EXERCISES Exercise 12 -1
1. Investment in Stun Corp.
Cost of investment (800 shares @ P200) P160,000
Book value of interest acquired as of July 1, 2006
Ordinary Share Capital (1,000 shares x P100 x 80%) P80,000
Retained Earnings [(P50,000 + 1/2 of P30,000) 80%] 52,000 132,000
Goodwill P 28,000
Grossed-up Goodwill (P28,000 / 80%) P 35,000
2. Investment in Stud Corp.
Cost of investment (900 shares @ P100) P 90,000
Book value of interest acquired as of July 1, 2003
Ordinary Share Capital (1,000 shares x P100 x 90%) P90,000
Retained Earnings [(P15,000 + 1/2 of P5,000) 90%] ( 15,750) 74,250
Goodwill P 15,750
Grossed-up Goodwill (P15,750 / 90%) P 17,500
Exercise 12 - 2 1. Equity Method
a. Investment in Stark Co. 240,000
Cash 240,000
b. Investment in Stark Co. 11,250
Equity in Subsidiary Income 11,250
P30,000 x 1/2 x 75% = P11,250
Equity in Subsidiary Income 500
Investment in Stark Co. 500
c. Cash 22,500
Investment in Stark Co. 22,500
P30,000 x 75% = P22,500
d. Equity in Subsidiary Income 7,500
Investment in Stark Co. 7,500
Equity in Subsidiary Income 1,500
Investment in Stark Co. 1,500
Cost Method
a. Investment in Stark Co. 240,000
Cash 240,000
b. no entry
Dividend Revenue 11,250
Investment in Stark Co. 11,250
d. no entry
2. Ordinary Share Capital P200,000
APIC 50,000
RE [P20,000 + (P30,000 x 1/2)] 35,000
Total shareholders’ equity on date of acquisition P285,000
x 75%
Book value of interest acquired P213,750
Exercise 12 –3
1. Investment in Saturn Co. 800,000
Cash 800,000
Cash 64,000
Dividend Income (80,000 x 80%) 64,000
2. Original cost of investment – P800,000
3. Minority net income = P200,000 x 20% = P40,000 4. Minority interest, December 31, 2008:
Ordinary Share Capital P 500,000
Retained Earnings = P500,000 + P200,000 – P80,000 620,000
Total P1,120,000
Minority interest percentage x 20%
Minority interest P 224,000
5. 2008
Jan. 1 Investment in Saturn Co. 800,000
Cash 800,000
Dec. 31 Investment in Saturn Co. 160,000
Equity in Subsidiary Income 160,000
P200,000 x 80% = P160,000
31 Cash 64,000
Investment in Saturn Co. 64,000
P80,000 x 80% = P64,000
Original cost of investment P800,000
Equity in subsidiary income 160,000
Dividends received from subsidiary ( 64,000)
Balance of investment, December 31, 2008 P896,000
Minority net income (P200,000 x 20%) P 40,000
Minority interest, January 1, 2008 (P1,000,000 x 20%) P200,000
Minority net income (see # 3) 40,000
Minority dividends (P80,000 x 20%) ( 16,000)
Exercise 12 – 4
a. Investment in Saloon Corp. 67,500
Cash 67,500
750 shares @ P90 = P67,500
b. Received 75 shares from Saloon Corp. as stock dividend. Shares now owned and held are 825 shares.
