Solution Chapter 18

(1)

Chapter 18

Problem I

1 Equipment

540,000

Beginning R/E – Prince (P100,000 × .80)

80,000

Noncontrolling Interest (P100,000 × .20)

20,000

Accumulated Depreciation

640,000

Accumulated Depreciation (P100,000/4) × 2

50,000

Depreciation Expense

25,000

Beginning R/E – Prince (P25,000 × .80)

20,000

Noncontrolling Interest (P25,000 × .20)

5,000

2 Controlling Interest in Consolidated Net Income:

Prince Company’s income from its

independent operations

P3,270,000

Reported net income of Serf Company

P820,000

Plus profit on intercompany sale of

equipment considered to be realized

through depreciation in 2014

25,000

Reported subsidiary income that has been

realized in transactions with third

parties

845,000

× .8

Prince Company’s share thereof

676,000

Controlling Interest in Consolidated net income

P3,946,000

3. Noncontrolling Interest Calculation:

Reported income of Serf Company

P820,000

Plus: Intercompany profit considered realized

in the current period

25,000

P845,000

Noncontrolling interest in Serf Company

(.20 × 845,000)

P169,000

4. NCI-CNI (No. 3)

P 169,000

CI-CNI (No. 2)

3,946,000

CNI

P4,115,000

or,

Consolidated Net Income for 20x5

P Company’s net income from own/separate operations…………. P3,270,000

Realized gain on sale of equipment (downstream sales) through depreciation 0 P Company’s realized net income from separate operations…….….. P3,270,000 S Company’s net income from own operations………. P 820,000

Realized gain on sale of equipment (upstream sales) through depreciation* 25,000

Son Company’s realized net income from separate operations*…….….. P 845,000 845,000

Total P4,115,000

Less: Amortization of allocated excess……… 0

Consolidated Net Income for 20x5 P4,115,000

Less: Non-controlling Interest in Net Income* * 169,000

Controlling Interest in Consolidated Net Income or Profit attributable to

equity holders of parent – 20x5………….. P3,946,000

Or, alternatively

(2)

P Company’s realized net income from separate operations…….….. P3,270,000 S Company’s net income from own operations………. P820,000

Realized gain on sale of equipment (upstream sales) through depreciation 25,000

S Company’s realized net income from separate operations…….….. P 845,000 845,000

Total P4,115,000

Less: Non-controlling Interest in Net Income* * P 169,000

Amortization of allocated excess……… 0 169,000

equity holders of parent………….. P3,946,000

Add: Non-controlling Interest in Net Income (NCINI) _169,000

**Non-controlling Interest in Net Income (NCINI) for 20x5

S Company’s net income of Subsidiary Company from its own operations

(Reported net income of S Company) P 820,000

Realized gain on sale of equipment (upstream sales) through depreciation 25,000 S Company’s realized net income from separate operations……… P 845,000

Less: Amortization of allocated excess 0

P845,000

Multiplied by: Non-controlling interest %... 20%

Non-controlling Interest in Net Income (NCINI) – partial goodwill P 169,000

1/1/20x4:

Selling price of equipment

P 740,000

Less: BV of equipment

Cost

P1,280,000

Less: Accumulated depreciation:

P1,280,000 / 8 years x 4 years*

640,000 640,000

Unrealized gain on sales – 1/1/20x4

P 100,000

Realized gain – depreciation: P100,000 / 4 years

P 25,000

*the original life is 8 years as of 1/1/20x3, since the remaining life as of 1/1/20x4

in only 4 years, for purposes of computing the accumulated depreciation to

determine the gain on sale, the difference of 4 years is presumed to be expired.

5 Equipment

540,000

Beginning R/E – Prince

100,000

Accumulated Depreciation

640,000

Accumulated Depreciation (P100,000/4) × 2

50,000

Depreciation Expense

25,000

Beginning R/E – Prince

25,000

6 Controlling Interest in Consolidated Net Income:

Prince Company’s income from its

independent operations

P3,270,000

Plus profit on intercompany sale of

equipment considered to be realized

through depreciation in 2014

25,000

P3,295,000

Reported net income of S Company

P820,000

× .8

Prince Company’s share thereof

656,000

Controlling Interest in Consolidated net income

P3,951,000

Noncontrolling Interest Calculation:

Reported income of S Company

P820,000

Noncontrolling interest in S Company

(3)

NCI-CNI

P 164,000

CI-CNI

3,951,000

CNI

P4,115,000

or,

Realized gain on sale of equipment (downstream sales) through depreciation ____25,000 P Company’s realized net income from separate operations…….….. P3,295,000 S Company’s net income from own operations………. P 820,000

Realized gain on sale of equipment (upstream sales) through depreciation* 0

S Company’s realized net income from separate operations*…….….. P 820,000 820,000

Total P4,115,000

Less: Amortization of allocated excess……… 0

equity holders of parent – 20x5………….. P3,951,000

Or, alternatively

Realized gain on sale of equipment (downstream sales) through depreciation 25,000 P Company’s realized net income from separate operations…….….. P3,295,000 S Company’s net income from own operations………. P820,000

Realized gain on sale of equipment (upstream sales) through depreciation 0

S Company’s realized net income from separate operations…….….. P 820,000 820,000

Total P4,115,000

Amortization of allocated excess……… 0 164,000

equity holders of parent………….. P3,951,000

Add: Non-controlling Interest in Net Income (NCINI) _169,000

Realized gain on sale of equipment (upstream sales) through depreciation 0 S Company’s realized net income from separate operations……… P 820,000

Less: Amortization of allocated excess 0

P820,000

Problem II

1. Journal entry to record sale:

Cash

84,000

Accumulated Depreciation

80,000

Equipment

150,000

Gain on Sale of Equipment

14,000

Record the sale of equipment:

P84,000 = P150,000 - P80,000 + P14,000

P80,000 = (P150,000 / 15 years) x 8 years

2. Journal entry to record purchase:

Equipment

84,000

Cash

84,000

Journal entry to record depreciation expense:

(4)

Accumulated Depreciation

12,000

3. Eliminating entry at December 31, 20x4, to eliminate intercompany sale of

equipment:

E(1)

Equipment

66,000

Gain on Sale of Equipment

14,000

Depreciation Expense

2,000

Accumulated Depreciation

78,000

Eliminate unrealized profit on equipment.

