 118,000
38
 Dividends (50,000)
e) Consolidated Retained Earnings P 166,000

12.
Table to Allocate Stockholders Equity
Preferred Common
P 500,000 P 2,500,000
APIC 500,000
Retained Earnings 300,000
P 500,000 P 3,300,000

Table for Determination and Allocation of Excess 60% 40% 100%

Acquisition Cost (30,000 x 75) 2,250,000 1,500,000
Subsidiary Interest (3,250,000 x 60%) 1,950,000 (1,300,000)
Goodwill P 300,000 P 200,000 P500,000

Table for Allocation of Net Income Total Pref Common

Net Income 240,000 40,000 P200,000
Share of Parent 144,000 24,000 120,000
Share of NCI P 96,000 P 16,000 P80,000

Table for Distribution of Dividends Total Pref Common

Total 100,000 40,000 P60,000
Share of parent 60,000 24,000 36,000
Share of NCI P 40,000 P 16,000 P24,000

Investment in Common Stock

Acquisition Cost P2,250,000
Share in net income (240,000-40,000 for
Preferred= 200,000 x 60%) 120,000
Dividends (36,000)
P2,334,000
NCI
Preferred Stock (500,000 x 40%) P 200,000
Common Stock 1,500,000
Share in Net Income 96,000
Share in Dividends (40,000)
P1,756,000
Working paper entries:
Income from Subsidiary 144,000
Dividend, National 60,000
Investment in Stocks 84,000

Ordinary Share Capital, Natl 2,500,000

APIC, Natl 500,000
Retained Earnings, Natl 300,000
Goodwill 500,000
Investment in Ordinary Shares 2,250,000
NCI 1,500,000

Pref Share Capital, Natl 500,000

Retained Earnings, Alto 150,000
Investment in Pref Shares, Natl 450,000
NCI 200,000

13.Update
Investment in Preferred 24,000
Investment in Ordinary Capital 96,000
Income from Subsidiary 100,000

Cash 48,000
Investment in Preferred 24,000
Investment in Ordinary Capital 24,000

Tables:
Total PS OC
Net Income 200,000 40,000 160,000
Parent 120,000 24,000 96,000
NCI 80,000 16,000 64,000

Dividends 80,000 40,000 40,000

Parents 48,000 24,000 24,000
NCI 32,000 16,000 16,000

WPE
Income from Subsidiary Ordinary 96,000
Income from Subsidiary Preferred 24,000
Dividends 48,0000
Investment in Ordinary 72,000
39
 Ordinary Capital 2,500,000
APIC 500,000
RE 4,400,000
GW 450,000
Investment in Ordinary 2,334,000
NCI (1,500,000+80,000-24,000) 1,556,000

Pref.Capital 500,000
RE of Allan 150,000
Investment in PS 450,000
NCI 200,000

NCI
1/1 (200,000 + 1,556,000) P1,756,000
Share in NI 80,000
Share in Dividends (32,000)
12/31 P1,804,000

14. Table to Allocate Stockholders Equity

Preferred Common
P2,000,000 P3,000,000
APIC 300,000
Retained Earnings 120,000 130,000
P2,120,000 P3,430,000

Table for Determination and Allocation of Excess

Acquisition Cost 2,880,000
Subsidiary Interest (3,310,000 x 80%) 2,648,000
Goodwill 232,000/80%
Total Goodwill P 290,000

Investment in Common Stock

Acquisition Cost P2,880,000
Share in net income (600,000-120,000 for
Preferred= 480,000 x 80%) 384,000
P3,264000

NCI
Preferred Stock (2,120,000 x 50%) P1,060,000
Common Stock (3,430,000 x 20%)
see first table 686,000
Net Income-Pref (120,000 x 50%) 60,000
Com (480,000 x 20%) 96,000
Dividends (120,000+48,000) 168,000
P1,734,000

Table for NI
Total Pref S Ord S
600,000 120,000 480,000
Parent 444,000 60,000 384,000
NCI 156,000 60,000 96,000

Table for Dividends

Total PS OS
480,000 240,000 240,000
Parent 312,000 120,000 192,000
NCI 168,000 120,000 48,000

WPE
Cost Method Equity Method
Income from Subsidiary 312,000 444,000
Investment in Pref S 60,000
Dividends 312,000 312,000
Investment in Ord. S 192,000

Ordinary Shares 3,000,000 Same entry

APIC 300,000
RE 130,000
GW 290,000
Investment in Ord S 2,880,000
NCI 720,000

40
 Preferred Shares 2,000,000
Retained Earning, S Co. 120,000 Same entry
Retained Earning, P Co. 680,000
Investment in PS 1,740,000
NCI 1,060,000

