Exercise No.4 Bus. Co.

PARTIAL GOODWILL
Pascal Co. Sax Co.

Sales 540,000 360,000
Less: COGS 216,000 192,000
GP 324,000 168,000
Less:
Dep. Exp. 60,000 24,000
Other exp. 72,000 54,000
Net Income 192,000 90,000
Add. Dividend Income 38,400 0
Net Income 230,400 90,000
Fair value of Subsidiary (80%)

Consideration transferred P 372,000
Less: Book value of stockholders’ equity of S:
Common stock (P240,000 x 80%) 192,000
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
January 1, 20x4:
(1) Investment in Sax Company 372,000
Cash 372,000
Acquisition of Sax Company.
January 1, 20x4 – December 31, 20x4:

(2) Cash 28,800
Dividend income (P36,000 x 80%) 28,800
Record dividends from Sax Company.
(E1) Common stock – Sax Co 240,000

Retained earnings – Sax Co 120
Investment in Sax 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 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
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 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
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
Interest expense 1,200
Goodwill impairment loss 3,000
Inventory 6,000
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:
(E4) Dividend income - Pascal Co. 28,800

Dividends paid – Sax Co. 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:
Income Statement Pascal Co. Sax Co.
Sales 480,000 240,000
Dividend income 28,800 0
Total Revenue 508,800 240,000
Cost of goods sold 204,000 138,000
Depreciation expense 60,000 24,000
Interest expense 0 0
Other expenses 48,000 18,000
Goodwill impairment loss 0 0
Total Cost and Expenses 312,000 180,000
Net Income 196,800 60,000
NCI in Net Income - Subsidiary 0 0
Net Income to Retained Earnings 196,800 60,000
Statement of Retained Earnings
Retained earnings, 1/1
Pascal Company 360,000
Sax Company 120,000
Net income, from above 196,800 60,000
Total 556,800 180,000
Dividends paid
Pascal Company 72,000
Sax Company 0 36,000
Retained earnings, 12/31 to Balance Sheet 484,800 144,000
Balance Sheet
Cash 232,800 90,000
Accounts receivable 90,000 60,000
Inventory 120,000 90,000
Land 210,000 48,000
Equipment 240,000 180,000
Buildings 720,000 540,000
Discount on bonds payable
Goodwill
Total 1,984,800 1,008,000
Accumulated depreciation equipment 135,000 96,000
Accumulated depreciation building 405,000 288,000
Accounts payable…………… 120,000 120,000

Bonds payable 240,000 120,000
Common stock, P10 par 600,000
Retained earnings, from above 484,800 144,000
Non-controlling interest
_________ _________
Total 1,984,800 1,008,000

Dr. Cr. Consolidated
720,000
28,800 0
720,000
6,000 348,000
6,000 90,000
1,200 1,200
66,000
3,000 3,000
508,200
211,800
9,360 -9,360
202,440
360,000
120,000 0
202,440
562,440
72,000
36,000 0
490,440
322,800
150,000
6,000 6,000 210,000
7,200 265,200
420,000
216,000 1,044,000
4,800 1,200 3,600
12,000 3,000 9,000
###
0
###
2,424,600
96,000 12,000 147,000

192,000
495,000
6,000
240,000
360,000
600,000
240,000 0
490,440
72,000
18,000
7,200 ____92,160
9,360
745560 745560 2,332,440
FULL GOODWILL METHOD
Pascal Co.
Sales 540,000
Less: COGS 216,000
GP 324,000
Less:
Dep. Exp. 60,000
Other exp. 72,000
Net Income 192,000
Add. Dividend Income 38,400
Net Income 230,400

Consideration transferred (80%)
Fair value of NCI (given) (20%)
Less: Book value of stockholders’ equity of Sax:
Common stock (P240,000 x 100%) P 240,000
Retained earnings (P120,000 x 100%) 120,000
Allocated excess (excess of cost over book value)
Decrease in bonds payable (P4,800 x 100%) 4,800
Positive excess: Full-goodwill (excess of cost over fair value)
January 1, 20x4:
Cash
Acquisition of Sax Company.

