Chapter 13

(1)

EXERCISES

Exercise 13 - 1 1. 2006 Sales 60,000 Cost of Sales 60,000 Cost of Sales 20,000 Inventory 20,000

2007 Retained Earnings, Parent 20,000

Inventory 20,000

Cost of Sales 20,000 2. 2006 Sales 60,000 Cost of Sales 60,000 3. 2006 Sales 60,000 Cost of Sales 60,000 Cost of Sales 5,000 Inventory 5,000 P20,000 x 25%

Cost of Sales 5,000

Exercise 13 - 2

1. 2006 Investment in Surigao Co. 150,000

Equity in Subsidiary Income 150,000

P200,000 x 75% = P150,000

Investment in Surigao Co. 12,000

P42,000 x 40%/140% = P12,000

2007 Investment in Surigao Co. 262,500

P350,000 x 75% = P262,500

2008 Investment in Surigao Co. 300,000

Equity in Subsidiary Income. 300,000

P400,000 x 75% = P300,000

(2)

2. Consolidation elimination entries

2006 Equity in Subsidiary Income 138,000

Cost of Sales 12,000

Inventory 12,000

Retained Earnings, Parent 12,000

Inventory 12,000

Cost of Sales 12,000 Exercise 13 – 3 a. Sales 200,000 Cost of Sales 200,000 b. Cost of Sales 16,000 Inventory 16,000 P80,000 x 20% = P16,000 Exercise 13 – 4

a. Equity in Subsidiary Income 212,000

Investment in Selecta Co. 212,000

b. Sales 1,000,000 Cost of Sales 1,000,000 c. Cost of Sales 64,000 Inventory 64,000 from Presto = P40,000 x 60% = P24,000 from Selecta = P80,000 x 50% = P40,000

d. Investment in Selecta Co. 76,000

Retained Earnings, Selecta Co. (P50,000 x 20%) 10,000

from Presto = P 60,000 x 60% = P36,000 from Selecta = P100,000 x 50% = P50,000

Exercise 13 -5

Share in net income of Santolan Co. (P360,000 x 80%) P288,000

Impairment loss on goodwill ( 4,000)

Unrealized profit on ending inventory

(3)

Realized profit on beginning inventory

(P242,000 x 40%/104%) 69,143

Equity in subsidiary income P346,743

Exercise 13 - 6

1. Original cost of the equipment to Paredes Co. P2,000,000

Accumulated depreciation as of December 31, 2008 (P2,000,000 x 6/20) 600,000

Book value of equipment as of December 31, 2008 P1,400,000

2. Elimination entries

a. Gain on Sale of Equipment 300,000

Equipment 200,000

Accumulated Depreciation – Equipment 500,000

b. Accumulated Depreciation – Equipment 20,000

Operating Expenses 20,000 Exercise 13 - 7 a. Sales 100,000 Cost of Sales 100,000 Cost of Sales 10,000 Inventory 10,000 P40,000 x 25% = P10,000

b. Gain on Sale of Machinery 600,000

Machinery 600,000

c. Cost of Sales 12,000

Inventory 12,000

Exercise 13 - 8

(2) (1)

Consolidated Minority interest

net income net income

Net income from own operations:

Princess Inc. P 800,000

Stella Co. 800,000 P200,000

Unrealized gain on sale of machine ( 240,000)

Realized gain on sale of machine 40,000 ______

Total P1,400,000 P200,000

3. Book value of the machine to Princess Inc. at the time of sale P960,000 Less Depreciation for 2008 based on original book value 160,000

Book value of equipment as of December 31, 2008 P800,000

Exercise 13 - 9

1. Share in net income of Sultan Co. (P4,000,000 x 80%) P3,200,000

Impairment loss on goodwill ( 20,000)

Unrealized gain on sale of machine (P400,000 x 80%) ( 320,000) Realized gain on sale of machine [(P400,000 / 5 yrs x 1/2) x 80%] 32,000

