Consolidated financial statements

These are the financial statements of a group presented as those of a

single economic entity.

Group is a parent and all of its subsidiaries.

 PRESENTATION OF CONSOLIDATED FINANCIAL
STATEMENTS

A parent shall present consolidated financial statements, except when (PAS 27)
The parent is itself a wholly-owned subsidiary, or is a partially-owned
subsidiary of another entity
The ultimate parent produces consolidated financial statements available for
public use
The parent’s debt or equity instruments are not traded in a public market
The parent did not file, nor is in the process of filing, its financial statements
with a securities commission for the purpose of issuing any class of
instruments in a public market
Consolidated statements are prepared from the separate
statements of the acquiring company and acquired company(ies)
from the standpoint of a single economic entity.
The acquiring company, generally, is a parent if it owns, directly
and indirectly, more than 50% of the outstanding voting shares of
the acquired company. If the controlling interest is not 100%, the
difference would represent the non-controlling interest.
Non Controlling Interest
Under revised provisions of IFRS3 (and also IFRS 10), the non-
controlling interest may be measured at either:

1. as a proportionate share in the full fair value of outstanding shares

or

2. as a proportionate share in the total fair value of identifiable net

assets at the date of acquisition.
NON CONTROLLING INTEREST
1. FAIR VALUE METHOD
1. GIVEN
2. FV OF THE SHARES OF THE SUBSIDIARY
3. COST PAID BY THE PARENT (COST / CI% * NCI%)

2. PROPORTIONATE SHARE METHOD

1. FV OF THE NET ASSETS OF THE SUBSIDIARY * NCI%
Case 1 Amount of NCI at
Date of Acquisition (DOA)
Based on FV of shares outstanding at DOA
(100,000 shares x 20%) x P17.60 = P352,000

Based on FV of identifiable net assets at DOA:

P1,600,000 x 20% = P320,000
 Computation of Goodwill or IFA
(a) NCI is based on fair value of outstanding shares @ DOA
Total CI NCI
Fair value P 1,760,000 P 1,408,000 P 352,000
Control premium 32,000 32,000 -
Revised amounts P 1,792,000 P 1,440,000 P 352,000
Book value (1,200,000) ( 960,000) (240,000)
Excess P 592,000 P 480,000 P112,000
BCVR ( 400,000) (320,000) ( 80,000)
Goodwill P 192,000 P 160,000 P 32,000
 Computation of Goodwill or IFA
(b) NCI is based on the Fair Value of Identifiable net assets @DOA:
Total Parent NCI
Fair value P 1,760,000 P 1,440,000 P 320,000
Book value (1,200,000) ( 960,000) (240,000)
Excess P 560,000 P 480,000 P 80,000
BCVR ( 400,000) (320,000 ) ( 80,000)
Goodwill P 160,000 P 160,000 P -
Case 2
2.1. a. Percentage of control
# of shares outstanding (P300,000 / P10) 30,000 shares

% of control (24,000 shares / 30,000 shares) 80%

2.1. b. Non-controlling interest at
date of acquisition
1. Using fair value of outstanding shares
(P756,000 / 80%) x 20% P 189,000

2. Using fair value of total identifiable

Net assets at DOA
Book value (P300,000 + P400,000) P 700,000
BCVR (P30,000 + P50,000 + P70,000 +
20,000 + P40,000) 210,000
Total fair value P 910,000 x 20% P 182,000
 FV BCVR Effect on the NA
BV
❑ Inc NA (+)
Inventories 40,000 70,000 30,000 ❑ Dec NA (-)

Land 150,000 200,000 50,000

Buildings 200,000 270,000 70,000

Equipment 450,000 470,000 20,000

Patent - 40,000 40,000

TOTALS 210,000
2.1.c. Goodwill or (IFA ) AT DOA
FV of OS FV OF INA
Fair value of shares acquired
Parent’s cost at fair value P 756,000 P 756,000
NCI 189,000 182,000
Totals P 945,000 P 938,000
FV of acquired net assets (910,000) (910,000)

