Consolidated

 

PRACTICAL ACCOUNTING II Consolidated Statements

N. D. DE LEON

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 CONSOLID CONSOLIDATED ATED FINANCIAL STATEMENTS A parent shall present consolidated financial statements, except when The partner is itself a wholly-owned subsidiary 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 produces consolidated financia financiall statements available for public use •

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CONSOLIDATION PROCEDURES The carrying carrying amou amount nt of the pare parent’s nt’s investment investment in each subsid subsidiary iary and the parent’ parent’s s port portion ion of equit equity y 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 inter interests ests in the net assets co consist nsist of: 1. The amount amount of tho those se mino minority rity in interes terests ts at the d date ate of the orig original inal co combina mbination tion 2. The minority’s share of changes in equity since the date o off the comb combination ination •

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ACCOUNTING FOR INVESTMENTS IN SUBSIDIARIES, JOINTLY CONTROLLED ENTITIES AND ASSOCIATES IN SEPARATE FINANCIAL STATEMENTS For sepa separate rate financial state statements ments investm investment ent in subs subsidiar idiaries, ies, jointly cont controlle rolled d entit entities ies and asso associate ciates, s, 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. Conso Consolid lidate ated d statem statement ents s are prepa prepared red fro from m the sep separa arate te sta statem tement ents s of the acq acquir uiring ing co compa mpany ny and acq acquir uired ed company(ies) from the standpoint of a single economic entity. 2. Consolidation proc procedures edures are necess necessary ary whenever a p parent arent and a subsidiary relati relationship onship existed, excep exceptt if the parent is exempted under PAS 27 to present consolidated financial statements. 3. The acquiring company, company, generally, is a parent if it owns, directly directly and indirectly, more more than 50% of the 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 schedule of excess to determ determine ine if there is either goodwill, goodwill, or, income from acquisition. acquisition. This will also be the basis in formulating the working paper elimination entries. b. If the workin working g paper is to prepare post acquis acquisition ition consolidate consolidated d state statements ments,, computati computations ons must show the amortization of increase/decrease increase/decrease in value of net assets of the acquired company. 5. Increase/decre Increase/decrease ase to fair value of net asset items and GOODWILL are recognized 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 Working paper eliminatio elimination n entries orc orchestr hestrate ate the items and balance balances s that must compris comprise e the cons consolida olidated ted 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, wor working king paper elimination entries aim to accomplish accomplish the following: a. Eliminate inter-company balances b. Make adjustments adjustments for acquired ass assets ets and ass assumed umed liabilities to comply with fair v value alue consider considerations. ations. c. Set up goodwill or inc income ome from from acquisition into the consolidated statements. d. Amortize Amortize increa increase/d se/decre ecrease ase in value of net assets and measur measure e their effects in the consolidate consolidated d financial statements, e. Make adjustments adjustments to consolidated amounts as a result of inter-c inter-company ompany tr transactions. ansactions. f. And ffor or a variet variety y of other other cons consolida olidation tion rrequi equireme rements. nts. 8. Basically, in the working papers, si similar milar items fro from m the par parent’s ent’s recor records ds and fro from m the subs subsidiary’s idiary’s rec records ords are simply combined, plus/minus any working paper adjustments affecting such items. 9. The fair valu value e method is usu usually ally appl applied ied to small sto stockho ckholding ldings. s. Generally Generally it is the method us used ed by the inves investor tor if the interest acquired is less than 20% of outstanding voting shares. An investor that can exercise significant influence

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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. preferred. - done –

MULTIPLE CHOICE THEORETICAL

Select the best answer for each of the following multiple-choice questions: 1. X has contro controll over the comp compositio osition n of Y's board of dire director ctors. s. X owns 49% of Y and is the largest shar sharehold eholder. er. 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 cann cannot ot exer exercise cise c contr ontrol ol beca because use it o owns wns on only ly 49 49% % of the vo voting ting ri rights ghts b. X cannot ex exerci ercise se cont control rol beca because use it can cont control rol only th the e makeup o off the board and no nott necessarily necessarily the wa way y the directors vote c. d.