(4)

2. Net income from own operations of Porter Co. P 8,000,000

Equity in subsidiary income (see # 1) 2,892,000

Consolidated net income P10,892,000

3. Minority interest, January 1 (P2,000,000 x 20%) P400,000

Minority interest net income:

Share in adj. of assets (P400,000 /80% x 20%) P100,000 Share in net income of Sultan Co.(P4,000,000 x 20%) 800,000 Unrealized gain on sale of machine (P400,000 x 20%) ( 80,000)

Realized gain on sale of machine (P40,000 x 20%) 8,000 728,000

Minority interest dividends (P1,000,000 x 20%) ( 200,000)

Minority interest, December 31 P1,028.000

4. Original cost of investment P2,000,000

Equity in subsidiary income 2,892,000

Dividends received (P1,000,000 x 80%) ( 800,000)

Balance of investment, December 31, 2008 P4,092,000

Exercise 13 - 10

a. Equity in Subsidiary Income 61,250

Investment in Success Co. 61,250

b. Sales 400,000

c. Investment in Success Co. 7,500

Retained Earnings, Success Co. 2,500

P40,000 x 33 1/3% /133 1/3% = P10,000

d. Cost of Sales 15,000

Inventory 15,000

e. Gain of Sale of Equipment 80,000

Equipment 80,000

f. Equipment 10,000

Operating Expenses 10,000

P80,000 / 8 yrs.

Exercise 13 -11

Pomelo Corp. P240,000

Santol Co. (P140,000 x 90%) 126,000

Singkamas Corp. (P160,000 x 60%) 96,000

Unrealized gross profit on ending inventory of

Pomelo Corp. - seller Singkamas Corp. (P50,000 x 25% x 60%) ( 7,500) Santol Co. - seller Pomelo Corp. (P100,000 x 30%) ( 30,000) Unrealized gain on sale of machinery to Singkamas Corp. by Santol Co.

(5)

Consolidated net income P352,500

PROBLEMS

Problem 13 - 1

Platinum Corp. and Subsidiary Silver Co.

Consolidated Statement of Recognized Income and Expenses For the Year Ended December 31, 2008

Sales (P3,000,000 - P400,000) P2,600,000

Cost of Sales* 905,000

Gross Margin P1,695,000

Expenses 1,040,000

Operating Income P 655,000

Less Minority Interest net income** 43,750

Consolidated Net Income P 611,250

* Combined cost of sales P1,300,000

Realized gross profit on beginning inventory

(P40,000 x 33 1/3%/133 1/3%) ( 10,000) Unrealized gross profit on ending inventory

(P60,000 x 33 1/3%/133 1/3%) 15,000

Intercompany sales ( 400,000)

Consolidated cost of sales P 905,000

** Minority interest net income

(P180,000 + P10,000 - P15,000) x 25% P 43,750

Problem 13 - 2

1. Minority interest net income P 26,180

Unrealized gross profit on ending inventory of Pedrito Co.

purchased from Salome Co. (P22,000 x 25%/125% x 20%) 880

Unadjusted share in net income of Salome Co. P 27,060

Minority interest percentage ÷ 20%

Net income of Salome Co. P135,300

x 80%

Unadjusted share in net income of Salome Co. P108,240

Pedrito Co., seller - Salome Co. (P22,000 x 25%/125% x 80%) ( 3,520) Salome Co., seller - Pedrito Co. P15,000 x 20%/120%) ( 2,500)

Equity in subsidiary income P102,220

2. Minority interest, December 31, 2008 P82,420

Add Unrealized gross profit on ending inventory of Pedrito Co.

purchased from Salome Co. 880

Total P83,300

Net assets of Salome Co., December 31, 2008 P416,500

3. Net assets of Salome Co., December 31, 2008 P416,500

Less: Net income for 2008 135,300

Net assets of Salome Co., January 1, 2008 P281,200

Book value (80%) P224,960

(6)