Goodwill P 35,000 P 28,000

2. 2. Working Paper Entries at the DOA
Share capital (S Co.) P 300,000 WPEE:
1. Eliminate the SHE of the Sub
Retained earnings (S Co.) 400,000 2. Set up the BCVR
3. Recognize GW
Inventories 30,000 4. Eliminate the Inv in Sub account
5. Set up the NCI
Land 50,000
Buildings 70,000
Equipment 20,000
Patent 40,000
Goodwill 35,000
NCI (using fair value of OS) P 189,000
Investment in S Co. 756,000
 CONSOLIDATED BALANCE SHEET
ELIMINATIONS Consolidated
Particulars Parent. Sub. Debits Credits Balance Sheet
Cash 109000 15000 124,000
Accounts receivable 300,000 35,000 335,000
Inventories 140,000 40,000 30,000 210,000
Land 150,000 50,000 200,000
Buildings 200,000 70,000 270,000
Equipment 250,000 450,000 20,000 720,000
Investment in S Co. 756,000 - 756,000 -
Patent 40,000 40,000
Goodwill 35,000 35,000
TOTALS 1555000 890,000 1934000
Accounts payable 175000 190,000 365000
Share capital 200,000 300,000 300,000 200,000
Share premium 400,000 400,000
Retained earning 780,000 400,000 400,000 780,000
Non-controlling interest 189,000 189,000
TOTALS 1555000 890,000 945,000 945,000 1934000
 CONSOLIDATED BALANCE SHEET USING BCVR BALANCES
Consolidated
Particulars Parent Co. Subsidiary Co. BCVR Balance Balance Sheet
Cash 109000 15000 124,000
Accounts receivable 300,000 35,000 335,000
Inventories 140,000 40,000 30,000 210,000
Land 150,000 50,000 200,000
Buildings 200,000 70,000 270,000
Equipment 250,000 450,000 20,000 720,000
Investment in S Co. 756,000 -
Patent 40,000 40,000
Goodwill 35,000 35,000
TOTALS 1555000 890,000 1,934,000

Accounts payable 175000 190,000 365,000

Share capital 200,000 300,000 200,000
Share premium 400,000 400,000
Retained earnings 780,000 400,000 780,000
Non-controlling interest 189,000
TOTALS 1555000 890,000 245,000 1934000
 2. 4. Amortization of EXCESS for 2019 and 2020
Schedule of unamortized excess
(includes actual impairment loss on GW
AMORTIZATION
AMOUNT 2019 2020
Inventories 30,000 30,000 P -
Land 50,000 - -
Buildings 70,000 3,500 3,500
Equipment 20,000 2,000 2,000
Patent 40,000 4,000 4,000
Goodwill 35,000 5,000 8,000
TOTALS 245,000 44,500 17,500
 2. 4. Amortization of EXCESS for 2019 and 2020
Schedule of unamortized excess
(includes actual impairment loss on GW
AMORTIZATION UNAMORTIZED EXCESS
AMOUNT 2019 2020 2019 2020
Inventories 30,000 30,000 P - - -
Land 50,000 - - 50,000 50,000
Buildings 70,000 3,500 3,500 66,500 63,000
Equipment 20,000 2,000 2,000 18,000 16,000
Patent 40,000 4,000 4,000 36,000 32,000
Goodwill 35,000 5,000 8,000 30,000 22,000
TOTALS 245,000 44,500 17,500 200,500 183,000
 Consolidated Net Income
CNI attributable to Parent and the NCI
CNI= PNI o/o + SNI +/- Adj

PNI - Dividend Inc + SNI +/- Adj

(PNI o/o)
Parent 80% NCI
Investment Inc 20%

CNI attri to the Parent= PNI o/o + Inv Income CNI attri NCI= Adj SNI * NCI%
Consolidated RE NCI (B/S)
 CNI= PNI o/o + SNI +/- Adj CNI= PNI o/o + SNI +/- Adj

2019 2020
RSNI 198,000 RSNI 285,000
+/- Adj (44,500) +/- Adj (17,500)
Adj SNI 153,500 Adj SNI 267,500

Parent: 80% NCI: 20% Parent: 80% NCI: 20%

Inv Inc 122,800 CNI:NCI Inv Inc 214,000 CNI:NCI

30,700 53,500
PNI o/o 300,000 PNI o/o 420,000

CNI: P 422,800 CNI: P 634,000

CNI 453,500 CNI 687,500

CNI attri to the Parent= PNI o/o + Inv Income

 3.5 Working Paper entries

2019 RPNI 348,0000 RSNI 198,0000

NCI 189,000

1/1/19 (DOA) 12/31/19 (1yr DOA) 12/31/20 (2 yrs + DOA)