Adjustment to equipment

Amount paid by WW to acquire building

P150,000

Amount paid by LL on intercompany sale

(84,000)

Adjustment to buildings and equipment

P 66,000

Adjustment to depreciation expense

Depreciation expense recorded by Lance

Corporation (P84,000 / 7 years)

P 12,000

Depreciation expense recorded by WW

Corporation (P150,000 / 15 years)

(10,000)

Adjustment to depreciation expense

P 2,000

Adjustment to accumulated depreciation

Amount required (P10,000 x 9 years)

P 90,000

Amount reported by LL (P12,000 x 1 year)

(12,000)

Required adjustment

P 78,000

4. Eliminating entry at January 1, 20x4, to eliminate intercompany sale of equipment

and prepare a consolidated balance sheet only:

E(1)

Equipment

66,000

Retained Earnings

12,000

Accumulated Depreciation

78,000

Eliminate unrealized profit on equipment.

Problem III

1. Eliminating entry, December 31, 20x8:

E(1)

Truck

55,000

Gain on Sale of Truck

35,000

Depreciation Expense

5,000

Accumulated Depreciation

85,000

Computation of gain on sale of truck:

Price paid by Minnow

P245,000

Cost of truck to Frazer

P300,000

Accumulated depreciation

(P300,000 / 10 years) x 3 years

( 90,000)

(210,000)

Gain on sale of truck

P 35,000

Accumulated depreciation adjustment:

Required [(P300,000 / 10 years) x 4 years]

P120,000

Reported [(P245,000 / 7 years) x 1 year]

(35,000)

Required increase

P 85,000

(5)

E(1)

Truck

55,000

Retained Earnings

30,000

Depreciation Expense

5,000

Accumulated Depreciation

80,000

Accumulated depreciation adjustment:

Required [(P300,000 / 10 years) x 5 years]

P150,000

Reported [(P245,000 / 7 years) x 2 years]

(70,000)

Required increase

P 80,000

Problem IV

a.

Eliminating entry, December 31, 20x8:

E(1)

Truck

90,000

Gain on Sale of Truck

30,000

Accumulated Depreciation

120,000

Computation of gain on sale of truck:

Price paid by MM

P210,000

Cost of truck to FF

P300,000

Accumulated depreciation

(P300,000 / 10 years) x 4 years

(120,000)

(180,000)

Gain on sale of truck

P 30,000

b.

Eliminating entry, December 31, 20x9:

E(1)

Truck

90,000

Retained Earnings, January 1

30,000

Depreciation Expense

5,000

Accumulated Depreciation

115,000

Accumulated depreciation adjustment:

Required [(P300,000 / 10 years) x 5 years]

P150,000

Recorded [(P210,000 / 6 years) x 1 year]

(35,000)

Required increase

P115,000

Problem V

Requirements 1 to 4

Schedule of Determination and Allocation of Excess (Partial-goodwill)

Date of Acquisition – January 1, 20x4

Fair value of Subsidiary (80%)

Consideration transferred……….. P 372,000 Less: Book value of stockholders’ equity of S:

Common stock (P240,000 x 80%)………. P 192,000

Retained earnings (P120,000 x 80%)………... 96,000 288,000 Allocated excess (excess of cost over book value)….. P 84,000 Less: Over/under valuation of assets and liabilities:

Increase in inventory (P6,000 x 80%)……… P 4,800 Increase in land (P7,200 x 80%)………. 5,760 Increase in equipment (P96,000 x 80%) 76,800 Decrease in buildings (P24,000 x 80%)………... ( 19,200)

Decrease in bonds payable (P4,800 x 80%)…… 3,840 72,000 Positive excess: Partial-goodwill (excess of cost over

(6)

The over/under valuation of assets and liabilities are summarized as follows:

S Co.

Book value Fair valueS Co. (Over) UnderValuation Inventory……….……….. P 24,000 P 30,000 P 6,000 Land……… 48,000 55,200 7,200 Equipment (net)... 84,000 180,000 96,000 Buildings (net) 168,000 144,000 (24,000) Bonds payable……… (120,000) ( 115,200) 4,800 Net……….. P 204,000 P 294,000 P 90,000

The buildings and equipment will be further analyzed for consolidation purposes as follows:

S Co.

Book value Fair valueS Co. (Decrease)Increase Equipment... 180,000 180,000 0 Less: Accumulated depreciation….. 96,000 - ( 96,000) Net book value………... 84,000 180,000 96,000

S Co.

Book value Fair valueS Co. (Decrease) Buildings... 360,000 144,000 ( 216,000) Less: Accumulated depreciation….. 1992,000 - ( 192,000) Net book value………... 168,000 144,000 ( 24,000)

A summary or depreciation and amortization adjustments is as follows:

Account Adjustments to be amortized UnderOver/ Life AmountAnnual Year(20x4)Current 20x5

Inventory P 6,000 1 P 6,000 P 6,000 P

-Subject to Annual Amortization

Equipment (net)... 96,000 8 12,000 12,000 12,000 Buildings (net) (24,000) 4 ( 6,000) ( 6,000) (6,000)

Bonds payable… 4,800 4 1,200 1,200 1,200

P 13,200 P 13,200 P 7,200

The goodwill impairment loss of P3,750 based on 100% fair value would be allocated to the controlling interest

and the NCI based on the percentage of total goodwill each equity interest received. For purposes of

allocating the goodwill impairment loss, the full-goodwill is computed as follows:

Consideration transferred: Cash (80%) P 372,000

Fair value of NCI (given) (20%) 93,000

Fair value of Subsidiary (100%) P 465,000

Less: Book value of stockholders’ equity of S (P360,000 x 100%) __360,000 Allocated excess (excess of cost over book value)….. P 105,000 Add (deduct): (Over) under valuation of assets and liabilities

(P90,000 x 100%) 90,000

Positive excess: Full-goodwill (excess of cost over

fair value)………... P 15,000

In this case, the goodwill was proportional to the controlling interest of 80% and non-controlling interest of 20%

computed as follows:

Value % of Total Goodwill applicable to parent……… P12,000 80.00% Goodwill applicable to NCI……….. 3,000 20.00% Total (full) goodwill……….. P15,000 100.00%

The goodwill impairment loss would be allocated as follows

Value % of Total Goodwill impairment loss attributable to parent or controlling P 3,000 80.00%

(7)

Interest

Goodwill applicable to NCI……….. 750 20.00%

Goodwill impairment loss based on 100% fair value or

full-Goodwill P 3,750 100.00%

The unrealized and gain on intercompany sales for 20x4 are as follows:

Date

of Sale Seller SellingPrice ValueBook Gain on saleUnrealized* RemainingLife Realized gain –depreciation** 20x4 4/1/20x4 P Co. P90,000 P75,000 P15,000 5 years P3,000/year P2,250 1/2/20x4 S Co. 60,000 28,800 31,200 8 years P3,900/year P3,900

* selling price less book value

** unrealized gain divided by remaining life; 20x4 – P3,000 x 9/12 = P2,250

20x4: First Year after Acquisition

Parent Company Cost Model Entry

January 1, 20x4: (1) Investment in S Company……… 372,000 Cash……….. 372,000 Acquisition of S Company. January 1, 20x4 – December 31, 20x4: (2) Cash……… 28,800 Dividend income (P36,000 x 80%)………. 28,800

Record dividends from S Company.