Cost of investment P249,960

Problem 13 -3

a. Sales 700,000

b. Retained Earnings, Pamela Co. 4,800

Cost of Sales 4,800

(P24,000 x 25/125 = P4,800)

Retained Earnings, Pamela Co. 3,375

Retained Earnings, Salve Co. 375

Cost of Sales 3,750 P15,000 x 33 1/3%/133 1/3% = P3,750 c. Cost of Sales 11,000 Inventory 11,000 P30,000 x 25%/125% = P6,000 P20,000 x 33 1/3%/133 1/3% = P5,000 P6,000 + P5,000 P11,000 Problem 13 - 4

Pentagon Co. and Subsidiary Sexagon Co.

Consolidated Statement of Recognized Income and Expenses For the Year Ended December 31, 2008

Sales (P4,600,000 - P1,000,000) P3,600,000

Cost of Sales* 1,002,000

Gross Margin P2,598,000

Expenses (P1,664,000 - P6,000) 1,658,000

Operating Income P 940,000

Less Minority net income** 46,400

Net Income P 893,600

* Combined cost of sales P2,000,000

Pentagon (P40,000 x 50%) 20,000 Sexagon (P100,000 x 60%) 60,000 Realized gross profit on beginning inventory of

Pentagon (P60,000 x 50%) ( 30,000)

Sexagon (P80,000 x 60%) ( 48,000)

Intercompany sales ( 1,000,000)

Consolidated cost of sales P1,002,000

** Share in net income of Sexagon (P276,000 x 20%) P55,200 Realized gross profit on beginning inventory of

Pentagon (P30,000 x 20%) 6,000

Pentagon (P20,000 x 20%) ( 4,000)

Unrealized gain of sale of equipment by Sexagon

(7)

Realized gain on sale of equipment by Sexagon

(P6,000 x 20%) 1,200

Minority interest net income P46,400

Problem 13 - 5

Cost of investment P1,200,000

Book value of interest acquired:

Ordinary Share Capital (P600,000 x 80%) P480,000 APIC (P400,000 x 80%) 320,000

Retained Earnings (P400,000 x 80%) 320,000 1,120,000

Excess P 80,000

Grossed-up excess – goodwill (P80,000 / 80%) P100,000

Impairment of goodwill (P4,000 x 2 years, 2006 and 2007 P 8,000

Balance of goodwill, Jan. 1, 2008 P92,000

Poland Co. and Subsidiary Sweden Co. Consolidated Working Paper For the Year Ended December 31, 2008 Poland Co. Sweden

Co. DebitAdj. & EliminationsCredit MinorityInterest Consolidated Income Statement Sales 1,600,000 400,000 e. 360,000 1,640,000 Cost of Sales 800,000 300,000 g. 11,000 e. 360,000 681,000 f. 70,000 Gross Margin 800,000 100,000 959,000 Expenses 440,000 160,000 d. 4,000 604,000 Operating Income (loss) 360,000 ( 60,000) 355,000

Equity in sub. income _1,600 _{b. 1,600}

Net income (loss) 361,600 ( 60,000) 355,000

MINI (6,600) ( 6,600)

NI (loss)- carried forward _361,600 _{( 60,000)} _361,600

Retained Earnings Statement Bal, Jan. 1, 2008: Poland Co. 1,142,400 1,142,400 Sweden Co. 600,000 a. 480,000 114,000 f. 6,000

NI (loss) - brought forward _361,600 _{( 60,000)} _(6,600) _361,600

Total 1,504,000 540,000 1,504,000

Less Div. declared:

Poland Co. 160,000 160,000 Bal, Dec. 31, 2008 - 1,344,000 540,000 107,400 1,344,000 Balance Sheet Cash 300,000 100,000 400,000 Accounts Receivable 180,000 60,000 h. 40,000 200,000 Inventories 120,000 80,000 g. 11,000 189,000 Equipment (net) 654,400 1,500,000 2,154,400