SC P 300,000 SC P 300,000
RE 400,000 RE 400,000
Inv. 30,000 Inv. 30,000
Land 50,000 Land 50,000
Bldg. 70,000 Bldg. 70,000
Equipt 20,000 Equipt 20,000
Patent 40,000 Patent 40,000
Goodwill 35,000 Goodwill 35,000
NCI 189,000 NCI 189,000
Investment 756,000 Investment 756,000
 3.5 Working Paper entries

2019 RPNI 348,000 RSNI 198,0000

DI (48,000)
PNI o/o 300,000

NCI 189,000 - 12,000

1/1/19 (DOA) 12/31/19 (1yr DOA) 12/31/20 (2 yrs + DOA)

DI 48,000
NCI 12,000
Dividends 60,000
 3.5 Working Paper entries

2019 RPNI 348,000 RSNI 198,000

DI (48,000) BCVR (44,500)
PNI o/o 300,000 Adj SNI 153,500

NCI 189,000 - 12,000

1/1/19 (DOA) 12/31/19 (1yr + DOA) 12/31/20 (2 yrs + DOA)

Cost of sales P 30,000
DE 5,500
Amortization of Patent 4,000
GW Impairment Loss 5,000
Inv. 30,000
Buildings 3,500
Equipment 2,000
Patent 4,000
Goodwill 5,000
 3.5 Working Paper entries

2019 RPNI 348,000 RSNI 198,000

DI (48,000) BCVR (44,500)
PNI o/o 300,000 Adj SNI 153,500
NCI Share (30,700)
Inv. Inc 122,800
NCI 189,000 - 12,000 + 30,700

1/1/19 (DOA) 12/31/19 (1yr + DOA) 12/31/20 (2 yrs + DOA)

NCI - IS 30,700
NCI - BS 30,700

NCI, 1/1/19 P189,000 NCI, 12/31/19 - P207,700

 3.5 Working Paper entries

2019 RPNI 348,000 RSNI 198,000 2020 RPNI 512,000 RSNI 285,000
DI (48,000) BCVR (44,500)
PNI o/o 300,000 Adj SNI 153,500
NCI Share (30,700)
Inv. Inc 122,800
NCI 189,000 - 12,000 + 30,700 NCI 189,000

1/1/19 (DOA) 12/31/19 (1yr DOA) 12/31/20 (2 yrs + DOA)

SC P 300,000 SC P 300,000 SC P 300,000
RE 400,000 RE 400,000 RE 400,000
Inv. 30,000 Inv. 30,000 Inv. 30,000
Land 50,000 Land 50,000 Land 50,000
Bldg. 70,000 Bldg. 70,000 Bldg. 70,000
Equipt 20,000 Equipt 20,000 Equipt 20,000
Patent 40,000 Patent 40,000 Patent 40,000
Goodwill 35,000 Goodwill 35,000 Goodwill 35,000
NCI 189,000 NCI 189,000 NCI 189,000
Investment 756,000 Investment 756,000 Investment 756,000
 3.5 Working Paper entries

2019 RPNI 348,000 RSNI 198,000 2020 RPNI 512,000 RSNI 285,000
DI (48,000) BCVR (44,500) DI (92,000)
PNI o/o 300,000 Adj SNI 153,500 PNI o/o 420,000
NCI Share (30,700)
Inv. Inc 122,800
NCI 189,000 - 12,000 + 30,700 NCI 189,000 - 23,000

1/1/19 (DOA) 12/31/19 (1yr DOA) 12/31/20 (2 yrs + DOA)

DI 48,000 DI 92,000
NCI 12,000 NCI 23,000
Dividends 60,000 Dividends 115,000
 4.5 Working Paper entries

2019 RPNI 348,000 RSNI 198,000 2020 RPNI 512,000 RSNI 285,000
DI (48,000) BCVR (44,500) DI (92,000) BCVR (17,500)
PNI o/o 300,000 Adj SNI 153,500 PNI o/o 420,000 Adj SNI 267,500
NCI Share (30,700)
Inv. Inc 122,800
NCI 189,000 - 12,000 + 30,700 NCI 189,000 - 23,000

