CHAPTER 16.doc

(1)

CHAPTER 16 MULTIPLE CHOICES - COMPUTATIONAL

16-1: c, [(P260,000/80%) x 20%]

16-2: d, consolidated CI will decrease by P6,000 due to amortization of the allocated excess (P60,000 / 10 years).

16-3: a, because there is no NCI in a wholly owned subsidiary. 16-4: c

Investment cost (price paid) P500,000

Less: Book value of interest acquired 480,000

Excess P 60,000

Cost Method Equity Method

Investment cost P500,000 P500,000

Parent’s share of subsidiary’s CI - 120,000 Dividends received from subsidiary - ( 48,000) Amortization of allocated excess (P60,000/20) - ( 3,000) Investment account balance, Dec. 31, 2013 P500,000 P569,000 16-5: a

NCI, January 2, 2013 [(P270,000/75%) x 25%] P 90,000 NCI in S Company dividends [(P60,000/75%) x 25%] (16,000)

NCI in S Company CI (P160,000 x 25%) 40,000

NCI balance, December 31, 2013 P114,000

16-6: a

Puno’s CI P 145,000

Dividend income (P40,000 x 90%) ( 36,000)

Puno’s CI from own operations 109,000

Salas’ CI from own operations 120,000

Consolidated CI P 229,000

16-7: b

Peter’s CI from own operations P1,000,000

Seller’s CI from own operations 200,000

Consolidated CI 1,200,000

Attributable to NCI (P200,000 x 20%) 40,000

(2)

16-8: a

2011 2012 2013

Investment in Son, Jan. 1 P310,000 P396,200 P512,400 Pop’s share of Son’s CI (100%) 150,000 180,000 200,000 Dividends received (100%) ( 60,000) (60,000) ( 60,000) Amortization of allocated excess to

Equipment (P38,000 / 10) ( 3,800) ( 3,800) ( 3,800) Investment in Son, Dec. 31 P396,200 P512,400 P648,600

16-9: a

Sy’s CI P300,000

Amortization of allocated excess ( 60,000)

Adjusted CI of Sy P240,000

NCI in CI of subsidiary (P240,000 x 10%) P 24,000

16-10: a. Under the equity method consolidated retained earnings is equal to the retained earnings of the parent company.

16-11: c

Retained earnings, Jan. 2, 2013 – Puzon P500,000

Consolidated CI attributable to parent:

CI – Puzon P200,000

CI – Suarez 40,000

Dividend income (P20,000 x 80%) (16,000)

NCI in Suarez CI (P40,000 x 20%) ( 8,000) 216,000

Dividends paid – Puzon ( 50,000)

Consolidated retained earnings, Dec. 31, 2013 P666,000 16-12: c

Price price P1,700,000

Less book value of interest acquired: 1,260,000

Excess P 440,000

Allocation due to undervaluation of net assets ( 40,000)

Goodwill P 400,000

16-13: d

NCI, January 2, 2013 [(P975,000/80%) x 20%] P243,750 NCI in subsidiary dividends (P125,000 x20%) (25,000) NCI in adjusted CI of subisidiary (P190,000 – P10,000) x 20% 36,000

(3)

16-14: b

Presto’s CI from own operations P140,000

Stork’s CI – March to December (P80,000 – P23,000) 57,000 NCI share in Stork’s CI (P57,000 x 10%) ( 5,700) Consolidated CI attributable to parent P191,300 16-15: b

Investment in Siso Company (at date of acquisition) P600,000

Dividend income (P30,000 x 5%) P 1,500

16-16 d

Consolidated CI:

Pepe’s CI from own operations P210,000

Sison’s adjusted CI:

CI -2013 P67,000

Amortization of allocated excess

to equipment (P20,000 / 5) 4,000 63,000

Consolidated CI P273,000

Consolidated retained earnings:

Pepe’s retained earnings, Jan.2, 2012 P701,000

Consolidated CI attributable to parent– 2012

Pepe’s CI from own operations P185,000 Sison’s adjusted CI;

CI – 2012 P40,000

Amortization -2012 4,000 36,000

NCI in Sison’s CI (P36,000 x 30%) (10,800) 210,200

Dividends paid ,2012 - Pepe ( 50,000)

