Documente Academic
Documente Profesional
Documente Cultură
SUGGESTED ANSWERS
EXERCISES
Exercise 3 -1
1. Investment in Stun Corp.
Consideration transferred (800 shares @ P200)
Book value of interest acquired as of July 1, 2014
Ordinary Share Capital (1,000 shares x P100 x 80%)
Retained Earnings [(P50,000 + 1/2 of P30,000) 80%]
Goodwill
2.
P160,000
P80,000
52,000
132,000
P 28,000
P 90,000
P90,000
( 15,750)
74,250
P 15,750
Exercise 3 - 2
Cost Method
a.
Investment in Stark Co. 1,500/2,000 = 75%
Cash
b.
no entry
c.
d.
2.
240,000
240,000
22,500
11,250
11,250
no entry
P200,000
50,000
35,000
P285,000
x 75%
P213,750
3.
800,000
800,000
64,000
64,000
4.
page 2
500,000
620,000
P1,120,000
x 20%
P 224,000
Exercise 3 4
a.
67,500
67,500
b.
No entry
c.
d.
Cash
Dividend Revenue
825 shares @ P5 = P4,125
e.
No entry
Exercise 3 5
2013
2014
2015
P90,000 x 60%
P180,000 x 60%
P135,000 x 60%
P 54,000
P108,000
P 81,000
Exercise 3 - 6
Net income (loss) from own operations:
Pastel Corp.
Sly Corp. (90%-owned)
Sty Corp. (70%-owned)
Depreciation:
Excess of cost over book value of
investment in Sly (P9,000/90%/5 yrs.)
Excess of book value over cost of
investment in Sty (P3,500/70%/5 yrs.)
Consolidated net income
Case A
Case B
Case C
P 80,000
(13,500)
31,500
P(20,000)
45,000
49,000
P40,000
27,000
24,500
( 2,000)
________
P 98,000
Exercise 3 7
1. a.
Investment in Sat Co.
Retained Earnings, Pat Co.
To record the share of Pat in the net increase
in the retained earnings of Sat.
________
P 74,000
1,000
P90,500
16,000
16,000
page 3
c.
200,000
70,000
10,000
224,000
56,000
Operating Expenses
Retained Earnings, Pat Co.
Assets
To record depreciation of adjustment for prior
years and current year at P1,000 per year.
2.
1,000
2,000
3,000
Investment in Sat
Cost of Sales
Operating Exp.
Total
Credits
Liabilities
OSC, P100par
Ret. Earnings
Sales
Pat Co.
452,000
208,000
300,000
90,000
1,050,000
Sat Co.
440,000
150,000
300,000
120,000
200,000
100,000
70,000
500,000
1,050,000
300,000
690,000
200,000
50,000
690,000
Non-cont
Interest
Cons.
SFP
899,000
500,000
141,000
1,000
899,000
270,000
300,000
b. 200,000
b. 70,000
c. 2,000
a. 16,000
114,000
(800,000)
Consolidated NI
159,000
9,800
149,200
Non-cont. int. NI
NI attrib. to parent
Non-cont. int.
Total
Cons.
IS
b.
245,000
56,000
245,000
9,800
56,000
149,200
65,800
899,000
3.
Pat Co. and Subsidiary Sat Co.
Consolidated Income Statement
For the Year Ended December 31, 2014
Sales (P500,000 + P300,000)
Cost of Sales (P300,000 + P200,000)
Gross Profit
Operating Expenses (P90,000 + P50,000 + P1,000)
P800,000
500,000
P300,000
141,000
page 4
P159,000
9,800
P149,200
4.
Pat Co. and Subsidiary Sat Co.
Consolidated Statement of Financial Position
December 31, 2014
Assets
Liabilities and Shareholders Equity
Cash and Other Assets
P899,000
Liabilities
P270,000
Ordinary Share Capital, P100 par
300,000
Retained Earnings
263,200
Non-controlling Interest
65,800
Total liabilities and shareholders Equity
Total Assets
P899,000
P899,000
Exercise 3 - 8
a.