1/1/19 (DOA) 12/31/19 (1yr + DOA) 12/31/20 (2 yrs + DOA)

Cost of sales P 30,000 RE P 44,500
DE 5,500 DE 5,500
Amortization of Patent 4,000 Amortization of Patent 4,000
GW Impairment Loss 5,000 Impairment loss on GW 8,000
Inv. 30,000 Inv. 30,000
Buildings 3,500 Buildings 7,000
Equipment 2,000 Equipment 4,000
Patent 4,000 Patent 8,000
Goodwill 5,000 Goodwill 13,000
 4.5 Working Paper entries

2019 RPNI 348,000 RSNI 198,000 2020 RPNI 512,000 RSNI 285,000
DI (48,000) BCVR (44,500) DI (92,000) BCVR (17,500)
PNI o/o 300,000 Adj SNI 153,500 PNI o/o 420,000 Adj SNI 267,500
NCI Share (30,700) NCI Share (53,500)
Inv. Inc 122,800 Inv Inc 214,000

NCI 189,000 - 12,000 + 30,700 NCI 189,000 - 23,000 + 53,500 + 18,700

RE: DI (48,000)
NCI Share (30,700)
Dividend 60,000
TOTAL (18,700)

1/1/19 (DOA) 12/31/19 (1yr + DOA) 12/31/20 (2 yrs + DOA)

NCI - IS 30,700 NCI - IS 53,500

NCI - BS 30,700 NCI - BS 53,500
RE 18,700
NCI - BS 18,700

NCI, 1/1/19 P189,000 NCI, 12/31/19 - P207,700 NCI, 12/31/20 - P 238,200

STATEMENT OF COMP INCOME
ELIMINATIONS Consolidated
Particulars Parent Co.Subsidiary Co. Debits Credits Income Statement
Sales 1,200,000 700,000 1,900,000
Dividend Income 48,000 - 48,000 -
Cost of Sales (500,000) (250,000) 30,000 (780,000)
Expenses (400,000) (252,000) 14,500 (666,500)
NET INCOME 348,000 198,000 453,500
Profit to NCI 30,700 (30,700)
Profit to CI 422,800
123,200

RETAINED EARNINGS STATEMENT

Retained Earnings 780,000 400,000 400,000 780,000
Net Income 348,000 198,000 123,200 422,800
Dividends (150,000) (60,000) 150,000
60,000
RE, DEC. 31 978,000 538,000 523,200 60,000 1,052,800
 Consolidated Balance Sheet - 2019
P Company S Company Elimination CONSOLIDATED
Cash 233,600 48,000 281,600
Accounts receivable 240,000 70,000 310,000
Inventories 150,000 80,000 30,000 30,000 230,000
Land 150,000 50,000 200,000
Buildings 190,000 70,000 3,500 256,500
Equipment 349,000 405,000 20,000 2,000 772,000
Patent 40,000 4,000 36,000
Goodwill 35,000 5,000 30,000
Investment 756,000 756,000
1,728,600 943,000 2,116,100
Total
150,600 105,000 275600
Accounts payable
Share capital 200,000 300,000 300,000 200000
Share premium 400,000 400,000
Retained earnings* 978,000 538,000 523,200 60,000 1,052,800
NCI in subsidiary company 12,000 189,000 207,700
30,700
TOTAL 1,728,600 943,000 2,116,100
STATEMENT OF COMP INCOME 2020 ELIMINATIONS Consolidated
Particulars Parent Co.Subsidiary Co. Debits Credits Balance Sheet
Sales 1,500,000 900,000 2,400,000
Dividend Income 92,000 - 92,000 -
Cost of Sales (600,000) (315,000) (915,000)
Expenses (480,000) (300,000) 17,500 (797,500)
NET INCOME 512,000 285,000 687,500
Profit to NCI 30,700 (53,500)
Profit to CI 634,000
163,000

