Chapter 3

Problem I
Cost Model
1. January 1, 20x4
a. On date of acquisition the retained earnings of P should always be considered as the consolidated retained earnings,
thus:
Consolidated Retained Earnings, January 1, 20x4
Retained earnings - P Company, January 1, 20x4 (date of acquisition) P360,000

b. NCI (Partial/Full)
Non-controlling interest (partial-goodwill), January 1, 20x4
Common stock – S Company, January 1, 20x4…… P 240,000
Retained earnings – S Company, January 1, 20x4 120,000
Stockholders’ equity – S Company, January 1, 20x4 P 360,000
Adjustments to reflect fair value - (over) undervaluation of assets and
liabilities, date of acquisition (January 1, 20x4) 90,000
Fair value of stockholders’ equity of subsidiary, January 1, 20x4…… P450,000
Multiplied by: Non-controlling Interest percentage…………... 20
Non-controlling interest (partial-goodwill)………………………………….. P 90,000
Add: NCI on full-goodwill (P15,000 – P12,000) ___3,000
Non-controlling interest (full-goodwill/fair value basis)………………………………….. P 93,000

The over/under valuation of assets and liabilities are summarized as follows:

S Co. S Co. (Over) Under
Book value Fair value Valuation
Inventory………………….…………….. P 24,000 P 30,000 P 6,000
Land……………………………………… 48,000 55,200 7,200
Equipment (net)......... 84,000 180,000 96,000
Buildings (net) 168,000 144,000 (24,000)
Bonds payable………………………… (120,000) ( 115,200) 4,800
Net……………………………………….. P 204,000 P 294,000 P 90,000

The buildings and equipment will be further analyzed for consolidation purposes as follows:
S Co. S Co. Increase
Book value Fair value (Decrease)
Equipment .................. 180,000 180,000 0
Less: Accumulated depreciation….. 96,000 - ( 96,000)
Net book value………………………... 84,000 180,000 96,000
S Co. S Co.
Book value Fair value (Decrease)
Buildings................ 360,000 144,000 ( 216,000)
Less: Accumulated depreciation….. 192,000 - ( 192,000)
Net book value………………………... 168,000 144,000 ( 24,000)

A summary or depreciation and amortization adjustments is as follows:

Over/ Annual Current
Account Adjustments to be amortized Under Life Amount Year(20x4) 20x5
Inventory P 6,000 1 P 6,000 P 6,000 P -
Subject to Annual Amortization
Equipment (net)......... 96,000 8 12,000 12,000 12,000
Buildings (net) (24,000) 4 ( 6,000) ( 6,000) (6,000)
Bonds payable… 4,800 4 1,200 1,200 1,200
P 13,200 P 13,200 P 7,200

c. Partial/Proportionate Goodwill
Consolidated SHE:
Stockholders’ Equity
 Common stock, P10 par P 600,000
Retained earnings 360,000
P’s Stockholders’ Equity / CI – SHE P 960,000
NCI, 1/1/20x4 (b) ___90,000
Consolidated SHE, 1/1/20x4 P1,050,000

Full-Goodwill/Fair Value Basis

Consolidated SHE:
Stockholders’ Equity
Common stock, P10 par P 600,000
Retained earnings 360,000
Parent’s Stockholders’ Equity / CI – SHE P 960,000
NCI, 1/1/20x4 (b) ___93,000
Consolidated SHE, 1/1/20x4 P1,053,000

2, The following items for December 31, 20x4 and December 31, 20x5 in the Consolidated Financial Statements:
(refer to requirement 6 as a guide)

December 31, 20x4 December 31, 20x5

Partial Full- Partial Full-Goodwill
Consolidated Amounts Goodwill Goodwill Goodwill
a. Cash P 322,800 P 322,800 P 367,200 P 367,200
b. Accounts receivable 150,000 150,000 276,000 276,000
c. Inventory 210,000 210,000 324,000 324,000
d. Land 265,200 265,200 265,200 265,200
e. Equipment (net) 273,000 273,000 240,000 240,000
f. Buildings (net) 549,000 549,000 492,000 492,000
g. Investment in Sax -0- -0- -0- -0-
h. Total Assets 1,782,600 1,784,850 1,975,800 1,978,050
i. Accounts payable 240.000 240.000 240,000 240,000
j. Bonds payable 360,000 360,000 360,000 360,000
k. Total Liabilities 600,000 600,000 600,000 600,000
l. Common stock/Ordinary share 600,000 600,000 600,000 600,000
m. Retained earnings/Accumulated P&L 490,440 490,440 676,680 676,680
n. Sales 720,000 720,000 900,000 900,000
o. Cost of Goods sold 348,000 348,000 408,000 408,000
p. Gross profit 372,000 372,000 492,000 492,000
q. Expenses (including GW impairment) 160,200 160,950 217,200 217,200
r. Dividend income -0- -0- -0- -0-
s. Controlling Interests in Net Income 202,440 202,440 258,240 258,240
t. Non-controlling Interests in Net Income 9,360 8,610 16,560 16,560
u. Net Income or CNI 211,800 211,050 274,800 274,800
v. Common stock/Ordinary share* 600,000 600,000 600,000 600,000

w. Retained Earnings/Accumulated P&L*

490,440 490,440 676,680 676,680
x. Controlling Interests / Equity Holders of
Parent/ Parent’s Stockholders’ Equity
1,090,440 1,090,440 1,276,680 1,276,680
y. Non-Controlling Interests 92,160 94,410 99,120 101,370
z1. Stockholders’ Equity 1,182,600 1,184,850 1,375,800 1,378,050
z2. Liabilities and Stockholders’ Equity 1,782,600 1,784,850 1,975,800 1,978,050

Alternative Solution (refer also to the worksheet)

80% Owned: Partial/Proportionate-Goodwill
The over/under valuation of assets and liabilities are summarized as follows:
S Co. S Co. (Over) Under
Book value Fair value Valuation
 Inventory………………….…………….. P 24,000 P 30,000 P 6,000
Land……………………………………… 48,000 55,200 7,200
Equipment (net)......... 84,000 180,000 96,000
Buildings (net) 168,000 144,000 (24,000)
Bonds payable………………………… (120,000) ( 115,200) 4,800
Net……………………………………….. P 204,000 P 294,000 P 90,000

The buildings and equipment will be further analyzed for consolidation purposes as follows:
S Co. S Co. Increase
Book value Fair value (Decrease)
Equipment .................. 180,000 180,000 0
Less: Accumulated depreciation….. 96,000 - ( 96,000)
Net book value………………………... 84,000 180,000 96,000
S Co. S Co.
Book value Fair value (Decrease)
Buildings................ 360,000 144,000 ( 216,000)
Less: Accumulated depreciation….. 192,000 - ( 192,000)
Net book value………………………... 168,000 144,000 ( 24,000)

Amortization Table: A summary or depreciation and amortization adjustments is as follows:

Over/ Annual Current
Account Adjustments to be amortized Under Life Amount Year(20x4) 20x5
Inventory P 6,000 1 P 6,000 P 6,000 P -
Subject to Annual Amortization
Equipment (net)......... 96,000 8 12,000 12,000 12,000
Buildings (net) (24,000) 4 ( 6,000) ( 6,000) (6,000)
Bonds payable… 4,800 4 1,200 1,200 1,200
P 13,200 P 13,200 P 7,200
12/31/20x4:
CI-CNI
Consolidated Net Income for 20x4
Net income from own/separate operations
P Company P168,000
S Company 60,000
Total P228,000
Less: Non-controlling Interest in Net Income* P 9,360
Amortization of allocated excess (refer to amortization above) 13,200
Goodwill impairment (impairment under partial-goodwill approach) 3,000 25,560
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent………….. P202,440
Add: Non-controlling Interest in Net Income (NCINI) 9,360
Consolidated Net Income for 20x4 P211.800
NCI-CNI
*Non-controlling Interest in Net Income (NCINI) for 20x4
Net income of S Company P 60,000
Less: Amortization of allocated excess / goodwill impairment
(refer to amortization table above) 13,200
P 46,800
Multiplied by: Non-controlling interest %.......... 20%
Non-controlling Interest in Net Income (NCINI) P 9,360
CNI, P211,800
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent………….. P202,440
Add: Non-controlling Interest in Net Income (NCINI) 9,360
Consolidated Net Income for 20x4 P211.800
On subsequent to date of acquisition, consolidated retained earnings would be computed as follows:
Consolidated Retained Earnings, December 31, 20x4
Retained earnings - P Company, January 1, 20x4 (date of acquisition) P360,000
Add: Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent for 20x4 202,440
Total P562,440
Less: Dividends paid – P Company for 20x4 72,000
 Consolidated Retained Earnings, December 31, 20x4 P490,440
NCI/NCINAS. The goodwill recognized on consolidation purely relates to the parent’s share. NCI is
measured as a proportion of identifiable assets and goodwill attributable to NCI share is not recognized.
The NCI on December 31, 20x4 are computed as follows:
Non-controlling interest (partial-goodwill), December 31, 20x4
Common stock – S Company, December 31, 20x4…… P 240,000
Retained earnings – S Company, December 31, 20x4
Retained earnings – S Company, January 1, 20x4 P120,000
Add: Net income of S for 20x4 60,000
Total P180,000
Less: Dividends paid – 20x4 36,000 144,000
Stockholders’ equity – S Company, December 31, 20x4 P 384,000
Adjustments to reflect fair value - (over) undervaluation of assets and
liabilities, date of acquisition (January 1, 20x4) 90,000
Amortization of allocated excess (refer to amortization above) – 20x4 ( 13,200)
Fair value of stockholders’ equity of subsidiary, December 31, 20x4…… P460,000
Multiplied by: Non-controlling Interest percentage…………... 20
Non-controlling interest (partial-goodwill)………………………………….. P 92,160
Consolidated SHE:
Consolidated SHE:
Stockholders’ Equity
Common stock, P10 par P 600,000
Retained earnings 490,440
P’s Stockholders’ Equity / CI – SHE, 12/31/20x4 P1,090,440
NCI, 12/31/20x4 ___92,160
Consolidated SHE, 12/31/20x4 P1,182,600
12/31/20x5:
CI-CNI
Consolidated Net Income for 20x5
Net income from own/separate operations:
P Company P192,000
S Company 90,000
Total P282,000
Less: Non-controlling Interest in Net Income* P16,560
Amortization of allocated excess (refer to amortization above) __7,200 23,760
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent………….. P258,240
Add: Non-controlling Interest in Net Income (NCINI) 16,560
Consolidated Net Income for 20x5 P274,800
NCI-CNI
*Non-controlling Interest in Net Income (NCINI) for 20x5
Net income of S Company P 90,000
Less: Amortization of allocated excess / goodwill impairment for 20x5
(refer to amortization table above) 80,400
P 82,800
Multiplied by: Non-controlling interest %.......... 20%
Non-controlling Interest in Net Income (NCINI) for 20x5 P 16,560
CNI, P274,800
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent………….. P258,240
Add: Non-controlling Interest in Net Income (NCINI) 16,560
Consolidated Net Income for 20x5 P274,800
On subsequent to date of acquisition, consolidated retained earnings would be computed as follows:
Consolidated Retained Earnings, December 31, 20x5
Retained earnings - P Company, January 1, 20x5 (cost model P484,800
Adjustment to convert from cost model to equity method for purposes of
consolidation or to establish reciprocity:/Parent’s share in adjusted net
increased in subsidiary’s retained earnings:
Retained earnings – S, January 1, 20x5 P 144,000
Less: Retained earnings – S, January 1, 20x4 120,000
Increase in retained earnings since date of acquisition P 24,000
Less: Amortization of allocated excess – 20x4 13,200
P 10,800
 Multiplied by: Controlling interests %................... 80%
P 8,640
Less: Goodwill impairment loss (full-goodwill), net (P3,750– P750)* or
(P3, 750 x 80%) 3,000 5,640
Consolidated Retained earnings, January 1, 20x5 P 490,440
Add: Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of P for 20x5 258,240
Total P748,680
Less: Dividends paid – P Company for 20x5 72,000
Consolidated Retained Earnings, December 31, 20x5 P676,680
*this procedure would be more appropriate, instead of multiplying the full-goodwill impairment loss of P3,750 by 80%. There might be
situations where the controlling interests on goodwill impairment loss would not be proportionate to NCI acquired.
NCI/NCINAS. The goodwill recognized on consolidation purely relates to the parent’s share. NCI is
measured as a proportion of identifiable assets and goodwill attributable to NCI share is not recognized.
The NCI on December 31, 20x5 are computed as follows:
Non-controlling interest (partial-goodwill), December 31, 20x5
Common stock – S Company, December 31, 20x5…… P 240,000
Retained earnings – S Company, December 31, 20x5
Retained earnings – S Company, January 1, 20x5 P14,000
Add: Net income of S for 20x5 90,000
Total P234,000
Less: Dividends paid – 20x5 48,000 186,000
Stockholders’ equity – S Company, December 31, 20x5 P 426,000
Adjustments to reflect fair value - (over) undervaluation of assets and
liabilities, date of acquisition (January 1, 20x4) 90,000
Amortization of allocated excess (refer to amortization above) :
20x4 P 13,200
20x5 7,200 ( 20,400)
Fair value of stockholders’ equity of S, December 31, 20x5…… P 495,600
Multiplied by: Non-controlling Interest percentage…………... 20
Non-controlling interest (partial goodwill)………………………………….. P 99,120
Consolidated SHE:
Consolidated SHE:
Stockholders’ Equity
Common stock, P10 par P 600,000
Retained earnings 676,680
Parent’s Stockholders’ Equity / CI – SHE, 12/31/20x5 P1,276,680
NCI, 12/31/20x5 ___99,120
Consolidated SHE, 12/31/20x5 P1,375,800