NCI (720+1060) 1,780,000

Share in NI 156,000
Share in Dividends (168,000)
NCI 12/31 1,768,000

15. a) Investment Balance Equity Method

Investment
Acquisition 580,000
Net Income 100,000 x .7 x 1/2 35,000 Dividend. 35,000
580,000

Acquisition Cost 580,000

Subsidiary Interest (600,000 x .7) (420,000)
Preacquisition Earnings ( 35,000)
Goodwill 125,000/70%
Total Goodwill P 178,571

b) P800,000 P35,000 = P765,000 Net Income of Prolife from own operation

c) Entries Adjustments:
1. Equity over Subsidiary 35,000
Dividends, Share 35,000

2. Capital Stock Share Co. 350,000

Retained Earnings Share Co. 70,000
Pre-acquisition Earnings 35,000
Goodwill 178,571
Investment in Share Co. 580,000
Share of NCI in GW 53,571

d. SHE 12/31/ (650,000 x 30%) P195,000

P Co. Books Equity Method

16. Investment in Stocks, S Co. 112,000
Equity on Subsidiary Income 112,000

Cash 49,000
Investment In Stocks, S Co. 49,000
(70,000 x 70%)
1. Investment Balance will become (580,000 + 112,000 49,000) P643,000
2. (750,000 112,000) P638,000
3. Adjustment and Elimination Entries:
Equity on Subsidiary Income 112,000
Investment In Stocks, S Co. 63,000
Dividends, S Co. 49,000
* Investment Balance will become (P643,000 63,000) P580,000

Capital Stock, S Co. 350,000

Retained Earnings, S Co. (70% x 150,000) 105,000
Goodwill 178,571
Investment in Stocks 580,000
Share of NCI in GW 53,571
* Investment balance will become zero.

Non Controlling Interest 12/31/11 P222,000

(650,000 + 160,000 70,000) x 30%

Controlling Interest NCI

17. a. Investment Cost P3,600,000 2,540,000
Equity over Bell (60% x 3,000,000) 1,800,000 (1,200,000)
Pre-acquisition Loss (60% x 250,000) ( 150,000) 1,650,000 100,000
Excess 1,950,000 2,880,000
Revaluation: Inventories (60% x 100,000) ( 60,000) 40,000
Plant assets (60% x 3.1M) (1,860,000) 1,240,000
Long Term Debt (60% x 400000) ( 240,000) 1,600,000
Gain on Bargain Purchases P 210,000 P 0

WP Entries:
b. Dividend Income 60,000
41
 Dividends 60,000

Inventories 100,000
Plant Assets 3,100,000
Capital Stock, Bell 1,000,000
APIC, Bell 400,000
Ret. Earnings, Bell 1,600,000
LT Debts 400,000
Preacquisition Loss 250,000
Gain 210,000
Investment 3,600,000
Share of MI in AR 2,540,000

Cost of Sales 100,000

Depreciation 186,000
Inventories 100,000
Plant Assets 186,000

Depreciation 155,000
Cost of Sales 100,000
LTD 40,000
Plant Assets 155,000
Inventories 100,000
Expense 40,000

AJe in Moores Book:

Business Combination Expenses 150,000
Investment in Bell 150,000

Income Statement Adjust. & Elimination Minority

Consolidated
c. P S Debit Credit Income
Sales 3,281,750 1,125,000 4,406,750
Cost of Sales 1,550,000 475,000 d) 100,000 2,125,000
Gross Profit 1,731,750 650,000 2,281,750
Expenses 900,000 450,000 d) 155,000 1,505,000
Net Operating Income 831,750 200,000 776,750
Gain fr Bargain Purchase d) 210,000 210,000
Dividend Income 60,000 a) 60,000
Pre-acquisition Loss c) 250,000 250,000
Minority Interest ________ ________ (22,000) 22,000
Net Income 891,750 200,000 (22,000) 1,008,750
Retained Earnings Statement
1/1 Balance 5,470,000 1,600,000 c) 960,000 b) 640,000 640,000 5,470,000
NI brought forward 891,750 200,000 ( 22,000) 891,750
6,361,750 1,800,000 618,000 6,361,750
Dividends 500,000 100,000 a) 60,000 ( 40,000) 500,000
12/3 Balance 5,861,750 1,700,000 578,000 5,861,750
Balance Sheet
Cash 8,196,250 625,000 8,821,250
Accounts Receivable 2,400,000 1,500,000 3,900,000
Inventories 2,000,000 2,500,000 b) 100,000 d) 100,000 4,500,000
Plant Assets, net 2,00,000 6,850,000 b)3,100,000 d) 155,000 11,795,000
Other Assets 1,415,500 375,000 1,790,500
Investment in Sister 3,600,000 _________ c)3,600,000 _________
19,611,750 11,850,000 30,806,750
Liabilities 3,750,000 8,750,000 b) 400,000 12,100,000
Common Stock 5,000,000 1,000,000 c) 600,000 400,000 5,000,000
APIC 5,000,000 400,000 c) 240,000 160,000 5,000,000
MI in Asset Rev. b)1,440,000 1,440,000
Retained Earnings 5,861,750 1,700,000 578,000 5,861,750
Minority Interest ________ ________ _______ ________ 2,578,000 2,578,000
19,611,750 11,850,000 7,992,000 7,992,000 30,310,50

