13) cpgqennentts (Et y sete pt a "1 4 rie CHOICE - THEORY ub interest is. measured at. ‘proportionate v vant st lens “ : rawill attributable to NCI. ae HN hill attributable to NCL 3100 . " aw ® a indirect holding adjustment. isa ; © per? , tation for goodwill would be very complex. e oypees wes the following, statements is correct? whi! ot aidation begins when control is obtained and ceases one nitro is Lost. pen contee) ¢ s jidation begins at the earliest comparative period cpnsotida et ‘ weented if business combination occurred during the ares i current period. / Consotidation bee when there is no non-controlling x © Nerest leit in the subsidiary. inte a None of these ithe parent's ownership interest in a subsidiary changes but trol is not lost, the change counted for as a gain or loss transaction. b. isaccounted for retrospectively counted for as equity transaction. cont ‘ @ isnot accounted for When a parent loses control over a subsidiary, the parent shall a. derecognize the net identifiable assets of the former subsidiary from the consolidated financial statements and shall recognize the gain or loss associated with the loss of control attributable to the former controlling interest. b. restate the consolidated financial’ statements presented in previous yearsShy c. derecognize the net identifiable Re, subsidiary from the consolidate fi ie ets , shall recognize the gain or loss direct Sta en \ d. bandc aN 5, When a parent-subsidiary relationship es financial statements are prepared in et ti accounting concept of: Blition a’ a. Reliabil € Legal ent b. Materiality. 4. Ecotec (Adapted) PROBLEM 2: FOR CLASSROOM DISCUSSION 1. On January 1, 20x1, Bright Co. acquired 75% interest in Co, for P180,000. On this date the carrying amount of! net identifiable assets was P160,000, equal to fair value yg controlling interest was measured at a fair value of P69) The financial statements of the entities on December 31, ayy show the following information: Bright Co. Dull Co, ASSETS Investment in subsidiary (at cost) 180,000 - Other assets 600,000 235,000 TOTAL ASSETS 780,000 235,000 LIABILITIES AND EQUITY Liabilities 70,000 25,000 600,000 100,000 Share capital Retained earnings 110,000 110,000__ Total equity 710,000 210,000 TOTAL LIABILITIES AND EQUITY 780,000 235,000,garment Part i wo Bright Co. 010,00) (600,009) 240,000 (DIG) 50,00) jon . . were declared by either entity during 201 and company transactions. ined by year-end that goodwill was e December 31, 20x1 consolidated : ; ea draft of th d consolidated statement of cial position an 1 the next five questions: gt in Plastic, Inc. The statements of ry 1, 20x1 are shown . jayormation fo Ss 75% jntere: he entities on Janua: jn subsidiary 112,500 - aie assets 514,500 186,000 709,500 Goodwill ee ASSETS 627,000 186,000 721,500 45,000 154,500 _——_, ~~ a ‘Accounts payable 109,500 352,500 352,500 73,000 177,000 Share capital feained earnings 365,000 66,000 Equity attributable to owners of parent a a fineiaaormee( ___2 , 20x2, Rubber Co. acqui . acqui in Plastic Inc. for P80,000. a the Teng the ac isition to b OW Much j ain oe mgt © Pn 4, financial statements? 7 ol; 0 cars d.0 b. (42,500) On January 1, 20x2, Rubber Co. acquired the interest for 100,000. Non-controlling interests TeMaiing | using the proportionate share method. ide me controlling n the net assets of the ‘gi is tay e in " interest i consolidated financial statements prepared immedi the acquisition? ately a c. 25,000 ~a, 42,500 d.0 b. 37,500 1, 20x2, Rubber Co- acquired additional ay, | “controlling interests were nial | re method. How much is nop, ts of the acquiree ine On January controlling interest i consolidated financial statements prepared immediately afer the acquisition? a. 37,500 ©. 7,500 b. 30,000 d.0 On January 1, 0x2, Rubber Co- acquired additional 20% interest for 100,000. Non-controlling interests were measured using the proportionate share method. How much # consolidated retained earnings jmmediately after the acquisition? a. 70,000 c. 130,000 p. 107,000 4,137,500 ts 758 60% out of i On January 4, 20x2, Rubber Co. sold ted to 105 interest in Plastic Inc. for P120,000. The sale rest!Ld amaititg interest is classified as he gain or Joss on the sale? ©. 48,500 di. 197,500 ed for trading, ERCISE at hath Day Co. acquired 75% interest in Night « yt noo, On this date, the carrying amount he mga is date ying of Night's was P192,000, equal to fair value, Non. was measured at a fair value of P72 000 : on oe “ifs jae teres ain inte vi 8 tements of the entities on December 31, 20x1 jal stal __ancial statements OF © a information: = fin’ a [ we followiNS a Day Co. Night Co, ee tin subsidiary (at cost) 216,000 : ye 720,000 282,000 4s i 936,000 282,000 utes AND EQUITY : F 720,000 120,000 5 132,000 132,000 ygndeomings 0TAL LIABILITIES AND EQUITY. 936,000. 