Pepe’s retained earnings, Jan. 2, 2013 P861,200

Consolidated CI attributable to parent– 2013:

Consolidated CI (see above) P273,000

NCI in Sison’s CI (P63,000 x 30%) ( 18,900) 254,100

Dividends paid, 2013 – Pepe ( 60,000)

Consolidated retained earnings, Dec. 31, 2013 P1,055,300 16-17: a

Price paid P 700,000

NCI, June 30, 2013 [(P700,000/70%) x 30%} 300,000

Total 1,000,000

(4)

16-17, continued:

Consolidated retained earnings

Retained earnings, Jan. 1, 2013 – Pepe P550,000

Consolidated CI attributable to parent:

CI – Precy P275,000

Adjusted CI of Susy:

CI of Susy P100,000

Amortization (P100,000 / 10) ÷ 2 ( 5,000) 95,000

NCI in Susy’s CI (P95,000 x 30%) (28,500) 341,500

Dividends paid – Precy ( 70,000)

Consolidated retained earnings, Dec. 31, 2013 P821,500 Non-controlling interest

NCI, June 30, 2013 P300,000

NCI in Susy’s dividends, July 1 to December 31

-0-NCI in Susy’s CI (P100,000 – P5,000) x 30% 28,500

NCI, December 31, 2013 P328,500

16-18: a

Goodwill

Price paid P1,200,000

Less: Book value of interest acquired (P1,320,000 – P320,000) 1,000,000

Goodwill (not impaired) P 200,000

Consolidated retained earnings under the equity method is equal to the retained earnings of the parent company, P1,240,000.

16-19: b

CI – Pablo P130,000

Sito’s CI 70,000

NCI in Sito’s CI (P70,000 x 30%) (21,000)

Consolidated CI attributable to parent P151,000

16-20: c

Consolidated net income – 2013

CI – Ponce P 90,000

Solis’ CI 40,000

NCIin Solis’ CI (P40,000 x 40%) (16,000)

(5)

16-20, continued:

Consolidated retained earnings – 2013

Retained earnings, Jan. 2, 2012- Ponce P 400,000

Consolidated CI attributable to parent– 2012

CI – Ponce P70,000

Solis’ CI 35,000

NCI in Solis’s CI (P35,000 x 40%) ( 14,000) 75,000

Dividends paid, 2012– Ponce (25,000)

Consolidated retained earnings, Dec. 31, 2012 P450,000

Consolidated CI attributable to parent– 2013 105,000

Dividends paid. 2013 – Ponce (30,000)

Consolidated retained earnings, Dec. 31, 2013 P525,000 16.21 b

Price paid, January 2, 2013 P216,000

NCI, January 2, 2013 {(P216,000/80%) x 20%] 54.000

Total 270,000

Less book value of Seed’s net assets (P80,000 + P140,000) 220,000

Excess 50,000

Allocated to:

Depreciable assets (40,000)

Goodwill 10,000

Consolidated CI, December 31, 2013:

Polo CI from own corporation P 95,000

Seed CI from own operation:

CI 35,000

Amortization (40,000 ÷ 10%) (4,000)

GW impairment lost (8,000) 23,000

Total P118.000

16-22: c

Retained earnings 1/1/013 – Polo P520,000

Consolidated CI attributed to parent:

Consolidated CI 118,000

NCI in Seed’s adjusted CI (23,000x 20%) (4,600) 113,400

Total 633,400

Dividends paid- Polo (46,000)

Consolidated retained earnings 12/31/013 P587,400 16-23: b, P4,600 (see 16-22)

(6)

16-24: c

NCI, January 2, 2013 P 54,000

NCI ins Seed’s dividends (P15,000 x 20%) (3,000)

NCI in Seed’s CI 4,600

NCI, December 31, 2013 P 55,600

16-25: c (see no. 16-22) 16-26: a

Price paid, January 1, 2012 P231,000

NCI, January 1, 2012 [(P231,000/70%) x 30%] 99,000

Total 330,000

Less book value of Sisa’s net assets 280,000 Excess 50,000 Allocated to depreciable assets (10 years remaining life) (50,000)

Retained earnings, 1/1/13-Sisa company P230,000

Retained earnings, 1/1/12-Sisa company (squeeze) 155,000

Increase 75,000

Amortization- prior years (50,000 ÷ 10 years) (5,000) Adjusted increase in earnings of Sisa (21,000/30% ) P70,000 16-27: a