Inv. in Sweden Co. 1,289,600 f. 64,000 a.1,280,000

(8)

c. 72,000

Goodwill c. 92,000 d. 4,000 88,000

Total 2,544,000 1,740,000 3,031,400

AP and accrued exp 400,000 200,000 h. 40,000 560,000

OS – Poland Co. 800,000 800,000

OS - Sweden Co. 600,000 a. 480,000 120,000

APIC -Sweden Co. 400,000 a. 320,000 80,000

RE-brought forward 1,344,000 540,000 107,400 1,344,000

Minority interest c. 20,000 20,000 327,400

2,544,000 1,740,000 1,858,600 1,858,600 3,011,400

Explanation of adjusting and elimination entries:

a. To eliminate 80% of stockholders' equity of subsidiary. b. To eliminate equity in subsidiary income

c. To recognize balance of goodwill as of Jan. 1, 2008. d. To recognize impairment of goodwill for 2008. e. To eliminate intercompany sales.

f. To recognize realized gross profit on beginning inventories of

Poland, seller - Sweden(P120,000 x 33 1/3%/133 1/3%) P30,000 Sweden, seller - Poland(P80,000 x 100%/200%) P40,000 g. To eliminate unrealized gross profit on ending inventories of

Poland, seller - Sweden (P12,000 x 33 1/3%/133 1/3%) P3,000 Sweden, seller - Poland (P16,000 x 100%/200%) P8,000 h. To eliminate intercompany receivable and payable.

Computation of minority net income:

Unadjusted share in net income (loss) of Sweden Co. (P60,000 x 20%) P(12,000)` Realized gross profit on beginning inventory of Poland Co. (P30,000 x 20%) 6,000 Unrealized gross profit on ending inventory of Poland Co. (P3,000 x 20%) ( 600)

Minority interest net income (loss) P( 6,600)

Problem 13 -6

Palladium Co. and Subsidiary Stadium Co. Consolidated Working Paper For the Year Ended December 31, 2008 Palladium

Company

Stadium Company

Adj. & Eliminations Minority

Interest Consolidated Debit Credit Income Statement Sales 1,000,000 500,000 1,500,000 Cost of sales 400,000 300,000 700,000 Gross margin 600,000 200,000 800,000 Expenses 400,000 140,000 e. 5,000 535,000 Operating income 200,000 60,000 265,000

Gain on sale of equit. 25,000 d. 25,000

Equity in sub. income _28,000 _{b. 28,000}

Net income 253,000 60,000 265,000

MINI 12,000 12,000

NI (loss)- carried forward _253,000 _60,000 _253.000 Retained Earnings

(9)

Balance, Jan. 1, 2008: Palladium Co. 1,526,500 1,526,500 Stadium Co. 430,000 a. 344,000 86,000 NI - brought forward _253,000 _60,000 _12,000 _253,000 Total 1,779,500 490,000 98,000 1,779,500 Less Dividends declared: Palladium Co. 200,000 200,000 Stadium Co. 30,000 c. 24,000 6,000 Balance, Dec. 31, 2008 - _1,579,500 _460,000 _92,000 _1,579,500 Balance Sheet Cash 150,000 100,000 250,000 Accounts receivable 130,000 100,000 230,000 Inventories 200,000 100,000 300,000 Land 300,000 300,000 Building 200,000 200,000 Equipment 651,500 500,000 d. 25,000 1,176,500

Inv. in Stadium Co. _548,000 _{c. 24,000 a. 544,000}

b. 28,000

Total 2,179,500 800,000 2,456,500

Accounts payable 151,000 10,000 161,000

Acc. depr. - bldg. _20,000 _20,000

Acc. depr. - equipt. _29,000 _80,000 _{e. 5,000} _{d. 50,000} _154,000

OS - Palladium Co. _250,000 _250,000

OS - Stadium Co. _250,000 _{a. 200,000} _50,000

APIC - Palladium Co. _150,000 _150,000

RE-brought forward _1,579,500 _460,000 _92,000 _1,579,500

Total _2,179,500 _800,000 _651,000 _651,000

Minority interest _142,000 _142,000

2,456,500 Explanation of adjusting and elimination entries

a. To eliminate 80% of shareholders' equity accounts of Stadium Co. b. To eliminate equity in subsidiary income.

c. To eliminate dividends from subsidiary.

d. To eliminate unrealized gain on sale of equipment e. To recognize gain on sale of equipment.