282,000 Day Co. Night Co. lerenues 360,000 96,000 ‘paating expenses (72,000) (36,000) !nfitfor the year 288,000 60,000 Nétonl information: "No di mividends were declared by either entily "e were no intercompany transactions during the during 20x1. period.314 « However, it was determined ep impaired by P8,000, VeAreng tha, Requirement: Prepare a draft of the Decemb, " statements of financial position and ope o4 Oy profit or loss. "SOlida amy PROBLEM 4: MULTIPLE CHOICE - Coup 1. Selected information from the separate ATION: balance:sheets and income statements of pt “ty subsidiary, Shel Co., as of December 31, 1994, ‘ate, . then ended is as follows: 20d fo the Pare Shel Balance sheet accounts: Cosa Accounts receivable 52,000 38,000 Inventory 60,000 50,000 . 1o4oq) Income statement accounts: Revenues Cost of goods sold 300,000 220,000 4¢a%p Gross profit 100,000 60,000 15400) ~ 400,000 280,000 616,09) Additional information: During 1994, Pare sold goods to Shel at the same markup oncg that Pare uses for all sales. At December 31, 1994, what was the amount of Shel’s payable Pare for intercompany sales? 2 a. 6,000 c. 58,000 b. 12,000 d. 64,000 (Adapted) 2. Wright Corp. has several subsidiaries that are included it és consolidated financial statements. In its December 31, ! trial balance, Wright had the following intercompany balancé before eliminations:Debit Main Co. P 32,000 o from abe ge orm Main 114,000 it able 6,000 | at re en Corp r eel Onin Co. P15,000 ay F % Se role to King 101,000 ey a cop, consolidated balance shee, what amount yer Sh intercompany receivables? pete eport oS! 36,000 iO vagh ©. 36; voi 4.0 T4600 b we or 3t, 1989 Grey, a owned 90% of Winn Corp, a a oxen q subsidiary, and 20% of Carr Corp., an investee in Sg date nnot exercise significant influence. On the same hit Grey had receivables of 300,000 from Wirn and ine, OF cart. In its December 31, 1989 consolidated ee sheet, Grey should report accounts receivable from be gliatos of aff 00 000 c. 230,000 . * 50.000 4. 200,000 air?) 1 cord Co. owns four corporations. Consolidated financial gatements are being prepared for these corporations, which have intercompany loans of 200,000 and intercompany profits of 500,000. What amount of these intercompany loans and profits should be included in the consolidated financial statements? Intercompany Loans Intercompany Profits a. 200,000 0 . 200,000 . 500,000 ‘ 0 0 a 0 500,000 (Nps5, Sun, Inc. isa wholly owned subsidia, 1, 1993, Patton declared and paid a ay f Patton to stockholders of record on May 15, Per share 0, Sun bought 10,000 shares of ee On ‘ash diy 700,000 on the open market, when the | Common? My was P30. What amount of gain should peek Value wee atton, Te Per q transaction in its consolidated inco 0) ended December 31, 1993? MMe statemen y a hy c. 400,000 ) b, 390,000 aa (Adapted) * 410,000 Use the following information for the next five questions; Oblong Co. owns 80% interest in Round, Inc. i: | c . cee sae 7 Stal financial position of the entities on January 1, 20x1 ae « hy, “pelowe 5 Oblong Co._Round, Inc. Consoiga~) ida Tnvestment in subsidiary 180,000 - Other assets ~ 823,200 297,600 Lissa 7.200 Goodwill : : 77003200 297,600 1a TOTAL ASSETS [econo 28 Accounts ayable 564,000 120,000 564,000 Share capital Retained earnings 764,000 105,600 283.20 attributable to owners of parent 34720 : 4,000 Equity Non-controllins interest Total equit 1142 TOTAL LIABILITIES & EQUITY _ 1,003,200 297,600 a acquired the remaining yw much is the gain! d in the consolid#! 828,000. 225,600 895,200 | 6. On January 1, 20x2, Oblong Co. interest in Round Inc. for 80,000. Ho Joss on the acquisition to be recognize financial statements? a. 12,500 c. (37,500) Jdo 9,900) 2§ 1 * b ( 2002, Oblong, Co, acquired the yay ), Non-controlling interests vy, yn Fa TOOK 8 Interests wore Measured 4 rte ionate share method . oe _, proportions lod. How MUCH is ney t erest in the net assets of the acquires in fe he ared immediately after 4 financial statements prep: ater ©. 25,000 do wary 1 20x2, Oblong Co. acquired additional 10% for P100,000. Non-controlling interests Were measured on J" erest ft z iter the proportionate share method. How muc ooling interest in the net assets of the acquiree com colidated financial statements prepared immediately after con’ h is non- in the isition? the acquist 4,000 ¢. 37,500 : 30000 d.0 On January 1, 20x2, Oblong Co. acquired additional 10% interest for P100,000. Non-controlling interests were measured using the proportionate share method. How much is consolidated retained earnings immediately after the acquisition? a. 78,200 c. 207,200 b. 107,200 d. 237,500 On January 1, 20x2, Oblong Co. sold 60% out of its 80% interest in Round Inc. for P120,000. The sale resulted to loss of control. The remaining interest is classified as held for trading. How much is the gain or loss on the sale? & 39200 c. (49,200) b, (39,200) d. 49,200