On Jan. 1, 2020, B1 Co. purchase 80% interest of B2 Co. for P150,000.

Information on Simon’s financial position on this date follows:

 The identifiable assets and liabilities approximated their fair values except for inventories with carrying amount of P40,000 and fair
value of P43,000 and building with carrying amount of P90,000 and fair value of P96,000. The building has a remaining useful life of 3
years.
 B2’s equity comprises only share capital and retained earnings with carrying amounts of P150,000 and P35,000, respectively.
 NCI is measured at proportionate share.
All of the inventories on Jan. 1, 2020 were sold during 2020.
The following intercompany transactions occurred in 2020:
a. B2 Co. sold goods costing P10,000 to B1 Co. for P19,000. B1 Co. held 3/4 of these goods in its ending inventory.
b. B1 Co. sold goods to B2 Co. for P20,000. The gross profit rate is 20% based on sales price. B2 Co. sold 1/2 to unrelated parties during the
year.
The individual FS of the entities on Dec. 31, 2020 are shown below.
Statement of financial position
B1__ B2
Cash P 143,000 P 60,000
Inventory 440,000 160,000
Investment in subsidiary (at cost) 160,000
Building 700,000 81,000
Total Assets P1,443,00 P301,000
Accounts Payable P 200,000 P91,000
Share capital 1,000,000 150,000
Retained Earnings 243,000 60,000
Total Liabilities and Equities P1,443,000 P301,000
Income Statement
B1 B2
Sales P300,000 P120,000
Cost of sales 165,000 72,000
Gross profit 135,000 48,000
Operating expenses 32,000 13,000
Depreciation expense 40,000 10,000
Net income 63,000 25,000
Compute the ff. as of December 31, 2020 –
a. Consolidated Sales
Sales – B1 P300,000
Sales - B2 120,000
Less: intercompany sales(19,000+20,000) (39,000)
Consolidated sales P381,000

b. Consolidated Cost of sales

Cost of sales – B1 P165,000
Cost of sales – B2 72,000
Add: (Deduct) intercompany sales (39,000)
Unrealized profit in EI(6,750+2,000) 8,750
Depreciation of FVA on inventory 3,000
Consolidated Cost of sales P209,750

c. Consolidated Inventory

Ending inventory – B1 P440,000

Ending inventory – B2 160,000
Add: (Deduct) Unrealized profit in EI (8,750)
Consolidated Ending InventoryP591,250

d. Share of NCI on the Net Income of the Subsidiary

Net income - B2 P25,000
Add: (Deduct)
Depreciation of FVA (3,000+2,000) (5,000)
Unrealized profit in EI (6,750) EI per B2(19,000x75%) 14,250
Adjusted Net income P13,250 EI @ cost (10,000 x75%) 7,500
Multiply 20% Unrealized profit 6,750
Share of NCI-NI of the Subsidiary P2,650
e. NCI on the NA of the Subsidiary
Net assets at BV – 12/31/2020 (150,000+60,000) P210,000 Net Assets – FV 1/1/2020 P194,000
Add: (Deduct) Add: (Deduct)
FV adjustments (6,000+3,000) 9,000 Depreciation on FVA (5,000)
Depreciation on FVA (5,000) Unrealized profit on EI (6,750)
Unrealized profit in EI – upstream (6,750) Net income – B2 25,000
Net Assets 12/31/2020 – B2 at FV P207,250 Total Net Assets – FV 12/31/2020 P207,250
Multiply by 20% Multiply by 20%
NCI on Net Assets of Subsidiary P41,450 NCI on Net Assets of Subsidiary P41,450

f. CNI
Profits before adjustments P88,000
Add: (Deduct) Unrealized Profit (8,750)
Depreciation on FVA (2,000+3,000) (5,000)
Consolidated Net Income P74,250

g. CRE
RE 12/31/2021 – B1 P243,000 RE, beg. – B1 P180,000
Add: (Deduct) Add: Consolidated Net Income:
Unrealized profit on EI – downstream (2,000) Adjusted Net Income – (63,000-2,000) P61,000
Parents share in the NI of subsidiary: Add: Share of B1 on NI of B2:
Adjusted Net Income – B2 P13,250 Adjusted NI – B2 P13,250
Multiply by 80% 10,600 Multiply by 80% 10,600 71,600
Negative goodwill 5,200 Negative Goodwill 5,200
Consolidated Retained Earnings 12/31/20 P256,800 Consolidated Retained Earnings 12/31/20 P256,800

h. Consolidated Financial Statements (SFP & IS)

Statement of financial position

B1__ B Consolidated
Cash P 143,000 P 60,000 P 203,000
Inventory 440,000 160,000 591,250
Investment in subsidiary (at cost) 150,000 -
Building 710,000 81,000 795,000 (6,000-2,000)
Total Assets P1,443,00 P301,000 1,589,250
Accounts Payable P 200,000 P91,000 P 291,000
Share capital 1,000,000 150,000 1,000,000
Retained Earnings 243,000 60,000 256,800
NCI – Net Assets - - 41,450
Total Liabilities and Equities P1,443,000 P301,000 1,589,250

Consideration given P150,000

NCI – proportionate value(194,000 x20%) 38,800
Total 188,800
FV – NA of subsidiary 194,000
Negative Goodwill (P5,200)

Consolidated Income Statement

Sales P381,000
Less: Cost of sales 209,750
Gross Profit P171,250
Less: Operating Expenses P45,000
Depreciation expense 52,000 97,000
Consolidated Net Income P 74,250