RETAINED EARNINGS STATEMENT

Retained Earnings 978,000 538,000 463,200 1,052,800
Net Income 512,000 285,000 163,000 634,000
Dividends (210,000) (115,000) 115,000 210,000
RE, DEC. 31 1,280,000 708,000 626,200 115,000 1,476,800
-400,000 -44,500 -18,700= (463,200)
 Consolidated Balance Sheet - 2020
P Company S Company Elimination CONSOLIDATED
Cash 224,400 98,000 322,400
Accounts receivable 300,000 160,000 460,000
Inventories 180,000 150,000 30,000 30,000 330,000
Land 150,000 50,000 200,000
Buildings 180,000 70,000 7,000 243,000
Equipment 500,000 360,000 20,000 4,000 876,000
Patent 40,000 8,000 32,000
Goodwill 35,000 13,000 22,000
Investment 756,000 756,000
1,960,400 1,098,000 2,485,400
Total
80,400 90,000 170,400
Accounts payable
Share capital 200,000 300,000 300,000 200,000
Share premium 400,000 400,000
Retained earnings* 1,280,000 708,000 626,200 115,000 1,476,800
NCI in subsidiary company 23,000 189,000 238,200
53,500
TOTAL 1,960,400 1,098,000 18,700 2,485,400
 2019 CONSOLIDATED STATEMENTS
Direct Method (using BCVRs)
INCOME STATEMENT
Sales (P1,200,000 + P 700,000) P1,900,000
Cost of goods sold (P500,000 + P250,000) + P30,000 ( 780,000)
Gross profit P1,120,000
Expenses (P400,000 + P252,000) + P14,500 ( 666,500)
Consolidated net income P 453,500
Attributable to: Parent’s shareholders (P300,000 + P122,800) P 422,800
NCI [(P198,000 – P44,500) * 20% 30,700
Consolidated Net Income P 453,500
BALANCE SHEET Parent Subsidiary BCVR Consolidated
Cash P 233,600 P P 281,600
Accounts receivable 240,000 70,000 310,000
Inventories 150,000 80,000 230,000
Land 150,000 50,000 200,000
Buildings 190,000 66,500 256,500
Equipment 349,000 405,000 18,000 772,000
Investment in Stocks 756,000 -
Patent 36,000
Goodwill 36,000
30,000 30,000
Total assets
P 2,116,100
Accounts payable P 150,600 P 105,000 P 255,600
Common stocks 200,000 * 200,000
APIC 400,000 * 400,000
Retained earnings 1,052,800 * 1,052,800
Equity of Parent’s shareholders 1,652,800
Equity of non-controlling interest 207,700
Total Liabilities and Stockholders’ equity P2,116,100

RE= 978,000 – 48,000 + 122,800= 1,052,800 NCI= 189,000 + 30,700 -12,000 = 207,700
 2020 CONSOLIDATED STATEMENTS
Direct Method (using BCVRs)

INCOME STATEMENT
Sales (P 1,500,000 + P900,000) P2,400,000
Cost of goods sold (P600,000 + P315,000) (915,000)
Gross profit P1,485,000
Expenses(P480,000+P300,000) + P17,500 797,500
Consolidated net income P 687,500
Attr to: Parent [(P420,000 + P214,000) P 634,000
NCI (P285,000 – P17,500) X 20% 53,500
Total P687,500
BALANCE SHEET
Cash P 224,400 P 98,000 P - P 322,400
Accounts receivable 300,000 160,000 - 460,000
Inventories 180,000 150,000 - 330,000
Land 150,000 P 50,000 200,000
Buildings 180,000 63,000 243,000
Equipment 500,000 360,000 16,000 876,000
Investment in Stocks 756,000 -
Patent 32,000 32,000
Goodwill 22,000 22,000
Total assets P1,960,400 P 1,098,000 P 183,000 P 2,485,400