No entries are made on the parent’s books to depreciate, amortize or write-off the portion of the allocated

excess that expires during 20x4, and unrealized profits in ending inventory.

Consolidation Workpaper – Year of Acquisition

(E1) Common stock – S Co……… 240,000 Retained earnings – S Co……… 120.000

Investment in S Co……… 288,000

Non-controlling interest (P360,000 x 20%)……….. 72,000 To eliminate intercompany investment and equity accounts

of subsidiary on date of acquisition; and to establish non-controlling interest (in net assets of subsidiary) on date of acquisition.

(E2) Inventory………. 6,000 Accumulated depreciation – equipment……….. 96,000 Accumulated depreciation – buildings……….. 192,000

Land………. 7,200

Discount on bonds payable………. 4,800 Goodwill………. 12,000

Buildings……….. 216,000

Non-controlling interest (P90,000 x 20%)……….. 18,000

Investment in S Co………. 84,000

To allocate excess of cost over book value of identifiable assets acquired, with remainder to goodwill; and to establish

non-controlling interest (in net assets of subsidiary) on date of acquisition.

(E3) Cost of Goods Sold………. 6,000

Depreciation expense……….. 6,000

Accumulated depreciation – buildings……….. 6,000

Interest expense……… 1,200

Goodwill impairment loss………. 3,000

Inventory……….. 6,000

Accumulated depreciation – equipment……….. 12,000

Discount on bonds payable……… 1,200

Goodwill……… 3,000

(8)

amortization on differences between acquisition date fair value and book value of Son’s identifiable assets and liabilities as follows:

Cost of Goods Sold

Depreciation/ Amortization

Expense Amortization-Interest Total Inventory sold P 6,000

Equipment P 12,000

Buildings ( 6,000)

Bonds payable _______ _______ P 1,200

Totals P 6,000 P 6,000 P1,200 13,200

(E4) Dividend income - P………. 28,800

Dividends paid – S……… 36,000

To eliminate intercompany dividends and non-controlling interest share of dividends.

(E5) Gain on sale of equipment 15,000

Equipment 30,000

Accumulated depreciation 45,000

To eliminate the downstream intercompany gain and restore to its original cost to the consolidate entity (along with its accumulated depreciation at the point of the intercompany sale).

Equipment 12,000

To eliminate the upstream intercompany gain and restore to its original cost to the consolidate entity (along with its accumulated depreciation at the point of the intercompany sale).

(E7) Accumulated depreciation……….. 2,250

Depreciation expense……… 2,250

To adjust downstream depreciation expense on equipment sold to subsidiary, thus realizing a portion of the gain through depreciation (P15,000 / 5 years x 9/12 = P2,250).

To adjust upstream depreciation expense on equipment sold to parent, thus realizing a portion of the gain through depreciation (P31,200/85 years x 1 year = P3,900).

(E9) Non-controlling interest in Net Income of Subsidiary………… 10,140

Non-controlling interest ………….. 10,140

To establish non-controlling interest in subsidiary’s adjusted net income for 20x4 as follows:

Net income of subsidiary……….. P 91,200 Unrealized gain on sale of equipment

(upstream sales) ( 31,200)

Realized gain on sale of equipment (upstream

sales) through depreciation 3,900

S Company’s realized net income from

separate operations P 63,900

Less: Amortization of allocated excess [(E3)]…. 13,200 P 50,700 Multiplied by: Non-controlling interest %... 20% Non-controlling Interest in Net Income (NCINI) –

(9)

Subsidiary accounts are adjusted to full fair value regardless on the controlling interest percentage or what

option used to value non-controlling interest or goodwill.

Worksheet for Consolidated Financial Statements, December 31, 20x4.

Cost Model (Partial-goodwill)

80%-Owned Subsidiary

December 31, 20x4 (First Year after Acquisition)

Income Statement P Co S Co. Dr. Cr. Consolidated

Sales P480,000 P240,000 P 720,000

Gain on sale of equipment 15,000 31,200 (5) 15,000 (6) 31,200

Dividend income 28,800 - (4) 28,800 _________

Total Revenue P523,800 P271,200 P 720,000

Cost of goods sold P204,000 P138,000 (3) 6,000 P 348,000

Depreciation expense 60,000 24,000 (3) 6,000 (7) 2,250

(8) 3,900 83,850

Interest expense - - (3) 1,200 1,200

Other expenses 48,000 18,000 66,000

Goodwill impairment loss - - (3) 3,000 3,000

Total Cost and Expenses P312,000 P180,000 P 502,050

Net Income P211,800 P 91,200 P 217,950

NCI in Net Income - Subsidiary - - (9 10,140 ( 10,140)

Net Income to Retained Earnings P211,800 P 91,200 P 207,810

Statement of Retained Earnings Retained earnings, 1/1

P Company P360,000 P 360,000

S Company P120,000 (1) 120,000

Net income, from above 211,800 91,200 207,810

Total P571,800 P211,200 P 567,810

Dividends paid

P Company 72,000 72,000

S Company - 36,000 (4) 36,000 _ ________

Retained earnings, 12/31 to Balance

Sheet P499,800 P175,200 P 495,810 Balance Sheet Cash………. P 232,800 P 90,000 P 322,800 Accounts receivable…….. 90,000 60,000 150,000 Inventory………. 120,000 90,000 (2) 6,000 3) 6,000 210,000 Land………. 210,000 48,000 (2) 7,200 265,200 Equipment 240,000 180,000 (5) 30,000 (6) 12,000 462,000 Buildings 720,000 540,000 (2) 216,000 1,044,000

Discount on bonds payable (2) 4,800 (3) 1,200 3,600

Goodwill……… (2) 12,000 (3) 3,000 9,000 Investment in S Co……… 372,000 (1)288,000 (2) 84,000 -Total P1,984,800 P1,008,000 P2,466,600 Accumulated depreciation - equipment P 135,000 P 96,000 (3)(7) 2,25096,000 (8) 3,900 (3) 12,000 (5) 45,000 (6) 43,200 P229,050 Accumulated depreciation - buildings 405,000 288,000 (2) 192,000(3) 6,000 495,000 Accounts payable……… 105,000 88,800 193,800 Bonds payable……… 240,000 120,000 360,000

Common stock, P10 par……… 600,000 600,000

Common stock, P10 par……… 240,000 (1) 240,000

Retained earnings, from above 499,800 175,200 495,810

Non-controlling interest………… _________ _________ (4) 7,200 __________ (1 ) 72,000 (2) 18,000 (9) 10,140 ____92,940 Total P1,984,800 P1,008,000 P 834,450 P 834,450 P2,466,600

(10)

20x5: Second Year after Acquisition

P Co. S Co.