(2) Cash 28,800
Dividend income (P36,000x 80%)
Record dividends from S Company.
(E1) Common stock – Sax Co. 240,000

Retained earnings – Sax Co. 120
Investment in Sax Co.
Non-controlling interest (P360,000 x 20%)

Land 7,200
Goodwill 15,000
Buildings
Non-controlling interest (P90,000 x 20%) + [(P15,000, full – P12,000 partial Goodwill)

Inventory
Accumulated depreciation – equipment
Goodwill
(E4) Dividend income - Pascual Co. 28,800

Dividends paid – Sax Co.
Income Statement Pascual Co.
Sales 480,000
Dividend income 28,800
Total Revenue 508,800
Cost of goods sold 204,000
Interest expense 0
Other expenses 48,000
Goodwill impairment loss 0
Total Cost and Expenses 312,000
Net Income 196,800
NCI in Net Income - Subsidiary 0
Net Income to Retained Earnings 196,800
Pascual Company 360,000
Sax Company
Net income, from above 196,800
Total 556,800
Dividends paid
Sax Company 0
Retained earnings, 12/31 to Balance
484,800
Sheet
Balance Sheet
Cash 232,800
Accounts receivable 90,000
Inventory 120,000
Land 210,000
Equipment 240,000
Buildings 720,000
Goodwill
Total 1,984,800
Accumulated depreciation 135,000

Accumulated depreciation
405,000
- buildings
Accounts payable…………… 120,000
Bonds payable………………… 240,000
Common stock, P10 par……… 600,000
Common stock, P10 par………
Retained earnings, from above 484,800
Non-controlling interest………… _________
Total 1,984,800
Sax Co.
360,000
192,000
168,000
24,000
54,000
90,000
0
90,000
P 372,000
93,000
P 465,000
360,000
P 105,000
90,000
P 15,000
372,000
28,800
288,000
72,000
216,000
21,000
84,000
6,000
12,000
1,200
3,750
36,000
8,610
Sax Co. Dr. Cr. Consolidated
240,000 720,000
0 28,800 0
240,000 720,000
138,000 6,000 348,000
24,000 6,000 90,000
0 1,200 1,200
18,000 66,000
0 3,750 3,750
180,000 508,950
60,000 211,050
0 8,610 -8,610
60,000 202,440
360,000
120,000 120,000 0
60,000 202,680
180,000 562,680
72,000
36,000 36,000 0
144,000 490,680
90,000 322,800
60,000 150,000
90,000 6,000 6,000 210,000
48,000 7,200 265,200
180,000 420,000
540,000 216,000 1,044,000
4,800 1,200 3,600
15,000 3,750 11,250
288,000
0
84000
1,008,000 2,426,850
96,000 96,000 12,000 147,000

192,000
288,000 495,000
6,000
120,000 240,000
120,000 360,000
600,000
240,000 240,000 0
144,000 490,440
72,000
_________ 7,200 94,410
21,000
8,610
1,008,000 748560 748560 2,426,850
Pascal Co.
Sales 540,000
Less: Cost of goods sold 216,000
Gross profit 324,000
Less: Depreciation expense 60,000
Other expense 72,000
Net income from its own separate operations 192,000
Add: Dividend income 38,400

Net income 230,400
Dividends paid P 72,000

Cash 38,400
Dividend income (P48,000 x 80%)
(E1) Investment in Sax Company 19,200

Retained earnings – Pascual Co.
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:
(E2) Common stock – Sax Co.… 240,000

Retained earnings – Sax Co., 1/1/20x5 144,000
Investment in Sax Co (P384,000 x 80%)
To eliminate intercompany investment and equity accounts of subsidiary and to establish non-controlling
interest (in net assets of subsidiary) on January 1, 20x5.