80% Owned: Full-Goodwill/Fair Value Basis

12/31/20x4:
Note: The goodwill recognized on consolidation purely relates to the parent’s share. NCI is measured as a proportion of
identifiable assets and goodwill attributable to NCI share is not recognized.
12/31/20x4:
CI-CNI – P202,440
Consolidated Net Income for 20x4
Net income from own/separate operations:
P Company P168,000
S Company 60,000
Total P228,000
Less: Non-controlling Interest in Net Income* P 8,610
Amortization of allocated excess (refer to amortization above) 13,200
Goodwill impairment (impairment under full-goodwill approach) 3,750 25,560
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of P………….. P202,440
Add: Non-controlling Interest in Net Income (NCINI) 8,610
Consolidated Net Income for 20x4 P211.050
NCI-CNI – P8,610
*Non-controlling Interest in Net Income (NCINI) for 20x4
Net income of S Company P 60,000
Less: Amortization of allocated excess (refer to amortization table above) 13,200
P 46,800
 Multiplied by: Non-controlling interest %.......... 20%
Non-controlling Interest in Net Income (NCINI) P 9,360
Less: Non-controlling int. on impairment loss on full-goodwill (P3,750 x 20%)
or (P3,750 impairment on full-goodwill less P3,000, impairment on
partial-goodwill)* 750
Non-controlling Interest in Net Income (NCINI) P 8,610
*this procedure would be more appropriate, instead of multiplying the full-goodwill impairment loss of P3,750 by
20%. There might be situations where the NCI on goodwill impairment loss would not be proportionate to NCI
acquired.
CNI, P211,050
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of P………….. P202,440
Add: Non-controlling Interest in Net Income (NCINI) 8,610
Consolidated Net Income for 20x4 P211.050

On subsequent to date of acquisition, consolidated retained earnings would be computed as follows:

Consolidated Retained Earnings, December 31, 20x4
Retained earnings - P Company, January 1, 20x4 (date of acquisition) P360,000
Add: Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent for 20x4 202,440
Total P562,440
Less: Dividends paid – P Company for 20x4 72,000
Consolidated Retained Earnings, December 31, 20x4 P490,440
NCI/NCINAS. The goodwill recognized on consolidation purely relates to the parent’s share. NCI is
measured as a proportion of identifiable assets and goodwill attributable to NCI share is not recognized.
The NCI on December 31, 20x4 are computed as follows:
Non-controlling interest (full-goodwill), December 31, 20x4
Common stock – S Company, December 31, 20x4…… P 240,000
Retained earnings – S Company, December 31, 20x4
Retained earnings – S Company, January 1, 20x4 P120,000
Add: Net income of S for 20x4 60,000
Total P180,000
Less: Dividends paid – 20x4 36,000 144,000
Stockholders’ equity – S Company, December 31, 20x4 P 384,000
Adjustments to reflect fair value - (over) undervaluation of assets and
liabilities, date of acquisition (January 1, 20x4) 90,000
Amortization of allocated excess (refer to amortization above) – 20x4 ( 13,200)
Fair value of stockholders’ equity of S, December 31, 20x4…… P460,800
Multiplied by: Non-controlling Interest percentage…………... 20
Non-controlling interest (partial-goodwill, 12/31/20x4………………………….. P 92,160
Add: Non-controlling interest on full goodwill , net of impairment loss, 12/31/x4:
[(P15,000 full – P12,000, partial = P3,000) – P750 impairment loss 2,250
Non-controlling interest (full-goodwill), 12/31/20x4…………….. P 94,410
Consolidated SHE:
Consolidated SHE:
Stockholders’ Equity
Common stock, P10 par P 600,000
Retained earnings 490,440
P’s Stockholders’ Equity / CI – SHE, 12/31/20x4 P1,090,440
NCI, 12/31/20x4 ___94,410
Consolidated SHE, 12/31/20x4 P1,184,850
12/31/20x5:
CI-CNI – P258,240
Consolidated Net Income for 20x5
Net income from own/separate operations
P Company P192,000
S Company 90,000
Total P282,000
Less: Non-controlling Interest in Net Income* P16,560
Amortization of allocated excess (refer to amortization above) 7,200
Goodwill impairment (impairment under full-goodwill approach) 0 23,760
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent………….. P258,240
Add: Non-controlling Interest in Net Income (NCINI) 16,560
 Consolidated Net Income for 20x5 P274,800
NCI-CNI – P16,560
*Non-controlling Interest in Net Income (NCINI) for 20x5
Net income of S Company P 90,000
Less: Amortization of allocated excess / goodwill impairment for 20x5
(refer to amortization table above) 7,400
P 82,800
Multiplied by: Non-controlling interest %.......... 20%
Non-controlling Interest in Net Income (NCINI) for 20x5 P 16,560
CNI, P274,800
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent………….. P258,240
Add: Non-controlling Interest in Net Income (NCINI) 16,560
Consolidated Net Income for 20x5 P274,800
On subsequent to date of acquisition, consolidated retained earnings would be computed as follows:
Consolidated Retained Earnings, December 31, 20x5
Retained earnings - P Company, January 1, 20x5 (cost model P484,800
Adjustment to convert from cost model to equity method for purposes of
consolidation or to establish reciprocity:/P’s share in adjusted net
increased in subsidiary’s retained earnings:
Retained earnings – Subsidiary, January 1, 20x5 P 144,000
Less: Retained earnings – Subsidiary, January 1, 20x4 120,000
Increase in retained earnings since date of acquisition P 24,000
Less: Amortization of allocated excess – 20x4 13,200
P 10,800
Multiplied by: Controlling interests %................... 80%
P 8,640
Less: Goodwill impairment loss (full-goodwill), net (P3,750– P750)* or
(P3, 750 x 80%) 3,000 5,640
Consolidated Retained earnings, January 1, 20x5 P 490,440
Add: Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent for 20x5 258,240
Total P748,680
Less: Dividends paid – P Company for 20x5 72,000
Consolidated Retained Earnings, December 31, 20x5 P676,680
*this procedure would be more appropriate, instead of multiplying the full-goodwill impairment loss of P3,750 by 80%. There might be
situations where the controlling interests on goodwill impairment loss would not be proportionate to NCI acquired.
NCI/NCINAS. The goodwill recognized on consolidation purely relates to the parent’s share. NCI is
measured as a proportion of identifiable assets and goodwill attributable to NCI share is not recognized.
The NCI on December 31, 20x5 are computed as follows:
Non-controlling interest (partial-goodwill), December 31, 20x5
Common stock – S Company, December 31, 20x5…… P 240,000
Retained earnings – S Company, December 31, 20x5
Retained earnings – S Company, January 1, 20x5 P144,000
Add: Net income of S for 20x5 90,000
Total P234,000
Less: Dividends paid – 20x5 48,000 186,000
Stockholders’ equity – S Company, December 31, 20x5 P 426,000
Adjustments to reflect fair value - (over) undervaluation of assets and
liabilities, date of acquisition (January 1, 20x4) 90,000
Amortization of allocated excess (refer to amortization above) :
20x4 P 13,200
20x5 7,200 ( 20,400)
Fair value of stockholders’ equity of S, December 31, 20x5…… P 495,600
Multiplied by: Non-controlling Interest percentage…………... 20
Non-controlling interest (partial goodwill)………………………………….. P 99,120
Add: Non-controlling interest on full goodwill , net of impairment loss
[(P15,000 full – P12,000, partial = P3,000) – P750 impairment loss 2,250
Non-controlling interest (full-goodwill)………………………………….. P 101,370
Consolidated SHE:
Consolidated SHE:
Stockholders’ Equity
Common stock, P10 par P 600,000
Retained earnings 676,680
P’s Stockholders’ Equity / CI – SHE, 12/31/20x5 P1,276,680
 NCI, 12/31/20x5 __101,370
Consolidated SHE, 12/31/20x5 P1,378,050

