CHAPTER(17(

(
17#1:%
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17#2:%
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17#3:%
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!
+
17#4:%
(
(
(
(
(
(
!

b%

Consolidated+sales+
Sales((Papa( (
(
(
Sales((San(
(
(
(
Elimination(of(inter=company(sales(
Consolidated!sales!
!
!

(
(
(
!

(
(
(
!

Consolidated+cost+of+goods+sold+
Cost(of(goods(sold((Papa(
(
(
(
Cost(of(goods(sold((San(
(
(
(
Eliminations:(
(
Realized(profit(in(beginning(inventory( (
(
Unrealized(profit(in(ending(inventory((((((((((((
(
Intercompany(purchases(
(
(
Consolidated!cost!of!goods!sold!!
!
!

(
(
(
!

P((((900,000(
((((((500,000(
((((((((50,000)(
P!1,350,000!

(
(

P((((490,000(
((((((190,000(

(
(
(
!

((((((((((4,000)(
(((((((((10,000(
(
(((((((((50,000)(
P!!!!!636,000!

c%
Net(income((Sisa(
(
(
(
(
Unrealized(profit(in(ending(inventory((upstream(
Adjusted(net(income((Sisa(
(
(
(
NCI(proportionate(share(
(
(
(
NCI!in!net!income!of!subsidiary!!
!
!

(
P((((((60,000(
(
(
((((((((10,000)(
(
P((((((50,000(
(
(
(
20%(
P!!!!!!10,000!

d%
Net(income(from(own(operation((Pat( (
(
(
Adjusted(net(income(of(Susan:(
(
Net(income((Susan(
(
(
P200,000(
(
Realized(profit(in(beginning(inventory( (
(
(
(P112,000(x(50%/150%)(((((37,500(
(
Unrealized(profit(in(ending(inventory(
(
(
(P33,000(x(50%/150%)( (
((((11,000)(
Consolidated+net+income(
(
(
(
(
Attributable!to!NCI!(P226,500!x!30%)! !
!
!
Attributable!to!parent! !
!
!
!
!

P((200,000(

((((226,500(
P((426,500(
!!!!!!67,950!
P!!358,550!!

b%
Net(income(from(own(operations=(Patton(
(
(
Unrealized(profit(in(ending(inventory((DS((P200,000(x(.25)(
Adjusted(net(income(for(own(operations((Patton(
(
Solis(net(loss(from(own(operations(
(
(
(
Consolidated!net!income!
!
!
!
!

(
P((300,000(
(((((50,000)(
(
((((250,000(
((((150,000)(
P!!100,000!

!
17#5:%
(
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(
(
!
(
17#6:%
(
(
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(
(
!
(
!
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17#7:%
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(
17#8:%
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(
(
(
!
(
(
(
(
(
(
(

d%
Pardos(share(of(Santos(net(income((P300,000(x(75%)(
Unrealized(profit(in(ending(inventory((Upstream(
(
(P200,000(x(25%/125%)(x(75%( (
(
Realized(profit(in(beginning(inventory((Upstream(
(
(P150,000(x(25%/125%)(x(75%( (
(
Investment!income!account!balance,!Dec.!31,!2011!

P(225,000(

(
(
(
!

(((((30,000)(
(
((((((22,500(
P!217,500!

d%
Net(income(from(own(operation((Puzon(
(
(
(
P(200,000(
Suazons(adjusted(net(income(from(own(operations:(
(
Net(income(
(
(
(
P110,000(
(
Unrealized(profit(in(ending(inventory=(
(
(((((Upstream((P25,000(x(40%)( (((((((((((((((((10,000)(((((((((((((100,000(
Consolidated(net(income(
(
(
(
(
P(300,000(
Attributable(to(NCI((P100,000(x(25%)( (
(
(
(((((25.000)(
Attributable!to!parent! !
!
!
!
!
P!275,000!
b%
(
(
(
(
(
Net(income(from(own(operation((Pat(
Unrealized(profit(in(ending(inventory:(
(
2010((P20,000(x(.40)( (
(
2011((P30,000(x(.50)( (
Realized(profit(in(beginning(inventory(
Realized(income(
(
(
Sun(net(income(((
(
(
Consolidated!net!income!
!