Land 7,200
Goodwill 12,000
Buildings
Investment in S Co
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 – Pascual Company, 1/1/20x5 13,560
Non-controlling interests (P13,200 x 20%) 2,640
Inventory
Goodwill



Sales 540,000
Total Revenue 578,400
Cost of goods sold 216,000
Interest expense 0
Goodwill impairment loss 0
Total Cost and Expenses 348,000
Net Income 230,400
NCI in Net Income - Subsidiary 0
Net Income to Retained Earnings 230,400
Sax Company
Total 715,200
Dividends paid
Sax Company -
643,200
Sheet
Balance Sheet
Cash 265,200
Inventory 216,000
Land 210,000
Equipment 240,000
Buildings 720,000
Goodwill
Total 2,203,200
Accumulated depreciation-equipment 150,000

450,000
Accumulated depreciation-building
Accounts payable 120,000

Bonds payable 240,000
Common stock, P10 par
Non-controlling interest ___ _____
Total 2,203,200
Sax Co.
360,000
192,000
168,000
24,000
54,000
90,000
0
90,000
P 48,000
38,400
19,200
he beginning of the year, 1/1/20x5, computed
307,200
76,800
o establish non-controlling
216,000
18,000
84,000
remainder to goodwill; and to

5
6,000
24,000
2,400
3,000
48,000
16,560

360,000 900,000
0 38,400 0
360,000 900,000
192,000 408,000
24,000 6,000 90,000
0 1,200 1,200
54,000 126,000
0 0
270,000 625,200
90,000 274,800
0 16,560 -16,560
90,000 258,240
0 13,560 19200 490,440

144,000 144,000 0
90,000 258,240
234,000 748,680
72,000
48,000 48,000 _ ________
186,000 676,680
102,000 367,200
96,000 276,000
108,000 6,000 6,000 324,000
48,000 7,200 265,200
180,000 420,000
540,000 216,000 1,044,000
4,800 2,400 2,400
12,000 3,000 9,000
307,200
19,200 0
84,000
1,074,000 2,707,800
102,000 96,000 24,000 180,000

306,000 192,000
552,000
12,000
120,000 240,000
120,000 360,000
600,000
240,000 240,000 0
186,000 676,680
9,600 76,800
_________ 2,640 18,000 99,120
16,560
1,074,000 821160 821160 2,707,800
Pascal Co.
Sales 540,000
Gross profit 324,000
Net income from its own separate operations 192,000
Add: Dividend income 38,400

Net income 230,400

Cash 38,400
Dividend income (P48,000x 80%)
(E1) Investment in Sax Company 19,200
Retained earnings – Pascual Co.

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:
(E2) Common stock – Sax Co.… 240,000

Retained earnings – Sax Co., 1/1/20x5 144,000
To eliminate intercompany investment and equity accounts of subsidiary and to establish non-controlling interest (in
net assets of subsidiary) on January 1, 20x5.

Land 7,200
Goodwill 15,000
Buildings
Non-controlling interest (P90,000 x 20%) + [(P15,000, full –
P12,000 Partial Goodwill)
Investment in Sax Co
(E4) Retained earnings – Pascual Company, 1/1/20x5 13,560

Non-controlling interests (P16,950 x 20%) 3,390
Inventory
Goodwill


Income Statement P Co
Sales P540,000
Total Revenue P578,400
Cost of goods sold P216,000
Interest expense -
Goodwill impairment loss -
Total Cost and Expenses P348,000
Net Income P230,400
NCI in Net Income - Subsidiary -
Net Income to Retained Earnings P230,400
Pascual Company P484,800
Sax Company
Total P715,200
Dividends paid
Sax Company -
P643,200
Sheet
Balance Sheet
Cash P 265,200
Inventory 216,000
Land 210,000
Equipment 240,000
Buildings 720,000
Goodwill
Total P2,203,200
Accumulated depreciation- equipment P 150,000

