Since 1977
PRACTICAL ACCOUNTING II
P2.708-Consolidated Statements
DE LEON / DE LEON
OCTOBER 2009
LECTURE NOTES
Consolidated financial statements- are the financial
statements of a group presented as those of a single
economic entity.
Group is a parent and all of its subsidiaries.
Separate financial statements – are those presented by a
parent, an investor in an associate, or a venturer in a
jointly controlled entity, in which the investments are
accounted for on the basis of the direct equity interest
rather than on the basis of the reported credits, and the
net assets of the investee.
PRESENTATION
OF
CONSOLIDATED
FINANCIAL
STATEMENTS
A parent shall present consolidated financial statements,
except when

The partner is itself a wholly-owned subsidiary, or is
a partially-owned subsidiary of another entity

The parent’s debt or equity instruments are not
traded in a public market

The parent did not file, nor is in the process of filing,
its financial statements with a securities commission
for the purpose of issuing any class of instruments in
a public market

The ultimate parent produces consolidated financial
statements available for public use
CONSOLIDATION PROCEDURES

The carrying amount of the parent’s investment in
each subsidiary and the parent’s portion of equity of
each subsidiary are eliminated

Minority interests in the profit or loss of consolidated
subsidiaries for the reporting period are identified

Minority interests in the net assets of consolidated
subsidiaries are identified separately from the parent
shareholders’ equity in them.
Minority interests in
the net assets consist of:
1. The amount of those minority interests at the
date of the original combination
2. The minority’s share of changes in equity since
the date of the combination
ACCOUNTING FOR INVESTMENTS IN SUBSIDIARIES,
JOINTLY CONTROLLED ENTITIES AND ASSOCIATES IN
SEPARATE FINANCIAL STATEMENTS
For separate financial statements investment in
subsidiaries, jointly controlled entities and associates,
that are not classified as held for sales, shall be
accounted for either:
 at cost, or
 in accordance with IAS 39
Summary of Critical Points:
1. Consolidated statements are prepared from the
separate statements of the acquiring company and
acquired company(ies) from the standpoint of a single
economic entity.
2. Consolidation procedures are necessary whenever a
parent and a subsidiary relationship existed, except if
the parent is exempted under PAS 27 to present
consolidated financial statements.
3. The acquiring company, generally, is a parent if it
owns, directly and indirectly, more than 50% of the
Page 1 of 8
outstanding voting shares of the acquired company. If
the controlling interest is not 100%, the difference
would represent the minority interest.
4. The following steps summarize the consolidation
worksheet procedures.
a. Prepare a schedule of excess to determine if there
is either goodwill, or, income from acquisition.
This will also be the basis in formulating the
working paper elimination entries.
b. If the working paper is to prepare post acquisition
consolidated statements, computations must
show the amortization of increase/decrease in
value of net assets of the acquired company.
5. Increase/decrease to fair value of net asset items and
GOODWILL are recognized in full regardless of the
extent of the minority interest. Such remeasurement
and resulting amortization/impairment loss accrue to
both the controlling interest and the non-controlling
interests.
Please note that goodwill, which is part of the excess
is no longer amortized but subjected to annual tests
for impairment losses.
6. Working paper elimination entries orchestrate the
items and balances that must comprise the
consolidated statements. Their two basic objectives
are (1) to eliminate intercompany balances and (2) to
make adjustments to or set-up some items in order
to conform with purchase principles.
7. In purchase combination, for example, working paper
elimination entries aim to accomplish the following:
a. Eliminate inter-company balances
b. Make adjustments for acquired assets and
assumed liabilities to comply with fair value
considerations.
c. Set up goodwill or income from acquisition into
the consolidated statements.
d. Amortize increase/decrease in value of net assets
and measure their effects in the consolidated
financial statements,
e. Make adjustments to consolidated amounts as a
result of inter-company transactions.
f. And for a variety of other consolidation
requirements.
8. Basically, in the working papers, similar items from
the parent’s records and from the subsidiary’s records
are simply combined, plus/minus any working paper
adjustments affecting such items.
9. The fair value method is usually applied to small
stockholdings. Generally it is the method used by the
investor if the interest acquired is less than 20% of
outstanding voting shares. An investor that can
exercise significant influence must use the equity
method as required by PAS 28. Control by the
investor over the investee may use either the cost
method or the equity method and must consolidate
unless exempted. The cost method is however
preferred.