Accounts payable P 80,400 P 90,000 P 170,400

Common stocks 200,000 * 200,000
APIC 400,000 * 400,000
Retained earnings 1,476,800 * 1,476,800
Equity of Parent’s shareholders 2,076,800
Equity of non-controlling interests 238,200
Total Liabilities and stockholders’ equity P2,485,400
RE= 1,280,000 + 214,000 – 92,000 + ( 122,800 – 48,000)
NCI= 189,000 + 53,500 – 23,000 +( 30,700 -12,000)
CONSOLIDATED
FINANCIAL
STATEMENTS
Ms. Ellery de Leon
 NCI NCI
DS: Allocate the SNI, US/ BCVR: Adjust the SNI, then allocate
Parent; then adjust Parent
Upstream
Downstream
PARENT
RSNI xxx
RSNI xxx
US Adj xxx
Parent: % NCI: %
Downstream Upstream Adj SNI xxx
Inv Inc
prior to Adj xxx CNI:NCI
xxx Parent: % NCI: %
DS Adj xxx
Inv Inc xxx SUBSIDIARY Inv Inc xxx CNI:NCI
PNI o/o xxx xxx
PNI o/o xxx
CNI: P xxx
CNI: P xxx
CNI xxx
CNI xxx
STAREX, INC., a 75% owned subsidiary of PUREHATCH COMPANY, sold merchandise during
2020 to its parent company for P288,000. The merchandise cost STAREX, INC. P 201,600, 25%
of the transferred merchandise remained in PUREHATCH COMPANY’s ending inventory. STAREX’s
gross profit has been the same rate over the past three (3) years. On January 1, 2020,
PUREHATCH has P9,600 worth of merchandise purchased from STAREX in 2019. For the year
2020, STAREX, INC. reported a net income of P288,000 and PUREHATCH COMPANY reported net
income (including dividend income of P 115,200) of P528,000.
Requirements:
1. Calculate Purehatch Company’s investment income from Starbucks, Inc. in 2020.
2. Determine non-controlling interests in the net income of the subsidiary for 2020.
3. Show consolidated net income for 2020, and allocate to Controlling interests and to
Non-controlling interests.
4. Working paper elimination entries for 2020.
 PARENT WPEE:
SUB CONSO
72,000 Sales 288,000
SP 288,000 320,000 320,000 COS 288,000
72,000
Cost 201,600 288,000 201,600
Inv, end
GP 86,400 32,000 118,400 (288,000* 25%)= 72,000
GPR: 86,400/288,000= 30% (201,600* 25%)= 50,400
21,600
I/S COS Sales Inv, end
RGP Inv, beg * GPR(s) ( + ) (-) 9,600 * 30%= 2,880
GP * % of Unsold
DGP Inv, end * GPR(s) ( - ) (+) (-) 72,000 * 30% = 21,600
GP * % of Unsold 86,400 * 25% = 21,600

ICT SP (-) (-) SP 288,000

 NCI
US/ BCVR: Adjust the SNI, then allocate
Parent

RSNI 288,000
US Adj:
RGP 2,880
DGP (21,600)
Adj SNI 269,280
Parent: 75% NCI: 25%

Inv Inc 201,960 CNI:NCI 67,320

PNI o/o 412,800

CNI: P 614,760
CNI 682,080
4. WPEE

a. on RGP RE (75%) 2,160

NCI ( 25%) 720
Cost of Sales (100%) 2,880

b. on DGP Cost of Sales 21,600

MI, end 21,600

c. On current year’s inter-company sale

Sales 288,000
Cost of Sales 288,000
 Upstream Downstream
NCI NCI
US/ BCVR: Adjust the SNI, then allocate DS: Allocate the SNI,
Parent Parent; then adjust

RSNI 288,000 RSNI 288,000

US Adj:
Parent: 75% NCI: 25%
RGP 2,880 Inv Inc
DGP (21,600) prior to Adj 216,000 CNI:NCI 72,000
Adj SNI 269,280 DS Adj:
Parent: 75% NCI: 25% RGP 2,880
DGP (21,600)
Inv Inc 201,960 CNI:NCI 67,320 Inv Income 197,280
PNI o/o 412,800 PNI o/o 412,800

CNI: P 614,760 CNI: P 610,080

CNI 682,080 CNI 682,080
During 2018 PRIME COMPANY sold land with a cost of P230,400 to its 80% owned
subsidiary, SPEAR, INC., for P 307,200. The subsidiary sold the land in 2020 to an outsider
for P430,080. The subsidiary and the parent reported net income as follows:
PRIME CO SPEAR, INC
2018 P539,136 236,544
2019 514,560 228,864
2020 606,720 253,440