Problem 13 - 7

Cost of investment P360,000

Book value of acquired investment:

Ordinary Share Capital (P300,000 x 80%) P240,000

Retained earnings (P90,000 x 80%) 72,000 312,000

(10)

Grossed-up excess – goodwill (P$8,000 / 80%) P 60,000

Impairment of goodwill P 2,400

Adjusting and elimination entries

a. Investment 65,600

Retained Earnings, Pluto Co. 65,600

To record share in the net increase in retained earnings of Saturn Inc.

P225,000 + (9% of P300,000) - P80,000 = P172,000 P172,000 - P90,000 = P82,000 x 80% = P65,600

b. Ordinary Share Capital, Saturn Co. (P300,000 x 80%) 240,000

Retained Earnings, Saturn Co. (P172,000 x 80%) 137,600

Investment 377,600

To eliminated 80% of stockholders' equity of Saturn Inc.

c. Goodwill 60,000

Investment 48,000

Minority Interest 12,000

To record the excess of cost over book value of investment attributed to goodwill.

d. Retained Earnings, Pluto (P2,400 x 3 years) 7,200

Expenses 2,400

Goodwill 9,600

To record amortization of goodwill of prior years and current year.

e. Sales 300,000

Cost of Goods Sold 300,000

To eliminate intercompany sale of merchandise.

f. Retained Earnings, Pluto Corp. 15,000

Cost of Goods Sold 15,000

To record realized gross profit on beginning inventory of Saturn Inc.

P90,000 - P30,000 = P60,000 x 25% = P15,000

g. Cost of Goods Sold 22,500

Inventories 22,500

To eliminate unrealized gross profit on ending inventories of Saturn, Inc.

P90,000 x 25% = P22,500

h. Accounts Payable 108,000

Accounts Receivable 108,000

To eliminate intercompany receivable and payable. P63,000 + P45,000 = P108,000

(11)

i. Retained Earnings, Pluto 36,000

Plant and Equipment 36,000

To eliminate unrealized gain on sale of building.

j. Accumulated Depreciation – Building 6,300

Expenses 1,800

Retained Earnings, Pluto (P1,800 x 2.5 yrs.) 4,500

To record amortization of unrealized gain on sale of building of prior years and current year. P36,000 / 20 yrs. = P1,800 per year

k. Notes Payable 24,000

Notes Receivable 24,000

To eliminate intercompany note receivable and payable.

l. Other Current Liabilities 1,440

Other Current Assets 1,440

To eliminate intercompany interest receivable and payable.

P24,000 x 12% x 6/12 = P1,440

m. Dividends Payable 21,600

Retained Earnings, Saturn Inc. 21,600

P300,000 x 9% x 80% = P21,600

Problem 13 - 8

Paloma P240,000

Selma (100% x P120,000) 120,000

Solita (90% x P96,000) 86,400

Sandara (80% x P80,000) 64,000

Realized gross profit on beginning inventory of Paloma, seller- Sandara

(P6,400 x 80%) 5,120

Paloma, seller - Sandara (P4,000 x 80%) ( 3,200) Sandara, seller - Selma (P640,000 x 20% x 25% x 100%)) ( 32,000) seller - Solita (P40,000 x 20% x 20% x 90%) ( 1,440)

Problem 13 - 9

Polaroid Co. and Subsidiary Solar Co. Consolidated Working Paper For the Year Ended December 31, 2008