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P2.708
EXCEL PROFESSIONAL SERVICES, INC.
MULTIPLE CHOICE THEORETICAL
Select the best answer for each of the following multiple-choice questions:
1. X has control over the composition of Y's board of
directors. X owns 49% of Y and is the largest
shareholder. X has an agreement with Z, which owns
10% of Y, whereby Z will always vote in the same way
as X. Can X exercise control over Y?
a. X cannot exercise control because it owns only
49% of the voting rights
b. X cannot exercise control because it can control
only the makeup of the board and not necessarily
the way the directors vote
c. X can exercise control solely because it has an
agreement with Z for the voting rights to be used
in whatever manner X wishes
d. X can exercise control because it controls more
than 50% of the voting power, and it can govern
the financial and operating policies of Y through is
control of the board of directors
5. A manufacturing group has just acquired a controlling
interest in a football club that is listed on a stock
exchange. The management of the manufacturing
group wishes to exclude the football club from the
consolidated financial statements on the grounds that
its activities are dissimilar. How should the football
club be accounted for?
a. The entity should be consolidated as there is no
exemption from consolidation on the grounds of
dissimilar activities
b. The entity should not be consolidated using the
purchase method but should be consolidated using
equity accounting
c. The entity should not be consolidated and should
appear as an investment in the group accounts
d. The entity should not be consolidated; details
should be disclosed in the financial statements
2. X owns 50% of Y's voting shares. The board of
directors consists of six members; X appoints three of
them and Y appoints the other three. The casting vote
at meetings always lies with the directors appointed by
X. Does X have control over Y?
a. No, control is equally split between X and Z
b. Yes, X holds 50% of the voting power and has the
casting vote at board meetings in the event that
there is not a majority decision
c. No, x owns only 50% of the entity's shares and
therefore does not have control
d. No, control can be exercised only through voting
power, not through a casting vote
6. In the separate financial statements of a parent entity,
investments in subsidiaries that are not classified as
held for sale should be accounted for
a. At cost
b. In accordance with IAS 39
c. At cost or in accordance with IAS 39
d. Using the equity method
3. Z has sold all of its shares to the public. The company
was formerly a state-owned entity. The national
regulator has retained the power to appoint the board
of directors. An overseas entity acquires 55% of the
voting shares, but the regulator still retains its power
to appoint the board of directors. Who has control of
the entity?
a. The national regulator
b. The overseas entity
c. Neither the national regulator nor the overseas
entity
d. The board of directors
4. A has acquired an investment in a subsidiary, B, with
the view to dispose of this investment within six
months. The investment in the subsidiary has been
classified as held for sale and is to be accounted for in
accordance with IFRS 5. The subsidiary has never been
consolidated. How should the investment in the
subsidiary be treated in the financial statements?
a. Purchase accounting should be used
b. Equity accounting should be used
c. The subsidiary should not be consolidated but IFRS
5 should be used
d. The subsidiary should remain off balance sheet
Page 2 of 8
7. Which of the following is not a valid conditions that will
exempt an entity from preparing consolidated financial
statements?
a. The parent entity is a wholly owned subsidiary of
another entity
b. The parent entity's debt or equity capital is not
traded on the stock exchange
c. The ultimate parent entity produces consolidated
financial statements available for public use that
comply with IFRS
d. The parent entity is in the process of filing its
financial statements with a securities commission
8. Entity X controls an overseas entity Y. Because of
exchange controls, it is difficult to transfer funds out of
the country to the parent entity. X owns 100% of the
voting power of Y. How should Y be accounted for?
a. It should be excluded from consolidation and the
equity method should be used
b. It should be excluded from consolidation and
stated at cost
c. It should be excluded from consolidation and
accounted for in accordance with IAS 39
d. It is not permitted to be excluded from
consolidation because control is not lost
9. Where should minority interests be presented in the
consolidated balance sheet?
a. Within long-term liabilities
b. In between long-term liabilities and current
liabilities
c. Within the parent shareholders' equity
d. Within equity but separate from the parent
shareholders' equity
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P2.708
EXCEL PROFESSIONAL SERVICES, INC.