The reported income of the parent company includes P78,336 of dividend income each
year.
Requirements:
1. Calculate Prime Company’s investment income from Spear Company in 2018, 2019, and
2020.
2. Determine non-controlling interest in the net income of the subsidiary in 2018, 2019
and 2020.
3. Show the consolidated net income for 2018, 2019 & 2020. Allocate each to Controlling
and non-controlling interests.
4. Elimination entries for 2018, 2019, and 2020.
 2018 2019 2020
Parent In Between Yrs
Subsidiary Computation under
Yr of ICT Yr of Sale to Outsider Consolidation

SP 307,200 Sub SP 430,080 SP 430,080

Cost 230,400 Parent Cost 307,200 Cost 230,400
GOS 76,800 GOS 122,880 GOS 199,680

GOS 76,800 RE 76,800 RE 76,800

Land 76,800 Land 76,800 GOS 76,800

I/S: GOS ( - ) I/S: None I/S: GOS ( + )

B/S; Land: GOS ( - ) B/S; Land: GOS ( - ) B/S; Land: None
 2018
2020
RSNI 236,544
RSNI 253,440
Parent: 80 % NCI: 20 %
Parent: 80 % NCI: 20 %
Inv Inc
prior to Adj 189,235 CNI:NCI Inv Inc
47,309 CNI:NCI
prior to Adj 202,752
DS Adj 50,688
DGOS (76,800) DS Adj
RDG 76,800
Inv Inc 112,435 Inv Inc 279,552
PNI o/o 460,800 PNI o/o 528,384
2019
CNI: P 573,235
RSNI 228,864 CNI: P 807,936
CNI 620,544 Parent: 80 % NCI: 20 % CNI 858,624

Inv Inc 183,091 CNI:NCI

45,773
PNI o/o 436,224
CNI: P 619,315
CNI 665,088
On January 1, 2019, Satellite, INC. a 90% owned subsidiary of PORT COMPANY
transferred equipment to its parent in exchange for P115,200 cash. At the date of
transfer, the subsidiary’s record carried the equipment at a cost of P162,816 less
accumulated depreciation of P69,120. The equipment has an estimated remaining life
of 7 years. The subsidiary reported net income for 2019 and 2020 of P 202,752 and
P302,592, respectively. The parent company reported income of P 337,920 (including
dividend income of P 69,120) and P453,120 (including dividend income of 69,120) for
2019 and 2020, respectively.

Requirements
1 Calculate Port Company’s investment income from Satellite Company in 2019 and in
2020.
2. Determine non-controlling interest in the net income of the subsidiary for 2019 and
for 2020.
3. Show the consolidated net income for 2019 and 2020. Allocate each to Controlling
and Non-controlling interests.
4. Elimination entries for 2019 and for 2020.
On January 1, 2019, Satellite, INC. a 90%
owned subsidiary of PORT COMPANY transferred
equipment to its parent in exchange for 2019
P115,200 cash. At the date of transfer, the Parent
Depreciation
subsidiary’s record carried the equipment at a SP 115,200 16,457
cost of P162,816 less accumulated depreciation
of P69,120. The equipment has an estimated
BV
remaining life of 7 years. The subsidiary OAC 162,816
Sub
reported net income for 2019 and 2020 of P AD (69,120) 93,696 13,385
202,752 and P302,592, respectively. The parent
GOS 21,504 3,072
company reported income of P 337,920
(including dividend income of P 69,120) and
P453,120 (including dividend income of 69,120)
for 2019 and 2020, respectively. GOS 21,504 AD 3,072
Eqpt 47,616 Dep Exp 3,072
Requirements
1 Calculate Port Company’s investment income AD 69,120
from Satellite Company in 2019 and in
2020. Yr of ICT Succeeding Yrs
2. Determine non-controlling interest in the net I/S:
income of the subsidiary for 2019 and for GOS (-) x
2020.
3. Show the consolidated net income for 2019 RDG(GOS/#yrs) (+) (+)
and 2020. Allocate each to Controlling and
Non-controlling interests.
4. Elimination entries for 2019 and for 2020.
 NCI
US/ BCVR: Adjust the SNI, then allocate
Parent
2019 2020
RSNI 202,752 RSNI 302,592
US Adj: US Adj:
DGOS (21,504)
RDG 3,072 RDG 3,072
Adj SNI 184,320 Adj SNI 305,664

