Problem

 1:    On  April  1,  2018  Papa  Co  purchased  80%  of  the  outstanding  shares  of  Son  Co  for  P3,500,000.    P125,000  
of  the  excess  is  attributable  to  goodwill  and  the  balance  to  a  depreciable  asset  with  an  economic  life  of  ten  years.    
The  non-­‐controlling  interest  is  measured  at  fair  value  on  the  date  of  acquisition.    On  the  date  of  acquisition,  Son  Co  
reported   ordinary   shares   of   P2,500,000   and   retained   earnings   of   P1,500,000.       Papa   Co's   retained   earnings   on  
January  1,  2018  is  P3,000,000  

Papa  Co  reported  earnings  of  P1,500,000  and  declared  dividends  of  P500,000  while  Son  reports  net  income  for  the  
year  of  P800,000  and  pays  parent  dividends  of  P200,000  on  December  1,  2018.    Goodwill  is  impaired  by  P20,000  by  
the  end  of  the  year.  
 
Required:  
1.   Equity  holder's  income  of  parent  
2.   Consolidated  retained  earnings  to  be  reported  on  December  31,  2018  
3.   Non-­‐controlling   interest   presented   in   the   consolidated   statement   of   financial   position   on   December   31,  
2018.  
 
Problem   2:     On   January   1,   2018,   Pedro   Company   acquired   70%   of   Sonia   Company   for   P1,253,000.     P210,000   of   the  
excess  over  the  cost  of  acquisition  is  attributable  to  an  understated  depreciable  asset  with  a  remaining  life  of  10  
years.     Sonia   Company's   stockholders'   equity   on   this   date   were   as   follows:   Ordinary   shares,   P500,000;   Share  
premium,  P250,000  and  Retained  earnings,  P500,000.    The  non-­‐controlling  interest  is  measured  at  fair  value  on  the  
date  of  acquisition  and  the  fair  value  of  the  30%  non-­‐controlling  interest  is  P507,000.      
 
Goodwill   is   written   down   by   P10,000   at   the   end   of   the   year.     The   following   are   the   results   of   both   company's  
operations  by  December  31,  2018.  
 
  Pedro  Company   Sonia  Company  
Total  Assets   5,000,000   2,500,000  
Total  Liabilities   3,000,000   980,000  
Net  Income   500,000   300,000  
Dividends   200,000   30,000  
 
Sonia   declared   dividends   of   P10,000   each   on   November   1,   December   15   and   December   28.     Dividends   are   paid   20  
days  after  declaration.    Pedro  still  did  not  record  the  dividends  declared  on  December  28.  
Determine:  
4.   Goodwill  to  be  reported  on  the  consolidated  balance  sheet  on  January  1,  2018    
5.   Equity  Holders  of  Parents'  net  income  
6.   Non-­‐controlling  interest  net  income  
7.   Non-­‐controlling  interest  at  December  31,  2018  
8.   Consolidated  assets  as  of  December  31,  2018  
9.   Consolidated  Liabilities  as  of  December  31,2  018  
10.   Consolidated  Stockholders'  Equity  as  of  December  31,  2018  
 
Problem  3:    On  January  1,  2016,  Parent  Company  purchased  80%  of  the  outstanding  shares  of  Subsidiary  Company  
for   P800,000.     On   this   date,   Subsidiary   Company   reported   ordinary   shares   of   P500,000   and   retained   earnings   of  
P300,000.     The   non-­‐controlling   interest   is   to   be   stated   at   fair   value.     The   purchase   price   of   Parent   Company  
excluded  a  control  premium  of  P40,000.  
 
On   the   date   of   acquisition,   all   of   Subsidiary's   net   assets   approximated   their   fair   values   except   for:   inventory,  
understated  by  P10,000,  Land,  overstated  by  P50,000  and  Equipment  with  a  5-­‐year  life  which  was  understated  by  
P50,000.  
 
The  following  are  reported  by  both  companies  as  of  December  31,  2018.  
   Parent   Subsidiary  
Sales   1,000,000   1,200,000  
Cost  of  Sales   600,000   800,000  
Net  Income   400,000   200,000  
Dividends   250,000   150,000  
Assets   8,000,000   2,500,000  
Liabilities   3,000,000   950,000  
Ordinary  shares   3,000,000   500,000  
Retained  Earnings-­‐Jan  1   1,850,000   1,000,000  
 
Subsidiary  declared  dividends  of  P100,000  for  2016  and  2017.    The  following  intercompany  sales  occurred  during  
2017  and  2018:  
        Unsold  at  
Year  of   Seller   Cost   Sales  Price   year-­‐end    
sale   (by  buyer)  
2017   Parent   P80,000   120,000   15,000  
2017   Subsidiary   150,000   200,000   50,000  
2018   Subsidiary   120,000   150,000   40,000  
2018   Parent   100,000   200,000   50,000  
 
Determine  the  following:  
11.   Consolidated  sales  for  2018  
12.   Consolidated  Cost  of  Sales  for  2018  
13.   Non-­‐Controlling  Interest  net  income  for  2018  
14.   Consolidated  Assets  as  of  December  31,  2018  
15.   Consolidated  Equities  as  of  December  31,  2018  
 
Problem   4:     Solen   Company   is   a   75%   owned   company   of   Pia   Company,   acquired   by   Pia   at   Book   Value   when   Solen's  
retained   earnings   was   P800,000   and   the   ordinary   shares   was   P200,000.     For   2018,   Pia   and   Solen   reported   net  
income   of   P650,000   and   P300,000   each   respectively   and   report   total   assets   of   P5,000,000   and   P3,000,000   each  
respectively  at  December  31,  2018.    Solen's  retained  earnings  on  January  1,  2018  is  P1,300,000  and  Pia's  liabilities  
on  December  31,  2018  is  P1,500,000.    Analysis  of  transactions  of  the  two  companies  revealed  the  following:  
 
Date  of  Sale   Seller/Item  sold   Cost/Book  Value   Sales  Price  
Feb  1,  2015   Solen/Inventory   150,000   200,000  
Mar  1,  2016   Pia/Land   500,000   650,000  
Apr  1,  2016   Solen/Equipment   400,000   310,000  
May  1,  2017   Pia/Equipment   100,000   160,000  
Mar  1,  2018   Solen/Equipment   90,000   120,000  
June  30,  2018   Solen/Inventory   50,000   75,000  
 
Additional  information:  
30%  of  the  inventory  sold  remains  unsold  at  the  end  of  the  year  of  sale  and  is  subsequently  sold  the  next  year.  
All  equipment  have  a  remaining  life  of  5-­‐years  from  the  date  of  sale.  
Determine  the  following:  
16.   The  equity  holders  of  parent's  net  income  for  2018  
17.   The  non-­‐controlling  interest  net  income  for  2018  
18.   The   equity   holders   of   parents   retained   earnings   if   the   retained   earnings   of   Pia   on   January   1,   2018   is  
P1,200,000.  
19.   Consolidated  assets  as  of  December  31,  2018  
20.   Consolidated  equities  as  of  December  31,  2018