STRAIGHT PROBLEMS
Problem 1
On January 1, 2010, P Company purchased interest in
S Company. On this date the book values and the fair
values of S Company were as follows:
Fair Market
Book Values
Values
Cash
P 300,000
Accounts receivable
180,000
Merchandise
inventory
720,000
900,000
Building (net)
1,860,000
1,920,000
Equipment
600,000
480,000
Long term inv. in
MS
1,200,000
1,740,000
P 4,860,000
Current liabilities
P 600,000
Bonds payable
1,260,000
1,560,000
Common stock
1,200,000
Retained earnings
1,800,000
P 4,860,000
Requirements: Prepare the following assuming that P
Company paid
(a) P 3,420,000 for a 100% interest
(b) P 2,208,000 for an 80% interest
1. Determination and distribution of excess
schedule
2. Working paper elimination entries
Problem 2
Pluto Company acquired a 60% interest in Saturn Co
on 2 January, 2010. Book and fair values at the date of
acquisition were close to each other. The fair value of
non-controlling interests as at the date of acquisition is
P75,000. A control premium was paid by Pluto to
acquire Saturn.
The following balance sheets relate to Pluto and Saturn
right after the combination:
Pluto Co
Saturn Co
Investment in Saturn Co, cost
P117,000
P
0
Other assets
578,000
294,700
Total assets
P695,000
P294,700
Share capital
P300,000
P 80,000
Retained earnings
140,000
30,000
Long-term liabilities
200,000
150,400
Current liabilities
55,000
34,300
Total equities
P695,000
P294,700
Required:
1. Determination and distribution of excess schedule
at the date of acquisition.
2. Consolidation working paper entries at the date of
acquisition.
3. Consolidated balance sheet at the date of
acquisition.
Problem 3
On January 1, 20x9, P Company purchased an 80%
interest in S Company for P340,000. On this date, S
Company had Capital Stock of P150,000 and Retained
Earnings of P100,000. An examination of S Company’s
assets and liabilities revealed that book values were
equal to market values for all except the following:
Book value
Market value
Plant and equipment (net)
300,000
400,000
Merchandise inventory
80,000
100,000
The plant and equipment had an expected remaining
life of 5 years, and the inventory should be sold in
20x9. P Company’s income was P250,000 in 20x9 and
Page 3 of 8
P290,000 in 20x0. S Company’s income was P120,000
in 20x9 and P 180,000 in 20x0. S Company paid cash
dividends of P50,000 in 20x9 and P60,000 in 20x0.
P Company uses the cost method in accounting for its
investment in stocks of S Company.
Requirements:
1. Calculate the investment income of P Company
from S Company in 20x9 and in 20x0.
2. Elimination entries for consolidated statement
working papers on January 1, 20x9, December 31,
20x9 and December 31, 20x0.
3. Calculation of minority interest in net income of
subsidiary for 20x9 and 20x0
4. Calculation of consolidated net income for 20x9 and
20x0.
5. Calculation of minority interest in net assets as of
January 1, 20x9, December 31, 20x9 and
December 31, 20x0.
Problem 4
Pet Company acquired a 60% interest in Show
Enterprises on 2 January 20x1 when Show’s share
capital and retained earnings were P80,000 and
P30,000 respectively. The net assets of Show were
fairly valued on that date. The fair value of noncontrolling interest as at the date of acquisition is
P78,000.
The following financial statements pertain to the two
companies for the year ended December 31, 20x8
Income Statement for the year ended December 31,
20x8
Operating profit
Dividend
income
from
Show
Net profit before tax
Tax expense
Net profit after tax
Retained
earnings,
January 1
Dividends declared
Retained
earnings,
December 31
Pet Co
P160,000
Show Ent
P 60,000
18,900
178,900
(48,900)
130,000
60,000
(18,000)
42,000
110,000
(100,000)
38,200
(31,500)
P140,000
P 48,700
Balance as at December 31, 20x8
Pet Co
Show Ent
Investment in Saturn Co,
cost
P117,000
P
Other assets
520,200
265,230
Total assets
P637,200
P265,230
Share capital
P270,000
P 80,000
Retained earnings
126,000
48,700
Long-term liabilities
180,000
120,000
Current liabilities
61,200
16,530
Total equities
P637,200
P265,230
Required:
1. Show the consolidation working paper entries for
the year ended December 31, 20x8.
2. Perform an analytical check on the non-controlling
interests as at December 31, 20x8.
3. Prepare the consolidation worksheet for the year
ended December 31, 20x8.
