Since 1977
PRACTICAL ACCOUNTING II
P2.708-Consolidated Statements
LECTURE NOTES
Consolidated financial statements- are the financial
statements of a group presented as those of a single
economic entity.
Group is a parent and all of its subsidiaries.
Separate financial statements – are those presented by a
parent, an investor in an associate, or a venturer in a
jointly controlled entity, in which the investments are
accounted for on the basis of the direct equity interest
rather than on the basis of the reported credits, and the
net assets of the investee.
PRESENTATION OF CONSOLIDATED FINANCIAL
STATEMENTS
A parent shall present consolidated financial statements,
except when
 The partner is itself a wholly-owned subsidiary, or is
a partially-owned subsidiary of another entity
 The parent’s debt or equity instruments are not
traded in a public market
 The parent did not file, nor is in the process of filing,
its financial statements with a securities commission
for the purpose of issuing any class of instruments in
a public market
 The ultimate parent produces consolidated financial
statements available for public use
CONSOLIDATION PROCEDURES
 The carrying amount of the parent’s investment in
each subsidiary and the parent’s portion of equity of
each subsidiary are eliminated
 Minority interests in the profit or loss of consolidated
subsidiaries for the reporting period are identified
 Minority interests in the net assets of consolidated
subsidiaries are identified separately from the parent
shareholders’ equity in them. Minority interests in
the net assets consist of:
1. The amount of those minority interests at the
date of the original combination
2. The minority’s share of changes in equity since
the date of the combination
ACCOUNTING FOR INVESTMENTS IN SUBSIDIARIES,
JOINTLY CONTROLLED ENTITIES AND ASSOCIATES IN
SEPARATE FINANCIAL STATEMENTS
For separate financial statements investment in
subsidiaries, jointly controlled entities and associates,
that are not classified as held for sales, shall be
accounted for either:
 at cost, or
 in accordance with IAS 39
Summary of Critical Points:
1. Consolidated statements are prepared from the
separate statements of the acquiring company and
acquired company(ies) from the standpoint of a single
economic entity.
2. Consolidation procedures are necessary whenever a
parent and a subsidiary relationship existed, except if
the parent is exempted under PAS 27 to present
consolidated financial statements.
3. The acquiring company, generally, is a parent if it
owns, directly and indirectly, more than 50% of the
Page 1 of 11 www.prtc.com.ph
DE LEON / DE LEON
OCTOBER 2009
outstanding voting shares of the acquired company. If
the controlling interest is not 100%, the difference
would represent the minority interest.
4. The following steps summarize the consolidation
worksheet procedures.
a. Prepare a schedule of excess to determine if there
is either goodwill, or, income from acquisition.
This will also be the basis in formulating the
working paper elimination entries.
b. If the working paper is to prepare post acquisition
consolidated statements, computations must
show the amortization of increase/decrease in
value of net assets of the acquired company.
5. Increase/decrease to fair value of net asset items and
GOODWILL are recognized in full regardless of the
extent of the minority interest. Such remeasurement
and resulting amortization/impairment loss accrue to
both the controlling interest and the non-controlling
interests.
Please note that goodwill, which is part of the excess
is no longer amortized but subjected to annual tests
for impairment losses.
6. Working paper elimination entries orchestrate the
items and balances that must comprise the
consolidated statements. Their two basic objectives
are (1) to eliminate intercompany balances and (2) to
make adjustments to or set-up some items in order
to conform with purchase principles.
7. In purchase combination, for example, working paper
elimination entries aim to accomplish the following:
a. Eliminate inter-company balances
b. Make adjustments for acquired assets and
assumed liabilities to comply with fair value
considerations.
c. Set up goodwill or income from acquisition into
the consolidated statements.
d. Amortize increase/decrease in value of net assets
and measure their effects in the consolidated
financial statements,
e. Make adjustments to consolidated amounts as a
result of inter-company transactions.
f. And for a variety of other consolidation
requirements.
8. Basically, in the working papers, similar items from
the parent’s records and from the subsidiary’s records
are simply combined, plus/minus any working paper
adjustments affecting such items.
9. The fair value method is usually applied to small
stockholdings. Generally it is the method used by the
investor if the interest acquired is less than 20% of
outstanding voting shares. An investor that can
exercise significant influence must use the equity
method as required by PAS 28. Control by the
investor over the investee may use either the cost
method or the equity method and must consolidate
unless exempted. The cost method is however
preferred.
- done –
P2.708
EXCEL PROFESSIONAL SERVICES, INC.