80% Partial Goodwill - Cost Model – First Year

3. 20x4: First Year after Acquisition
Parent Company Cost Model Entry
January 1, 20x4:
(1) Investment in S Company…………………………………………… 372,000
Cash…………………………………………………………….. 372,000
Acquisition of S Company.
January 1, 20x4 – December 31, 20x4:
(2) Cash……………………… 28,800
Dividend income (P36,000 x 80%)……………. 28,800
Record dividends from S Company.
On the books of S Company, the P36,000 dividend paid was recorded as follows:
Dividends paid………… 36,000
Cash……. 36,000
Dividends paid by S Co..

4. Schedule of Determination and Allocation of Excess (Partial-goodwill)

Date of Acquisition – January 1, 20x4
Fair value of Subsidiary (80%)
Consideration transferred……………………………….. P 372,000
Less: Book value of stockholders’ equity of S:
Common stock (P240,000 x 80%)……………………. P192,000
Retained earnings (P120,000 x 80%)………………... 96,000 288,000
Allocated excess (excess of cost over book value)….. P 84,000
Less: Over/under valuation of assets and liabilities:
Increase in inventory (P6,000 x 80%)……………… P 4,800
Increase in land (P7,200 x 80%)……………………. 5,760
Increase in equipment (P96,000 x 80%) 76,800
Decrease in buildings (P24,000 x 80%)………..... ( 19,200)
Decrease in bonds payable (P4,800 x 80%)…… 3,840 72,000
Positive excess: Partial-goodwill (excess of cost over
fair value)………………………………………………... P 12,000

The over/under valuation of assets and liabilities are summarized as follows:

S Co. S Co. (Over) Under
Book value Fair value Valuation
Inventory………………….…………….. P 24,000 P 30,000 P 6,000
Land……………………………………… 48,000 55,200 7,200
Equipment (net)......... 84,000 180,000 96,000
Buildings (net) 168,000 144,000 (24,000)
Bonds payable………………………… (120,000) ( 115,200) 4,800
Net……………………………………….. P 204,000 P 294,000 P 90,000

The buildings and equipment will be further analyzed for consolidation purposes as follows:
S Co. S Co. Increase
Book value Fair value (Decrease)
Equipment .................. 180,000 180,000 0
Less: Accumulated depreciation….. 96,000 - ( 96,000)
Net book value………………………... 84,000 180,000 96,000
S Co. S Co.
Book value Fair value (Decrease)
Buildings................ 360,000 144,000 ( 216,000)
Less: Accumulated depreciation….. 192,000 - ( 192,000)
Net book value………………………... 168,000 144,000 ( 24,000)

A summary or depreciation and amortization adjustments is as follows:

Account Adjustments to be amortized Over/ Life Annual Current 20x5
 Under Amount Year(20x4)
Inventory P 6,000 1 P 6,000 P 6,000 P -
Subject to Annual Amortization
Equipment (net)......... 96,000 8 12,000 12,000 12,000
Buildings (net) (24,000) 4 ( 6,000) ( 6,000) (6,000)
Bonds payable… 4,800 4 1,200 1,200 1,200
P 13,200 P 13,200 P 7,200
The goodwill impairment loss of P3,125 based on 100% fair value would be allocated to the controlling interest and the NCI
based on the percentage of total goodwill each equity interest received. For purposes of allocating the goodwill impairment
loss, the full-goodwill is computed as follows:
Fair value of Subsidiary (100%)
Consideration transferred: Cash (80%) P 372,000
Fair value of NCI (given) (20%) 93,000
Fair value of Subsidiary (100%) P 465,000
Less: Book value of stockholders’ equity of S (P360,000 x 100%) __360,000
Allocated excess (excess of cost over book value)….. P 105,000
Add (deduct): (Over) under valuation of assets and liabilities
(P90,000 x 100%) 90,000
Positive excess: Full-goodwill (excess of cost over
fair value)………………………………………………... P 15,000

5. Consolidation Workpaper – 20x4 Year of Acquisition (Partial-goodwill)

(E1) Common stock – S Co………………………………………… 240,000
Retained earnings – S Co…………………………………… 120.000
Investment in S Co…………………………………………… 288,000
Non-controlling interest (P360,000 x 20%)……………………….. 72,000
To eliminate intercompany investment and equity accounts
of subsidiary on date of acquisition; and to establish non-controlling
interest (in net assets of subsidiary) on date of acquisition.

(E2) Inventory…………………………………………………………………. 6,000

Accumulated depreciation – equipment……………….. 96,000
Accumulated depreciation – buildings………………….. 192,000
Land………………………………………………………………………. 7,200
Discount on bonds payable…………………………………………. 4,800
Goodwill…………………………………………………………………. 12,000
Buildings……………………………………….. 216,000
Non-controlling interest (P90,000 x 20%)……………………….. 18,000
Investment in S Co………………………………………………. 84,000
To allocate excess of cost over book value of identifiable assets
acquired, with remainder to goodwill; and to establish non-
controlling interest (in net assets of subsidiary) on date of acquisition.
(E3) Cost of Goods Sold……………. 6,000
Depreciation expense……………………….. 6,000
Accumulated depreciation – buildings………………….. 6,000
Interest expense………………………………… 1,200
Goodwill impairment loss………………………………………. 3,000
Inventory………………………………………………………….. 6,000
Accumulated depreciation – equipment……………….. 12,000
Discount on bonds payable………………………… 1,200
Goodwill…………………………………… 3,000
To provide for 20x4 impairment loss and depreciation and
amortization on differences between acquisition date fair value and
book value of Son’s identifiable assets and liabilities as follows:
Cost of Depreciation/
Goods Amortization Amortization
Sold Expense -Interest Total
Inventory sold P 6,000
Equipment P 12,000
Buildings ( 6,000)
Bonds payable _______ _______ P 1,200
 Totals P 6,000 P 6,000 P1,200 13,200