c. Cash 4,125
Investment in Saloon Corp. 4,125
825 shares @ P5 = P4,125
d. Investment in Saloon Corp. 11,250
Equity in Subsidiary Income 11,250
P15,000 x 75% = P11,250
e. Equity in Subsidiary Income 4,500
Investment in Saloon Corp. 4,500
P6,000 x 75% = P4,500 Exercise 12 – 5
Assuming the interest of Paxton is 60%
(a) 2006 P300,000 2007 P180,000 2008 P750,000 (b) 2006 P300,000 + (40% of P210,000) P384,000 2007 P180,000 + (40% of P120,000) P228,000 2008 P750,000 + (40% of P 75,000) P780,000 Exercise 12 - 6
Case A Case B Case C
Net income (loss) from own operations:
Pastel Corp. P 80,000 P(20,000) P40,000
Sly Corp. (90%-owned) 40,500 45,000 27,000
Sty Corp. (70%-owned) ( 10,500) 49,000 24,500
Depreciation:
Excess of cost over book value of
investment in Sly (P10,000/90%/5 yrs.) ( 2,220)
Excess of book value over cost of
investment in Sty (P5,000/70%/5 yrs.) ________ ________ 1,430
Consolidated net income P110,000 P 74,000 P90,710
Exercise 12 – 7
1. a. Investment in Sat Co. 16,000
Retained Earnings, Pat Co. 16,000
To record the share of Pat in the net increase in the retained earnings of Sat.
b. Ordinary Share Capital, Sat Co. (P200,000 x 80%) 160,000 Retained Earnings , Sat Co. (P70,000 x 80%) 56,000
Investment in Sat Co. 216,000
To eliminate 80% of stockholders’ equity account balances of Sat Co.
c. Assets 10,000
Investment in Sat Co. 8,000
Minority Interest 2,000
To record excess of cost over book value of inv.
P208,000 - (P250,000 x 80%) = P8,000/80% = P100,000
(10,000)
d. Operating Expenses 1,000
Retained Earnings, Pat Co. 2,000
Assets 3,000
To record depreciation of adjustment for prior years and current year at P1,000 per year.
2. Pat and Subsidiary Sat Co.
Consolidated Working Paper For the Year Ended December 31, 2008
Adj. & Eliminations Cons. Minority Cons.
Pat Co. Sat Co. Debit Credit IS Interest BS
Debits
Cash and Other Assets 452,000 440,000 c. 10,000 d. 3,000 899,000
Inv. in Sat Co. stock 208,000 a. 16,000 b. 216,000
c. 8,000 Cost of Sales 300,000 200,000 500,000 Operating Expenses 90,000 50,000 d. 1,000 141,000 Total 1,050,000 690,000 899,000 Credits Liabilities 150,000 120,000 270,000 Ordinary Share Capital, P100par 300,000 200,000 b. 160,000 40,000 300,000 Retained Earnings 100,000 70,000 b. 56,000 a. 16,000 14,000 114,000 d . 2,000 Sales 500,000 300,000 (800,000) 1,050,000 690,000 159,000
Minority net income 10,000 10,000
CNI 149,000 149,000
Minority interest c. 2,000 64,000 66,000
Total 245,000 245,000 899,000
3.
Pat Co. and Subsidiary Sat Co.
Consolidated Statement of Recognized Income and Expenses For the Year Ended December 31, 2008
Sales (P500,000 + P300,000) P800,000
Cost of Sales (P300,000 + P200,000) 500,000
Gross Profit P300,000
Operating Expenses (P90,000 + P50,000 + P1,000) 141,000
Less Minority Interest net income (Sales – Cost of Sales – Operating Expenses) 10,000
Consolidated Net Income P149,000
4.
Pat Co. and Subsidiary Sat Co. Consolidated Statement of Financial Position
December 31, 2008
Assets Liabilities and Shareholders’ Equity
Cash and Other Assets P899,000 Liabilities P270,000
Minority Interest 66000
Ordinary Share Capital, P100 par 300,000
Retained Earnings 263,00
_______ Total Liabilities and ________
Total Assets P899,000 Shareholders’ Equity P899,000
Exercise 12 - 8
a. Advances from Pallet Co. 15,000
Advances to Stall Co. 15,000
b. Notes Receivable Discounted 10,000
Notes Receivable from Pallet Co. 10,000
c. Note Payable to Stall Co. 5,000
Note Receivable from Pallet Co. 5,000
d. Dividends Payable 1,600
Dividends Receivable 1,600
Exercise 12 -9
September 1 Acquired investment at a cost of P630,000. August 16 The subsidiary declared dividends.
August 27 The subsidiary distributed declared dividends.
August 31 The parent recorded share in the reported income of the subsidiary.