Polaroid Solar Adj. & Eliminations Minority

Company Company Debit Credit Interest Consolidated

Income Statement

Sales 1,000,000 500,000 f. 250,000 1,250,000

Cost of sales 400,000 300,000 h. 60,000 f. 250,000 480,000

g. 30,000

(12)

Expenses 390,000 140,000 e. 2,500 532,500 Operating income 210,000 60,000 237,500 Dividend income- subsidiary 24,000 c. 24,000 Net income 234,000 60,000 237,500 MINI 12,000 12,000

NI (loss)- carried forward _234,000 _60,000 _225,500

Retained Earnings Statement Bal., Jan. 1, 2008: Polaroid Co. 1,367,500 e. 7,500 a. 224,000 1,554,000 g. 30,000 Solar Co. 430,000 b. 344,000 86,000 NI – brought forward 234,000 60,000 12,000 225,500 Total 1,601,500 490,000 98,000 1,779,500

Less Div. declared:

Polaroid Co. 200,000 200,000 Solar Co. 30,000 c. 24,000 6,000 Bal, Dec. 31, 2008- carried forward 1,401,500 460,000 92,000 1,579,500 Balance Sheet Cash 150,000 100,000 250,000 Accounts receivable 130,000 100,000 i. 35,000 195,000 Inventories 200,000 100,000 h. 60,000 240,000 Land 300,000 300,000 Building (net) 200,000 200,000 Equipment (net) 651,500 500,000 1,151,500

Inv. in Solar Co. 370,000 a. 224,000 b. 544,000

d. 50,000

Goodwill d. 62,500 e.

10,000 52,500

Total 2,001,500 800,000 2,389,000

AP and accrued exp 151,000 90,000 i. 35,000 206,000

Bonds payable

(FV-P100,000) 49,000 49,000

OS – Polaroid Co. 250,000 250,000

OS – Solar Co. 250,000 b. 200,000 50,000

APIC – Polaroid Co. 150,000 150,000

RE-brought forward 1,401,500 460,000 92,000 1,579,500

Minority interest d. 12,500

Total 2,001,500 800,000 1,239,500 1,239,500 12,500 154,500

2,389,000 Explanation of adjusting and elimination entries:

(13)

a. To recognize share of Polaroid Co. in the net increase in the retained earnings account balance of Solar Co.

RE, Jan. 1, 2008 P430,000

RE, Jan. 1, 2006 (P400,000 – P250,000) 150,000 Net increase in retained earnings P280,000 Share of Polaroid Co. (P280,000 x 80%) P224,000 b. To eliminate 80% of stockholders' equity account of Solar Co.

c. To eliminate dividend income of Polaroid Co.

d. To record goodwill arising from the acquisition on January 1, 2006.

e. To record amortization of goodwill for the period 2006 to 2007 and for 2008. f. To eliminate intercompany sales.

g. To record realized gross profit on beginning inventory of Solar Co. h. To eliminate unrealized gross profit on ending inventory of Solar Co. i. To eliminate intercompany receivable and payable.

Computation of goodwill

Cost of acquired investment P370,000

Book value of acquired investment (P400,000 x 80%) 320,000

Excess P 50,000

Grossed-up excess – goodwill (P50,000/80%) P 62,500

Computation of consolidated net income and minority net income

Consolidated Minority int. net income net income Net income from own operations:

Polaroid Co. P234,000

Solar Co. 48,000 P12,000

Impairment of goodwill ( 2,500)

Realized gross profit on beginning inventory 30,000 Unrealized gross profit on ending inventory ( 60,000)

Dividend income from Solar ( 24,000) ______

Total P225,500 P12,000

MULTIPLE CHOICE

13-A 1. A 5. A 2. D 6. C 3. C 7. A 4. A 8. C 13-B 1. A 13-C 1. B 2. A 3. C (P100,000 – P80,000) + [(P150,000 – P100,000) x 80%] 13-D 1. B Net income from own operations:

(14)

