Chapter 17

Problem I
1.
Consolidated Net Income for 20x5
P Company’s net income from own/separate operations…………. P 760,000
Realized profit in beginning inventory of S Company (downstream sales) 36,000
Unrealized profit in ending inventory of S Company (downstream sales)… (_50,000)
P Company’s realized net income from separate operations*…….….. P 746,000
S Company’s net income from own operations…………………………………. P 460,000
Realized profit in beginning inventory of P Company (upstream sales) 0
Unrealized profit in ending inventory of P Company (upstream sales)… ( 0)
S Company’s realized net income from separate operations*…….….. P 460,000 460,000
Total P1,206,000
Less: Amortization of allocated excess…………………… 0
Consolidated Net Income for 20x5 P1,206,000
Less: Non-controlling Interest in Net Income* * 92,000
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent – 20x5………….. P
1,114,000
*that has been realized in transactions with third parties.
Beginning inventory: P1,080,000 x 1/5 = P216,000 x 20/120 = P36,000 profit
Ending inventory: P1,200,000 x ¼ = P300,000 x 20/120 = P50,000 profit

Or, alternatively
Consolidated Net Income for 20x5
P Company’s net income from own/separate operations…………. P 760,000
Realized profit in beginning inventory of S Company (downstream sales) 36,000
Unrealized profit in ending inventory of S Company (downstream sales)… (_50,000)
P Company’s realized net income from separate operations*…….….. P 746,000
S Company’s net income from own operations…………………………………. P 460,000
Realized profit in beginning inventory of P Company (upstream sales) 0
Unrealized profit in ending inventory of P Company (upstream sales)… ( 0)
S Company’s realized net income from separate operations*…….….. P460,000 460,000
Total P1,206,000
Less: Non-controlling Interest in Net Income* * P 92,000
Amortization of allocated excess…………………… 0 92,000
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent………….. P1,114,000
Add: Non-controlling Interest in Net Income (NCINI) _ 92,000
Consolidated Net Income for 20x5 P
1,206,000
*that has been realized in transactions with third parties.

**Non-controlling Interest in Net Income (NCINI) for 20x5
S Company’s net income of Subsidiary Company from its own operations
(Reported net income of Son Company) P460,000
Realized profit in beginning inventory of P Company (upstream sales) 0
Unrealized profit in ending inventory of P Company (upstream sales) ( 0)
S Company’s realized net income from separate operations……… P460,000
Less: Amortization of allocated excess _____0
P460,000
Multiplied by: Non-controlling interest %.......... 20%
Non-controlling Interest in Net Income (NCINI) – partial goodwill P 92,000

2. Books of Puma
(a) Cost Method
20x4
Dividend – Smarte Company:
None, since, there is no amount given
20x5
Dividend – Smarte Company:
None, since, there is no amount given

(b) Equity Method
20x4
Net income – Smarte
Investment in Smarte (400,000 x 80%) 320,000
Equity in Subsidiary Income 320,000

Dividend – Smarte
Cash/Dividends receivable 0
Investment in Smarte 0

Amortization of Allocated excess:
Equity in Subsidiary Income 0
Investment in Smarte 0

Realized Profit in BI:
Investment in Smarte 0
Equity in Subsidiary Income 0

Unrealized Profit in EI:
Equity in Subsidiary Income 36,000
Investment in Smarte 36,000
20x5
Net income – Smarte
Investment in Smarte (460,000 x 80%) 368,000
Equity in Subsidiary Income 368,000

Dividend – Smarte
Cash/Dividends receivable 0
Investment in Smarte 0

Amortization of Allocated excess:
Equity in Subsidiary Income 0
Investment in Smarte 0

Realized Profit in BI:
Investment in Smarte 36,000
Equity in Subsidiary Income 36,000

Unrealized Profit in EI:
Equity in Subsidiary Income 50,000 50,000
Investment in Smarte
3. Downstream Sales
20x4
Sales…………………………………………………………………………………1,080,000
Purchases (Cost of Goods Sold)……………………………………... 1,080,000

**100% UPEI of S:
Cost of Sales (Ending Inventory in Income Statement)
[216,000 – (216,000/1.20)]………..………………………………………….. 36,000
Inventory (Ending Inventory in Balance Sheet)…………………….. 36,000

20x5
100% Interscompany Sales
Sales………………………………………………………………………………….1,200,000
Purchases (Cost of Goods Sold)………………………………….. 1,200,000

Downstream Sales:
*100% RPBI of S:
Retained Earnings – P, beginning………………………………………..... 36,000
Cost of Sales (Beginning Inventory in Income Statement)….. 36,000
**100% UPEI of S:
Cost of Sales (Ending Inventory in Income Statement)
[300,000 – (300,000/1.20)]………..………………………………………….. 15,000
Inventory (Ending Inventory in Balance Sheet)……………….. 15,000

Problem II
1.
Consolidated Net Income for 20x5
P Company’s net income from own/separate operations…………. P
1,720,000
Realized profit in beginning inventory of S Company (downstream sales) 0
Unrealized profit in ending inventory of S Company (downstream sales)… (_ 0)
P Company’s realized net income from separate operations*…….….. P 1,
720,000
S Company’s net income from own operations…………………………………. P 600,000
Realized profit in beginning inventory of P Company (upstream sales) 40,000
Unrealized profit in ending inventory of P Company (upstream sales)… ( 51,00 0)
Son Company’s realized net income from separate operations*…….….. P 589,000 589,000
Total P2,309,000
Less: Amortization of allocated excess…………………… 0
Consolidated Net Income for 20x5 P2,309,000
Less: Non-controlling Interest in Net Income* * 58,900
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent – 20x5………….. P
2,250,100
*that has been realized in transactions with third parties.

Beginning inventory: P800,000 x 1/4 = P200,000 x 25/125 = P40,000 profit
Ending inventory: P1,020,000 x ¼ = P255,000 x 25/125 = P51,000 profit

Or, alternatively
Consolidated Net Income for 20x5
P Company’s net income from own/separate operations…………. P
1,720,000
Realized profit in beginning inventory of S Company (downstream sales) 0
Unrealized profit in ending inventory of S Company (downstream sales)… (________0)
P Company’s realized net income from separate operations*…….….. P1,720,,00
0
S Company’s net income from own operations…………………………………. P 600,000
Realized profit in beginning inventory of P Company (upstream sales) 40,000
Unrealized profit in ending inventory of P Company (upstream sales)… ( 51,000)
S Company’s realized net income from separate operations*…….….. P589,000 589,000
Total P2,309,000
Less: Non-controlling Interest in Net Income* * P 58,900
Amortization of allocated excess…………………… 0 __58,900
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent………….. P2,250,100
Add: Non-controlling Interest in Net Income (NCINI) _ 58,900
Consolidated Net Income for 20x5 P
2,309,000
*that has been realized in transactions with third parties.
**Non-controlling Interest in Net Income (NCINI) for 20x5
S Company’s net income of Subsidiary Company from its own operations
(Reported net income of Son Company) P600,000
Realized profit in beginning inventory of P Company (upstream sales) 40,000
Unrealized profit in ending inventory of P Company (upstream sales) ( 51,000)
Son Company’s realized net income from separate operations……… P589,000
Less: Amortization of allocated excess _____0
P589,000
Multiplied by: Non-controlling interest %.......... 10%
Non-controlling Interest in Net Income (NCINI) P 58,900

2. Books of Pinta
(a) Cost Method
20x4
Dividend – Simplex Company:
None, since, there is no amount given
20x5
Dividend – Simplex Company:
None, since, there is no amount given

(b) Equity Method
20x4
Net income – Simplex
Investment in Simplex (600,000 x 90%) 540,000
Equity in Subsidiary Income 540,000

Dividend – Simplex
Cash/Dividends receivable 0
Investment in Simplex 0

Amortization of Allocated excess:
Equity in Subsidiary Income 0
Investment in Simplex 0

Realized Profit in BI:
Investment in Simplex 0
Equity in Subsidiary Income 0

Unrealized Profit in EI:
Investment in Simplex (40,000 x 90%) 36,000
Equity in Subsidiary Income 36,000
20x5
Net income – Simplex
Investment in Simplex (600,000 x 90%) 540,000
Equity in Subsidiary Income 540,000

20x4…… P5. Non-controlling Interest in Net Income (NCINI) for 20x4 S Company’s net income of Subsidiary Company from its own operations (Reported net income of Son Company) P3.000.250.000 Realized profit in beginning inventory of P Company (upstream sales): P525. beg.000 Less: Unrealized profit in ending inventory of P Company (upstream sales) 250.250.(over) undervaluation of assets and liabilities.000 25/125 Unrealized profit in ending inventory of P Company (upstream sales): P1.900 3. 20x4 P5. 36.900 Equity in Subsidiary Income 45.000)……………..400. ***100% RPBI of P: (if equity method Investment in S instead of RE – P.000 [P1.00 0 Multiplied by: Non-controlling interest %. 4. Problem III 1.000 x 90%) 45.000 Noncontrolling interest (20%) 21.000/1.000 Unrealized Profit in EI: Investment in Simplex (51.….Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent – 20x5 – cannot be solved.000 Ending Inventory (Balance Sheet) 250.000 3. Stockholders’ equity – Subsidiary Company.000 To eliminate unrealized intercompany profit in ending inventory.25)] = P105. beginning – P Company (80%) 84. …….000 NCI ………………………………………………. 20x4…… P5.000 Purchases (Cost of Sales)……………………………………….000 Inventory (Ending Inventory in Balance Sheet)……………… 51.000 x ( 250.000 Realized stockholders’ equity of subsidiary. 1. Dividend – Simplex Cash/Dividends receivable 0 Investment in Simplex 0 Amortization of Allocated excess: Equity in Subsidiary Income 0 Investment in Simplex 0 Realized Profit in BI: Investment in Simplex (40.000 – (P525..000 Less: Amortization of allocated excess _____0 P3.25)] Retained Earnings.000 Cost of Goods Sold 250.000...055. Upstream Sales: 100% Interscompany Sales Sales…………………………………………………………………………………1. 20% Non-controlling Interest in Net Income (NCINI) P 571. beginning (90% x P40.000) 25/125 Son Company’s realized net income from separate operations……… P 2. December 31.855. 20x4) 0 Amortization of allocated excess (refer to amortization above) – 20x4 ( 0) Fair value of stockholders’ equity of subsidiary. December 31. since there is no net income from separate operations for P Company.000 Adjustments to reflect fair value .000 x 105.000 2 . ****100% UPEI of P: Cost of Sales (Ending Inventory in Income Statement)………………51..000 .000 x 90%) 36.250.000 Cost of Goods Sold (Beginning Inventory) 105. December 31. Incidentally.) Retained Earnings – P..000 Cost of Sales (Beginning Inventory in Income Statement) 40.020..000.150.000 [P525. date of acquisition (January 1..000 Equity in Subsidiary Income 36.020...000 Cost of Goods Sold 4.000 .400.. the eliminating entries are as follows: Sales 4.000/1.000 To recognize unrealized profit in beginning inventory realized during the year.(P1.000 To eliminate intercompany sales.………………………….

000 Buildings (net) 168.. Multiplied by: Non-controlling Interest percentage…………. ( 96.200 0 P 13.. S Co...000 .000) Net book value……………………….000 288..000 55....000 x 80%) ……………………..000 1 6.000 x 80%) ……………… P 4. 180..200 P 13..200 x 80%) ……………………..200) Decrease in bonds payable (P4....000 Positive excess: Partial-goodwill (excess of cost over fair value)……………………………………………….000) ( 115.800 Increase in land (P7...200) 4. Increase Book value Fair value (Decrease) Equipment .000 Retained earnings (P120.. 192.000 P 6.000 144.000 - Subject to Annual Amortization Equipment (net).000 180. P1.030..000 x 80%) 76.000 Problem IV Requirements 1 to 4: Schedule of Determination and Allocation of Excess (Partial-goodwill) Date of Acquisition – January 1.000 Allocated excess (excess of cost over book value) …..000 (24. ( 192.000 The buildings and equipment will be further analyzed for consolidation purposes as follows: S Co.000 P 30. 20x4 Fair value of Subsidiary (80%) Consideration transferred………………………………..00 Buildings (net) 0) 4 ( 6. …………….000 x 80%) ………. 168. P 192.. 96.000 ....200 7..000 The over/under valuation of assets and liabilities are summarized as follows: SCo.800 Decrease in buildings (P24.20 1..... SCo...200 P 7..760 Increase in equipment (P96.800 x 80%) …… 3.. Book value Fair value (Decrease) Buildings.....000 12. 360.840 72.800 Net……………………………………….000) Bonds payable………………………… (120..000 0 Less: Accumulated depreciation…...000) ( 6. P 12.. 84......000 ( 24.200 Equipment (net).000) (6.000 180..000 ( 216.000) Less: Accumulated depreciation….. (Over) Under Book value Fair value Valuation Inventory…………………..000 8 12. P 204.000) 4800 1.. S Co.000 S Co. P 372..000 P 294..20 Bonds payable… 0 4 0 1. 84. 5.....000 144. 96..000 P 6..000 Less: Book value of stockholders’ equity of Son: Common stock (P240..200 . P 24.000 96.000 Land……………………………………… 48.000 12...000 96. 20 Non-controlling interest (in net assets)…………………………….000 P 90....000 Less: Over/under valuation of assets and liabilities: Increase in inventory (P6..000 180.000) Net book value………………………. 96.000 (24.000 144..000) A summary or depreciation and amortization adjustments is as follows: Account Adjustments to be Over/ Annual Current amortized Under Life Amount Year(20x4) 20x5 P P P Inventory 6.. P 84. ( 19..000 x 80%) ……………….

000 x 40% = P10.000 x 50% = P25.00% Total (full) goodwill……………………………….000 Fair value of Subsidiary (100%) P 465.00% Goodwill impairment loss based on 100% fair value or full- Goodwill P 3..750 based on 100% fair value would be allocated to the controlling interest and the NCI based on the percentage of total goodwill each equity interest received. For purposes of allocating the goodwill impairment loss. 750 20.800 Dividend income (P36..000 x 20% = P 5.000 x 100%) __360.000 Add (deduct): (Over) under valuation of assets and liabilities (P90. and on December 31.000 80.800 Record dividends from S Company.000 P25. 3.000 100.000 20.000 P96. P15.. Acquisition of S Company.00% The unrealized profits on January 1.500 P 62.000 P150.000 x 80% = P96.00% Goodwill applicable to NCI……………………..000 4 20x 120. resulting intercompany sales.500 x 40% = P25.000 372.000 Less: Book value of stockholders’ equity of Son (P360. 20x4 – December 31.000 80.00% Interest Goodwill applicable to NCI……………………..000 P25...The goodwill impairment loss of P3.750 100.000 Fair value of NCI (given) (20%) 93.000 5 Upstream Sales: Intercompany Merchandise Year Sales of in 12/31 Inventory Unrealized Intercompany Subsidiary to of S Company Profit in Ending Inventory Parent 20x P 50.000 4 20x 62. . the full-goodwill is computed as follows: Fair value of Subsidiary (100%) Consideration transferred: Cash (80%) P 372. the goodwill was proportional to the controlling interest of 80% and non- controlling interest of 20% computed as follows: Value % of Total Goodwill applicable to parent………………… P12.000 x 100%) 90. 20x4: (1) Investment in S Company…………………………………………… 372.000 Allocated excess (excess of cost over book value)….00% The goodwill impairment loss would be allocated as follows Value % of Total Goodwill impairment loss attributable to parent or controlling P 3. P 15.000 5 20x4: First Year after Acquisition Parent Company Cost Model Entry January 1.000 Cash……………………………………………………………………. 20x4: (2) Cash……………………… 28. 20x5.000 x 80%)…………….000 Positive excess: Full-goodwill (excess of cost over fair value)……………………………………………….000 P90. P 105. 28. are as summarized below: Downstream Sales: Intercompany Merchandise Year Sales of Parent to in 12/31 Inventory Unrealized Intercompany Subsidiary of S Company Profit in Ending Inventory 20x P150.000 P100.000 x 20% = P18. January 1.000 x 60% = P90.000 In this case.000 x 25% = P40.000 P120.

000 Interest expense………………………………… 1..000 P1.000 P 2. (E2) 6. 150.800 payable………………………………………….000 ……………………….000 x 20%) 72. and to establish non- controlling interest (in net assets of subsidiary) on date of acquisition.000 To provide for 20x4 impairment loss and depreciation and amortization on differences between acquisition date fair value and book value of S’s identifiable assets and liabilities as follows: Cost of Depreciation/ Goods Amortization Amortizatio Sold Expense n Total -Interest Inventory sold P 6.000 Co………………………………………………..000 Cost of Goods Sold (or Purchases) 60.200 Dividends paid – S…………………… 36.000 Discount on bonds payable………………………… 1. 216.000 Cost of Goods Sold (or Purchases) 150. (E3) Cost of Goods Sold……………. (E5) Sales……………………….. Accumulated depreciation – equipment……………….000 x 20%)……………….200 Land……………………………………………………………………….000 7.000 Retained earnings – S Co…………………………………… 120.000 x 20%) 18. Investment in Son 84.000 To eliminated intercompany upstream sales.000 Inventory…………………………………………………………. 6.200 Goodwill impairment loss………………………………………. Consolidation Workpaper – Year of Acquisition (E1) Common stock – S Co………………………………………… 240. 6. Discount on bonds 4. To eliminate intercompany investment and equity accounts of subsidiary on date of acquisition.... 12.200 Goodwill…………………………………… 3.000 ……………………….000 To eliminate intercompany dividends and non-controlling interest share of dividends. Goodwill………………………………………………………………….000 Buildings ( 6..000 Buildings……………………………………….000) Bonds payable _______ _______ P 1. 192. 6.20 0 (E4) Dividend income .000 Non-controlling interest (P90. 6.000 Inventory………………………………………………………………….. and to establish non- controlling interest (in net assets of subsidiary) on date of acquisition.000 Non-controlling interest (P360.200 13..000 Accumulated depreciation – buildings…………………. (E6) Sales………………………. (E7) Cost of Goods Sold (Ending Inventory – Income Statement) … 18.000 Investment in S Co…………………………………………… 288. 28.000 To defer the downstream sales .P………. 7. To allocate excess of cost over book value of identifiable assets acquired.000 Equipment P 12.000 Inventory – Balance Sheet…… 18.800 Non-controlling interest (P36..000 To eliminated intercompany downstream sales. 96.000 Depreciation expense………………………. 3. with remainder to goodwill.000 Accumulated depreciation – equipment………………. 60.No entries are made on the parent’s books to depreciate. and unrealized profits in ending inventory.200 Totals P 6. amortize or write-off the portion of the allocated excess that expires during 20x4.unrealized profit in ending .000 Accumulated depreciation – buildings…………………. 12.

960) NCI in Net Income .960 Net Income to Retained Earnings P196.000 Inventory – Balance Sheet…… 12. Dr.000 (6) (8) 60.000 P180.000 6.000 (1) S Company P120. .. 20x4. 1/1 P P Company P360.960 To establish non-controlling interest in subsidiary’s adjusted net income for 20x4 as follows: Net income of subsidiary…………………….000 P240.. .000 P174.000 Total Cost and Expenses P312.Subsidiary .unrealized profit in ending inventory until it is sold to outsiders.000 18.000 Less: Amortization of allocated excess [(E3)] 13.000 12.000 P534.inventory until it is sold to outsiders.000 Cost of goods sold P204.200 Other expenses 48.840 Dividends paid P Company 72.960 Subsidiary………… Non-controlling interest …………. (E9) Non-controlling interest in Net Income of 6.000 Net income. Non-controlling Interest in Net Income (NCINI) P 6.840 Total P556. 3..800 Multiplied by: Non-controlling interest 20% %. 6.800 P180.000 Depreciation expense 60.000 174.000 72.000 120.. S Company’s realized net income from separate operations*……. __36.000 Sales P480.000 To defer the upstream sales .800 P 60.800 P144.000 P 510.960 – partial goodwill Worksheet for Consolidated Financial Statements.. from above 196.000 24.. ..000 Total Revenue P508. P 34.000 P181.. 6.. 12/31 to Balance P484. December 31. 36.000 Unrealized profit in ending inventory of P Company (upstream sales) ( 12.800 __60..000 150.800 P 60.000 (6) 60.000 36. 20x4 (First Year after Acquisition) Income Statement P Co S Co. P 60. Cr.000 P138.800 P240.800 (9) ( 6. P 48.000 (4) S Company . Cost Model (Partial-goodwill) 80%-Owned Subsidiary December 31.000 P .000 360.000 (5) (7) 150.000 (3) 3.800 .000 (3) P 168.000 (3) 90.….200 …..000 (3) 1. (E8) Cost of Goods Sold (Ending Inventory – Income Statement) … 12. Consolidated (5) P 510.000) ……………………….000 66..200 Interest expense .000 (4) _________ Dividend income 28.200 Net Income P196.000 P328. 1..000 6.000 _ ________ Retained earnings.000 Goodwill impairment loss .840 Statement of Retained Earnings Retained earnings.000 18.

000 462..000 (2) Buildings 720.800 00 P2..008.394.000 P 355. Since NCI share of goodwill is not recognized..960 Amortization of allocated excess (refer to amortization above) 13.000 Less: Non-controlling Interest in Net Income* * P 6.000 (1) 288. P168.000 48.960 Consolidated Net Income for 20x4 P181.200 Goodwill impairment (impairment under partial-goodwill approach) 3.000 ______ (9) _________ ___ __________ 6..044.buildings 6.. S Co.600 Consolidated Net Income for 20x4 P Company’s net income from own/separate operations…………. P174.000 (3) 6.….000 (Reported net income of S Company) Unrealized profit in ending inventory of P Company (upstream sales) ( 12.000 180.….000 (2) Land…………………………….160 P2.000 23.000) S Company’s realized net income from separate operations……… P 48. from above 484.000 (8) 12.760 P1.800 12000 3..000) P Company’s realized net income from separate operations*…….000 (2) 84.000 60.000 Bonds payable………………… 240.000 P 360.000 (1) Common stock.000 48..000 S Company’s net income from own operations………………………………….000 12.200 Accounts receivable…….000 90.000 Unrealized profit in ending inventory of S Company (upstream sales)… ( 12.394.800 Multiplied by: Non-controlling interest %. Sheet 462.000 Total P198.000 495.000 Investment in S Co……… 372.200 Equipment 240.000 3.800 *that has been realized in transactions with third parties.000) Son Company’s realized net income from separate operations*…….800 00 983.000 P 96.0 P P Total P1.000 150.840 Balance Sheet P Cash……………………….0 Total P1.000 (2) 192.000 240.. 232.. 120.000 6.000 1.000 240.000 120.000 (2) (3) Discount on bonds payable 4.000 360.000 288.000 Unrealized profit in ending inventory of S Company (downstream sales)… ( 18.984.600 (2) (3) Goodwill…………………… 12. P10 par……… 240.960 ____89.000 (2) (7) Inventory…………………..000 (2) Non-controlling interest………… (4) 7.200 265.000 7. 210.600 Accumulated depreciation (2) (3) .000 180.160 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent…………. P 48. 20x5: Second Year after Acquisition P Co.000 Less: Amortization of allocated excess 13.800 P 90.000 Common stock.800 144. P10 par……… 600.160 983. P150.000 P147. 20% Non-controlling Interest in Net Income (NCINI) – partial goodwill P 6.000 120.200 P 34.000 Accounts payable…………… 120.960 *that has been realized in transactions with third parties.000 540.000 Accumulated depreciation 405. P 60.000 Retained earnings.984.000 (3) .000 - P1.000 420.000 216. **Non-controlling Interest in Net Income (NCINI) for 20x4 S Company’s net income of Subsidiary Company from its own operations P 60.840 (1 ) 72. Sales P 540.000 18.000 600.. no adjustment is required for the impairment loss on goodwill and impairment losses are not shared with NCI.200 18.000 96. 90.equipment P 135.840 Add: Non-controlling Interest in Net Income (NCINI) _ 6.000 9.008..000 ..

560 Non-controlling interests (P13.000 Investment in S Co (P384.400 Dividend income (P48.. Consolidation Workpaper – Second Year after Acquisition (E1) Investment in S Company………………………… 19. 2. Accumulated depreciation – equipment………………..000 x 80%)……………...000 Buildings……………………………………….800 ………………………. Discount on bonds 4.000 Cash 48.. computed as follows: Retained earnings – S Company. 20x5: Cash……………………… 38...000 Accumulated depreciation – buildings………………….....000 Add: Dividend income 38..200 x 20%)…………………….000 Net income from its own separate operations P 192... with remainder to goodwill.000 dividend paid was recorded as follows: Dividends paid………… 48...000 Inventory………………………………………………………………….400 P 90.000 Increase in retained earnings……....200 Land……………………………………………………………………….200 .. 20x5 – December 31.. 20x5....000 Dividends paid P 72..000 x 80%) 307.. (E4) Retained earnings – P Company.. 12..... Non-controlling interest (P90.200 To provide entry to convert from the cost method to the equity method or the entry to establish reciprocity at the beginning of the year. 38...000 P 90.000 Multiplied by: Controlling interest % 80% Retroactive adjustment P 19.. impairment loss on partial-goodwill] 13.200 ………………………… Non-controlling interest (P384..... 12... the P48.000 P 168.400 - Net income P 230. and to establish non- controlling interest (in net assets of subsidiary) on January 1..000 x 20%) 76.... .. Investment in S Co……………………………………………….000 20%).000 Interest expense………………………………… 1. 20x5...200 x 80%) + P3.000 54. 1/1/20x5 [(P13. 96. (E3) 6.400 Record dividends from S Company.000 24.000 Gross profit P 324. To eliminate intercompany investment and equity accounts of subsidiary and to establish non-controlling interest (in net assets of subsidiary) on January 1. 1/1/20x5.000 Less: Depreciation expense 60..000 192.000 x 18.000 To allocate excess of cost over book value of identifiable assets acquired. 84. 1/1/20x4 120.000...200 Retained earnings – P Company……………………… 19.000 Other expense 72.000 Retained earnings – S Co. 20x5: Parent Company Cost Model Entry Only a single entry is recorded by the parent in 20x5 in relation to its subsidiary investment: January 1.000 No goodwill impairment loss for 20x5.. Goodwill………………………………………………………………….000 Dividends paid by S Co. 1/1/20x5 P144.000 P 48....000 216.800 payable…………………………………………..000 Accumulated depreciation – buildings………………….640 Depreciation expense………………………. 192. 6.000 7.000 Retained earnings – S Company..... P 24...... . 1/1/20x5 144. On the books of S Company.200 (E2) Common stock – S Co………………………………………… 240. Less: Cost of goods sold 216...

560 Impairment loss 3.P……….400 Non-controlling interest (P48.400 Cost of Goods Sold (Ending Inventory – Income Statement) 12..20 ________ P 1.000 To eliminate intercompany dividends and non-controlling interest share of dividends.unrealized profit in ending inventory until it is sold to outsiders.000 x 20%)……………….200 P 6.000 P 1. (E11) Cost of Goods Sold (Ending Inventory – Income Statement)… 6.000 x 20%)…… 2.000 Buildings (6.000 Discount on bonds payable………………………… 2. (E6) Sales……………………….000 To eliminated intercompany upstream sales. (E7) Sales……………………….000 To defer the downstream sales . 75.600 Noncontrolling interest (P12.000 To defer the upstream sales .200 0 Sub-total P13..000) ( 6.000 To provide for years 20x4 and 20x5 depreciation and amortization on differences between acquisition date fair value and book value of S’s identifiable assets and liabilities as follows: Year 20x4 amounts are debited to P’s retained earnings & NCI.000 To eliminated intercompany downstream sales.000) Bonds payable 1. (E10) Cost of Goods Sold (Ending Inventory – Income Statement)… 24. 24. Inventory………………………………………………………….unrealized profit in ending inventory until it is sold to outsiders. (E9) Beginning Retained Earnings – P Company (P12.400 Goodwill…………………………………… 3.600 Dividends paid – S…………………… 48.000 Cost of Goods Sold (Ending Inventory – Income Statement) 18.000 x 80%) 9.000 To realized profit in beginning inventory deferred in the prior period. 9.000 Cost of Goods Sold (or Purchases) 120. Year 20x5 amounts are debited to respective nominal accounts. Inventory sold P 6. (E8) Beginning Retained Earnings – P Company…… 18. 6.000 P 12.000 Inventory – Balance Sheet…… 6.560 (E5) Dividend income .000 Equipment 12.000 Inventory – Balance Sheet…… 24.00 0 Total P 13. 38.200 Multiplied by: 80% To Retained earnings P 10.000 To realized profit in downstream beginning inventory deferred in the prior period. (20x4) Depreciation/ Retaine Amortization Amortizatio d expense n earnings -Interest .000 Cost of Goods Sold (or Purchases) 75.. 120. .000 Accumulated depreciation – equipment……………….