Retained earnings 1/1/13- Pepe P520,000

Retained earnings 1/1/13- Sisa 230,000

Adjustment and elimination:

Date of acquisition (155,000) Undistributed earnings to NCI (21,000)

Amortization- prior year (5,000) 49,000 Consolidated retained earnings 1/1/13 P569,000 16-28: a

Pepe company CI, 2013 P120,000

Sisa company CI, 2013 25,000

Dividend income (10,000 x 70%), 2013 (7,000)

Amortization- 2013 (5,000)

Consolidated CI P133,000

16-29: a

Consolidated retained earnings 1/1/13(see 16 – 27) P569,000 Consolidated CI attributable to parent:

Consolidated CI (see 16-28) 133,000

NCI in Sisa CI (25,000 – 5,000) 30% (6,000) 127,000

Dividend paid- Pepe company ( 50,000)

(7)

16-30: a

Cash Proceeds P3,000,000

Fair value of retained NCI (40%) 1,750,000

Carrying amount of NCI before deconsolidation 500,000

Total 5,250,000

Less carrying value of Simon Company net assets 5,000,000

Gain on sale to profit or loss P 250,000

16-31: c

The gain is computed as follows:

Cash proceeds P280,000

Carrying value of interest sold (P2,400,000 x 10%) 240,000

Gain to APIC P 40,000

Since the APIC is only P30,000 on the date of sale, the remaining P10,000 is to be credited to retained earnings account.

(8)

PROBLEMS

Problem 16-1

1. Determination and Allocation of Excess Schedule:

Implied Parent Price NCI Value

Fair Value (80%) (20%)

Fair value of subsidiary P 312,500 P 250,000 P 62,500

Less book value of interest acquired

Capital stock P 100,000 Retained earnings 150,000 Total equity P 250,000 P 250,000 P 250,000 Interest acquired 80% 20% Book value P200,000 P 50,000 Excess P 62,500 P 50,000 P 12,500 Allocation to: Fixed assets 62,500

2. Working Paper Elimination Entries:

a. Eliminate dividends declared by the subsidiary against dividend income and NCI:

Dividend income 4,000

NCI 1,000

Dividends declared – Sulu 5,000

b. Eliminate equity accounts of the subsidiary against the investment account and the NCI account.

Common stock – Sulu 100,000

Retained earnings – Sulu 150,000

Investment in Sulu Company 200,000

NCI 50,000

c Allocate excess to fixed assets:

Fixed assets 62,500

Investment in Sulu Company 50,000

NCI 12,500

d. Amortized fixed assets (P62,500 / 10)

Expenses 6,250

e. Recognize NCI in subsidiary net income:

(9)

NCI 3,750

Probem 16-1 concluded

3. Pedro Company

Consolidated Statement of CI Year Ended December 31, 2013

Sales P250,000

Expenses 191,250

Consolidated CI P 58,750

Attributable to NCI 3,750

Attributable to controlling interest P 55,000

Statement of Retained Earnings Year Ended December 31, 2013

Retained earnings, January 1 – Pedro Company P200,000

Consolidated CI attributable to controlling interest 55,000

Retained earnings, December 31, 2011 P255,000

Consolidated Statement of Financial Position December 31, 2013 Assets Current assets P190,000 Non-current assets Fixed assets (P662,500 – P132,250) 530,250 Total assets P720,250

Liabilities and Stockholders’ Equity

Current liabilities P100,000 Stockholders’ Equity: Controlling interest: Common stock P300,000 Retained earnings 255,000 Total P555,000 Non-controlling interest (P62,500 – P1,000 + P3,750) 65,250 620,250

(10)

Problem 16-2

1. Eliminations and adjustments: a to c are the same as in Problem 16-1:

d. Depreciate the fixed asset for the current year and one prior year: Retained earnings, Jan. 1 – Sulu (prior year) 6,250

Expenses (current year) 6,250

e. Recognize NCI in subsidiary CI:

NCI in subsidiary CI 1,750

NCI 1,750

e. Assign to the NCI their share of the increase in the subsidiary’s Adjusted undistributed earnings of prior year:

Retained earnings, January 1- Sulu 2,750

NCI 2,750

Retained earnings, January 1, 2013 P170,000 Retained earnings, January 2, 2012 150,000 Increase in undistributed earnings P 20,000

Amortization in prior years 6,250

Adjusted undistributed earnings P 13,750

NCI % 20%

NCI P 2,750

Consolidated Statement of CI Year Ended December 31, 2013

Sales P300,000

Expenses (P245,000 + P6,250) 251,250

Attributable to NCI 1,750

(11)

Problem 16-3

Amortization Schedule

Annual

Accounts Adjustments Life Amount 2010 2011 2012 2013

Inventory 1 P 6,250 P 6,250 Amortization: Investments 3 5,000 5,000 5,000 5,000 5,000 Buildings 20 12,500 12,500 12,500 12,500 12,500 Equipment 5 34,500 34,500 34,500 34,500 34,500 Patent 10 2,250 2,250 2,250 2,250 2,250 Trademark 10 2,000 2,000 2,000 2,000 2,000

Discount on bonds payable 5 2,500 2,500 2,500 2,500 2,500

Total P 65,000 P 65,000 P 58,750 P 58,750 P58,750

Problem 16-4 Allocation Schedule

Price paid P206,000

Less: Book value of interest acquired 140,000

Excess P 66,000

Allocation:

Equipment P(40,000)

Buildings 10,000 (30,000)

Goodwill (not impaired) P 36,000

a. Investment in Stag Company – 12/31/13 (at acquisition cost) P 206,000

b. Non-controlling interest P

-0-c. Consolidated CI

CI from own operations – Pony (P310,000 – P198,000) P 112,000 CI from own operations – Stag (P104,000 – P74,000) 30,000

Amortization: Equipment (P40,000/8) P5,000

Buildings (P10,000/20) (500) ( 4,500)

d. Consolidated Equipment

Total book value (P320,000 + P50,000) P 370,000

Allocation 40,000

Amortization (P5,000 x 3 years) (15,000)

(12)

Problem 16-4 concluded

e. Consolidated Buildings

Total book value P 288,000

Allocation ( 10,000)

Amortization (P500 x 3 years) 1,500

Total P 279,500

f. Consolidated Goodwill (not impaired) P 36,000

g. Consolidated Common Stock (Pony) P 290,000

h. Consolidated Retained Earnings

Retained earning, Dec. 31, 2013 – Pony P 410,000

Add: Pony’s share of Stag’s adjusted increase in earnings Net earnings – 2013 (P30,000 – P20,000) P10,000

Amortization ( 4,500) 5,500

Retained earnings, December 31, 2013 P 415,500

Problem 16-5

a. Working Paper Elimination Entries, Dec. 31, 2013

(1) Dividend income 10,000

Dividends declared – Short 10,000

To eliminate intercompany dividends.

(2) Common stock – Short 100,000

Retained earnings – Short 50,000

Investment in Short Company 150,000

To eliminate equity accounts of Short at date of acquisition

(3) Depreciable asset 30,000

Investment in Short Company 30,000

To allocate excess

(4) Depreciation expense 5,000

Depreciable asset 5,000

To amortize allocatedexcess

(13)

Problem 16-5 concluded

b. Pony Corporation and Subsidiary Consolidation Working Paper December 31, 2013

Pony Short Adjustments & Eliminations

Consoli-Corporation Company Debit Credit dated

Statement of CI Sales 200,000 120,000 320,000 Dividend income 10,000 (1) 10,000 -Total 210,000 120,000 320,000 Depreciation 25,000 15,000 (3) 5,000 45,000 Other expenses 105,000 75,000 180,000 Total 130,000 90,000 225,000 CI carried forward 80,000 30,000 95,000 Retained Earnings

Retained earnings, Jan. 1 230,000 50,000 (2) 50,000 230,000

CI from above 80,000 30,000 95,000

Total 310,000 80,000 325,000

Dividends declared 40,000 10,000 (1) 10,000 40,000

Retained earnings, Dec. 31

Carried forward 270,000 70,000 285,000

Statement of FP

Cash 15,000 5,000 20,000

Accounts receivable 30,000 40,000 70,000

Inventory 70,000 60,000 130,000

Depreciable asset (net) 325,000 225,000 (3) 30,000 (4) 5,000 575,000

Investment in Short company 180,000 (2)150,000

-(3) 30,000 Total 620,000 330,000 795,000 Accounts payable 50,000 40,000 90,000 Notes payable 100,000 120,000 220,000 Common stock Pony 200,000 200,000 Short 100,000 (2)100,000