Sales P 540,000 P 360,000

Less: Cost of goods sold 216,000 192,000

Gross profit P 324,000 P 168,000

Less: Depreciation expense 60,000 24,000

Other expense 72,000 54,000

Net income from its own separate operations P 192,000 P 90,000

Add: Dividend income 38,400

-Net income P 230,400 P 90,000

Dividends paid P 72,000 P 48,000

No goodwill impairment loss for 20x5.

Parent Company Cost Model Entry

Only a single entry is recorded by the parent in 20x5 in relation to its subsidiary investment:

January 1, 20x5 – December 31, 20x5:

Cash……… 38,400

Dividend income (P48,000 x 80%)………. 38,400

On the books of S Company, the P48,000 dividend paid was recorded as follows:

Dividends paid………… 48,000

Cash 48,000

Dividends paid by S Co..

Consolidation Workpaper – Second Year after Acquisition

The working paper eliminations (in journal entry format) on December 31, 20x5, are as follows:

(E1) Investment in S Company……… 44,160

Retained earnings – P Company……… 44,160

To provide entry to convert from the cost method to the equity method or the entry to establish reciprocity at the beginning of the year, 1/1/20x5, computed as follows:

Retained earnings – S Company, 1/1/20x5 P175,200 Retained earnings – S Company, 1/1/20x4 120,000 Increase in retained earnings…….. P 55,200 Multiplied by: Controlling interest % 80%

Retroactive adjustment P 44,160

Entry (1) above is needed only for firms using the cost method to account for their investments in the subsidiary.

If the parent is already using the equity method, there is no need to convert to equity.

(E2) Common stock – S Co……… 240,000 Retained earnings – S Co., 1/1/20x5 175,200

Investment in S Co (P415,200 x 80%)……… 332,160 Non-controlling interest (P415,200 x 20%)……….. 83,040 To eliminate intercompany investment and equity accounts

of subsidiary and to establish non-controlling interest (in net assets of subsidiary) on January 1, 20x5.

Land………. 7,200

(11)

Goodwill………. 12,000

Non-controlling interest (P90,000 x 20%) 18,000

To allocate excess of cost over book value of identifiable assets acquired, with remainder to goodwill; and to establish non-controlling interest (in net assets of subsidiary) on January 1, 20x5. (E4) Retained earnings – P Company, 1/1/20x5

[(P13,200 x 80%) + P3,000, impairment loss on

partial-goodwill] 13,560

Non-controlling interests (P13,200 x 20%)………. 2,640

To provide for years 20x4 and 20x5 depreciation and amortization on differences between acquisition date fair value and book value of Son’s identifiable assets and liabilities as follows:

Year 20x4 amounts are debited to Perfect’s retained earnings & NCI;

Year 20x5 amounts are debited to respective nominal accounts. (20x4)

Retained earnings,

expense Amortization-Interest Inventory sold P 6,000 Equipment 12,000 P 12,000 Buildings (6,000) ( 6,000) Bonds payable 1,200 ________ P 1,200 Sub-total P13,200 P 6,000 P 1,200 Multiplied by: 80% To Retained earnings P 10,560 Impairment loss 3,000 Total P 13,560

(E5) Retained Earnings – P Company, 1/1/20x5 15,000

Equipment 30,000

(E6) Retained Earnings–P Company, 1/1/20x5 (P31,200 x 80%) 24,960 Non-controlling interest (P31,200 x 20%) 6,240

Equipment 12,000

(12)

Retained Earnings–P Company, 1/1/20x5 (prior year) 2,250 To adjust downstream depreciation expense on equipment sold to

subsidiary, thus realizing a portion of the gain through depreciation

Depreciation expense (current year) 3,900

Retained Earnings–P Co. 1/1/20x5 (P3,900 x 80%) 3,120

Non-controlling interest (P31,200 x 20%) 780

Net income of subsidiary……….. P 90,000 Realized gain on sale of equipment (upstream

S Company’s Realized net income* P 93,900 Less: Amortization of allocated excess ( 7,200) P 86,700 Multiplied by: Non-controlling interest %... 20% Non-controlling Interest in Net Income (NCINI)

– partial goodwill P 17,340

*from separate transactions that has been realized in transactions with third persons.

Worksheet for Consolidated Financial Statements, December 31, 20x5.

Cost Model (Partial-goodwill)

80%-Owned Subsidiary

December 31, 20x5 (Second Year after Acquisition)

Sales P540,000 P360,000 P 900,000

Dividend income 38,400 - (5) 38,400 ___________

Cost of goods sold P216,000 P192,000 P 408,000

Depreciation expense 60,000 24,000 (4) 6,000 (7) 3,000 (8) 3,900 83,100 Interest expense - - (4) 1,200 1,200 Other expenses 72,000 54,000 126,000

Goodwill impairment loss - -

-Total Cost and Expenses P348,000 P270,000 P 618,300

Net Income P230,400 P 90,000 P 281,700

NCI in Net Income - Subsidiary - - (9) 17,340 ( 17,340)

Statement of Retained Earnings Retained earnings, 1/1 P Company P499,800 (1) 13,560 (5) 15,000 (6) 24,960 (1) 44,160 (7) 2,250 (8) 3,120 P 495,810 S Company P 175,200 (2) 175,200

Net income, from above 230,400 __90,000 264,360

Total P730,200 P265,200 P 760,170

Dividends paid

P Company 72,000 72,000

S Company - 48,000 (5) 48,000 _ ________

(13)

Balance Sheet Cash………. P 265,200 P 102,000 P 367,200 Accounts receivable…….. 180,000 96,000 276,000 Inventory………. 216,000 108,000 (1) 6,000 (2) 6,000 324,000 Land………. 210,000 48,000 (3) 7,200 265,200 Equipment 240,000 180,000 (5) 30,000 (6) 12,000 462,000 Buildings 720,000 540,000 (3) 216,000 1,044,000

Goodwill……… (3) 12,000 (4) 3,000 9,000 Investment in S Co……… 372,000 (1) 44,160 (2) 332,160 (3) 84,000 -Total P2,203,200 P1,074,000 P2,749,800 Accumulated depreciation - equipment P 150,000 P 102,000 (3) 96,000(7) 5,250 (8) 7,800 (4) 24,000 (5) 45,000 (6) 43,200 P 255,150 Accumulated depreciation - buildings 450,000 306,000 (3) 192,000(4) 12,000 552,000 Accounts payable……… 105,000 88,800 193,800 Bonds payable……… 240,000 120,000 360,000

Non-controlling interest………… ___ _____ _________ (4) 2,640 (5) 9,600 (6) 6,240 __________ (2 83,040 (3) 18,000 (8) 780 (9) 17,340 ____100,680 Total P2,203,200 P1,074,000 P 979,350 P 979,350 P2,749,800

5. 1/1/20x4

a. On date of acquisition the retained earnings of parent should always be considered as the consolidated

retained earnings, thus:

Consolidated Retained Earnings, January 1, 20x4

Retained earnings - Parent Company, January 1, 20x4 (date of acquisition) P360,000

b.

