Professional Documents
Culture Documents
ended December 31, Year 1. Zuma owns 80 percent of the common shares of its subsidiary,
acquired at book value. Noncontrolling interest was assigned income of P30,000 in the
consolidated income statement for Year 1. What is the amount of separate operating income
reported by Zuma for the year?
P170,000
During 2017, Pard Corp. sold goods to its 80%-owned subsidiary, Seed Corp. At
December 31, 2017, one-half of these goods were included in Seed’s ending inventory.
Reported 2017 selling expenses were 1,100,000 and 400,000 for Pard and Seed,
respectively. Pard’s selling expenses included 50,000 in freight-out costs for goods sold
to Seed.
1,450,000
P412,000
Roland Company acquired 100 percent of Garros Company's voting shares in Year 1. During
Year 2, Garros purchased tennis equipment for P30,000 and sold them to Roland for P55,000.
Roland continues to hold the items in inventory on December 31, Year 2. Sales for the two
companies during Year 2 totaled P655,000, and total cost of goods sold was P420,000. Which
of the following observations will be true if no adjustment is made to eliminate the intercorporate
sale when a consolidated income statement is prepared for Year 2?
Net income will be overstated by P25,000
Pact acquired 80% of the equity shares of Sact on 1 July Year 1, paying P3.00
for each share acquired. This represented a premium of 20% over the market price of
Sact’s shares at that date. Sact’s shareholders’ funds (equity) as at 31 March Year 2
were:
Equity shares of P1 each 100,000
Retained earnings at 1 April Year 1 80,000
Profit for the year ended 31 March Year 2 40,000 120,000
220,000
The only fair value adjustment required to Sact’s net assets on consolidation was a
P20,000 increase in the value of its land. Pact’s policy is to value non-controlling
interests at fair value at the date of acquisition. For this purpose the market price of
Sact’s shares at that date can be deemed to be representative of the fair value of the
shares held by the non-controlling interest. Sub Company sells all its output at 20
percent above cost to Par Corporation. Par purchases all its inventory from Sub. The
incomes reported by the companies over the past three years are as follows:
Year Sub Company’s Net Income Par Corporation’s Operating Income
Year 1 150,000 225,000
Year 2 135,000 360,000
Year 3 240,000 450,000
Sub Company sold inventory for P300,000, P262,500 and P337,500 in the years Year
1, Year 2, and Year 3 respectively. Par Company reported ending inventory of
P105,000, P157,500 and P180,000 for Year 1, Year 2, and Year 3 respectively. Par
acquired 70 percent of the ownership of Sub on January 1, Year 1, at underlying book
value. The fair value of the noncontrolling interest at the date of acquisition was equal to
30 percent of the book value of Sub Company.
P448,375
294,000
Parker Corp. owns 80% of Smith Inc.’s common stock. During 2017, Parker sold
Smith 250,000 of inventory on the same terms as sales made to third parties. Smith
sold all of the inventory purchased from Parker in 2017. The following information
pertains to Smith and Parker’s sales for 2017:
Parker Smith
Sales 1,000,000 700,000
Cost of sales 400,000 350,000
600,000 350,000
What amount should Parker report as cost of sales in it s 2017 consolidated income
statement?
500,000
Pact acquired 80% of the equity shares of Sact on 1 July Year 1, paying P3.00
for each share acquired. This represented a premium of 20% over the market price of
Sact’s shares at that date. Sact’s shareholders’ funds (equity) as at 31 March Year 2
were:
Equity shares of P1 each 100,000
Retained earnings at 1 April Year 1 80,000
Profit for the year ended 31 March 40,000 120,000
Year 2
220,000
The only fair value adjustment required to Sact’s net assets on consolidation was a
P20,000 increase in the value of its land. Pact’s policy is to value non-controlling
interests at fair value at the date of acquisition. For this purpose the market price of
Sact’s shares at that date can be deemed to be representative of the fair value of the
shares held by the non-controlling interest
How much is the profit attributable to the Controlling Interest?