Parent: 90% NCI: 10% Parent: 90% NCI: 10%

Inv Inc 165,888 Inv Inc 275,098 CNI:NCI 30,566

CNI:NCI 18,432
PNI o/o 268,800 PNI o/o 384,000

CNI: P 434,688 CNI: P 659,098

CNI 453,120 CNI 689,664
 WPEE
Gain on sale 21,504
2019 Gain on sale 21,504 Equipment 21,504
Equipment 47,616
A/D 69,120
Equipment 3,072
A/D 3,072 Depn expense 3,072
Depn expense 3,072
RE 19,354
2020 RE 19,354 NCI 2,150
NCI 2,150 Equipment 21,504
Equipment 47,616
A/D 69,120
Equipment 6,144
A/D 6,144 Depn expense 3,072
Depn expense 3,072 RE 2,765
RE 2,765 NCI 307
NCI 307
DEPRECIABLE ASSET TRANSFER
YEAR OF ICT SUCCEEDING YEARS
I/S GOS (-)
GOS/ #YRS + +

B/S GOS (-) (-)

GOS/#YRS + + (MULTIPLIED BY THE # OF EXPIRED YRS)
On January 1, 2019, PRIMARY COMPANY acquired 75% of Income statements for the two companies for the year 2020
the outstanding shares of SECONDARY, INC. at a fair value are as follows:
differential of P25,600 represented by understated plant
assets with a 10-year remaining life. During 2020,
PRIMARY COMPANY purchased merchandise from secondary,
inc. in the amount of P 204,800 at billed prices.
SECONDARY, INC. shipped the merchandise at 40% above
its cost, and this pricing policy was also used for shipments
made in 2019 to PRIMARY COMPANY. The inventories of
PRIMARY COMPANY included merchandise at billed prices
from SECONDARY, INC. as follows:
Requirements:
1. Calculate the non-controlling interests in the consolidated
net income in 2020.
Also, in 2019 PRIMARY COMPANY sold land to SECONDARY, Calculate the controlling interest in the consolidated net
INC. for P102,400. The cost of the land to PRIMARY was income in 2020.
P76,800. SECONDARY sold the land to an outsider for 3. Prepare working paper elimination entries for the above
P117,760 in 2020. information on December 31, 2020.
Furthermore, on January 1, 2020 SECONDARY, INC. sold 4. Prepare a consolidated income statement for the year
equipment to PRIMARY COMPANY for P38,400 cash. At the ended December 31, 2020.
date of the transfer, the equipment is carried at a cost of
P54,272 less accumulated depreciation of P23,040. The
equipment has an estimated remaining life of 7 years.
Intercompany Transactions
2020
BCVR: 25,600/ .75= 34,133
34,133/ 10 = 3,413 (3,413)

US Merch Inv Transfer

RGP: 57,344 * 40/140 16,384 Merchandise Inventory Transfer

DGP: 43,008 * 40/140 (12,288)

DS Land Transfer
SP 102,400
Cost 76,800
GOS 25,600 25,600

Land Transfer
Intercompany Transactions
2020
BCVR: 25,600/ .75= 34,133
34,133/ 10 = 3,413 (3,413)

US Merch Inv Transfer

RGP: 57,344 * 40/140 16,384
DGP: 43,008 * 40/140 (12,288)
DS Land Transfer
SP 102,400
Cost 76,800
GOS 25,600 25,600

US Dep Asset Transfer

SP 38,400
Cost 54,272
AD (23,040) 31,232
GOS 7,168 (7,168)
RDG 7,168 / 7 1,024
Inter-company Transactions: Comprehensive Problem

1. Computation of Controlling Interest and Non-controlling Interest Shares in

Consolidated Net Income.
2020
SNI P 114,688
Amort. of understated plant asset ( 3,414)
Upstream adjustments:
RGP on BI (of P Co.) 16,384
DGP on EI (of P Co.) (12,288)
Deferred gain on sale ( 7,168)
Realized deferred gain 1,024
Adjusted SNI P 109,227 x 25% = P 27,306 CNI: NCI
Multiply by CI% 75%
Inv. Income before dwnstrm adj. P 81,920
Downstream adjustment
Realized deferred gain 25,600 PNI(0/0)
Investment Income P 107,520 + P245,760 = 353,280 CNI: Parent

CNI P 380,586