MULTIPLE CHOICE THEORETICAL

Page 2 of 11 www.prtc.com.ph P2.708

Select the best answer for each of the following multiple-choice questions:
1. X has control over the composition of Y's board of
directors. X owns 49% of Y and is the largest
shareholder. X has an agreement with Z, which owns
10% of Y, whereby Z will always vote in the same way
as X. Can X exercise control over Y?
a. X cannot exercise control because it owns only
49% of the voting rights
b. X cannot exercise control because it can control
only the makeup of the board and not necessarily
the way the directors vote
c. X can exercise control solely because it has an
agreement with Z for the voting rights to be used
in whatever manner X wishes
d. X can exercise control because it controls more
than 50% of the voting power, and it can govern
the financial and operating policies of Y through is
control of the board of directors
2. X owns 50% of Y's voting shares. The board of
directors consists of six members; X appoints three of
them and Y appoints the other three. The casting vote
at meetings always lies with the directors appointed by
X. Does X have control over Y?
a. No, control is equally split between X and Z
b. Yes, X holds 50% of the voting power and has the
casting vote at board meetings in the event that
there is not a majority decision
c. No, x owns only 50% of the entity's shares and
therefore does not have control
d. No, control can be exercised only through voting
power, not through a casting vote
3. Z has sold all of its shares to the public. The company
was formerly a state-owned entity. The national
regulator has retained the power to appoint the board
of directors. An overseas entity acquires 55% of the
voting shares, but the regulator still retains its power
to appoint the board of directors. Who has control of
the entity?
a. The national regulator
b. The overseas entity
c. Neither the national regulator nor the overseas
entity
d. The board of directors
4. A has acquired an investment in a subsidiary, B, with
the view to dispose of this investment within six
months. The investment in the subsidiary has been
classified as held for sale and is to be accounted for in
accordance with IFRS 5. The subsidiary has never been
consolidated. How should the investment in the
subsidiary be treated in the financial statements?
a. Purchase accounting should be used
b. Equity accounting should be used
c. The subsidiary should not be consolidated but IFRS
5 should be used
d. The subsidiary should remain off balance sheet
STRAIGHT PROBLEMS
5. A manufacturing group has just acquired a controlling
interest in a football club that is listed on a stock
exchange. The management of the manufacturing
group wishes to exclude the football club from the
consolidated financial statements on the grounds that
its activities are dissimilar. How should the football
club be accounted for?
a. The entity should be consolidated as there is no
exemption from consolidation on the grounds of
dissimilar activities
b. The entity should not be consolidated using the
purchase method but should be consolidated using
equity accounting
c. The entity should not be consolidated and should
appear as an investment in the group accounts
d. The entity should not be consolidated; details
should be disclosed in the financial statements
6. In the separate financial statements of a parent entity,
investments in subsidiaries that are not classified as
held for sale should be accounted for
a. At cost
b. In accordance with IAS 39
c. At cost or in accordance with IAS 39
d. Using the equity method
7. Which of the following is not a valid conditions that will
exempt an entity from preparing consolidated financial
statements?
a. The parent entity is a wholly owned subsidiary of
another entity
b. The parent entity's debt or equity capital is not
traded on the stock exchange
c. The ultimate parent entity produces consolidated
financial statements available for public use that
comply with IFRS
d. The parent entity is in the process of filing its
financial statements with a securities commission
8. Entity X controls an overseas entity Y. Because of