(
(

(((((2010+++++++++++++++++2011+
P((500,000(
P((550,000(

(
(
(
(
(
!

(((((((8,000)(
(
(
(
(
((((492,000(
((((200,000(
P!!692,000!

(((((
(((((15,000)(
(((((((8,000(
((((543,000(
((((225,000(
P!!768,000!

a%
Net(income(from(own(operation((Pip( (
(
(
P((400,000(
Adjusted(net(income(from(own(operation(=(Sol(
(
Net(income(( (
(
(
P((250,000(
(
Realized(profit(in(beginning(inventory=(
(
(((((Upstream((P40,000(x(40%)( (((((((((((((((((((16,000(
(
Unrealized(profit(in(ending(inventory=(
(
(((((Upstream((P70,000(x(30%)( (
((((((21,000)((((((((((((245,000(
Consolidated!net!income!J!2011!!
!
!
!
P!!645,000!

(
(
(
(
17#9:%
(
(
(
(
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(
(
(
(
%
17#10:%
%
(
(
(
(
!
(
17#11:%
+
(
(
(
(
(
!
(
(
(
(
(
(
(
!
(
(
(
(
(
!
(

a%
Net(income(from(own(operations((Popo(
(
(
(
P((500,000(
Unrealized(profit(in(ending(inventory((Downstream(
(
((((((15,000)(
Realized(net(income(from(own(operation((Popo(
(
(
P((485,000(
Adjusted(net(income(from(own(operations(=(Sotto(
(
Net(income(
(
(
(
P((360,000(
(
Realized(profit(in(beginning(inventory=(
(
(((((
Upstream(
(
(
((((((10,000(((((((((((((370,000(
Consolidated(net(income(
(
(
(
(
P((855,000(
Attributable(to(NCI(((P370,000(x(5%)(
(
(
(
((((((18,500(
(
Attributable!to!parent! !
!
!
!
!
P!!836,500!
d,%should%be%P(19,200).%
Net(income((Sand(Company( (
(
(
Realized(profit(in(beg.(Inventory((P120,000(x(.20)(
Unrealized(profit(in(ending(inventory((P360,000(x(.20)(
Amortization(of(allocated(excess(P1.000,000(/(5)((
Adjusted(net(loss((Sand(Company(
(
(
NCI!(P48,000!x!40%)! !
!
!
!

(
(
(
(
(
!

d%
Gross+profit+rate++Short+(P110,000+/+P200,000)+ +

55%+

Inventories+
Inventory(from(outsiders((Power(
(
(
Inventory(from(outsiders((Short(
(
(
Powers(inventory(acquired(from(Short((at(cost:(
(
[P5,000(((P5,000(x(55%)}(
(
(
Consolidated!ending!inventories!
!
!
Investment+income+
Powers(share(of(Shorts(net(income((P50,000(x(75%)(
Unrealized(profit(in(ending(inventory((upstream(
(
(P5,000(x(55%)(x(75%( (
(
(
Realized(profit(in(beginning(inventory((upstream(
(
(P10,000(x(55%)(x(75%( (
(
(
Investment!income,!Dec.!31,!2011!
!
!
Investment+in+Short+Company+
Acquisition(cost((P80,000(x(80%)(
(
Unrealized(profit(in(ending(inventory( (
Realized(profit(in(beginning(inventory( (
Investment!in!Short!Company,!Dec.!31,!2011!
(

(
(
(
!

P200,000(
((((24,000(
(((72,000)(
(200,000)(
P(48,000)(
P(19,200)!

(
(

P((((5,000(
((((25,000(

(
!

(((((((2,250(
P!!32,250!

P((37,500(

(((((2,063)(

(
!

((((((4,125(
P!!39,562!

(
(
(
!

P((60,000(
((((((2,063)(
((((((4,125(
P!!62,062!

