Peer, Inc.

acquires 75 percent of Sea-breeze Corporation for P600,000 cash on January 1,

2016. The remaining percent of the Sea-breeze shares traded near a total value of 200,000
both before and after the acquisition date. NCI is measured on a full basis .On January 1,
2016, Sea-breeze had the following assets and liabilities:

Book Value Fair Value

Current Assets P 250,000 P 250,000
Land 100,000 100,000
Building (net) – 5-year-year 400,000 350,000
life
Equipment (net) – 8-year life 300,000 400,000
Patent (10-year life) -0- 50,000
Accounts Payable (200,000) (200,000)
Bonds Payable – 5-years (150,000) (175,000)
Net P 700,000 P 775,000
Common Stock P 650,000
Retained Earnings P 50,000
The companies’ financial statements for the year ending December 31, 2016 using cost
method are as follows:
Peer Sea-Breeze
Revenue P (800,000) P (250,000)
Operating expenses 550,000 160,000
Dividend Income ( 60,000) 0
Net Income P (310,000) P (90,000)

Peer Sea-Breeze
Retained earnings, 1/1/16 P (700,000) P (50,000)
Net Income (310,000) ( 90,000)
Dividends paid 100,000 80,000
Retained earnings, 12/31/16 P (910,000) P (60,000)

Current Assets P 360,000 P 207,500

Land 320,000 200,000
Building (net) 750,000 320,000
Equipment (net) 370,000 262,500
Investment in Sea-breeze 600,000
Total Assets P 2,400,000 P 990,000

Liabilities P (600,000) P (130,000)

Bonds Payable (290,000) (150,000)
Common Stock (600,000) (650,000)
Retained Earnings, 12/31/16 (910,000) (60,000)
Total Liabilities & Equities P (2,400,000) P (990,000)
Required:
1. Prepare the working paper eliminating entries for 2016 for the purpose of preparing
consolidated financial statement.
Eliminating Entries

1. To establish reciprocity at the beginning of the

year

Investment in Sea Breeze Corp. 7,500.00

Retained earnings - Peer Inc. 7,500.00

2. To eliminate equity of subsidiary

Common stock - Sea Breeze Corp. 650,000.00

Retained earnings - Sea Breeze Corp. 50,000.00
Investment in Sea Breeze Corp. 525,000.00
Non-controlling interest 175,000.00

3. To adjust subsidiary's assets and liabilities to FV

Accum. dep. - equipment 100,000.00

Patent 50,000.00
Accum. dep. - building 50,000.00
Premium on bonds payable 25,000.00
Investment in Sea Breeze Corp. 56,250.00
Non-controlling interest 18,750.00

4. To recognize goodwill

Goodwill 25,000.00
Investment in Sea Breeze Corp. 18,750.00
Noncontrolling interest 6,250.00

5. To amortize differences between FV and BV

Depreciation exp. - equipt. 7,500.00

Accum. dep. - building 10,000.00
Premium on bonds payable 5,000.00
Accum. dep. - equipt. 12,500.00
Accum. amo. - patent 5,000.00
Interest expense 5,000.00

6. To eliminate intercompany dividends

Dividend income - Peer Inc. 60,000.00
Noncontrolling interest 20,000.00
Dividends paid - Sea Breeze Corp. 80,000.00

7. To establish NCI in net income of subsidiary

NCI in NI of subsidiary 21,875.00

Noncontrolling interest 21,875.00

CI (75%) NCI (25%) Total

Consideration transferred + FV of NCI 600,000.00 200,000.00 800,000.00
FV of net assets 581,250.00 193,750.00 775,000.00
Goodwill 18,750.00 6,250.00 25,000.00

Net income of subsidiary 90,000.00

Amortization of allocated excess 2,500.00
Adjusted 87,500.00
Non-controlling interest % 0.25
Non-controlling interest in net income
(NICNI) 21,875.00

2. Prepare a consolidated workpaper on December 31, 2014.

Income Statement Peer Inc. Sea Breeze Corp. Dr. Cr. Consol
Revenue 800,000.00 250,000.00 1,
Dividends income 60,000.00 60,000.00
Total revenue 860,000.00 250,000.00 1,
Operating expenses 550,000.00 160,000.00
Net Income 310,000.00 90,000.00
NCI-in net income of subsidiary 21,875.00
Net Income to retained earnings 310,000.00 90,000.00

Statement of Retained Earnings Peer Inc. Sea Breeze Corp. Dr. Cr. Consol
Retained earnings,1/1/16
Peer Inc. 700,000.00 11,250.00 7,500.00
Sea Breeze Corp. 50,000.00 50,000.00
Net income, from above 310,000.00 90,000.00
Total 1,010,000.00 140,000.00 1,
Dividends paid
Peer Inc. 100,000.00
Sea Breeze Corp. 80,000.00 80,000.00
Retained earnings,12/31/16 536,000.00 155,000.00

Balance Sheet Peer Inc. Sea Breeze Corp. Dr. Cr. Consol
Current assets 360,000.00 207,500.00
Land
Equipment 200,000.00 150,000.00
180,000.0
Buildings 600,000.00 450,000.00 0
Discount on bonds payable 4,000.00 2,000.00
Goodwill 12,500.00 3,125.00
240,000.0
Investment in Son Company 310,000.00 0
60,000.00
10,000.00

Total 1,836,000.00 895,000.00 2,

Accumulated depreciation-equipment 125,000.00 85,000.00 80,000.00 20,000.00
160,000.0
Accumulated depreciation- buildings 375,000.00 255,000.00 0
10,000.00
Accounts payable 100,000.00 100,000.00
Bonds payable 200,000.00 100,000.00
Common stock, P10 par 500,000.00
200,000.0
Common stock, P10 par 200,000.00 0
Retained earnings from above 536,000.00 155,000.00
Non-Controlling interest 8,000.00 64,000.00
2,825.00 15,000.00
2,500.00
13,800.00
Total 1,836,000.00 895,000.00 2,

3. Determine the following items for December 31, 2016

a. Consolidated net income = 337,500
b. Net income attributable to parent = 315,625
c. Non-Controlling interests in the consolidated net income = 21,875
d. Consolidated retained earnings = 915,625
e. Non-controlling interest = 201,875
f. Consolidated total assets = 2,907,500

2,925,000
(12,500)
(5,000)
2,907,000

g. Consolidated total liabilities = 1,190,000

Liabilities 730,000
Bonds Payable 440,000
Premium on Bonds Payable 20,000
Total 1,190,000
h. Consolidated stockholder’s equity = 1,717,500