(E12) Non-controlling interest in Net Income of 17.000 P 647. 38.800 18.600 (1) 19.20x5 (upstream sales) 12.000 213. - Total Cost and Expenses P348.000 P192.200 P234.200 P P 274. 17.Subsidiary .000 (10) 24.200 102.000 18.000 (8) (11) 6.000 257. Cr.800 Multiplied by: Non-controlling interest 20% %.400 90.000 (7) 75.000 (5) S Company . 265.000 Cost of goods sold P216..000 Statement of Retained Earnings Retained earnings.800 Net Income P230.. from above 230. 1/1 (2) 13.200 Interest expense . Consolidated (6) P 705.400 90..840 (2) P 144. 1. Dr.000 Unrealized profit in ending inventory of P Company .000 (12) ( 17.760 Subsidiary………… Non-controlling interest ………….000 54.760) NCI in Net Income .000 P360. December 31.000 6. Worksheet for Consolidated Financial Statements.200 Other expenses 72.000 48.000 (4) 1. Cost Model (Partial-goodwill) 80%-Owned Subsidiary December 31.400 Total Revenue P578.200 P 462. 20x5.880 Dividends paid P Company 72.000 (9) 12. 48.000 24..040 Net Income to Retained Earnings P230.20x5 (upstream sales) ( 6.400 . Non-controlling Interest in Net Income (NCINI ) P 17.200 P186. ..000 P 430.000 (9) 9.00 S Company 144.000 126...000 _ ________ Retained earnings.000 P 719.000 120.000 Goodwill impairment loss .400 P360. .400 90.760 To establish non-controlling interest in subsidiary’s adjusted net income for 20x5 as follows: Realized profit in beginning inventory of P Company .000 Less: Amortization of allocated excess 7.000 0 Net income..880 Balance Sheet P P Cash……………………….200 .000 (6) 120.000 (4) 90. 20x5 (Second Year after Acquisition) Income Statement P Co S Co.760 P P 257. .000 P 705.760 – partial goodwill *from separate transactions that has been realized in transactions with third persons.000 72.000 P270.040 Total P715.000) S Company’s Realized net income* P 96. 12/31 to Balance Sheet P643.200 P 88.56 0 (8) P Company P484.000 P 367.000 Depreciation expense 60. 17.000 (7) 75.000 Sales P540...000 (5) ___________ Dividend income 38.

203.000 24.….000 Accounts payable…………… 120.000 c.000 Consolidated SHE.………….800 5. NCI is measured as a proportion of identifiable assets and goodwill attributable to NCI share is not recognized.000 294.000 540.074. January 1.000 (3) 7.000 120.SHE P 960.050. P150..000 9.600 (2 ) (9) 76.203.000 552.677.000 P180.000 NCI.(over) undervaluation of assets and liabilities 90.200 (2) 307.200 Equipment 240.000 647.000 240. P10 par……… 600. 1/1/20x4 P1.920 P1.000 b. Non-controlling interest (partial-goodwill).000 (3) Land…………………………….000 Retained earnings.840 Consolidated Net Income for 20x4 P Company’s net income from own/separate operations………….200 (3) 84. P 360. On date of acquisition the retained earnings of parent should always be considered as the consolidated retained earnings.074.000 (11) 6.000 276. CI-CNI – P174.000 Stockholders’ equity – Subsidiary Company.000 Investment in S Co……… 372.000 Accumulated depreciation 450. 1/1/20x4 ___90.000 Inventory………………….36 P1.000 Retained earnings – Subsidiary Company………………………………….000 Retained earnings 360. 20x4 Common stock – Subsidiary Company…………………………………… P 240.400 18. 180.000 102. thus: Consolidated Retained Earnings.400 (3) Goodwill…………………… 12.000 Adjustments to reflect fair value .000 6.800 Accumulated depreciation P (3) (4) .000) P Company’s realized net income from separate operations*…….077.044.200 (10) 24. 20x4………………… P 450. 12/31/20x4: a.000 (3) Discount on bonds payable 4.000 Buildings 720. January 1.000 420. 20x4 Retained earnings – P Company.000 7...000 120.200 00 0 0 P2.000 _____ ___ __________ (12) 17.000 (4) 3. 216.000 600.000 1. P168. Note: The goodwill recognized on consolidation purely relates to the parent’s share. 20x4 (date of acquisition) P360.000 Unrealized profit in ending inventory of S Company (downstream sales)… ( 18. P10 par P 600. January 1.000 Bonds payable………………… 240.000 .0 Total P2.200 186.0 P1.000 (1) 19.400 2.000 360.000 (3) 216.000 - P1.760 ____97. 20 Non-controlling interest (partial) P 90.200 (4) 7.buildings 12. 210.000 48.000 108.200 265.000 Common stock.800 (3) ___ ______ 2.000 Fair value of stockholders’ equity of subsidiary.equipment P 150.677. Accounts receivable…….640 (5) Non-controlling interest………… 9. 1/1/20x4 a.000 180. P10 par……… 240. from above 643.000 (3) 192.000 Multiplied by: Non-controlling Interest percentage………….880 (4) 2..36 Total 2..000 96.200 00 P2.000 240. 120.000 (4) . Consolidated SHE: Stockholders’ Equity Common stock.800 (4) 2.000 (2) Common stock.000 Parent’s Stockholders’ Equity / CI .000 96.077. January 1.000 306.

b. P 89..160 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent…………. 20x4 Common stock – Subsidiary Company..000 Realized stockholders’ equity of subsidiary. 20x4 P462.000 Total P198.000 Realized profit in beginning inventory of P Company (upstream sales) 12. December 31.000 Amortization of allocated excess (refer to amortization above) – 20x4 ( 13.800 Multiplied by: Non-controlling Interest percentage………….000 Realized profit in beginning inventory of S Company (downstream sales) 18..062. December 31.000) P Company’s realized net income from separate operations*…….. 20x4 are computed as follows: Non-controlling interest (partial-goodwill).840 Less: Dividends paid – P Company for 20x4 72.000) .960 **Non-controlling Interest in Net Income (NCINI) for 20x4 S Company’s net income of Subsidiary Company from its own operations P 60.000 Adjustments to reflect fair value .….000 48. c. P 90.000 Unrealized profit in ending inventory of P Company (upstream sales)… ( 6. December 31.600 12/31/20x5: a. 20 Non-controlling interest (partial-goodwill)…………………………………. 20x4 (date of acquisition) P360.960 *that has been realized in transactions with third parties.800 – refer to (a) d.000 Add: Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent for 20x4 174.000 Unrealized profit in ending inventory of S Company (downstream sales)… (_24. 20x4…… P460..200) Fair value of stockholders’ equity of subsidiary.000 Stockholders’ equity – Subsidiary Company.. P10 par P 600. December 31. 20x4 Retained earnings .840 NCI.…. On subsequent to date of acquisition. 20x4…… P448. P 48. The NCI on December 31.000) S Company’s realized net income from separate operations……… P 48.000 Less: Amortization of allocated excess 13. 12/31/20x4 ___89. 20x4…… P 240.000 144. December 31.760 f.960 Consolidated Net Income for 20x4 P181.760 Consolidated SHE.800 *that has been realized in transactions with third parties. December 31.152.. 20x4 P120... date of acquisition (January 1..840 Add: Non-controlling Interest in Net Income (NCINI) _ 6. 12/31/20x4 P1. CNI..(over) undervaluation of assets and liabilities. January 1.200 P 34. December 31.000 Retained earnings 462. P174. CI-CNI Consolidated Net Income for 20x5 P Company’s net income from own/separate operations…………. consolidated retained earnings would be computed as follows: Consolidated Retained Earnings.000 Add: Net income of subsidiary for 20x4 6.000 Retained earnings – Subsidiary Company. 20x4) 90.800 Multiplied by: Non-controlling interest %.840 Total P534. 20x4 P 384. 20x4 Retained earnings – Subsidiary Company.960 Amortization of allocated excess (refer to amortization above) 13. 12/31/20x4 P1.840 Parent’s Stockholders’ Equity / CI – SHE. Consolidated SHE: Stockholders’ Equity Common stock. NCI is measured as a proportion of identifiable assets and goodwill attributable to NCI share is not recognized.000 Total P180. January 1.000) S Company’s realized net income from separate operations*……. 20% Non-controlling Interest in Net Income (NCINI) – partial goodwill P 6.000 (Reported net income of S Company) Unrealized profit in ending inventory of P Company (upstream sales) ( 12.P Company. NCI-CNI – P6. P 60. P192..000 Less: Unrealized profit in ending inventory of P Company (upstream sales) 12. P186. December 31.000 Consolidated Retained Earnings.000 23..000 Less: Dividends paid – 20x4 36.200 Goodwill impairment (impairment under partial-goodwill approach) 3..000 Less: Non-controlling Interest in Net Income* * P 6.840 e. S Company’s net income from own operations…………………………………. P181. The goodwill recognized on consolidation purely relates to the parent’s share.000 Unrealized profit in ending inventory of S Company (upstream sales)… ( 12..000 S Company’s net income from own operations………………………………….

consolidated retained earnings would be computed as follows: Consolidated Retained Earnings. P466.. January 1.. NCI-CNI **Non-controlling Interest in Net Income (NCINI) for 20x5 S Company’s net income of Subsidiary Company from its own operations P 90.200) Multiplied by: Controlling interests %. 20x5 P462..680 Less: Dividends paid – Parent Company for 20x5 72..000 Consolidated Retained Earnings.000 Unrealized profit in ending inventory of P Company (upstream sales) ( 6.200 Consolidated Net Income for 20x5 P274.040 *that has been realized in transactions with third parties. partial goodwill 3.000 Realized profit in beginning inventory of P Company (upstream sales) 12.040 Add: Non-controlling Interest in Net Income (NCINI) _ 17.800 Adjustment to convert from cost model to equity method for purposes of consolidation or to establish reciprocity:/Parent’s share in adjusted net increased in subsidiary’s retained earnings: Retained earnings – Subsidiary. 20x5 (cost model P484.. On subsequent to date of acquisition....Parent Company. January 1.800 Less: Unrealized profit in ending inventory of S Company (downstream sales) – 20x4 (UPEI of S – 20x4) or Realized profit in beginning inventory of 18.760 c. Adjusted Retained Earnings – Parent 1/1/20x5 (cost model (S Company’s Retained earnings that have been realized in transactions with third parties.000 inventory of P Company (upstream sales) –20x5 (RPBI of P - 20x5) (P 1.. CNI.000) S Company’s realized net income from separate operations*…….880 *this procedure would be more appropriate..960 Controlling Interest in Consolidated Net Income or Profit attributable toequity holders of parent………….000 Less: Amortization of allocated excess – 20x4 13.000 Realized profit in beginning inventory of S Company (downstream sales) 18. instead of multiplying the full-goodwill impairment loss of P3.200 P 88.760 Amortization of allocated excess…………………… 7..000 Unrealized profit in ending inventory of P Company (upstream sales)… ( 6...000 Unrealized profit in ending inventory of S Company (downstream sales)… (_24.200 Unrealized profit in ending inventory of P Company (upstream sales) 20x4 (UPEI of P – 20x4) or Realized profit in beginning 12.. January 1.000 Less: Amortization of allocated excess…………………… 7.200 24.800 Multiplied by: Non-controlling interest %. 20x5 Retained earnings .000 96.000 S Company (downstream sales) –20x5 (RPBI of S . 20% Non-controlling Interest in Net Income (NCINI) – partial goodwill P 17.000 Less: Amortization of allocated excess 7.000 (Reported net income of S Company) Realized profit in beginning inventory of P Company (upstream sales) 12.000 Less: Non-controlling Interest in Net Income* * P 17. . January 1. December 31... December 31. 20x4 120.800 *that has been realized in transactions with third parties.000 S Company’s net income from own operations…………………………………..800 Less: Non-controlling Interest in Net Income* * 17.840 Add: Controlling Interest in Consolidated Net Income or Profit attributable to 257.000) P Company’s realized net income from separate operations*……. P192.000 ( 3.760 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent – 20x5…………. 20x5 P647..125 by 80%.….000 Total P282.. P 90...000) S Company’s realized net income from separate operations……… P 96.. Son Company’s realized net income from separate operations*……. P257. alternatively Consolidated Net Income for 20x5 P Company’s net income from own/separate operations………….. 80% (P 960) Less: Goodwill impairment loss. Or.000 Total P282.….. b.000 Less: Retained earnings – Subsidiary.960) Consolidated Retained earnings. P257.20x5)……………..000 96.760 Consolidated Net Income for 20x5 P274. P 96..…...040 equity holders of parent for 20x5 Total P748... P186.800 – refer to (a) d.. P 96..000 Increase in retained earnings since date of acquisition P 24. 20x5 P 144. P274. There might be situations where the controlling interests on goodwill impairment loss would not be proportionate to NCI acquired (refer to Illustration 15-6)..

20x5 Retained earnings ...20x6)…………….000 Less: Book value of stockholders’ equity of Son: Common stock (P240.000 inventory of P Company (upstream sales) –20x6 (RPBI of P - 20x6) P 39.200 20x5 7. Adjusted Retained Earnings – Parent 12/31/20x5 (cost model ( S Company’s Retained earnings that have been realized in transactions with third parties.000 360.200 Less: Unrealized profit in ending inventory of S Company (downstream sales) – 20x5 (UPEI of S – 20x5) or Realized profit in beginning inventory of 24... 20x5 P 186..200 ( 20.920 Consolidated SHE. Consolidated SHE: Stockholders’ Equity Common stock. 12/31/20x4 P1..345. 12/31/20x4 ___97.800 Problem V Requirements 1 to 4: Schedule of Determination and Allocation of Excess Date of Acquisition – January 1..(over) undervaluation of assets and liabilities.000 Adjustments to reflect fair value ... 120.. Non-controlling interest (partial-goodwill). alternatively: Consolidated Retained Earnings. 20x5 P 426. 20x5 Retained earnings – Subsidiary Company.920 * the realized profit in beginning inventory of P Company (upstream sales) –20x5 (RPBI of P .000 x 100%)……….. 20x4 120.000 Less: Retained earnings – Subsidiary. January 1.880 Parent’s Stockholders’ Equity / CI – SHE.600 Less: Unrealized profit in ending inventory of P Company (upstream sales) 20x5 (UPEI of P – 20x5) or Realized profit in beginning inventory 6. 20 Non-controlling interest (partial goodwill)………………………………….880 NCI. P 372..000 of P Company (upstream sales) –20x6 (RPBI of P . 20x5 P647..680 Less: Goodwill impairment loss.600 Multiplied by: Non-controlling Interest percentage…………. December 31.000) 20.000 Retained earnings 647.20x6 Realized stockholders’ equity of subsidiary. 20x5* P144. 20x5…… P 495.20x5 amounting to P10..000 Retained earnings (P120..Parent Company. P489.400 Unrealized profit in ending inventory of P Company (upstream sales) 20x5 (UPEI of P – 20x5) or Realized profit in beginning 6.000 Fair value of Subsidiary (100%)……….. 20x5 Common stock – Subsidiary Company..000 . December 31. December 31..000 Increase in retained earnings since date of acquisition P 66.880 e. partial goodwill 3. 12/31/20x4 P1.000 Amortization of allocated excess (refer to amortization above) : 20x4 P 13.200 Adjustment to convert from cost model to equity method for purposes of consolidation or to establish reciprocity:/Parent’s share in adjusted net increased in subsidiary’s retained earnings: Retained earnings – Subsidiary.400) Fair value of stockholders’ equity of subsidiary.000 28. 20x4 Fair value of Subsidiary (80%) Consideration transferred (80%)……………. 20x5 (cost model P643. 20x5……….. January 1.680 Consolidated Retained earnings.000 Add: Net income of subsidiary for 20x5 90...000 x 100%) ………………. f.247. P10 par P 600.000 Retained earnings – Subsidiary Company.000 + P6. P 465.. December 31. December 31.. P 97. December 31.000 186.000 Less: Accumulated amortization of allocated excess – 20x4 and 20x5 (P11.600 Multiplied by: Controlling interests %.000 Total P234. 93. P 240.000 Less: Dividends paid – 20x5 48. December 31. Or. December 31.000 Stockholders’ equity – Subsidiary Company. December 31.000 is already included in the beginning retained earnings of S Company. 80% P 31. December 31.. 20x4) 90... P619.000 S Company (downstream sales) –20x6 (RPBI of S . 20x5…… P 240. date of acquisition (January 1.000 Fair value of NCI (given) (20%)……………….

000 x 20%) 72.200 P 7.000 dividend paid was recorded as follows: Dividends paid………… 36.000 x 100%) 96. January 1. amortize or write-off the portion of the allocated excess that expires during 20x4.000 Non-controlling interest (P360.800 payable………………………………………….000) Decrease in bonds payable (P4.000 Dividends paid by SCo. Allocated excess (excess of cost over book value) ….000 x 100%) ……………… P 6. Accumulated depreciation – equipment……………….200 Land……………………………………………………………………….800 x 100%) …… 4.000 372...800 90.. 192..200 20x4: First Year after Acquisition Parent Company Cost Model Entry January 1. 96.... 7.000 x 80%)…………….000 12.200 x 100%) …………………….80 1. On the books of Son Company.000 12.000 7. 96. To eliminate intercompany investment and equity accounts of subsidiary on date of acquisition. No entries are made on the parent’s books to depreciate.800 Record dividends from Son Company. Acquisition of S Company. and to establish non- controlling interest (in net assets of subsidiary) on date of acquisition.000 8 12.000 A summary or depreciation and amortization adjustments is as follows: Account Adjustments to be Over/ Annual Current amortized under Life Amount Year(20x4) 20x5 P P P Inventory 6.20 1. .000 (24.000 Inventory…………………………………………………………………..200 P 13.. 28.000 Increase in land (P7.000 ……………………….20 Bonds payable… 0 4 0 1.000 Decrease in buildings (P24.. (E2) 6. P 105.000 Cash……. 20x4: (1) Investment in S Company…………………………………………… 372. P 15.000) (6.000 Retained earnings – S Co…………………………………… 120.000 Investment in S Co…………………………………………… 288. 20x4: (2) Cash……………………… 28.200 Increase in equipment (P96..000) ( 6.000 Less: Over/under valuation of assets and liabilities: Increase in inventory (P6. Consolidation Workpaper – First Year after Acquisition (E1) Common stock – S Co………………………………………… 240.000 P 6..000 1 6.000 x 100%) ……….....200 0 P 13. 20x4 – December 31. ( 24..000 - Subject to Annual Amortization Equipment (net). 36..00 Buildings (net) 0) 4 ( 6.800 Dividend income (P36. the P36.000 Positive excess: Full-goodwill (excess of cost over fair value)………………………………………………...000) 4. Discount on bonds 4.000 Accumulated depreciation – buildings………………….000 Cash…………………………………………………………………….

210 To establish non-controlling interest in subsidiary’s adjusted net .200 Dividends paid – S…………………… 36.000 P12.750 To provide for 20x4 impairment loss and depreciation and amortization on differences between acquisition date fair value and book value of S’s identifiable assets and liabilities as follows: Cost of Depreciation/ Goods Amortization Amortizatio Sold Expense n -Interest Inventory sold P 6.000.000 Accumulated depreciation – equipment………………. To allocate excess of cost over book value of identifiable assets acquired. and to establish non- controlling interest (in net assets of subsidiary) on date of acquisition. 28.800 Non-controlling interest (P36.000 To eliminated intercompany downstream sales. (E7) Cost of Goods Sold (Ending Inventory – Income Statement) … 18.000 To defer the upstream sales .000 Depreciation expense………………………. (E9) Non-controlling interest in Net Income of 6.000 Inventory – Balance Sheet…… 12.unrealized profit in ending inventory until it is sold to outsiders. 7..000 To eliminate intercompany dividends and non-controlling interest share of dividends. 6. 6.000 P 6.000 To eliminated intercompany upstream sales. with remainder to goodwill..000 Equipment P12.000 Non-controlling interest (P90.000 Inventory – Balance Sheet…… 18. (E8) Cost of Goods Sold (Ending Inventory – Income Statement) … 12.000 Accumulated depreciation – buildings…………………. full – 21. (E6) Sales……………………….000 P1.000 Buildings ( 6.200 (E4) Dividend income . 150.000 x 20%)……………….P………. Goodwill………………………………………………………………….200 Goodwill…………………………………… 3.000 x 20%) + [(P15..000 Co………………………………………………. 6.000. 6.unrealized profit in ending inventory until it is sold to outsiders.000 To defer the downstream sales ..200 Totals P 6.000 Cost of Goods Sold (or Purchases) 60..000) Bonds payable _______ _______ P 1.000 Buildings……………………………………….210 Subsidiary………… Non-controlling interest ………….200 Goodwill impairment loss………………………………………. 12.000 Cost of Goods Sold (or Purchases) 150.. 216. 15. partial goodwill)]………… Investment in Son 84. 60..000 Interest expense………………………………… 1. 6.750 Inventory…………………………………………………………. (E5) Sales……………………….000 Discount on bonds payable………………………… 1. 3. (E3) Cost of Goods Sold…………….

000 (3) 90. 120. Consolidated (5) P 510. 12/31 to Balance P Sheet P484.840 Balance Sheet P Cash………………………..000 P 322..200 Interest expense . P 48.000 (4) _________ Dividend income 28. 36.750 x 20%) or (P3.Subsidiary .000 P181.000 90.000 (3) 3.050 (9) ( 6.800 P 60. 1/1 P P Company P360.000) ……………………….210 Net Income to Retained Earnings P196.000 Unrealized profit in ending inventory of P Company (upstream sales) ( 12. 28. Cost Model (Full-goodwill) 80%-Owned Subsidiary December 31. .000 (5) (7) 150.000 72.000 P180.000 6. 232.840 Dividends paid P Company 72.000 (3) 1. S Company’s realized net income from separate operations*…….000..000 12..000 6.840 Statement of Retained Earnings Retained earnings.800 P144. December 31.210 – full goodwill Worksheet for Consolidated Financial Statements.000 P 510.000 (7) 18.000 174.000 Inventory………………….000 150. Dr.000 (6) (8) 60.960 (NCINI) – partial goodwill Less: Non-controlling interest on impairment loss on full-goodwill (P3.750 impairment on full-goodwill less 750 P3.000 (2) (3) 180.. Non-controlling Interest in Net Income P 6.800 P180..000 (3) P 168.000 (6) 60..750 Goodwill impairment loss . 90. income for 20x4 as follows: Net income of subsidiary…………………….000 6..800 Multiplied by: Non-controlling interest 20% %.800 P 90.000 P534.200 Other expenses 48.000 P240.000 60.000 120.000 (4) S Company ..800 Total Revenue P451.000 150. Cr. from above 196. 3.….840 Total P556.210) NCI in Net Income . .000 P174.000 (8) .800 P 60..000 18.000 36.000 Depreciation expense 60.200 …..000 462.000 24.800 Accounts receivable…….800 60.950 Net Income P196.000 6.750 Total Cost and Expenses P312.000 _ ________ Retained earnings. 1. impairment on partial- goodwill) Non-controlling Interest in Net Income (NCINI) P 6.800 .000 (1) S Company P120.000 Less: Amortization of allocated excess [(E3)] 13.200 P240.. P 60.000 Net income. P 34.000 Sales P480.000 66.000 18.000 360.000 Cost of goods sold P204. 20x4. 6. 20x4 (First Year after Acquisition) Income Statement P Co S Co.000 P328.. .000 P138.

160 P2. 1/1/20x5.000 Less: Cost of goods sold 216.010 P1.000 120.000 495.000 24.000 Retained earnings.160 986.008.210 ____92. Sales P 540.400 Record dividends from S Company.000 Less: Depreciation expense 60. 12.000 (6) 192.000 P 360. Retained earnings – S Company.044.984.0 P P Total P1.000 48. 210.000 P147.000 420.000 180.200 To provide entry to convert from the cost method to the equity method or the entry to establish reciprocity at the beginning of the year.000 (2) Non-controlling interest………… 7. 20x5: Cash……………………… 38.000 Gross profit P 324.200 Retained earnings – P Company……………………… 19. P10 par……… 600.000 Retained earnings – S Company. P 24.000 1. 20x5 – December 31.000 462.000 3. 20x5: Parent Company Cost Model Entry Only a single entry is recorded by the parent in 20x5 in relation to its subsidiary investment: January 1.000 (2) Buildings 720.000 Accumulated depreciation 405.400 - Net income P 230.000 Dividends paid by SCo.equipment P 135.buildings 6.000 192.000 Bonds payable………………… 240.000 (2) (3) Discount on bonds payable 4.000 ______ (9) _________ ___ 6. the P48.396.000 240.000 P 90.000 240.000 Multiplied by: Controlling interest % 80% Retroactive adjustment P 19.000 600. 38..000 7. Son Co.850 Accumulated depreciation (2) (3) ..000 Net income from its own separate operations P 192.000 Other expense 72.000 Dividends paid P 72.000 P 168.400 P 90.000 (4) 84.840 (1 ) (4) 72.000 120.000 Common stock.000 360.000 Cash 48.008.200 (E2) Common stock – S Co………………………………………… .000 No goodwill impairment loss for 20x5.984. Consolidation Workpaper – Second Year after Acquisition (E1) Investment in S Company………………………… 19. 1/1/20x5 P144.200 Equipment 240.000 12.000 540. On the books of S Company.000 (1) Common stock.200 3.000 - P1.000 dividend paid was recorded as follows: Dividends paid………… 48.000 54.000 (7) .000 (2) Land…………………………….800 144.396. P10 par……… 240.0 Total P1.000 Accounts payable…………… 120. 1/1/20x4 120. from above 484.000 Increase in retained earnings…….600 (2) (3) Goodwill…………………… 15.200 265.800 00 986.000 Add: Dividend income 38.000 288.850 20x5: Second Year after Acquisition Perfect Co.750 11.000 P 48.000 96.000 216.000 P 96.400 Dividend income (P48.800 1.000 x 80%)…………….200 21.800 00 P2.000 (3) 288.250 Investment in S Co……… 372.

800 To eliminate intercompany investment and equity accounts of subsidiary and to establish non-controlling interest (in net assets of subsidiary) on January 1.000 Accumulated depreciation – buildings…………………. (E3) Inventory………………………………………………………………….000 x 80%)………………………… 307. 6.. 76.000 Land………………………………………………………………………. with remainder to goodwill. 20x5.000 Accumulated depreciation – equipment……………….000 x 20%)……………………….000 Retained earnings – S Co. 7. and to establish non- controlling interest (in net assets of subsidiary) on January 1.800 Goodwill…………………………………………………………………. 6.. 3.000 Investment in S Co (P384. partial goodwill)]………… 21.000 Buildings………………………………………. 20x5.950 x 80%) 13. 15. 12..000 x 20%) + [(P15.200 Discount on bonds payable…………………………………………. 1/1/20x5 (P16.000.000 Non-controlling interest (P90.000 Interest expense………………………………… 1.800 .000. 4. 84.000 Discount on bonds payable………………………… 2.. 6000 Accumulated depreciation – equipment……………….. 240.000 Investment in S Co………………………………………………. 96. (E4) Retained earnings – P Company. 1/1/20x5 144..950 x 20%)……………………..200 Inventory………………………………………………………….. full – P12. 216..200 Non-controlling interest (P384.000 To allocate excess of cost over book value of identifiable assets acquired.000 Accumulated depreciation – buildings…………………. 192.390 Depreciation expense……………………….560 Non-controlling interests (P16. 24.