450,000
- buildings
Total P2,203,200
Sax Co.
360,000
192,000
168,000
24,000
54,000
90,000
0
90,000
P 48,000
38,400
19,200
eginning of the year, 1/1/20x5, computed as
307,200
76,800
stablish non-controlling interest (in
216,000
21,000
84,000
6,000
24,000
2,400
3,750
48,000
16,560
S Co. Dr. Cr. Consolidated

P360,000 900,000
- 38,400 ___________
P360,000 P 900,000
P192,000 408,000
24,000 6,000 90,000
- 1,200 1,200
54,000 126,000
- -
P270,000 P 625,200
P 90,000 P 274,800
- 16,560 -16,560
P 90,000 P 258,240
13,560 19,200 P 490,440

P 144,000 144,000
90,000 258,240
P234,000 P 748,680
72,000
48,000 57,600 _ ________
P186,000 P 676,680
P 102,000 367,200
96,000 276,000
108,000 6,000 6,000 324,000
48,000 7,200 265,200
180,000 420,000
540,000 216,000 1,044,000
4,800 2,400 2,400
15,000 3,750 11,250
307,200
19,200 -
84,000
P1,074,000 P2,710,050
P 102,000 96,000 24,000 P180,000

192,000
306,000 552,000
12,000
120,000 240,000
120,000 360,000
600,000
240,000 240,000
186,000 676,680
9,600 76,800
_________ 3,390 21,000 ____101,370
16,560
P1,074,000 P 824,910 P 824,910 P2,710,050
Partial Goodwill
Consolidated Amounts 20x4 20x5
Cash 322,800 367,200
Accounts Receivable 150,000 276,000
Invetory 210,000 324,000
Land 265,200 265,200
Equpment 273,000 240,000
Buildings 549,000 492,000
Investment in Sax 0 0
Total Assets 1,770,000 1,964,400
Accounts Payable 240,000 240,000
Bonds Payable 360,000 360,000
Total Liabilities 600,000 600,000
Common Stock/Ordinary Share 600,000 600,000
Retained Earnings/Accumulated P&L 490,440 676,680
Sales 720,000 900,000
Cost of Goods Sold 384,000 408,000
Gross Profit 336,000 492,000
Expenses 160,200 217,200
Dividend Income 0 0
Controlling Interest in Net Income 202,440 258,240
Non-Controlling Interest in Net Income 9,360 16,560
Net Income 211,800 274,800
Controlling Interest/Equity Holders of

Parent/Parent Stockholders' Equity
1,090,440 1,276,680
Non-Controlling Interest 92,160 99,120
Stockholders' Equity 1,182,600 1,375,800
Liabilities and Stockholders' Equity 1,782,600 1,975,800
Full Goodwill
20x4 20x5
322,800 367200
150,000 276000
210,000 324000
265,200 265200
273,000 240,000
549,000 492,000
0 0
1,770,000 1,964,400
240,000 240,000
360,000 360,000
600,000 600,000
600,000 600,000
490,440 676,680
720,000 900,000
348,000 408000
372,000 492,000
164,700 217,200
0 0
202,440 258,240
8,610 16,560
211,050 274,800
600,000 600,000
490,440 676,680
1,090,440 1,276,680
94,410 101,370
1,184,850 1,378,050
1,784,850 1,978,050
PARTIAL GOODWILL
Consideration transferred
Less: Book value of stockholders’ equity of Sax:

Common stock (P240,000 x 80%) P192,000
Retained earnings (P120,000 x 80%) 96,000
Allocated excess (excess of cost over book value)

Decrease in bonds payable (P4,800 x 80%) 3,840
Positive excess: Partial-goodwill
January 1, 20x4:
Cash
Acquisition of S Company.