Retained earnings, Dec. 31

From above 270,000 70,000 285,000

(14)

Problem 16-6

a. Working Paper Elimination Entries

NCI 2,000

Dividends declared – Sisa 10,000

(2) Common stock – Sisa 100,000

Retained earnings – Sisa 50,000

Investment in Sisa stock 120,000

NCI 30,000

(3) NCI in CI of subsidiary 6,000

NCI 6,000

b. Popo Corporation and Subsidiary Consolidated Working Paper December 31, 2013

Popo Sisa Adjustments & Eliminations

Statement of CI Sales 200,000 120,000 320,000 Dividend income 8,000 (1) 8,000 -Total revenue 208,000 120,000 320,000 Depreciation expense 25,000 15,000 40,000 Other expenses 105,000 75,000 180,000 Total expenses 130,000 90,000 220,000 CI 78,000 30,000 100,000 NCI in CI of Sub. (3) 6,000 ( 6,000) CI carried forward 78,000 30,000 94,000 Retained Earnings Retained earnings, 1/1 230,000 50,000 (2) 50,000 230,000 CI from above 78,000 30,000 94,000 Total 308,000 80,000 324,000 Dividends declared 40,000 10,000 (1) 10,000 40,000 Retained earnings, 12/31 Carried forward 268,000 70,000 284,000 Statement of FP Current assets 173,000 105,000 278,000 Depreciable assets 500,000 300,000 800,000

Investment in Sisa Company 120,000 (2)120,000

-Total 793,000 405,000 1,078,000 Accumulated depreciation 175,000 75,000 250,000 Current liabilities 50,000 40,000 90,000 Long-term debt 100,000 120,000 220,000 Common stock 200,000 100,000 (2)100,000 200,000 Retained earnings , 12/31 From above 268,000 70,000 284,000 NCI (1) 2,000 (2) 30,000 34,000

(15)

(3) 6,000

Total 793,000 405,000 166,000 166,000 1,078,000

Problem 16-6 - Concluded

c. Consolidated Financial Statements Popo Corporation and Subsidiary

Consolidated Statement of Financial Position December 31, 2013

Assets

Current assets P278,000

Depreciable assets P800,000

Less: Accumulated depreciation 250,000 550,000

Total assets P828,000

Liabilities and Stockholders’ Equity

Current liabilities P 90,000 Long-term debt 220,000 Total liabilities P310,000 Stockholders’ Equity Common stock P200,000 Retained earnings, 12/31 284,000

Minority interest in net assets of subsidiary 34,000 518,000

Total liabilities and stockholders’ equity P828,000

Popo Corporation and Subsidiary Consolidated Statement of CI Year Ended December 31, 2013

Sales P320,000 Expenses: Depreciation expense P 40,000 Other expenses 180,000 220,000 Consolidated CI P100,000 NCI in CI of subsidiary 6,000 Attributable to parent P 94,000

Popo Corporation and Subsidiary Consolidated Retained Earnings Year Ended December 31, 2013

Retained earnings, Jan. 1 – Popo P230,000

Consolidated CI attributable to parent 94,000

Total P324,000

Dividends paid – Popo 40,000

(16)