August 31 The parent recorded impairment/depreciation of the excess of cost over book value of the acquired investment.
PROBLEMS
Problem 12 - 1
Cost of investment P280,000
Book value of interest acquired :
Ordinary Share Capital (P100,000 x 80%) P 80,000
Retained Earnings (P50,000 x 80%) 40,000 120,000
Excess of cost over book value P160,000
Percentage of ownership ÷ 80%
Grossed-up excess P200,000
Allocation of excess:
Plant and equipment P 50,000
Inventory 20,000 76,000
Expenses on the adjustment
2007 2008
Plant and equipment (P50,000/5 yrs.) P10,000 P10,000
Goodwill impairment 5,000 4,000
Inventories 20,000 ---__
Total P35,000 P14,000
1. Journal entries on the books of the parent 2007
Jan. 1 Investment in Slow Co. 280,000
Cash 280,000
Dec. 31 Investment in Slow Co. 48,000
Equity in Subsidiary Income 48,000
P60,000 x 80% = P48,000
31 Equity in Subsidiary Income 35,000
Investment in Slow Co. 35,000
2008
Dec. 31 Investment in Slow Co. 40,000
Equity in Subsidiary Income 40,000
P50,000 x 80% = P40,000
31 Equity in Subsidiary Income 14,000
Investment in Slow Co. 14,000
2. Working paper elimination entries:
2007 a. Ordinary Share Capital, Slow Co. 80,000
Retained Earnings, Slow Co. 40,000
Investment in Slow Co. 120,000
b. Equity in Subsidiary Income (P48,000 – P35,000) 13,000
Investment in Slow Co. 13,000
c. Plant and Equipment 50,000
Goodwill 130,000
Inventory 20,000
Investment in Slow Co. 160,000
Minority Interest 40,000
d. Cost of Sales 20,000
Operating Expenses 15,000
Plant and Equipment 10,000
Goodwill 5,000
Inventory 20,000
2008 a. Ordinary Share Capital, Slow Co. 80,000
Investment in Slow Co. 168,000 b. Equity in Subsidiary Income (P40,000 – P14,000) 26,000
Investment in Slow Co. 26,000
c. Plant and Equipment 40,000
Goodwill 125,000
Investment in Slow Co. 132,000
Minority Interest 33,000
d. Operating Expenses 14,000
Plant and Equipment 10,000
Goodwill 4,000
3. Computation of consolidated net income
2007 2008 Net income from own operations:
Plow Co. P70,000 P 80,000
Slow Co. 48,000 40,000
Impairment / depreciation / amortization ( 35,000) ( 14,000)
Consolidated net income P83,000 P 106,000
Problem 12 - 2
Original cost of investment (book value is also P294,000) P294,000
Equity in subsidiary income – 2007 (P84,000 x 70%) 58,500
Dividends received from subsidiary – 2007 (P63,000 x 70%) ( 44,100)
Balance of investment, December 31, 2007 P308,400
Equity in subsidiary income - Jan. 1 - June 30, 2008 (P105,000 x 1/2 x 70%) 367,750
Balance of investment, June 30, 2008 P345,450
Cost of investment sold (P345,450 x 300/2,100) ( 49,350)
Equity in subsidiary income, July 1 - Dec. 31, 2008 (P105,000 x 1/2 x 60%) 31,500 Dividends received from subsidiary – 2008(P94,500 x 60%) ( 56,700)
Balance of investment, December 31, 2008 P270,900
Problem 12 - 3
Cost of investment P2,280,000
Book value of interest acquired:
Ordinary Share Capital (P1,000,000 x 80%) P 800,000
Retained Earnings (P1,600,000 x 80%) 1,280,000 2,080,000
Goodwill P 200,000
Grossed-up Goodwill (P200,000 / 80%) P 250,000
