Buscmb-3

Points:
15/20
1.If the impairment of the value of goodwill is seen to have reversed, then the company may

(1/1 Points)
Reverse the impairment charge and credit income for the period.
Reverse the impairment charge and credit retained earnings.
Not reverse the impairment charge.
Reverse the impairment charge only if the original circumstances that led to the
impairment no longer exist and credit retained earnings.

2.Beta Company acquired 100 percent of the voting common shares of Standard Video
Corporation, its bitter rival, by issuing bonds with a par value and fair value of P150,000.
Immediately prior to the acquisition, Beta reported total assets of P500,000, liabilities of
P280,000, and stockholders' equity of P220,000. At that date, Standard Video reported total
assets of P400,000, liabilities of P250,000, and stockholders' equity of P150,000. Included in
Standard's liabilities was an account payable to Beta in the amount of P20,000, which Beta
included in its accounts receivable. Based on the preceding information, what amount of total
assets did Beta report in its balance sheet immediately after the acquisition?
(1/1 Points)
P500,000
P650,000
P750,000
P900,000

Consideration Transferred 150,000

FV of Net Assets (150,000)
Goodwill 0

Assets of Beta before Acquisition 500,000

Investment in Subsidiary 150,000
Goodwill 0
Total Assets of Beta 650,000
3.Beta Company acquired 100 percent of the voting common shares of Standard Video
Corporation, its bitter rival, by issuing bonds with a par value and fair value of P150,000.
Immediately prior to the acquisition, Beta reported total assets of P500,000, liabilities of
P280,000, and stockholders' equity of P220,000. At that date, Standard Video reported total
assets of P400,000, liabilities of P250,000, and stockholders' equity of P150,000. Included in
Standard's liabilities was an account payable to Beta in the amount of P20,000, which Beta
included in its accounts receivable. Based on the preceding information, what amount of total
liabilities was reported in the consolidated balance sheet immediately after acquisition?
(1/1 Points)
P500,000
P530,000
P280,000
P660,000

Journal Entry for Issuance of Bonds

Investment in Subsidiary 150,000

Bonds Payable 150,000

Adjusting Journal Entry

Accounts Payable 20,000

Accounts Receivable 20,000

Liability of Beta 280,000

Liability of Standard 250,000
Bonds Payable 150,000
Decrease in A/P (20,000)
Consolidated Liabilities 660,000
4.On January 1, 2019, ABC Co. acquired 80% interest in XYZ, Inc. by issuing 5,000 shares with
fair value of ₱15 per share. On this date, XYZ’s total equity was ₱74,000. The investment in
subsidiary is measured at cost. XYZ’s assets and liabilities approximate their fair values on
January 1, 2019 except for the following: XYZ, Inc. Carrying amounts Fair values Fair value
adjustments Inventory 23,000 31,000 8,000 Equipment (4 yrs. remaining life) 40,000 48,000
8,000 Total 63,000 79,000 16,000 There were no intercompany transactions during 2019.
However, it was determined that goodwill is impaired by ₱1,000. How much is the goodwill
attributable to NCI as of December 31, 2019?
(1/1 Points)
550
2,220
620
1,280
Goodwill measured at Fair Value 18,750
75,000/.8 = 93,750
93,750 x .2 = 18, 750
Goodwill measured at Proportionate Share of 18,000
FVNIA
74,000 + 16,000 FV adjustments = 90,000
90,000 x .2 = 18,000
Goodwill Atttributable to NCI, Beg. 750
Less: Share in Goodwill Impairment (200)
1,000 x .2 = 200
Goodwill Atttributable to NCI, End. 550

5.Which f the following statements is TRUE?