(
(
(
(
(
(
(
!
17#12:%
%

NCI+in+Short+companys+net+income+
Shorts(net(income(from(own(operations(
(
Realized(profit(in(beginning(inventory((P10,000(x(55%)(
Unrealized(profit(in(ending(inventory((P5,000(x(55%)(
Adjusted(net(income(from(own(operations(
(
NCI(proportionate(share(
(
(
(
NCI!in!! Shorts!net!income!
!!!!!!!
!
!

(
(
(
(
(
!

(
P((50,000(
((((((5,500(
((((((2,750)(
P((52,750(
(
(((((((25%(
P!!13,187.50!

b%

Gross+profit+rate+of+Sit+(P200,000+/+P500,000)+ +
+
++40%+
+
(
Net(income(from(own(operations((Pit( (
(
(
P(200,000(
(
Adjusted(net(income(of(Sit:(
(
(
Net(income(
(
(
(
P((75,000(
(
(
Realized(profit(in(beginning(inventory=(
(
(
(((((Upstream((P40,000(x(40%)( (
((((16,000(
(
(
Unrealized(profit(in(ending(inventory=(
(
(
(((((Upstream((P25,000(x(40%)( (
((((10,000)((((((((((((((81,000(
(
Consolidated(net(income(
(
(
(
(
P(281,000(
(
Attributable(to(NCI((P81,000(x(10%)(
(
(
(
(((((((8,100)(
(
Attributable!to!parent! !
!
!
!
!
P!272,900!
(
(
(
17#13:% b%
%
Gross+profit+of+Sir+(P120,000+/+P400,000)++
+
30%+
(
(
Consolidated+cost+of+sales+
(
Cost(of(sales((Pig(
(
(
(
(
(
P(((600,000(
(
Cost(of(sales((Sir(
(
(
(
(
(
(((((280,000(
(
Eliminations:(
(
(((((Realized(profit(in(beginning(inventory((P70,000(x(30%)(
(((((((21,000)(
(
(((((Unrealized(profit(in(ending(inventory((P60,000(x(30%)((((((((18,000(
(
(((((Intercompany(purchases(
(
(
(
(
(((((200,000)(
!
Consolidated!cost!of!sales!
!
!
!
!
P!!!677,000!
(
(
Consolidated+net+income+
(
Net(income(from(own(operations((Pig( (
(
(
P((200,000(
(
Sirs(adjusted(net(income:(
(
(
Net(income(
(
(
(
P(80,000(
(
(
Realized(profit(in(beginning(inventory((((((((21,000(
(
(
Unrealized(profit(in(ending(inventory( (((18,000)(((((((((((((((((83,000(
(
Consolidated(net(income(
(
(
(
(
(((((283,000(
(
Attributable(to(NCI((P83,000(x(10%)(
(
(
(
((((((((8,300)(
!
Attributable!to!parent! !
!
!
!
!
P!!274,700!
!
!
!

!
!
!
!
!
!
!
!
!
!
!
17#14:%a%
+
+
+
+
+
+
2009+ +
2010+ +
2011+
(
Pal(Corp(net(income(
(
(
150,000(
(
240,000(
(
300,000(
(
Intercompany(profit((in(ending(inventory:(
(
(
2009( (
(
(
(14,000)(
((14,000(
(
(
2010( (
(
(
(
(
((21,000)(
((21,000(
(
(
2011( (
(
(
(
(
(
(
((24,000)(
(
Pal(net(income(from(own(operation(
136,000(
(
233,000(
(
297,000(
(
Solo(net(income(from(own(operation( 100,000(
(
((90,000((
160,000(
(
Consolidated(net(income(
(
236,000(
(
323,000(
(
(
427,000(
(
Attributable(to(NCI(
(
(
(
(
(
(
(((
(
((((((((((((((((((2009(100,000((14,000)(x(40%(((34,400(
(
( ((((2010(90,000(+14,000((21,000)(40%( (
(((
((33,200(
(
( ((((2011(160,000(+(21,000((24,000)(40%(
(
(
(
((62,800(
!
Attributable!to!Parent!! !
!
201,600!
!
289,800!
!
394,200!
(
17#15:%a%
%
(
(Total(sales(
(
(
(
(
(
(
(
600,000(
(
Intercompany(sales((30,000(+(80,000)( (
(
(
(((((((((((((110,000)(
!
Consolidated!sales!
!
!
!
!
!
!
490,000!
(
(
17#16:%c%
(
Total(cost(of(goods(sold((250,000(+120,000)(
(
(
(
370,000(
(
Adjustments(due(to(intercompany(sale:(
(
( ((((((COGS(charged(for(intercompany(sale((20,000(+(50,000)((((((70,000(
(
(((((((COGS(charged(by:(Star((30,000((6,000)(
(
(((((((((((24,000(
(
(
(
((((((((((((Polo((80,000((20,000)( (
(((((((((((60,000(
(
Total( (
(
(
(
(
(
(((((((((154,000(
(
Cost(of(goods(sold(for(consolidated(entity:(
(
(
20,000(x((24,000/30,000)(
(
((
((((((((((16,000)(
(
(
50,000(x((60,000/80,000)(
(
((((((((((( ((((((((((37,500)(((100,500)(

