Total P 1,200,000: Refer PDF Problem 1

Problem 1. Paco Company acquired 100 percent of the stock of Garland Corp. on December 31, 2017.
The stockholder's equity section

of Garland's balance sheet at that date is as follows:
Common Stock P 300,000
Additional Paid-in Capital 500,000
Retained Earnings 400,000
Total P 1,200,000
Paco financed the acquisition by using P 880,000 cash and giving a note payable for P 400,000. Book value approximated fair value
for all of Garland's assets and liabilities except for buildings which had a fair value P 60,000 more than its book value and a remaining
useful life of 10 years. Any remaining differential was related to goodwill. Paco has an account payable to Garland in the amount of P
30,000. Required:
1) Present all eliminating entries needed to prepare a consolidated statement of financial position immediately following the
acquisition.
2) What additional eliminating entry must be prepared at December 31, 2018?
Refer PDF Problem 1
Problem 2. On January 1, 2018, Pank Corporation and Spank Corporation and their condensed balance sheet are as follows:
Pank Corp. Spank Corp.
Current Assets P 70,000 P 20,000
Non-current Assets 90,000 40,000
Total Assets P 160,000 P 60,000
Current Liabilities P 30,000 P 10,000

Long-term Debt 50,000
Stockholder’s Equity 80,000 50,000
Total Liabilities and Equities P 160,000 P 60,000
On January 2, 2018, Pank Corporation borrowed P 60,000 and used the proceeds to obtain 80% of the outstanding common shares of
Spank Corporation. The acquisition price was considered proportionate to Spank’s fair value. The P 60,000 debt is payable in 10
equal annual principal payments, plus interest, beginning December 31, 2018. The excess fair value of the investment over the
underlying book value of the acquired net assets is allocated to inventory (60%) and to goodwill (40%). On the consolidated
statement of financial position as of January 2, 2018, what should be the amount of the following?
 The amount of goodwill using proportionate basis (partial):
 Using the same information above, the amount of goodwill using full fair value (full/gross-up ) basis:
 Using the same information above, the amount of currents assets should be
 Using the same information above, the amount of non-current assets using proportionate basis (partial) in computing
goodwill should be:
 Using the same information above, the amount of non-current assets using full fair value basis in computing goodwill should
be:
 Using the same information above, the amount of current liabilities should be
 Using the same information above, the amount of non-current liabilities should be:
 Using the same information above, the amount of stockholders’ equity using proportionate (partial goodwill) basis to
determine non-controlling interest should be:
 Using the same information above, the amount of stockholders’ equity using full fair value basis to determine non-controlling
interest should be:
Refer PDF Problem 7
Problem 3.
Sub Company sells all its output at 20 percent above cost to Par Corporation. Par purchases all its inventory from Sub. The incomes
reported by the companies over the past three years are as follows:
Year Sub Company’s Par Corporation’s
Net Income Operating Income
2017 150,000 225,000
2018 135,000 360,000
2019 240,000 450,000
Sub Company sold inventory for P 300,000, P 262,500 and P 337,500 in the years 2017, 2018, and 2019 respectively. Par Company
reported ending inventory of P 105,000, P 157,500 and P 180,000 for 2017, 2018, and 2019 respectively. Par acquired 70 percent of
the ownership of Sub on January 1, 2017, at underlying book value. The fair value of the noncontrolling interest at the date of
acquisition was equal to 30 percent of the book value of Sub Company.
 Based on the information given above, what will be the consolidated net income for 2017?
 Based on the information given above, what will be the consolidated net income for 2018?
 Based on the information given above, what will be the income assigned to controlling interest for 2018?
 Based on the information given above, what will be the income to noncontrolling interest for 2019?
 Based on the information given above, what will be the income to controlling interest for 2019?
Refer PDF Problem 28
Problem 4. Spiniflex Pigeon Company owns 90% of the outstanding stock of Waterhole Corporation. This interest was purchased on
January 1, 2012, when Waterhole’s book values were equal to its fair values. The amount paid by Spiniflex Pigeon included P10,000
for goodwill.
On January 1, 2013, Spiniflex Pigeon purchased equipment for P100,000 which had no salvage value with a useful life of 8 years. On a
straight-line basis. On January 1, 2018, Spiniflex Pigeon sold the truck to Waterhole Corporation for P40,000. The equipment was
estimated to have a four-year remaining life on this date. All affiliates use the straight-line depreciation method. Prepare all relevant
entries with respect to the truck. Record the journal entries on Spiniflex Pigeon’s books for 2018. Record the journal entries on
Waterhole’s books for 2018.
Word CH7 plantassets Ex1
Problem 5. Buzzard Corporation acquired 70% of the outstanding voting common stock of Tool Inc. in 2011. On January 1, 2012, Tool
Inc. purchased a depreciable machine for P120,000 cash with an estimated useful life of 10 years that was depreciated on a straight-
line basis. Tool used the machine until the end of 2017. On January 2, 2018, Tool sold the machine to Buzzard who continued to use
the same estimated life and depreciation method that was used by Tool. At the end of 2018, Buzzard made the following elimination
entry in the consolidation working papers.
Machine 22,000
Gain on Sale of Machine 14,000
Depreciation Expense 2,000
Accumulated Depreciation 34,000
Answer the following questions concerning Buzzard and Tool.
 How much depreciation expense did Buzzard record in 2018?
 What amounts were reported for the Machine and the Accumulated Depreciation in the consolidated balance sheet on
December 31, 2018?
 If Tool reported P60,000 of net income for 2018, what amount was assigned to the non-controlling interest?
Word CH7 plantassets Ex10

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Problem 1. Paco Company acquired 100 percent of the stock of Garland Corp. on December 31, 2017.

The stockholder's equity section

Refer PDF Problem 1

Current Liabilities P 30,000 P 10,000

Refer PDF Problem 7

Refer PDF Problem 28

Word CH7 plantassets Ex1

Word CH7 plantassets Ex10

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