Problem 5 (Upstream Merchandise Transfer)
S Company, a 75% owned subsidiary of P Company,
sold merchandise during 2009 to its parent company
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P2.708
EXCEL PROFESSIONAL SERVICES, INC.
for P 150,000. The merchandise cost S Company P
110,000, 25% of the transferred merchandise
remained in P Company’s ending inventory. For the
year 2009, S Company reported a net income of P
150,000 and P Company reported net income
(including dividend income of P 60,000) of P 275,000.
Requirements:
1. Calculate P Company’s investment income from S
Company in 2009.
2. Elimination entries for 2009
3. Determine non-controlling interests in the net
income of the subsidiary for 2009.
4. Show consolidated net income for 2009, and
allocate to Controlling interests and Non-controlling
interests.
Problem 6 (Downstream Land Transfer)
During 2008 P Company sold land with a cost of
P150,000 to its 80% owned subsidiary, S Company,
for P 200,000. The subsidiary sold the land in 2010 to
an outsider for P280,000. The subsidiary and the
parent reported net income as follows:
Parent
Subsidiary
2008
351,000
154,000
2009
335,000
149,000
2010
315,000
165,000
The reported income of the parent company includes P
51,000 of dividend income each year.
Requirements:
1. Calculate P Company’s investment income from S
Company in 2008, 2009, and 2010.
2. Elimination entries for 2008, 2009, and 2010
3.
Determine non-controlling interest in the net
income of the subsidiary in 2008, 2009 and 2010
4. Show the consolidated net income for 2008, 2009
& 2010. Allocate each to Controlling and noncontrolling interests.
Problem 7 (Upstream depreciable asset transfer)
On January 1, 2009, S Company a 90% owned
subsidiary of P Company transferred equipment to its
parent in exchange for P75,000 cash. At the date of
transfer, the subsidiary’s record carried the equipment
at a cost of P106,000 less accumulated depreciation of
P45,000. The equipment has an estimated remaining
life of 7 years. The subsidiary reported net income for
2009 and 2010 of P 132,000 and P197,000,
respectively. The parent company reported income of
P 220,000 (including dividend income of P 45,000) and
P295,000 (including dividend income of P45,000) for
2009 and 2010, respectively.
Requirements
1. Calculate P Company’s investment income from S
Company in 2009 and in 2010.
2. Elimination entries for 2009 and for 2010.
3.
Determine non-controlling interest in the net
income of the subsidiary for 2009 and for 2010.
4. Show the consolidated net income for 2009 and
2010. Allocate each to Controlling and MNoncontrolling interests.
Problem 8 (Intercompany Transactions)
On January 1, 2009, P Company acquired 75% of the
outstanding shares of S Company at book value.
During 2010, P Company purchased merchandise from
S Company in the amount of P 400,000 at billed
prices. S Company shipped the merchandise at 40%
above its cost, and this pricing policy was also used for
shipments made in 2009 to P Company.
The
inventories of P Company included merchandise at
billed prices from S Company as follows:
January 1, 2010
December 31, 2010
112,000
84,000
Also, in 2009 P Co sold land to S Co for P200, 000. The
cost of the land to P Co was P150, 000. S Co sold the
land to an outsider for P230, 000 in 2010.
Furthermore, on January 1, 2010 S Co sold equipment
to P Co for P75, 000 cash at the date of the transfer,
the equipment is carried at a cost of P106, 000 less
accumulated depreciation of P45, 000. The equipment
has an estimated remaining life of 7 years.
Income statements for the two companies for the year
2010 are as follows:
P Company
S Company
Sales
P2,000,000
P1,000,000
Cost of sales
800,000
500,000
Gross profit
1,200,000
500,000
Operating expenses
720,000
320,000
Operating income
480,000
180,000
Gain on sale of land
30,000
Gain on sale of equipment
_________
14,000
Net income
P 480,000
P 224,000
Requirements:
1. Calculate the non-controlling interests in
consolidated net income in 2010.
2. Calculate
the
controlling
interest
in
consolidated net income in 2010.
3. Prepare working paper elimination entries for
above information at December 31, 2010.
4. Prepare a consolidated income statement for
year ended December 31, 2010.
the
the
the
the
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P2.708
EXCEL PROFESSIONAL SERVICES, INC.
MULTIPLE CHOICE
Daito Corporation owns 100% of Prince Enterprises.
On January 1, 2010, Daito sold Prince delivery
equipment at a gain. Daito had owned the equipment
for two years and used a five-year straight-line
depreciation rate with no residual value. Prince is
using a three-year straight-line depreciation rate with
no residual value for the equipment.