!
Consolidated!cost!of!goods!sold!!
!
!
!
!
269,500!
(
17#17:%c(
(
Polo(Corp.(net(income(from(own(operation((105,000((25,000)( (
((80,000(
(
Unrealized(profit(in(ending(inventory=DS((6,000(x(10/30)((
(
((((2,000)(
(
Adjusted(Polo(Corp.(net(income(from(own(operation(
(
(
((78,000(
(
Star(Corp.(net(income(from(own(operation:(
(
(
(
(
(
Net(income(( (
(
(
(
(45,000(
(
(
Unrealized(profit(in(EI=US((20,000(x(30/80)((((((((((7,500)(
(
(
Amortization((20,000/10(years)(((
(
((2,000)((
((35,500(
(
Consolidated(net(income(
(
(
(
(
(((((((((((((113,500(
(
(Attributable(to(NCI((35,500(x(40%)(
(
(
(
(
((14,200)(
!
Attributable!to!Parent!! !
!
!
!
!
!
!!99,300!
%
%
%
%
%
17#18:%a%
%
%
Pepsi(net(income(from(own(operation( (
(
(
(((((((((((160,000(
(
Sarsi(net(income(
(
(
(
90,000(
(
Unrealized(profit(in(EI((45,000(x(60/180)((((((((((((15,000)( (
(
75,000(
(
Consolidated(net(income(
(
(
(
(
(((((((((((235,000(
(
Attributable(to(NCI(((75,000(x(30%)(
(
((
(
(((((((((((((22,500)(
!
Attributable!to!ParentJ2011! !
!!!!!!!!!!! !
!
!!!!!!!!!!!212,500!
(
17#19:%a%
%
%
Inventory=Pepsi((
(
(
(
P(30,000(
(
Less:(unrealized(profit(in(books(of(Sarsi:(
(
( ((((((135,000((90,000)(x((30,000/135,000)((((((((((((10,000)((
20,000(
(
Inventory=Sarsi( (
(
(
(((((((((((P110,000(
(
Less:(unrealized(profit(in(books(of(Pepsi:(
(
((((((((280,000((140,000)(x((110,000/280,000)( ((55,000)(
(
55,000(
!
Consolidated!inventory!12/31/11!
!
!
!
!
75,000!
(
17#20:%a%
%
(
Cost(of(goods(sold(on(sale(of(inventory(on(hand=1/1/10:( (
(
(
[45,000(x((120,000/180,000)]( (
(
(
(
30,000(
(
Cost(of(goods(sold(on(purchases(from(Sarsi=(2010(
(
(
[(135,000((30,000)(x((90,000/135,000)]((
(
(
70,000(
(
Cost(of(goods(sold(on(purchases(from(Pepsi=(2010(
((
(
[(280,000((110,000)(x((140,000/280,000)](
(
(
85,000(
!
Consolidated!cost!of!goods!soldJ2011! !
!
!
!!!!!!!!!!!185,000!
(
%

17#21:%b%
%
(
Pepsi(net(income(
(
(
(
(
Sarsi(net(income(
(
(
(
(
Realized(profit(in(beginning(inventory(=(2011(
(
Unrealized(profit(in(ending(inventory=(Sarsi(
(
Unrealized(profit(in(ending(inventory=(Pepsi(
!
Consolidated!net!income!!2011!
!
!
!
!
!
!
!
!
!
!
!
!