X can exercise exer cise co contro ntroll solely b becaus ecause e it has an agree agreement ment wit with h Z for the vot voting ing righ rights ts to be use used d in whatev whatever er manner X wishes X can exercise exercise co control ntrol becaus because e it contr controls ols more than 50% of the v voting oting power power,, and it can gover govern n the financial and operating policies of Y through is control of the board of directors

2. X owns 50% of Y's vo voting ting sha shares. res. The bo board ard of dire director ctors s consis consists ts of six memb members; ers; X app appoints oints thr three ee 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, cont control rol iis s equally equally split betw between een X and Z b. Yes, X holds 50% of the v voting oting power and has the cas casting ting vote at boa board rd meetings in the event that there is not a majority decision c. No, x owns owns only 50% of tthe he enti entity's ty's shares shares a and nd ther therefor efore e does n not ot hav have e contr control ol d. No, con control trol ca can n be exer exercised cised o only nly thro through ugh vo voting ting pow power, er, not thr through ough a cas casting ting vot vote e 3. Z has sold all of its share shares s to the public. The co compan mpany y was forme formerly rly a statestate-owne owned d entity entity.. The national reg regulato ulatorr 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. Th The e n nat atio iona nall rreg egul ulat ator or b. Th The e ov over erse seas as enti entity ty c. Th Neither Neith erard the th national onal rregula tor nor nor tthe he ov overse erseas as en entity tity d. The e boar bo deo ofnati f dire direct ctor ors segulator 4. A has acquir acquired ed an invest investment ment in a subsid subsidiary iary,, B, with the view to dispos dispose e of this investment investment within six mo months. nths. 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. Purcha Purchase se acco account unting ing s sho hould uld be be us used ed b. Equ Equity ity accoun accountin ting gs shou hould ld b be e us used ed c. The subsidia subsidiary ry sho should uld not be be cons consolida olidated ted but IIFRS FRS 5 sho should uld be us used ed d. The subs subsidiar idiary y sh should ould rema remain in off off bala balance nce shee sheett 5. A manufac manufacturin turing g group has just acq acquired uired a controlling controlling int interes erestt in a footb football all club that is listed on a stock exc exchang hange. e. 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 entity sh shoul ould d be cons consoli olidat dated ed as the there re is no exemptio exemption n from from conso consolid lidati ation on on the grounds grounds of dis dissim simila ilarr activities b. The entit entity y sho should uld not be conso consolid lidate ated d usi using ng the purc purchas hase e met method hod but sho should uld be conso consolid lidate ated d usi using ng equit equity y accounting c. d.

The entity entity shou should ld not consoli nsolidated dated and nd shou should ldould appe appear ardisc as an inve investmen t inncial the grou group p accou accounts The entit entity y should not be be co co consoli nsolidated dated;;a details sh should be disclosed losed instment the fina financial sta statemen tements ts nts

6. In the separ separate ate financ financial ial state statements ments of a pare parent nt entity, inv investm estments ents in subsi subsidiari diaries es that are not clas classifie sified d as held for sale should be accounted for a. At cost b. In a acc ccor orda danc nce e wi with th IIAS AS 3 39 9 c. At c cost ost or in a acco ccorda rdance nce with with IA IAS S 39 d. Usin Using g the the e equ quity ity me meth thod od 7. Whi Which ch of the follo followin wing g is not a val valid id cond conditio itions ns that wil willl exe exempt mpt an ent entity ity from prepari preparing ng conso consolid lidate ated d fin financ ancial ial statements? a. The pa parent rent entity is a wh wholly olly o owned wned subs subsidiar idiary y of ano another ther e entity ntity b. The par parent ent enti entity's ty's de debt bt or equ equity ity cap capital ital is not tr traded aded on th the e stock e exchan xchange ge c. The ultimate ultimate paren parentt entity prod produces uces con consolid solidated ated finan financial cial state statement ments s availab available le for public use that co comply mply with IFRS d. The pare parent nt entity is in the pro process cess of filing filing its financi financial al statem statements ents with a secu securitie rities s commi commission ssion 8.

Entity X contr controls ols an over overseas seas entity Y. B Because ecause of ex exchange change contr controls, ols, it is difficult to transfer funds out of the co country untry to the parent entity. X owns 100% of the voting power of Y. How should Y be accounted for? a. It shou should ld be exc excluded luded fr from om cons consolida olidation tion and th the e equit equity y metho method d should b be e used b. It sho should uld be exclu excluded ded from from c conso onsolidat lidation ion and state stated d at co cost st c. It should should be exc excluded luded fr from om cons consolida olidation tion and ac account counted ed for in acc accorda ordance nce wit with h IAS 39

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d.