(0/1 Points)
Amortization of excess affects the computation of consolidated operating expenses.
Downstream and upstream sales affect the computation of the consolidated net income
and consolidated sales and cost of goods sold.
Under the acquisition method of accounting for business combination, the stockholder
equity of any acquired company is eliminated in the working paper
In case of downstream sales, unrealized profits are charged to consolidated net income
and-non controlling interest net income
6.Marie Co. acquired inventories on May 1, 2019, from its 70% owned subsidiary, Paz Company.
The inventories were sold for P94,000, including the 25% mark up on cost. Out of these
inventories, 65% were sold to outsiders. During the year, Marie reported net income of
P215,000 and Paz reported net income of P140,000. How much is the realized profit to be
allocated to non-controlling interest in 2019?
(1/1 Points)
P1,974
P2,467.5
P3,666
P6,580

Intercompany sales 94,000

Cost of Goods Sold 75,200
94,000 /1.25
Gross Profit 18,800
Multiply by Unsold Portion 35%
Unrealized Profit 6,580
Subsidiary Share in NCI 30%
Share in Unrealized Profit Allocated to NCI 1,974

7.How is the portion of consolidated earnings to be assigned to the noncontrolling interest in

consolidated financial statements determined?
(1/1 Points)
The net income of the parent is subtracted from the subsidiary’s net income to determine
the noncontrolling interest.
The subsidiary’s net income is extended to the noncontrolling interest.
The amount of the subsidiary’s earnings recognized for consolidation purposes is multiplied
by the noncontrolling interest’s percentage ownership
The amount of consolidated earnings on the consolidated workpapers is multiplied by the
noncontrolling interest percentage on the balance sheet date.
8.Lovely Co. acquired 80% of Carry Co. on January 1, 2019 for ₱100,000. The following
information was determined at acquisition date: Lovely Co. Carry Co. Carry Co. Carrying amt.
Carrying amt. Fair value Equipment 1,000,000 500,000 400,000 Accumulated depreciation
(200,000) (100,000) (80,000) Net 800,000 400,000 320,000 Remaining useful life, 1/1/ 19 10
yrs. 5 yrs. 5 yrs. How much is the consolidated “Equipment – net” in the December 31, 2020
financial statements?
(0/1 Points)
880,000
846,000
852,000
832,000

Lovely Co.
Equipment as of Jan 1 2019 1,000,000
Accum. Dep. (200,000)
Equipment, Net 800,000
Carry Co.
CA of Equipment as of Jan 1 2019 500,000
Accum. Dep. (100,000)
Equipment, Net 400,000
FV of Equipment as of Jan 1 2019 400,000
Accum. Dep. (80,000)
Equipment, Net 320,000
Difference 80,000
CJE
Gain 80,000
Equipment 80,000
CJE on Dec. 2019
Accumulated Depreciation (80k/5) 16,000
Depreciation Expense 16,000
CJE on Dec. 2020
Accumulated Depreciation (80k/5) 16,000
Depreciation Expense 16,000
Lovely Co.
Equipment as of Dec 2020 (800K-200K) 600,000
Carry Co.
Equipment as of Dec 2020 (400K-200K) 200,000
Adjustments on FV
Dec 2019 16,000
Dec 2020 16,000
Consolidated Equipment, Net 832,000
9.When NCI is measured at proportionate share,
(1/1 Points)
goodwill is attributed only to the owners of the parent.
goodwill is attributed to both the owners of the parent and NCI.
goodwill impairment is allocated to both the owners of the parent and NCI.
not given

10.On January 1, 2019, Kenneth Co. acquired 75% of Joey Co. At that time, Joemy’s equipment
has a carrying amount of ₱100,000 and a fair value of ₱120,000. The equipment has a
remaining useful life of 10 years. On December 31, 2020, Kenneth and Joemy reported
equipment with carrying amounts of ₱500,000 and ₱300,000, respectively. How much is the
consolidated “equipment – net” in the December 31, 2020 financial statements?
(1/1 Points)
800,000
816,000
784,000
826,000

Consolidated Journal Entries

Equipment(100k-120k) 20,000
Loss 20,000
Dep. Expense(20k/5) 4,000
Accum. Dep. 4,000