Problem 16-7

a. Palo Corporation and Subsidiary Consolidation Working Paper December 31, 2013

Palo Sebo Adjustments & Eliminations

Statement of CI

Sales 300,000 150,000 450,000

Investment Income 19,000 (1) 19,000

-Total revenues 319,000 150,000 450,000

Cost of goods sold 210,000 85,000 295,000

Depreciation expense 25,000 20,000 45,000

Other expenses 23,000 25,000 48,000

Total cost and expenses 258,000 130,000 388,000

CI carried forward 61,000 20,000 62,000

Retained Earnings

Retained earnings, Jan. 1 230,000 50,000 (2) 50,000 230,000

CI from above 61,000 20,000 62,000

Total 291,000 70,000 292,000

Dividends declared 20,000 10,000 (1) 10,000 20,000

Retained earnings, Dec. 31

carried forward 271,000 60,000 272,000

Statement of FP

Cash 37,000 20,000 57,000

Accounts receivable 50,000 30,000 80,000

Inventory

Buildings and equipment 70,000300,000 60,000240,000 130,000540,000

Investment in Sebo Company 229,000 (1) 9,000

-(2)200,000 (3) 20,000 Goodwill (3) 20,000 20,000 Total 686,000 350,000 827,000 Accumulated depreciation 105,000 65,000 170,000 Accounts payable 40,000 20,000 60,000 Taxes payable 70,000 55,000 125,000 Common stock 200,000 150,000 (2)150,000 200,000

Retained earnings, Dec. 31 from above

(17)

Problem 16-7 - Concluded

b. Consolidated Financial Statements Palo Corporation and Subsidiary Consolidated Statement of CI Year Ended December 31, 2013

Sales P450,000

Cost of goods sold 295,000

Gross profit 155,000

Expenses:

Depreciation expenses P45,000

Other expenses 48,000 93,000

Palo Corporation and Subsidiary Consolidated Retained Earnings Year Ended December 31, 2013

Retained earnings, January 1 – Palo P230,000

Consolidated CI 62,000

Total 292,000

Dividends paid – Palo 20,000

Retained earnings, December 31 P272,000

Palo Corporation and Subsidiary

Consolidated Statement of Financial Position December 31, 2013

Assets

Cash P 57,000

Accounts receivable 80,000

Inventory 130,000

Buildings and equipment P540,000

Less: Accumulated depreciation 170,000 370,000

Goodwill 20,000

Total P657,000

Liabilities and Stockholders’ Equity

Accounts payable P 60,000

Taxes payable 125,000

Common stock 200,000

Retained earnings, Dec. 31 272,000

Total P657,000

(18)

Problem 16-8

1. Determination and Allocation of Excess Schedule:

Company Parent Price NCI Value

Estimated FV (80%) (20%)

Fair value of subsidiary P945,000 P756,000 P189,000

Less book value of interest acquired:

Common stock – S Company 300,000

Retained earnings – S Company 400,000

Total equity 700,000 700,000 700,000

Interest acquired 80% 20%

Book value 560,000 140,000

Excess of fair value over book value 245,000 196,000 49,000

Allocations: Inventory (30,000) Land (50,000) Building (100,000) Equipment 75,000 Patent (40,000) Total 145,000 Goodwill P 100,000

Working Paper Elimination Entries - December 31, 2013(not required)

(1) Investment income 94,800

NCI 10,000

Dividends declared – S Company 50,000

Investment in S Company 54,800

(2) Common stock – S 300,000

Retained earnings, Jan. 1 – S 400,000

Investment in S Company 560,000 NCI 140,000 (3) Inventories 30,000 Land 50,000 Building 100,000 Patents 40,000 Goodwill 100,000 Equipment 75,000 Investment in S Company 196,000 NCI 49,000

(4) Cost of goods sold 30,000

Inventory 30,000

Equipment (P75,000 / 10) 7,500

Expenses (amortization) 1,500

Buildings (P100,000 / 20) 5,000

(19)

(5) NCI in CI of subsidiary 23,700

NCI 23,700

To recognize NCI in subsidiary CI (P150,000 – 31,500)x 20%

Problem 16-8, Concluded

2. P Company and Subsidiary Consolidated Working Paper Year Ended December 31, 2013

P S Adjustments & Eliminations

Consoli-Company Company Debit Credit dated

Statement of CI Sales 1,000,000 500,000 1,500,000 Cost of sales 400,000 150,000 (4) 30,000 580,000 Gross profit 600,000 350,000 920,000 Expenses 360,000 200,000 (4) 1,500 561,500 Operating income 240,000 150,000 358,500 Investment income 94,800 - (1) 94,800