exchange controls, it is difficult to transfer funds out of
the country to the parent entity. X owns 100% of the
voting power of Y. How should Y be accounted for?
a. It should be excluded from consolidation and the
equity method should be used
b. It should be excluded from consolidation and
stated at cost
c. It should be excluded from consolidation and
accounted for in accordance with IAS 39
d. It is not permitted to be excluded from
consolidation because control is not lost
9. Where should minority interests be presented in the
consolidated balance sheet?
a. Within long-term liabilities
b. In between long-term liabilities and current
liabilities
c. Within the parent shareholders' equity
d. Within equity but separate from the parent
shareholders' equity
 Problem 1 in 20x9 and P 180,000 in 20x0. S Company paid cash
On January 1, 2010, P Company purchased interest dividends of P50,000 in 20x9 and P60,000 in 20x0.
in S Company. On this date the book values and the P Company uses the cost method in accounting for its
fair values of S Company were as follows: investment in stocks of S Company.
Fair Market Requirements:
Book Values Values 1. Calculate the investment income of P Company
Cash P 300,000 from S Company in 20x9 and in 20x0.
Accounts receivable 180,000 2. Elimination entries for consolidated statement
Merchandise working papers on January 1, 20x9, December 31,
inventory 720,000 900,000 20x9 and December 31, 20x0.
Building (net) 1,860,000 1,920,000 3. Calculation of minority interest in net income of
Equipment 600,000 480,000 subsidiary for 20x9 and 20x0
Long term inv. in 4. Calculation of consolidated net income for 20x9 and
MS 1,200,000 1,740,000 20x0.
P 4,860,000 5. Calculation of minority interest in net assets as of
Current liabilities P 600,000 January 1, 20x9, December 31, 20x9 and
Bonds payable 1,260,000 1,560,000 December 31, 20x0.
Common stock 1,200,000
Problem 4
Retained earnings 1,800,000
Pet Company acquired a 60% interest in Show
P 4,860,000
Enterprises on 2 January 20x1 when Show’s share
capital and retained earnings were P80,000 and
Requirements: Prepare the following assuming that P
P30,000 respectively. The net assets of Show were
Company paid
fairly valued on that date. The fair value of non-
(a) P 3,420,000 for a 100% interest
controlling interest as at the date of acquisition is
(b) P 2,208,000 for an 80% interest
P78,000.
1. Determination and distribution of excess
schedule
The following financial statements pertain to the two
2. Working paper elimination entries
companies for the year ended December 31, 20x8
Problem 2
Income Statement for the year ended December 31,
Pluto Company acquired a 60% interest in Saturn Co
20x8
on 2 January, 2010. Book and fair values at the date of
acquisition were close to each other. The fair value of
non-controlling interests as at the date of acquisition is Pet Co Show Ent
P75,000. A control premium was paid by Pluto to Operating profit P160,000 P 60,000
acquire Saturn. Dividend income from
Show 18,900 -
The following balance sheets relate to Pluto and Net profit before tax 178,900 60,000
Tax expense (48,900) (18,000)
Saturn right after the combination: Net profit after tax 130,000 42,000
Pluto Co Saturn Co Retained earnings,
Investment in Saturn Co, cost P117,000 P 0 January 1 110,000 38,200
Other assets 578,000 294,700 Dividends declared (100,000) (31,500)
Total assets P695,000 P294,700 Retained earnings,
Share capital P300,000 P 80,000 December 31 P140,000 P 48,700
Retained earnings 140,000 30,000
Long-term liabilities 200,000 150,400 Balance as at December 31, 20x8
Current liabilities 55,000 34,300 Pet Co Show Ent
Total equities P695,000 P294,700 Investment in Saturn Co,
cost P117,000 P -
Required: Other assets 520,200 265,230
1. Determination and distribution of excess schedule Total assets P637,200 P265,230
at the date of acquisition. Share capital P270,000 P 80,000
2. Consolidation working paper entries at the date of Retained earnings 126,000 48,700
acquisition. Long-term liabilities 180,000 120,000
3. Consolidated balance sheet at the date of Current liabilities 61,200 16,530
acquisition. Total equities P637,200 P265,230