(2) Cash 28,800
Investment in Sax Company (P36,000 x 80%)
Record dividends from Sax Company.
December 31, 20x4:

Investment income (P60,000 x 80%)
Record share in net income of subsidiary.
December 31, 20x4:

(4) Investment income [(P13,200 x 80%) + P3,000*, goodwill impairment
13,560
loss
Investment in Sax Company
Record amortization of allocated excess of inventory, equipment, buildings and

bonds payable and goodwill impairment loss.


Land 7,200
Goodwill 12,000
Buildings


Inventory
Goodwill
(E4) Investment income 34,440



Sales P480,000
Investment income 34,440
Interest expense -


Net Income P202,440

Sax Company
Total P562,440
Dividends paid
Sax Company -

P490,440
Sheet
Balance Sheet
Cash P 232,800
Inventory 120,000
Land 210,000
Equipment 240,000
Buildings 720,000
Goodwill
Investment in Sax Co. 377,640
Total P1,990,440
P 135,000
- equipment
405,000
- buildings
Non-controlling interest _________
Total P1,990,440
P 372,000
288,000
P 84,000
72,000
P 12,000
372,000
28,800
48,000
13,560
288,000
72,000
216,000
18,000
84,000
6,000
12,000
1,200
3,000
36,000
5,640
9,360

P240,000 720,000
- (4) 34,440 _________
P240,000 P 720,000
P138,000 (3) 6,000 348,000
24,000 (3) 6,000 90,000
- (3) 1,200 1,200
18,000 66,000
- (3) 3,000 3,000
P180,000 P508,200
P 60,000 P211,800
- (5) 9,360 -9,360
P 60,000 P202,440
P360,000
P120,000 (1) 120,000
60,000 202,440
P180,000 P562,440
72,000
36,000 (4) 36,000 -
P144,000 P490,440
P 90,000 322,800
60,000 150,000
90,000 (2) 6,000 (3) 6,000 210,000
48,000 (2) 7,200 265,200
180,000 420,000
540,000 (2) 216,000 1,044,000
(2) 4,800 (3) 1,200 3,600
(2) 12,000 (3) 3,000 9,000
(2) 288,000
(2) 84,000 -
(4) 5,640
P1,008,000 P2,424,600
P 96,000 (2) 96,000 (3) 12,000 P147,000
192,000
288,000 495,000
6,000
120,000 240,000
120,000 360,000
600,000
240,000 240,000
144,000 490,440
7,200 72,000
18,000
_________ ____92,160
__________
9,360
P1,008,000 P 751,200 P 751,200 P2,424,600
FULL GOODWILL
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

Decrease in bonds payable (P4,800 x 100%) 4,800 90,000
Positive excess: Full-goodwill (excess of cost over
P 15,000
fair value)………………………………………………...
January 1, 20x4:
(1) Investment in S Company 372,000
Cash 372,000
(2) Cash 28,800
Investment in S Company (P36,000 x 80%) 28,800
December 31, 20x4:
Investment income (P60,000 x 80%) 48,000
December 31, 20x4:
(4) Investment income [(P13,200 x 80%) + (P3,750 – P750)* goodwill
13,560
impairment loss)],
Investment in Sax Company 13,560

Land 7,200
Goodwill 15,000
Buildings 216,000
Non-controlling interest (P90,000 x 20%) + [(P15,000, full – P12,000,
21,000
partial goodwill)]

Depreciation expense.. 6,000
Inventory 6,000
Goodwill 3,750


Income Statement Pascual Co. Sax Co.

Sales P480,000 P240,000
Investment income 34,440 -
Total Revenue P514,440 P240,000
Cost of goods sold P204,000 P138,000
Interest expense - -

Goodwill impairment loss - -
Total Cost and Expenses P312,000 P180,000

Net Income P202,440 P 60,000
NCI in Net Income - Subsidiary - -
Net Income to Retained Earnings P202,440 P 60,000

Sax Company P120,000
Total P562,440 P180,000
Dividends paid
Sax Company - 36,000

P490,440 P144,000
Sheet
Balance Sheet
Cash P 232,800 P 90,000
Inventory 120,000 90,000
Land 210,000 48,000