-Net /consolidated income 334,800 150,000 358,500

NCI in CI of Subsidiary (5) 23,700 (23,700) CI carried forward 334,800 150,000 334,800 Retained earnings Retained earnings, 1/1 600,000 400,000 (2)400,000 600,000 CI from above 334,800 150,000 334,800 Total 934,800 550,000 934,800 Dividends declared 100,000 50,000 (1) 50,000 100,000 Retained earnings, 12/31 Carried forward 834,800 500,000 834,800 Statement of FP Cash 200,000 100,000 300,000 Accounts receivable 150,000 50,000 200,000 Inventories 100,000 40,000 (3) 30,000 (4) 30,000 140,000 Land 150,000 (3) 50,000 200,000 Buildings (net) 200,000 (3)100,000 (4) 5,000 295,000 Equipment (net) 298,000 450,000 (4) 7,500 (3) 75,000 680,500 Patent - - (3) 40,000 (4) 4,000 36,000 Investment in S Company 810,800 (1) 54,800 -(2)560,000 (3)196,000 Goodwill Total 1,558,800 1,090,000 (3) 100,000 1,951,500 100,000 Accounts payable 124,000 190,000 314,000 Common stock 200,000 300,000 (2)300,000 200,000

Additional paid-in capital 400,000 - 400,000

Retained earnings, 12/31

from above 834,800 500,000 834,800

NCI (1) 10,000 (2)140,000 2022,700

(3) 49,000 (5) 23,700

(20)

Problem 16-9

a. Investment in Sally Products Co. 160,000

Cash 160,000

To record acquisition of 80% stock of Sally.

Cash 8,000

Dividend income 8,000

To record dividends received from Sally (P10,000 x 80%)

b. Working Paper Eliminating Entries – Dec. 31, 2011

NCI 2,000

Dividends declared – Sally 10,000

(2) Common stock – Sally 100,000

Retained earnings, 1/1/08 –Sally 50,000

Investment in Sally Products 120,000

NCI 30,000

(3) Building and equipment 50,000

Investment in Sally Products 40,000

NCI 10,000

(4) Retained earnings, 1/1 – Sally (prior year) 5,000 Depreciation expense (current year) 5,000

Accumulated depreciation – Bldg 10,000

(5) Accounts payables 10,000

Cash and receivables 10,000

(6)

NCI in CI of subsidiary 5,000

NCI 5,000

(P30,000 – P5,000) x 20%

(7) Retained earnings, 1/1 – Sally 7,000

NCI 7,000

To recognize NCI in subsidiary’s prior year earnings [(P50,000 – P90,000) – P5,000] x 20%

(21)

Problem 16-9, Concluded

c. Pilar Corporation and Subsidiary Consolidation Working Paper December 31, 2013

Pilar Sally Wood Adjustments & Eliminations

Consoli-Corporation Products Debit Credit dated

Statement of CI

Sales 200,000 100,000 300,000

Dividend income 8,000 (1) 8,000

-Total revenue 208,000 100,000 300,000

Depreciation expense 25,000 15,000 (4) 5,000 45,000

Inventory losses 15,000 5,000 20,000

Total cost and expenses 160,000 70,000 235,000

Net /consolidated CI 48,000 30,000 65,000

NCI in CI of

subsidiary (6) 5,000 (5,000)

CI carried forward 48,000 30,000 60,000

Retained earnings statement

Retained earnings, 1/1 298,000 90,000 (2) 50,000 (4) 5,000 (7) 7,000 326,000 CI from above 48,000 30,000 60,000 Total 346,000 120,000 386,000 Dividends declared 30,000 10,000 (1) 10,000 30,000 Retained earnings, 12/31 carried forward 316,000 110,000 356,000 Statement of FP

Cash and receivables 81,000 65,000 (5) 10,000 136,000

Inventory 260,000 90,000 350,000

Land 80,000 80,000 160,000

Buildings and equipment 500,000 150,000 (3) 50,000 700,000

Investment in Sally 160,000 (2)120,000 -(3) 40,000 Total 1,081,000 385,000 1,346,000 Accumulated depreciation 205,000 105,000 (4) 10,000 300,000 Accounts payable Notes payable 60,000200,000 20,000 50,000 (5) 10,000 250,000 70,000 Common stock 300,000 100,000 (2)100,000 300,000

Retained earnings from above 316,000 110,000 356,000

NCI (1) 2,000 (2) 30,000

(3) 10,000 (6) 5,000 (7) 7,000

(22)

Problem 16-10

Determination and Allocation of Excess Schedule (not required)

Price paid P220,000

Common stock – Star Company P150,000

Retained earnings, 1/1 – Star Company 50,000 200,000

Goodwill P 20,000

a. Eliminating entries:

E(1) Dividend Income 20,000

Dividends Declared

20,000

Eliminate dividend income from subsidiary.

