Consolidated Financial Statement-Part 3
Consolidated Financial Statement-Part 3
Consolidated Financial Statement-Part 3
1. On January 1, 20x1, Bright Co. acquired 75% interest in Dull Co. for P180,000. On this date, the
carrying amount of Dull’s net identifiable assets was P160,000, equal to fair value.
Non-controlling interest was measured at fair value of P60,000.
The financial statements of the entities on December 31, 20x1 show the following information:
Bright Co. Dull Co.
Assets
Investment in subsidiary (at cost) 180,000 -
Other assets 600,000 235,000
Total Assets 780,000 235,000
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Liabilities and Equity
Liabilities 70,000 25,000
Share Capital 600,000 100,000
Retained earnings 110,000 110,000
Total equity 710,000 210,000
Total liabilities and equity 780,000 235,000
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Additional Information:
● No dividends were declared by either entity during 20x1 and there were no intercompany
transactions
● However, it was determined by year-end that goodwill was impaired by P10,000.
Requirement: Prepare a draft of the December 31, 20x1 consolidated statements of financial position and
consolidated statement of profit or loss
Solution:
Step 1: Analysis of effects of intercompany transaction
There were no inter-company transactions during the year.
Consolidated
ASSETS
Investment in subsidiary (at cost) – eliminated -
Other assets (600,000 + 235,000) 835,000
Goodwill – net (Step 3) 70,000
TOTAL ASSETS 905,000
Consolidated
Revenues (300,000 + 80,000) 380,000
Operating expenses (60,000 + 30,000) (90,000)
Impairment loss on goodwill (10,000)
Profit for the year 280,000
2. On January 1, 20x2, Rubber Co. acquired the remaining 25% interest for P100,000.
Non-controlling interests were measured using the proportionate share method. How much is
non-controlling interest in the net assets f the acquire in the consolidated financial statements
prepared immediately after the acquisition?
a. 42,500 c. 25,000
b. 37,500 d. 0
3. On January 1, 20x2, Rubber Co. acquired additional 20% interest for P100,000.
Non-controlling interest were measured using the proportionate share method. How much is
non-controlling interest in the net assets of the acquire in the consolidated financial
statements prepared immediately after the acquisition?
a. 37,500 c. 7,500
b. 30,000 d. 0
4. On January 1, 20x2, Rubber Co. acquired additional 20% interest for P100,000.
Non-controlling interest were measured using the proportionate share method. How much is
consolidated retained earnings immediately after the acquisition?
a. 70,000 c. 130,000
b. 107,000 d. 137,500
5. On January 1, 20x2, Rubber Co. sold 60% out of its 75% interest in Plastic Inc for P120,000.
The sale resulted to a loss of control. The remaining interest is classified as held for trading.
How much is the gain or loss on the sale?
a. 25,500 c. 48,500
b. 37,500 d. 137,500
Answer: (solution)
1. D
2. D
3. C
Solution:
Owners of
% parent % NCI Net assets of XYZ
Before the transaction 75% 112,500 25% 37,500 150,000 a
After the transaction 95% 142,500 5% 7,500 150,000
Change – Inc./ (Decrease) 30,000 (30,000) -
a
The fair value of Plastic Co.’s net assets on January 1, 20x1 is computed as follows:
Rubber Co. Plastic, Inc. Consolidated FV of net assets
(a) (b) (c) (d) = (c) - (a)
Investment in sub. 112,500 - - -
Other assets 514,500 186,000 709,500 195,000
Goodwill - - 12,000
TOTAL ASSETS 627,000 186,000 721,500 195,000
4. B
Solution:
The entry in Rubber’s separate books is as follows:
Jan. 1, Investment in subsidiary 100,000
20x2 Cash in bank 100,000
to record the acquisition of additional interest in Plastic, Inc.
5. A
Solution:
The fair value of Plastic’s net identifiable assets is computed as follows:
Rubber Co. Plastic, Inc. Consolidated FV of net assets
(a) (b) (c) (d) = (c) - (a)
Investment in sub. 112,500 - - -
Other assets 514,500 186,000 709,500 195,000
Goodwill - - 12,000
TOTAL ASSETS 627,000 186,000 721,500 195,000
OR
Consideration received 120,000
Investment retained in the former subsidiary (at fair value) 30,000
NCI (carrying amount - see consolidated financial statements) 37,500
Total 187,500
Less: Plastic’s net identifiable assets (see computation above) (150,000)
Goodwill (see consolidated financial statements) (12,000)
Gain or loss on disposal of controlling interest 25,500