1. In the consolidated income statement, Prince
recorded depreciation expense on the equipment
for 2010 will be decreased by:
a. 20% of the gain on sale
b. 33.33% of the gain on sale
c. 50% of the gain on sale
d. 100% of the gain on sale
Parker Corporation sells equipment with a book value
of P80,000 to Sheaffer Enterprises, its 75%-owned
subsidiary, for P100,000 on January 1, 2010. Sheaffer
determines that the remaining useful life of the
equipment is four years and that straight-line
depreciation is appropriate. The December 31, 2010
separate company financial statements of Parker and
Sheaffer show equipment-net of P500,000 and
P300,000, respectively.
2. The consolidated equipment-net will be:
a. P800,000
c. P780,000
b. P785,000
d P650,000
Balance sheet data for P Corporation and S Company
on December 31, 2010, are given below:
P Corporation S Company
Cash
P 70,000
P 90,000
Merchandise
Inventory
100,000
60,000
Property and
equipment (net)
500,000
250,000
Investment in S
Company
260,000
________
Total assets
P930,000
P400,000
Current liabilities
P180,000
Long term liabilities 200,000
Common stock
300,000
Retained earnings
250,000
Total liabilities & SE P930,000
P 60,000
90,000
100,000
150,000
P400,000
P Corporation purchased 80% interest in S Company
on December 31, 2010 for P260,000. S Company’s
property and equipment had a fair value of P50,000
more than the book value shown above. All other
book values approximated fair value. In the
consolidated balance sheet on December 31, 2010.
3. The amount of total stockholders’ equity to be
reported will be
a. P 550,000
c. P 750,000
b. P 610,000
d. P 615,000
4. The amount of non-controlling interest will be
a. P 50,000
c. P 110,000
b. P 60,000
d. P 65,000
Separate balance sheet data for the companies at the
combination date are given below:
Cash
Accounts Receivables
Inventory
Land
Plant Assets
Accum. Depreciation
Invesment in Argo
Total Assets
Accounts Payable
Capital Stock
Retained Earnings
Total Equities.
Sabina
12,000
72,000
66,000
39,000
350,000
(120,000)
196,000
615,000
103,000
400,000
112,000
615,000
Argo
103,000
13,000
19,000
16,000
150,000
(30,000)
_______271,000
71,000
150,000
50,000
271,000
At the date of combination the book values of ARGO’s
net assets was equal to the fair value of the net assets
except for ARGO’s inventory which has a fair value of
P30,000.
5. What amount of goodwill will be reported?
a. P15,667
c. P21,000
b. P37,750
d. P50,333
6. What amount of total liability will be reported?
a. P174,000
c. P213,000
b. P284,333
d. P 90,667
7. What is the amount of total assets?
a. P590,667
c. P751,333
b. P686,000
d. P738,750
On January 1, 2009, Paul Company purchased 90% of
the common stock of Bryan Company for P81,000 over
the book value of the shares acquired. All of the
differential was related to land held by Bryan. On May
1, 2010, Bryan sold the land at a gain of P145,000.
For the year 2010, Bryan reported net income of
P331,000 and paid dividends of P80,000.
Paul
reported income from its own separate operations of
P659,000 and paid no dividends.
9. Consolidated net income for 2010 was
a. P 824,000
c. P 1,005,400
b. P 875,900
d. P 900,000
On January 1, 2009 the Blumentritt Corporation sold
equipment to its wholly-owned subsidiary, Morayta
Enterprises, for P1,800,000. The equipment cost
Blumentritt P2,000,000; accumulated depreciation at
the time of the sale of P500,000. Blumentritt was
depreciating the equipment on the straight-linemethod over twenty years with no salvage value, a
procedure that Morayta continued.
10. On the consolidated balance sheet at December
31, 2009 the cost and accumulated depreciation,
respectively, should be:
a. P1,500,000 and P600,000
b. P1,800,000 and P100,000
c. P1,800,000 and P500,000
d. P2,000,000 and P600,000
On January 1, 2010. SABINA Corporation purchased
75% of the common stock of ARGO Company.
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P2.708
EXCEL PROFESSIONAL SERVICES, INC.
DO-IT-YOURSELF (DIY) DRILL
P Company acquired a 65% interest in S company in 2008.