Equipment 240,000 180,000
Buildings 720,000 540,000
Goodwill
Total P1,990,440 P1,008,000
Accumulated depreciation equipment P 135,000 P 96,000

405,000 288,000
- buildings
Accounts payable 120,000 120,000
Non-controlling interest _________ _________
Total P1,990,440 P1,008,000

720,000
(4) 34,440 _________
P 720,000
(3) 6,000 348,000
(3) 6,000 90,000
(3) 1,200 1,200
66,000
(3) 3,750 3,750
P508,950
P211,050
(5) 8,610 -8,610
P202,440
P360,000
(1) 120,000
202,440
P562,440
72,000
(4) 36,000 -
P490,440
322,800
150,000
(2) 6,000 (3) 6,000 210,000
(2) 7,200 265,200

420,000
(2) 216,000 1,044,000
(2) 4,800 (3) 1,200 3,600
(2) 15,000 (3) 3,750 11,250
(2) 288,000
-
(2) 84,000
(4) 5,640
P2,426,850
(2) 96,000 (3) 12,000 P147,000

(2) 192,000
495,000
(2) 6,000
240,000
360,000
600,000
(1) 240,000
490,440
(3) 7,200 72,000
21,000
____94,410
__________
8,610
P 754,200 P 754,200 P2,426,850
Pascual Co.
Sales P 540,000
Gross profit P 324,000
Net income from its own separate operations P 192,000
Add: Investment income 66,240

Net income P 258,240

(2) Cash 38,400
Investment in Sax Company (P48,000 x 80%)
December 31, 20x5:

Investment income (P90,000 x 80%)
December 31, 20x5:
(4) Investment income (P7,200 x 80%) 5,760

Retained earnings – Sax Co, 1/1/x5 144
(E2) Accumulated depreciation – equipment (P96,000 – P12,000) 84,000
Accumulated depreciation – buildings (P192,000 + 6,000) 198,000
Land 7,200
Discount on bonds payable (P4,800 – P1,200) 3,600
Goodwill (P12,000 – P3,000) 9,000
Buildings
Non-controlling interest [(P90,000 – P13,200) x 20%]
(E3) Depreciation expense 6,000



Sales P540,000
Investment income 66,240
Interest expense -
Net Income P258,240

Sax Company
Total P748,680
Dividends paid
Sax Company -
P676,680
Sheet
Balance Sheet
Cash P 265,200
Inventory 216,000
Land 210,000
Equipment 240,000
Buildings 720,000
Goodwill
Total P2,236,680
P 150,000
- equipment
450,000
- buildings
Total P2,236,680
Sax Co.
P 360,000
192,000
P 168,000
24,000
54,000
P 90,000
-
P 90,000
P 48,000
38,400
72,000
5,760
307,200
76,800
216,000
15,360
70,440
12,000
1,200
48,000
27,840
16,560

P360,000 900,000
- (4) 66,240 ___________
P360,000 P 900,000
P192,000 408,000
24,000 (3) 6,000 90,000
- (3) 1,200 1,200
54,000 126,000
- -
P270,000 P 625,200
P 90,000 P 274,800
- (5) 16,560 -16,560
P 90,000 P258,240
P490,440
P144,000 (1) 144,000
90,000 258,240
P234,000 P748,680
72,000
48,000 (4) 48,000 -
P186,000 P676,680
P 102,000 367,200
96,000 276,000
108,000 324,000
48,000 (2) 7,200 265,200
180,000 420,000
540,000 (3) 216,000 1,044,000
(2) 3,600 (3) 1,200 2,400
(2) 9,000 9,000
(1) 307,200
(2) 70,440 -
(4) 27,840
P1,074,000 P2,707,800
P 102,000 (2) 84,000 (3) 12,000 P180,000
(2) 198,000 (3)