Peach Co. and Subsidiary Silver Co. Consolidated Working Paper For the Year Ended December 31, 2008
Eliminations Minority
Peach Co. Silver Co. Debit Credit Interest Consolidated
Income Statement
Cost of sales 1,600,000 1,200,000 2,800,000
Gross profit 2,400,000 800,000 3,200,000
Operating expenses 1,560,000 440,000 e. 10,000 2,010,000
Operating income 840,000 360,000 1,190,000
Equity in sub. Income 278,000 b. 278,000
---Net income 1,118,000 360,000 1,190,000 MINI 72,000 72,000 NI-carried forward 1,118,000 360,000 72,000 1,118,000 Retained Earnings Statement Balance, January 1 6,000,000 1,600,000 a. 1,280,000 320,000 6,000,000 Net income-brought forward 1,118,000 360,000 72,000 1,118,000 Total 7,118,000 1,960,000 392,000 7,118,000
Less Div. declared 800,000 120,000 c. 96,000 24,000 800,000
Balance, Dec. 31 6,318,000 1,840,000 368,000 6,318,000 Balance Sheet Cash 600,000 200,000 800,000 Accounts rec’l 400,000 400,000 f. 10,000 790,000 Inventories 800,000 600,000 1,400,000 Land 1,200,000 1,200,000
Building (net of AD) 800,000 800,000
Equipment (net of AD) 2,456,000 2,000,000 4,456,000
Inv. in Silver Co. 2,462,000 c. 96,000 a. 2,080,000 b. 278,000 d. 200,000
Goodwill d. 250,000 e. 10,000 240,000
Total 8,718,000 3,200,000 9,686,000
AP and accrued exp. 604,000 360,000 f. 10,000 954,000
Bonds payable 196,000 196,000 OS - Peach Co. (P100 par) 1,000,000 1,000,000 OS - Silver Co. (P20 par) 1,000,000 a. 800,000 200,000 APIC 600,000 600,000 RE-brought forward 6,318,000 1,840,000 368,000 6,318,000 Total 8,718,000 3,200,000 Minority interest d. 50,000 50,000 618,000 2,724,000 2,724,000 9,636,000
Peach Co. and Subsidiary Silver Co.
Consolidated Statement of Recognized Income and Expenses For the Year Ended December 31, 2008
Sales P6,000,000
Cost of Sales 2,800,000
Gross Profit P3,200,000
Operating Expenses 2,010,000
Operating Income P1,190,000
Consolidated Net Income P1,118,000 Peach Co. and Subsidiary Silver Co.
Consolidated Statement of Financial Position December 31, 2008 Assets Cash P 800,000 Accounts Receivable 790,000 Inventories 1,400,000 Land 1,200,000
Building (net of accumulated depreciation) 800,000
Equipment (net of accumulated depreciation) 4,456,000
Goodwill 240,000
Total Assets P9,686,000
Liabilities and Shareholders’ Equity
Accounts Payable and Accrued Expenses P 954,000
Bonds Payable (face amount - P200,000) 196,000
Minority Interest 618,000
Ordinary Share Capital, P100 par 1,000,000
Additional Paid-in Capital 600,000
Retained Earnings 6,318,000
Total Liabilities and Shareholders’ Equity P9,686,000
Problem 12 - 4
Cost of investment P1,512,000
Book value of interest acquired:
Ordinary Share Capital (P600,000 x 80%) P480,000
Retained Earnings (P800,000 x 80%) 640,000 1,120,000
Excess of cost over book value of acquired investment P 392,000
Grossed-up excess (P392,000 /80%0 P490,000 Allocation of excess: Inventories p 60,000 Land 100,000 Building 200,000 Equipment (150,000) Patent (P80,000 x 80%) 80,000 290,000 Goodwill P 200,000
Charges to expense for asset adjustments:
Inventories P60,000
Building 10,000