Non-controlling interest (partial-goodwill), January 1, 20x4

Common stock – Subsidiary Company……… P 240,000

Retained earnings – Subsidiary Company………. 120,000

Stockholders’ equity – Subsidiary Company.………….. P 360,000

Adjustments to reflect fair value - (over) undervaluation of assets and liabilities 90,000 Fair value of stockholders’ equity of subsidiary, January 1, 20x4……… P 450,000

Multiplied by: Non-controlling Interest percentage…………... 20

Non-controlling interest (partial goodwill),……….. P 90,000

c.

Consolidated SHE: Stockholders’ Equity

Common stock, P10 par P 600,000

Retained earnings 360,000

Parent’s Stockholders’ Equity / CI – SHE P 960,000

NCI, 1/1/20x4 ___90,000

Consolidated SHE, 1/1/20x4 P1,050,000

6. Note: The goodwill recognized on consolidation purely relates to the parent’s share. NCI is measured as a

proportion of identifiable assets and goodwill attributable to NCI share is not recognized.

12/31/20x4:

a. CI-CNI - P

(14)

Unrealized gain on sale of equipment (downstream sales) (15,000) Realized gain on sale of equipment (downstream sales) through depreciation 2,250 P Company’s realized net income from separate operations*…….….. P170,250 S Company’s net income from own operations………. P 91,200

Unrealized gain on sale of equipment (upstream sales) ( 31,200) Realized gain on sale of equipment (upstream sales) through depreciation 3,900

Total P234,150

Amortization of allocated excess (refer to amortization above) 13,200

Goodwill impairment (impairment under partial-goodwill approach) 3,000 26,340 Controlling Interest in Consolidated Net Income or Profit attributable to

equity holders of parent………….. P207,810

Add: Non-controlling Interest in Net Income (NCINI) _ 10,140

Consolidated Net Income for 20x4 P217,950

*that has been realized in transactions with third parties.

b. NCI-CNI – P10,140

Unrealized gain on sale of equipment (upstream sales) ( 31,200) Realized gain on sale of equipment (upstream sales) through depreciation 3,900 S Company’s realized net income from separate operations……… P 63,900 Less: Amortization of allocated excess / goodwill impairment

(refer to amortization table above) 13,200

P 50,700

Non-controlling Interest in Net Income (NCINI) – partial goodwill P 10,140 *that has been realized in transactions with third parties.

c. CNI, P217,950 – refer to (a)

d. On subsequent to date of acquisition, consolidated retained earnings would be computed as follows:

Consolidated Retained Earnings, December 31, 20x4

Retained earnings - Parent Company, January 1, 20x4 (date of acquisition) P360,000 Add: Controlling Interest in Consolidated Net Income or Profit attributable to

equity holders of parent for 20x4 207,810

Total P567,810

Less: Dividends paid – Parent Company for 20x4 72,000

Consolidated Retained Earnings, December 31, 20x4 P495,810

e.

The goodwill recognized on consolidation purely relates to the parent’s share. NCI is measured as a

proportion of identifiable assets and goodwill attributable to NCI share is not recognized. The NCI on

January 1, 20x4 and December 31, 20x4 are computed as follows:

Non-controlling interest (partial-goodwill), December 31, 20x4

Common stock – Subsidiary Company, December 31, 20x4…… P 240,000

Retained earnings – Subsidiary Company, December 31, 20x4

Retained earnings – Subsidiary Company, January 1, 20x4 P120,000

Add: Net income of subsidiary for 20x4 91,200

Total P211,200

Less: Dividends paid – 20x4 36,000 175,200

Stockholders’ equity – Subsidiary Company, December 31, 20x4 P 415,200 Adjustments to reflect fair value - (over) undervaluation of assets and

liabilities, date of acquisition (January 1, 20x4) 90,000

Amortization of allocated excess (refer to amortization above) – 20x4 ( 13,200) Fair value of stockholders’ equity of subsidiary, December 31, 20x4…… P492,000

Unrealized gain on sale of equipment (upstream sales) ( 31,200)

Realized gain on sale of equipment (upstream sales) through depreciation 3,900 Realized stockholders’ equity of subsidiary, December 31, 20x4…… P464,700

(15)

f.

Parent’s Stockholders’ Equity / CI – SHE, 12/31/20x4 P1,095,810

NCI, 12/31/20x4 ___92,940

12/31/20x5:

a. CI-CNI – P264,360

P Company’s net income from own/separate operations…………. P192,000

Realized gain on sale of equipment (downstream sales) through depreciation 3,000 P Company’s realized net income from separate operations*…….….. P195,000 S Company’s net income from own operations………. P 90,000

Total P288,900

Less: Amortization of allocated excess……… 7,200

equity holders of parent – 20x5………….. P264,360

Or, alternatively

Total P288,900

Amortization of allocated excess……… 7,200 24,540

Add: Non-controlling Interest in Net Income (NCINI) _ 17,340

b. NCI-CNI – P17,340

(Reported net income of Son Company) P 90,000

Realized gain on sale of equipment (upstream sales) through depreciation 3,900 S Company’s realized net income from separate operations……… P 93,900

Less: Amortization of allocated excess 7,200

P 86,700

c. CNI, P281,700 – refer to (a)

d. On subsequent to date of acquisition, consolidated retained earnings would be computed as follows:

Retained earnings - Parent Company, January 1, 20x5 (cost model) P499,800 Less: Downstream - net unrealized gain on sale of equipment – prior to 20x5

(P15,000 – P2,250) 12,750

Adjusted Retained Earnings – Parent 1/1/20x5 (cost model ) Son Company’s Retained earnings that have been realized in transactions with third

(16)

Adjustment to convert from cost model to equity method for purposes of consolidation or to establish reciprocity:/Parent’s share in adjusted net increased in subsidiary’s retained earnings:

Retained earnings – Subsidiary, January 1, 20x5 P 175,200 Less: Retained earnings – Subsidiary, January 1, 20x4 120,000 Increase in retained earnings since date of acquisition P 55,200

Less: Amortization of allocated excess – 20x4 13,200

Upstream - net unrealized gain on sale of equipment –prior to

20x5 (P31,200 – P3,900) 27,300

P 14,700 Multiplied by: Controlling interests %... 80% P 11,760

Less: Goodwill impairment loss 3,000 __ 8,760

Consolidated Retained earnings, January 1, 20x5 P495,810

Add: Controlling Interest in Consolidated Net Income or Profit attributable to

Total P760,170

*this procedure would be more appropriate, instead of multiplying the full-goodwill impairment loss of P3,750 by 80%. There might be situations where the controlling interests on goodwill impairment loss would not be proportionate to NCI acquired (refer to Illustration 15-6).