(E6) Sales……………………….P……….000) Bonds payable 1.750 Totals P 16. 38.. 120.000 Equipment 12.400 Non-controlling interest (P48.000) ( 6..000 Buildings (6.200 P 1.200 Multiplied by: CI%.600 Dividends paid – S…………………… 48.000 x 20%)………………. Goodwill…………………………………… 3. Year 20x5 amounts are debited to respective nominal accounts. 80% To Retained earnings P13. 9.950 P 6.000 P1..200 Impairment loss 3.. (20x4) Retained earnings..000 . Depreciation/ Amortization expense Amortization -Interest Inventory sold P 6.000 To eliminate intercompany dividends and non-controlling interest share of dividends.750 To provide for years 20x4 and 20x5 depreciation and amortization on differences between acquisition date fair value and book value of Son’s identifiable assets and liabilities as follows: Year 20x4 amounts are debited to Perfect’s retained earnings and NCI.560 (E5) Dividend income .000 P 12.

(E10) Cost of Goods Sold (Ending Inventory – Income Statement)… 24.600 Noncontrolling interest (P12.200 P 88. partial goodwill Less: NCI on goodwill impairment loss on full.000 Dividend income 38. 0 Goodwill Non-controlling Interest in Net Income (NCINI) P 17.000 To realized profit in upstream beginning inventory deferred in the prior period. (E7) Sales……………………….000 x 80%) 9. Worksheet for Consolidated Financial Statements.20x5 (upstream sales) 12.000 Inventory – Balance Sheet…… 6..000 (7) 75.000 To defer the downstream sales . (E8) Beginning Retained Earnings – P Company…… 18.000 Unrealized profit in ending inventory of P Company .800 Multiplied by: Non-controlling interest 20 %. (E12) Non-controlling interest in Net Income of 17. 20x5 (Second Year after Acquisition) Income Statement P Co S Co.000 To defer the upstream sales . (E9) Beginning Retained Earnings – P Company (P12..000 To realized profit in downstream beginning inventory deferred in the prior period.unrealized profit in ending inventory until it is sold to outsiders.000 To eliminated intercompany upstream sales. 17. Cost Model (Full-goodwill) 80%-Owned Subsidiary December 31. 75..760 Subsidiary………… Non-controlling interest …………. % Non-controlling Interest in Net Income P 17.20x5 (upstream sales) ( 6. Cr. Consolidated (6) P 705. (E11) Cost of Goods Sold (Ending Inventory – Income Statement)… 6.000 To eliminated intercompany downstream sales.. 20x5...000 Realized profit in beginning inventory of P Company .760 – full goodwill *from separate transactions that has been realized in transactions with third persons..000 Sales P540. December 31.000 120..unrealized profit in ending inventory until it is sold to outsiders. P 90.000 Inventory – Balance Sheet…… 24.400 .400 Cost of Goods Sold (Ending Inventory – Income Statement) 12. Cost of Goods Sold (or Purchases) 120..760 (NCINI) .000 x 20%)…… 2..000 Less: Amortization of allocated excess 7.000 P360.760 To establish non-controlling interest in subsidiary’s adjusted net income for 20x5 as follows: Net income of subsidiary……………………. Dr.000 Cost of Goods Sold (or Purchases) 75. (5) ___________ .000 Cost of Goods Sold (Ending Inventory – Income Statement) 18.000) Son Company’s Realized net income* P 96..

38.760 P P 257.000 (2) Common stock.000 P 430. 216.390 (3) 21.250 Investment in S Co……… 372.000 Inventory………………….200 Other expenses 72.000 (3) 216.000 120.equipment P 150.000 P270.400 2.000 (10) 24.400 (3) Goodwill…………………… 15.000 Buildings 720.050 Accumulated depreciation P (3) (4) .200 P186. .000 24.880 Balance Sheet P P Cash……………………….000 P 367.200 P 462.600 (9) .000 Accumulated depreciation 450.000 P 719.200 P P 274.760 9.200 (3) 84.000 P192.000 (4) 3.170 _____ ___ 3. 180.680.000 (3) Discount on bonds payable 4. 48.000 (12) ( 17.000 180. from above 643.000 120.000 P 647.800 Net Income P230.750 11.000 540. 12/31 to Balance Sheet P643.044.000 96.000 (4) 6.000 120.000 240.000 72.Subsidiary .400 90.800 18.200 Accounts receivable…….200 (2) 307.000 (5) S Company .000 360.000 (3) 192.000 - P1.000 Statement of Retained Earnings Retained earnings.000 (4) 1.000 (8) (12) 17.000 306. 1.000 7. P10 par……… 600.000 Depreciation expense 60.200 265. .000 (3) Land…………………………….000 108.000 48.000 294.000 Accounts payable…………… 120.200 00 P2.000 647.200 P234.000 (11) 6.200 Interest expense . 17.000 _ ________ Retained earnings.000 (8) (11) 6.000 (10) 24.400 90.000 102.00 S Company 144. 210.040 Net Income to Retained Earnings P230.400 90.200 102.760) NCI in Net Income .000 P 705. .000 600.000 240.000 96.000 420. - Total Cost and Expenses P348.0 Total P2.600 (9) 14.200 186.56 0 (8) P Company P484.000 552. P10 par……… 240.000 Common stock.400 (4) 90.000 1.800 (4) 2.000 6.203.800 ____100.880 Dividends paid P Company 72. 1/1 (3) 13.000 276.000 Bonds payable………………… 240.000 (1) 19.000 (6) 6.000 (6) P 213.000 257.000 24.000 Cost of goods sold P216..800 P360.000 P180.074.000 Retained earnings.000 21.000 0 Net income.000 54.400 Total Revenue P574. from above 230.040 Total P715. 265.000 (4) .000 Goodwill impairment loss .000 126.000 (9) 96000 (4) 19.840 (5) P 144.200 Equipment 240.000 (7) 90.buildings 12.880 Non-controlling interest………… ___ ______ (4) (2 ) 76.000 48.

160 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent………….400 __________ P1.. 1/1/20x4 P1. P 48. CI-CNI – P174.000..000 6.11 Total P2. thus: Consolidated Retained Earnings. b.680.000) Son Company’s realized net income from separate operations*…….081.000 Less: Amortization of allocated excess 13.200 00 0 0 P2. Note: The goodwill recognized on consolidation purely relates to the parent’s share.000 b..(over) undervaluation of assets and liabilities 90.500.. 1/1/20x4 (P12. P 60. S Company’s net income from own operations………………………………….000 Fair value of stockholders’ equity of subsidiary.000 Multiplied by: Non-controlling Interest percentage…………. P168. 1/1/20x4 ___93..SHE P 960. 20x4………………… P 450.800 Multiplied by: Non-controlling interest %.1210 Amortization of allocated excess (refer to amortization above) 13.000 goodwill) Non-controlling interest (full-goodwill) P 93. c.000 48..074.750 23. P10 par P 600.000. 20x4 Retained earnings .000 NCI.000) S Company’s realized net income from separate operations……… P 48.000 Total P198.081.000 …. P 90. 20 Non-controlling interest (partial)…………………………………..210 **Non-controlling Interest in Net Income (NCINI) for 20x4 S Company’s net income of Subsidiary Company from its own operations P 60.000 Unrealized profit in ending inventory of S Company (downstream sales)… ( 18. 120.210 Consolidated Net Income for 20x4 P181.11 P1.210 *that has been realized in transactions with third parties.000 Parent’s Stockholders’ Equity / CI .000 Stockholders’ equity – Subsidiary Company. January 1..960 Less: Non-controlling interest on impairment loss on full-goodwill (P3.750 x 20%) or (P3.. January 1. 12/31/20x4: a.000 c.050 5.050 – refer to (a) .750 impairment on full-goodwill less P3.203.. partial 3. CNI – P181.000) Perfect Company’s realized net income from separate operations*…….. NCI-CNI – P6. 750 impairment on partial. NCI is measured as a proportion of identifiable assets and goodwill attributable to NCI share is not recognized.840 Consolidated Net Income for 20x4 P Company’s net income from own/separate operations………….000 Retained earnings 360.. Consolidated SHE: Stockholders’ Equity Common stock.000 Add: Non-controlling interests on full goodwill.Parent Company. On date of acquisition the retained earnings of parent should always be considered as the consolidated retained earnings.goodwill) Non-controlling Interest in Net Income (NCINI) P 6. January 1.053. 20% Non-controlling Interest in Net Income (NCINI) – partial P 6. Non-controlling interest (partial-goodwill).840 Add: Non-controlling Interest in Net Income (NCINI) _ 6.000 Unrealized profit in ending inventory of S Company (upstream sales)… ( 12. January 1.0 P1.200 Goodwill impairment (impairment under full-goodwill approach) 3.. full-goodwill – P10. P150. P 360..200 P 34. 1/1/20x4 a..…………..000 Less: Non-controlling Interest in Net Income P 6.000 (Reported net income of S Company) Unrealized profit in ending inventory of P Company (upstream sales) ( 12. 20x4 Common stock – Subsidiary Company…………………………………… P 240.000 Retained earnings – Subsidiary Company………………………………….000 Consolidated SHE. 20x4 (date of acquisition) P360.050 *that has been realized in transactions with third parties. P174.….000 Adjustments to reflect fair value . 2.

P186. 20x4…… P460.000 Add: Net income of subsidiary for 20x4 60.760 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent – 20x5…………. January 1.800 Less: Non-controlling Interest in Net Income* * 17.….. P 92.84 0 NCI.SHE P1. 1/1/20x4 ___92. P 90. P 89. 20x4 P120. P 96. December 31. P 90.000 Unrealized profit in ending inventory of S Company (downstream sales)… (_24.84 0 Parent’s Stockholders’ Equity / CI .800 Less: Unrealized profit in ending inventory of P Company (upstream sales) 12. 12/31/x4: 2.000 Less: Dividends paid – 20x4 36.840 Less: Dividends paid – Parent Company for 20x4 72. December 31. December 31. December 31.000 Unrealized profit in ending inventory of P Company (upstream sales)… ( 6.000) P Company’s realized net income from separate operations*……..040 Consolidated Net Income for 20x5 P Company’s net income from own/separate operations………….200 Consolidated Net Income for 20x5 P274.154. P10 par P 600.000 Retained earnings – Subsidiary Company.000 Realized profit in beginning inventory of S Company (downstream sales) 18. 20x4…… P448..000 Realized profit in beginning inventory of P Company (upstream sales) 12. d. P192. January 1. P192. alternatively Consolidated Net Income for 20x5 P Company’s net income from own/separate operations…………. Consolidated SHE: Stockholders’ Equity Common stock.000 Total P282.000 Consolidated Retained Earnings. December 31.000 Realized stockholders’ equity of subsidiary.000) – P750 impairment loss Non-controlling interest (full-goodwill)…………….000 96.000 Total P180.84 0 12/31/20x5: a. 20x4 P 384.840 Total P534.000 S Company’s net income from own operations………………………………….062..000 S Company’s net income from own operations………………………………….000 full – P12.010 f. 20x4 Retained earnings – Subsidiary Company.000 .(over) undervaluation of assets and liabilities.….800 Multiplied by: Non-controlling Interest percentage………….000 Adjustments to reflect fair value .840 e.010 Consolidated SHE.000 Realized profit in beginning inventory of S Company (downstream sales) 18. December 31. date of acquisition (January 1. partial = P3.000 Unrealized profit in ending inventory of S Company (downstream sales)… (_24. 20x4 P462.….000 Total P282. 1/1/20x4 P1...000 Realized profit in beginning inventory of P Company (upstream sales) 12. 20x4 (date of acquisition) P360. 20x4 Common stock – Subsidiary Company. Or.000 Retained earnings 462.000 Amortization of allocated excess (refer to amortization above) – 20x4 ( 13.000..040 *that has been realized in transactions with third parties. 2 0 Non-controlling interest (partial-goodwill)…………………………………. 20x4…… P 240. Non-controlling interest ).000 Less: Amortization of allocated excess…………………… 7. 20x4 Retained earnings .000) P Company’s realized net income from separate operations*…….000 96.200 ) Fair value of stockholders’ equity of subsidiary. P257. December 31. net of impairment loss.000) S Company’s realized net income from separate operations*……. P 96.…. consolidated retained earnings would be computed as follows: Consolidated Retained Earnings. CI-CNI – P257.000 Stockholders’ equity – Subsidiary Company..760 Add: Non-controlling interest on full goodwill .000 Unrealized profit in ending inventory of P Company (upstream sales)… ( 6.000 144. P186.000 Add: Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent for 20x4 174. December 31.000) Son Company’s realized net income from separate operations*……. On subsequent to date of acquisition.. 20x4) 90.250 [(P15.Parent Company.

. 20x5 P 186.200 24...800 – refer to (a) d.040 Add: Non-controlling Interest in Net Income (NCINI) _ 17.760 Consolidated Net Income for 20x5 P274.. 20x5 P 144. 20x5 Retained earnings . b. January 1. 80% (P 960) Less: Goodwill impairment loss (full-goodwill).. 20x5 Retained earnings . 20x5 P462.760 c..880 *this procedure would be more appropriate..960) (P3.840 Add: Controlling Interest in Consolidated Net Income or Profit attributable to 257.200) Multiplied by: Controlling interests %. Less: Non-controlling Interest in Net Income* * P 17.. January 1.760 Less: NCI on goodwill impairment loss on full goodwill 0 Non-controlling Interest in Net Income (NCINI) – full goodwill P 17. Adjusted Retained Earnings – Parent 1/1/20x5 (cost model (S Company’s Retained earnings that have been realized in transactions with third parties.760 Amortization of allocated excess…………………… 7..960 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent………….000 Unrealized profit in ending inventory of P Company (upstream sales) ( 6. 20% Non-controlling Interest in Net Income (NCINI) – partial goodwill P 17.. December 31.000 Consolidated Retained Earnings. December 31.Parent Company.200 P 88.040 equity holders of parent for 20x5 Total P719...750 – P750)* or 3.800 Multiplied by: Non-controlling interest %. December 31. 20x5 P647... CNI..000 ( 3.000 inventory of P Company (upstream sales) –20x5 (RPBI of P - 20x5) (P 1.750 by 80%.. net (P3. January 1..880 Less: Dividends paid – Parent Company for 20x5 72.000 Less: Retained earnings – Subsidiary.Parent Company. P466.000 Less: Amortization of allocated excess 7..20x5)…………….000 . consolidated retained earnings would be computed as follows: Consolidated Retained Earnings..000 S Company (downstream sales) –20x4 (RPBI of S .200 Less: Unrealized profit in ending inventory of S Company (downstream sales) – 20x5 (UPEI of S – 20x5) or Realized profit in beginning inventory of 24.... Or.000) S Company’s realized net income from separate operations……… P 96. On subsequent to date of acquisition..800 Less: Unrealized profit in ending inventory of S Company (downstream sales) – 20x4 (UPEI of S – 20x4) or Realized profit in beginning inventory of 18.560 **Non-controlling Interest in Net Income (NCINI) for 20x5 S Company’s net income of Subsidiary Company from its own operations P 90. P274.000 (Reported net income of S Company) Realized profit in beginning inventory of P Company (upstream sales) 12. alternatively: Consolidated Retained Earnings.000 Less: Amortization of allocated excess – 20x4 13.750 x 80%) Consolidated Retained earnings..200 Unrealized profit in ending inventory of P Company (upstream sales) 20x4 (UPEI of P – 20x4) or Realized profit in beginning 12. Adjusted Retained Earnings – Parent 12/31/20x5 (cost model ( S Company’s Retained earnings that have been realized in transactions with third parties.. 20x4 120.800 Adjustment to convert from cost model to equity method for purposes of consolidation or to establish reciprocity:/Parent’s share in adjusted net increased in subsidiary’s retained earnings: Retained earnings – Subsidiary. December 31.20x6)……………. There might be situations where the controlling interests on goodwill impairment loss would not be proportionate to NCI acquired (refer to Illustration 15-6)..000 S Company (downstream sales) –20x6 (RPBI of S . 20x5 (cost model P643. 20x5 (cost model P484.200 Adjustment to convert from cost model to equity method for purposes of consolidation or to establish reciprocity:/Parent’s share in adjusted net increased in subsidiary’s retained earnings: Retained earnings – Subsidiary.800 *that has been realized in transactions with third parties.. P619... January 1.000 Increase in retained earnings since date of acquisition P 24. instead of multiplying the full-goodwill impairment loss of P3. December 31. P257. NCI-CNI – P16..

P 372.800 Decrease in buildings (P24.880 NCI.. 20x5 P 426. P 100. December 31. 12/31/20x5 P1.000 x 80%) 76.200 ( 20. December 31. f..000 Less: Over/under valuation of assets and liabilities: Increase in inventory (P6.680 Less: Goodwill impairment loss (full-goodwill).000 Total P234... 20x5 P647.200) 20.000 inventory of P Company (upstream sales) –20x6 (RPBI of P - 20x6) P 39.20x5 amounting to P10.... 96.750 x 80%) Consolidated Retained earnings.000 Amortization of allocated excess (refer to amortization above) : 20x4 P 13. 20x4 120.000 x 80%) …………………….000.680 (P3.(over) undervaluation of assets and liabilities. 80% P 31..348.400 Unrealized profit in ending inventory of P Company (upstream sales) 20x5 (UPEI of P – 20x5) or Realized profit in beginning 6.000 is already included in the beginning retained earnings of S Company.880 e.000 Allocated excess (excess of cost over book value) ….000 Less: Accumulated amortization of allocated excess – 20x4 and 20x5 (P13.. 20x5* P144.050 Problem VI Requirements 1 to 4: Schedule of Determination and Allocation of Excess (Partial-goodwill) Date of Acquisition – January 1. 20x5……….170 Consolidated SHE.000 Stockholders’ equity – Subsidiary Company.000 Adjustments to reflect fair value .880 Parent’s Stockholders’ Equity / CI .000 Add: Net income of subsidiary for 20x5 90.000 Retained earnings (P120. date of acquisition (January 1. P 84.170 * the realized profit in beginning inventory of P Company (upstream sales) –20x5 (RPBI of P .000 28.000) – P750 impairment loss 2.000 x 80%) ……………… P 4. December 31. 20 Non-controlling interest (partial goodwill)…………………………………...200 + P7.. 20x4) 90. 20x5 Retained earnings – Subsidiary Company.000 Retained earnings 647.000 Less: Dividends paid – 20x5 48.SHE P1.000 Retained earnings – Subsidiary Company.. 20x5 Common stock – Subsidiary Company. December 31.000 288... January 1.000 full – P12.000 x 80%) ……………….920 Add: Non-controlling interest on full goodwill .600 Less: Unrealized profit in ending inventory of P Company (upstream sales) 20x5 (UPEI of P – 20x5) or Realized profit in beginning inventory 6.200 20x5 7.... P 192. 20x5…… P 240.400) Fair value of stockholders’ equity of subsidiary.760 Increase in equipment (P96. 1/1/20x4 ___100.. P10 par P 600.200 x 80%) ……………………... Non-controlling interest. 20x4 Fair value of Subsidiary (80%) Consideration transferred……………………………….. P 97.200) . net of impairment loss [(P15.800 Increase in land (P7.. 20x5…… P 495.250 Non-controlling interest (full-goodwill)………………………………….000 186. Consolidated SHE: Stockholders’ Equity Common stock. 5. Less: Retained earnings – Subsidiary. December 31. December 31.750 – P750)* or 3.000 x 80%) ( 19...600 Multiplied by: Non-controlling Interest percentage………….20x6 Realized stockholders’ equity of subsidiary.000 Less: Book value of stockholders’ equity of Son: Common stock (P240. net (P3. partial = P3. January 1.000 Increase in retained earnings since date of acquisition P 66.600 Multiplied by: Controlling interests %..247. December 31. P489.000 of P Company (upstream sales) –20x6 (RPBI of P .

200 The goodwill impairment loss of P3.000 The buildings and equipment will be further analyzed for consolidation purposes as follows: S Co.800 x 80%) …… 3.000) Net book value……………………….. 168...000) Net book value……………………….000 144...000) (6.000 ( 216..000) A summary or depreciation and amortization adjustments is as follows: Account Adjustments to be Over/ AnnualA CurrentYea amortized Under Life mount r(20x4) 20x5 P P P Inventory 6...000 .000 (24. (Over) Under Book value Fair value Valuation Inventory…………………..840 72.000 Fair value of NCI (given) (20%) 93.000 12... S Co.200 P 13. Book Fair value value (Decrease) Buildings..000 144.. For purposes of allocating the goodwill impairment loss... ( 96.000) ( 6.000 Fair value of Subsidiary (100%) P 465.000 Less: Book value of stockholders’ equity of Son (P360...200 P 7.000 0 Less: Accumulated depreciation….000 ( 24. 96.. P 24.200) 4. Book Fair Increase value value (Decrease) Equipment ..000) 4800 1.000 P 90. ( 192.. 360..000 144..000 55...000 P 6..000) Less: Accumulated depreciation….000 180...000 8 12..000 x 100%) __360..000 ...000 (24. S Co.20 Bonds payable… 0 4 0 1.200 7..000 In this case.000 P 6. P 12.000 P 294..000 S Co..000 180.00 Buildings (net) 0) 4 ( 6....000 Buildings (net) 168.. 180. 84... P 105. ……………...800 Net………………………………………... 96.000 1 6.200 0 P 13.750 based on 100% fair value would be allocated to the controlling interest and the NCI based on the percentage of total goodwill each equity interest received. the goodwill was proportional to the controlling interest of 80% and non- controlling interest of 20% computed as follows: .000 Positive excess: Partial-goodwill (excess of cost over fair value)……………………………………………….000 12..000 Add (deduct): (Over) under valuation of assets and liabilities (P90. 84. 192..000 96. P 15...000 P 30. ………... Decrease in bonds payable (P4.000) ( 115.000) Bonds payable………………………… (120.000 The over/under valuation of assets and liabilities are summarized as follows: S Co...200 Equipment (net)..000 Land……………………………………… 48...000 Positive excess: Full-goodwill (excess of cost over fair value)……………………………………………….000 x 100%) 90.. S Co.000 - Subject to Annual Amortization Equipment (net).000 Allocated excess (excess of cost over book value)…... the full-goodwill is computed as follows: Fair value of Subsidiary (100%) Consideration transferred: Cash (80%) P 372.000 96......20 1.000 180. P 204...

000 x 80%)…………….000 P150.600 To adjust investment income for upstream sales .000 x 80% = P96. December 31. 3.800 Record dividends from S Company. December 31. the investment balance and investment income in the books of P Company is as follows: . 20x4: (5) Investment income (P18. 20x4: (4) Investment income [(P13.800 Investment in S Company (P36..000 P25. are as summarized below: Downstream Sales: Intercompany Merchandise Year Sales of Parent to in 12/31 Inventory Unrealized Intercompany Subsidiary of S Company Profit in Ending Inventory 20x P150.000 Investment in S Company 18.500 P 62.000 x 50% = P25.00% The goodwill impairment loss would be allocated as follows Value % of Total Goodwill impairment loss attributable to parent or controlling P 3. buildings and bonds payable and goodwill impairment loss. 20x4: (3) Investment in S Company 48.000 x 80%) 48.000.000 4 20x 62. 20x4: (2) Cash……………………… 28.00% Interest Goodwill applicable to NCI…………………….000 x 20% = P 5.560 Record amortization of allocated excess of inventory.000 80.00% Total (full) goodwill……………………………….000 P25..200 x 80%) + P3. and on December 31.000 4 20x 120.000 P90. Acquisition of S Company.000 x 100%) 18.unrealized profit in ending inventory P .000 5 20x4: First Year after Acquisition Parent Company Cost Model Entry January 1. Thus.00% Goodwill impairment loss based on 100% fair value or full- Goodwill P 3..unrealized profit in ending inventory of S.000 20.750 100.000 Investment income (P60.500 x 40% = P25. 750 20.000 80.000 P96. January 1.000 x 25% = P40.600 Investment in S Company 9.560 impairment loss)] Investment in S Company 13.000 100. 20x5. 20x4: (6) Investment income (P12.000 x 60% = P90.000 Record share in net income of subsidiary.000 x 80%) 9. P15.000 Cash……………………………………………………………………. 20x4: (1) Investment in S Company…………………………………………… 372.000 P120.000 P100.00% The unrealized profits on January 1. 28. December 31.000 x 20% = P18.00% Goodwill applicable to NCI……………………. 20x4 – December 31.. Value % of Total Goodwill applicable to parent………………… P12.000 x 40% = P10.000 5 Upstream Sales: Intercompany Merchandise Year Sales of in 12/31 Inventory Unrealized Intercompany Subsidiary to of S Company Profit in Ending Inventory Parent 20x P 50. equipment. resulting intercompany sales.000 372. December 31. goodwill 13.000 To adjust investment income for downstream sales .

000 To eliminate investment on January 1..040 UPEI of S (P18.000 Inventory………………………………………………………………….560 impairment 48. 20x4 and allocate excess of cost over book value of identifiable assets acquired.000 18.000 x 20%)………………. 96. 6.. with remainder to goodwill..200 P1.000) Bonds payable _______ _______ P 1.000 x 80%) Balance.000 x Investment100%) Income Amortization & 9.000 Buildings ( 6.560 12/31/x4 350.000 .000 Non-controlling interest (P90. 6.. 192.000 x 100%) 18.000 (P60.000 UPEI of Son (P15.200 Dividends paid – S…………………… 36. 3. Investment in S Cost.40 0 (E4) Investment income 6.000 To provide for 20x4 impairment loss and depreciation and amortization on differences between acquisition date fair value and book value of S’s identifiable assets and liabilities as follows: Cost of Depreciation/ Goods Amortization Amortizatio Sold Expense n Total -Interest Inventory sold P 6. 84.800 Dividends – S (30.000 Non-controlling interest (P360. 20x4 and equity accounts of subsidiary on date of acquisition. Goodwill…………………………………………………………………..200 14.000 Buildings……………………………………….000 Accumulated depreciation – buildings………………….000 UPEI of P (P12. and to establish non-controlling interest (in net assets of subsidiary) on date of acquisition. Accumulated depreciation – equipment……………….. 216.000 80%) NI of S Amortization & (60.200 Totals P 6. 12.800 payable…………………………………………. 12/31/x4 Consolidation Workpaper – First Year after Acquisition (E1) Common stock – S Co………………………………………… 240.000 Discount on bonds payable………………………… 1.000 Depreciation expense……………………….840 Investment in S Company 21. 7.000 ………………………..200 Land……………………………………………………………………….000 x 20%) 72.000 Retained earnings – S Co…………………………………… 120.000 impairment x80%) 48. Investment in S Co………………………………………………. and to establish non.000 Equipment P 12.000 Accumulated depreciation – buildings………………….000 ………………………. 6.840 Balance. 6. (E3) Cost of Goods Sold…………….960 Non-controlling interest (P36. Discount on bonds 4.controlling interest (in net assets of subsidiary) on date of acquisition.000 P 7.000 x 80%) 13.. (E2) 6. 13.000 7.600 6.000 Investment in S Co…………………………………………… 288.000 Accumulated depreciation – equipment………………..000 Interest expense………………………………… 1. To eliminate investment on January 1.000 Inventory………………………………………………………….600 UPEI NI ofof S Perfect (P10. 12.200 Goodwill…………………………………… 3. 1/1/x4 28..200 Goodwill impairment loss……………………………………….000 x 20%) 18.000 x80%) 9.000x 372.

