ABUSCOM: Consolidated Financial

Statements Subsequent to Date of

Acquisition
1) On January 1, 2021, Pure Company purchased 24,000 shares of Salad Company in the
open market for P 756,000. On that date the following assets of Salad Company had book
values that were different from their respective market values:
Book value Fair value
Inventories (FIFO) P 40,000 P 70,000
Land 150,000 200,000
Building (net) – 20 years life 200,000 300,000
Equipment (net) – 10 years life 450,000 375,000
Patent – 10 years life -0- 40,000

All other assets and liabilities had book values approximately equal to their respective
market values. Inventories were sold in 2021.

The January 1, 2021 retained earnings balance of Pure and Salad are P 600,000 and P
400,000, respectively. Financial statements for the companies for the year ended
December 31, 2021 are as follows:

Statement of Profit Pure Salad

Sales P 1,000,000 P 500,000
Income from Salad 94,800
Cost of sales (400,000) (150,000)
Other expenses (360,000) (200,000)
Net income P 334,800 P 150,000

Statement of Financial Position Pure Salad

Cash P 200,000 P 100,000
Accounts receivable 150,000 50,000
Inventories 100,000 40,000
Land 150,000
Building, net 200,000
Equipment, net 700,000 450,000
Investment in Salad Company 810,800 __________
P 1,960,800 P 990,000

Accounts payable and accrued P 124,000 P 190,000

expenses
Ordinary shares
P 50 par 200,000
P 10 par 300,000
Additional paid-in capital 400,000
Retained earnings 834,800 500,000
P 1,960,800 P 990,000

Prepare consolidated financial statements for Pure Corporation and Subsidiary at

December 31, 2021.

Marilou E. Malquisto, CPA, RCA MEM - 0008 Page 1 of 3

2) Separate company financial statements for Pen Corporation and its subsidiary, Sync
Company, at and for the year ended December 31, 2021 are summarized as follows:

Statement of Financial Position at December 31, 2021

PEN SYNC
Cash P 18,000 P 15,000
Accounts receivable – net 80,000 20,000
Dividends receivable from Sync 7,200
Notes receivable from Pen 5,000
Inventories 95,000 10,000
Investment in Sync 218,800
Land 65,000 30,000
Building – net 170,000 80,000
Furniture & fixtures – net 130,000 50,000
Total Assets P 784,000 P 210,000

Accounts payable P 85,000 P 10,000

Dividends payable 8,000
Notes payable to Sync 5,000
Ordinary share, P 10 par 500,000 150,000
Retained earnings 194,000 42,000
Total Equities P 784,000 P 210,000

Income Statement for the year ended Dec. 31, 2021

Pen Sync
Sales P 400,000 P 100,000
Income from Sync 17,600
Cost of sales (250,000) (50,000)
Expenses (101,600) (26,000)
Net Income P 66,000 P 24,000

Additional information:
a) Pen Corp. acquired 13,500 shares of Sync Company shares for P 15 per share on
January 1, 2020, when Sync’s shareholders’ equity consisted of P 150,000 ordinary
share and P 15,000 retained earnings.
b) Non-controlling interest are valued at fair value.
c) Sync Company’s land was undervalued when Pen acquired its interest, and
accordingly, P27,000 of the cost/book value differential was allocated to land. Any
remaining differential is allocated to goodwill.
d) Sync Company owes Pen P 5,000 on account, and Pen owes Sync P 5,000 on a note
payable.
e) Impairment loss for goodwill at December 31, 2021 is determined to be P 7,000.
f) Dividends declared by Pen and Sync during 2021 are P 50,000 and P 16,000,
respectively.

Compute for the following:

• Consolidated/Group Net Income for 2021
• Non-controlling Interest in Net Income on December 31, 2021
• Profit for the period attributable to Equity Holders of Parent on December
31, 2021
• Non-controlling Interest, December 31, 2021

Prepare consolidated financial statements for Pen Corporation and Subsidiary at

December 31, 2021.

Marilou E. Malquisto, CPA, RCA MEM - 0008 Page 2 of 3

3) Puff Corp. acquired a 60% interest in Scot Corp. for P 200,000 on January 1, 2019, when
the stockholders’ equity of Scot consisted of P 200,000 ordinary share and P 25,000
retained earnings. The excess of cost over book value acquired was allocated to
machinery that was undervalued by P50,000 and to goodwill. The undervalued
machinery is being depreciated over 4 years. Non-controlling interest are measured at
fair value.

Puff’s accounts receivable includes P 5,000 due from Scot. During 2021, it was
determined that a goodwill impairment loss is P 5,000. Retained earnings at January 1,
2021 for Puff and Scot Corp. were P 112,000 and P 50,000, respectively.

Financial statements for Puff and Scot Corp. for 2021 are summarized as follows:

Income Statement for the year ended Puff Corp. Scot Corp.
December 31, 2021
Net sales P 900,000 P 300,000
Dividend from Scot 12,000
Cost of sales (600,000) (150,000)
Operating expenses (190,000) ( 90,000)
Net income P 122,000 P 60,000

Statement of Financial Position

Cash P 26,000 P 15,000
Accounts receivable – net 26,000 20,000
Dividends receivable 6,000
Inventories 82,000 60,000
Other current asset 80,000 5,000
Investment in Scott 200,000
Land 160,000 30,000
Plant and equipment – net 340,000 230,000
Total Assets P 920,000 P 360,000

Accounts payable P 24,000 P 15,000

Dividends payable 10,000
Other liabilities 62,000 45,000
Ordinary share 700,000 200,000
Retained earnings 134,000 90,000
Total equities P 920,000 P 360,000

Determine the amounts for each of the following:

a. Goodwill, December 31, 2021
b. Consolidated/group Net income for 2021
c. Non-controlling Interest Net Income for 2021
d. Profit for the period attributable to Equity Holders of Parent for 2021
e. Non-controlling interest, December 31, 2021

Prepare consolidated financial statements for Puff Corporation and Subsidiary at

December 31, 2021.

Marilou E. Malquisto, CPA, RCA MEM - 0008 Page 3 of 3