Or, alternatively:

Retained earnings - Parent Company, December 31, 20x5 (cost model) P658,200 Less: Downstream - net unrealized gain on sale of equipment – prior to

12/31/20x5 (P15,000 – P2,250 – P3,000) 9,750

Adjusted Retained Earnings – Parent 12/31/20x5 (cost model ) S Company’s Retained earnings that have been realized in

transactions with third parties.. P648,450

Adjustment to convert from cost model to equity method for purposes of consolidation or to establish reciprocity:/Parent’s share in adjusted net increased in subsidiary’s retained earnings:

Retained earnings – Subsidiary, December 31, 20x5 P 217,200 Less: Retained earnings – Subsidiary, January 1, 20x4 120,000 Increase in retained earnings since date of acquisition P 97,200 Less: Accumulated amortization of allocated excess –

20x4 and 20x5 (P11,000 + P6,000) 20,400

Upstream - net unrealized gain on sale of equipment – prior to

12/31/20x5 (P31,200 – P3,900 – P3,900) 23,400

P 53,400 Multiplied by: Controlling interests %... 80% P 42,720

Less: Goodwill impairment loss 3,000 39,720

Consolidated Retained earnings, December 31, 20x5 P688,170

e.

Total P 265,200

Amortization of allocated excess (refer to amortization above) :

20x4 P 13,200

20x5 7,200 ( 20,400)

Fair value of stockholders’ equity of subsidiary, December 31, 20x5…… P 526,800 Less: Upstream - net unrealized gain on sale of equipment – prior to 12/31/20x5

(P31,200 – P3,900 – P3,900) 23,400

(17)

Non-controlling interest (partial goodwill)……….. P 100,680

f.

NCI, 12/31/20x5 __100,680

Problem VI

Requirements 1 to 4

Schedule of Determination and Allocation of Excess

Date of Acquisition – January 1, 20x4

Consideration transferred (80%)……….. P 372,000 Fair value of NCI (given) (20%)……….. 93,000 Fair value of Subsidiary (100%)………. P 465,000 Less: Book value of stockholders’ equity of Son:

Common stock (P240,000 x 100%)………. P 240,000

Retained earnings (P120,000 x 100%)………... 120,000 360,000 Allocated excess (excess of cost over book value)….. P 105,000 Less: Over/under valuation of assets and liabilities:

Increase in inventory (P6,000 x 100%)……… P 6,000 Increase in land (P7,200 x 100%)………. 7,200 Increase in equipment (P96,000 x 100%) 96,000 Decrease in buildings (P24,000 x 100%)………... ( 24,000)

Decrease in bonds payable (P4,800 x 100%)…… 4,800 90,000 Positive excess: Full-goodwill (excess of cost over

fair value)………... P 15,000

A summary or depreciation and amortization adjustments is as follows:

Account Adjustments to be amortized Over/under Life AmountAnnual Year(20x4)Current 20x5

Inventory P 6,000 1 P 6,000 P 6,000 P

-Subject to Annual Amortization

Equipment (net)... 96,000 8 12,000 12,000 12,000 Buildings (net) (24,000) 4 ( 6,000) ( 6,000) (6,000)

Bonds payable… 4,800 4 1,200 1,200 1,200

P 13,200 P 13,200 P 7,200

20x4: First Year after Acquisition

Parent Company Cost Model Entry

January 1, 20x4: (1) Investment in S Company……… 372,000 Cash……….. 372,000 Acquisition of S Company. January 1, 20x4 – December 31, 20x4: (2) Cash……… 28,800 Dividend income (P36,000 x 80%)………. 28,800

On the books of S Company, the P36,000 dividend paid was recorded as follows:

(18)

Cash……. 36,000 Dividends paid by S Co..

No entries are made on the parent’s books to depreciate, amortize or write-off the portion of the allocated

excess that expires during 20x4.

Consolidation Workpaper – First Year after Acquisition

(E1) Common stock – S Co……… 240,000 Retained earnings – S Co……… 120.000

Investment in S Co……… 288,000

Non-controlling interest (P360,000 x 20%)……….. 72,000 To eliminate intercompany investment and equity accounts

of subsidiary on date of acquisition; and to establish non-controlling interest (in net assets of subsidiary) on date of acquisition.

Land………. 7,200

Non-controlling interest (P90,000 x 20%) + [(P15,000, full –

P12,000, partial goodwill)]………… 21,000

To allocate excess of cost over book value of identifiable assets acquired, with remainder to goodwill; and to establish

non-controlling interest (in net assets of subsidiary) on date of acquisition.

Since the set-up entry in (E2) NCI at fair value, non-controlling interests have a share of entity goodwill and

hence is exposed to impairment loss on goodwill. PAS 36 requires the impairment loss to be pro-rated between

the parent and NCI on the same basis as that on which profit or loss is allocated. In other words, the impairment

loss is not pro-rated in accordance with the proportion of goodwill recognized by parent and NCI.

(E3) Cost of Goods Sold………. 6,000

Goodwill impairment loss………. 3,750

To provide for 20x4 impairment loss and depreciation and

amortization on differences between acquisition date fair value and book value of Son’s identifiable assets and liabilities as follows:

Cost of Goods Sold

Expense Amortization-Interest Inventory sold P 6,000

Equipment P12,000

Buildings ( 6,000)

Bonds payable _______ _______ P 1,200

Totals P 6,000 P 6,000 P1,200

(19)

Equipment 30,000

Equipment 12,000

To adjust downstream depreciation expense on equipment sold to subsidiary, thus realizing a portion of the gain through depreciation (P15,000 / 5 years x 9/12 = P2,250).