Consolidated Sales P480. intercompany 13. computed as follows: Investment in S Investment Income NI of S 28.200) …..960 Inventory – Balance Sheet…… 18. & impairment 48..S NI of S (60.. 372...000 60.960 – partial goodwill Subsidiary accounts are adjusted to full fair value regardless on the controlling interest percentage or what option used to value non-controlling interest or goodwill..000 Inventory – Income Statement) (E2) Investment. Cr.560 impairment 13.960 To establish non-controlling interest in subsidiary’s adjusted net income for 20x4 as follows: Net income of subsidiary……………………. To eliminate intercompany dividends and investment income under equity method and establish share of dividends.000 1/1/20x4 … and dividends …………… 21. Worksheet for Consolidated Financial Statements. Investment in S Cost.800 Dividends . P 48.000 (E1) Investment.000 To defer the upstream sales .600 UPEI of Perfect 60.000 Inventory – Balance Sheet…… 12.unrealized profit in ending inventory until it is sold to outsiders.000 (E6) Sales……………………….000 UPEI of S UPEI of S 18. 18. Dr.000) ……………………….800 Dividends – S (30.000 (6) .840 After the eliminating entries are posted in the investment account.. 20x4.….000 (5) P 510.560 80%) 18. P 34. 20x4 (First Year after Acquisition) Income Statement P Co S Co.000 To defer the downstream sales ..000 x 80%)……. Thus. 1/1/x4 28.000 To eliminated x 80%) downstream sales. Non-controlling Interest in Net Income (NCINI) P 6. To eliminated 12/31/x4 upstream sales.000 x 48.000 UPEI of Son Cost of Goods Sold (or Purchases) 9. 18.000 P240. December 31.560 impairment 48.960 Subsidiary………… Non-controlling interest ………….960 6..000 Cost NI of of S Goods Sold (or Purchases) Amortization & 150.000x (E5) Sales………………………. 1/1/20x4 350...000 inventory until it is sold to outsiders.000 80%) 150.. Son Company’s realized net income from separate operations*…….000 9. Equity Method (Partial-goodwill) 80%-Owned Subsidiary December 31.000 Amortization Amortization (50.000 Unrealized profit in ending inventory of P Company (upstream sales) ( 12. (E8) Cost of Goods Sold (Ending Inventory – Income Statement) … 12. intercompany 288. (E9) Non-controlling interest in Net Income of 6.800 Multiplied by: Non-controlling interest 20% %.unrealized profit in ending 372.000 13. it should be observed that from consolidation point of view the investment account is totally eliminated.000 150.040 (E4) Investment (E7) Cost of Goods Income Sold (Ending 84.. 6.000 372.600 UPEI of P UPEI of P 9. P 60.000 Less: Amortization of allocated excess [(E3)] ( 13.600 21.000 Balance.000 (60.

000 Common stock.394.840 Dividends paid P Company 72.000 462.200 18.000 96.000 7.000 (1) Common stock.200 3.000 (1) 5.000 - P1. .840 P180.800 1.600 Accumulated depreciation (2) (3) .000 (7) (6) Cost of goods sold P204.960 Net Income to Retained Earnings P174.200 Other expenses 48.000 Accumulated depreciation 405.960) NCI in Net Income .200 Net Income P174.000 120.006.000 180.040 (2) (4) 21.000 216.000 6.000 (8) 12.800 P 90.000 120.000 P180.000 (2) Non-controlling interest………… 7.000 P328.840 .000 P 510.840 144.840 P 60. 1. . .000 36. 90.840 (1 ) (4) 72.000 P414. 6.96 288.000 288.000 (7) Inventory…………………..000 150.000 18.000 1.000 Bonds payable………………… 240.equipment P 135. 12/31 to Balance P Sheet P462.700 00 P2.000 (3) 3.000 (1) S Company P120. 60.760 .840 Total P414.840 P144. 3.000 12. 1/1 P PCompany P360.000 180.044.Subsidiary .000 120.000 (3) .000 18.000 0 (2) 84.000 540. 232.840 P 60.000 380.000 Accounts payable…………… 120.000 Depreciation expense 60.000 360.000 (4) _________ Investment income 6.000 72.000 (8) 12.000 P 96.000 60. 210.000 642.000 P 147. P10 par……… 600. P10 par……… 240.200 Equipment 220.000 (3) (5) P 168.000 Goodwill impairment loss . 36.000 150.000 (2) 192.000 P181.000 P138.000 360.800 (9) ( 6.000 24.000 P 387.000 (3) 90.000 Retained earnings.000 Net income.840 Statement of Retained Earnings Retained earnings.000 9.840 P240.0 Total P1.000 495. 6.000 3.000 600. from above 462.000 60.200 265.360 Accounts receivable…….000 (2) Land……………………………. from above 174.840 Balance Sheet P Cash……………………….000 Investment in S Co……… 350.000 48.000 Total Cost and Expenses P312.000 6.840 60.000 (2) Buildings 720.000 P174.000 ______ (5) _________ ___ __________ 6.840 Total Revenue P486.000 (4) S Company .000 174.000 _ ________ Retained earnings.000 240.635.960 ____89.000 240.000 90.000 66.000 (2) (3) Discount on bonds payable 4.200 Interest expense .buildings 6.600 (2) (3) Goodwill…………………… 12.000 (3) 6.000 18. 120.000 (3) 1.

000 54.840 00 983. 9. buildings and bonds payable December 31. 12/31/x5 Investment Income Amortization 376.000 x 80%) 24.000 100%) RPBI of S (P18.600 Investment income (P12. 20x5: Parent Company Equity Method Entry January 1.000 x 80%) 9. December 31..200 x 805) NI of S 5.040 P 90.. S Co. 18.000 UPEI of P (P6. 20x5: (4) Investment income (P7. Sales P 540. 20x5: (5) Investment income (P24.000 Investment in S Company 24.760 UPEI of S (P24.000 x 100%) 9.600 Second Year after Acquisition P Co. the investment balance and investment income in the books of P Company is as follows: Investment in S Cost.000 x 100%) 72.000 UPEI of Son (P24.040 Balance.000 x 80%)……….000 x 100%) 24.000 Less: Cost of goods sold 216.000 Other expense 72.400 Dividends – S (48.000 80%) RPBI of P (P12.. 9.realized profit in beginning inventory of Perfect (RPBI of P) Thus.000 Dividends paid P 72.800 UPEI of Perfect (P6. December 31..000 x 80%)…………….000 24.160 P2.760 Investment in S Company 5. 20x5 – December 31.800 18.040 80%) NI of Son 5. 1/1/x5 38.000 Record share in net income of subsidiary.unrealized profit in ending inventory of Son (UPEI of S).000 x 72. 20x5: (7) Investment income (P6.160 983.000 P 168.760 Amortization (7.000 Net income from its own separate operations P 192.000 P 90.400 Investment in S Company (P48.000 To adjust investment income for downstream sales .000 x 100%) 4.000 x 18.000 P 48.800 Investment in S Company 4.000 x 80%) 4.000 192.008.000 x 80%) 65.200 x 80%) (90.200 x 80%) 5. P1. 20x5: (2) Cash……………………… 38.680 (7. 12/31/x5 .600 RPBI of P(P12. 18.000 To adjust investment income for downstream sales .000 x 80%) 72.000 P 360.000 RPBI of S (P18. 20x5: (3) Investment in S Company 72. equipment.000 Investment income (P18.000 x 80%) 24.000 Add: Investment income 65.760 Record amortization of allocated excess of inventory.400 Record dividends from S Company.000x 350.000 Less: Depreciation expense 60.000 No goodwill impairment loss for 20x5. 20x5: (8) Investment in S Company…………….000 x 100%)……….000 Gross profit P 324. December 31. 20x5: (6) Investment in S Company…………….000 Investment income (P90.040 - Net income P 257.000 x 80%) 4.800 To adjust investment income for upstream sales .600 Balance.unrealized profit in ending inventory Perfect (UPEI of P). December 31.000 (P90.962.0 P P Total P1. 38.600 To adjust investment income for upstream sales .394.realized profit in beginning inventory of S (RPBI of S). December 31.

..040 Non-controlling interest (P48.600 4.200) x 20%] 15.000) Accumulated depreciation – buildings (P160.000 x 80%) 9.000 Buildings ( 6.. and to establish non- controlling interest (in net assets of subsidiary) on 1/1/20x5.000 P12. 20x5 and equity accounts of subsidiary on date of acquisition. intercompany downstream 5.. 144.000 Amortization Amortization 120.000 P1.200 To provide for 20x5 depreciation and amortization on differences between acquisition date fair value and book value of Son’s identifiable assets and liabilities as follows: Depreciation/ Amortization Amortizatio Expense n Total -Interest Inventory sold Equipment P 12. 6. 3.600 Goodwill (P12.000 RPBI of S (E7) Sales……………………….000 x 20%) 76. and to establish non- controlling interest (in net assets of subsidiary) on 1/1/20x5. 216.000 To x eliminated 80%)……. computed as follows: Investment in S Investment Income (E6) Sales……………………….760 RPBI of S 24.000) 198. Discount on bonds payable (P4.600 Dividends paid – S…………………… 48.360 Investment in S Co……………………………………………….800 26. x (P7. 9.000 Discount on bonds payable………………………… 1.000 – P3.000 UPEI of S UPEI of S 24.. 75.000 NI of S Cost of Goods Sold (or Purchases) (90. (E3) Depreciation expense………………………. 12.040 (E8) Investment in Son Company…………………….000 Non-controlling interest [(P90.200sales.200 payable Totals P 6.000 Accumulated depreciation – buildings………………….640 65.000 x 80%) 72.000 18.200)….200 Non-controlling interest (P384.200 Accumulated depreciation – equipment……………….000 Interest expense………………………………… 1.. 70.800 – P1. To eliminate investment on January 1. 9.000 Retained earnings – S Co.200 P7. 18.000 18.000 (90.000 x 20%)……………….760 (P7. 1/1/x5…………………………. 6. (E9) Investment in Son Company (P12.800 ……………………….200 Land……………………………………………………………………….. 20x5 and allocate excess of cost over book value of identifiable assets acquired.800 UPEI of P UPEI of P 9.000) Bonds _______ P 1.000 Investment in S Company 26.000)…………………………….400 Dividends – S 120.000 Cost RPBI of P of Goods Sold (or Purchases) 4.000 – P13.600 75.000 – 84.20 0 (E4) Investment income 65.000 + P6.000 Cost of Goods Sold (Ending Inventory – Income Statement) 18.000 Investment in SCo (P384.640 To eliminate intercompany dividends and investment income under equity method and establish share of dividends.600 . 9.000 To realized profit in downstream beginning inventory deferred in the prior period.000 7.000 x 80%) 307.440 To eliminate investment on January 1. (E2) Accumulated depreciation – equipment (P96.000 80%) 5.000 Buildings……………………………………….Consolidation Workpaper – Second Year after Acquisition The schedule of determination and allocation of excess presented above provides complete guidance for the worksheet eliminating entries: (E1) Common stock – S Co………………………………………… 240. NI of S 38.000 RPBI of P To eliminated intercompany upstream sales. with remainder to the original amount of goodwill.200 x 80%) 72.

000 To defer the upstream sales .000 (7) 75.000 120..000 (6) P 213.000 x 80%) 72.760 To establish non-controlling interest in subsidiary’s adjusted net income for 20x5 as follows: Net income of subsidiary…………………….000 UPEI of S (P20.000 P360. Thus.20x5 (upstream sales) 12.. 1/1/x5 38.440 (E2) Investment.000 Depreciation expense 60..unrealized profit in ending inventory (E8) RPBI of S 18.800 UPEI of P (P5. it should be observed that from consolidation point of view the investment account is totally eliminated. % Non-controlling Interest in Net Income (NCINI) P 17.000 (10) 24.600 4. 17.040 ..200 Other expenses 72.000 (3) 1...000 x (E10) Cost of18.000 (9) 12.000 Goodwill impairment loss . 1/1/20x5 until it is sold(E9) RPBI of P to outsiders.000x 350.unrealized profit in ending inventory until it is sold to outsiders. December 31.600 26.000 x 100%) 24.000 120. Cr. 1.000 (3) 90.000 18. Investment in S Cost.000 24.000 Goods Sold (Ending Inventory – Income100%) 24.000 Cost of goods sold P216. 9.680 the downstream sales .000 126.900 404. 1/1/20x5 24.200) P 88.000 Less: Amortization of allocated excess ( 7. After the eliminating entries are posted in the investment account.400 Dividends – S (40.200 (E1) Investment.000 RPBI of S (P18. Worksheet for Consolidated Financial Statements.280 (E11) Cost of Goods Sold (Ending Inventory – Income 6.000 (7) 75. 65.040 Total Revenue P605.000 Statement)… Inventory – Balance Sheet…… 6.20x5 (upstream sales) ( 6.000 70.760 – partial goodwill *from separate transactions that has been realized in transactions with third persons.000 To realized profit in upstream beginning inventory deferred in the prior period.000 (4) ___________ Investment income 65.000 x 80%) 5.760 (6. Dr.000 P192. .000 To defer 376.800 Multiplied by: Non-controlling interest 20 %. .000 x 80%) 9. Equity Method (Partial-goodwill) 80%-Owned Subsidiary December 31.000 x 20%)…… 2.000 Realized profit in beginning inventory of P Company .040 P360. Consolidated (6) P 705.000 Statement)…RPBI of P(P12.640 (E4) Investment Income and dividends 336.000) S Company’s Realized net income* P 96.760 Subsidiary………… Non-controlling interest ………….. (E12) Non-controlling interest in Net Income of 17. P 90.000 Unrealized profit in ending inventory of P Company . Inventory 12/31/x5 – Balance Sheet…… 307.200 Interest expense .040 80%) NI of S Amortization (90...000 P 705.. Noncontrolling interest (P12.400 Cost of Goods Sold (Ending Inventory – Income Statement) 12.000 x 80%) Balance.. - .000 54. 20x5 (Second Year after Acquisition) Income Statement P Co S Co.000 (8) (11) 6.000 Sales P540.000 6. 20x5.

000 108.000 120.600 (9) 2. 93.000 P270.000 257.000 7.677.000 102.800 Net Income P257.840 (1) S Company P144. consolidated equity on December 31. .000 (2) Land…………………………….800 ___ (2) 15.440 (9) 9.200 Accounts receivable…….040 90.400 (2 ) 76.000 .000 Investment in S Co……… 376. 20x4 and 20x5 are exactly the same (refer to Problem IX solution).880 P234.000 (1) Common stock.000 120. 12/31 to Balance Sheet P777. P 465.Subsidiary .000 48.000 240.600 (4) 26.000 144.800 (2) Accumulated depreciation P 84.000 (2) 70. Problem VII Requirements 1 to 4: Schedule of Determination and Allocation of Excess Date of Acquisition – January 1. 48.buildings (3) 6.000 Net income. Total Cost and Expenses P348.000 (3) .000 96.000 P 367.000 Bonds payable………………… 240.677.200 102.000 360.074.000 P180. non-controlling interests.200 18.000 (2) Accumulated depreciation 450.044.040 90.760 ____97.000 (2) Discount on bonds payable 3.000 276.000 Less: Book value of stockholders’ equity of Son: Common stock (P240.880 186.880 00 0 0 P2.074. 1/1 P Company P462.040 90.000 Fair value of Subsidiary (100%)……….000 12.000 540.000 Statement of Retained Earnings Retained earnings. P10 par……… 240..760 P P 257.200 Equipment 240. P 372. P 240.000 198.040 Total P719.800 5 and 6.40 P1.000 (10) Inventory………………….000 420.680 (8) (1) 307.600 (3) 1. consolidated retained earnings.0 Total P2.000 9.000 _ ________ Retained earnings.000 1.000 (5) ( 17.040 Net Income to Retained Earnings P257.000 (11) 6. 17.000 72.40 Total P2.000 24.000 240.000 48.840 P 462.000 Accounts payable…………… 120.200 P 777.207.456 P223.000 306.880 Dividends paid P Company 72. Refer to Problem IX for computations Note: Using cost model or equity method.000 Retained earnings.000 P 430. 210. 180.880 00 P2.000 294.200 P P 274.equipment P 150.000 Common stock.207.360 _____ _________ __________ (5) 17. 216. 20x4 Fair value of Subsidiary (80%) Consideration transferred (80%)…………….0 P1.000 P 719.456 Balance Sheet P P Cash……………………….000 600.200 2. from above 257.000 647.046.760) NCI in Net Income .000 (4) S Company .400 (2) Goodwill…………………… 9.. the consolidated net income.046.000 x 100%) ……………….880 Non-controlling interest………… (4) 9.000 Buildings 720.000 Fair value of NCI (given) (20%)………………. P10 par……… 600. 265.000 180.640 - P1.000 (3) 216.200 265.. from above 647.000 552.920 P1.000 .

000 x 100%)………..000 x 80%) 13.000 18. 20x4: (5) Investment income (P18.000 1 6.000 x 100%) ……………… P 6....000 x 100%) 18.000) ( 6. 20x4: (1) Investment in S Company…………………………………………… 372. ( 24.unrealized profit in ending inventory of S.000x 372. 12/31/x4 324..000 x 80%) 48... Retained earnings (P120.000 - Subject to Annual Amortization Equipment (net). 28.200 x 100%) …………………….000 UPEI of S (P18. 120.560 Record amortization of allocated excess of inventory. 13.000 x 80%)…………….000 (24. 20x4: (6) Investment income (P12.unrealized profit in ending inventory P . P 105. 20x4: (2) Cash……………………… 28. Acquisition of S Company.000 12.750 – P750)*.000 To adjust investment income for downstream sales . 20x4: (3) Investment in S Company 48..000) (6.000 x80%) Balance.600 Investment in S Company 9..000 Cash…………………………………………………………………….800 Investment in S Company (P36. 1/1/x4 28. the investment balance and investment income in the books of P Company is as follows Investment in S Cost. 20x4: (4) Investment income [(P13.20 1.200 Increase in equipment (P96.000 x 100%) 96.000 . 96.000 Increase in land (P7. There might be situations where the controlling interests on goodwill impairment loss would not be proportionate to NCI acquired (refer to Illustration 15-6).800 90.00 Buildings (net) 0) 4 ( 6.000) Decrease in bonds payable (P4..800 Dividends – S (36.560 goodwill impairment loss)] Investment in S Company 13...80 1.. Thus.000 Investment income (P60.000 360.000 80%) NI of S Amortization & (60.. 20x4 – December 31.000 Decrease in buildings (P24..000 Positive excess: Full-goodwill (excess of cost over fair value)………………………………………………. P 15.600 UPEI of P (P12.000 12. equipment.000 P 6. December 31.000 Allocated excess (excess of cost over book value) ….000 8 12.000 A summary or depreciation and amortization adjustments is as follows: Account Adjustments to be Over/ Annual Current amortized under Life Amount Year(20x4) 20x5 P P P Inventory 6. December 31. December 31..000) 4.200 0 P 13.000 Less: Over/under valuation of assets and liabilities: Increase in inventory (P6.200 x 80%) + (P3.000 x 100%) ……….000 372. buildings and bonds payable and goodwill impairment loss.600 To adjust investment income for upstream sales .200 P 13.200 20x4: First Year after Acquisition Parent Company Equity Method Entry January 1.000 x 80%) 9.560 impairment 48.000 x 100%) 9. January 1.20 Bonds payable… 0 4 0 1.000 Record share in net income of subsidiary. December 31. *this procedure would be more appropriate.800 x 100%) …… 4. instead of multiplying the full-goodwill impairment loss of P3.200 P 7.000 Investment in S Company 18.125 by 80%.800 Record dividends from S Company... 7.

000 Accumulated depreciation – buildings………………….200 P1.840 Balance..000 Investment in S Co…………………………………………… 288.000 Inventory…………………………………………………………………. Discount on bonds 4..000 Discount on bonds payable………………………… 1. Goodwill…………………………………………………………………. Investment Income Amortization & NI of S impairment 48.200 Land………………………………………………………………………. 6.000. 3. Accumulated depreciation – equipment……………….000 P12. 20x4 and allocate excess of cost over book value of identifiable assets acquired. 6... 96.840 Investment in S Company 21.200 Goodwill…………………………………… 3.600 6. 192.000 P 7. with remainder to goodwill. To eliminate investment on January 1.750 Inventory…………………………………………………………...000 (P60. (E3) Cost of Goods Sold…………….200 Totals P 6.000 x 20%) + [(P15. 15. 12.200 Goodwill impairment loss………………………………………. (E2) 6.000 x80%) 9.000 ……………………….. partial goodwill)]………… Investment in Son 84. 216.000 Equipment P 12.000 Buildings ( 6. 12/31/x4 Consolidation Workpaper – First Year after Acquisition (E1) Common stock – S Co………………………………………… 240.560 UPEI of S (P18.000 7.000 Accumulated depreciation – buildings………………….000 Buildings……………………………………….000 UPEI of P (P12.000 x 80%) 13. 20x4 and equity accounts of subsidiary on date of acquisition.200 14. 6. 6.40 0 (E4) Investment income 6.000 Non-controlling interest (P360.000. and to establish non- controlling interest (in net assets of subsidiary) on date of acquisition.960 .000 Depreciation expense……………………….000 Interest expense………………………………… 1.000 Non-controlling interest (P90.000 Accumulated depreciation – equipment………………. full – 21.750 To provide for 20x4 impairment loss and depreciation and amortization on differences between acquisition date fair value and book value of S’s identifiable assets and liabilities as follows: Cost of Depreciation/ Goods Amortization Amortizatio Sold Expense n Total -Interest Inventory sold P 6.000 Co………………………………………………. To eliminate investment on January 1. and to establish non.000 Retained earnings – S Co…………………………………… 120.000 x 20%) 72.controlling interest (in net assets of subsidiary) on date of acquisition.000) Bonds payable _______ _______ P 1.000 x 100%) 18..800 payable………………………………………….

.000 Cost 21. (E7) Cost of Goods Sold (Ending Inventory – Income Statement) … 18..….600 21.. 12/31/x4 288.560 impairment 48.000 (E2) Investment.000 Amortization Amortization (50..040 (E4) Investment Income 84.000 Inventory – Balance Sheet…… 12.750 x 20%) or (P3.000) ………………………. Investment in S Cost.000 To defer the upstream sales . 6.. 1/1/x4 28.600 UPEI of P Balance. 372. impairment on partial- goodwill)* Non-controlling Interest in Net Income (NCINI) P 6210 .000 (E1) Investment. (E8) Cost of Goods Sold (Ending Inventory – Income Statement) … 12.000 To eliminated intercompany downstream sales.. computed as follows: Investment Income Investment in S NI of S 28. 60.000 To eliminate intercompany dividends and investment income under equity method and establish share of dividends. (E9) Non-controlling interest in Net Income of 6.S NI of S (60..000 To defer the downstream sales .000 x 48.000 Less: Amortization of allocated excess [(E3)] ( 13..000x 372.000 Unrealized profit in ending inventory of P Company (upstream sales) ( 12...200 Dividends paid – S…………………… 36.000 x 80%) 13.800 Dividends .800 Dividends – S (30.210 Subsidiary………… Non-controlling interest …………. it should be observed that from consolidation point of view the investment account is totally eliminated..960 (NCINI) – partial goodwill Less: Non-controlling interest on impairment loss on full-goodwill (P3. P 48. & impairment 48.210 To establish non-controlling interest in subsidiary’s adjusted net income for 20x4 as follows: Net income of subsidiary…………………….800 Multiplied by: Non-controlling interest 20% %. Non-controlling Interest in Net Income P 6.000 372.000.and dividends …………… 150.000 To eliminated intercompany upstream sales.600 UPEI of P UPEI of P 9.unrealized profit in ending inventory until it is sold to outsiders.000 80%) NI of S Amortization & (60.000 x 20%)……………….000 Inventory – Balance Sheet…… 18.960 of Goods Sold (or Purchases) 150.750 impairment on full-goodwill less 750 P3. S Company’s realized net income from separate operations*……. Non-controlling interest (P36.. P 60.000 x 80%)……. 7. 1/1/20x4 350..000 UPEI of S 9. 1/1/20x4 (E5) Sales……………………….000 13.560 80%) 18.unrealized profit in ending inventory until it is sold to outsiders.840 After the eliminating entries are posted in the investment account.960 6. P 34. Thus.200) ….000 UPEI of S UPEI of S 18..000 (E6) Sales……………………….000 Cost of Goods Sold (or Purchases) 60.000 18.000 9.560 impairment 13.

000 P 322. Worksheet for Consolidated Financial Statements.000 (3) 6.000 150. 232.000 66.000 (6) 60.600 (2) (3) Goodwill…………………… 15.000 P 147.750 Goodwill impairment loss .044. 120.000 420.000 (2) Land…………………………….000 P145.000 150.840 .. There might be situations where the NCI on goodwill impairment loss would not be proportionate to NCI acquired (refer to Illustration 15-6).000 174.875 (9) ( 5.840 Total Revenue P486.000 360.040 (2) (4) 288.000 (2) 6.800 P 90.000 (2) Buildings 720.Subsidiary .000 P 96.000 180.000 (4) S Company .000 18.800 Accounts receivable…….000 _ ________ Retained earnings.200 Other expenses 48.000 (3) 1.700 Statement of Retained Earnings Retained earnings. December 31.000 216.equipment P 135.000 (3) 3.000 180.000 - P1. Equity Method (Full-goodwill) 80%-Owned Subsidiary December 31. from above 174.000 P150.960 (2) 84.800 1. 20x4.250 Investment in S Co……… 350. .000 Net income. 6.750 11. 90.175 Net Income to Retained Earnings P174.200 3.396. .000 1.000 90. 1/1 P P Company P360.000 150.000 18. 3.750 Total Cost and Expenses P312.000 (8) 12. Cr.000 120.000 18.000 (7) (6) Cost of goods sold P204.000 P138.635.000 P 510.000 (8) 12. 1.700 00 P2.000 P274.000 36.840 Dividends paid P Company 72.000 60.840 P144. 5. instead of multiplying the full-goodwill impairment loss of P3.000 (1) S Company P120.840 P 50.000 21. – full goodwill *this procedure would be more appropriate.850 Accumulated depreciation (2) (3) .840 Balance Sheet P Cash……………………….000 P240.000 6. .0 Total P1.000 Depreciation expense 60.840 P180.000 60.200 Equipment 240.000 (4) _________ Investment income 6. 210.000 7. 36. Dr. 20x4 (First Year after Acquisition) Income Statement P Co S Co.200 Interest expense .200 265.000 P150.000 540.000 72.750 by 20%.000 Sales P480.000 48.000 6.000 96.000 24. 12/31 to Balance P Sheet P462.000 414.840 P240.000 462.008.840 P Total P414.000 .000 (3) 90.000 12.840 60.125 Net Income P174.000 (3) (5) P 168.000 (2) (3) Discount on bonds payable 4.840 P 50.000 (7) Inventory………………….000 3. Consolidated (5) P 510.175) NCI in Net Income .