It should be observed that the goodwill computed above was proportional to the controlling interest of 80% and
non-controlling interest of 20% computed as follows:
Value % of Total
Goodwill applicable to parent………………… P12,000 80.00%
Goodwill applicable to NCI…………………….. 3,000 20.00%
Total (full) goodwill……………………………….. P15,000 100.00%
Therefore, the goodwill impairment loss of P3,125 based on 100% fair value or full-goodwill would be allocated
as follows:
Value % of Total
Goodwill impairment loss attributable to P or controlling P 3,000 80.00%
Interest
Goodwill impairment loss applicable to NCI…………………….. 750 20.00%
Goodwill impairment loss based on 100% fair value or full-
Goodwill P 3,750 100.00%
(E4) Dividend income - P………. 28,800
Non-controlling interest (P36,000 x 20%)……………….. 7,200
Dividends paid – S…………………… 36,000
To eliminate intercompany dividends and non-controlling interest
share of dividends.

(E5) Non-controlling interest in Net Income of Subsidiary………… 9,360

Non-controlling interest ………….. 9,360
To establish non-controlling interest in subsidiary’s adjusted net
income for 20x4 as follows:
Net income of subsidiary…………………….. P 60,000
Amortization of allocated excess [(E3)]…... ( 13,200)
P 46,800
Multiplied by: Non-controlling interest %.......... 20%
Non-controlling Interest in Net Income (NCINI) P 9,360

6. Worksheet for Consolidated Financial Statements, December 31, 20x4.

Cost Model (Partial-goodwill)
80%-Owned Subsidiary
December 31, 20x4 (First Year after Acquisition)
Income Statement P Co S Co. Dr. Cr. Consolidated
Sales P480,000 P240,000 P 720,000
Dividend income 28,800 - (4) 28,800 _________
Total Revenue P508,800 P240,000 P 720,000
Cost of goods sold P204,000 P138,000 (3) 6,000 P 348,000
Depreciation expense 60,000 28,000 (3) 6,000 90,000
Interest expense - - (3) 1,200 1,200
Other expenses 48,000 18,000 66,000
Goodwill impairment loss - - (3) 3,000 3,000
Total Cost and Expenses P310,000 P180,000 P508,200
Net Income P196,800 P 60,000 P211,800
NCI in Net Income - Subsidiary - - (5) 9,360 ( 9,360)
Net Income to Retained Earnings P196,800 P 60,000 P202,440

Statement of Retained Earnings

Retained earnings, 1/1
P Company P360,000 P 360,000
S Company P120,000 (1) 120,000
Net income, from above 196,800 60,000 202,440
Total P552,000 P180,000 P562,440
Dividends paid
P Company 72,000 72,000
S Company - 36,000 (4) 36,000 _ ________
Retained earnings, 12/31 to Balance
Sheet P484,800 P144,000 P 490,440
 Balance Sheet
Cash………………………. P 232,800 P 90,000 P 322,800
Accounts receivable…….. 90,000 60,000 150,000
Inventory…………………. 120,000 90,000 (2) 6,000 (3) 6,000 210,000
Land……………………………. 210,000 48,000 (2) 7,200 265,200
Equipment 240,000 180,000 420,000
Buildings 720,000 540,000 (2) 216,000 1,044,000
Discount on bonds payable (2) 4,800 (3) 1,200 3,600
Goodwill…………………… (2) 12,000 (3) 3,000 9,000
Investment in S Co……… 372,000 (1) 288,000
(2) 84,000 -
Total P1,984,800 P1,008,000 P2,424,600

Accumulated depreciation
- equipment P 135,000 P 96,000 (2) 96,000 (3) 12,000 P147,000
Accumulated depreciation 405,000 288,000 (2) 192,000
- buildings (3) 6,000 495,000
Accounts payable…………… 120,000 120,000 240,000
Bonds payable………………… 240,000 120,000 360,000
Common stock, P10 par……… 600,000 600,000
Common stock, P10 par……… 240,000 (1) 240,000
Retained earnings, from above 484,800 144,000 490,440
Non-controlling interest………… (4) 7,200 (1 ) 72,000
(2) 18,000
_________ _________ __________ (5) 9,360 ____92,160
Total P1,984,800 P1,008,000 P 745,560 P 745,560 P2,424,600