Net income of subsidiary……….. P 91,200 Unrealized gain on sale of equipment

(upstream sales) ( 31,200)

Realized gain on sale of equipment (upstream

S Company’s realized net income from

separate operations P 63,900

Less: Amortization of allocated excess [(E3)]…. 13,200 P 50,700 Multiplied by: Non-controlling interest %... 20% Non-controlling Interest in Net Income (NCINI) –

partial goodwill P 10,140

Less: Non-controlling interest on impairment loss on full-goodwill (P3,750 x 20%) or (P3,750 impairment on full-goodwill less

P3,000, impairment on partial-goodwill) 750 Non-controlling Interest in Net Income (NCINI) P 9,390

Worksheet for Consolidated Financial Statements, December 31, 20x4.

Cost Model (Full-goodwill)

80%-Owned Subsidiary

December 31, 20x4 (First Year after Acquisition)

Sales P480,000 P240,000 P 720,000

Gain on sale of equipment 15,000 31,200 (5) 15,000

(6) 31,200

Dividend income 28,800 - (4) 28,800 _________

Cost of goods sold P204,000 P138,000 (3) 6,000 P 348,000

(20)

(8) 3,900

Interest expense - - (3) 1,200 1,200

Other expenses 48,000 18,000 66,000

Goodwill impairment loss - - (3) 3,750 3,750

Total Cost and Expenses P312,000 P180,000 P 502,800

Net Income P211,800 P 91,200 P 217,200

Statement of Retained Earnings Retained earnings, 1/1

P Company P360,000 P 360,000

S Company P120,000 (1) 120,000

Total P571,800 P211,200 P 567,810

Dividends paid

P Company 72,000 72,000

S Company - 36,000 (4) 36,000 _ ________

Sheet P499,800 P175,200 P 495,810 Balance Sheet Cash………. P 232,800 P 90,000 P 322,800 Accounts receivable…….. 90,000 60,000 150,000 Inventory………. 120,000 90,000 (2) 6,000 3) 6,000 210,000 Land………. 210,000 48,000 (2) 7,200 265,200 Equipment 240,000 180,000 (5) 30,000 (6) 12,000 462,000 Buildings 720,000 540,000 (2) 216,000 1,044,000

Goodwill……… (2) 15,000 (3) 3,750 11,250 Investment in S Co……… 372,000 (1) 288,000 (2) 84,000 -Total P1,984,800 P1,008,000 P2,468,850 Accumulated depreciation - equipment P 135,000 P 96,000 (2) 80,000(7) 2,250 (8) 3,900 (3) 10,000 (5) 45,000 (6) 43,200 P229,050 Accumulated depreciation - buildings 405,000 288,000 (2) 192,000(3) 6,000 495,000 Accounts payable……… 105,000 88,800 193,800 Bonds payable……… 240,000 120,000 360,000

Non-controlling interest………… _________ _________ (3) 7,200 __________ (1 ) 72,000 (2) 21,000 (9) 9,390 ____95,190 Total P1,984,800 P1,008,000 P 843,690 P 843,690 P2,468,850

20x5: Second Year after Acquisition

P Co. S Co.

Sales P 540,000 P 360,000

Less: Cost of goods sold 216000 192,000

Gross profit P 324,000 P 168,000

Less: Depreciation expense 60,000 24,000

Other expense 72,000 54,000

Net income from its own separate operations P 192,000 P 90,000

Add: Dividend income 38,400

-Net income P 230,400 P 90,000

Dividends paid P 72,000 P 48,000

(21)

Parent Company Cost Model Entry

January 1, 20x5 – December 31, 20x5:

Cash……… 38,400

Dividend income (P48,000 x 80%)………. 38,400

On the books of S Company, the P48,000 dividend paid was recorded as follows:

Dividends paid………… 48,000

Cash 48,000

Dividends paid by S Co..

Consolidation Workpaper – Second Year after Acquisition

(E1) Investment in S Company……… 44,160

Retained earnings – P Company……… 44,160

To provide entry to convert from the cost method to the equity method or the entry to establish reciprocity at the beginning of the year, 1/1/20x5, computed as follows:

Retained earnings – S Company, 1/1/20x5 P175,200 Retained earnings – S Company, 1/1/20x4 120,000 Increase in retained earnings…….. P 55,200 Multiplied by: Controlling interest % 80%

Retroactive adjustment P 44,160

(E2) Common stock – S Co……… 240,000 Retained earnings – S Co., 1/1/20x5 175,200

Investment in S Co (P415,200 x 80%)……… 332,160 Non-controlling interest (P415,200 x 20%)……….. 83,040 To eliminate intercompany investment and equity accounts

of subsidiary and to establish non-controlling interest (in net assets of subsidiary) on January 1, 20x5.

Land………. 7,200

Non-controlling interest (P90,000 x 20%) + [(P15,000, full –

P12,000, partial goodwill)]………… 21,000

To allocate excess of cost over book value of identifiable assets acquired, with remainder to goodwill; and to establish non-controlling interest (in net assets of subsidiary) on January 1, 20x5. (E4) Retained earnings – P Company, 1/1/20x5

[(P13,200 x 80%) + P3,000, impairment loss on

partial-goodwill] 13,560

Non-controlling interests (P16,950 x 20%) or (P13,200 x 20% +

(P3,750 – P3,000 = P750) 3,390

(22)

To provide for years 20x4 and 20x5 depreciation and amortization on differences between acquisition date fair value and book value of Son’s identifiable assets and liabilities as follows:

Year 20x4 amounts are debited to Perfect’s retained earnings & NCI;

Year 20x5 amounts are debited to respective nominal accounts. (20x4)

Retained earnings,

expense Amortization-Interest Inventory sold P 6,000 Equipment 12,000 P 12,000 Buildings (6,000) ( 6,000) Bonds payable 1,200 ________ P 1,200 Sub-total P13,200 P 6,000 P 1,200 Multiplied by: 80% To Retained earnings P 10,560 Impairment loss 3,000 Total P 13,560

(E6) Retained Earnings – P Company, 1/1/20x5 15,000

Equipment 30,000

(E7) Retained Earnings–P Company, 1/1/20x5 (P31,200 x 80%) 24,960 Non-controlling interest (P31,200 x 20%) 6,240

Equipment 12,000

Depreciation expense (current year)……… 3,000

Retained Earnings–P Company, 1/1/20x5 (prior year) 2,250 To adjust downstream depreciation expense on equipment sold to

subsidiary, thus realizing a portion of the gain through depreciation

Depreciation expense (current year) 3,900

Retained Earnings–P Co. 1/1/20x5 (P3,900 x 80%) 3,120

Non-controlling interest (P3,900 x 20%) 780

Net income of subsidiary……….. P 90,000 Realized gain on sale of equipment (upstream

S Company’s Realized net income* P 93,900 Less: Amortization of allocated excess ( 7,200)

(23)

P 86,700 Multiplied by: Non-controlling interest %... 20% Non-controlling Interest in Net Income (NCINI P 17,340 Less: NCI on goodwill impairment loss on

full-Goodwill 0

Non-controlling Interest in Net Income (NCINI) P 17,340 *from separate transactions that has been realized in transactions

with third persons.