306,000 552,000
6,000
120,000 240,000
120,000 360,000
600,000
240,000 (1) 240,000
186,000 676,680
(5) 9,600 76800
15360
_________ ____99,120
16,560
__________
P1,074,000 P 794,400 P 794,400 P2,707,800
Pascual Co, Sax Co.
Sales P 540,000 P 380,000
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: Investment income 66,240 -

Net income P 258,240 P 90,000
Dividends paid P 72,000 P 48,000

(2) Cash 38,400
Investment in Sax Company (P48,000 x 80%) 38,400
December 31, 20x5:

Investment income (P90,000 x 80%) 72,000
December 31, 20x5:
(4) Investment income (P7,200 x 80%) 5,760

Retained earnings – Sax Co, 1/1/x5 144
Investment in S Co (P384,000 x 80%) 307,200
(E2) Accumulated depreciation – equipment (P96,000 – P12,000) 84,000
Accumulated depreciation – buildings (P192,000 + P6,000) 198,000
Land 7,200
Discount on bonds payable (P4,800 – P1,200) 3,600
Goodwill (P15,000 – P3,750) 11,250
Buildings 216,000
Non-controlling interest [(P90,000 – P13,200) x 20%] +

[P3,000, full goodwill - [(P3,750, full-goodwill impairment – P3,000, 17,610
partial- goodwill impairment)*
Investment in S ax Co. 70,440
(E3) Depreciation expense 6,000


Income Statement Pascual Co. Sax Co.

Sales P540,000 P360,000
Investment income 66,240 -
Total Revenue P606,000 P360,000
Cost of goods sold P216,000 P192,000
Interest expense - -
Goodwill impairment loss - -
Total Cost and Expenses P348,000 P270,000
Net Income P258,240 P 90,000
NCI in Net Income - Subsidiary - -
Net Income to Retained Earnings P258,240 P 90,000

Sax Company P144,000
Total P748,680 P234,000
Dividends paid
Sax Company - 48,000
P676,680 P186,000
Sheet
Balance Sheet
Cash P 265,200 P 102,000
Inventory 216,000 108,000
Land 210,000 48,000
Equipment 240,000 180,000
Buildings 720,000 540,000
Goodwill
Investment in Sax Co. 4,059,480
Total P2,236,680 P1,074,000
P 150,000 P 102,000
- equipment
450,000 306,000
- buildings
Accounts payable 120,000 120,000
Non-controlling interest ___ _____ __________
Total P2,236,680 P1,074,000

900,000
(4) 66,240 ___________
P 900,000
408,000
(3) 6,000 90,000
(3) 1,200 1,200
126,000
-
P 625,200
P 274,800
(5) 16,560 -16,560
P 258,240
P490,440
(1) 144,000
258,240
P748,680
72,000
(4) 48,000 -
P676,680
367,200
276,000
324,000
(2) 7,200 265,200
420,000
(3) 216,000 1,044,000
(2) 3,600 (3) 1,200 2,400
(2) 11,250 11,250
(1) 307,200
(2) 70,440 -
(4) 27,840
P2,634,000
(2) 84,000 (3) 12,000 P 180,000
(2) 198,000 (3) 6,000 552,000
240,000
360,000
600,000
(1) 240,000
676,680
(2 ) 76,800
(2) 17,610
(3) 9,600 __________
(5) 16,560
P 796,650 P 796,650 P2,634,000

Partial Goodwill
Consolidated Amounts 20x4 20x5
Cash 322,800 367,200
Accounts Receivable 150,000 276,000
Invetory 210,000 324,000
Land 265,200 265,200
Equpment 273,000 240,000
Buildings 549,000 492,000
Investment in Sax 0 0
Total Assets 1,770,000 1,964,400
Accounts Payable 240,000 240,000
Bonds Payable 360,000 360,000
Total Liabilities 600,000 600,000
Sales 720,000 900,000
Cost of Goods Sold 348,000 408,000
Gross Profit 372,000 492,000
Expenses 157,200 217,200
Dividend Income 0 0
Controlling Interest in Net Income 202,440 258,240
Non-Controlling Interest in Net Income 9,360 16,560
Net Income 211,800 274,800
Controlling Interest/Equity Holders of