400 Record dividends from S Company. Parent Company Equity Method Entry January 1.000 360. 38.000 Investment income (P90.040 P 90. 20x5: (3) Investment in S Company 72. 9. 20x5: (8) Investment in S Company……………. 1/1/x5 38.000 Accumulated depreciation 405.000 P 168.000 Common stock. (2) 192. equipment.400 Investment in S Company (P48.760 Amortization (7. P10 par……… 240. 20x5: (2) Cash……………………… 38.000 120.000 Less: Depreciation expense 60.000 P 48. 20x5: (4) Investment income (P7.800 UPEI of P (P6.000 (3) .000 x 100%)………. 20x5: (5) Investment income (P24. P10 par……… 600.840 144.840 00 986. 9.000 Net income from its own separate operations P 192.000 x 80%) 9. 12/31/x5 376.040 - Net income P 257.040 80%) NI of Son 5.000 No goodwill impairment loss for 20x5.000 P 360.000 (2) Non-controlling interest………… 7.210 ____92..000 54.962.realized profit in beginning inventory of S (RPBI of S).010 P1.000 x 80%) 4..160 P2.000 (1) Common stock.000 Add: Investment income 65.850 20x5: Second Year after Acquisition Perfect Co. 18. from above 462.000 600.buildings 6. December 31.000 x 80%)…………….600 To adjust investment income for upstream sales .000 Gross profit P 324.000 Retained earnings.000 192.000 To adjust investment income for downstream sales .600 Investment income (P12. the investment balance and investment income in the books of Perfect Company is as follows: Investment in S Cost.600 Balance.unrealized profit in ending inventory P (UPEI of P).008.400 Dividends – S (48.000 Other expense 72.000 Record share in net income of subsidiary.unrealized profit in ending inventory of S (UPEI of S).840 (1 ) (4) 72.760 Investment in S Company 5.760 Record amortization of allocated excess of inventory.000 24..160 986.0 P P Total P1. 20x5: (6) Investment in S Company……………. December 31.000 x 80%) 24.. 20x5: (7) Investment income (P6.396. buildings and bonds payable December 31.000 P 90.000 240.000 Investment income (P18.000 462. 18.200 x 80%) (90. December 31.realized profit inbeginning inventory of P (RPBI of P) Thus.000 x 100%) 4.000 RPBI of (P18.000 Accounts payable…………… 120.800 Investment in S Company 4. Son Co.200 x 80%) 5.000 Investment in S Company 24.800 To adjust investment income for upstream sales .000 x 80%) 18.000 x 80%)……….000 288.000 UPEI of S (P24.000x 350.000 ______ (9) _________ ___ __________ 6.000 495.000 To adjust investment income for downstream sales .000 240.000 Dividends paid P 72. 20x5 – December 31.000 x 100%) 72.000 Less: Cost of goods sold 216.680 .000 RPBI of P (P12.000 120.000 x 80%) 72.200 21. Sales P 540. December 31. December 31.000 Bonds payable………………… 240.000 x 100%) 24.

000 – 84. 9.000 Non-controlling interest [(P90.750 x 20%)] Investment in S Co………………………………………………. full goodwill . There might be situations where the NCI on goodwill impairment loss would not be proportionate to NCI acquired (refer to Illustration 15-6).000 x 100%) 9.610 or (P3..200 Non-controlling interest (P384.640 To eliminate intercompany dividends and investment income .250 Buildings………………………………………. Discount on bonds payable (P4.[(P3.760 UPEI of S (P24.. (E1) Common stock – S Co………………………………………… 240.200 To provide for 20x5 depreciation and amortization on differences between acquisition date fair value and book value of Son’s identifiable assets and liabilities as follows: Depreciation/ Amortization Amortizatio Expense n Total -Interest Inventory sold Equipment P 12.600 Dividends paid – S…………………… 48. 3. 6.200)….20 0 (E4) Investment income 65.000 x 80%) 24. 20x5 and allocate excess of cost over book value of identifiable assets acquired.. 12.750 by 20%. 12/31/x5 Consolidation Workpaper – Second Year after Acquisition The schedule of determination and allocation of excess presented above provides complete guidance for the worksheet eliminating entries.000 P1.000 – P3. To eliminate investment on January 1. 1/1/x5…………………………. partial.800 ……………………….000 Investment in S Company 26.200 x 805) NI of S 5. 11.440 To eliminate investment on January 1.600 Goodwill (P15..800 18. 70.000 x 80%) 307.040 Non-controlling interest (P48.800 – P1.000 – P13.000 UPEI of P (P6.000.000 Interest expense………………………………… 1.000 P12.000 Investment in SCo (P384.000 x 80%) 65.000 x 20%) 76.200 Accumulated depreciation – equipment……………….200 Land………………………………………………………………………. full-goodwill impairment – P3.000.750)…………………………….000 (P90. Investment Income Amortization (7.. (E3) Depreciation expense………………………. 216.040 Balance.. with remainder to the original amount of goodwill.000 Accumulated depreciation – buildings…………………. instead of multiplying the full-goodwill impairment loss of P3. 144. and to establish non- controlling interest (in net assets of subsidiary) on 1/1/20x5. 20x5 and equity accounts of subsidiary on date of acquisition. *this procedure would be more appropriate.000 Retained earnings – S Co.600 RPBI of P (P12.000 7.goodwill impairment)* 17.000 x 100%) 72.200 payable Totals P 6.200) x 20%] + [P3.000 Discount on bonds payable………………………… 1.000) Bonds _______ P 1.200 P7.. 6.750.000 x 20%)………………. and to establish non- controlling interest (in net assets of subsidiary) on 1/1/20x5.000 + P6.000) Accumulated depreciation – buildings (P192.000 x 80%) 4. (E2) Accumulated depreciation – equipment (P96.000 Buildings ( 6.000) 198.000 RPBI of S (P18.

800 120.680 (E8) RPBI of S 70.000 80%) 5.640 Sold (E4) Investment 24. computed as follows: Investment in S Investment Income NI of Son 38.000 Income Statement)…9.400 Cost of Goods Sold (Ending Inventory – Income Statement) 12.800 UPEI of P (P6.000 To eliminated intercompany downstream sales.000 x 80%) 72.000 To realized profit in downstream beginning inventory deferred in the prior period.280 Inventory – Balance Sheet…… 24.600 RPBI of P 9.000 UPEI of S (P24.040 120.000 x 80%) Balance. After the eliminating entries are posted in the investment account.000 x 80%) 5.760 To establish non-controlling interest in subsidiary’s adjusted net income for 20x5 as follows: Net income of subsidiary……………………. (E9) Investment in Son Company (P12.000 RPBI of P 4. under equity method and establish share of dividends. 4.000 RPBI of S 18.000 x 80%) 9.600 (7. 1/1/20x5 376.000 To defer the downstream sales .200 (E1) Investment. (E7) Sales……………………….000 Cost of Goods Sold (Ending Inventory – Income Statement) 18.280 404. 75..000 x 18. (E11) Cost of Goods Sold (Ending Inventory – Income Statement)… 6.000 Cost of Goods Sold (or Purchases) 75. 18. 12/31/x5 307.unrealized profit in ending inventory until it is sold to outsiders.000 To realized profit in upstream beginning inventory deferred in the prior period. 1/1/x5 38.unrealized profit in ending inventory until it is sold to outsiders.000 x 100%) 24.000 To defer the upstream sales .000 To eliminated intercompany upstream sales.200 x (P7. (E12) Non-controlling interest in Net Income of 17.000 UPEI of S UPEI of S 18. 17.440 (E2) Investment.600 and dividends 404.000 24.200 x 80%) 72.000 26.000 Realized profit in beginning inventory of P ..760 RPBI of S 24.640 Cost of Goods Sold (or Purchases) 65.800 UPEI of P UPEI of P 9.000 x 80%) 72.000 x 80%)……. Investment in S Cost.000 Inventory – Balance Sheet…… 6. Thus.600 4. it should be observed that from consolidation point of view the investment account is totally eliminated.760 (P7. (E8) Investment in Son Company…………………….600 (E6) Sales……………………….000 RPBI of S (P18. 1/1/20x5 18.000 Amortization Amortization (90.040 80%) NI of Son Amortization (90.000 (E10) Cost of(E9) GoodsRPBI of P(Ending Inventory – Income 26.400 Dividends – S NI of S (90.000 100%) RPBI of P (P18.400 Dividends – S (48.000 x 20%)…… 2.000 x 80%) 9. 5.600 Noncontrolling interest (P12.760 Subsidiary………… Non-controlling interest ………….000x 350. P 90.

000 P 705.000 Net income.800 Net Income P257.000 Goodwill impairment loss . % Non-controlling Interest in Net Income P 17.000 216.000 108.000 (11) 6.200 2.000 48. 265.20x5 (upstream sales) ( 6.448 Net Income to Retained Earnings P257.000 Sales P540. .200 Interest expense .044.000 Less: Amortization of allocated excess ( 7.040 .000 257. Worksheet for Consolidated Financial Statements.000 P270.000 (2) Land……………………………. 0 Goodwill Non-controlling Interest in Net Income (NCINI) P 17.000 126. December 31. 48.000 Statement of Retained Earnings Retained earnings.000 120.000 Unrealized profit in ending inventory of P Company .400 .000 540.000 48. Consolidated (6) P 705. Dr.880 Balance Sheet P P Cash……………………….840 (1) S Company P144.000 (3) Buildings 720. 20x5.000 120..000 6.000 276.000 P 719.000 (8) (11) 6. 216.880 Dividends paid P Company 72.000 (7) 75.760 (NCINI) – partial goodwill Less: NCI on goodwill impairment loss on full.200 Equipment 240.000 P 367.000 (5) ( 17.760 – full goodwill *from separate transactions that has been realized in transactions with third persons..000 (10) 24.000 (6) P 213.000 180.000 24.600 (3) 1.760) NCI in Net Income . Equity Method (Full-goodwill) 80%-Owned Subsidiary December 31.000 144...000 24.20x5 (upstream sales) 12.000 (9) 12.Subsidiary .000 P192.000 54.000 1.000 (7) 75. Company .040 Total Revenue P605.000 (4) S Company .200 265.000 (4) ___________ Investment income 65.. 210.000 18. .040 Total P719.840 P 462. 65. - Total Cost and Expenses P348.000 Multiplied by: Non-controlling interest 20 %..880 P186. Cr. 20x5 (Second Year after Acquisition) Income Statement P Co S Co.000 (2) Discount on bonds payable 3.880 P234.. 1. .000) Son Company’s Realized net income* P 96. 1/1 P Company P462.000 294.000 (10) Inventory………………….000 7..040 90.200 Other expenses 72.200 Accounts receivable……. 180. 12/31 to Balance Sheet P647.000 420.000 P 430.200 114.000 Cost of goods sold P216.000 (3) 90.000 Depreciation expense 60.040 P360.000 P360.000 _ ________ Retained earnings.000 72.000 P 647.200 P P 274..040 90. 17.040 90.000 96.000 (3) 1. from above 257.760 P P 308..200) P 88.

...000 12...207..000 240.................. 30% Unrealized Intercompany Gross profit. P 169.... 12/31/x5 ............000 Inventory remaining at year's end ............000 Outside ownership ..000 Realized profit in beginning inventory of S Company (downstream sales) 14...................000) Realized gross profit deferred in 20x4 ..........170 P1. the consolidated net income............000 or.. P50..................... Refer to Problem V for computations Note: Using cost model or equity method..610 _____ ___ __________ (14)17.... Problem VIII 1.000 – P72...........000 Common stock..000 198...........400 S Company’s net income from own operations (P600 – P400 – P100) P 100.....000) Broadway adjusted income.......680 (8) 18..........400 Unrealized profit in ending inventory of S Company (downstream sales)… (_10.....000 Eliminate intercompany transfers ... P14...............050 5 and 6... 10. (10...........000 102..........0 P1.....074.......................000 306.................... from above 647..048........................... consolidated retained earnings.. 90...000 600................. non-controlling interests........000 Accounts payable…………… 120.000) P Company’s realized net income from separate operations*…….................760 ____100..... (Computation of selected consolidation balances as affected by downstream inventory transfers) UNREALIZED GROSS PROFIT.........880 186...............680............................ 12/31/x4: (downstream transfer) Intercompany gross profit (P120...65 P1....................074.............000 120.................000 Cost of goods sold ......................000)  Cost of goods sold: Benson's book value ......... P535.000 (2) Accumulated depreciation 450.... (2) Goodwill…………………… 11.....250 Investment in S Co……… 376..............000 120.......000 Intangible amortization.....0 Total P2........ P10 par……… 240..000 Retained earnings............ 20x4 and 20x5 are exactly the same (refer to Problem V solution).........................880 Non-controlling interest………… (4) 9..................600 (9) 2....... P 27..600  Operating expenses = P210.....000 647.........207.(intercompany transfer eliminated in consolidation)  Noncontrolling interest in consolidated income: (impact of transfers is not included because they were downstream) Broadway reported income for 20x5 ....000 Realized profit in beginning inventory of P Company (upstream sales) 0 Unrealized profit in ending inventory of P Company (upstream sales)… ( 0) .................................... (250...440 9...equipment P 150........ 20% Unrealized intercompany gross profit............................................000)....000 (add the two book values and include intangible amortization for current year)  Dividend income = -0..........640 - P1..000 552....000 ............... P10 par……… 600...................... P100....... Consolidated Net Income for 20x5 P Company’s net income from own/separate operations (P800-P535-P100) P 165...65 Total P2......... consolidated equity on December 31.............600 (4) 26............................000 (1) Common stock...000 Inventory remaining at year's end .000 240...........200 (9) (3) 70........................... 12/31/x5: (downstream transfer) Intercompany gross profit (P250...........................880 00 P2..... P680......048...000 (1) 307.250 11.........................150.............000 360...800 ___ ______ (2) 17................buildings (3) 6...................... (14.............680......... 30% Noncontrolling interest in Broadway’s earnings..............000 – P200....... P10.... P48.....400 (1 ) 76...............000 CONSOLIDATED TOTALS  Sales = P1.......000) .880 00 0 0 P2.000 (3) .....050 (2) Accumulated depreciation P 84...................000 (add the two book values and eliminate intercompany sales of P250... 12/31/x4 ....…......................000 P180......................................400) Deferral of 20x5 unrealized gross profit ..000 Bonds payable………………… 240...............400 UNREALIZED GROSS PROFIT...........000 Broadway's book value ....... 400.

............................000 (add the two book values and eliminate the Intercompany transfer)  Cost of goods sold: Benson's COGS book value .. 12/31/x4 .................. 10......................000 Less: Amortization of allocated excess __10............ (14...........400 Outside ownership .................... P28.400 104................ P50.......000 Realized profit in beginning inventory of P Company (upstream sales) 0 Unrealized profit in ending inventory of P Company (upstream sales) ( 0) S Company’s realized net income from separate operations……… P 100.......... P48............................................................(interco.............. 20% Unrealized intercompany gross profit.. 12/31/x5 = P385..000 Broadway's COGS book value ..................400 20x5 gross profit deferred ............................000 Multiplied by: Non-controlling interest %...... P680............000 Intangible amortization......... 30% Noncontrolling interest ....................................................000 Realized profit in beginning inventory of S Company (downstream sales) 0 Unrealized profit in ending inventory of S Company (downstream sales)… (_ 0) P Company’s realized net income from separate operations*……........................................................... 30% Non-controlling Interest in Net Income (NCINI) – partial goodwill P 27.....000 Inventory remaining at year's end .......000 Inventory remaining at year's end ................ (Computation of selected consolidation balances as affected by upstream inventory transfers)................................................................400 Unrealized profit in ending inventory of P Company (upstream sales)… ( 10... P100..............000)..................….000 ending unrealized gross profit)  Noncontrolling interest in subsidiary.................500 Noncontrolling Interest in Broadway’s earnings........ P385..........000)...000 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent – 20x5…………............................................000) Total noncontrolling interest at 12/31/x5.............................. P 232.... P 104..........000 Realized profit in beginning inventory of P Company (upstream sales) 14........................... (10...600  Operating expenses = P210.......................................500 30% beginning P950.. 27...000) ....................400 Total P 269...500 2.. P285.................400 ..... 12/31/x5: (upstream transfer) Intercompany gross profit (P250.........000 – P200.......................000 Dividends (30% × P50.000 P 90........................................000 Excess January 1 intangible allocation (30% × P295..400 Less: Amortization of allocated excess…………………… __10........................ (15...................…...000  Inventory = P988..................150................000) .......................000) 20x4 gross profit recognized in 20x5 ....... S Company’s realized net income from separate operations*…….......................................000 CONSOLIDATED TOTALS  Sales = P1............... 400..000 Consolidated Net Income for 20x5 P 259.......000) Realized gross profit deferred in 20x4 ......... P10. UNREALIZED GROSS PROFIT.....................000 Consolidated cost of goods sold .........................000 (add the two book values and include intangible amortization for current year)  Dividend income = -0................................. 12/31/x5 ......... 30% Unrealized intercompany gross profit...................…...........................000 Consolidated Net Income for 20x5 P 259...... P94.......... P14..................................000 Total P 269............ 12/31/x4: (upstream transfer) Intercompany gross profit (P120...400 Less: Non-controlling Interest in Net Income* * 27............000 100......... P 165..............................000) S Company’s realized net income from separate operations*…….....................400 **Non-controlling Interest in Net Income (NCINI) for 20x5 S Company’s net income of Subsidiary Company from its own operations (Reported net income of S Company) P 100................................000 Eliminate intercompany transfers ..............400 UNREALIZED GROSS PROFIT........................................................................................... (10... transfer eliminated in consolidation)  Noncontrolling interest in consolidated income: (impact of transfers is included because they were upstream) Broadway reported income for 20x5 .....000 book value.........320 Consolidated Net Income for 20x5 P Company’s net income from own/separate operations (P800-P535-P100) P 165....................................000 S Company’s net income from own operations (P600 – P400 – P100) P 100..............400) Deferral of 20x5 unrealized gross profit .............................000) Broadway realized income for 20x5......................400 Less: Amortization of allocated excess…………………… __10..........000 – P72.. 14.....000 (add the two book values less the P10............................ P 100........ (250.................. P535. 88........

...... P382............. 28...000 Non-controlling Interest in Subsidiary’s Net Income Because all intercompany sales were downstream..080 **Non-controlling Interest in Net Income (NCINI) for 20x5 S Company’s net income of Subsidiary Company from its own operations (Reported net income of S Company) P 100.320 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent – 20x5………….000/1...400 unrealized gross profit (30% × P935....000 Unrealized profit in ending inventory of S Company (downstream sales)… (_ 12...............000) P Company’s realized net income from separate operations*……...000) Consolidated Inventory ...........000) Reduction of ending inventory because of 20x5 unrealized gross profit (P42.....................4 = P30.. (12............... (110.......... the non-controlling interest is 20% of the P58................ P280......000 Realized profit in beginning inventory of S Company (downstream sales) 8...........400 Unrealized profit in ending inventory of P Company (upstream sales) ( 10............................ P42.............................000 SW’s cost of goods sold ........ P346........ Thus. the deferrals do not affect SW......000 P 94.................................... P28......... P 231...000 Elimination of 20x5 intercompany transfers .... P290..400 Less: Amortization of allocated excess __10.......000 cost = P8................. Less: Non-controlling Interest in Net Income* * 28.....320 Dividends (30% × P50.000). P444.............................................................. P 58...000 cost = P12.......000 Less: Non-controlling Interest in Net Income* * 11...600 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent – 20x5…………. 30% Non-controlling Interest in Net Income (NCINI) – partial goodwill P 28...................000) Total noncontrolling interest at 12/31/x5..................... Consolidated Cost of Goods Sold PP’s cost of goods sold ..................000 Consolidated Inventory PP book value .. (15.000)...................000 ending unrealized gross profit)  Noncontrolling interest in subsidiary....4 = P20..000 cost...........500 30% beginning book value less P14....000 Total P 254.680 Excess intangible allocation (30% × P295..000 unrealized gross profit) ...................000) Reduction of beginning Inventory because of 20x4unrealized gross profit (P28...............000 cost........600................ P381....... 197...............000 transfer price less P20......................... 12/31/x5 = P382.........000 (add the two book values and defer the P10.000 58......000 (revenues minus cost of goods sold and expenses) reported income or P11.....…...320  Inventory = P988.............000 unrealized gross profit) .200 **Non-controlling Interest in Net Income (NCINI) for 20x5 S Company’s net income of Subsidiary Company from its own operations (Reported net income of Son Company) P 58.....000 S Company’s net income from own operations (P360 – P197 – P105) P 58...000 Realized profit in beginning inventory of P Company (upstream sales) 14..........000/1.......500 Problem IX (Compute selected balances based on three different intercompany asset transfer scenarios) 1...... 110..........000 Consolidated cost of goods sold ......................... or Consolidated Net Income for 20x5 P Company’s net income from own/separate operations (P640-P290-P150) P 200......000 SW book value .........600).............…................... (88......................... (8........ 12................000) S Company’s realized net income from separate operations……… P 104......... P 242.000 Eliminate ending unrealized gross profit (see above) ..000 transfer price less P30...........500) Noncontrolling Interest in Broadway’s earnings.............000 Less: Amortization of allocated excess…………………… ____0 Consolidated Net Income for 20x5 P 254..........000 Realized profit in beginning inventory of P Company (upstream sales) 0 Unrealized profit in ending inventory of P Company (upstream sales)… ( 0) S Company’s realized net income from separate operations*…….... P 196...................000 .400 Multiplied by: Non-controlling interest %......

........000) Reduction of ending inventory because of 20x5 unrealized gross profit (P35............................000 transfer price less P15........................000/1............ P 3................000 Realized profit in beginning inventory of P Company (upstream sales) 6...............000) S Company’s realized net income from separate operations……… P 54....4 = P25. (10.......................000 + P2.............. P10...000) SW realized income .... P346...000 20x5 unrealized gross profit to be realized in 20x6 (above) ..000 Unrealized profit in ending inventory of S Company (downstream sales)… (_ 45.......... P58..............000 Non-controlling Interest in Subsidiary's Net income Since all intercompany sales are upstream....................................800 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent – 20x5………….....000 Outside ownership percentage .....200 **Non-controlling Interest in Net Income (NCINI) for 20x5 S Company’s net income of Subsidiary Company from its own operations (Reported net income of Son Company) P 58. P21.. 6.............. (6...... (80.....4 = P15....000 Multiplied by: Non-controlling interest %....................000 S Company’s net income from own operations (P1............000 Total P 254.........................000) P3.......00 0 ...........000 cost..... P35........................................400..000 Realized profit in beginning inventory of P Company (upstream sales) 6............................000 Consolidated cost of goods sold ..............000 unrealized gross profit) ............000 Realized profit in beginning inventory of S Company (downstream sales) 54.....000 Less: Amortization of allocated excess ____0 P 58...900. P 3.................000 Consolidated Inventory PP book value ................ P 243.......................................000 54..............000 transfer price less P25..........................000 Realized profit in beginning inventory of S Company (downstream sales) Unrealized profit in ending inventory of S Company (downstream sales)… (_ 0) P Company’s realized net income from separate operations*……........... Realized profit in beginning inventory of P Company (upstream sales) 0 Unrealized profit in ending inventory of P Company (upstream sales) ( 0) S Company’s realized net income from separate operations……… P 58....................... 10... P411..000 Less: Amortization of allocated excess…………………… ____0 Consolidated Net Income for 20x5 P 254.........000 cost = P10..........................800 or Consolidated Net Income for 20x5 P Company’s net income from own/separate operations (P640-P290-P150) P 200....000 Elimination of 20x5 intercompany transfers ..........600 2...........000/1..... P446.000 Unrealized profit in ending inventory of P Company (upstream sales) ( 10.000 20x4 unrealized gross profit realized in 20x5 (above) .000 Unrealized profit in ending inventory of P Company (upstream sales)… ( 10.......…......000) S Company’s realized net income from separate operations*……...... P290.............000 SW book value .... 20% Non-controlling Interest in Net Income (NCINI) – partial goodwill P 10.............….000) Consolidated inventory ..000 unrealized gross profit) .. 20% Non-controlling interest in SW’s income .......000 Eliminate ending unrealized gross profit (see above) ........... P54. P 200..........................…..............000) Reduction of beginning inventory because of 20x4 unrealized gross profit (P21...000 Multiplied by: Non-controlling interest %...... 20% Non-controlling Interest in Net Income (NCINI) – partial goodwill P 11...... P 54............800 Problem X Consolidated Net Income for 20x4 P Company’s net income from own/separate operations…………................. 110..500................ Consolidated Cost of Goods Sold PP book value ........609.. (10..........000 Less: Amortization of allocated excess ____0 P 54.. 197.................000 S Company’s net income from own operations (P360 – P197 – P105) P 58...............................000 cost = P6.................000 SW book value ..........00 0) P Company’s realized net income from separate operations*……..... the effect on Snow's income must be reflected in the non-controlling interest computation: SW reported income .600...............000 cost..000 Less: Non-controlling Interest in Net Income* * 10..........

400.00 0 Realized profit in beginning inventory of P Company (upstream sales) – 66.000 Realized profit in beginning inventory of S Company (downstream sales) 54.Salad P 301.20 0 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent………….509..600.512.00 3.900.000 Realized profit in beginning inventory of P Company (upstream sales) 66.512. alternatively Consolidated Net Income for 20x4 P Company’s net income from own/separate operations………….394.000 Less: Amortization of allocated excess _____0 P1.512.800 Non-controlling Interest in Net Income* *.00 3.000 Less: Non-controlling Interest in Net Income* * . P3. **Salad Non-controlling Interest in Net Income (NCINI) for 20x4 S Company’s net income of Subsidiary Company from its own operations (Reported net income of S Company) P1..800 **Tuna Non-controlling Interest in Net Income (NCINI) for 20x4 S Company’s net income of Subsidiary Company from its own operations (Reported net income of S Company) P2..000) Salad Unrealized profit in ending inventory of P Company (upstream sales) – ( 69..000 Less: Amortization of allocated excess…………………… 0 Consolidated Net Income for 20x4 P7...800 Non-controlling Interest in Net Income* * .903. 10% Non-controlling Interest in Net Income (NCINI) P 239.500.000) Son Company’s realized net income from separate operations……… P1..000) P3.000 Salad Realized profit in beginning inventory of P Company (upstream sales).40 ___541.609.000 Less: Non-controlling Interest in Net Income* *.000) Tuna S Company’s realized net income from separate operations*…….000 Less: Amortization of allocated excess _____0 P2.000 *that has been realized in transactions with third parties.00 0 S Company’s net income from own operations (P1..000 + P2. __ 20% Non-controlling Interest in Net Income (NCINI) P 301.. P6.000 Unrealized profit in ending inventory of P Company (upstream sales) ( 57.…. Or.000 Salad Realized profit in beginning inventory of P Company (upstream sales).903.512..970.Tuna ___239. P 3..200 0 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent – 20x4…………. P3.800 *that has been realized in transactions with third parties..400 Realized Profit in Beginning inventory: .000) Son Company’s realized net income from separate operations……… P2.500.. P6..903.400 Amortization of allocated excess…………………… 0 __541..000 Unrealized profit in ending inventory of P Company (upstream sales) ( 69.000 0 Total P7.. 63.00 0 Multiplied by: Non-controlling interest %...….903.000 0 Total P7.000) Salad Unrealized profit in ending inventory of P Company (upstream sales) – ( 69.509.000 Tuna Unrealized profit in ending inventory of P Company (upstream sales) – ( 57.970...000 Realized profit in beginning inventory of P Company (upstream sales) 63.Tuna 239.….200 Consolidated Net Income for 20x4 P 7.00 0 Multiplied by: Non-controlling interest %. P3.000) P Company’s realized net income from separate operations*…….394.400. 63.000 Unrealized profit in ending inventory of S Company (downstream sales)… (___45..000 Tuna Unrealized profit in ending inventory of P Company (upstream sales) – ( 57...Salad P 301. Realized profit in beginning inventory of P Company (upstream sales) – 66.800 Add: Non-controlling Interest in Net Income (NCINI) _541.000) Tuna S Company’s realized net income from separate operations*……..