Equipment, Kenneth 500,000

Equipment, Joey 300,000
Adjustments:
Equipment 20,000
Less: Accum. Dep. (4,000)
Equipment, Net 816,000
11.Mamba Corporation sold equipment to its 80% owned subsidiary, King Co., on January 1,
2019. Mamba sold the equipment for 110,000 when its book value was 85,000 and it had a 5-
year remaining useful life with no expected salvage. Separate balance sheets for Mamba and
King included the following equipment and accumulated depreciation amounts on December
31, 2019. Mamba King Equipment 750,000 300,000 Accumulated Depreciation (200,000)
(50,000) Equipment-net 550,000 250,000 Consolidated amounts of equipment and
accumulated depreciation at December 31, 2019 were respectively:
(0/1 Points)
1,025,000 and 245,000
1,025,000 and 250,000
1,050,000 and 245,000
1,050,000 and 250,000

Consolidated Journal Entries

Gain(110k-85k) 25,000
Equipment 25,000

Accum. Dep(25k/5) 5,000

Dep. Expense 5,000

Equipment, Mamba 750,000

Equipment, King 300,000
Adjustment: (25,000)
Adjusted, Equipment 1,025,000

Accum. Dep., Mamba 200,000

Accum. Dep., King 50,000
Adjustment: (25,000)
Adjusted, Accum. Dep. 245,000

12.On January 2, year 1, Taj Co. purchased 75% of Majal Co.’s outstanding common stock. On
that date, the fair value of the 25% noncontrolling interest was P35,000. During year 1, Majal
had net income of P20,000. Selected balance sheet data at December 31, year 1, is as follows:
Taj Majal Total assets P 420,000 P 180,000 Liabilities P 120,000 P 60,000 Common stock
100,000 50,000 Retained earnings 200,000 70,000 P 420,000 P180,000 During year 1 Taj and
Majal paid cash dividends of P25,000 and P5,000, respectively, to their shareholders. There
were no other intercompany transactions. In its December 31, year 1 consolidated statement of
retained earnings, what amount should Taj report as dividends paid?
(1/1 Points)
P5,000
 P25,000
P26,250
P30,000
*It is a downstream transaction. The whole 25,000 should be recorded as Dividends paid while
the 5,000(80%) dividend income should be adjusted in consolidated statement.

13.When NCI is measured at fair value,

(0/1 Points)
goodwill is attributed only to the owners of the parent.
goodwill is attributed to both the owners of the parent and NCI.
goodwill impairment is allocated to both the owners of the parent and NCI.
not given

14.On January 2, year 1, Taj Co. purchased 75% of Majal Co.’s outstanding common stock. On
that date, the fair value of the 25% noncontrolling interest was P35,000. During year 1, Majal
had net income of P20,000. Selected balance sheet data at December 31, year 1, is as follows:
Taj Majal Total assets P 420,000 P 180,000 Liabilities P 120,000 P 60,000 Common stock
100,000 50,000 Retained earnings 200,000 70,000 P 420,000 P180,000 During year 1 Taj and
Majal paid cash dividends of P25,000 and P5,000, respectively, to their shareholders. There
were no other intercompany transactions. In its December 31, year 1 consolidated balance
sheet, what amount should Taj report as common stock?
(0/1 Points)
P 50,000
P 100,000
P 137,500
P 150,000
*There should be no changes in Common Stock

15.Which of the following statements is correct?

(1/1 Points)
A consolidated balance sheet encompasses all accounts found in the individual balance
sheets of the parent and subsidiary.
Minority interest must be reported as a liability in the consolidated balance sheet.
The elimination’s required on the working papers of the consolidated statements are not
recorded in the ledgers of either the parent or the subsidiary companies.
 Consolidated retained earnings several years after the parent company acquired an 80
percent interest in the subsidiary will include the entire amount of the subsidiary’s earnings
since the date of acquisition.