Silahis (P92,000 x 100%) 92,000

Sultan (P64,000 x 90%) 57,600

Unrealized gross profit on ending inventory of Palacio

on purchases from Silahis (P1,200 x 100%) ( 1,200) from Sultan (P2,600 x 90%) ( 2,340) Realized gross profit on beginning inventory of Palacio

on purchases from Silahis (P2,400 x 100%) 2,400 from Sultan (P2,000 x 90%) 1,800

13-E 1. D Net income from own operations:

Pearl P200,000

Sapphire (P200,000 x 70%) 140,000

Unrealized gross profit on ending inventory of Sapphire

(P180,000 x 40% x 20%/120%) ( 12,000)

13-F 1. D Consolidated Minority

2. D net income net income

Pancho P120,000

Sanchez 56,000 P14,000

Realized gross profit on beginning invty.

of Pancho 640 160

Unrealized gross profit on ending invty. of

Pancho (P40,000 x 20% x 25%/125%) ( 1,280) ( 320) Sanchez (P100,000 x 20% x 25%/125%) ( 4,000) ______

Total P171,360 P13,840

13-G 1. D Net income from own operations:

Panay P 90,000

Sta. Ana (P75,000 x 80%) 60,000

Unreallized gross profit on ending inventory of Sta. Ana

(P60,000 x 20%) ( 12,000)

Unrealized gain on construction of warehouse by Sta. Ana

(P30,000 x 80%) ( 24,000)

Realized gain on warehouse (P30,000 / 5 yrs. x 80%) 4,800

13-H 1. D Consolidated Minority int.

net income net income 2. D Net income from own operations:

Pureza P200,000

3. D Sta. Mesa 80,000 P20,000

Realized gross profit on beginning inventory

of Sta. Mesa (P4,800 x 25%/125%) 960 Unrealized gross profit on ending inventory

of Sta. Mesa (P9,000 x 25%/125%) ( 1,800) ______

Total P275,160 P20,000

(15)

4. C Minority interest, January 1, 2008 (P400,000 x 20%) P 80,000 Adjustment of assets (P80,000/80% x 20%) 20,000

Minority interest net income 20,000

Minority interest dividends (P20,000 x 20%) ( 4,000)

Minority interest, December 31, 2008 P116,000

5. D Original cost of investment P400,000

Equity in subsidiary income 75,160

Dividends received from Sta. Mesa (P20,000 x 80%) ( 16,000)

Balance of investment, December 31, 2008 P459,160

13-I 1. D Unadjusted share in the NI of San Simon

(P200,000 x 80%) P160,000

Unrealized profit on ending inventory of San Simon

(P18,000 x 25%/125%) ( 3,600)

Realized profit on beginning inventory of San Simon

(P9,600 x 25%/125%) 1,920

Equity in San Simon Co.'s net income for 2008 P150,320

13-J 1. B Minority interest net income P 30,560

Add Unrealized GP on Ending Inventory of Panasonic Co.

(36,000 x 25%/125% = P7,200 x 20%) 1,440 Unadjusted share in Net Income of Panasonic Co. P 32,000

Net income of Supersonic Co. P 160,000

Controlling interest x 80%

Unadjusted share of Panasonic in net income of Supersonic P 128,000 Unrealized GP on ending inventory of Panasonic Co. (P7,200

x 80%)

( 5,760) Unrealized GP on ending inventory of Supersonic Co.

(P24,000 x 20%/120%) ( 4,000)

Equity in subsidiary net income P 118,240

2. D Minority interest, Dec. 31, 2008 P158,560

Less Minority interest net income 30,560

Minority interest, January 1, 2008 P120,000

Percentage of minority interest ÷ 20%

Net assets of Supersonic Co., Jan. 1, 2008 P640,000

Add Net income of Supersonic Co. for 2008 160,000

Net assets of Supersonic Co., Dec. 31, 2009 P800,000

3. B Net assets of Supersonic Co., Jan. 1, 2008 P640,000

Percentage of interest acquired x 80%

Book value of investment acquired P512,000

Excess of cost over book value of investment 20,000

Price paid for investment P532,000

4. A Original cost of investment P532,000

(16)

Balance of investment, Dec. 31, 2008 P650,240

13-K 1. A 2007 2008

Unadjusted share in net income of Soriaga Co.

