On January 1, 2016.

Raven Corporation acquired 180,000 ordinary shares of Harris

Company in the open market for P5,760,000. Included in this amount is a control premium
of P180,000. Also, the company has incurred acquisition related expenses amounting to
P72,000. On the date of acquisition, the following information is available:

Harris Company Raven Corporation

Book Value Fair Value Book Value Fair Value
Cash P300,000 P300,000 P6,000,000 P6,000,000
Receivables, net 480,000 480,000 720,000 660,000
Inventory 660,000 900,000 1,080,000 1,440,000
Land 960,000 924,000 1,200,000 1,800,000
Equipment, net 1,620,000 1,836,000 1,920,000 2,400,000
Buildings, net 3,240,000 3,780,000 4,950,000 5,400,000
Intangible assets 600,000 720,000 1,056,000 1,080,000

All the liabilities of Raven and Harris have fair values equal to their book values on January
1, 2016.

The recognized amount of the non-controlling interest on January 1, 2016, has a fair value
of P2,340,000. Raven’s shareholders’ equity is composed of common stock, P6,000,000,
additional paid in capital of P2,160,000 and retained earnings of P4,062,000. Meanwhile,
the common stock, additional paid in capital and retained earnings of Harris is P1,200,000,
P1,080,000 and P2,640,000, respectively.

Five-eighths of the inventories of Harris on the date of acquisition were sold during the
year 2016. Both companies follow the straight-line method of depreciation and
amortization. Upon testing, the recoverable amount of goodwill was determined to be
P1,920,000.

As of January 1, 2016, Raven’s notes payable is due to be paid in full on December 31,
2019, whereas their bonds payable were issued at face value and due on January 1, 2022.
Harris’ notes payable is due in five annual installments starting December 31, 2018,
whereas their bonds payable were also issued at face value and due five years after the
date of acquisition.

During 2016, Raven reported sales of P6,000,000, cost of sales of P3,840,000 and
operating expenses of P552,000. Dividend income found in the statement of
comprehensive income of Raven and Harris amounted to P540,000 and P120,000. Harris
reported sales, cost of sales and expenses of P2,880,000, P1,560,000 and P480,000,
respectively.

For 2016, Raven and Harris declared and paid dividends of P960,000 and P600,000
respectively.
The controllers have prepared the separate statement of financial position of the parent
and subsidiary as of December 31, 2016:

Harris Raven
Company Corporation
Cash P420,000 P750,000
Receivables, net 300,000 1,188,000
Inventory 360,000 840,000
Land 960,000 1,200,000
Equipment 1,800,000 2,400,000
Accumulated depreciation- equipment (360,000) (600,000)
Buildings 3,600,000 6,000,000
Accumulated depreciation – building (540,000) (1,200,000)
Intangible assets 540,000 960,000
Investment in Harris 5,760,000
Total Assets P7,080,000 P17,298,000

Accounts payable P 180,000 P780,000

Accrued expenses 60,000 180,000
Notes payable (long-term) 360,000 600,000
Bonds payable 1,200,000 2,400,000
Common stock (P5 par) 1,200,000 6,000,000
Additional paid in capital 1,080,000 2,160,000
Retained earnings 3,000,000 5,178,000
Total Liabilities and shareholders’ P7,080,000 P17,298,000
equity
Two-thirds of the remaining inventories of Harris on the date of acquisition were sold
during the year 2017. The balance is sold the following year. Both companies continue to
use the straight-line method of depreciation and amortization with no change in the
useful life of the assets. After testing, the goodwill was found to be impaired and should
be written down to P1,440,000.

The controllers have prepared the separate statement of financial position of the parent
and subsidiary as of December 31, 2017:

Harris Company Raven

Corporation
Cash P636,000 P 1,098,000
Receivables, net 624,000 1,320,000
Inventory 480,000 1,362,000
Land 960,000 1,200,000
Equipment 1,800,000 2,400,000
Buildings 3,600,000 6,000,000
Intangible assets 480,000 864,000
Investment in Harris 5,760,000
Cost of sales 1,800,000 4,920,000
Operating expenses 960,000 1,080,000
Dividends declared 720,000 780,000
Total assets P12,060,000 P26,784,000

Accumulated depreciation – equipment P540,000 P720,000

Accumulated depreciation – building 720,000 1,350,000
Accounts payable 120,000 216,000
Accrued expenses 120,000 120,000
Notes payable 360,000 600,000
Bonds payable 1,200,000 2,400,000
Common stock (P5 par) 1,200,000 6,000,000
Additional paid in capital 1,080,000 2,160,000
Retained earnings 3,000,000 5,178,000
Sales 3,720,000 7,500,000
Dividend revenue 540,000
Total equities P12,060,000 P26,784,000

Raven Corporation prepared the appropriate working paper elimination entries on

December 31, 2016 and 2017 need to facilitate the preparation of the consolidated
statement of comprehensive income, statement of retained earnings and statement of
financial position.
Compute for the following items for the year 2016:

1. Consolidated cost of sales.

2. Consolidated total expenses.
3. Consolidated net income.
4. Consolidated net income attributed to controlling interest.
5. Non-controlling interest in net income of subsidiary.
6. Consolidated current assets.
7. Consolidated property, plant, and equipment, net.
8. Consolidated noncurrent assets.
9. Consolidated current liabilities.
10. Consolidated noncurrent liabilities.
11. Consolidated dividends income.
12. Consolidated retained earnings.
13. Consolidated shareholders’ equity.
14. Non-controlling interest in the net assets on December 31, 2016.
15. Share of non-controlling interest in consolidated goodwill on December 31,
2016.

Compute for the following items for the year 2017:

16. Consolidated gross profit.

17. Consolidated cost of sales.
18. Consolidated operating expenses.
19. Consolidated net income.
20. Consolidated net income attributed to controlling interest.
21. Non-controlling interest in net income of subsidiary.
22. Consolidated inventories.
23. Consolidated current assets.
24. Consolidated property, plant, and equipment, net.
25. Consolidated noncurrent assets.
26. Consolidated current liabilities.
27. Consolidated noncurrent liabilities.
28. Consolidated dividends declared.
29. Consolidated additional paid in capital.
30. Share of the non-controlling interest in the increase/ (decrease) of the 2016
retained earnings of the subsidiary.
31. Consolidated retained earnings.
32. Consolidated shareholders’ equity.
33. Non-controlling interest in the net assets on December 31, 2016.
34. Share of controlling interest in consolidated goodwill on December 31, 2016.
35. Share of non-controlling interest in consolidated goodwill on December 31,
2016.
Answers.

1. 5,550,000
2. 6,900,000
3. 2,190,000
4. 2,076,000
5. 114,000
6. 3,948,000
7. 13,926,000
8. 17,454,000
9. 1,200,000
10. 4,500,000
11. 210,000
12. 5,178,000
13. 15,642,000
14. 2,304,000
15. 768,000
16. 4,440,000
17. 6,780,000
18. 2,106,000
19. 1,854,000
20. 1,837,500
21. 16,500
22. 1,872,000
23. 5,550,000
24. 13,242,000
25. 16,122,000
26. 648,000
27. 4,488,000
28. 780,000
29. 2,160,000
30. 36,000
31. 6,235,500
32. 16,536,000
33. 2,140,500
34. 864,000
35. 576,000