Share-in-MIDTERMS-EXAMINATION-2ND-SEM-AY-2023-2024

Mr.
Nangamote the operation manager of Mamaya Na Company hired you to audit their
operations and asked you to prepare the combined financial statement with the Next Problem
Branch operation in accordance with the generally accepted accounting principle. Mr.
Nangamote gave you the authority to make all the necessary corrections and an adjustment of
their records.
The following trial balances are for the main office and the branch as of December 31, 2025 are
presented below.
Unadjusted Trial Balance

Mamaya Na Next Problem
Cash 120,000.00 18,000.00
Accounts receivable 108,000.00 49,000.00
Inventory 1/1/25 175,000.00 46,200.00
Investment in Next Problem Branch 249,500.00
Building 1,200,000.00
Equipment 340,000.00 112,000.00
Shipment from Home Office 112,200.00
Purchases 348,000.00
Expenses 113,000.00 48,000.00
Total 2,653,500.00 385,400.00
Inventory 12/31/25 190,000.00 42,240.00
Total 2,843,500.00 427,640.00
Accumulated Depreciation 80,000.00 16,000.00

Accounts Payable 37,000.00
Notes Payable 820,000.00
Home Office 166,760
Common Stock 100,000.00
Retained Earnings 1/1/25 840,000.00
Sales - net of returns 598,360.00 202,640.00
Miscellaneous Income 12,500.00
Shipment to Branch 117,000.00
Allowance for overvaluation in Branch Inventory 48,640.00
Total 2,653,500.00 385,400.00
Income and Expense Summary 190,000.00 42,240.00
Total 2,843,500.00 427,640.00
Before the preparation of closing entries the following adjustments were discovered:
a. Merchandise is shipped to this store periodically using constant mark-up over cost. One
shipment amounted to P26,400 inventory has not yet been received or recorded by the
Branch.
b. Assigned expenses of P25,000 by the Main office to the Branch have been properly
recorded, no entry has yet been made by the branch.
c. Excess merchandise returned by the branch on October 15, 2025, amounted to P15,840
and were credited to one of the Home office customer’s accounts.
d. Collection of Home office of P12,000 from own accounts receivables was deducted in favor
of the branch.
e. The Home Office credited the remittance of the branch on August 21, 2025, to
Miscellaneous Income amounted to P12,500.
f. On December 1, branch office manager purchased P30,000 furniture and fixtures having a
useful life of 5 years failed to notify the Home Office. All plant assets are carried on the
Home Office books.
g. On December 28, 2025, the customer's check amounted to P15,000 received from the
remittances of the branch was returned by the bank to Home Office due to insufficient funds.
The home office adjusted but failed to notify the branch.
1. Branch true net income

2. Combined net income
3. Combined total assets
4. Combined total liabilities
5. Combined total shareholders’ equity
On January 1, 2026, the Mamaya Na Company was acquired by a larger conglomerate in the
name of Ayoko Na Company. Ayoko Na Company acquired 80% of Mamaya Na Company by
issuing 96,000 shares with a par value of P10 and a market value P25. At the date of the
acquisition, Ayoko Na Company also provided a control premium to Mamaya Na Company
amounting to P500,000 and a contingent consideration of 800,000 with a present value equal to
the one-fourth of Mamaya Na Company’s net assets at the date of acquisition.
The current value of Mamaya Na Company’s identifiable assets and liabilities were the same as
their carrying values except for the following assets:
Assets Increas Decrease Remaining
e life
Inventory 200,000 25% sold in 2026
Building 600,000 20 years
Equipment 200,000 10 years
Acquisition costs paid were as follows:
Broker’s fee paid to firm that located Mamaya Na 10,000

Accountant’s fee for pre-acquisition 20,000
Legal fee for contract of business combination 35,000
Cost of SEC registration, including accounting and legal fees 20,000
Printing cost of stock certificates issued 10,000
General and administrative expenses 25,000
On the date of acquisition, the Ayoko Na Company’s balance sheet is presented as follows:
Assets: Book Value Fair Value

Cash 500,000 500,000
Accounts Receivables 3,200,000 2,800,000
Inventory 800,000 1,200,000
Building 2,400,000 3,000,000
Equipment 480,000 400,000
Total Assets 7,380,000 7,900,000
Liabilities and Equity:
Accounts Payable 480,000 480,000
Bonds Payable 1,100,000 1,120,000
Capital Stock 3,600,000 3,600,000
Additional Paid-in Capital 1,200,000 1,200,000
Retained Earnings 1,000,000 1,500,000
Total Liabilities and Equity 7,380,000 7,900,000
6. Consolidated Total Assets

7. Consolidated Total Liabilities
8. Consolidated Shareholders’ Equity
At the end of 2026, Ayoko Na and Mamaya Na reported a net income of 2,450,000 and
1,370,000, respectively, and declared cash dividends of 800,000 and 250,000, respectively.
Also, an impairment of 120,000 was incurred in the value of goodwill.
9. Consolidated Net income attributable to Parent Company

10. Consolidated Net income attributable to Subsidiary
11. Consolidated Retained Earnings
12. Non-controlling interest

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Mr.

Unadjusted Trial Balance

Accumulated Depreciation 80,000.00 16,000.00

1. Branch true net income

Acquisition costs paid were as follows:

Broker’s fee paid to firm that located Mamaya Na 10,000

Assets: Book Value Fair Value

6. Consolidated Total Assets

9. Consolidated Net income attributable to Parent Company

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