Advances from Pallet Co.
Advances to Stall Co.
15,000
b.
10,000
5,000
Dividends Payable
Dividends Receivable
1,600
c.
d.
15,000
10,000
5,000
1,600
PROBLEMS
Problem 3 1
1.
Investment in Stow Co.
Cash
280,000
280,000
Consideration transferred
Book value of interest acquired :
Ordinary Share Capital (P100,000 x 80%)
Retained Earnings (P50,000 x 80%)
Excess of cost over book value
Allocation of excess:
Plant and equipment
Inventory
Goodwill
Expenses on the adjustment
Plant and equipment (P50,000/5 yrs.)
Goodwill impairment
Inventories
Total
P280,000
P 80,000
40,000
P 50,000
20,000
2014
P10,000
5,000
20,000
P35,000
70,000x 80%
2015
P10,000
4,000
---__
P14,000
100,000
50,000
120,000
P160,000
56,000
P104,000
page 5
Inventories
Plant and Equipment
Goodwill
Investment in Slow Co.
Non-controlling Interest
100,000 +50,000+50,000+20,000 x 20% = 44,000
c.
2015
a.
b.
3.
20,000
50,000
104,000
280,000
44,000
Cost of Sales
Operating Expenses
Plant and Equipment
Goodwill
Inventory
20,000
15,000
10,000
5,000
20,000
100,000
50,000
20,000
50,000
104,000
280,000
44,000
35,000
14,000
20,000
20,000
9,000
Problem 3 - 2
Consideration transferred
Book value of interest acquired:
Ordinary Share Capital (P1,000,000 x 80%)
Retained Earnings (P1,600,000 x 80%)
Goodwill
P70,000
60,000
( 35,000)
P95,000
P 80,000
50,000
( 14,000)
P 116,000
P2,280,000
P 800,000
1,280,000
2015
2,080,000
P 200,000
Non-cont
Interest
Consolidated
St. of FP
Sales
Cost of sales
Gross profit
Operating expenses
Operating income
page 6
4,000,000
1,600,000
2,400,000
1,560,000
840,000
2,000,000
1,200,000
800,000
440,000
360,000
c.
72,000
72,000
72,000
6,000,000
1,118,000
72,000
24,000
48,000
7,118,000
800,000
6,318,000
10,000
Non-cont. interest NI
NI-carried forward
6,000,000
2,800,000
3,200,000
2,010,000
1,190,000
72,000
1,118,000
840,000
360,000
6,000,000
840,000
96,000
6,936,000
800,000
6,136,000
1,600,000
360,000
1,960,000
120,000
1,840,000
a.
96,000
600,000
400,000
800,000
1,200,000
800,000
2,456,000
2,280,000
200,000
400,000
600,000
d.
10,000
Bal. January 1
NI brought forward
Dividend fr. Subsidiary
Total
Less Div. declared
Balance, Dec. 31
b. 1,600,000
a.
96,000
Cash
Accounts Receivable
Inventories
Land
Building (net of AD)
Equipment (net of AD)
Bonds payable
OS - Peach Co. P100 par
8,536,000
604,000
196,000
1,000,000
APIC
RE-brought forward
Non-cont. Interest
Total
800,000
790,000
1,400,000
1,200,000
800,000
4,456,000
2,000,000
b.
200,000
3,200,000
360,000
d.
10,000
1,000,000
b. 1,000,000
600,000
6,136,000
1,840,000
8,536,000
3,200,000
2,916,000
b. 2,280,000
c.