80% Partial Goodwill - Cost Model – Second Year

3. 20x5: Second Year after Acquisition
Parent Company Cost Model Entry
Only a single entry is recorded by the P in 20x5 in relation to its subsidiary investment:
January 1, 20x5 – December 31, 20x5:
Cash……………………… 38,400
Dividend income (P48,000 x 80%)……………. 38,400
Record dividends from S Company.
On the books of S Company, the P48,000 dividend paid was recorded as follows:
Dividends paid………… 48,000
Cash 48,000
Dividends paid by S Co..
20x5: Second Year after Acquisition
P Co. S Co.
Sales P 540,000 P 360,000
Less: Cost of goods sold 216,000 192,000
Gross profit P 324,000 P 168,000
Less: Depreciation expense 60,000 24,000
Other expense 72,000 54,000
Net income from its own separate operations P 192,000 P 90,000
Add: Dividend income 38,400 -
Net income P 230,400 P 90,000
Dividends paid P 72,000 P 48,000
No goodwill impairment loss for 20x5.
4. Schedule of Determination and Allocation of Excess (Partial-goodwill) – refer to the schedule above.
5. Consolidation Workpaper – 20x5 Second Year after Acquisition
The working paper eliminations (in journal entry format) on December 31, 20x5, are as follows:
(E1) Investment in S Company………………………… 19,200
Retained earnings – P Company……………………… 19,200
To provide entry to convert from the cost method to the equity
 method or the entry to establish reciprocity at the beginning of the
year, 1/1/20x5, computed as follows:
Retained earnings – S Company, 1/1/20x5 P144,000
Retained earnings – S Company, 1/1/20x4 120,000
Increase in retained earnings…….. P 24,000
Multiplied by: Controlling interest % 80%
Retroactive adjustment P 19,200
(E2) Common stock – S Co………………………………………… 240,000
Retained earnings – S Co., 1/1/20x5 144,000
Investment in S Co (P384,000 x 80%)………………………… 307,200
Non-controlling interest (P384,000 x 20%)……………………….. 76,800
To eliminate intercompany investment and equity accounts
of subsidiary and to establish non-controlling interest (in net assets of
subsidiary) on January 1, 20x5.
(E3) Inventory…………………………………………………………………. 6,000
Accumulated depreciation – equipment……………….. 96,000
Accumulated depreciation – buildings………………….. 192,000
Land………………………………………………………………………. 7,200
Discount on bonds payable…………………………………………. 4,800
Goodwill…………………………………………………………………. 12,000
Buildings……………………………………….. 216,000
Non-controlling interest (P90,000 x 20%) 18,000
Investment in S Co………………………………………………. 84,000
To allocate excess of cost over book value of identifiable assets
acquired, with remainder to goodwill; and to establish non-
controlling interest (in net assets of subsidiary) on January 1, 20x5.
(E4) Retained earnings – P Company, 1/1/20x5
[(P13,200 x 80%) + P3,000, impairment loss on
partial-goodwill] 13,560
Non-controlling interests (P13,200 x 20%)……………………. 2,640
Depreciation expense……………………….. 6,000
Accumulated depreciation – buildings………………….. 12,000
Interest expense………………………………… 1,200
Inventory………………………………………………………….. 6,000
Accumulated depreciation – equipment……………….. 24,000
Discount on bonds payable………………………… 2,400
Goodwill…………………………………… 3,000
To provide for years 20x4 and 20x5 depreciation and amortization on
differences between acquisition date fair value and book value of
S’s identifiable assets and liabilities as follows:
Year 20x4 amounts are debited to P’s retained earnings &
NCI;
Year 20x5 amounts are debited to respective nominal accounts.
(20x4) Depreciation/
Retained Amortization Amortization
earnings, expense -Interest
Inventory sold P 6,000
Equipment 12,000 P 12,000
Buildings (6,000) ( 6,000)
Bonds payable 1,200 ________ P 1,200
Sub-total P13,200 P 6,000 P 1,200
Multiplied by: 80%
To Retained earnings P 10,560
Impairment loss 3,000
Total P 13,560
(E5) Dividend income - P………. 38,400
Non-controlling interest (P48,000 x 20%)……………….. 9,600
Dividends paid – S…………………… 48,000
To eliminate intercompany dividends and non-controlling interest
share of dividends.
(E6) Non-controlling interest in Net Income of Subsidiary………… 16,560
Non-controlling interest ………….. 16,560
 To establish non-controlling interest in subsidiary’s adjusted net
income for 20x5 as follows:
Net income of subsidiary…………………….. P 90,000
Amortization of allocated excess [(E4)]…... ( 7,200)
P 82,800
Multiplied by: Non-controlling interest %.......... 20%
Non-controlling Interest in Net Income (NCINI P 16,560

6. Worksheet for Consolidated Financial Statements, December 31, 20x5.

Cost Model (Partial-goodwill)
80%-Owned Subsidiary
December 31, 20x5 (Second Year after Acquisition)
Income Statement P Co S Co. Dr. Cr. Consolidated
Sales P540,000 P360,000 P 900,000
Dividend income 38,400 - (5) 38,400 ___________
Total Revenue P578,400 P360,000 P 900,000
Cost of goods sold P216,000 P192,000 P 408,000
Depreciation expense 60,000 24,000 (4) 6,000 90,000
Interest expense - - (4) 1,200 1,200
Other expenses 72,000 54,000 126,000
Goodwill impairment loss - - -
Total Cost and Expenses P348,000 P270,000 P 625,200
Net Income P230,400 P 90,000 P 274,800
NCI in Net Income - Subsidiary - - (6) 16,560 ( 16,560)
Net Income to Retained Earnings P230,400 P 90,000 P 258,240
Statement of Retained Earnings
Retained earnings, 1/1
P Company P484,800 (2) 13,560 (1) 19,200 P 490,440
S Company P 144,000 (2) 144,000
Net income, from above 230,400 90,000 258,240
Total P715,200 P234,000 P 748,680
Dividends paid
P Company 72,000 72,000
S Company - 48,000 (5) 48,000 _ ________
Retained earnings, 12/31 to Balance
Sheet P643,200 P186,000 P 676,680
Balance Sheet
Cash………………………. P 265,200 P 114,000 P 367,200
Accounts receivable…….. 180,000 96,000 276,000
Inventory…………………. 216,000 108,000 (3) 6,000 (4) 6,000 324,000
Land……………………………. 210,000 48,000 (3) 7,200 265,200
Equipment 240,000 180,000 420,000
Buildings 720,000 540,000 (3) 216,000 1,044,000
Discount on bonds payable (3) 4,800 (4) 2,400 2,400
Goodwill…………………… (3) 12,000 (4) 3,000 9,000
Investment in S Co……… 372,000 (1) 19,200 (2) 307,200
(3) 84,000 -
Total P2,203,200 P1,074,000 P2,707,800
Accumulated depreciation
- equipment P 150,000 P 102,000 (3) 96,000 (4) 24,000 P180,000
Accumulated depreciation 450,000 306,000 (3) 192,000
- buildings (4) 12,000 552,000
Accounts payable…………… 120,000 120,000 240,000
Bonds payable………………… 240,000 120,000 360,000
Common stock, P10 par……… 600,000 600,000
Common stock, P10 par……… 240,000 (2) 240,000
Retained earnings, from above 643,200 186,000 676,680
Non-controlling interest………… (5) 9,600
(4) 2,640 (2 ) 76,800
_______ (3) 18,000
___ _____ __ __________ (6) 16,560 ____99,120
Total P2,203,200 P1,074,000 P 821,160 P 821,160 P2,707,800

80% Full-Goodwill - Cost Model – First Year

3. 20x4: First Year after Acquisition
 Parent Company Cost Model Entry
January 1, 20x4:
(1) Investment in S Company………………………………………… 372,000
Cash…………………………………………………………….. 372,000
Acquisition of S Company.
January 1, 20x4 – December 31, 20x4:
(2) Cash……………………… 28,800
Dividend income (P36,000x 80%)……………. 28,800
Record dividends from S Company.
On the books of S Company, the P36,000 dividend paid was recorded as follows:
Dividends paid………… 36,000
Cash……. 36,000
Dividends paid by S Co..
No entries are made on the P’s books to depreciate, amortize or write-off the portion of the allocated excess that
expires during 20x4.