.......000 per year Intercompany Gross profit (P160........000 (add the two book values and subtract the intercompany transfer and add [to defer] ending unrealized gross profit)  Operating Expenses = P443..... P 240... P240...................... includes inventory transfers and an outside ownership.000 Unrealized Profit in Ending inventory: Downstream Sales (Sales from Parent to Subsidiary) P345.000/5 years = P13..........000 S Company’s net income from own operations…………………………………....................... P 220...............000 Total P 262.........000)  Sales = P1....000 = P692.......000  Controlling Interest in CNI: Gross profit.. 443....000 Problem XI (Determine selected consolidated balances..000 Consolidated Net Income for 20x5 P 249......000 Realized profit in beginning inventory of P Company (upstream sales) 0 Unrealized profit in ending inventory of P Company (upstream sales)… ( 8......240.......................... alternatively Consolidated Net Income for 20x5 P Company’s net income from own/separate operations………….….........................) Customer list amortization = P65.... Downstream Sales (Sales from Parent to Subsidiary) P414...................000 42........000 Realized profit in beginning inventory of P Company (upstream sales) 0 Unrealized profit in ending inventory of P Company (upstream sales)… ( 8.000 x 20/120 57..240......000 intercompany transfer)  Cost of Goods Sold = P548. P 220.....300 or Consolidated Net Income for 20x5 P Company’s net income from own/separate operations (P800-P400-P180) P 220......... 000) S Company’s realized net income from separate operations*……..000 (add the two book values and the amortization expense for the period)  Gross profit: P1............000 Less: NCI-CNI.....000 Consolidated Net Income .000 Upstream Sales (Sales from Subsidiary-Tuna to Parent): Tuna: P345.. P40....000 x 15/115 P45........... P249........….......000 (add the two book values and subtract the ending unrealized gross profit of P8....000 Upstream Sales (Sales from Subsidiary-Salad to Parent): Salad: P396....... P8.000 Inventory Remaining at Year's End..…...........000 – P120.........000 (add the two book values and subtract the P160..700 CI-CNI... P 50.000 – P548........000 Realized profit in beginning inventory of S Company (downstream sales) 0 Unrealized profit in ending inventory of S Company (downstream sales)… (_ 0) P Company’s realized net income from separate operations*……...000 Less: Non-controlling Interest in Net Income* * 8......................000 x 25/125 69....000 Realized profit in beginning inventory of S Company (downstream sales) 0 Unrealized profit in ending inventory of S Company (downstream sales)… (_ 0) P Company’s realized net income from separate operations*……..700 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent – 20x5…………... P692...000) ......................000 Less: Operating expenses.. P 220..000 x 15/115 P54.... 12/31 ..... 20% Unrealized Intercompany Gross profit.................…...........000 42...........000 Consolidated Totals:  Inventory = P592..........000 ............... Or..000 x 20/120 66.........000 Less: Amortization of allocated excess…………………… 13... P 42... P 42......000) S Company’s realized net income from separate operations*……...000 x 25/125 63............000 S Company’s net income from own operations (P600 – P300 – P250) P 50....000 Upstream Sales (Sales from Subsidiary-Salad to Parent): Salad: P342.300 *that has been realized in transactions with third parties................ 8............................000 Upstream Sales (Sales from Subsidiary-Tuna to Parent): Tuna: P315.....................

...000 P24.000 *that has been realized in transactions with third parties..000 Realized profit in beginning inventory of P Company (upstream sales) 0 Unrealized profit in ending inventory of P Company (upstream sales) ( 8..000 Consolidated Net Income for 2014 P Company’s net income from own/separate operations (P724..….. P240....600 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent – 2014…………...000 excess fair value amortization and deferring P8.…….000 95.000 RPBI of S (downstream sales):…………………..000 Less: Non-controlling Interest in Net Income* * P 8... P695.000 Less: Non-controlling Interest in Net Income* * P 18.... P 90.000 95...000 Less: Non-controlling Interest in Net Income* * 18.000 ending unrealized gross profit) Gross profit is included in this computation because the transfer was upstream from SS to PT.000 Unrealized profit in ending inventory of P Company (upstream sales) ( 5. Problem XII Amortization of equipment: P20...000 *that has been realized in transactions with third parties...700 Amortization of allocated excess…………………… 13...000 ..000 UPEI of S (downstream sales)…………………………………………………….000 Realized profit in beginning inventory of S Company (downstream sales) 15.. P15..300 Add: Non-controlling Interest in Net Income (NCINI) _ 8....000) S Company’s realized net income from separate operations*…….. P 95...00 0) S Company’s realized net income from separate operations……… P 42..600 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent…………....600 Consolidated Net Income for 2014 P788....…......... P 90.700  Noncontrolling Interest in Subsidiary's Net Income = P8... 10...... 30% Non-controlling Interest in Net Income (NCINI) – partial goodwill P 8..400 *that has been realized in transactions with third parties. P 95..000 21.....000 / 10 years = P2.... 20..000 Unrealized profit in ending inventory of P Company (upstream sales)… ( 5....00 0) P Company’s realized net income from separate operations*……..000 Realized profit in beginning inventory of S Company (downstream sales) 15..000 Total P790.......…...000 Less: Amortization of allocated excess 13.700 Consolidated Net Income for 20x5 P249....00 0) P Company’s realized net income from separate operations*……..000) Son Company’s realized net income from separate operations*…….700 (30 percent of the reported income after subtracting 13.000 P 93...0000 Unrealized profit in ending inventory of S Company (downstream sales)… (20.000 RPBI of P (upstream sales)……………………….000 Less: Amortization of allocated excess…………………… 2...700 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent…………..000 S Company’s net income from own operations…………………………………...600 Amortization of allocated excess…………………… 2.000 Total P790...000 S Company’s net income from own operations…………………………………...….000 Less: Amortization of allocated excess 2..…………… 5.000 (Reported net income of S Company) Realized profit in beginning inventory of P Company (upstream sales) 10.... Total P 262..000 Multiplied by: Non-controlling interest %.....400 Add: Non-controlling Interest in Net Income (NCINI) _ 18... P695.000 Realized profit in beginning inventory of P Company (upstream sales) 10.. Or. P769..000 Unrealized profit in ending inventory of S Company (downstream sales)… (20.. **Non-controlling Interest in Net Income (NCINI) for 20x5 S Company’s net income of Subsidiary Company from its own operations (Reported net income of Son Company) P 50..000 P 29.000 20....000) S Company’s realized net income from separate operations……… P 95.. alternatively Consolidated Net Income for 2014 P Company’s net income from own/separate operations P700...000 Unrealized profit in ending inventory of P Company (upstream sales) ( 5. P769....000 Consolidated Net Income for 2014 P788. **Non-controlling Interest in Net Income (NCINI) for 2014 S Company’s net income of Subsidiary Company from its own operations P 90.000 – P700..000 Realized profit in beginning inventory of P Company (upstream sales) 10..000 UPEI of P (upstream sales)…………………………………………………......

000 P3.………….P 150..000 Less: Retained earnings – Subsidiary.000 Increase in Retained earnings since acquisition (cumulative net income – cumulative dividends)…………P 110. 12/31/2014 (ending balance of the current year) - Retained earnings – Parent.000 -: UPEI of S (down) – 2013 or RPBI of S (down) – 2014.801..000 Accumulated amortization (1/1/2011 – 1/1/2014): P 2.. 12/31/2014 (equity method) = CRE.( 8.000 Accumulated amortization (1/1/2011 – 12/31/2014): P 2.. P 3..……………………… 25..000) UPEI of P (up) – 2014 or RPBI of P (up) – 2015……………….000 Intercompany sales .861.000 NI of P)…. 769.000 UPEI of P (upstream sales)**** _________ 5. 12/31/2014 (cost)……………………….. P 3. 12/31/2014 (equity method) = CRE.000 RE – P..000 X: Controlling Interests………………………………………… 80% 75.605..000) Intercompany sales .000) ( 320..000 Less: Retained earnings – Subsidiary.600 Sales Cost of Sales P P2. 15. 1/1/2014 (cost)……………… P2.000) RPBI of S (downstream sales)* ( 15.000) UPEI of P (up) – 2013 or RPBI of P (up) – 2014……………….………….200 RE – P..000) RPBI of P (upstream sales)*** ( 10. 2014 (use work back approach). 20.000 S 1.000 x: Controlling Interests………………………………………… 80% 125. P 3. 1/1/2014 (cost) (P3. 20% Non-controlling Interest in Net Income (NCINI) – partial goodwill P 18.515.600 Or..000 x 3 years……………………………………………….000 plus P25... Multiplied by: Non-controlling interest %. ( 10.480.000 Consolidated P1.. 1/1/2011………………………P 150..500.200 +: CI – CNI or Profit Attributable to Equity Holders of Parent……. 1/1/2014……………… 260. 320..since what is given is the RE – P.000) P157..500.400 -: Dividends – P……………………….upstream ( 290. P2.000) P 94.600 Note: Preferred Solution .090.600 RE – P.000 Adjusted Retained earnings – Parent.( 5. 1/1/2014 (equity method) = CRE. compute first the RE – P on January 1..000) UPEI of S (downstream sales)** 20.P3..000 Div of P less P724.downstream ( 320.000) ( 290..000 Retroactive Adjustments to convert Cost to “Equity” for purposes of consolidation / Parent’s share of adjusted net increase in subsidiary’s retained earnings: Retained earnings – Subsidiary.. ( 6..786.000 Working Paper Eliminating Entries: 1...000 P1. 1/1/2014……………….000 x 4 years……………………………………………….605.250..000 Increase in Retained earnings since acquisition (cumulative net income – cumulative dividends)………… P 170.000 875.000 -: UPEI of S (down) – 2014 or RPBI of S (down) – 2015. 1/1/2011……………………….600 Less: NCI on goodwill impairment loss on full goodwill 0 Non-controlling Interest in Net Income (NCINI) – full goodwill P 18. 12/31/2014………….500.000 Adjusted Retained earnings – Parent.P2. 12/31/2014………….200..000 Retroactive Adjustments to convert Cost to “Equity” for purposes of consolidation / Parent’s share of adjusted net increase in subsidiary’s retained earnings: Retained earnings – Subsidiary. 12/31/2014 (cost)…………. Intercompany Sales and Purchases: . 12/31/2014………….. Retained earnings – Parent.

4.00 3...60 20x6: (P112.000 Cost of Sales (Beginning Inventory in Income Statement)…..000 x 80% = P14.258. b – (P14. beginning……………………………………….800 x 30% x 80%) – (P3.….800 x 30% x 80%) = P80.. 1.00 100% UPEI of P: (P4...60 NCI ………………………………………………. Downstream Sales: Sales…………………………………………………………………………...000 Multiple Choice Problems 1. 290.000 **100% UPEI of S: Cost of Sales (Ending Inventory in Income Statement)……………… 20.000 Upstream Sales: ***100% RPBI of P: (if equity method Investment in S instead of RE – P. 320..400 100% RPBI of P: (if equity method Investment in S instead of RE – P.000 Cost of Sales (or Purchases)……………………………………… 290.000 Upstream Sales: Sales………………………………………………………………………….440 x 30% x 80%) .000 Inventory (Ending Inventory in Balance Sheet)……………….000 ****100% UPEI of P: Cost of Sales (Ending Inventory in Income Statement)………………… 5.40 20x5: (P102.800 x 80%) + (P4..000 NCI ………………………………………………...(P4. 20...... 20. 1. 5..400 Cost of Sales (or Purchases)…………………………………… 14.440 .000 x 80%) + (P1.. 16...000 x 80% = P9. 14.854.. 4.600 x 30% x 80%) = P90. 15. 432.392) Analysis: Eliminating entries Upstream Sales: Sales…………………………………………………………………………... 320....440 x 30% x 80%) = P66.. Intercompany Profit: (COST Model) Downstream Sales: *100% RPBI of S: Retained Earnings – P.…………………………… 86.800 x 30% = P1.000 Inventory (Ending Inventory in Balance Sheet)………………...000 Cost of Sales (or Purchases)…………………………………….000 x 80%) = P67.000 Cost of Sales (Beginning Inventory in Income Statement)…. a 20x4 and 20x5:: P12.) Retained Earnings – P.440 = P13. beg. beginning…………………………………. beginning………………………………….): (P1....400 + P432 – P1.400 2.793.. 345.. beg.40 Cost of Sales (Beginning Inventory in Income Statement)..600 20x6: P18...440 Inventory (Ending Inventory in Balance Sheet)…………….200 – (P1. No requirement.……………………………. c 20x4: (P84..……. 15.440 x 30% = P432) Retained Earnings – P..440) Cost of Sales (Ending Inventory in Income Statement)……………..000 2..

. . . . .800 109.694 Balance. . .000. . 110. 12/31/x4 LP: P1.350 x 35/135 = P350 UPEI of LP: P1..000 x 85%)* 10. .000 Allocated excess (excess of cost over book value) .000 Full Fair value of Subsidiary (100%) Consideration transferred P (80%). so need to adjust retained earnings. . . ___30. 120. . . .070 80%) NI of Leisure 4. . ___24. . . . . . .. . . .000 x 80%) 850 Impairment (1.000 % . P 68. . .000 x 80%) ……………………………………….000 Less: Book value of stockholders’ equity of LP (P10. . . .000 Less: Over/under valuation of assets and liabilities: Increase in favorable leases (P30. 12/31/x3 NI of Leisure 4. ____8. . . . . .. .. . . . P . . . . . . . . .000 Positive excess: Partial-goodwill (excess of cost over fair value) . P . P100.000 x 80%) (13. . . . .000 x 100%) .. . .000 Positive excess: Partial-goodwill (excess of cost over fair value) . . for instance in Questions 6 to 10. . . 100.000 x 80%) .000 Less: Over/under valuation of assets and liabilities: Increase in favorable leases (P30. .000 Note: The controlling interests of parent to subsidiary of 80% is not an outright application to impairment of goodwill. . . . .000 x 80% = P4. Investment in Leisure. P5. . .620 x 35/135 = P420 Partial Fair value of Subsidiary (80%) Consideration P transferred . . .000 x 100%) ……………………………………….. ..000 Fair value of NCI (given) (20%) ……………………………. . . 100.000 Allocated excess (excess of cost over book value) . .000.Investment income. .000 Fair value of Subsidiary (100%) P ……………………………. P 80.000 Dividends – Lei (5. ___20.. . . . . . . . . .400 RPBI of LP (350 x 80%) 336 UPEI of LP (420 x 80%) 280 Investment Income Amortization Balance. . a – there are no intercompany profit in 20x3 (prior year). . . .000 x 80%) 850 UPEI of LP (420 x 80%)) 280 RPBI of LP (350 x 80%) 336 RPBI of 4. . . 92. . . . . . . 1/1/x3 4. 7. . a .764 Impairment* 10.800 Amortization (6. . . . .5.. .c Investment in Leisure Cost. . . . ___10. . the CI is 85% and NCI is 15% for impairment computed as follows: Partial goodwill 68. it still depends on the resulting goodwill of partial and full goodwill. . .000 Less: Book value of stockholders’ equity of LP (P10. . .000 85% _15 NCI on Full Goodwill 12. . .400 (13.000x 109.000 % 100 Full-goodwill 80. 6. .

930 . .000 . . . . . . . . . . . . . . . Son Company’s realized net income from separate P12.. . . . . . . . . . . . . . . .. . .. . .. Less: Non-controlling Interest in Net Income* * . . . .930 12. . ..930 Multiplied by: Non-controlling interest % . . . . . . . . . . . . . .930 . . .000) P 20.. . .930 12. . . . . ..930 . .. .. . . . .. .. . .. . . . . . Or. . . ... . . . . . . . . .. .. . . . . . .. . . ( 420) .. . ..000) P 13. . . . . . . Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of P 24. . . .. . . . .. Consolidated Net Income for 20x3 . . . . P 6. . . . . ... . . . . . . .000) P 13. . . . . . . . . . .8. . . . . ... .. .. . . . . .. ..... . . . . . . . .. . .. . . . . . . . . . . . . . ... .. . . . . . . . . ( 420) . . . . . . . . . . . Add: Non-controlling Interest in Net Income _ _ 1.000 – P250.386 .. . . . . . .000 excess .694 20x3 . . . . . . Less: NCI on goodwill impairment loss on full goodwill (P1. ..000 Realized profit in beginning inventory of P Company (upstream sales) . . . .. . . . P 32. . . . . . .. . .. . . . . . . . . . ___1.930 operations* . . . .. . Non-controlling Interest in Net Income (NCINI) – partial goodwill .. .000 Realized profit in beginning inventory of P Company (upstream sales) . . . a Consolidated Net Income for 20x3 Parent Company’s net income from own/separate operations (P400. .930 . . . . . . . .. . .. . .000 – P250. . . . . . . . . . . . . . Less: Non-controlling Interest in Net Income* 1. . . . . Impairment of 1. . .000 – P67. . Or. . Unrealized profit in ending inventory of P Company (upstream sales) . . . . . . P 12.. . .. . . .. . . . . . . . . . .. . . . . P 32. . . P 1. . .. . . .694 parent . . . Less: Amortization of allocated excess . . . . . . .. Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent – P24.236 excess . . . . . alternatively CI-CNI NCINI CNI Parent’s net income own operations 20. .. .000 Subsidiary Company’s net income from own operations (P200. .. . .. .. . . . . .. . . .. **Non-controlling Interest in Net Income (NCINI) for 20x3 S Company’s net income of Subsidiary Company from its own operations P 13. . . . .. . . . . . . . . . . . . . . . . .236 (NCINI) ... . . . .000 8. ( 420) . .. . . . . . .000 – P67. . .. . . . . . . 6. . . . .. . . .000 – P130. 20% .000 goodwill. . . . . *that has been realized in transactions with third parties..236 *.. . Consolidated Net Income for 20x3 . .. Unrealized profit in ending inventory of P Company (upstream sales) .0 . Non-controlling Interest in Net Income (NCINI) – full goodwill . . . . .. . . . . 350 . Impairment of goodwill. .. .000 (Reported net income of S Company) Realized profit in beginning inventory of P Company (upstream 350 sales) . . . . . . .... . . . .. .000 – P120. . . . . . Amortization of allocated 6. Less: Amortization of allocated 6. . . .236 . . . . . . . . . . . . . Son Company’s realized net income from separate P12. . .236 . . .000 . . . .000) P 20. . ..000 – P130. . . . . . . . . . . . . .. . . . . . . . .930 . . .. . . . . 350 . . . P 1. . S Company’s realized net income from separate operations . . . . . . . . . . .930 operations* . . .. . . . . . . . . . . . . . . . .. . . . . . . .. . . . . . .. P 1.. . . ..000 x 150 15%). .000 Subsidiary Company’s net income from own operations (P200... . . . . . . . . . . Unrealized profit in ending inventory of P Company (upstream sales) . . . .. .. . . . .. . .. Total . . P 25. *that has been realized in transactions with third parties. .. . . . . . .. . alternatively Consolidated Net Income for 20x3 Parent Company’s net income from own/separate operations (P400. . P25. . . . . . . . Total . . . . . . . . . .000 – P120. . . . .. . . . . . .

. . . there are some missing figures particularly the details of subsidiary’s stockholders equity since the date of acquisition.. .P200. b Retained earnings of Parent Company (under equity method) / Consolidated Retained earnings .. . .000 20x4. . . profit confirmed 0 Upstream end.000 Realized profit in beginning inventory of P Company (upstream sales) 40. .000 Unrealized profit in ending inventory of P Company (upstream sales) ( 25. inv. . P 64. .000 Equity Method: (P120. . . . . . . . .000 x 70% = P28. . . . . .. . . . . . . . . . .000 15.000 x 80% = P48. . . . 10. . .000 16. . . . . . . . . . d Non-controlling Interest in Net Income (NCINI) for 20x4: S Company’s net income of Subsidiary Company from its own operations (Reported net income of S Company) P 137.. . . . . .P720. . . . . . .000 20x3. . . . . a . .250. . . P 54. .. . . . . . equity in subsidiary income 14. . Add: Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent for 24. . . . 00 Subsidiary’s reported net income 10. . . . . . . . . .... . inv.600 12. . Total. .694 1. . .000) = 50 Consolidated cost of sales P 76. December 31. .000 + P400. . .00 0 Less: Intercompany sales revenue 110. . . 11. . . . . . . . .400 2. Ignore. ..000 = P500. .000 x 80%) –(P200. . . . Therefore. . . profit unconfirmed (336) (84) 25. . . . .. . . . . . . . . . . . . .P26. dividend income Equity Method: (P115.694 20x4. . . Less: Dividends paid – Parent Company for 10. . . .694 .000. . . .000 +P 20. . ... . . . Retained earnings of Parent Company (under equity method) / Consolidated Retained Earnings. 30% Non-controlling Interest in Net Income (NCINI) – partial goodwill P 45.. regardless of the method used in the separate financial statement of parent. b Combined cost of sales P 160. . . . . . . . . . . . . . . .000 x 50% = P100.600 Favorable leases amortization (4. . . . . . b Cost method: P60. . . . . ..93 24. . . . . .000 x 20% = P20.000)=P76. . . . .0 00 Add: Unrealized profit taken out of inventory 26. . d Cost method: P40. . the consolidated balance (which is under equity method) is always the same. . . . . . d Downstream situation . . P 40. . . January 1. . .000 x 70%) .000 Less: Amortization of allocated excess _ 0 P 152.600 Less: NCI on goodwill impairment loss on full goodwill 0 Non-controlling Interest in Net Income (NCINI) – full goodwill P 45. . . . . .2 (75%)x(35.200) Goodwill impairment loss (850) (150) 8 Upstream beg. .. . . . . .. . ..250 = P54. .000 . . . . . .800) (1.000 Multiplied by: Non-controlling interest %. . .694 20x5. . . .000) S Company’s realized net income from separate operations……… P 152.250 13.. .236 9. . . . . . .

a Beginning inventory profit = P825. c – P100.000 x 1/3 = P105.000 – P20.000 135)/P189] Intercompany profit to be eliminated P54. b – [P300.000 Ending inventory (90.000 = P15. P 37. c .000.000 x 1/3 = P100.000 x (90 .000 x 30% = P27.000 x 70%)] P 37.000) __8. S Company’s net income from own/separate operations P120. __30.P825.….25 = P150.….000 x (P315.000 x (P189.000 Less: Unrealized profit in ending inventory of S {P189. c – P400. 28. [P90.000 x 60%) P120.000/1.000 x 40% = P60.000 Realized profit in beginning inventory of P Company (upstream sales) 0 Unrealized profit in ending inventory of P Company (upstream sales) [P90.000 x: NCI % 20% P 24.67)/90] __6.000 Less: Unrealized profit in ending inventory of S {P315.000 x (90-67/90)] ( 6.000 x 1/3 = P63.000 Total 130.000 – P67. P165. c Ending inventory at selling price: P300.25 = P165.P750.000 x 60%) P72.100 Less: Non-controlling Interest in Net Income* * 1.000) P23. c Share in net income (P120.000 25.000 26.000 .000 x 1/2 = P150..000 Less: Intercompany sales 90.000 + P110. so the only eliminating entry is to debit sales revenue and credit cost of goods sold for P1.000 x (300.000 Realized profit in beginning inventory of S Company (downstream sales) 0 Unrealized profit in ending inventory of S Company (downstream sales)… (_0) P Company’s realized net income from separate operations*…….000 .000 – P92.000 17. b 23.000 x 70%) ______ 63.000 S Company _63.000 Add: Unrealized profit in EI of S Co.000] 27.000 x 30% = P27. P16.P50.100 Less: Amortization of allocated excess…………………… 0 Consolidated Net Income for 20x4 P 53.000 Less: Inventory write-down (P100. b .000 Subsidiary (90.000 Ending inventory profit = P750.000 240.There is no unconfirmed profit in beginning or ending inventory.000 P225)/P315] Intercompany profit to be eliminated P 90.100 16.000 .000 increase 20.100 Total P 53.000 Downstream sales only affect equity in net income.900 Parent Subsidiary Sales 90.000 . b Share in net income (P200.000 = P25.P80.000 increase.000 .000 Gross profit 23.000 Less: Cost of goods sold – Parent 67. c Cost of Sales P Company 67.000 100.000 x 1/4 = P100.000 Intercompany profit to be eliminated P12. 21.000.000/1.000 18.900 ) S Company’s realized net income from separate operations*…….P45.610 Controlling Interest in Consolidated Net Income or Profit attributable to .000 19.000 37.00 sales to unrelated/unaffiliated company.000 29.000)/300. a Consolidated Net Income for 20x4 P Company’s net income from own/separate operations [P100.000 x 30% = P30.000 – (P90.000 x 30%) 27.. __18.P150. 22.000 S Company’s net income from own operations (P90.900 Consolidated 46. a 24.

.….000) P3 0.000 30.490 Add: Non-controlling Interest in Net Income (NCINI) _ 1.000 *that has been realized in transactions with third parties. P16.000 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent…………. **Non-controlling Interest in Net Income (NCINI) for 20x4 S Company’s net income of Subsidiary Company from its own operations (Reported net income of S Company) P 23.000 Realized profit in beginning inventory of P Company (upstream sales) 0 Unrealized profit in ending inventory of P Company (upstream sales) () S Company’s realized net income from separate operations*……..000 Less: Non-controlling Interest in Net Income* * P 3.100 Less: Amortization of allocated excess 0 P 16.100 Multiplied by: Non-controlling interest %..000 Add: Non-controlling Interest in Net Income (NCINI) _ 3.000 Realized profit in beginning inventory of P Company (upstream sales) 0 Unrealized profit in ending inventory of P Company (upstream sales) [P90.000 S Company’s net income from own operations (P120. alternatively Consolidated Net Income for 20x4 P Company’s net income from own/separate operations (P90..000 x 67/90 = P20.000 x 30% = P27.000 Realized profit in beginning inventory of P Company (upstream sales) 0 Unrealized profit in ending inventory of P Company (upstream sales () S Company’s realized net income from separate operations*…….610 30...….. P 51.610 Less: NCI on goodwill impairment loss on full goodwill 0 Non-controlling Interest in Net Income (NCINI) – full goodwill P 1.000 – (P90..100 Total P 53. .….….. P30.000.000 – P 28. a – the cost of inventory produced by the parent (downstream sales) 33.000 S Company’s net income from own operations (P90. alternatively Consolidated Net Income for 20x4 P Company’s net income from own/separate operations [P100.000 – P90.000 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent – 20x4…………. P 51.000 Consolidated Net Income for 20x4 P 58. the amount of sales to outsiders is the amount of sales presented in the consolidated income statement..000 Total P 58.. 10% Non-controlling Interest in Net Income (NCINI) – partial goodwill P 1. P 55.900 ) S Company’s realized net income from separate operations*…….100 Less: Non-controlling Interest in Net Income* * P 1.000 Total P 58.000 – P90.000 x (90-67/90)] ( 6. d – P27.000) Realized profit in beginning inventory of S Company (downstream sales) 0 Unrealized profit in ending inventory of S Company (downstream sales)… (_0) P Company’s realized net income from separate operations*……... P30. Or.000) P23.000 Less: Amortization of allocated excess…………………… 0 Consolidated Net Income for 20x4 P 58.000 P62.000 – P67. P 28.610 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent………….000) Realized profit in beginning inventory of S Company (downstream sales) 0 Unrealized profit in ending inventory of S Company (downstream sales)… (_0) P Company’s realized net income from separate operations*……. P 37.100 *that has been realized in transactions with third parties.000 Less: Non-controlling Interest in Net Income* * 3.. 32.….. equity holders of parent – 20x4………….100 16.…. P 28.490 *that has been realized in transactions with third parties.610 Amortization of allocated excess…………………… 0 1.000 Amortization of allocated excess…………………… 0 3..000 S Company’s net income from own operations (P120.000 Realized profit in beginning inventory of S Company (downstream sales) 0 Unrealized profit in ending inventory of S Company (downstream sales)… (_0) P Company’s realized net income from separate operations*……..900) S Company’s realized net income from separate operations……… P 16.100 31.000 x 70%)] P 37. P 55.000 Realized profit in beginning inventory of P Company (upstream sales) 0 Unrealized profit in ending inventory of P Company (upstream sales) ( 6.000) P3 0.610 Consolidated Net Income for 20x4 P 53. c Consolidated Net Income for 20x4 P Company’s net income from own/separate operations (P90.000 30. b – P120..000 P62. Or..000 *that has been realized in transactions with third parties.000 – P 28.

b Consolidated Net Income for 20x4 P Company’s net income from own/separate operations P 225.200.000 _160.000 Add: Unrealized profit in EI of S Co. P 285.000 Realized profit in beginning inventory of S Company (downstream sales) 0 Unrealized profit in ending inventory of S Company (downstream sales)… (_0) P Company’s realized net income from separate operations*…….000 1.700. a 20x5 Sales Cost of Sales P Company 1.000 7.500 35. 10% Non-controlling Interest in Net Income (NCINI) – partial goodwill P 3.000 ) S Company’s realized net income from separate operations*……..000) 40.000 41.000 Less: Intercompany sales – downstream sales 60.. **Non-controlling Interest in Net Income (NCINI) for 20x4 S Company’s net income of Subsidiary Company from its own operations .821. c Sales Cost of Sales P Company 10.000 x (P30. **Non-controlling Interest in Net Income (NCINI) for 20x4 S Company’s net income of Subsidiary Company from its own operations P 30. c Sales P Company 10.604.000 7.….520.000 2.000 x 30% = P18.000 375.000 Total 10.500) = P2.….000 S Company __200.000 75.000 S Company __900.000 38.000 Add: Unrealized profit in EI of S Co. [P60. c .440.000. 34 for computation 36. [P240. 40 for computations 42.680.000 Less: Amortization of allocated excess 0 P 30..000 Less: Amortization of allocated excess…………………… _0 Consolidated Net Income for 20x4 P 300.5)/10] ________ Consolidated 10. c – (P10.5)/10] ________ __ 4.000 Total 10.000 x 50% = P75.000 x (240-192)/240] 24.000 x (10 – 7.000 *that has been realized in transactions with third parties.000 _750.325.000 Less: Intercompany sales – upstream sales 60.refer to No.000 x 40% = P150.000 Add: Unrealized profit in EI of S Co.000 Less: Intercompany sales 375. P225.000 x 30% = P18. [P375.000) 39.000 x 1/2 = P120.000 60.500 37..000 Total P 300.000 7.000..140..190..000/P150.000 Realized profit in BI of S Co.000 = P16.000 34.000 x (10 – 7. P 75.200.535.000 – P7.800..000 Less: Non-controlling Interest in Net Income* * 15.500 Consolidated 10...000 1.000 Multiplied by: Non-controlling interest %.000 Consolidated 2.000 Realized profit in beginning inventory of P Company (upstream sales) Unrealized profit in ending inventory of P Company (upstream sales) [P150. [P60.000 S Company __200.604.000 Total 2.140.000)] ( 15.000 (Reported net income of S Company) Realized profit in beginning inventory of P Company (upstream sales) 0 Unrealized profit in ending inventory of P Company (upstream sales) ( 0) S Company’s realized net income from separate operations……… P 30. a – (P56..140.000 – P40. a – (P40..000 x 140% = P56.000 S Company’s net income from own operations P 90. d – refer to No.000 Less: NCI on goodwill impairment loss on full goodwill 0 Non-controlling Interest in Net Income (NCINI) – full goodwill P 3.000 x (375-300)/375] ________ __30.000 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent – 20x4………….

