Problem 1

P Company and Subsidiary

Consolidated Working Paper
Year Ended December 31, 2017

Eliminations/ Adjustments Conso-

P Company S Company Debit Credit lidated
Income Statement
Sales 600,000 315,000 (7) 40,000 875,000
Dividend income 16,000 (3) 16,000 -
Total revenue 616,000 315,000 875,000
Cost of goods sold 350,000 150,000 (9) 5,000 (7) 40,000
(8) 10,000 455,000
Operating expenses 150,000 60,000 (6) 6,250 (11) 3,000 213,250
Total costs and expenses 500,000 210,000 668,250
Net income 116,000 105,000 206,750

NCI in net income of S (2) 20,750 (20,750)

Net income carried forward 116,000 105,000 186,000

Retained Earnings Statement

Retained earnings, January 1 280,000 150,000 (1) 6,250 285,000
(4)100,000
(6) 18,750
(8) 8,000
(10) 12,000
Net income from above 116,000 105,000 186,000
Dividends declared (60,000) (20,000) (3) 20,000 (60,000)
RE, 12/31 carried forward 336,000 235,000 411,000

Statement of FP
Inventory 130,000 50,000 (5) 12,500 (6) 12,500 175,000
(9) 5,000
Other current assets 241,000 235,000 476,000
Investment in S Company 200,000 (4)160,000
(5) 40,000
Goodwill (5) 12,500 12,500
Other long-term investments 20,000 20,000
Land 140,000 80,000 220,000
Buildings and equipment 375,000 200,000 (5) 25,000 (10) 15,000 585,000
Intangible assets 20,000 20,000
Totals 1,106,000 585,000 1,508,500

Accumulated depreciation 120,000 30,000 (10) 3,000 (6) 12,500 156,500

(11) 3,000
Current liabilities 150,000 70,000 220,000
Non-current liabilities 200,000 150,000 350,000
Common stock 200,000 50,000 (4) 50,000 200,000
APIC 100,000 50,000 (4) 50,000 100,000
RE, 12/31 from above 336,000 235,000 411,000

NCI (3) 4,000 (1) 6,250 71,000

(8) 2,000 (2) 20,750
(4) 40,000
(5) 10,000
Totals 1,106,000 585,000 395,000 395,000 1,508,000
Determination and Allocation of Excess Schedule

Company Parent NCI

Implied Price Value
Fair Value (80%) (20%)
Price paid for investment P250,000 P200,000 P 50,000*
Less book value of interest acquired:
Total equity 200,000 P200,000 P200,000
Interest acquired 80% 20%
Book value of interest acquired P160,000 P 40,000
Excess P 50,000 P 40,000 P 10,000
Allocations
Inventory (12,500)
Equipment (25,000)
Total (37,500)

Goodwill P12,500

* (P200,000/80%) x 20% = P50,000

Amortization
Inventory P12,500
Equipment (P25,000/4) 6,250

Explanations of Eliminations and Adjustments:

1. To recognize NCI share in subsidiary’s adjusted prior year’s undistributed earnings

(P50,000 – P18,750) 20% = P6,250.
- Retained Earnings, Jan. 1 – S Company 6,250
NCI 6,250

2. To recognized NCI in net of subsidiary for the current year

(P105,000 + P10,000 – P5,000 – 6,250) x 20% = P20,750
- NCI in CI of subsidiary 20,750
NCI 20,750

3. To eliminated intercompany dividends paid the subsidiary.

- Dividend income 16,000
NCI 4,000
Dividend declared – S Company 20,000

4. To eliminate equity of the subsidiary at date of acquisition.

- Common stock – S Company 50,000
Additional paid in capital – S company 50,000
Retained earnings – S Company 100,000
Investment in S Company 160,000
NCI 40,000

5. To allocate excess.
 -Inventory 12,500
Building and equipment 25,000
Goodwill 12,500
Investment in Sake Company 40,000
NCI 10,000
6. To amortize allocated excess.
- Retained earnings – Jan. 1 6,250
Operating expense 6,250
Inventory 12,500