For years ended December 31, 2009 and 2010, S reported
net income of P325,000 and P390,000, respectively.
During 2009, S sold merchandise to P for P70,000 at a
cost of P54,000. Two-fifths of the merchandise was later
resold by P to outsiders for P38,000 during 2010. In 2010,
P sold merchandise to S for P98,000 at a profit of P24,000.
One-fourth of the merchandise was resold by S to
outsiders for P30,000 during 2010.
1. Minority interest net income in 2009 is P__________ .
2. Minority interest net income in 2010 is P__________ .
CORN Corporation sells equipment with a book value of
P200,000 to BEANS Company, its 75% owned subsidiary
for P160,000 on April 1, 2009. BEANS determines that the
remaining useful life of the equipment is four years and
that the straight-line depreciation is appropriate. The
December 31, 2009 separate financial statements of CORN
and BEANS show equipment-net of P1,000,000 and
P600,000, respectively.
3. Consolidated equipment-net will be P___________.
RICH Corporation paid P1,125,000 for an 80% interest in
HARD Corporation on January 1, 2009 at a price P37,500
in excess of underlying book value. The excess was
allocated P15,000 to undervalued equipment with a tenyear remaining useful life and P22,500 to goodwill which
was not impaired during the year. During 2009, HARD
Corporation paid dividend of P60,000 to RICH Corporation.
The income statements of RICH and HARD for 2009 are
given below:
Sales
Cost of sales
Depreciation
expense
Other expense
Net income
RICH
P2,500,000
(1,250,000)
HARD
P1,000,000
(500,000)
(250,000)
(500,000)
P500,000
(150,000)
(225,000)
P125,000
4. Consolidated net income for 2009 is P____________.
5. Non-controlling interest in net assets at December 31,
2009 is P____________ .
Income information for 2009 taken from the separate
company financial statements of PARKER Corporation
remaining useful life that was sold to SPENCER for P45,000
on October 1, 2009.
Sales
Cost of goods sold
Depreciation expense
Loss on sale of equipment
Other expense
Page 6 of 8
PARKER
P1,250,000
(625,000)
(125,000)
(30,000)
(250,000)
SPENCER
P575,000
(325,000)
(75,000)
(50,000)
Net income
P220,000
P125,000
PARKER’s loss o sale of equipment relates to an equipment
with a book value of P75,000 and a 6-year remaining
useful life that was sold to SPENCER for P45,000 on
October 1, 2009.
6. Consolidated Depreciation expense in 2009 is
P___________.
On December 31, 2008, PANDOY Inc. purchased 75% of
the outstanding shares of SAHARA Company at cost of
P1,750,000. On that date, SAHARA Company had
P500,000 of capital stock and P1,250,000 of retained
earnings. For 2009, the results of operations are:
PANDOY
SAHARA
Inc.
Company
Net income (loss) from own
operations
P900,000
P(110,000)
Dividends paid
350,000
60,000
All assets and liabilities of SAHARA Company have book
values approximately equal to their respective market
values. The beginning inventory of PANDOY Inc. includes
P20,000 of merchandise purchased from SAHARA
Company on December 31, 2008 at 25% above its cost.
The ending inventory of SAHARA Company includes
P22,500 of merchandise purchased from PANDOY Inc. in
2009 at 20% above its cost. Goodwill is not impaired.
7. Consolidated net income in 2009 is P___________ .
8. Non-controlling interest net income (loss) for 2009 is
P___________ .
9. Total non-controlling interest at December 31, 2009 is
P_____________ .
On January 1, 2009, PAN Co. purchased 85% of the
outstanding shares of SAN Company for P640,000 when
the latter’s stockholders’ equity is P640,000. On October 1,
2009. SAN Company sold equipment with a book value of
P32,000 to PAN Company for P64,000. The equipment is
expected to have a remaining life of five years. The gain
on sale is included in the 2009 net income of SAN
Company. Goodwill if any is not impaired. SAN Company
paid dividends of P60,000 in 2009 and P100,000 in 2010.
The individual income of PAN Company and SAN Company
from their own operations are:
PAN Company
SAN Company
2009
P220,000
140,000
2010
P360,000
240,000
10. Minority interest in a assets for 2009 is P__________ .
11. Consolidated net income in 2010 is P____________
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P2.708
PROFESSIONAL REVIEW and TRAINING CENTER, INC.
