Problem 1

On January 1, 2x01, Fontainbleau acquired Marmont (90% ownership) for Php

40,320,000.

Account balances immediately before acquisition are as follows

Amounts in millions of pesos
Fontainebleau Marmont
Cash 65.00 34.40
Inventory 12.00 5.00
Machineries 60.00 18.00
Accu. Depn – machineries (24.00) (7.20)
Equipments 12.00
Accu. Depn – equipments (4.80)
Buildings 100.00
Accu. Depn – bldng (50.00)
Total 163.00 57.40

Loans payable (10%) 50.00 20.00

Ordinary shares 40.00 30.00
Share premium 20.00 3.00
Retained earnings 53.00 4.40
Total 163.00 57.40

On acquisition date:
 The machineries of both companies are 40% depreciated and have
remaining useful life of 6 years.
 The machineries of Marmont have fair value of Php15,600,000.
 The equipments of Marmont are 40% depreciated and have remaining
useful life of 3 years.
 The equipment of Marmont have fair value of Php9,600,000.
 The buildings of Fontainebleau are 50% depreciated and have remaining
useful life of 10 years.
The income statements of both companies in 2x01 and 2x02 are as follows.
Amounts in millions of pesos
2x01 2x02
Fontaineblea Marmount Fontaineblea Marmount
u u
Sales 150,00 60.00 180.00 90.00
Cost of Goods Sold (60.00) (18.00) (72.00) (27.00)
Gross Profit 90.00 42.00 108.00 63.00
Cash expenses (12.00) (7.00) (12.00) (5.00)
Depreciation (11.00) (4.20) (11.00) (4.20)
Dividend Income 18.00 27.00
Interest Expense (5.00) (2.00) (5.00) (2.00)
Profit 80.00 28.80 107.00 51.80
Note:
 20% of sales of Fontainebleau are sales to Marmont. Marmont was able to
sell 40% and 30% of these to outside parties in 2x01 and 2x02
respectively.
 10% of sales of Marmont are sales to Fontainebleau. Fontainebleau was
able to sell 60% and 20% of these to outside parties in 2x01 and 2x02,
respectively.

The statements of financial position of both companies at the end of 2x01 and
2x02 are as follows.
Amounts in millions of pesos
12/31/2x01 12/31/2x02
Fontainebleau Marmon Fontainebleau Marmont
t
Cash 17.28 25.40 23.88 58.60
Inventory 10.40 27.00 11.80 19.80
Machineries 60.00 18.00 60.00 18.00
Accu. Depn –
machineries (30.00) (9.00) (36.00) (10.80)
Equipments 12.00 12.00
Accu. Depn – equipments (7.20) (9.60)
Buildings 100.00 100.00
Accu. Depn – bldng (55.00) (60.00)
Investment in subsidiary 40.32 40.32
Total 143.00 66.20 140.00 88.00

Loans payable (10%) 50.00 20.00 50.00 20.00

Ordinary shares 40.00 30.00 40.00 30.00
Share premium 20.00 3.00 20.00 3.00
Retained earnings 33.00 13.20 30.00 35.00
Total 143.00 66.20 140.00 88.00

The dividends paid by both companies in 2x01 and 2x02 are as follows:
Amounts in millions of pesos
2x01 2x02
Fontainebleau Marmont Fontainebleau Marmont
100.00 20.00 110.00 30.00

Required:
1. What is he amount of NCI on January 1, 2x01 assuming it is measured on
acquisition using the proportionate value method?
a. 320,000
b. 4,000,000
c. 4,460,000
d. 4,480,000
 e. (Other value) specify _______________
2. What is the amount of goodwill or gain on acquisition assuming NCI is
measured on acquisition using the proportionate value method?
a. 180,000
b. 200,000
c. 320,000
d. 4,480,000
e. (Other value) specify _______________

3. Compute the consolidated sales in 2x01

a. 160,000,000
b. 180,000,000
c. 210,000,000
d. 243,000,000
e. (Other value) specify _______________

4. Compute the gross profit in 2x02

a. 153,900,000
b. 166,360,000
c. 171,000,000
d. 177,240,000
e. (Other value) specify _______________

5. Compute the consolidate profit for 2x01

a. 75,248,000
b. 97,350,000
c. 97,920,000
d. 108,800,000
e. (Other value) specify _______________

6. Compute the consolidate profit for 2x02

a. 132,670,000
b. 142,920,000
c. 168,800,000
d. 172,240,000
e. (Other value) specify _______________

7. Compute the inventory to appear in the 2x01 consolidated statement of

financial position
a. 12,480,000
b. 24,920,000
c. 33,660,000
d. 37,400,000
e. (Other value) specify _______________
 8. Compute the NCI to appear in the 2x02 consolidated statement of
financial position
a. 4,480,000
b. 5,250,000
c. 6,780,000
d. 20,920,000
e. (Other value) specify _______________