7. To eliminate intercompany sales.

- Sales 40,000
Cost of goods sold 40,000

8. To eliminate beginning inventory profit.

- Retained earnings – Jan. 1 8,000
NCI 2,000
Cost of goods sold 10,000

9. To eliminate ending inventory profit.

- Cost of goods sold 5,000
Inventory 5,000
10. To eliminate fixed asset gain at beginning of year.
- Retained earnings – Jan. 1 12,000
Accumulated depreciation 3,000
Building and equipment 15,000

11. To eliminate realized gain on fixed assets.

- Accumulated depreciation 3,000
Operating expenses 3,000

Problem 2

P Company and Subsidiary

Consolidated Worksheet
Year Ended December 31, 2017

Eliminations Adjustments Conso-

P Company S Company Debit Credit lidated
Income Statement
Sales 1,900,000 1,500,000 (7)180,000 3,220,000
 Dividend income 40,000 (1) 40,000 -
Total revenue 1,940,000 1,500,000 3,220,000
Cost of goods sold 1,180,000 870,000 (8) 18,000 (7)180,000 1,888,000
Operating expenses 550,000 440,000 (4) 9,000 (6) 4,000 995,000
Total costs and expenses 1,730,000 1,310,000 2,883,000
Net income carried forward 210,000 190,000 337,000

Retained Earnings Statement

Retained earnings, Jan. 1 250,000 206,000 (2)156,000 258,000
(4) 18,000
(5) 24,000
Net income from above 210,000 190,000 337,000
Dividends paid (40,000) (1) 40,000 -
RE, 12/31, carried forward 460,000 356,000 595,000

Statement of FP
Cash 285,000 150,000 435,000
Accounts receivables (net) 430,000 350,000 (9) 75,000 705,000
Inventories 530,000 410,000 (8) 18,000 922,000
Land, buildings, and 660,000 680,000 (3) 54,000 (5) 30,000 1,364,000
equipment
Investment in S Company 750,000 (2)636,000
(3)114,000
Goodwill (3) 60,000 60,000
Totals 2,655,000 1,590,000 3,486,000

Accumulated depreciation 185,000 210,000 (5) 6,000 (4) 27,000 412,000

(6) 4,000
Accounts payable 670,000 544,000 (9) 75,000 1,139,000
Common stock, P10 par 1,200,000 400,000 (2)400,000 1,200,000
APIC 140,000 80,000 (2) 80,000 140,000
Retained earnings from above 460,000 356,000 595,000

Totals 2,655,000 1,590,000 1.124,000 1,124,000 3,486,000

Determination and Allocation of Excess Schedule

Price paid by the parent P750,000

Less book value of interest acquired (100%)
Common stock – S Company P400,000
Additional paid in capital – S Company 80,000
Retained earnings – S Compay 156,000 636,000
Excess P114,000
Allocated to machinery (54,000)
Goodwill P 60,000
Problem 3

Pluto Corporation and Subsidiary Star Corporation

Comparative Consolidated Income Statement
Years Ended December 31, 2016 and 2017

. December 31 .
. 2017 2016 .
Sales P800,000 P660,000
Cost of goods sold 442,000 368,000 .
Gross profit 358,000 292,000
Operation expenses 178,000 138,000 .
Consolidated net income 180,000 154,000
NCI in net income of subsidiary 10,000 10,000 .
Attributable to equity holders of Pluto P170,000 P144,000 .

Supporting computations:
. .
. 2017 2016 .
Consolidated sales:
Combined sales P850,000 P700,000
Less: intercompany sales (50,000) (40,000) .
Consolidated sales P800,000 P660,000 .

Consolidated cost of goods sold:

Combined costs of good sold P490,000 P400,000
Intercompany sales (50,000) (40,000)
Unrealized profit in ending inventory 10,000 8,000
Unrealized profit in beginning inventory (8,000) .
Consolidated cost of goods sold P442,000 P368,000 .

Consolidated operating expenses

Combined operating expenses P180,000 P140,000
Realized gain on sale of equipment (P10,000/.2) (2,000) (2,000) .
Consolidated operating expenses P178,000 P138,000 .

NCI in net income of subsidiary

Star Company’s reported net income P65,000 P50,000
Gain on upstream sale of land (5,000)
Unrealized gain in upstream, inventory sales (10,000) .
Realized net income P50,000 P50,000
NCI 20% 20%
NCI in net income of subsidiary P10,000 P10,000 .