Step 1: Analysis of effects of intercompany transaction

The unamortized balance of the deferred gain is computed as follows:

Deferred gain on sale – Jan. 1, 2021 (60,000-(120000- 72000) 12,000
Multiply by: (3yrs. Remaining as of Dec. 31, 2021 over 4 yrs.) ¾
Deferred gain on sale – Dec. 31, 2021 9,000

Step 2: Analysis of net assets

Dull co. Acquisition date Consolidation date Net Change
Total net assets at
carrying amounts fair
value adjustments at
acquisition date 160,000 210,000
Fair value adjustment at
acquisition date - -
Subsequent Dep’n of NIL -
FVA
Unrealized profit NIL -
(upstream only)

Subsidiary’s net assets 160,000 210,000 50,000

at fair value

Step 3: Goodwill computation

Consideration transferred 180,000

Non- controlling interest in the acquiree (160k x 25%) 40,000
Previously held equity interest in the acquiree. —
Total 220,000
Fair value of net identifiable assets acquired (160,000)
Goodwill 60,000

Step 4: Non- controlling interest assets

Dull’s net assets at fair value – Dec. 31, 2021(step 2) 210,000

Multiply by: NCI percentage 25%
Total 52,500
Add: Goodwill to NCI net of accumulated impairment losses -
Non- controlling interest in net assets – Dec 31, 2021 52,500

Step 5: Consolidated retained earnings

Bright’s retained earnings – Dec 31, 2021 110,000

Consolidation adjustments:
Bright’s share in the net change in Dull’s net assets 37,500
Unamortized deferred gain (Downstream only) step 1 (9,000)
Gain or loss on extinguishment of bonds -
Impairment loss on goodwill attribute to parent -
Net consolidation adjustment 28,500
Consolidated retained earnings – Dec 31, 2021 138,000

Step 6: Consolidated profit or loss

Parent Subsidiary Consolidated

Profit before adjustments 240,000 50,0000 290,000
Consolidation Adjustment: (9,000) (-) ( 9,000 )
unamortized def. gain – (Step 1)
Dividend income from subsidiary (-) N/A (-)
Gain or loss on extinguishment
of bonds (-) (-) (-)
Net Consolidation Adjustment ( 9,000 ) (-) ( 9,000 )
Profit before FVA 231,000 50,000 281,000
Depreciation of FVA (-) (-) (-)
Impairment loss on goodwill (-) (-) (-)
Consolidated profit 231,000 50,000 281,000

Step 7: Profit or Loss attributed to owners of parent and NCI

Owners of Parent NCI Consolidated

Bright’s Profit before FVA (step 6 ) 231,000 N/A 231,000
Share in Dull’s profit before FVA (b) 37,500 12,500 50,000
Depreciation of FVA (-) (-) (-)
Share in impairment loss on goodwill (-) (-) (-)
Totals 268,500 12,500 281,000

Requirement (d):

ASSETS Consolidated
Investment in subsidiary (at cost) – eliminated --
Equipment – net (Requirement b) 581,000
Other assets (200,000 + 45,000) 245,000
Goodwill (step 3) 60,000
Total Assets 886,000

Liabilities and Equity

Liabilities (70,000 + 45,000) 95,000
Share capital (Bright’s only) 600,000
Retained earnings (step 5) 138,500
Equity attributable to owners of the parent 738,500
Non- controlling interest (step 4) 52,500
Total equity 791,000
Total Liabilities and Equity 886,000

Consolidated
Revenues (300,000 + 80,000) 380,000
Depreciation expense (Requirement c) (45,000)
Other expenses (32,000 + 18,000) (50,000)
Gain on sale of equipment (eliminated) -
Profit for the year P 285,000

Profit attributable to the owners of the parent (Step 7) 268,500

Profit attributed to NCI (Step 7) 12,500
PROFIT FOR THE YEAR 281,000