Worksheet for Consolidated Financial Statements, December 31, 20x5.

Cost Model (Full-goodwill)

80%-Owned Subsidiary

December 31, 20x5 (Second Year after Acquisition)

Sales P540,000 P360,000 P 900,000

Dividend income 38,400 - (5) 38,400 ___________

Cost of goods sold P216,000 P192,000 P 408,000

Depreciation expense 60,000 24,000 (4) 6,000 (8) 3,000 (9) 3,900 83,100 Interest expense - - (4) 1,200 1,200 Other expenses 72,000 54,000 126,000

Goodwill impairment loss - -

-Total Cost and Expenses P348,000 P270,000 P 618,300

Net Income P230,400 P 90,000 P 281,700

Statement of Retained Earnings Retained earnings, 1/1 P Company P499,800 (2) 13,560 (6) 15,00 (7) 24,960 (1) 44,160 (8) 2,250 (9) 3,120 P 495,810 S Company P 175,200 (1) 175,200

Total P730,200 P265,200 P 760,170

Dividends paid

P Company 72,000 72,000

S Company - 48,000 (5) 48,000 _ ________

Sheet P658,200 P217,200 P 688,170 Balance Sheet Cash………. P 265,200 P 102,000 P 367,200 Accounts receivable…….. 180,000 96,000 276,000 Inventory………. 216,000 108,000 (3) 6,000 (4) 6,000 324,000 Land………. 210,000 48,000 (3) 7,200 265,200 Equipment 240,000 180,000 (6) 30,000 (7) 12,000 462,000 Buildings 720,000 540,000 (3) 216,000 1,044,000

Goodwill……… (3) 15,000 (4) 3,750 11,250 Investment in S Co……… 372,000 (1) 44,160 (2) 332,160 (3) 90,000 -Total P2,203,200 P1,074,000 P2,752,050 Accumulated depreciation - equipment P 150,000 P 102,000 (3) 96,000(8) 5,250 (9) 7,800 (4) 24,000 (6) 45,000 (7) 43,200 P 255,150 Accumulated depreciation - buildings 450,000 306,000 (3) 192,000(4) 12,000 552,000 Accounts payable……… 105,000 88,800 193,800 Bonds payable……… 240,000 120,000 360,000

(24)

Non-controlling interest………… ___ _____ _________ (4) 3,390 (5) 9,600 (7) 6,240 __________ (2 ) 83,040 (3) 21,000 (9) 780 (10) 17,340 ____102,930 Total P2,203,200 P1,074,000 P 983,100 P 983,100 P2,752,050

5. 1/1/20x4

a. On date of acquisition the retained earnings of parent should always be considered as the consolidated

retained earnings, thus:

Consolidated Retained Earnings, January 1, 20x4

Retained earnings - Parent Company, January 1, 20x4 (date of acquisition) P360,000

b.

Non-controlling interest (partial-goodwill), January 1, 20x4

Common stock – Subsidiary Company……… P 240,000

Retained earnings – Subsidiary Company………. 120,000

Stockholders’ equity – Subsidiary Company.………….. P 360,000

Adjustments to reflect fair value - (over) undervaluation of assets and liabilities 90,000 Fair value of stockholders’ equity of subsidiary, January 1, 20x4……… P 450,000

Non-controlling interest (partial goodwill),……….. P 90,000

Add: Non-controlling interests on full goodwill, 1/1/20x4 (P12,500, full-goodwill – P10,000, partial

goodwill) 3,000

Non-controlling interest (full-goodwill) P 93,000

c.

Parent’s Stockholders’ Equity / CI – SHE P 960,000

NCI, 1/1/20x4 ___93,000

6. Note: The goodwill recognized on consolidation purely relates to the parent’s share. NCI is measured as a

proportion of identifiable assets and goodwill attributable to NCI share is not recognized.

12/31/20x4:

a. CI-CNI – P207,810

Unrealized gain on sale of equipment (downstream sales) (15,000)

Unrealized gain on sale of equipment (upstream sales) ( 31,200) Realized gain on sale of equipment (upstream sales) through depreciation 3,900

Total P234,150

Amortization of allocated excess (refer to amortization above) 13,200

Goodwill impairment (impairment under partial-goodwill approach) 3,000 26,340 Controlling Interest in Consolidated Net Income or Profit attributable to

Add: Non-controlling Interest in Net Income (NCINI) 10,140

b. NCI-CNI – P10,140

(25)

Unrealized gain on sale of equipment (upstream sales) ( 31,200) Realized gain on sale of equipment (upstream sales) through depreciation 3,900 S Company’s realized net income from separate operations……… P 63,900 Less: Amortization of allocated excess / goodwill impairment

(refer to amortization table above) 13,200

P 50,700

Non-controlling Interest in Net Income (NCINI) – partial goodwill P 10,140 Less: Non-controlling interest on impairment loss on full-goodwill (P3,750 x

20%) or (P3,750mpairment on full-goodwill less P3,000, impairment on

partial- goodwill) 750

Non-controlling Interest in Net Income (NCINI) – full goodwill P 9,390 *that has been realized in transactions with third parties.

c. CNI, P217,950 – refer to (a)

d. On subsequent to date of acquisition, consolidated retained earnings would be computed as follows:

Retained earnings - Parent Company, January 1, 20x4 (date of acquisition) P360,000 Add: Controlling Interest in Consolidated Net Income or Profit attributable to

Total P567,810

e.

Total P211,200

Amortization of allocated excess (refer to amortization above) – 20x4 ( 13,200) Fair value of stockholders’ equity of subsidiary, December 31, 20x4…… P492,000

Unrealized gain on sale of equipment (upstream sales) ( 31,200)

Realized gain on sale of equipment (upstream sales) through depreciation 3,900 Realized stockholders’ equity of subsidiary, December 31, 20x4…… P464,700

Non-controlling interest (partial-goodwill)……….. P 92,940

Add: Non-controlling interest on full goodwill , net of impairment loss, 12/31/x4:

[(P15,000 full – P12,000, partial = P3,000) – P750 impairment loss 2,250

Non-controlling interest (full-goodwill)……….. P 95,190

f.

NCI, 12/31/20x4 ___95,190

12/31/20x5:

a. CI-CNI – P281,700

Realized gain on sale of equipment (downstream sales) through depreciation 3,000 P Company’s realized net income from separate operations*…….….. P195,000