SOLUTION TO PROBLEM 4
Determination and Distribution of Excess Schedule:
Cost
Less
(P117,000 + P78,000)
Book value acquired:
Share capital
Retained earnings
Goodwill (Excess of Cost over Fair Value)
P195,000
P80,000
30,000
110,000
P 85,000
Consolidation working paper entries:
CWPE#1: Share capital (Show)
P80,000
Retained earnings (Show)
30,000
Goodwill
85,000
Investment in Show
P117,000
Non-controlling interests
78,000
Elimination of investment in Show, share capital, and pre-acquisition retained
earnings and recognition of goodwill and non-controlling interests as at date
of acquisition.
CWPE#2: Retained earnings (Show)
3,280
Non-controlling interests
3,280
Allocation of share of change in retained earnings of Show to non-controlling
interests from the date of acquisition to beginning of current period.
(P38,200 – P30,000) x 40% = P3,280; (P38,200 – P30,000) x 60% = P4,920
CWPE#3: Dividend income (Pet) (60% x P31,500)
18,900
Non-controlling interests (40% x P31,500)
12,600
Dividends declared by Show
31,500
Elimination of dividends declared by Show against (a) Dividend income of
Pet, and (b) non-controlling interests - balance sheet
CPWE#4: Income to non-controlling interests (I/S)
16,800
Non-controlling interests (B/S)
16,800
Allocation of share of current profit after tax of Show to non-controlling
Interests. (Show’s net income, P42,000 x 40%)
2. Analytical check on the non-controlling interests as at December 31, 20x8.
NCI, 12/31/x8: ( P78,000 + P3,280 + P16,800 – P12,600
P85,480
Show’s book value of net assets as at December 31, 20x8
Goodwill
Total at fair value
X NCI%
NCI, 12/31/x8
P128,700
85,000
P213,700
40%
P 85,480
4. Consolidation Worksheets for the year ended December 31, 20x8.
INCOME STATEMENTS for the year ended December 31, 20x8:
Cons. Adjustment
Consolidted
Pet Co Show Ent
Debit
Credit Balance Sheet
Operating profit P160,000 P 60,000
P 220,000
Dividend income 18,900
0 18,900
0
Net profit b4 tax P178,900 P 60,000
220,000
Tax expense
(48,900) (18,000)
66,900
Net prft after tax P130,000 P 42,000
153,100
Profit to NCI
16,800
( 16,800)
Profit to Parent P130,000 P 42,000
P136,300
RE, Jan. 1
110,000
38,200
30,000
114,920
3,280
Dividends dclrd (100,000) (31,500)
31,500
(100,000)
RE, Dec. 31
P140,000 P 48,700 P68,980
P31,500 P 151,220
Page 7 of 8
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P2.708
PROFESSIONAL REVIEW and TRAINING CENTER, INC.
BALANCE SHEETS as at December 31, 20x8
Inv in Show
Other assets
Goodwill
Total assets
Share capital
RE, 12/31
NCI, 12/31
P117,000
520,200
P
0
265,230
P637,200
P265,230
P270,000
126,000
P80,000
48,700
LT liabilities
180,000 120,000
C / liabilities
61,200
16,530
Total equities P637,200 P265,230
117,000
85,000
85,000
80,000
68,980
12,600
246,580
117,000
31,500
78,000
3,280
16,800
246,580
P
0
785,430
85,000
P 870,430
P 270,000
137,220
85,480
300,000
77,730
P870,430
CONSOLIDATED INCOME SSTATEMENT FOR YEAR ENDED DEC. 31, 20X8
Net profit before tax
Tax expense
Net profit after tax
P220,000
( 66,900)
P153,100
Attributable to NCI
Attributable to parent’s shareholders
Total
P 16,800
136,300
P153,100
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR 20X8
Retained earnings, January 1
Net profit after tax attributable to parent’s shareholders
Dividends declared by Pet
Retained earnings, December 31, 20x8
P114,920
136,300
(100,000)
P151,220
CONSOLIDATED BALANCE SHEET AS AT December 31, 20x8
Other assets
Goodwill
Total assets
P785,430
85,000
P870,430
Share capital
Retained earnings
Parent’s shareholders’ equity
Non-controlling interests
Total shareholders’ equity
Long-term liabilities
Current liabilities
Total equity and liabilities
P270,000
137,220
P407,220
85,480
P492,700
Page 8 of 8
P300,000
77,730
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377,730
P 870,430
P2.708