It is not per permitted mitted tto o be excl excluded uded fr from om cons consolida olidation tion be because cause c contr ontrol ol is not los lostt

9. Wher Where e should min minorit ority y intere interests sts be pre presente sented d in the consol consolidate idated d balanc balance e sheet? a. Within Within lon long-t g-ter erm m lia liabil biliti ities es b. In be between tween long long-term -term liabil liabilities ities and c curre urrent nt liabiliti liabilities es c. Wit Within hin th the e par parent ent s shar hareho eholde lders' rs' e equi quity ty d. Within e equity quity b but ut sepa separate rate fr from om the pa parent rent sh shareh areholde olders' rs' equity equity STRAIGHT PROBLEMS Problem 1

On January 1, 2010, P Company purchased interest interest in S Company. On this date the book values and tthe he fair  values of S Company were as follows: Cash Accounts receivable Merchandise inventory Building (net) Equipment Long term inv. in MS Current liabilities Bonds payable Common stock Retained earnings

Book Values P 300,000 180,000 720,000 1,860,000 600,000 1,200,000 P 4,860,000 P 60 600,000 1,260,000 1,200,000 1,800,000 P 4,860,000

Fair Market Values

900,000 1,920,000 480,000 1,740,000

1,560,000

Requirements: Prepare the follow Requirements: following ing assuming that P Company p paid aid (a) P 3,42 3,420,00 0,000 0 for a 100% 100% intere interest st (b) P 2,20 2,208,00 8,000 0 for an 80% intere interest st 1. Determina Determination tion and d distri istributio bution n of exces excess s sch schedule edule 2. Wor Workin king g pap paper er el elimi iminat nation ion entr entries ies 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. Dete Determina rmination tion and d distri istributio bution n of exces excess s sched schedule ule at the da date te of acqui acquisitio sition. n. 2. Cons Consolida olidation tion wo workin rking g paper paper entr entries ies at the date of a acquis cquisition. ition. 3. Cons Consolida olidated ted ba balance lance sheet sheet at the d date ate o off acqu acquisitio isition. n. Problem 3

On January 1, 20x9, 20x9, P Company purchased an 80% interest interest in S Company for P340,000. P340,000. On this date, S Company had Capital Stock of P150,000 P150,000 and Retained Earnings of P100,000 P100,000.. An examination of S Company’s assets and liabilities revealed that book values were equal to market values for f or all except the following: Book value alue Ma Marrket val value ue 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 P250,000 in 20x9 and P290,000 in 20x0. S Company’s income was P120,000 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 inv investment estment income of P Company from S Company in 20x9 and in 20x0. 2. Elimination entries entries for consolid consolidated ated stateme statement nt work working ing papers on Janua January ry 1, 20x 20x9, 9, Dece December mber 31, 20x 20x9 9 and December 31, 20x0.

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3. Calculation of minor minority ity interest in net income income of subs subsidiary idiary for 2 20x9 0x9 and 20 20x0 x0 4. Calculation of consolid consolidated ated net income for 20 20x9 x9 and 20x0. 5. Calcula Calculation tion of minority interest in net assets as of January 1, 20x9, December 31, 20x9 and December 31, 20x0. Problem 4 (Upstream Merchandise Transfer) S Company, a 75% owned subsidiary of P Company, sold merchandise during 2009 to its parent company for P 15 150,0 0,000 00.. The merc merchan handis dise e co cost st S Com Compan pany y P 110,0 110,000 00,, 25% 25% of the trans transfer ferre red d mer mercha chandi ndise se re remai mained ned in P Company’s ending ending inventory. For the year 2009 2009,, S Company reported a net income of P 150,000 and P Company Company reported net income (including dividend income of P 60,000) of P 275,000 275,000..