16.Beta Company acquired 100 percent of the voting common shares of Standard Video
Corporation, its bitter rival, by issuing bonds with a par value and fair value of P150,000.
Immediately prior to the acquisition, Beta reported total assets of P500,000, liabilities of
P280,000, and stockholders' equity of P220,000. At that date, Standard Video reported total
assets of P400,000, liabilities of P250,000, and stockholders' equity of P150,000. Included in
Standard's liabilities was an account payable to Beta in the amount of P20,000, which Beta
included in its accounts receivable. Based on the preceding information, what amount of total
assets was reported in the consolidated balance sheet immediately after acquisition?
(1/1 Points)
P650,000
P880,000
P920,000
P750,000

Consolidated Total Assets

Beta, Total Assets 500,000

Investment in Subsidiary 150,000
Total Assets 650,000

Standard, Total Assets 400,000

Total Assets, Before Adjustments 1,050,000

Adjustments
Decrease in Accounts Receivable (20,000)
Eliminate Investment in Subsidiary (150,000)
Total Assets, After Adjustments 880,000

17.On January 2, year 1, Taj Co. purchased 75% of Majal Co.’s outstanding common stock. On
that date, the fair value of the 25% noncontrolling interest was P35,000. During year 1, Majal
had net income of P20,000. Selected balance sheet data at December 31, year 1, is as follows:
Taj Majal Total assets P 420,000 P 180,000 Liabilities P 120,000 P 60,000 Common stock
100,000 50,000 Retained earnings 200,000 70,000 P 420,000 P180,000 During year 1 Taj and
Majal paid cash dividends of P25,000 and P5,000, respectively, to their shareholders. There
were no other intercompany transactions. In its December 31, year 1 consolidated statement of
retained earnings, what amount should Taj report as dividends paid?
(1/1 Points)
P30,000
P35,000
P38,750
P40,000

Fair value of noncontrolling interest P35,000

Plus: Share of net income (25% x 20,000) 5,000
Less: Share of dividends (25% x 5,000) (1,250)
Noncontrolling interest P38,750

18.P, Inc. owns 80% of S, Inc. During year 1, P sold goods with a 40% gross profit to S. S sold all
of these goods in year 1. For year 1 consolidated financial statements, how should the
summation of P and S income statement items be adjusted?
(1/1 Points)
Sales and cost of goods sold should be reduced by the intercompany sales.
Sales and cost of goods sold should be reduced by 80% of the intercompany sales.
Net income should be reduced by 80% of the gross profit on intercompany sales.
 No adjustment is necessary

19.Lovely Co. acquired 80% of Carry Co. on January 1, 2019 for ₱100,000. The following
information was determined at acquisition date: Lovely Co. Carry Co. Carry Co. Carrying amt.
Carrying amt. Fair value Equipment 1,000,000 500,000 400,000 Accumulated depreciation
(200,000) (100,000) (80,000) Net 800,000 400,000 320,000 Remaining useful life, 1/1/ 19 10
yrs. 5 yrs. 5 yrs. The consolidation journal entry for the depreciation of the fair value
adjustment on December 31, 2020 includes which of the following?
(1/1 Points)
16,000 debit to depreciation expense
12,800 credit to retained earnings of Lovely
32,000 credit to accumulated depreciation
16,000 credit to depreciation expense

CJE
Gain 80,000
Equipment 80,000
CJE on Dec. 2019
Accumulated Depreciation (80k/5) 16,000
Depreciation Expense 16,000
CJE on Dec. 2020
Accumulated Depreciation (80k/5) 16,000
Depreciation Expense 16,000
Lovely Co.
Equipment as of Dec 2020 (800K-200K) 600,000
Carry Co.
Equipment as of Dec 2020 (400K-200K) 200,000
Adjustments on FV
Dec 2019 16,000
Dec 2020 16,000
 Consolidated Equipment, Net 832,000

20.Consolidated financial statements are typically prepared when one company has a
controlling financial interest in another unless:
(1/1 Points)
The subsidiary is a finance company.
The fiscal year-ends of the two companies do not coincide.
The two companies are in unrelated industries, such as manufacturing and real estate.
d. The parent is in itself a subsidiary of another entity, its debt or equity instruments are
not traded in a public market, and its ultimate parent produces consolidated general-purpose
financial statements that comply with PFRSs.
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