4. Schedule of Determination and Allocation of Excess (Full-goodwill)

Date of Acquisition – January 1, 20x4
Fair value of Subsidiary (80%)
Consideration transferred (80%)…………….. P 372,000
Fair value of NCI (given) (20%)……………….. 93,000
Fair value of Subsidiary (100%)………. P 465,000
Less: Book value of stockholders’ equity of Son:
Common stock (P240,000 x 100%)………………. P 240,000
Retained earnings (P120,000 x 100%)………... 120,000 360,000
Allocated excess (excess of cost over book value)….. P 105,000
Less: Over/under valuation of assets and liabilities:
Increase in inventory (P6,000 x 100%)……………… P 6,000
Increase in land (P7,200 x 100%)……………………. 7,200
Increase in equipment (P96,000 x 100%) 96,000
Decrease in buildings (P24,000 x 100%)………..... ( 24,000)
Decrease in bonds payable (P4,800 x 100%)…… 4,800 90,000
Positive excess: Full-goodwill (excess of cost over
fair value)………………………………………………... P 15,000

A summary or depreciation and amortization adjustments is as follows:

Over/ Annual Current
Account Adjustments to be amortized under Life Amount Year(20x4) 20x5
Inventory P 6,000 1 P 6,000 P 6,000 P -
Subject to Annual Amortization
Equipment (net)......... 96,000 8 12,000 12,000 12,000
Buildings (net) (24,000) 4 ( 6,000) ( 6,000) (6,000)
Bonds payable… 4,800 4 1,200 1,200 1,200
P 13,200 P 13,200 P 7,200
The goodwill impairment loss of P3,125 based on 100% fair value would be allocated to the controlling interest and the NCI
based on the percentage of total goodwill each equity interest received. For purposes of allocating the goodwill impairment
loss, the full-goodwill is computed as follows:
Fair value of Subsidiary (100%)
Consideration transferred: Cash (80%) P 372,000
Fair value of NCI (given) (20%) 93,000
Fair value of Subsidiary (100%) P 465,000
Less: Book value of stockholders’ equity of S (P360,000 x 100%) __360,000
Allocated excess (excess of cost over book value)….. P 105,000
Add (deduct): (Over) under valuation of assets and liabilities
(P90,000 x 100%) 90,000
Positive excess: Full-goodwill (excess of cost over
fair value)………………………………………………... P 15,000
5. Consolidation Workpaper – 20x4 Year of Acquisition (Full-goodwill)
(E1) Common stock – S Co………………………………………… 240,000
Retained earnings – S Co…………………………………… 120.000
Investment in S Co…………………………………………… 288,000
Non-controlling interest (P360,000 x 20%)……………………….. 72,000

(E2) Inventory…………………………………………………………………. 6,000

Accumulated depreciation – equipment……………….. 96,000
Accumulated depreciation – buildings………………….. 192,000
Land………………………………………………………………………. 7,200
Discount on bonds payable…………………………………………. 4,800
Goodwill…………………………………………………………………. 15,000
Buildings……………………………………….. 216,000
Non-controlling interest (P90,000 x 20%) + [(P15,000, full –
P12,000, partial goodwill)]………… 21,000
Investment in S Co………………………………………………. 84,000
(E3) Cost of Goods Sold……………. 6,000
Depreciation expense……………………….. 6,000
Accumulated depreciation – buildings………………….. 6,000
Interest expense………………………………… 1,200
Goodwill impairment loss………………………………………. 3,750
Inventory………………………………………………………….. 6,000
Accumulated depreciation – equipment……………….. 12,000
Discount on bonds payable………………………… 1,200
Goodwill…………………………………… 3,750
Cost of Goods Sold Depreciation/ Amortization Amortization
Expense -Interest
Inventory sold P 6,000
Equipment P12,000
Buildings ( 6,000)
Bonds payable _______ _______ P 1,200
Totals P 6,000 P 6,000 P1,200
(E4) Dividend income - P………. 28,800
Non-controlling interest (P36,000 x 20%)……………….. 7,200
Dividends paid – S…………………… 36,000
(E5) Non-controlling interest in Net Income of Subsidiary………… 8,610
Non-controlling interest ………….. 8,610
Net income of subsidiary…………………….. P 60,000
Amortization of allocated excess [(E3)]…... ( 13,200)
P 46,800
Multiplied by: Non-controlling interest %.......... 20%
P 9,360
Less: Non-controlling interest on impairment
loss on full-goodwill (P3,125 x 20%) or
(P3,125 impairment on full-goodwill less
P2,500, impairment on partial-goodwill)* 750
Non-controlling Interest in Net Income (NCINI) P 8,610
*this procedure would be more appropriate, instead of multiplying the full-goodwill impairment loss of P3,125 by 20%.
There might be situations where the NCI on goodwill impairment loss would not be proportionate to NCI acquired (refer to
Illustration 15-6).

6. Worksheet for Consolidated Financial Statements, December 31, 20x4.

Cost Model (Full-goodwill)
80%-Owned Subsidiary
December 31, 20x4 (First Year after Acquisition)
Income Statement P Co S Co. Dr. Cr. Consolidated
Sales P480,000 P240,000 P 720,000
Dividend income 28,800 - (4) 28,800 _________
Total Revenue P508,800 P240,000 P 720,000
Cost of goods sold P204,000 P138,000 (3) 6,000 P 348,000
 Depreciation expense 60,000 24,000 (3) 6,000 90,000
Interest expense - - (3) 1,200 1,200
Other expenses 48,000 18,000 66,000
Goodwill impairment loss - - (3) 3,750 3,750
Total Cost and Expenses P312,000 P180,000 P508,950
Net Income P196,800 P 60,000 P211,050
NCI in Net Income - Subsidiary - - (5) 8,610 ( 8,610)
Net Income to Retained Earnings P196,800 P 60,000 P202,440
Statement of Retained Earnings
Retained earnings, 1/1
P Company P360,000 P 360,000
S Company P120,000 (1) 120,000
Net income, from above 196,800 60,000 202,440
Total P556,800 P180,000 P562,440
Dividends paid
P Company 72,000 72,000
S Company - 36,000 (4) 36,000 _ ________
Retained earnings, 12/31 to Balance
Sheet P484,800 P144,000 P 490,440
Balance Sheet
Cash………………………. P 232,800 P 90,000 P 322,800
Accounts receivable…….. 90,000 60,000 150,000
Inventory…………………. 120,000 90,000 (2) 6,000 (3) 6,000 210,000
Land……………………………. 210,000 48,000 (2) 7,200 265,200
Equipment 240,000 180,000 420,000
Buildings 720,000 540,000 (2) 216,000 1,044,000
Discount on bonds payable (2) 4,800 (3) 1,200 3,600
Goodwill…………………… (2) 15,000 (3) 3,750 11,250
Investment in S Co……… 372,000 (3) 288,000
(4) 84,000 -
Total P1,984,800 P1,008,000 P2,426,850
Accumulated depreciation
- equipment P 135,000 P 96,000 (2) 96,000 (3) 12,000 P147,000
Accumulated depreciation 405,000 288,000 (5) 192,000
- buildings (6) 6,000 495,000
Accounts payable…………… 120,000 120,000 240,000
Bonds payable………………… 240,000 120,000 360,000
Common stock, P10 par……… 600,000 600,000
Common stock, P10 par……… 240,000 (1) 240,000
Retained earnings, from above 484,800 144,000 490,440
Non-controlling interest………… (7) 7,200 (1 ) 72,000
_______ (2) 21,000
_________ __ __________ (5) 8,610 ____94,410
Total P1,984,800 P1,984,800 P 748,560 P 748,560 P2,426,850
80% Full-Goodwill - Cost Model – Second Year
3. 20x5: Second Year after Acquisition
Parent Company Cost Model Entry
Only a single entry is recorded by the P in 20x5 in relation to its subsidiary investment:
January 1, 20x5 – December 31, 20x5:
Cash……………………… 38,400
Dividend income (P48,000 x 80%)……………. 38,400
Record dividends from S Company.

