CMU
Enrichment Learning Activity
Name: John Carlo C. Tolentino Date: January 07, 2022
Year and Section: BSMA – 3A Instructor Mr. Jefferson Cruz
:
Module #: 6 Topic: Consolidated Financial Statements
– Part 3
Directions: ANSWER PROBLEM 3 EXERCISE ON YOUR BOOK Page 313-314 (Show your solutions)
1. Solutions:
Step 1: Analysis of effects of intercompany transaction
There were no intercompany transactions during the period.
Step 2: Analysis of net assets
Night Co. Acquisition date Consolidation date Net change
Total net assets at carrying amounts 192,000 252,000
Fair value adjustments at acquisition
Date - -
Subsequent depreciation of FVA NIL -
Unrealized profits (Upstream only) NIL -
Subsidiary's net assets at fair value 192,000 252,000 60,000
Step 3: Goodwill computation
Formula #2 - NCI measured at fair value
Consideration transferred 216,000
Less: Previously held equity interest in the acquiree -
Total 216,000
Less: Parent’s proportionate share in the net assets of subsidiary (144,000)
(₱192,000 acquisition-date fair value x 75%)
Goodwill attributable to owners of parent – Jan. 1, 20x1 72,000
Less: Parent’s share in goodwill impairment (₱8,000 x 75%) (6,000)
Goodwill attributable to owners of parent – Dec. 31, 20x1 66,000
Fair value of NCI (see given) 72,000
Less: NCI's proportionate share in the net assets of subsidiary (48,000)
(₱192,000 acquisition-date fair value x 25%)
Goodwill attributable to NCI – Jan. 1, 20x1 24,000
Less: NCI’s share in goodwill impairment (₱8,000 x 25%)
(2,000)
Goodwill attributable to NCI – Dec. 31, 20x1 22,000
Goodwill, net – Dec. 31, 20x1 88,000
SY2021-2022 1st Term Homework
CMU
Enrichment Learning Activity
Step 4: Non-controlling interest in net assets
Night's net assets at fair value – Dec. 31, 20x1 (Step 2) 252,000
Multiply by: NCI percentage 25%
Total 63,000
Add: Goodwill to NCI net of accumulated impairment losses 22,000
Non-controlling interest in net assets – Dec. 31,20x1 85,000
Step 5: Consolidated retained earnings
Day's retained earnings – Dec. 31, 20x1 132,000
Consolidation adjustments:
Day's share in the net change in Night's net assets (a) 45,000
Unamortized deferred gain (Downstream only) -
Gain or loss on extinguishment of bonds -
Impairment loss on goodwill attributable to Parent (6,000)
Net consolidation adjustments 39,000
Consolidated retained earnings – Dec. 31,20x1 171,000
(a) Net change in Night’s net assets (Step 2) of ₱60,000 x 75% = ₱45,000.
Step 6: Consolidated profit or loss
Parent Subsidiary Consolidated
Profits before adjustments 288,000 60,000 348,000
Consolidation adjustments:
Unamortized def. gain ( - ) ( - ) ( - )
Dividend income from subsidiary ( - ) N/A ( - )
Gain or loss on extinguishment of bonds ( - ) ( - ) ( - )
Net consolidation adjustments ( - ) ( - ) ( - )
Profits before FVA 288,000 60,000 348,000
Depreciation of FVA ( - ) ( - ) ( - )
Impairment loss on good will (6,000) (2,000) (8,000)
Consolidated profit 282,000 58,000 340,000
Step 7: Profit or loss attributable to owners of parent and NCI
Owners of parent NCI Consolidated
Day's profit before FVA (Step 6) 288,000 N/A 288,000
Share in Night’s profit before FVA (c) 45,000 15,000 60,000
Depreciation of FVA ( - ) ( - ) ( - )
Share in impairment loss on goodwill (6,000) (2,000) (8,000)
Totals 327,000 13,000 340,000
(c) Shares in Night’s profit before FVA (Step 6) :(60,000 x 75%); (60,000 x 25%)
SY2021-2022 1st Term Homework
CMU
Enrichment Learning Activity
Requirement (d):
ASSETS
Investment in subsidiary (at cost) – eliminated –
Other assets (720,000 + 282,000) 1,002,000
Goodwill – net (Step 3) 88,000
TOTAL ASSETS 1,090,000
LIABILITIES AND EQUITY
Liabilities (84,000 + 30,000) 114,000
Share capital (Day's only) 720,000
Retained earnings (Step 5) 171,000
Equity attributable to owners of the parent 891,000
Non-controlling interest (Step 4) 85,000
Total equity 976,000
TOTAL LIABILITIES AND EQUITY
1,090,000
Consolidated
Revenues (360,000 + 96,000) 456,000
Operating expenses (72,000 + 36,000) (108,000)
Impairment loss on goodwill (Step 3) (8,000)
Profit for the year 340,000
Profit attributable to owners of the parent (Step 7) 327,000
Profit attributable to NCI (Step 7) 13,000
Profit for the year 340,000
SY2021-2022 1st Term Homework