(
(
(
(
(
!

(
(
(
(
(
!

(
(
(
(
(
!

220,000(
((85,000(
((15,000(
((10,000)(
((55,000)(
!
255,000!

P200,000(

P30,000(

(((3,000)(

(
(
(
!

((((2,000((
(
(
(
(
!
!

((((29,000(
((229,000
((((((8,700(
P220,300!

(
(
(
!

(
(
(
!

P105,000(
((((((6,000)(
((((((8,700(
P107,700!

P!!80,000!

%
17#22:%
(
(
(
(
(
(
(
(
(
!
!
17#23:%
(
(
(
!
!
17#24:%
!
!
(
(
(
(
(

b(
Net(income(from(own(operations((P(Company(
S(Co.(adjusted(net(income:(
(
Net(income((S( (
(
(
(
Unrealized(profit(in(ending(inventory((
(
(((((Upstream((P9,000(x(50/150)( (
(
Realized(profit(in(beginning(inventory=(
(
(((((Upstream((P6,000(x(50/150)( (
Consolidated(net(income(
(
(
Attributzble(to(NCI((P29,000(x(30%)(
(
Attributable!to!parent! !
!
!

b%
%
(
NCI,(December(31,(2010([(P245,000/70%)(x(30%](
NCI(in(subsidiary(dividends((P20,000(x(30%)(
(
NCI(in(net(income(of(subsidiary( (
(
(
NCI!in!S!Company,!December!31,!2011! !
!
c%
P!Company!(P400,000!x!20%)% %
(
S!Company:( (
Sales( (
(
(
(
Cost(of(goods(sold((P400,000(x(80%)(
Add(write(down(of(ending(inventory(

(
(
(

(
(
(

(
(
P320,000(
((((10,000(

P416,000(
((330,000(

(
Gross!profit!
(
(
(
(
(
!
17#25! a%
%
Sales( (
(
(
(
(
(
Consolidated(cost(of(goods(sold((
(
(
Gross!profit(
(
(
(
(
(
(
*((Purchases(at(cost((P400,000(x(80%)( (
(
((((Less(ending(inventory(at(cost((P80,000(x(80%)((
((((Consolidated(cost(of(goods(sold(
(
(
(
Note+that+cost+is+lower+than+market+
%

P!!86,000!

(
(
(

(
(
(

P416,000(
((256,000*(
P160,000(

(
(
(

(
P320,000(
((((64,000(
(
P256,000(

%
%
%
%
%

%
%
%
%

%
17#26:% a%
%
Sales(( (
(
(
(
Cost(of(goods(sold(
(
(
Gross(profit(
(
(
(
Other(income( (
(
(
Other(expenses((
(
(
Consolidated(net(income(
(
Attributable(to(NCI(
(
(
Attributable!to!controlling!interest(
(
Supporting+computations:+
(
Sales:%
Pablo(Company((
(
(
Sally(Company( (
(
(
Intercompany(sales(
(
(
Consolidated(sales(
(
(
(
Consolidated%cost%of%goods%sold:(
Pablo(Company((
(
(
Sally(Company( (
(
(

(
(
(
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Realized(profit(in(beginning(inventory((P15,000(x(25%)(
Unrealized(profit(in(ending(inventory((P20,000(x(25%)(
Consolidated(costs(of(goods(sold(
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Other%income:(
Pablo(Company((
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Computer(services(
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Other%expenses:%
Pablo(Company((
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Computer(services(
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Consolidated(other(expenses( (
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NCI%in%net%income%of%Sally%
Net(income(
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Realized(profit(in(beginning(inventory((upstream)(
Unrealized(profit(in(ending(inventory((upstream)(
Adjusted(net(income( (
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NCI(proportionate(share(
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CHAPTER%18%
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18#1:% a%
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Equipment!!at!original!cost! !
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Accumulated!depreciation:(
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Current(depreciation(based(on(
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18#2:% b%
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Net(income((Sol(
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Unrealized(gain(on(sale(of(computer,(Dec.(31(
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Adjusted(net(income( (
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NCI(proportionate(share(
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!
NCI!in!net!income!of!subsidiary!!
!
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18#3:% b%
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P171,250(