Equipment ( 15,000)
Patent 8,000
Total P68,000
Adjustments to Building and equipment: Building (increase is 50%) Cost (P520,000 x 50% ) P260,000 AD (P120,000 x 50% ) 60,000 Net amount P200,000 Equipment (decrease is 16.67%) Cost (P940,000 x 16.67% ) P156,670 AD (P 40,000 x 16.67%) 6,670 Net amount P150,000
Prose Co. and Subsidiary Slope Co. Consolidated Working Paper For the Year Ended December 31, 2008
Prose Slope Adj. & Eliminations IS Minority Balance
Co. Co. Debit Credit Dr. (Cr.) Interest Sheet
Debits Cash 400,000 200,000 600,000 AR 300,000 100,000 400,000 Inventories 200,000 80,000 d. 60,000 e. 60,000 280,000 Land 300,000 d. 100,000 400,000 Buildings 520,000 d. 260,000 780,000 Equipment 1,400,000 940,000 d. 156,670 2,183,330
Inv. in Slope Co. 1,617,600 c. 80,000 a. 1,120,000
b. 185,600 d. 392,000 Cost of sales 800,000 300,000 e. 60,000 1,160,000 Expenses 720,000 400,000 e. 8,400 1,238,000 f. 110,000 Dividends paid 200,000 100,000 c. 80,000 (20,000) 200,000 Patents d. 80,000 e. 8,000 72,000 Goodwill d. 200,000 e. 5,000 195,000 5,637,600 2,940,000 5,110,330
Credits
AP & accrued exp. 248,000 380,000 628,000
AD - Bldg. 120,000 d. 60,000 196,000 e. 10,000 f. 20,000 AD - Equipt. 804,000 40,000 d. 6,670 f. 90,000 916,667 e. 15,000 OS - P100 par 400,000 400,000 OS - P20 par 600,000 a. 480,000 120,000 APIC 800,000 800,000 RE - Prose Co. 1,200,000 1,200,000 RE - Slope Co. 800,000 a. 640,000 160,000 Sales 2,000,000 1,000,000 (3,000,000) Equity in SI 185,600 b. 185,600 Totals 5,637,600 2,940,000 MINI 60,000 60,000 CNI 542,000 542,000 Minority interest d. 98,000 98,000 418,000 2,285,279 2,285,270 5,110,330
Current year depreciation based on book value:
Building = (P520,000 – P120,000) / 20 yrs. = P20,000
Equipment = (P940,000 – P40,000) / 10 yrs. = P90,000
Prose Co. and Subsidiary Slope Co.
Consolidated Statement of Recognized Income and Expenses For the Year Ended December 31, 2008
Sales P3,000,000
Cost of sales 1,160,000
Gross Profit P1,840,000
Expenses 1,238,000
Operating Income P 602,000
Minority Interest net income 60,000
Consolidated Net Income P 542,000
Prose Co. and Subsidiary Slope Co. Consolidated Statement of Financial Position
December 31, 2008 Assets Cash P 600,000 Accounts Receivable 400,000 Inventories 280,000 Land 400,000 Buildings P 780,000
Less Accumulated Depreciation 210,000 570,000
Equipment P2,183,330
Patents 72,000
Goodwill 195,000
Total Assets P3,788,000
Liabilities and Shareholders’ Equity
Accounts Payable and Accrued Expenses P628,000
Minority Interest 418,000
Ordinary Share Capital, P100 par 400,000
Additional Paid-in Capital 800,000
Retained Earnings (P1,200,000 + P542,000 - P200,000) 1,542,000
Total Liabilities and Shareholders’ Equity P3,788,000
Problem 12 - 5
1. a. Notes Payable - Palma Corp. 10,000
Notes Receivable - Salman Co. 10,000
b. Accrued Interest on Notes Payable 600
Accrued Interest on Notes Receivable 600
2. Sales P 70,000
Interest revenue 600
Expenses ( 53,000)
Interest expense ( 600)
Net income P 17,000
Minority net income [(P20,000 - P17,000 - P600) x 10%] ( 240)