Parent/Parent Stockholders' Equity
1,090,440 1,276,680
Non-Controlling Interest 92,160 99,120
Stockholders' Equity 1,182,600 1,375,800
Liabilities and Stockholders' Equity 1,782,600 1,975,800
Full Goodwill
20x4 20x5
322,800 367200
150,000 276000
210,000 324000
265,200 265200
273,000 240,000
549,000 492,000
0 0
1,770,000 1,964,400
240,000 240,000
360,000 360,000
600,000 600,000
600,000 600,000
490,440 676,680
720,000 900,000
348,000 408,000
372,000 492,000
157,200 217,200
0 0
202,440 258,240
8,610 16,560
211,050 274,800
600,000 600,000
490,440 676,680
1,090,440 1,276,680
94,410 101,370
1,184,850 1,378,050
1,784,850 1,978,050

Exercise No.4 Bus. Co.

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Exercise No.4 Bus. Co.

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PARTIAL GOODWILL

Pascal Co. Sax Co.

Fair value of Subsidiary (80%)

Positive excess: Partial-goodwill (excess of cost over fair value. P 12,000

January 1, 20x4 – December 31, 20x4:

(E1) Common stock – Sax Co 240,000

(E2) Inventory 6,000

(E3) Cost of Goods Sold 6,000

(E4) Dividend income - Pascal Co. 28,800

To eliminate intercompany dividends and non-controlling interest share of dividends

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

Investment in Sax Co 372,000

Total 1,984,800 1,008,000

Accumulated depreciation equipment 135,000 96,000

Accumulated depreciation building 405,000 288,000

Accounts payable…………… 120,000 120,000

Total 1,984,800 1,008,000

96,000 12,000 147,000

Fair value of Subsidiary (80%)

January 1, 20x4 – December 31, 20x4:

(E1) Common stock – Sax Co. 240,000

Non-controlling interest (P360,000 x 20%)

Non-controlling interest (P90,000 x 20%) + [(P15,000, full – P12,000 partial Goodwill)

Investment in Sax Co.

(E3) Cost of Goods Sold 6,000

Depreciation expense 6,000

Accumulated depreciation – buildings 6,000

(E4) Dividend income - Pascual Co. 28,800

(E5) Non-controlling interest in Net Income of Subsidiary 8,610

Discount on bonds payable

Investment in Sax Co 372,000

Accumulated depreciation 135,000

Non-controlling interest………… _________

4,800 1,200 3,600

15,000 3,750 11,250

96,000 96,000 12,000 147,000

Net income from its own separate operations 192,000

Add: Dividend income 38,400

January 1, 20x5 – December 31, 20x5:

(E1) Investment in Sax Company 19,200

(E2) Common stock – Sax Co.… 240,000

(E3) Inventory 6,000

(E5) Dividend income - Pascual Co. 38,400

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

Income Statement Pascual Co.

Investment in Sax Co 372,000

Accumulated depreciation-equipment 150,000

Accounts payable 120,000

Non-controlling interest ___ _____

remainder to goodwill; and to

Sax Co. Dr. Cr. Consolidated

0 13,560 19200 490,440

102,000 96,000 24,000 180,000

Net income from its own separate operations 192,000

Add: Dividend income 38,400

January 1, 20x5 – December 31, 20x5:

(E1) Investment in Sax Company 19,200

Retained earnings – Pascual Co.

(E2) Common stock – Sax Co.… 240,000

(E3) Inventory 6,000

(E4) Retained earnings – Pascual Company, 1/1/20x5 13,560

(E5) Dividend income - Pascual Co. 38,400

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

Investment in Sax Co 372,000

Non-controlling interest _ ___

Non-controlling interest _ ___