E(2) Common Stock – Star Company 150,000

Retained Earnings, January 1 50,000

Investment in Star Company Stock 200,000

Eliminate subsidiary equity accounts.

E(3) Goodwill 8,000

Retained Earnings, January 1 12,000

Investment in Star Company

20,000

Assign excess at beginning of year Porno Corporation and Star Company

Consolidated Working Paper December 31, 2013

Porno Star Eliminations

_____Item_____ Corporation Company Debit Credit Consolidated Statement of CI

Sales 350,000 200,000 550,000

Dividend income 20,000 - (1) 20,000 _______

Credits 370,000 200,000 550,000

Depreciation expense 25,000 20,000 45,000

Other expenses 21,000 10,000 31,000

Debits (316,000) (165,000) __ - ____ (481,000) CI, carry forward 54,000 35,000 20,000 - 69,000

Retained Earnings Statement

Retained earnings, Jan. 1 262,000 60,000 (2) 50,000

(3) 12,000 260,000

CI, from above 54,000 35,000 20,000 69,000

(23)

Dividends declared (20,000) (20,000) ___ - (1) 20,000 (20,000) Retained earnings, Dec. 31,

carry forward 296,000 75,000 82,000 20,000 309,000 Problem 16-10, Concluded Statement of FP Cash 46,000 30,000 76,000 Accounts receivable 55,000 40,000 95,000 Inventory 75,000 65,000 140,000

Buildings and equipment 300,000 240,000 540,000

Investment in Star Company 220,000 (2)200,000

(3) 20,000 Goodwill - - (3) 8,000 8,000 Debits 696,000 375,000 859,000 Accumulated depreciation 130,000 85,000 215,000 Accounts payable` 20,000 30,000 50,000 Taxes payable 50,000 35,000 85,000 Common stock Light Corporation 200,000 200,000 Star Company 150,000 (2)150,000

Retained earnings, from above 296,000 75,000 82,000 20,000 309,000

Credits 696,000 375,000 240,000 240,000 859,000

Problem 16-11

(1) Determination and Distribution of Excess Schedule:

Company Parent NCI Implied Price Value Fair Value (90%) (10%)

Common stock (P10 Par) 100,000

Retained earnings 250,000

Total equity 350,000 315,000 35,000

Excess of fair value over book value P115,000 P103,500 P11,500

Adjustments: Amortization Life

Equipment P115,000 P5,750/yr 20 yrs.

(2) Entries:

Investment in Venus Company 195,300

Retained earnings* 137,475

(24)

Equipment depreciation (3 x 90% x P5,750) = P137,475.

** Investment income = 90% x (P70,000 - P5,750 equipment depreciation) = P57,825.

Problem 16-11 continued:

Cash 700,000

Investment in Venus Company (8/9 x P418,500 cost

+ P195,300 adjustment) 545,600

Gain on sale of investment 154,400

To record the sale of the 8,000 shares of Venus stock.

Problem 16-12

Entries on Pluto’s books, January 1, 2014:

Investment in Saturn Company 2,960*

Retained earnings – Pluto 2,960

To adjust investment carrying amount of shares sold (equity method). Remaining shares remain at cost, because they will be consolidated.

Cash 40,000

Investment in Saturn Company 10,960

Additional paid-in capital – Pluto 29,040

To record sale of shares. Investment eliminated = [(2,000 ÷ 40,000) x P160,000 original cost] plus P2,960 equity adjustment.

Determination and Allocation of Excess Schedule:

Company Parent NCI Implied Price Value Fair Value (80%) (20%)

Total equity 150,000 120,000 30,000

Excess of fair value over book value P50,000 P40,000 P10,000

Adjustment of identifiable accounts: Adjustment Amortization Life

Machine P20,000 P4,000/yr 5 yrs.

Goodwill 30,000

Total P50,000

*Equity adjustment

Income P110,000

Amortization of excess (4 years x P4,000) (16,000)

Dividends (20,000)

Total P74,000

(25)