Consolidated net income P 16,760
Problem 12 – 6
1. Minority net income (P100,000 x 20%) P 20,000
2. Current assets of Pentium and Stadium P558,000
Less Dividends receivable (P20,000 x 80%) 16,000
Current assets P542,000
3. None, since investment income is eliminated in consolidation. 4. P1,000,000 – the capital stock of Pentium.
5. None, since the investment account is eliminated. 6. Net income for own operation
(800,000 – 500,000 – 100,000) P 200,000
Income for Stadium 76,000
7. Cost of investment P560,000
Excess of cost over book value P160,000
Goodwill (P160,000 / 80%) P200,000
8. Goodwill P200,000
Less Impairment loss for 2007 and 2008 16,000
Goodwill as of December 31, 2008 P184,000
9. Beginning retained earnings of Pentium P400,000
Consolidated net income 276,000
Pentium dividends for 2008 (120,000)
Consolidated retained earnings at December 31, 2008 P556,000
10. Ordinary Share Capital and retained earnings of Stadium P600,000
Net income 100,000
Dividends ( 50,000)
Adjustment in assets 184,000
Shareholders’ Equity of Stadium at December 31, 2008 P834,000
Minority interest percentage x 20%
Minority interest at December 31, 2008 P166,800
MULTIPLE CHOICE
12-A 1. C 3. A 5. C 7. A
2. B 4. D 6. A
12-B 1. D Cost P290,000
Excess of BV over cost (14,000 x 80%) 11,200
BV of interest purchased P301,200
2. D P58,400 ÷ 20% P292,000
3. C Consolidated working capital (P726,000 – P300,000) P426,000 Pole’s working capital (P436,000 – P166,000) 270,000
Sole’s working capital P156,000
12-C 1. A Net income from own operations of Parker Co. P100,000
Share in Starter Co. net income (P40,000 x 85%) 34,000
Dividends received from Starter Co. ( 8,500)
Consolidated net profit P125,500
12-D 1. D Net income from own operations of Pentium
(P1,000,000 - P600,000 - P180,000) P220,000
Share in Systems = [P600,000 - P400,000 - P100,000}x 80%] 80,000 Depreciation of excess of cost over BV of investment
(P416,000 - P400,000) / 10 years ( 1,600)
Consolidated net income P298,400
12-E 1. C Investment cost P756,000
3. C 50,000 x 80% P 40,000
4. B Investment cost P756,000
Dividends
(P60,000 + P36,000 – P50,000 – P50,000) x 80% 3,200
Investment balance, December 31, 2008 P752,800
R
12-F 1. B Original cost of investment P540,000
Equity in subsidiary income (P60,000 x 90%) 54,000
Dividends received (P30,000 x 90%) ( 27,000)
Balance of investment, December 31, 2008 P567,000
2. D
12-G Investment cost, Jan. 1, 2005 P820,000
Book value of interest acquired (P800,000 x 90%) 720,000
Excess of cost over BV P100,000
Equipment with 10-year life (P100,000 / 90%) P111,111
1. B RE – Singson, Dec. 31, 2008 P400,000
RE – Singson, Jan. 1, 2005 200,000
Increase in RE from date of acquisition P200,000
Percentage of ownership x 90%
Pingson’s share on the increase P180,000
Depreciation on the excess allocated to equipment
(P111,111 / 10 years x 4 years) x 90% 40,000 Amount needed to convert the inv. to equity basis P140,000
2. C Pingson’s separate net income P500,000
Share in Singson’s net income
P160,000 x 90% P144,000
Depreciation of equipment 11,111 132,889
Consolidated net income P632,889
3. C Shareholders’ equity of Singson, January 1, 2008 P1,000,000
Net income for 2008 160,000
Dividends for 2008 ( 100,000)
Adjustment in assets 111,111
Shareholders’ equity of Singson, December 31, 2008 P1,171,111
Minority interest percentage x 10%
Minority interest, December 31, 2008 P 117,111
4. D P 100,000 x 10% P 10,000
12-H 1. C Original cost of investment P207,500
Equity in subsidiary income 45,000
Amortization of excess of cost over BV of investment