Requirements: 1. Calculate P Company’s investment income from S Co Company mpany iin n 200 2009. 9. 2. Elimination entries for 2009 3. Show Determine non-c non-controlling ontrolling interest interests in the netallocate incom income e to ofControlling the subsidiar subsidiary y for 200 2009. 9. Non-co 4. conso consolidated lidated net income for s2009, 2009 , and inter interests ests and Non-controlling ntrolling interests. Problem 5

(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 subsidiar 200,000 subsidiary y sold the land land in 2010 to an outsider outsider ffor or P280,000. P280,000. The subsidiar subsidiary y and the parent 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 fro from m S Company in 200 2008, 8, 2009 2009,, and 2010. 2010. 2. Elimination entr entries ies for 2008, 2009, and 20 2010 10 3. Determine non-cont non-controlling rolling interest in the net income of the subsidiary in 2008, 2009 and 2010 4. Show the consolid consolidated ated net income for 2008, 2009 & 201 2010. 0. Allocate each to Cont Controlli rolling ng and non-c non-contr ontrolling olling interests. (Upstream depreciable asset transfer) On January 1, 2009, S Company a 90% owned subsidiary of P Company transferred equipment to its parent in exchange exch ange for P75,0 P75,000 00 cash. At the date of transfer transfer,, the subs subsidiar idiary’s y’s recor record d carried the equipm equipment ent at a cost of  P106,000 less accumulated depreciation of P45,00 P45,000. 0. The equipme equipment nt has an es estimated timated remaining llife ife of 7 y years. ears. The subsidiary reported reported net income for 2009 and 20 2010 10 of P 132,000 and P197,000, P197,000, respectively 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. Problem 6

Requirements 1. Calculate P Company’s investment income fro from m S Company in 200 2009 9 and in 201 2010. 0. 2. Elimination entries for 2009 and for 2010. 3. Determine non-cont non-controlling rolling interest in the net income of the subsidiary for 2009 and for 2010. 4. Show the consolidate consolidated d net income for 20 2009 09 and 2010. Alloc Allocate ate each to Controlling and MNon-controlling MNon-controlling interest interests. s. (Intercompany Transactions) On January 1, 2009, 2009, P Company acquired 75% of the outst outstanding anding shares of S Company at book value. value. During 2010 2010,, P Company purchased purchased merchandise from S Comp Company any 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 Problem 7

Company. The inventories of P Company included mer merchandise chandise at billed prices from S Company as follows: 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 equip ment is carried at a cost of P106 P106,, 000 less accumulat accumulated ed depre depreciatio ciation n of P45, 000 000.. The equip equipment ment has an estimated remaining life of 7 years. Income statements for the two companies for the year 2010 are as follows: f ollows: 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 Net income Requirements:

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_________ P 480,000  

14,000 P 224,000

 

1. 2. 3. 4.

Calculate the n non-controlling on-controlling int interests erests in the consolidated n net et income in 2010 2010.. Calculate the c controlling ontrolling inter interest est in the consolidated net income iin n 2010. Prepare wor working king paper e elimination limination entries for the above info information rmation at Dece December mber 31, 2 2010. 010. Prepare a co consolidated nsolidated incom income e statement for the year ende ended d Decembe Decemberr 31, 201 2010. 0. - end –

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 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. b. c. d.

20% 20 o off the the ga gain on sale 33.3 33% .33% 3% o off th the ein g gai ain n sa onlesa sale le 50 50% %o off the the g gai ain no on n sal sale e 100% 100% of th the e g gai ain n on on sal sale e

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. appropriate. The December 31 31,, 2010 separate compa company ny financial statements of  Parker and Sheaffer show equipment-net of P500,000 and P300,000, respectively. 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 P Corporation S Cash P 70,000 P Merchandise Inventory 100,000 Property and equi uipm pme entin (n (ne Investment Set) Company Total assets

500,00 ,000

S Company on December 31, 2010, are given below: Company 90,000 60,000 250,00 ,000

2 26 60,000 ________ P930,000 P400,000

Cu Currren entt liab liabil ilit itie ies s P1 P18 80,00 ,000 Long term lia liabilit ilitie ies s 200,0 ,00 00 Common stock 300,000 Retained earnings 250,000 Tota Totall liab liabil ilit itie ies s & SE P930,00 ,000

P 60,00 ,000 90,00 ,000 100,000 150,000 P40 P400,00 ,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 more than the book value shown above. All other book values approximated approximated fair value. In the consolidated balance sheet on December 31, 2010 2010.. 3. The amount of total stockholders 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 will be a. Pamount 50,000of non-controlling c.interest P 110,000 b. P 60,000 d. P 65 65,000 On January 1, 2010. SABINA Corporation purchased 75% of the common stock of ARGO Company. 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

Argo 103,000 13,000 19,000 16,000 150,000 (30,000) _______271,000 71,000 150,000 50,000

615,000

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.