24,000
Pact acquired 80% of the equity shares of Sact on 1 July Year 1, paying P3.00
for each share acquired. This represented a premium of 20% over the market price of
Sact’s shares at that date. Sact’s shareholders’ funds (equity) as at 31 March Year 2
were:
Equity shares of P1 each 100,000
Retained earnings at 1 April Year 1 80,000
Profit for the year ended 31 March 40,000 120,000
Year 2
220,000
The only fair value adjustment required to Sact’s net assets on consolidation was a
P20,000 increase in the value of its land. Pact’s policy is to value non-controlling
interests at fair value at the date of acquisition. For this purpose the market price of
Sact’s shares at that date can be deemed to be representative of the fair value of the
shares held by the non-controlling interest.
What would be the carrying amount of the non-controlling interest of Sact in
the consolidated statement of financial position of Pact as at 31 March Year 2?
P56,000
Wilmslow acquired 80% of the equity shares of Zeta on 1 April Year 1 when Zeta’s
retained earnings were P200,000. During the year ended 31 March Year 2, Zeta
purchased goods from Wilmslow totalling P320,000. At 31 March Year 2, one
quarter of these goods were still in the inventory of Zeta. Wilmslow applies a mark-
up on cost of 25% to all of its sales. At 31 March Year 2, the retained earnings of
Wilmslow and Zeta were P450,000 and P340,000 respectively.
What would be the amount of retained earnings in Wilmslow’s consolidated
statement of financial position as at31 March Year 2?
P546,000
Pact acquired 80% of the equity shares of Sact on 1 July Year 1, paying P3.00
for each share acquired. This represented a premium of 20% over the market price of
Sact’s shares at that date. Sact’s shareholders’ funds (equity) as at 31 March Year 2
were:
Equity shares of P1 each 100,000
Retained earnings at 1 April Year 1 80,000
Profit for the year ended 31 March 40,000 120,000
Year 2
220,000
The only fair value adjustment required to Sact’s net assets on consolidation was a
P20,000 increase in the value of its land. Pact’s policy is to value non-controlling
interests at fair value at the date of acquisition. For this purpose the market price of
Sact’s shares at that date can be deemed to be representative of the fair value of the
shares held by the non-controlling interest
How much is the profit attributable to the Controlling Interest?
24,000
Pact acquired 80% of the equity shares of Sact on 1 July Year 1, paying P3.00
for each share acquired. This represented a premium of 20% over the market price of
Sact’s shares at that date. Sact’s shareholders’ funds (equity) as at 31 March Year 2
were:
Equity shares of P1 each 100,000
Retained earnings at 1 April Year 1 80,000
Profit for the year ended 31 March Year 2 40,000 120,000
220,000
The only fair value adjustment required to Sact’s net assets on consolidation was a
P20,000 increase in the value of its land. Pact’s policy is to value non-controlling
interests at fair value at the date of acquisition. For this purpose the market price of
Sact’s shares at that date can be deemed to be representative of the fair value of the
shares held by the non-controlling interest. Sub Company sells all its output at 20
percent above cost to Par Corporation. Par purchases all its inventory from Sub. The
incomes reported by the companies over the past three years are as follows:
Year Sub Company’s Net Income Par Corporation’s Operating Income
Year 1 150,000 225,000
Year 2 135,000 360,000
Year 3 240,000 450,000
Sub Company sold inventory for P300,000, P262,500 and P337,500 in the years Year
1, Year 2, and Year 3 respectively. Par Company reported ending inventory of
P105,000, P157,500 and P180,000 for Year 1, Year 2, and Year 3 respectively. Par
acquired 70 percent of the ownership of Sub on January 1, Year 1, at underlying book
value. The fair value of the noncontrolling interest at the date of acquisition was equal to
30 percent of the book value of Sub Company.