10,000
b. 520,000
2,916,000
190,000
9,636,000
954,000
196,000
1,000,000
48,000
520,000
568,000
P6,000,000
2,800,000
P3,200,000
2,010,000
P1,190,000
P 72,000
P1,118,000
600,000
6,318,000
568,000
9,636,000
page 7
Assets
Cash
Accounts Receivable
Inventories
Land
Building (net of accumulated depreciation)
Equipment (net of accumulated depreciation)
Goodwill
Total Assets
P 800,000
790,000
1,400,000
1,200,000
800,000
4,456,000
190,000
P9,636,000
P 954,000
196,000
1,000,000
600,000
6,318,000
568,000
P9,636,000
P1,512,000
1,120,000
P 392,000
290,000 x 80%
232,000
P 160,000
Requirement No. 2
Prose Co. and Subsidiary Slope Co.
Consolidated Working Paper
For the Year Ended December 31, 2014
Debits
Cash
Accounts Receivable
Inventories
Land
Buildings
Equipment
Inv. in Slope Co.
Cost of sales
Expenses
Prose
Co.
400,000
300,000
200,000
1,400,000
1,512,000
800,000
720,000
Slope
Adj. & Eliminations
IS
Co.
Debit
Credit
Dr. (Cr.)
200,000
100,000
80,000 b. 60,000 c.
60,000
300,000 b. 100,000
520,000 b. 260,000
940,000
b. 156,670
b. 1,512,000
300,000 c. 60,000
1,160,000
400,000 c.
8,000
1,238,000
d. 110,000
Non-cont
Interest
Consolidated
St. of FP
600,000
400,000
280,000
400,000
780,000
2,183,330
200,000
page 8
100,000
5,532,000
2,940,000
200,000
72,000
155,000
5,070,330
248,000
380,000
120,000
628,000
210,000
Patents
Goodwill
b. 80,000
b. 160,000
a.
c.
c.
80,000
8,000
5,000
(20,000)
Credits
AP & accrued exp.
AD - Bldg.
AD - Equipt.
804,000
OS - P100 par
OS - P20 par
APIC
400,000
RE - Prose Co.
RE - Slope Co.
Sales
Dividend fr. Sub
NCI Net Income
NI attr. to Prose
Non-cont. Int.
40,000
b.
6,670
c. 15,000
600,000
b. 600,000
b.
c.
d.
d.
60,000
10,000
20,000
90,000
912,330
400,000
800,000
1,200,000
2,000,000
80,000
800,000
1,200,000
800,000
1,000,000
b. 800,000
(3,000,000)
a. 80,000
47,400
554,600
Totals
5,637,600 2,940,000
2,339,670
NCI 600,000 + 800,000+290,000 x 20% = 338,000
b. 338,000
2,339,670
47,400
338,000
P60,000
10,000
( 15,000)
8,000
5,000
P68,000
P260,000
60,000
P200,000
P156,670
6,670
P150,000
554,600
365,400
5,070,000
page 9
Sales
Cost of sales
Gross Profit
Expenses
Consolidated Net Income
Non-controlling Interest net income
Net Income Attributable to Prose
P3,000,000
1,160,000
P1,840,000
1,238,000
P 602,000
P 47,400
P 554,600
P 600,000
400,000
280,000
400,000
570,000
1,271,000
72,000
155,000
P3,748,000
P628,000
400,000
800,000
1,554,600
365,400
P3,748,000
10,000
Sales
Interest revenue
Expenses
Interest expense
Consolidated Net income
Non-controlling Interest net income [(P20,000 - P17,000 - P600) x 10%]
Net income attributable to Palma Corp.
10,000
600
600
P 70,000
600
( 53,000)
(
600)
P 17,000
(
240)
P 16,760
Problem 3 5
1.
Non-controlling interest net income (400,000-240,000-60,000 x 20%)
P 20,000
2.
P294,000
3.
P470,000
page 10
16,000
P454,000
4.
Consideration transferred
Book value of interest acquired 500,000 x 80%
Goodwill
P560,000
400,000
P160,000
5.
None, since the dividend revenue received from Stadium is closed to RE.
6.
7.
8.
600,000+100,000-50,000 x 20%
9.
10.