P207,500 – (P250,000 x 75%) = P20,000 /75% =P26,667/10 ( 2,667) Dividends paid (2,000 shares x 75% x P20) ( 30,000) Carrying value of investment, December 31, 2008 P219,833
12-I 1. D Original cost of investment P290,000
Equity in subsidiary income:
2007 (P60,000 x 90%) 54,000
2008 (P20,000 x 90%) ( 18,000)
Impairment loss (P800 + P1,200) ( 2,000)
Dividends received from subsidiary:
2007 (P20,000 x 90%) ( 18,000)
2008 (P10,000 x 90%) ( 9,000)
Balance of investment, December 31, 2008 P297,000
12-J 1. D TSE of Saddle Co., Jan. 1, 2010 (P70,000 / 20%) P350,000
Cumulative net income for 5 years ( 200,000)
Dividends paid 50,000
TSE of Saddle Co., Jan. 1, 2005 P200,000
Percentage of interest of Paddle x 80%
Book value of acquired investment P160,000
Excess of cost over book value of investment 50,000
Cost of investment acquired P210,000
2. D Original cost of investment P210,000
Equity in subsidiary income (P200,000 x 80%) 160,000
Impairment loss on goodwill ( 12,500)
Dividends received (P50,000 x 80%) ( 40,000)
Carrying value of investment, Dec. 31, 2010 P317,500
12-K 1. C Ordinary Share Capital (P75,000 x 90%) P 67,500
Retained earnings (P45,000 x 90%) 40,500
Book value of Slogan shares P108,000
2. D Original cost of investment P110,000
Equity in subsidiary income (P5,000 x 90%) 4,500 Depreciation of excess of cost over BV of investment
(P2,000 / 10 years) ( 200)
Dividends received from Slogan (P4,500 x 90%) ( 4,050) Carrying value of investment, December 31, 2008 P110,250
3. C P4,500 x 90% P 4,050
4. D Retained earnings, January 1 P180,000
Net income from own operations 45,000
Equity in subsidiary income (P 4,500 – 200) 4,300
Dividends declared and paid ( 30,000)
Consolidated RE (RE of parent), December 31, 2008 P199,300 12-L 1. D Share in net income of Starlet Co. (P100,000 x 80%) P 80,000
Impairment loss on goodwill ( 4,000)
Equity in Starlet Co. income P 76,000
12-M 1. C Net income of parent company because it already includes the
equity in earnings of the subsidiary P 90,000
Total assets of Sub 350,000
Total P1,460,000
Adjustments and eliminations:
Investment in Sub ( 315,000)
Excess of cost over BV of investment:
Cost P300,000
Book value (OS – P30,000; APIC
P100,000; RE – P117,500) 247,500
Goodwill P 52,500
Less Impairment loss 5,000 47,500
Consolidated total assets P1,192,500
3. A Retained earnings of parent company
4. D P52,500 – P5,000 P47,500
5. D Total Stockholders’ equity of parent company P980,000
12-N 1. C TSE of Polo before the combination P 6,000,000
FMV of OS issued by Polo (200,000 x P20) 4,000,000
Net income of Polo and Solo 1,550,000
Impairment loss ( 100,000)
Dividends paid by Polo ( 450,000)
Consolidated shareholders’ equity, Dec. 31, 2008 P 11,000,000
12-O 1. A (P 6,500,000 + 630,000 @ 5 P 9,650,000
2. B (P 4,400,000 + 630,000 @ 3 P 6,290,000
3. A Retained Earnings of Post
4. D Net income of Post (P 1,000,000 + P 1,100,000) P 2,100,000 Share in Adjusted Net income of Shaw:
Net income (P500,000 x 50%) P 250,000 P 244,900 Impairment loss on goodwill 5,100 P 2,344,900 5. C [(P9,000,000 + 300,000 + 500,000 – 350,000) P 9,450,00 Asset adjustment [5,040,000 – (9,300,000 x 50%)] = P390,000 / 50% 780,000 Total P10,230,000 Percentage of ownership x 50% Minority interest P5,115,000
12-P 1. D Let x = Net income of Port
x = P84,080 + .70 of NI of Sort NI of Sort = (P12,000) + .20x
x = P84,080 + .70 [(P12,000) + .20x] x = P84,080 - P8,400 + .14x
x = P75,680/.86 x = P88,000 2. B NI of Sort = (P12,000) + .20 x P88,000 NI of Sort = (P12,000) + P17,600 NI of Sort = P5,600