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P200,000(
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P250,000(
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P250,000(
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18#4:%
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18#5:%
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18#9:%
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Consolidated!net!income!
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Net(income((Saw(
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Unrealized(loss=Upstream(
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Realized(loss(((P12,000(/(5)(x(6/12(
Adjusted(net(income((Saw(
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Equipment!!at!original!cost!

Accumulated!depreciation:!
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Time(of(sale( (
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Current(depreciation((P900,000/10)(

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P120,000!

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Adjusted(net(income((Susie((P12,000(/(40%)(
Add(back(unrealized(gain((Upstream( (
Net!income!of!Susie!!2011!
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c%
Net(income((Po(
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Unrealized(gain,(Dec.(31((DS( (
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Net(income(from(own(operation((Po(
Net(income(of(So(
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Attributable(to(NCI((P180,000(x(20%)( (
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18#10:%
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NCI,(January(1,(2011((P1,000,000(x(20%)((
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NCI(in(dividends(paid(by(subsidiary((P30,000(x(20%)(
NCI(in(net(of(subsidiary((P65,00(x(20%)( (
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NCI,!December!31,!2011!
!
!
!

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Consolidated%net%income%attributable%to%parent:%
Net(income(((Pink(
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Consolidated(net(income,(Dec.(31,(2011((
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P224,500(
Attributable(to(NCI((P28,000(x(20%)(
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Attributable!to!parent! !
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P230,100!
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18N10,+Continued:+
Non#controlling%interest%(NCI)%
(
NCI,(January(1,(2011([(P1,240,000/80%)(x(20%)( (
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NCI(share(in(dividends(paid(by(subsidiary((P30,000(x(20%)(
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NCI(in(adjusted(net(income((loss)(of(subsidiary(( (
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NCI,(December(31,(2011(
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18#11:% a%
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NCI(,Dec.(31,(2011((based(on(fair(value(of(net(assets)( (
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Investment(cost:(
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Net(assets,(Dec.(31,(2011(
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18#13:%
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Less(net(income((steve(
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NCI(per(book( (((((
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Book(value(of(interest(acquired( (
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Price(paid(
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Add(investment(income:(
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Peters(share(of(Steve(net(income((P240,000(x(80%)(
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Unrealized(profit(in(ending(inventory((Downstream((
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Unrealized(profit(in(beginning(inventory((Upstream(
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Unrealized(gain(on(sale(of(equipment((Upstream(
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Investment!in!Steve!Company,!Dec.!31,!2011! !
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Net(income(from(own(operations((Pipe((
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Adjusted(net(income(=(Smoker(
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Net(income(
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Realized(gain,(Dec.(31,(2011((P50,000/5)x((
Consolidated!net!income,!Dec.!31,!2011!!
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Net(income(from(operations((Parent( (
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Consolidated(net(income(
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18#14:%
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18#15:%
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Attributable(to(NCI(
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Attributable!to!parent! !

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P141,400!
P182,400!

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Investment%in%Sili%Company%stock%%Equity%method%
Price(paid(
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Investment(income(net(of(dividends((2007(to(2010:(
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Investment(income,(Dec.(31,(2010:(
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Investment(income,(Dec.(31,(2011:(
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Dividends(received:(
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Investment!in!Sili!Company!stock,!Dec.!31,!2011!

P500,000(

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P791,500!

a%
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Investment%in%Saw%Company%stock,%Dec.%31,%2011%
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P550,000(
Investment(income((2005(to(2009:(
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Investment(income((2010((see(above)( (
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Investment(income((2011:(
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Dividends(received:(
(((((2010:((((P20,000(x(90%)(
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Investment!in!Saw!Company!stock!account!balance!12/31/11! !
P885,250!