Problem 3
On January 1, 20x9, P Company purchased an 80%
interest in S Company for P340,000. On this date, S
Company had Capital Stock of P150,000 and Retained
Earnings of P100,000. An examination of S Company’s
assets and liabilities revealed that book values were
equal to market values for all except the following:
Book value Market value
Plant and equipment (net) 300,000 400,000
Merchandise inventory 80,000 100,000
The plant and equipment had an expected remaining
life of 5 years, and the inventory should be sold in
20x9. P Company’s income was P250,000 in 20x9 and
P290,000 in 20x0. S Company’s income was P120,000
Required:
1. Show the consolidation working paper entries for
the year ended December 31, 20x8.
2. Perform an analytical check on the non-controlling
interests as at December 31, 20x8.
3. Prepare the consolidation worksheet for the year
ended December 31, 20x8.
Problem 5 (Upstream Merchandise Transfer)
S Company, a 75% owned subsidiary of P Company,
sold merchandise during 2009 to its parent company
for P 150,000. The merchandise cost S Company P
110,000, 25% of the transferred merchandise
remained in P Company’s ending inventory. For the
year 2009, S Company reported a net income of P
150,000 and P Company reported net income 1. Calculate P Company’s investment income from S
(including dividend income of P 60,000) of P 275,000. Company in 2009 and in 2010.
2. Elimination entries for 2009 and for 2010.
Requirements: 3. Determine non-controlling interest in the net
1. Calculate P Company’s investment income from S income of the subsidiary for 2009 and for 2010.
Company in 2009. 4. Show the consolidated net income for 2009 and
2. Elimination entries for 2009 2010. Allocate each to Controlling and MNon-
3. Determine non-controlling interests in the net controlling interests.
income of the subsidiary for 2009.
4. Show consolidated net income for 2009, and Problem 8 (Intercompany Transactions)
allocate to Controlling interests and Non-controlling On January 1, 2009, P Company acquired 75% of the
interests. outstanding shares of S Company at book value.
During 2010, P Company purchased merchandise from
Problem 6 (Downstream Land Transfer) S Company in the amount of P 400,000 at billed
During 2008 P Company sold land with a cost of prices. S Company shipped the merchandise at 40%
P150,000 to its 80% owned subsidiary, S Company, above its cost, and this pricing policy was also used for
for P 200,000. The subsidiary sold the land in 2010 to shipments made in 2009 to P Company. The
inventories of P Company included merchandise at
an outsider for P280,000. The subsidiary and the billed prices from S Company as follows:
parent reported net income as follows:
Parent Subsidiary January 1, 2010 112,000
2008 351,000 154,000 December 31, 2010 84,000
2009 335,000 149,000
2010 315,000 165,000 Also, in 2009 P Co sold land to S Co for P200, 000. The
The reported income of the parent company includes P cost of the land to P Co was P150, 000. S Co sold the
51,000 of dividend income each year. land to an outsider for P230, 000 in 2010.
Requirements:
Furthermore, on January 1, 2010 S Co sold equipment
1. Calculate P Company’s investment income from S
to P Co for P75, 000 cash at the date of the transfer,
Company in 2008, 2009, and 2010.
the equipment is carried at a cost of P106, 000 less
2. Elimination entries for 2008, 2009, and 2010
accumulated depreciation of P45, 000. The equipment
3. Determine non-controlling interest in the net
has an estimated remaining life of 7 years.
income of the subsidiary in 2008, 2009 and 2010
4. Show the consolidated net income for 2008, 2009
Income statements for the two companies for the year
& 2010. Allocate each to Controlling and non-
controlling interests. 2010 are as follows:
P Company S Company
Problem 7 (Upstream depreciable asset transfer) Sales P2,000,000 P1,000,000
On January 1, 2009, S Company a 90% owned Cost of sales 800,000 500,000
subsidiary of P Company transferred equipment to its Gross profit 1,200,000 500,000
parent in exchange for P75,000 cash. At the date of Operating expenses 720,000 320,000
transfer, the subsidiary’s record carried the equipment Operating income 480,000 180,000
at a cost of P106,000 less accumulated depreciation of Gain on sale of land 30,000
P45,000. The equipment has an estimated remaining Gain on sale of equipment _________ 14,000
life of 7 years. The subsidiary reported net income for Net income P 480,000 P 224,000
2009 and 2010 of P 132,000 and P197,000, Requirements:
respectively. The parent company reported income of 1. Calculate the non-controlling interests in the
P 220,000 (including dividend income of P 45,000) and consolidated net income in 2010.
P295,000 (including dividend income of P45,000) for 2. Calculate the controlling interest in the
2009 and 2010, respectively. consolidated net income in 2010.
3. Prepare working paper elimination entries for the
above information at December 31, 2010.
Requirements 4. Prepare a consolidated income statement for the
year ended December 31, 2010.
 - end –