On the books of S Company, the P48,000 dividend paid was recorded as follows:
Dividends paid………… 48,000
Cash 48,000
Dividends paid by S Co..
20x5: Second Year after Acquisition
P Co. S Co.
Sales P 540,000 P 360,000
Less: Cost of goods sold 216,000 192,000
 Gross profit P 324,000 P 168,000
Less: Depreciation expense 60,000 24,000
Other expense 72,000 54,000
Net income from its own separate operations P 192,000 P 90,000
Add: Dividend income 38,400 -
Net income P 230,400 P 90,000
Dividends paid P 72,000 P 48,000
No goodwill impairment loss for 20x5.
4. Schedule of Determination and Allocation of Excess (Full-goodwill) – refer to the schedule above.
5. Consolidation Workpaper – 20x5 Second Year after Acquisition

(E1) Investment in S Company………………………… 19,200

Retained earnings – P Company……………………… 19,200
To provide entry to convert from the cost method to the equity
method or the entry to establish reciprocity at the beginning of the
year, 1/1/20x5.
Retained earnings – S Company, 1/1/20x5 P144,000
Retained earnings – S Company, 1/1/20x4 120,000
Increase in retained earnings…….. P 24,000
Multiplied by: Controlling interest % 80%
Retroactive adjustment P 19,200
(E2) Common stock – S Co………………………………………… 240,000
Retained earnings – S Co., 1/1/20x5 144,000
Investment in S Co (P384,000 x 80%)………………………… 307,200
Non-controlling interest (P384,000 x 20%)……………………….. 76,800
(E3) Inventory…………………………………………………………………. 6,000
Accumulated depreciation – equipment……………….. 96,000
Accumulated depreciation – buildings………………….. 192,000
Land………………………………………………………………………. 7,200
Discount on bonds payable…………………………………………. 4,800
Goodwill…………………………………………………………………. 15,000
Buildings……………………………………….. 216,000
Non-controlling interest (P90,000 x 20%) + [(P15,000, full –
P12,000, partial goodwill)]………… 21,000
Investment in S Co………………………………………………. 84,000
(E4) Retained earnings – P Company, 1/1/20x5
(P16,950 x 80%) 13,560
Non-controlling interests (P16,950 x 20%)……………………. 3,390
Depreciation expense……………………….. 6,000
Accumulated depreciation – buildings………………….. 12,000
Interest expense………………………………… 1,200
Inventory………………………………………………………….. 6,000
Accumulated depreciation – equipment……………….. 24,000
Discount on bonds payable………………………… 2,400
Goodwill…………………………………… 3,750
(20x4) Depreciation/
Retained Amortization Amortization
earnings, expense -Interest
Inventory sold P 6,000
Equipment 12,000 P 12,000
Buildings (6,000) ( 6,000)
Bonds payable 1,200 P 1,200
Impairment loss 3,750
Totals P 16,950 P 6,000 P1,200
Multiplied by: CI%.... 80%
To Retained earnings P13,560

(E5) Dividend income - P………. 38,400

 Non-controlling interest (P48,000 x 20%)……………….. 9,600
Dividends paid – S…………………… 48,000
To eliminate intercompany dividends and non-controlling interest
share of dividends.

(E6) Non-controlling interest in Net Income of Subsidiary………… 16,560

Non-controlling interest ………….. 16,560
Net income of subsidiary…………………….. P 90,000
Amortization of allocated excess [(E4)]…... ( 7,200)
P 82,800
Multiplied by: Non-controlling interest %.......... 20%
P 16,560
Less: NCI on goodwill impairment loss on full-
Goodwill 0
Non-controlling Interest in Net Income (NCINI) P 16,560

6. Worksheet for Consolidated Financial Statements, December 31, 20x5.

Cost Model (Full-goodwill)
80%-Owned Subsidiary
December 31, 20x5 (Second Year after Acquisition)

Income Statement P Co S Co. Dr. Cr. Consolidated

Sales P540,000 P360,000 P 900,000
Dividend income 38,400 - (5) 38,400 ___________
Total Revenue P578,400 P360,000 P 900,000
Cost of goods sold P216,000 P192,000 P 408,000
Depreciation expense 60,000 24,000 (4) 6,000 90,000
Interest expense - - (4) 1,200 1,200
Other expenses 72,000 54,000 126,000
Goodwill impairment loss - - -
Total Cost and Expenses P348,000 P270,000 P 625,200
Net Income P230,400 P 90,000 P 274,800
NCI in Net Income - Subsidiary - - (6) 16,560 ( 16,560)
Net Income to Retained Earnings P230,400 P 90,000 P 258,240

Statement of Retained Earnings

Retained earnings, 1/1
P Company P484,800 (3) 13,560 (5) 19,200 P 490,440
S Company P 144,000 (6) 144,000
Net income, from above 230,400 90,000 258,240
Total P715,200 P234,000 P 748,680
Dividends paid
P Company 72,000 72,000
S Company - 48,000 (5) 48,000 _ ________
Retained earnings, 12/31 to Balance
Sheet P643,200 P186,000 P 676,680

Balance Sheet
Cash………………………. P 265,200 P 102,000 P 367,200
Accounts receivable…….. 180,000 96,000 276,000
Inventory…………………. 216,000 108,000 (3) 6,000 (4) 6,000 324,000
Land……………………………. 210,000 48,000 (3) 7,200 265,200
Equipment 240,000 180,000 420,000
Buildings 720,000 540,000 (3) 216,000 1,044,000
Discount on bonds payable (3) 4,800 (4) 2,400 2,400
Goodwill…………………… (3) 15,000 (4) 3,750 11,250
Investment in S Co……… 372,000 (1) 19,200 (2) 307,200
(7) 84,000 -
Total P2,203,200 P1,074,000 P2,710,050
Accumulated depreciation
- equipment P 150,000 P 102,000 (3) 96,000 (4) 24,000 P180,000
Accumulated depreciation 450,000 306,000 (3) 192,000
- buildings (4) 12,000 552,000
Accounts payable…………… 120,000 120,000 240,000
Bonds payable………………… 240,000 120,000 360,000
Common stock, P10 par……… 600,000 600,000
Common stock, P10 par……… 240,000 (2) 240,000
Retained earnings, from above 643,200 186,000 676,680
Non-controlling interest………… (6) 9,600
(8) 3,390 (2 ) 76,800
_______ (3) 21,000
___ _____ __ __________ (6) 16,560 ___101,370
Total P2,203,200 P1,074,000 P 824,910 P 824,910 P2,710,050