18. a) Investment: Jan. 1 P3,750,000

Share in Net Income 390,000
Dividends ( 300,000)
Adjustments (310,000 x .6) ( 186,000)
P3,771,000

Dividend Income P300,000

Consolidated Net Income: Net Income of Moore P1,200,000

Income from Subsidiary (650-310)60% 204,000
P1,404,000

Consolidated Retained Earnings:

42
 Jan. 1 Balance (5,470,000 + 1,158,750 - 500,000) P6,128,750
Consolidated Net Income 1,404,000
Dividends (1,000,000)
P6,532,750

Minority Interest: Capital Stock P1,000,000

APIC 400,000
Retained Earnings (1,700,000 + 650,000
310,000- 500,000) 1,540,000
2,940,000
Multiply by 40% 1,176,000

b) Dividend Income 300,000

Dividends 300,000

Investment 117,000
Retained Earnings 117,000

Capital Stock 600,000

APIC 240,000
Retained Earnings (60% x 1,700,000) 1,020,000
Plant Assets 1,674,000
Long Term Debt 240,000
Investment 3,714,000

Expenses 186,000
Plant Assets 186,000

c) Consolidated Plant Assets, net P7,500,000

Parents Plant Assets, net (2,000,000)
Revaluation, net 1,488,000
Plant Assets of Subsidiary, net P4,012,000

d) Separate operating expenses P1,700,000

Adjustment 186,000
Consolidated operating expenses P1,886,000

19.a) Investment 105,260

Capital Stock 55,000
APIC 50,260

b) Cash 5,700
Dividend Income 5,700

Net Income of A P37,200

Net Income of G 12,000
Share of NCI ( 300)
Dividend Income ( 6,000)
Share of a in Consolidated NI 37,200
Ret Earnings Beg 64,900
Dividends ( 20,000)
Consolidated Ret Earnings P82,100

c) Stockholders Equity of A P289,850

Non Controlling Interest 5,195*
Consolidated SHE P295,045
* 60,000 + 10,000 + 27,900 + 12,000 6,000
Table for determination and allocation of excess 100% 95% 5%
Implied Value/Consideration 110,800 105,260 5,540
Subsidiary Interest: SHE 97,900
Pre Acquisition 6,000 98,705 5,195
Goodwill P6,900 P 6,555 P 345

MULTIPLE CHOICE
1. d 2. b 3. d
4. 1) Book Value over subsidiary shares acquired:
Capital Stock P75,000
Retained Earnings 1/190 30,000
Answer: C 105,000 x 95% = 99,750
2) Beginning Balance P 120,000.00
Share in net income 19,000.00
Share In dividends ( 4,750.00)
Ending Balance P134,250.00
3) Consolidated Retained Earnings 12/31/90:
43
 Beginning balance P60,000.00
Net Income 15,000.00
Equity over subsidiary income:
Share in Net Income 19,000.00
Less Dividends 10,000.00
P84,000.00
4) (105,000 + 20,000 5,000) 5% = 6,000+1,066GW Answer: D
5. Answer: D
6. 1) SHE of Sharp (1,320,000 320,000) P1,000,000
Acquisition Cost 1,200,000
Goodwill P 200,000 Answer E
2) Retained Earnings of Owen P1,240,000 Answer: A

7. 1) Dividends of Pare P25,000 Answer: C

2) SHE of kidd ( 120,000 x 25%) P30,000 Answer: C
3) Common Stock of Pare P100,000 Answer: C
8. Answer: A at cost of 15% acquisition
9. a) Minority Interest in Income P 6,000
Divide by % of Interest 20%
Subsidiary Net Income P30,000 Answer: A
b) Combined Net Income P75,000
Subsidiary Net Income 30,000
Net Income of Parent Co. P45,000 Answer: A
10. Acquisition Cost P250,000
Add share in net income for 2 years (80000 x 80%) 64,000
Less dividends recd in 991 (50,000 x 80%) (40,000)
Investment balance at sale date 274,000
Proceeds from sale 300,000
Gain from sale P 26,000 Answer: E

44