573 50. P 177.80 Realized net income P 36. a Consolidated Net Income for 20x4 P Company’s net income from own/separate operations P180.000 Income to Dresser’s noncontrolling interest: Sales P120.000 Portion to Noncontrolling Interest x . 42 for computations c 44.000) … P Company’s realized net income from separate operations*…….000 46. (Reported net income of S Company) P 90.000 Unrealized profit (45.000) Actual cost P 75.000 Total 850.000 . 45 a Amount paid by Lorn Corporation P120.000 Portion sold x .000 51..000) S Company’s realized net income from separate operations……… P 75.200 A Inventory reported by Lorn P 24.000 Multiplied by: Non-controlling interest %..000 S Company _350.000 47. a Selling price P 50.000 Less: Amortization of allocated excess 0 P 75. 20% Non-controlling Interest in Net Income (NCINI) – partial goodwill P 15.000 e Consolidated sales P140.000 Portion realized x ..000 43. Unrealized profit (P45..000 Less: NCI on goodwill impairment loss on full goodwill 0 Non-controlling Interest in Net Income (NCINI) – full goodwill P 15. a Ending inventory of Perth from Dundee (P36. c Sales P Company 500.800) Income to controlling interest P 69.000) Consolidated net income P 80.727 Ending inventory of Dundee from Perth (P31..000 49. Cost of goods sold (60.000 / 130%) _23.30 Income to noncontrolling Interest (10.000 Less: Cost of sales _40.80 Cost of goods sold P 60..000 Reported cost of sales (75.000 Less: Intercompany sales to Dundee 100. c – refer to No..00 0 Original unrealized profit 10.000 48.000) Report income P 45.000 Unrealized profit in ending inventory of S Company (downstream sales) ( 3.846 Total 56.000) Ending inventory reported P 15.000 x ..000 Unsold percentage __30% Unrealized profit P _3.000 / 110%) 32..000 Realized profit in beginning inventory of P Company (upstream sales) 0 Unrealized profit in ending inventory of P Company (upstream sales) ( 15.000 Intercompany sales to Perth 150.000 Consolidated 600.20) (9.

….. 70%:30% ( 11. 20% 20% Non-controlling Interest in Net Income (NCINI) – partial goodwill P 76.000 Less: Intercompany sales 1.000 Less: Amortization of allocated excess…………………… 0 Consolidated Net Income for 20x5 P253. d Combined cost of sales P 480... [P15. d Cost of Sales P Company 5.000 Unrealized Profit in EI of Parent (X-Beams): P180.000 P100.000 Total 6.000 x 10% = P100.600.800) Non-controlling Interest in Kent’s Net Income 85.000) P 1.000 x (1.000 Multiplied by: Non-controlling interest %.000 Realized profit in BI of Bates Co..000 Less: NCI on goodwill impairment loss on full goodwill 0 0 Non-controlling Interest in Net Income (NCINI) – full goodwill P 76.000 58.000 Sam Company 195.000 Add: Unrealized profit in EI of Bates Co.000 x (625 . S Company’s net income from own 76. Total P253.000 x 20%] __3.000 x 20%] 8.. a Combined 20x5 sales (P580.000 56.000 Less: 20x5 intercompany sales 0 Consolidated sales P 1.000 x 12% = P75.000 P 480. [P1.000 operations………………………………….000 Consolidated 5.000 52.000 53.200) ( 4..000 90.000x 20% = P36.000 .200 57.000) Add: Unrealized profit in 20x5 ending inventory ________0 Consolidated cost of sales P 477.025.000 Less: Intercompany sales 200.000.000 Less: 20x5 intercompany sales 0 Less: Unrealized profit in the 20x5 beginning inventory from 20x4 (3.000 Add: Unrealized profit in EI of S Co. 70%:30% 210.000 Unrealized profit in ending inventory of P Company (upstream sales) ( 20.000.000 55.000 x (180-100/180)= P16..000 P500. b Cost of Sales Bates Company 690.000 + P445.000 P100.025.000 54.000 P 500.000 Consolidated 680.000 Total 885. b Parent Subsidiar y Net Income from own operations: X-Beams (parent)Kent (subsidiary).000.596.000) 0 S Company’s realized net income from separate operations……… P 380..000 S Company _1. a **Non-controlling Interest in Net Income (NCINI) for 20x6 S Company’s net income of Subsidiary Company from its own operations (Reported net income of S Company) P 0 Realized profit in beginning inventory of P Company (upstream sales) 0 Unrealized profit in ending inventory of P Company (upstream sales) .000 Realized profit in BI of S Co.400.800)/1.000 (Reported net income of S Company) Realized profit in beginning inventory of P Company (upstream sales) 20. [P40.425)/625] 24. [P625.. d Non-controlling Interest in Net Income (NCINI) for 20x5 20x6 S Company’s net income of Subsidiary Company from its own operations P 400..000] __20.200.000 Less: Amortization of allocated excess 0 0 P380.

000 x 15/60 = P12.000) Less: Amortization of allocated excess 0 P( 3.000 Subsidiary 1 60...000 x (60-48/60] 64.000 S Company’s net income from own operations P150.000 Realized profit in beginning inventory of P Company (upstream sales) [P105. c Consolidated Net Income for 20x4 P Company’s net income from own/separate operations P360.000 x 20/120) ( 17. (P100. a Sales Cost of Sales Intercompany Parent 60.000 66..250 126.000 *117.000 Realized profit in beginning inventory of S Company (downstream sales) 0 Unrealized profit in ending inventory of S Company (downstream sales)… (_0) P Company’s realized net income from separate operations*……. a – the cost from parent of P48..250 Less: Non-controlling Interest in Net Income* * 1.….000 Realized profit in beginning inventory of P Company (upstream sales) 0 Unrealized profit in ending inventory of P Company (upstream sales) [P105..610 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent – 20x4………….000 x 10% = P10.000 60.000 63.000 Ending inventory (60.000 Gross profit 12.250 Total P 486.000 *or. b – the cost from parent of P48..250 ) S Company’s realized net income from separate operations*…….. Or.….500 Total P 357. P 51. a Consolidated Net Income for 20x3 P Company’s net income from own/separate operations P 225.000 Realized profit in beginning inventory of S Company (downstream sales) 0 Unrealized profit in ending inventory of S Company (downstream sales)… (_0) P Company’s realized net income from separate operations*……. P126..000 60.000 Amount to be eliminated 120. 10% Non-controlling Interest in GP P(300) Less: NCI on goodwill impairment loss on full goodwill 0 Non-controlling Interest in GP P( 300) 59. P225.000 61. 63 for computation 65.000 ) Unrealized profit 12..000 + P60..000 67.000 x 15/60) 15.000 Realized profit in beginning inventory of S Company (downstream sales) 0 .….000 Unsold fraction 1/3 Credit to Inventory P 4. alternatively Consolidated Net Income for 20x4 P Company’s net income from own/separate operations P360.500 Unrealized profit in ending inventory of P Company (upstream sales) [P157.000 x 45/60 = P36..000 Subsidiary (60.490 *that has been realized in transactions with third parties..000 – [P15..000 62.000) Multiplied by: Non-controlling interest %.000 45.500 Less: Amortization of allocated excess…………………… _0 Consolidated Net Income for 20x3 P357.000 x 20/120) 17.000 x 30%) ( 3.500 ) S Company’s realized net income from separate operations*…….500 x 20/120) ( 26..000 0 22.500 132. b – refer to No.000 . P132.….000 S Company’s net income from own operations P135.000 Add: Cost of EI in S2 Co.000 60.000 x (48/60] ________ __12.500 67.000 x 45/60) ______ ______ 45.250 Less: Amortization of allocated excess…………………… _0 Consolidated Net Income for 20x4 P486. d – P15.000 Less: Cost of goods sold – P and S1 48. a 60 a Selling price P 60.000) S Company’s realized net income from separate operations……… P( 3.000 Parent Subsidiary 1 Subsidiary 2 Sales 60. [P15.000 x [(60-48)/60] = P3. P360. Less: Cost of sales ( 48. P60.

000 x 20/120) ( 30.000) S Company’s realized net income from separate operations……… P 236. 30% Non-controlling Interest in Net Income (NCINI) – partial goodwill P 37. P 615..875 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent………….….…..375 Add: Non-controlling Interest in Net Income (NCINI) _37.….875 Consolidated Net Income for 20x4 P 486. P126.500 x 20/120) 26.250 Total P 486. P360. Or.000 Realized profit in beginning inventory of P Company (upstream sales) 17.500 x 20/120) 26.000 Realized profit in beginning inventory of P Company (upstream sales) 26.250 Less: Amortization of allocated excess 0 .250 236. alternatively Consolidated Net Income for 20x5 P Company’s net income from own/separate operations P 450. P 615.875 Consolidated Net Income for 20x5 P 686. P450.000 Realized profit in beginning inventory of P Company (upstream sales) [P105.000 x 20/120) ( 30. 69.375 *that has been realized in transactions with third parties.…...000 Realized profit in beginning inventory of P Company (upstream sales) [P157.250 Less: Amortization of allocated excess…………………… _0 Consolidated Net Income for 20x4 P686.250 Less: Non-controlling Interest in Net Income* * P 37.000 ) S Company’s realized net income from separate operations*……. Unrealized profit in ending inventory of S Company (downstream sales)… (_0) P Company’s realized net income from separate operations*…….250 236.250 Total P 686.250 Multiplied by: Non-controlling interest %. P 448.250 *that has been realized in transactions with third parties.000 Realized profit in beginning inventory of S Company (downstream sales) 0 Unrealized profit in ending inventory of S Company (downstream sales)… (_0) P Company’s realized net income from separate operations*……..000 Realized profit in beginning inventory of P Company (upstream sales) [P157.000 S Company’s net income from own operations P240.250 Unrealized profit in ending inventory of P Company (upstream sales) [P180.875 68. P236..875 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent – 20x5…………...875 Less: NCI on goodwill impairment loss on full goodwill 0 Non-controlling Interest in Net Income (NCINI) – full goodwill P 37.875 Amortization of allocated excess…………………… 0 70.….500 Unrealized profit in ending inventory of P Company (upstream sales) ( 26.000 S Company’s net income from own operations P240.250 Total P 686.000 ) S Company’s realized net income from separate operations*…….. 67 for computation. d Consolidated Net Income for 20x5 P Company’s net income from own/separate operations P 450. a – refer to No.250) S Company’s realized net income from separate operations……… P 126.375 Add: Non-controlling Interest in Net Income (NCINI) __70.875 Amortization of allocated excess…………………… 0 37..500 x 20/120) ( 26.000 x 20/120) 17.250 ) S Company’s realized net income from separate operations*…….250 126.…. **Non-controlling Interest in Net Income (NCINI) for 20x4 S Company’s net income of Subsidiary Company from its own operations (Reported net income of S Company) P 135...250 Less: Amortization of allocated excess 0 P126..250 Unrealized profit in ending inventory of P Company (upstream sales) [P180.250 *that has been realized in transactions with third parties.000 S Company’s net income from own operations ( P135. P236. P450..500 Unrealized profit in ending inventory of P Company (upstream sales) [P157.. **Non-controlling Interest in Net Income (NCINI) for 20x4 S Company’s net income of Subsidiary Company from its own operations (Reported net income of S Company) P 240.250 Unrealized profit in ending inventory of P Company (upstream sales) ( 30...875 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent…………..000 Realized profit in beginning inventory of S Company (downstream sales) 0 Unrealized profit in ending inventory of S Company (downstream sales)… (_0) P Company’s realized net income from separate operations*…….750 Less: Non-controlling Interest in Net Income* * 70.250 Less: Non-controlling Interest in Net Income* * P 70.

December 31.800 Add: NCI on full-goodwill (P70. January 1. 69 for computation.. [P140. Non-controlling interest (partial-goodwill).000 Add: Undervalued equipment (P35. b Operating Expenses P Company 28.goodwill)………………………………….875 Less: NCI on goodwill impairment loss on full goodwill 0 Non-controlling Interest in Net Income (NCINI) – full goodwill P 70. 84.. 20x4 P210.000 S Company _112.000 Less: Dividends paid – 20x4 0 364.000 Total 700.000 Less: Book value of stockholders’ equity of S: Common stock (P140.000 x 80%)…………………….000 Adjustments to reflect fair value .00 Retained earnings (P210.0 280. 20x4…… P 140. December 31.000 73.000 Non-controlling interest (full.000 x 60% = P84.000 S Company 280.000 – P56.000 x 80%)……………….800 Partial-goodwill Fair value of Subsidiary (80%) P Consideration transferred………………………………... 20x4) 35.. 30% Non-controlling Interest in Net Income (NCINI) – partial goodwill P 70.800 Consolidated 184. 71.000 Total P364.000 Consolidated 560. December 31. P 56.if full goodwill method.000 Consolidated 47.000 Add: Unrealized profit in EI of S Co.000 Add: Net income of S for 20x4 154.000 Full-goodwill . d Sales P Company 420.000 Less: Intercompany sales 140..000 Positive excess: Partial-goodwill (excess of cost over fair value)………………………………………………. 20 Non-controlling interest (partial goodwill)…………………………………. P 120.000 Less: Intercompany sales 140..000 Stockholders’ equity – S Company.. 20x5…… P 534.000 Multiplied by: Non-controlling Interest percentage…………. December 31. December 31... P 236.000 168.. c Cost of Sales P Company 196.875 70.000) Fair value of stockholders’ equity of S. a or e . 00 0 P Allocated excess (excess of cost over book value)…. 20x4 Common stock – S Company..000 Less: Over/under valuation of assets and liabilities: Increase in equipment (P35. date of acquisition (January 1.112)/140] _16.000/7 years) ( 5..000 Total 42..000 S Company 14. 364...000 x (140 . a – refer to No.800 74.000 Amortization of allocated excess (refer to amortization above) : 20x5 (P35... P112. P 106.000 72.000 Retained earnings – S Company.000) 14.000 x 80%) ___28..250 Multiplied by: Non-controlling interest %.000/7 years) _5.000 Total 308. 20x4 Retained earnings – S Company. 20x4 P 504.(over) undervaluation of assets and liabilities.

.............000 76.......... 70..........000 Consolidated 1..500 (add the two book values and include current year amortization expense) 80........000 S Company 420....000 Add: Undervalued equipment 35.............000 Less: Unrealized profit in EI: [P140.000 CONSOLIDATED COST OF GOODS SOLD Parent balance ..............000 20 years................000) Defer unrealized gross profit (above) .............. (100..................500 Total .....................000 Total 1............................000 Cost of goods sold ..... (250....................... a Non-controlling interest (partial-goodwill). 78....... 2.... 50............. Fair value of Subsidiary (100%) P Consideration transferred: Cash (P364..............................000/80%) 455.........000 x (140 .... January 1.............................. c Intercompany gross profit (P100... P -0...........000 79....000 Remove intercompany transfer .... d Add the two book values and remove P100....500 Consolidated Expenses = P37.000 Book value of net assets..000 75....... 20x4…… P 100..............................................000 Subsidiary balance .. P12.......00 0 Total P260............000 Annual Excess Life Amortizations Excess fair value assigned to undervalued assets: Equipment.. 16......P5..............000 Less: Book value of stockholders’ equity of S (P350............... December 31......... 65.......................000) .. P20.............. 20x4 P150.000 5 years....P80....................000 x 100% 35..... P132... 60% Unrealized intercompany gross profit ...................................000 SZ total fair value.....000 Add: Net income of S for 20x4 110................ P325...000 P Allocated excess (excess of cost over book value)…....................... d Equipment P Company 616.. December 31...........800 112)/140] Consolidated 347....................000 Total 364........000 intercompany transfers..................... 20x4 Common stock – S Company....000 ................036......... 80.064................. P7................000 Inventory remaining at year's end ..000 x 100%) __350... d Inventory P Company 210............................................................ P140.......................000) Excess fair over book value P75......000 Add (deduct): (Over) under valuation of assets and liabilities Increase in equipment P35......................... December 31.... 20x4 Retained earnings – S Company...... c Consideration transferred ...........000 Retained earnings – S Company..... 25....000 Positive excess: Full-goodwill (excess of cost over P fair value)……………………………………………….............000 Secret Formulas ............................ 12..000 x 60% = P84............ 105......................... P260.....200 77.....000 .000/7 years) 7..000 S Company 154.000 Non-controlling interest fair value.000 Less: Depreciation on undervalued equipment (P35..............

..000 20x4: P85.. b 20x3 20x4 20x5 Share in net income 20x3: P70..0 Retained earnings (P150.. P12.. P 85. 00 00 P Allocated excess (excess of cost over book value)…........000 / 5 years = P 5..000 x 90% P 76... 20x4 P 360.825 It should be noted that PAS 27 allow the use of cost model in accounting for investment in subsidiary in the books of parent company but not the equity method....0 200...000 Less: BV of stockholders’ equity of S (P100..... P 85......000) ...500 81.000 / 20 years = 2... 85....000 Adjustments to reflect fair value ...000 x 80% 40.000 83.000 Full-goodwill Fair value of Subsidiary (100%) P Consideration transferred: Cash (80%) 260.000 – P80...000 x 100% 0 P Increase in secret formulas: P50. Less: Dividends paid – 20x4 260....600 Less: Unrealized profit in ending inventory of P 20x3: P1.000 x 80%)…………………….000 + P150...000 x 80%) 20. December 31..000 x 90% P 84...000 120......000 x 90% ( 900) 900 20x5: P3.000 x 25% = P1.000 Amortization of allocated excess (refer to amortization above) : ( 7. 83 for computation.. 12/31 ... 82. 84...500 20x5: P94...000 x 80%)………………. P 80.. c – refer to No. c Add the two book values plus the original allocation (P25.000) less one year of excess amortization expense (P5..870 P 84...500 Partial-goodwill Fair value of Subsidiary (80%) P Consideration transferred………………………………..000 Less: Book value of stockholders’ equity of S: Common stock (P100. 260.500 Multiplied by: Non-controlling Interest percentage………….... 20x4) 75.500 Add: NCI on full-goodwill ( ________0 Non-controlling interest (full... d – refer to No...000 FV of NCI (20%) ___65.. December 31.000 0 Stockholders’ equity – S Company.(over) undervaluation of assets and liabilities.000 Inventory Remaining at Year's End ..... .000 Less: Over/under valuation of assets and liabilities: Increase in equipment (P25..500 Total amortization of allocated P 7...... 60% Unrealized Intercompany Gross profit.000 x 25% = P750 x 90% ________ ________ __( 675) Income from S P 62.000 P Fair value of Subsidiary (100%) 325.....000 Secret formulas: P50.......000 x 100% 50..00 Increase in equipment P25. b Add the two book values less the ending unrealized gross profit of P12... date of acquisition (January 1.. 75.. 60.000). 20x5…… P 427... 83 for computation..000... P20..000 Add (deduct): (Over) under valuation of assets and liabilities 25..730 P 75.... Intercompany Gross profit (P100.goodwill)………………………………….......000 Increase in secret formulas: P50..000 Amortization: Equipment: P25........000 P Allocated excess (excess of cost over book value)…........000) x 100% __250...........200 x 25% = P300 x 90% ( 270) 270 20x4: P4. 20 Non-controlling interest (partial goodwill)………………………………….000 x 90% P 63.500) Fair value of stockholders’ equity of S.

. since intercompany profit starts only at the end of 20x3.430 P 9... 95....375) Unrealized profit on sale [(P30.050 RPBI of P (upstream sales): P2..600 UPEI of P (upstream sales): Sales of Subsidiary EI % EI of P GP% of Subsidiary P60. 93. 304.000 + P230..Subsidiary): (P150.425 87..000) x 80%..... c – refer to No...P20..86... a – none.000 = (P26..000 Less: Book value of SHE .000 Allocated Excess...…...000 P 85...300 94.600 28.000 x 20%…………………………...000)] 99 B 14 years = (P28.000 x 30% = P18...400 Consolidated Net Income for 20x5 P Company’s net income from own/separate operations P 100. 90.000 97..000 / 80% P 25.500 (given)….430 P 9.000 UPEI of S (downstream sales): Sales of Parent EI % EI of S GP% of Parent P60..20 = P14.000 / [(28......000 x 25/125………………………………. d – the original cost 102.600 . c (P10.000 Realized profit in beginning inventory of P Company (upstream sales) 1... P 97....000 UPEI of P Company (upstream sales) ( 300) ( 1..000 x 80%)……………………………...000 Amortization of equipment: P20.000) – P308.. 10% 10% 10% Non-controlling Interest in Net Income (NCINI) – partial P 6. B .250 Multiplied by: Non-controlling interest %.….. 89...970 P 8.. 94.700 P 84. P28..000 98.700 84.000 96..P 20..P 36.000 Realized profit in beginning inventory of S Company (downstream sales) 1...000 / [(Stockholders’ Equity P50.000 (P32..000 Goodwill …………........000 Less: Over/Undervaluation of Assets & Liabilities (P20.. 88.. b P6..000 x 35%..000 + P140..600) P Company’s realized net income from separate operations*……..000 ..000 / 10 years = P2...000) – (3..000 Unrealized profit in ending inventory of P Company (upstream sales) ( ...000) +(Patent P20. P1.. c – refer to No.300 P 94.………………………………….... 92. 86 for computation.000 x 80%) 101.000) – P39. 1...250 Less: Amortization of allocated excess 0 0 0 P P P 69.. d P32.... a – refer to No. 91.... 86 for computation..….000] Carrying cost of inventory for Power P 9.. d Date of Acquisition (1/1/2010) Partial Full Fair value of consideration given…………………P 340..000) ( 750) S Company’s realized net income from separate operations P 69...000 RPBI of S (downstream sales): P3..970 P 8..000) / 4 years] 100.425 goodwill Less: NCI on goodwill impairment loss on full goodwill 0 0 0 Non-controlling Interest in Net Income (NCINI) – full goodwill P 6..000 x ..000 P 94......2. 16. b – the amount of unrealized profit at the end of 20x3.000 x 30% = P18. c P9.......000) P52.. a – refer to No........ c – the amount of unrealized profit at the end of 20x4. 2.. 3..000 = (P200..400 ) S Company’s realized net income from separate operations*…….000 RPBI of P Company (upstream sales) 0 300 1. 86 for computation. 86 for computation..000 + P25...... a **Non-controlling Interest in Net Income (NCINI) for 20x3 20x4 20x5 S Company’s net income of Subsidiary Company from its own operations (Reported net income of S Company) P 70.. 86 for computation.... b – refer to No.000 + P19......…………………………………….050 Unrealized profit in ending inventory of S Company (downstream sales)… (_ 3..450 S Company’s net income from own operations P 30......000 = Inventory held by Spin P12.

...000 Accumulated amortization (P2..050 Unrealized profit in ending inventory of S Company (downstream sales)… (_ 3......600 Multiplied by: Non-controlling interest %.050 Less: Non-controlling Interest in Net Income* * 5....S..S...320 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent – 20x5…………..…. 20.600 Total P 126.000 7.000 Unrealized profit in ending inventory of P Company (upstream sales) ( 2.600 28...…………………………. P 484.partial………………………….. P 28. P 470..400) S Company’s realized net income from separate operations……… P 28. alternatively Consolidated Net Income for 20x5 P Company’s net income from own/separate operations P 100.... 102 105..000 -: Div – S……………………………………………………………………… 10..600 x: NCI %. P 97... P118.12/31/20x2………………………………………………….000 +: NI-S………………………………………………………………………….450 S Company’s net income from own operations P 30. 107 107..320 +: NCI on full goodwill (25... Total P 126.. 20% Non-controlling Interest in Net Income (NCINI) – partial goodwill P 5... 102 104... 107 106..000 Consolidated Net Income for 20x4 P124.400) Realized SHE – S.. 12/31/20x2…………………………………. _ 20% Non-controlling Interest (in net assets) ..050 – refer to No......320 103..S...... **Non-controlling Interest in Net Income (NCINI) for 2012 S Company’s net income of Subsidiary Company from its own operations (Reported net income of S Company) P 30.... 1/1/20x0 ...320 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent………….P300..000 Book value of Stockholders’ equity... b – refer to No..........000 – 20... 1/1/20x2…………….. P 96.000 Non-controlling Interest (in net assets) – full……………………………..600 Less: Amortization of allocated excess 2. P 118.....000 Unrealized profit in ending inventory of P Company (upstream sales) ( 2.000) Fair Value of Net Assets/SHE.. b – refer to No.000 P 26..…...000 Realized profit in beginning inventory of P Company (upstream sales) 1....050 Less: Non-controlling Interest in Net Income* * P 5............000)…………………………. d ....... P 101.050 Less: Amortization of allocated excess…………………… 2.000 UPEI of P (up)…………………………………………………………………… ( 2. a – P124.320 108..730 Add: Non-controlling Interest in Net Income (NCINI) __ 5.. P 481. d – refer to No. c – refer to No. 12/31/20x2…….000 x 3 years)………………………….. 109 109. 12/31/20x2..600) P Company’s realized net income from separate operations*…….320 Consolidated Net Income for 2012 P124...000 Retained earnings .…………....050 *that has been realized in transactions with third parties...000 Realized profit in beginning inventory of S Company (downstream sales) 1... 12/31/20x2: RE.. 5..………………………………………………..320 Amortization of allocated excess…………………… 2.. Or... 30...000 Adjustments to reflect fair value of net assets Increase in equipment..……………….. a Non-controlling Interests (in net assets): Common stock ..000 Realized profit in beginning inventory of P Company (upstream sales) 1..….730 *that has been realized in transactions with third parties.400 ) S Company’s realized net income from separate operations*……..... P 150..... ( 6..…………………………….320 Less: NCI on goodwill impairment loss on full goodwill 0 Non-controlling Interest in Net Income (NCINI) – full goodwill P 5.000 320...