9. Compute the retained earnings to appear in the 2x01 consolidated

statement of financial position
a. 33,000,000
b. 64,400,000
c. 87,660,000
d. 97,400,000
e. (Other value) specify _______________

10. Compute the 2x02 consolidated profit attributable to the owners of the
parent
a. 107,000,000
b. 130,796,000
c. 142,920,000
d. 158,800,000
e. (Other value) specify _______________

11. Compute the total assets to appear in the 2x01 consolidated statement of
financial position
a. 143,000,000
b. 162,200,000
c. 188,280,000
d. 209,200,000
e. (Other value) specify _______________

Problem 2
On December 1, 2x01, EE and FF formed a partnership, agreeing to share for
profits and losses in the ratio of 2:3, respectively. EE invested a parcel of land
that cost him P25,000. FF invested P30,000 cash. The land was sold for P50,000
on the same date, three hours after formation of the partnership. How much
should be the capital balance of EE right after the formation?

a. P25,000 c. P60,000
b. P30,000 d. P50,000
e. (Other value) specify _______________
(AICPA)
Problem 3
On March 1, 2x01, II and JJ formed a partnership with each contributing the
following assets:
II JJ
Cash P300,000 P700,000
Machinery and building 250,00 750,000
Building - 2,250,000
Furniture and Fixture 100,000 -

The building is subject to mortgage loan of P800,000, which is to be assumed by

the partnership agreement provides that II and JJ share profits and losses 30%
and 70%, respectively. On March 1, 2x01 the balance in JJ’s capital account
should be:

a. P3,700,000 c. P3,050,000
b. P3,140,000 d. P2,900,000
e. (Other value) specify _______________
(AICPA)

Problem 4
MM, NN, and OO are partners with capital balances on December 31, 2x01 of
P300,000, P300,000 and P200,000, respectively. profits are shared equally. OO
wishes to withdraw and it is agreed that OO is to take certain equipment with
second-hand value of P50,000 and note for the balance of OO’s interest. The
equipment are carried on the books at P65,000. Brand new equipment may cost
P80,000.

Compute for: (1) OO’s acquisition of the second-hand equipment will result to
reduction in capital; (2) the value of the note that will OO get from the
partnership’s liquidation.

a. (1) P15,000 each for MM and NN (2) P150,000

b. (1) P5,000 each for MM, NN and OO (2) P145,000
c. (1) P5,000 each for MM, NN and OO (2) P195,000
d. (1) P7,000 each for MM and NN (2) P145,000
e. (Other value) specify _______________
(Adapted)
Problem 5
AA, BB, and CC are partners with average capital balances during 2x01 of
P360,000, P180,000, and P120,000, respectively. Partners receive 10% interest
on their average balances. After deducting salaries of P90,000 to AA and
P60,000 to CC the residual profit or loss is divided equally. In 2x01, the
partnership sustained a P99,000 loss before interest and salaries to partners. By
what amount should AA’s capital account change?

a. P21,000 increase c. P105,000 decrease

b. P33,000 decrease d. P126,000 increase
e. (Other value) specify _______________
(AICPA)

Problem 6
The partnership of DD and BB was formed and commenced operations on March
1, 2x01, with DD contributing P30,000 cash and BB investing cash of P10,000
and equipment with an agreed upon valuation of P20,000. On July 1, 2x01, BB
invested an additional P10,000 in the partnership, DD made a capital withdrawal
of P4,000 on May 2, 2x01 but reinvested P4,000 on October 1, 2x01. During
2x01, DD withdrew P800 per month and BB, the managing partner, withdrew
P1,000 per month. These drawings were charged to salary expense. A
preclosing trial balance taken at December 31, 2x01 is as follows:
Debit Credit
Cash P9,000
Receivable – net P15,000
Equipment – net 50,000
Other assets 19,000
Liabilities 17,000
DD, Capital 30,000
BB, Capital 40,000
Service revenue 50,000
Supplies expense 17,000
Utilities expense 4,000
Salaries to partners 18,000
Other miscellaneous expenses 5,000 -
Total P137,000 P137,000

Compute for the share of DD and BB in the partnership net income assuming
monthly salary allowances P800 and P1,000 for DD and BB, respectively;
interest allowance at a 12% annual rate on average capital balance; remaining
profits allocated equally.

a. DD, P10,520; BB, P13,480 c. DD, P10,800; BB, P13,200

b. DD, P12,000; BB, P12,000 d. DD, P10,600; BB, P13,400
e. (Other value) specify _______________
(Adapted)