Goodwill
Less impairment loss for 2014 and 2015
Goodwill as of December 31, 2015
P260,000
274,000
(120,000)
P414,000
P130,000
P160,000
16,000
P144,000
MULTIPLE CHOICE
Change 3-A No. 20 from 30% to 70%
3-A
1.
2.
3.
4.
C
B
B
A
3-B
1.
Consideration transferred
Excess of BV over cost
BV of interest acquired
P290,000
14,000
P304,000
2.
P58,400 20%
P292,000
3.
P426,000
270,000
P156,000
P 91,500
40,000
P131,500
P220,000
100,000
3-C
3-D
1.
5.
6.
7.
8.
C
A
C
A
9. A
10. C
11. D
12. C
13.
14.
15.
16.
B
D
B
C
17. B
18. C
19. B
20. A
( 2,000)
P 318,000
1.
60,000-50,000+36,000 x 80%
P 36,800
2.
Consideration transferred
Liquidating Dividends
(P60,000 + P36,000 P50,000 P50,000) x 80%
Investment balance, December 31, 2015
P756,000
60,000 x 10%
P 6,000
3-F
3-G
2.
3,200
P752,800
P820,000
640,000
P180,000
P400,000
( 200,000)
(67,500)
P132,500
X 80%
P106,000
P500,000
137,500
P637,500
3.
P1,000,000
160,000
( 100,000)
225,000
( 90,000)
P1,195,000
x 20%
P 239,000
4.
P 100,000 x 20%
P250,000
60,000
(40,000)
28,000
( 2,800)
P295,200
x 25%
P 73,800
3-H
Non-controlling interest
3-I
3-J
page 11
1.
Zero, eliminated
20,000
P350,000
( 200,000)
3-K
Dividends paid
TSE of Saddle Co., Jan. 1, 2009
Percentage of interest of Paddle
Book value of acquired investment
Excess of cost over book value of net assets
Consideration transferred
50,000
P200,000
x 80%
P160,000
50,000
P210,000
2.
50,000 12,500
P 37,500
1.
P 67,500
40,500
P108,000
2.
Consideration transferred
Book value of interest acquired
Excess of cost over book value
P110,700
108,000
P 2,700/
90%
P 3,000
3.
P4,500 x 90%
P 4,050
4.
P180,000
45,000
4,200
( 30,000)
P199,200
3-L
3-M
page 12
Consideration transferred
Book value of interest acquired 900,000 x 80%
Goodwill
300,000 + (100,000 x 80%) 4,000 = P376,000
P 800,000
720,000
P 80,000
1.
P 100,000
2.
P 1,110,000
350,000
P 1,460,000
3.
( 300,000)
P300,000
245,000
P 55,000
5,000
50,000
P1,210,000
page 13
4.
P55,000 P5,000
P 50,000
5.
P980,000
3-N
3-O
3-P
Preston Expenses
Seldon Expenses
Differential adjustment:
(P800,000 P660,000)/10
Consolidated Total Expenses
3-Q
3-R
P 6,000,000
4,000,000
1,550,000
( 100,000)
( 450,000)
P 11,000,000
P 1,242,000
P 1,428,000
14,000
1,442,000
P 2,684,000
1.
P 6,500,000 + 630,000 @ 5
P 9,650,000
2.
P 4,400,000 + 630,000 @ 3
P 6,290,000
3.
4.
P
P 500,000
5,100
2,100,000
494,900
P 2,594,900
P 9,450,000
X 40%
P3,780,000
5.
1.
2.
A
A
P1,000,000
P1,000,000
3.
4.
P240,000
14,000
P226,000
x 20%
P 45,200
5.
P 600,000
800,000
P1,400,000
140,000
(42,000)
page 14
110,000
P1,608,000
x 20%
P 321,600
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 + .14x
x = P75,680/.86
x = P88,000
3-T
P960,000
3-U
3,600,000 x 25%
P900,000
3-V
1.
2.
P600,000
200,000
(12,000)
P788,000
42,300
P745,700