. then RE – P on December 31... 12/31/20x2………….809.680 110. P809. P1. 12/31/20x2………….000 RE – P..000 Less: Retained earnings – Subsidiary. 12/31/20x2: Controlling Interest / Parent’s Interest / Parent’s Portion / Equity Holders of Parent – SHE.600 Adjusted Retained earnings – Parent.950 +: CI – CNI or Profit Attributable to Equity Holders of Parent……. 1/1/2012 (equity method) = CRE.950 Retroactive Adjustments to convert Cost to “Equity” for purposes of consolidation / Parent’s share of adjusted net increase in subsidiary’s retained earnings: Retained earnings – Subsidiary.. P750..000) UPEI of P (up) – 20x1 or RPBI of P (up) – 20x2……………….P 230. ( 2.____80% 52..000 x 3 years………………………………………………. if RE – P is not given on January 1. 20x2. P1... 12/31/20x2…………. ( 6.000 X: Controlling Interests………………………………………….600 X: Controlling Interests………………………………………………. 320. 1/1/20x2 (beginning balance of the current year) - Retained earnings – Parent. 3.000 -: UPEI of S (down) – 20x1 or RPBI of S (down) – 20x2. 12/31/20x2: Common stock – P (P only)……………………………………………. 1/1/20x2 (cost)……………… P 744.000 x 2 years…………………………………………………( 4...680 Controlling Interest / Parent’s Stockholders’ Equity…………….050 Adjusted Retained earnings – Parent.. 80% 65..680 Or.. 1/1/20x2 (cost)…………………………… P 700..000 + P20.………….. 1/1/20x2 (cost)……………… P698. 118....000 Accumulated amortization (1/1/20x0 – 1/1/20x2): P 2.. 1/1/20x0……………………….…………………………… P 748.000 Increase in Retained earnings since acquisition (cumulative net income – cumulative dividends)…………P 90.000) P 65.000 RE – P....000 – P10.. 12/31/20x2 (cost): (P700.000 Less: Retained earnings – Subsidiary.…………...400) P 81. 12/31/20x2 (partial)…………………………. 1/1/20x2……………… 300.. ( 1. 12/31/20x2 (equity method) = CRE..since what is given is the RE – P.680 Non-controlling interest. Note: Preferred solution .000 Retained Earnings – P (equity method).000...000) UPEI of P (up) – 20x2 or RPBI of P (up) – 20x3………………. 1.000 + P108.. 2012 should be use: Retained earnings – Parent.000)……….280 RE – P. P809. 809... b Consolidated Stockholders’ Equity.000 – P60..000 Increase in Retained earnings since acquisition (cumulative net income – cumulative dividends)…………P 70. 1/1/20x2………………….400 Retroactive Adjustments to convert Cost to “Equity” for purposes of consolidation / Parent’s share of adjusted net increase in subsidiary’s retained earnings: Retained earnings – Subsidiary.000 Accumulated amortization (1/1/20x0 – 12/31/20x2): P 2. . 96.P 230..730 -: Dividends – P……………………………………………………………… 60..000 -: UPEI of S (down) – 20x2 or RPBI of S (down) – 20x3. 12/31/20x2 (P300. 1/1/20x0………………………. 12/31/20x2 (equity method) = CRE.000)………………………..320 ..

December 31.250 .625 *that has been realized in transactions with third parties.000 111..500 P54...600 Stockholders’ equity – Subsidiary Company.. Or.……………………….000) Realized profit in beginning inventory of S Company (downstream sales) 0 Unrealized profit in ending inventory of S Company (downstream sales)… (_ 0) P Company’s realized net income from separate operations*……. P 3.. P1.. 20x1…… P 10. December 31.500 – P 49.. 20x4) 0 Amortization of allocated excess (refer to amortization above) – 20x4 ( 0) Fair value of stockholders’ equity of subsidiary..000 x 20%] P 8.000 112..000 Unrealized profit in EI of Bates Co..809.....250 Total P 150.000 UPEI of P (upstream sales): EI of Paque GP% of Subsidiary P75.. 12/31/20x2: Common stock – P (P only)…………………………………………….000 Net realized profit in intercompany sales of inventory P 5..…. 12/31/20x2………………………… P1. P 140..000 x 20%] __3.000 Multiplied by: NCI% ___40% NCI share in net realized profit P 2.680 Controlling Interest / Parent’s Stockholders’ Equity……………. Consolidated Stockholders’ Equity..000 x 40% 1.. 20 Non-controlling interest.. P 101... c Non-controlling interest . December 31.125 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent – 20x5………….750 Less: Non-controlling Interest in Net Income* * 10. P 49..………………………. P1..…. alternatively Consolidated Net Income for 20x5 P Company’s net income from own/separate operations (P103.. 12/31/20x2………….680 Non-controlling interest. 12/31/20x2: Controlling Interest / Parent’s Interest / Parent’s Portion / Equity Holders of Parent – SHE.000 ) S Company’s realized net income from separate operations*……... 20x4…… P 18..(over) undervaluation of assets and liabilities..………………………… 45. P 49. [P15. c RPBI of P (upstream sales)…….………………………. a Realized profit in BI of Bates Co...911.. 809.600 Adjustments to reflect fair value . 20x4 P 18.500 P54.250 Realized profit in beginning inventory of P Company (upstream sales) 45.. December 31. a Consolidated Stockholders’ Equity. 20x1 8..000 Consolidated Net Income for 20x5 P Company’s net income from own/separate operations (P103.. [P40.500 – P 49. 20x1 Common stock – Subsidiary Company.320 Consolidated Stockholders’ Equity. 20x1 …………………………………. date of acquisition (January 1. 20x4…… P 17.000 Retained Earnings – P (equity method)...400 Multiplied by: Non-controlling Interest percentage………….200 Realized stockholders’ equity of subsidiary......906.000 114.480 113.750 Less: Amortization of allocated excess…………………… ____0 Consolidated Net Income for 20x4 P150. December 31. December 31..….500 S Company’s net income from own operations P 71.000.600 Less: Unrealized profit in ending inventory of P Company (upstream sales) P3.000) Realized profit in beginning inventory of S Company (downstream sales) 0 Unrealized profit in ending inventory of S Company (downstream sales)… (_ 0) P Company’s realized net income from separate operations*…….000 x 20%.000 Retained earnings – Subsidiary Company... 12/31/20x2 (full)……. 15. 12/31/20x2………………………… P1.000 Unrealized profit in ending inventory of P Company (upstream sales) ( 15.…..250 101.. 101.500 S Company’s net income from own operations P 71. December 31.

. P 598. (P45.000 To eliminate intercompany dividends (6) Beginning Retained Earnings. P 101.000 ) S Company’s realized net income from separate operations*…….125 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent…………. 10% Non-controlling Interest in Net Income (NCINI) – partial goodwill P 10.000 Unrealized profit in ending inventory of P Company (upstream sales) ( 15.000 Adjusted Retained earnings – Parent..10 93.400 -: UPEI of S (down) – 20x7 or RPBI of S (down) – 20x8.500 Non-controlling Interest P45.000 ´ 0. 1/1/20x8 (cost)…………………….000 Beginning Retained Earnings-Paque Co.750 Less: Non-controlling Interest in Net Income* * P 10.000 To establish reciprocity as of 1/1/20x8 (2) Sales 300.since what is given is the RE – P..000 Non-controlling Interest (P750.000 ´ 0.Segal Co.000 + P180.400 Retroactive Adjustments to convert Cost to “Equity” for purposes of consolidation / Parent’s share of adjusted net increase in subsidiary’s retained earnings: .………….000 Common Stock .10) 4.000 Dividends Declared 54.125 (Not required) Analysis of workpaper entries (1) Investment in Segal (0.125 Less: NCI on goodwill impairment loss on full goodwill 0 Non-controlling Interest in Net Income (NCINI) – full goodwill P 10.000 To eliminate intercompany sales (3) Ending Inventory .. 27.000 Investment in Segal Company (P810.Paque Co.250 Total P 150.…..250 101.625 Add: Non-controlling Interest in Net Income (NCINI) __ 10.000 To eliminate unrealized intercompany profit in ending inventory (P75.90) 40. P140.250 Multiplied by: Non-controlling interest %..000 Purchases (Cost of Goods Sold) 300.000 + P27. c Preferred Solution .000)) 27.250 Less: Amortization of allocated excess _0 P101.125 Consolidated Net Income for 2012 P150. 25.000 Ending Inventory (Balance Sheet) 15.Income Statement (CGS) 15..000 To recognize intercompany profit realized during the year and to reduce controlling and non-controlling interests for their share of unrealized profit at beginning of year (5) Dividend Income (P60.000) x . 1/1/20x8 - Retained earnings – Parent.000) 837.Segal Company 750. Realized profit in beginning inventory of P Company (upstream sales) 45.20) (4) Beginning Retained Earnings . 1/1/20x8 (cost)……………… P 573.90) 54.500 Beginning Inventory (Income statement) 45.000 Unrealized profit in ending inventory of P Company (upstream sales) ( 15..000 – P150.90 ´ (P180. 180.. **Non-controlling Interest in Net Income (NCINI) for 20x4 S Company’s net income of Subsidiary Company from its own operations (Reported net income of S Company) P 71..000 ´ 0..000 To eliminate investment account and create non-controlling interest account 115.000 ´ 0.125 Amortization of allocated excess…………………… ___0 10.000) S Company’s realized net income from separate operations……… P 101..250 Realized profit in beginning inventory of P Company (upstream sales) 45.750 *that has been realized in transactions with third parties..

Retained earnings – Subsidiary, 1/1/20x4……………………P 95,000
Less: Retained earnings – Subsidiary, 1/1/20x8…………….. 144,000
Increase in Retained earnings since acquisition
(cumulative net income – cumulative dividends)………P 49,000
Accumulated amortization (1/1/20x4 – 1/1/20x8)…………. 0
UPEI of P (up) – 20x7 or RPBI of P (up) – 20x8………………... ( 0)
P 49,000
X: Controlling Interests…………………………………………… 90% 44,100
RE – P, 1/1/20x8 (equity method) = CRE, 1/1/20x8……………….. P
617,500
+: CI – CNI or Profit Attributable to Equity Holders of Parent……
203,700
-: Dividends – P………………………..………………………………… 110,000
RE – P, 12/31/2014 (equity method) = CRE, 12/31/2014………….. P
711,200

Consolidated Net Income for 20x8
P Company’s net income from own/separate operations P132,000
Realized profit in beginning inventory of S Company (downstream sales) 25,000
Unrealized profit in ending inventory of S Company (downstream sales)… (10,000)
P Company’s realized net income from separate operations*…….….. P147,000
S Company’s net income from own operations…………………………………. P 63,000
Realized profit in beginning inventory of P Company (upstream sales) 0
Unrealized profit in ending inventory of P Company (upstream sales) ( 0)
S Company’s realized net income from separate operations*…….….. P 63,000 63,000
Total P210,000
Less: Amortization of allocated excess…………………… 0
Consolidated Net Income for 20x8 P210,000
Less: Non-controlling Interest in Net Income* * 6,300
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent – 20x8………….. P203,700
*that has been realized in transactions with third parties.

Or, alternatively
Consolidated Net Income for 20x8
P Company’s net income from own/separate operations P132,000
Realized profit in beginning inventory of S Company (downstream sales) 25,000
Unrealized profit in ending inventory of S Company (downstream sales)… (10,000)
P Company’s realized net income from separate operations*…….….. P147,000
S Company’s net income from own operations…………………………………. P 63,000
Realized profit in beginning inventory of P Company (upstream sales) 0
Unrealized profit in ending inventory of P Company (upstream sales) ( 0)
S Company’s realized net income from separate operations*…….….. P 63,000 63,000
Total P210,000
Less: Non-controlling Interest in Net Income* * P 6,300
Amortization of allocated excess…………………… _____0 6,300
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent………….. P203,700
Add: Non-controlling Interest in Net Income (NCINI) _ 6,300
Consolidated Net Income for 20x8 P210,000
*that has been realized in transactions with third parties.

**Non-controlling Interest in Net Income (NCINI) for 20x8
S Company’s net income of Subsidiary Company from its own operations P 63,000
(Reported net income of S Company)
Realized profit in beginning inventory of P Company (upstream sales) 0
Unrealized profit in ending inventory of P Company (upstream sales) ( 0)
S Company’s realized net income from separate operations……… P 63,000
Less: Amortization of allocated excess 0
P 63,000
Multiplied by: Non-controlling interest %.......... 10%
Non-controlling Interest in Net Income (NCINI) – partial goodwill P 6,300
Less: NCI on goodwill impairment loss on full goodwill 0
Non-controlling Interest in Net Income (NCINI) – full goodwill P 6,300

Amortization of equipment: P20,000 / 10 years = P2,000
RPBI of Sedbrock (downstream sales) – 20x8.........................................................
P25,000
UPEI of Sedbrock (downstream sales) – 20x8: P60,000 x 20%/120%……..………
10,000

Net income:
Pruitt Co. Sedbrook
Sales P1,210,00 P
0 636,000
Less: Cost of goods sold
Inventory, 1/1 165,000 132,000
Purchases 935,000 420,000
Inventory, 12/31 (220,000) __880,000 (144,000) __408,000
Gross profit P P 228,000
330,000
Less: Other expense 198,00 165,00
0 0
Net income from its own
separate operations P P 63,000
132,000
Add: Dividend income 31,50
0 -
Net income P P 63,000
163,500
Dividends declared P P 35,000
110,000

Or, alternatively(compute the RE-P end of the year under the cost model)
Retained earnings – Parent, 1/1/20x8 (cost)………………………….. P
598,400
Add: NI of Parent as reported – 20x8 under cost model……………
163,500
Less: Dividend of Parent – 20x8…………………………………………..
110,000
Retained earnings – Parent, 12/31/20x8 (cost)……………………….. P
651,900
-: UPEI of S (down) – 20x8 or RPBI of S (down) – 20x9..………………..
10,000
Adjusted Retained earnings – Parent, 12/31/20x8 (cost model)….. P
641,900
Retroactive Adjustments to convert Cost to “Equity” for
purposes of consolidation / Parent’s share of adjusted
net increase in subsidiary’s retained earnings:
Retained earnings – Subsidiary, 1/1/20x4………… P 95,000
Less: Retained earnings – Subsidiary, 12/31/20x8
Retained earnings – Subsidiary , 1/1/20x8..… P144,000
Add: NI of Subsidiary – 20x8…………………… 63,000
Less: Dividend of Subsidiary – 20x8…………... 35,000 172,000
Increase in Retained earnings since acquisition
(cumulative net income – cumulative dividends)………… P 97,000
Accumulated amortization (1/1/20x4 – 12/31/20x8)…………..( 0)
UPEI of P (up) – 20x8 or RPBI of P (up) – 20x9………………........( 0)
P 97,000
x: Controlling Interests………………………………………… 90%
69,300
RE – P, 12/31/20x8 (equity method) = CRE, 12/31/20x8……… P
711,200

(Not required)
Analysis of workpaper entries
(1) Investment in Sedbrook Company (0.90(P144,000 – P95,000)) 44,100
Beginning Retained Earnings - Pruitt Co. 44,100
To establish reciprocity/convert to equity as of 1/1/x8

(2) Sales 250,000
Purchases (Cost of Goods Sold) 250,000
To eliminate intercompany sales

(3) Ending Inventory - Income Statement (CGS) 10,000
Ending Inventory (Balance Sheet) 10,000
To eliminate unrealized intercompany profit in ending
inventory (P60,000 – (P60,000/1.2)

(4) Beginning Retained Earnings - Pruitt Co. 25,000
Beginning Inventory (Income Statement) 25,000

To recognize intercompany profit in beginning inventory
realized during the year

(5) Dividend Income (P35,000.90) 31,500
Dividends Declared 31,500
To eliminate intercompany dividends

(6) Beginning Retained Earnings - Sedbrook Co. 144,000
Common Stock - Sedbrook Co. 600,000
Investment in Sedbrook Co.(P625,500 + P44,100) 669,600
Non-controlling Interest (P744,000 x .10) 74,400
To eliminate investment account and create non-controlling interest account

116. P941,000.
Fair value of consideration given…………………P1,360,000
Less: Book value of SHE - Subsidiary):
(P1,000,000 + P450,000) x 80%................... 1,160,000
Allocated Excess.…………………………………….P 200,000
Less: Over/Undervaluation of Assets & Liabilities
Increase in franchise (P250,000 x 80%)…….. 200,000 / 80% = P250,000
P 0

Amortization of equipment: P250,000 / 25 years = P10,000

RPBI of S (downstream sales):…………………........................................................
P30,000
RPBI of P (upstream sales)……………………….......................................................
20,000
UPEI of S (downstream sales)……………………………………………………..……. 5,000
UPEI of P (upstream sales)………………………………………………….…………… 10,000

Consolidated Net Income for 20x4
P Company’s net income from own/separate operations P700,000
Realized profit in beginning inventory of S Company (downstream sales) 30,000
Unrealized profit in ending inventory of S Company (downstream sales)… ( 5,000)
P Company’s realized net income from separate operations*…….….. P725,000
S Company’s net income from own operations…………………………………. P270,000
Realized profit in beginning inventory of P Company (upstream sales) 20,000
Unrealized profit in ending inventory of P Company (upstream sales) ( 10,000)
S Company’s realized net income from separate operations*…….….. P280,000 280,000
Total P1,005,000
Less: Amortization of allocated excess…………………… 10,000
Consolidated Net Income for 20x4 P 995,000
Less: Non-controlling Interest in Net Income* * 54,000
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent – 20x4………….. P 941,000
*that has been realized in transactions with third parties.

Or, alternatively
Consolidated Net Income for 2014
P Company’s net income from own/separate operations P700,000
Realized profit in beginning inventory of S Company (downstream sales) 30,000
Unrealized profit in ending inventory of S Company (downstream sales)… ( 5,000)
P Company’s realized net income from separate operations*…….….. P725,000
S Company’s net income from own operations…………………………………. P270,000
Realized profit in beginning inventory of P Company (upstream sales) 20,000
Unrealized profit in ending inventory of P Company (upstream sales) ( 10,000)
S Company’s realized net income from separate operations*…….….. P280,000 280,000
Total P1,005,000
Less: Non-controlling Interest in Net Income* * P 54,000
Amortization of allocated excess…………………… 10,000 64,000
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent………….. P 941,000
Add: Non-controlling Interest in Net Income (NCINI) __ _ 54,000
Consolidated Net Income for 2014 P 995,000
*that has been realized in transactions with third parties.

**Non-controlling Interest in Net Income (NCINI) for 2014
S Company’s net income of Subsidiary Company from its own operations P270,000
(Reported net income of S Company)
Realized profit in beginning inventory of P Company (upstream sales) 20,000
Unrealized profit in ending inventory of P Company (upstream sales) ( 10,000)
S Company’s realized net income from separate operations……… P280,000
Less: Amortization of allocated excess 10,000
P270,000

500.000 Inventory (Balance Sheet) 15..000 Increase in Retained earnings since acquisition (cumulative net income – cumulative dividends)………… P 510..500.8) 16.000.000 Non-controlling Interest 4.. 30. 1/1/20x1……………………….000 To recognize profit in beginning inventory (upstream sales) realized during year and to reduce the controlling and noncontrolling interests for their shares of the amount of unrealized upstream intercompany profit at beginning of year (4) Beginning Retained Earnings – Paul Company.000.000 RE – P..( 40. 12/31/20x4……… P1.00 Allocated excess (excess of cost over book value)…... 0 Partial-goodwill Fair value of Subsidiary (80%) P7..000 x 100%) ) ___300.P 450.000) UPEI of P (up) – 20x4 or RPBI of P (up) – 20x5……………….075. 12/31/20x4 (cost model)….000 Beginning Inventory – Income Statement (CGS) 20. P 1.000 ´ 0. a Full-goodwill Fair value of Subsidiary (100%) P9.495.00 Consideration transferred………………………………. 0 Less: Book value of stockholders’ equity of S: . 12/31/20x4……………… 960.375.000) (3) Beginning Retained Earnings – Paul Company (P20.00 100%) 0 P3. P54...000 Retroactive Adjustments to convert Cost to “Equity” for purposes of consolidation / Parent’s share of adjusted net increase in subsidiary’s retained earnings: Retained earnings – Subsidiary.000 – refer to No.000 Decrease in inventory: P(150. 12/31/20x4 (cost)………………………...000 To eliminate unrealized profit in ending inventories (P10.863...000 Retained earnings – Parent..000 + P5.……………….000 -: UPEI of S (down) – 20x4 or RPBI of S (down) – 20x5.00 Increase in building: P450.000 Purchases (Cost of Goods Sold) 120.000 Less: Retained earnings – Subsidiary..000 x 100% ___450.500..000 Accumulated amortization (1/1/20x1 – 12/31/20x4)………….000 Less: NCI on goodwill impairment loss on full goodwill 0 Non-controlling Interest in Net Income (NCINI) – full goodwill P 54.000 x: Controlling Interests………………………………………… 80% 368. P 1.000 0 Positive excess: Full-goodwill (excess of cost over P3..000) (2) Ending Inventory – Income Statement (CGS) 15.000 To recognize profit in beginning inventory (downstream sales) realized during the year and to reduce consolidated retained earnings at beginning of the year for the amount of unrealized downstream intercompany profit at the beginning of the year 117.375.000 x _6.863..000 118..000 To eliminate intercompany sales (P50.000 Beginning Inventory – Income Statement (CoGS) 30.000 + P70. 5. Multiplied by: Non-controlling interest %. 20% Non-controlling Interest in Net Income (NCINI) – partial goodwill P 54.000 Adjusted Retained earnings – Parent.. ( 10. 0 Add (deduct): (Over) under valuation of assets and liabilities P( 150.00 fair value)………………………………………………..000) P 460. P1. 12/31/20x4 (equity method) = CRE.00 Consideration transferred: Cash (P7.000/80%) 0 Less: Book value of stockholders’ equity of S (P6.. 116 for computation 119....000 (Not required) Analysis of workpaper entries (1) Sales 120.

800 Add: NCI on full-goodwill ___615. Common stock (P1.00 Retained earnings (P5.524.000.875. P1.375. 20x2 Common stock – S Company. 20..524.. 20x2) ___300.000……………………….goodwill)…………………………………. date of acquisition (December 31. 20 Non-controlling interest (partial goodwill)………………………………….000 x 80% ___360..000 x 80%)……………….. a Non-controlling interest is 20% × 9.875.000) 0 P 0 Building (15 years) 450.000 Adjustments to reflect fair value .000 Jane's retained earnings at December 31.914.460. 20x4 7. 20x2 5.00 fair value)………………………………………………..000 UPEI of P (upstream sales): (given)……………………………………………………….894. 0 0 P2.000 Multiplied by: Non-controlling Interest percentage………….000 _________0 ______0 3. 20x4 P1. 20x2) 300. 20x2 ( 5. P 800.000 Or.000) Change in carrying value P2. 20x4…… P8.000 4.000. P1.260.000 Total P3.000 390.(over) undervaluation of assets and liabilities... d – P2.000 20x4: Fair value of stockholders’ equity of S.000.000 Goodwill 3. 0 Less: Over/under valuation of assets and liabilities: Add (deduct): (Over) under valuation of assets and liabilities P( 120.000 120.000 .goodwill)………………………………….000 Decrease in inventory: P(150.000 Stockholders’ equity – S Company. December 31.000 240.000 x 50.000 x 60% = P60. December 31. 20x2…… P6.465.000. 20x2…… P1.700.800 Non-controlling interest .000 Adjustments to reflect fair value .000) P(150.31/X4 Inventory P(150.524. December 31. 12/31/20x2) = P1.…. December 31.000 Or.000 x 80%) ) Increase in building: P450.000 Fair value of stockholders’ equity of S.778.000 Non-controlling interest (full. 30.460. 31/X2 20X3 20X4 Dec.000 Less: UPEI of P (up) – 20x3 or RPBI of P (up) – 20x4 ____20... December 31. alternatively: Balance of NCI on acquisition — December 31.393.000 Non-controlling interest (full. _ 20 Non-controlling interest (partial goodwill)…………………………………. December 31. December 31. December 31.00 4.300. 0 Amortization schedule Balance at Remaining acquisition Amortization Amortization at Dec.524.000 – P2.000 Add: NCI on full-goodwill (P3.000) ___615. 20x4 Common stock – S Company.375. alternatively: Non-controlling interest.000 30.000.800 RPBI of P (upstream sales): Sales of Subsidiary EI % EI of P GP% of Subsidiary P100.000.875.393.000 Add: NCI's share of the adjusted change in retained earnings to 12/ 31/20x4 Jane's retained earnings.000/100.000 Positive excess: Partial-goodwill (excess of cost over P2.000) P30.000 (fair value of subsidiary..00 Allocated excess (excess of cost over book value)….000 Retained earnings – S Company. date of acquisition (December 31.075.000 P8. 20x4 P8. December 31.000 Amortization of allocated excess (refer to amortization above.075.(over) undervaluation of assets and liabilities. P 1.000.000. December 31. 20x2 P1..000 P30.. 20x2 P6.000 121.000 Retained earnings – S Company. December 31..000 Multiplied by: Non-controlling Interest percentage………….000 x 80%)…………………….000 P3.800.20x3 and __90. P2.000 Stockholders’ equity – S Company.. 20x4 P7.075.000 P(120.

594. .2 = P6. a ..000 Unrealized upstream profit — 20x4 ( 20. . . e . 44 c 49 a 54 d 59 b 64 c 69 d 74 a 79 c . . .8 = P25. . c .. e . a . c . 12/31/20x4 (equity method) = CRE. e . . .. .P93..800 122.P93.900. e .594.2 = P63. .000 Increase in Retained earnings since acquisition (cumulative net income – cumulative dividends)……….000. .( 20. . 12/31/20x2…………………. .080 Theories 1 True 6. . 42 c 47 b 52 c 57 b 62 a 67 b 72 a 77 c .000) . True 14 True 19 True 24 e 29 d 34 d 39 d . . 12/31/20x4…………… 7.[P293. 12/31/20x4 (cost)………………………. d 125. . Fals 13 Fals 18 True 23 b 28 c 33 b 38 e .000 .393.000 Retroactive Adjustments to convert Cost to “Equity” for purposes of consolidation / Parent’s share of adjusted net increase in subsidiary’s retained earnings: Retained earnings – Subsidiary. 3 Fals 8.000 -: UPEI of S (down) – 20x4 or RPBI of S (down) – 20x5. True 11 True 16 Fals 21 True 26 e 31 b 36 a .000) . ..(P125.000 Accumulated amortization (1/1/20x1 – 12/31/20x4)……….000 Less: Retained earnings – Subsidiary. .000 UPEI of P (up) – 20x4 or RPBI of P (up) – 20x5………………. . .524. .400 124.200 122. .000) P2. Fals 12 Fals 17 Fals 22 Fals 27 e 32 e 37 b . P11. P11.P5. 43 a 48 c 53 c 58 c 63 b 68 c 73 a 78 a . . 45 d 50 d 55 c 60 c 65 a 70 b 75 c 80 e . ..000 .P93. 20x4 P2. .800 Ending balance of NCI on December 31. . .975. 0 Adjusted Retained earnings – Parent.……………….200 RE – P.000 . e e . 5 Fals 10 Fals 15 True 20 Fals 25 a 30 a 35 a 40 d . 2 Fals 7. 90.000 .3 127.075. . 12/31/20x4 P13. . .600 123.900. . . 4 True 9. .P93. . . 12/31/20x4 (cost model)….000 + (P125. . 41 b 46 c 51 a 56 c 61 a 66 b 71 b 76 c . . e . .(P125..000 Multiplied by: NCI's share at 20% 518. .P2.000) . e . . . b .P93. . . Adjustments: Amortization of fair value increments to date 90. b Retained earnings – Parent.524. . .. . e e .7] .(P125. .000) . . . . .000 x: Controlling Interests………………………………………… 80% 2.000) . e .000) Adjusted change in retained earnings of Jane since acquisition P2. e .. . .7 126.. .000 .(P125. .