MULTIPLE CHOICE
Daito Corporation owns 100% of Prince Enterprises. Separate balance sheet data for the companies at the
On January 1, 2010, Daito sold Prince delivery combination date are given below:
equipment at a gain. Daito had owned the equipment
for two years and used a five-year straight-line Sabina Argo
depreciation rate with no residual value. Prince is Cash 12,000 103,000
using a three-year straight-line depreciation rate with Accounts Receivables 72,000 13,000
no residual value for the equipment. Inventory 66,000 19,000
1. In the consolidated income statement, Prince Land 39,000 16,000
recorded depreciation expense on the equipment Plant Assets 350,000 150,000
for 2010 will be decreased by: Accum. Depreciation (120,000) (30,000)
a. 20% of the gain on sale Invesment in Argo 196,000 _______-
b. 33.33% of the gain on sale Total Assets 615,000 271,000
c. 50% of the gain on sale Accounts Payable 103,000 71,000
d. 100% of the gain on sale Capital Stock 400,000 150,000
Retained Earnings 112,000 50,000
Parker Corporation sells equipment with a book value Total Equities. 615,000 271,000
of P80,000 to Sheaffer Enterprises, its 75%-owned
subsidiary, for P100,000 on January 1, 2010. Sheaffer At the date of combination the book values of ARGO’s
determines that the remaining useful life of the net assets was equal to the fair value of the net assets
equipment is four years and that straight-line except for ARGO’s inventory which has a fair value of
depreciation is appropriate. The December 31, 2010 P30,000.
separate company financial statements of Parker and
Sheaffer show equipment-net of P500,000 and 5. What amount of goodwill will be reported?
P300,000, respectively. a. P15,667 c. P21,000
2. The consolidated equipment-net will be: b. P37,750 d. P50,333
a. P800,000 c. P780,000
b. P785,000 d P650,000 6. What amount of total liability will be reported?
a. P174,000 c. P213,000
Balance sheet data for P Corporation and S Company b. P284,333 d. P 90,667
on December 31, 2010, are given below:
P Corporation S Company 7. What is the amount of total assets?
Cash P 70,000 P 90,000 a. P590,667 c. P751,333
Merchandise b. P686,000 d. P738,750
Inventory 100,000 60,000
Property and On January 1, 2009, Paul Company purchased 90% of
equipment (net) 500,000 250,000 the common stock of Bryan Company for P81,000 over
Investment in S the book value of the shares acquired. All of the
Company 260,000 ________ differential was related to land held by Bryan. On May
Total assets P930,000 1, 2010, Bryan sold the land at a gain of P145,000.
P400,000 For the year 2010, Bryan reported net income of
P331,000 and paid dividends of P80,000. Paul
Current liabilities P180,000 P 60,000 reported income from its own separate operations of
Long term liabilities 200,000 90,000 P659,000 and paid no dividends.
Common stock 300,000 100,000 9. Consolidated net income for 2010 was
Retained earnings 250,000 150,000 a. P 824,000 c. P 1,005,400
Total liabilities & SE P930,000 P400,000 b. P 875,900 d. P 900,000
On January 1, 2009 the Blumentritt Corporation sold
P Corporation purchased 80% interest in S Company
equipment to its wholly-owned subsidiary, Morayta
on December 31, 2010 for P260,000. S Company’s
Enterprises, for P1,800,000. The equipment cost
property and equipment had a fair value of P50,000
Blumentritt P2,000,000; accumulated depreciation at
more than the book value shown above. All other
the time of the sale of P500,000. Blumentritt was
book values approximated fair value. In the
depreciating the equipment on the straight-line-
consolidated balance sheet on December 31, 2010.
method over twenty years with no salvage value, a
procedure that Morayta continued.
3. The amount of total stockholders’ equity to be
reported will be 10. On the consolidated balance sheet at December
a. P 550,000 c. P 750,000 31, 2009 the cost and accumulated depreciation,
b. P 610,000 d. P 615,000 respectively, should be:
a. P1,500,000 and P600,000
4. The amount of non-controlling interest will be b. P1,800,000 and P100,000
a. P 50,000 c. P 110,000 c. P1,800,000 and P500,000
b. P 60,000 d. P 65,000 d. P2,000,000 and P600,000