2007 - P320,000 x 30% P 96,000

2008 - P360,000 x 30% P108,000

Gross profit on merchandise sold by Soriaga Co. to Pasadena Corp. in 2007 and sold by

Pasadena in 2008 (P8,000 x 30%) ( 2,400) 2,400

Minority net income P 93,600 P110,400

13-L 1. C Subsidiary net income in 2006 P60,000

Eliminate profit in transfer of land ( 10,000)

P50,000

Percentage of ownership x 80%

Parent’s income from subsidiary P40,000

2. A P80,000 x 80% = P64,000 3. B 4. A 5. C 6. A 7. D 8. C 9. B 10. D 11. D 13-M 1. C Original cost of P750,000

13-N 1. D Consolidated Net Income Minority Net Income

2. D Pateros Co. P120,000

Santiago Co. 67,200 P16,800

Unrealized gain on sale of machinery to

Pateros by Santiago (P300,000 - P250,000) ( 40,000) ( 10,000) Realized gain on sale of machinery

(P50,000/8 years = P6,250) 5,000 1,250

Total P152,200 P 8,050

3. B Book value of machinery, Jan. 1, 2008 P250,000

Less Depreciation expense for 2008 (P250,000/8 years) 31,250

Book value of machinery, Dec. 31, 2008 P218,750

13-O 1. D

Consolidated Net Income

Minority Net Income Net income from own operations:

Portero P 80,000

2. D Sotero 80,000 P 20,000

Unrealized gain on sale of machine ( 30,000) Realized gain on sale of machine

(17)

Total P 135,000 P 20,000

3. A Book value of machine, Jan. 1, 2008 P 90,000

Less Depreciation for 2008 (P90,000/6 years) ( 15,000)

Book value of machine, Dec. 31, 2008 P 75,000

13-P 1. D

Consolidated Net Income

Minority Net Income Net income from own operations:

2. B Pedro Co. P 800,000

Sixto Co. 320,000 P 80,000

3. D Impairment of goodwill ( 16,000)

Unrealized gain on sale of equipment ( 80,000) Realized gain on sale of equipment

(P80,000/5 x 9/12) 12,000 ______

Total P 1,036,000 P 80,000

Equity in subsidiary income (P1,036,000 - P800,000) P 236,000 4. D Minority interest, Jan. 1, 2008 (P1,600,000 x 20%) P 320,000 Share in assets adjustments (P320,000 / 80% x 20%) 80,000

Minority interest net income 80,000

Minority interest dividends (P80,000 x 20%) ( 16,000)

Minority interest, Dec. 31, 2008 P 464,000

13-Q 1. C

13-R 1. A 2007 2008

Unrealized gain on sale of machinery (P20,000) P ---Realized gain (P20,000/5 years) 4,000 4,000

Net adjustments (P16,000) P4,000

13-S 1. C Reported subsidiary net income P400,000

Eliminate intercompany profit on transfer of equipment ( 100,000)

Realized gain on sale of equipment 20,000

P320,000

Minority interest percentage x 40%

Minority net income P128,000

2. B P300,000 – (P30,000 x 3) P210,000 3. B P3,000,000 + (P2,000,000 – P100,000 + P20,000) P4,920,000 4. B (P1,200,000 – P200,000) + P800,000 P1,800,000 5. A Consolidated Net Income Minority Net Income Net income from own operations:

Parch P750,000

Starch 240,000 P160,000

Unrealized profit on transfer of equipt. ( 60,000) ( 40,000) Realized profit on transfer of equipt. 12,000 8,000

(18)

6. B The retained earnings of Parch of P4,210,000