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5. What amou amount nt of goodwill will be reported? a. P15,667 c. P21,000 b. P P3 37,750 d. P50,333

6. What amou amount nt of total liabi liability lity will be rreported? eported? a. P174,000 c. P213,000 b. P P2 284,333 d. P 90,667 7. What is the amount o off 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 value of the shares acquired. All of the differential differential was related to land held by Bryan. On May 1, 2 2010, 010, Bry Bryan an sold the land at a gain of P145,000. For the year 2010, Bryan reported reported net income of P331,000 and paid divide dividends nds of  P80,000. Paul reported income fro from m its own separate operations of P659,000 P659,000 and paid no dividends. 9. Consolidated net inc income ome for 2010 was a. P 824,000 c. P 1,005,400 b. P 875,900 d. P 90 900,000 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-line-method over twenty years with no salvage P500,000 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. P1,5 P1,500 00,0 ,000 00 a and nd P6 P600 00,0 ,000 00 b. P1,8 P1,800 00,0 ,000 00 an and d P10 P100, 0,00 000 0 c. P1,8 P1,800 00,0 ,000 00 a and nd P P50 500, 0,00 000 0 d. P2,0 P2,000 00,0 ,000 00 an and d P60 P600, 0,00 000 0 - now do the DIY drill -

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__________ P__________ . 2. Minority interest net income in 2010 is P__________ 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 P1,000,00 P1,000,000 0 and P600,000 P600,000,, respectively. 3. Consolidated equipment-net will be P_________ 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 ten-year remaining usefull life and P22, usefu P22,500 500 to goodwill goodwill which was not impa impaired ired during the year year.. Duri During ng 2009, HARD Corpora Corporation tion paid dividend of P60,000 to RICH Corporation. The income statements of RICH and HARD for 2009 are given below: RICH HARD Sales P2,500,000 P1,000,000 Cost of sales (1,250,000) (500,000) Depreciation expense (250,000) (150,000) Other expense (500,000) (225,000) Net income P500,000 P125,000   4. Consolidat Consolidated ed net income for 2009 is P____________. 5. Non-controlling inter interest est in net assets a att December 31, 2009 is P_____ 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. PARKER SPENCER Sales P1,250,000 P575,000 Cost of goods sold (625,000) (325,000)

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Depreciation expense Loss on sale of equipment Other expense Net income

(125,000) (30,000) (250,000) P220,000

(75,000) (50,000) 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. Cons Consolida olidated ted Dep Deprecia reciation tion expens expense e in 2009 is P_ P____ ______ _______ ____.. On Decemb December er 31 31,, 20 2008 08,, PAN PANDO DOY Y Inc Inc.. pur purcha chased sed 75% of the outst outstand anding ing sh share ares s of SAH SAHAR ARA A Compa Company ny at cos costt 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:

Net inc income ome (lo (loss) ss) from from own operations Dividends paid

PANDOY Inc.

SAHARA Company

P900,00 0 350,000

P(110,000) 60,000

All assets and liabilities of SAHARA Company have book values approximately equal to their respective market values. The begi beginning nning invento inventory ry of PAND PANDOY OY Inc. includes P20,000 P20,000 of merchandis merchandise e purc purchased hased from SAHA SAHARA RA Company 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. Consolidat Consolidated ed net income in 2009 is P___________ . 8. Non-c Non-contr ontrolling olling in intere terest st net inco income me (los (loss) s) for 20 2009 09 is P__ P______ _______ _____ __ . 9. Total non non-con -controll trolling ing inter interest est at Dece December mber 31 31,, 2009 is P__ 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 theand 2009 net income of SAN GoodwillofifPAN anyCompany is not impaired. Company of P60,000 2009 P100,000 in 2010. TheCompany. individual income and SANSAN Company frompaid theirdividends own operations are: in

PAN Company SAN Company

2009 P220,000 140,000

2010 P360,000 240,000

10. Minority interest in a assets for 2009 is P__________ P__________ .

11. Consolidat Consolidated ed net income in 2010 is P____________  P____________ 

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