On January 1, 2010. SABINA Corporation purchased

75% of the common stock of ARGO Company. - now do the DIY drill -

DO-IT-YOURSELF (DIY) DRILL

P Company acquired a 65% interest in S company in 2008. Net income P220,000 P125,000
For years ended December 31, 2009 and 2010, S reported
net income of P325,000 and P390,000, respectively. PARKER’s loss o sale of equipment relates to an equipment
During 2009, S sold merchandise to P for P70,000 at a with a book value of P75,000 and a 6-year remaining
cost of P54,000. Two-fifths of the merchandise was later useful life that was sold to SPENCER for P45,000 on
resold by P to outsiders for P38,000 during 2010. In 2010, October 1, 2009.
P sold merchandise to S for P98,000 at a profit of P24,000.
One-fourth of the merchandise was resold by S to 6. Consolidated Depreciation expense in 2009 is
outsiders for P30,000 during 2010. P___________.
1. Minority interest net income in 2009 is P__________ . On December 31, 2008, PANDOY Inc. purchased 75% of
2. Minority interest net income in 2010 is P__________ . the outstanding shares of SAHARA Company at cost of
P1,750,000. On that date, SAHARA Company had
CORN Corporation sells equipment with a book value of P500,000 of capital stock and P1,250,000 of retained
P200,000 to BEANS Company, its 75% owned subsidiary
earnings. For 2009, the results of operations are:
for P160,000 on April 1, 2009. BEANS determines that the
PANDOY SAHARA
remaining useful life of the equipment is four years and
Inc. Company
that the straight-line depreciation is appropriate. The
Net income (loss) from own
December 31, 2009 separate financial statements of CORN
operations P900,000 P(110,000)
and BEANS show equipment-net of P1,000,000 and
Dividends paid 350,000 60,000
P600,000, respectively.
3. Consolidated equipment-net will be P___________.
All assets and liabilities of SAHARA Company have book
values approximately equal to their respective market
RICH Corporation paid P1,125,000 for an 80% interest in
values. The beginning inventory of PANDOY Inc. includes
HARD Corporation on January 1, 2009 at a price P37,500
P20,000 of merchandise purchased from SAHARA
in excess of underlying book value. The excess was
Company on December 31, 2008 at 25% above its cost.
allocated P15,000 to undervalued equipment with a ten-
The ending inventory of SAHARA Company includes
year remaining useful life and P22,500 to goodwill which
P22,500 of merchandise purchased from PANDOY Inc. in
was not impaired during the year. During 2009, HARD
2009 at 20% above its cost. Goodwill is not impaired.
Corporation paid dividend of P60,000 to RICH Corporation.
The income statements of RICH and HARD for 2009 are 7. Consolidated net income in 2009 is P___________ .
given below: 8. Non-controlling interest net income (loss) for 2009 is
RICH HARD P___________ .
Sales P2,500,000 P1,000,000 9. Total non-controlling interest at December 31, 2009 is
Cost of sales (1,250,000) (500,000) P_____________ .
Depreciation
expense (250,000) (150,000)
Other expense (500,000) (225,000) On January 1, 2009, PAN Co. purchased 85% of the
Net income P500,000 P125,000 outstanding shares of SAN Company for P640,000 when
the latter’s stockholders’ equity is P640,000. On October 1,
4. Consolidated net income for 2009 is P____________. 2009. SAN Company sold equipment with a book value of
5. Non-controlling interest in net assets at December 31, P32,000 to PAN Company for P64,000. The equipment is
2009 is P____________ . expected to have a remaining life of five years. The gain
on sale is included in the 2009 net income of SAN
Income information for 2009 taken from the separate Company. Goodwill if any is not impaired. SAN Company
company financial statements of PARKER Corporation paid dividends of P60,000 in 2009 and P100,000 in 2010.
remaining useful life that was sold to SPENCER for P45,000 The individual income of PAN Company and SAN Company
from their own operations are:
on October 1, 2009.
PARKER SPENCER
Sales P1,250,000 P575,000 2009 2010
Cost of goods sold (625,000) (325,000) PAN Company P220,000 P360,000
Depreciation expense (125,000) (75,000) SAN Company 140,000 240,000
Loss on sale of equipment (30,000)
Other expense (250,000) (50,000) 10. Minority interest in a assets for 2009 is P__________ .
11. Consolidated net income in 2010 is P____________

SOLUTION TO PROBLEM 4
Determination and Distribution of Excess Schedule:

Page 9 of 4 www.prtc.com.ph PA2-301B

PROFESSIONAL REVIEW and TRAINING CENTER, INC.

Cost (P117,000 + P78,000) P195,000

Less Book value acquired:
Share capital P80,000
Retained earnings 30,000 110,000
Goodwill (Excess of Cost over Fair Value) P 85,000
Consolidation working paper entries:
CWPE#1: Share capital (Show) P80,000
Retained earnings (Show) 30,000
Goodwill 85,000
Investment in Show P117,000
Non-controlling interests 78,000
Elimination of investment in Show, share capital, and pre-acquisition retained
earnings and recognition of goodwill and non-controlling interests as at date
of acquisition.
CWPE#2: Retained earnings (Show) 3,280
Non-controlling interests 3,280
Allocation of share of change in retained earnings of Show to non-controlling
interests from the date of acquisition to beginning of current period.
(P38,200 – P30,000) x 40% = P3,280; (P38,200 – P30,000) x 60% = P4,920
CWPE#3: Dividend income (Pet) (60% x P31,500) 18,900
Non-controlling interests (40% x P31,500) 12,600
Dividends declared by Show 31,500
Elimination of dividends declared by Show against (a) Dividend income of
Pet, and (b) non-controlling interests - balance sheet
CPWE#4: Income to non-controlling interests (I/S) 16,800
Non-controlling interests (B/S) 16,800
Allocation of share of current profit after tax of Show to non-controlling
Interests. (Show’s net income, P42,000 x 40%)
2. Analytical check on the non-controlling interests as at December 31, 20x8.
NCI, 12/31/x8: ( P78,000 + P3,280 + P16,800 – P12,600 P85,480
Show’s book value of net assets as at December 31, 20x8 P128,700
Goodwill 85,000
Total at fair value P213,700
X NCI% 40%
NCI, 12/31/x8 P 85,480
4. Consolidation Worksheets for the year ended December 31, 20x8.
INCOME STATEMENTS for the year ended December 31, 20x8:
Cons. Adjustment Consolidted
Pet Co Show Ent Debit Credit Balance Sheet
Operating profit P160,000 P 60,000 P 220,000
Dividend income 18,900 0 18,900 0
Net profit b4 tax P178,900 P 60,000 220,000
Tax expense (48,900) (18,000) 66,900
Net prft after tax P130,000 P 42,000 153,100
Profit to NCI 16,800 ( 16,800)
Profit to Parent P130,000 P 42,000 P136,300
RE, Jan. 1 110,000 38,200 30,000 114,920
3,280
Dividends dclrd (100,000) (31,500) 31,500 (100,000)
RE, Dec. 31 P140,000 P 48,700 P68,980 P31,500 P 151,220
BALANCE SHEETS as at December 31, 20x8
Inv in Show P117,000 P 0 117,000 P 0

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PROFESSIONAL REVIEW and TRAINING CENTER, INC.

Other assets 520,200 265,230 785,430

Goodwill 85,000 85,000
Total assets P637,200 P265,230 85,000 117,000 P 870,430

Share capital P270,000 P80,000 80,000 P 270,000

RE, 12/31 126,000 48,700 68,980 31,500 137,220
NCI, 12/31 12,600 78,000 85,480
3,280
16,800
LT liabilities 180,000 120,000 300,000
C / liabilities 61,200 16,530 77,730
Total equities P637,200 P265,230 246,580 246,580 P870,430

CONSOLIDATED INCOME SSTATEMENT FOR YEAR ENDED DEC. 31, 20X8

Net profit before tax P220,000
Tax expense ( 66,900)
Net profit after tax P153,100

Attributable to NCI P 16,800

Attributable to parent’s shareholders 136,300
Total P153,100
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR 20X8
Retained earnings, January 1 P114,920
Net profit after tax attributable to parent’s shareholders 136,300
Dividends declared by Pet (100,000)
Retained earnings, December 31, 20x8 P151,220

CONSOLIDATED BALANCE SHEET AS AT December 31, 20x8

Other assets P785,430
Goodwill 85,000
Total assets P870,430
Share capital P270,000
Retained earnings 137,220
Parent’s shareholders’ equity P407,220
Non-controlling interests 85,480
Total shareholders’ equity P492,700
Long-term liabilities P300,000
Current liabilities 77,730 377,730
Total equity and liabilities P 870,430

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