Practice problems:

Problem 1: GV Company purchased 70% ownership of DL Company on January 1, 2013 at underlying book value. While each
company has its own sales forces and independent product lines, there are substantial intercompany sales of inventory each
period. The following intercompany sales occurred during 2014 and 2015:

Selling Cost of goods Buying Unsold at Year Sold to

Year affiliate sold affiliate Sales Price year-end Outsiders
2014 GV Co. P448,000 DL Co. P640,000 P140,000 2015
2015 DL Co. P312,000 GV Co. P480,000 P77,000 2016
2015 GV Co. P350,000 DL Co. P437,500 P63,000 2016

The following data summarized the results of their financial operations for the year ended, December 31, 2015:
GV Company DL Company
Sales P3,850,000 P1,680,000
Gross Profit 1,904,000 504,000
Operating Expenses 770,000 280,000
Ending Inventories 336,000 280,000
Dividend Received from affiliate 126,000 -
Dividend Received from non-affiliate - 70,000

For the year ended 2015, compute:

1. Consolidated sales and Consolidated cost of goods sold

2. Consolidated net income attributable to parent’s shareholders equity and non-controlling interest in net income

Problem 2: A Co. acquired 60% of the outstanding ordinary shares of B Co. on January 1, 2014. A Co. acquired it at book value
which is the same as its fair value at the date of acquisition. Income statements of A Co. and B Co. for 2015 were as follows:
A B
Net Sales P875,000 P350,000
Cost of Sales 525,000 210,000
Gross Profit P350,000 P140,000
Operating expenses 105,000 52,500
Operating income P245,000 P87,500
Dividend income 56,000 ____-____
Net income P301,000 P87,500
 There was an upstream sales of P112,000 in 2014 and P168,000 in 2015.
 The buying affiliate reported inventory on December 31, 2014 amounting to P70,000 of which 20% comes from the
selling affiliate and inventory on December 31, 2015 amounting to P84,000 of which 30% comes from the selling affiliate.
 A Co. uses 30% mark up on cost and B Co. uses 25% mark up on cost for their selling prices.
 A Co. and B Co. declared and paid dividends in 2015 amounting to P84,000 and P70,000 respectively.
 On January 1, 2015, B Co. has ordinary shares of P320,000; share premium of P120,000 and retained earnings of
P160,000.

How much is the non-controlling interest in the net assets of the subsidiary (NCINAS) at the end of 2015?

Problem 3: On January 1, 2015, RDJ Company purchased 80% of the stocks of MCD Corporation at book value. The stockholders’
equity of MCD Corporation on this date showed: Common stock - PI,140,000 and Retained earnings - P980,000.

 On April 30, 2015, RDJ Company acquired a used machinery for P168,000 from MCD Corp. that was being carried in the
latter's books at P210,000. The asset still has a remaining useful life of 5 years.
 On the other hand, on August 31, 2015, MCD Corp. purchased an equipment that was already 20% depreciated from RDJ
Co. for P690,000. The original cost of this equipment was P750,000 and had a remaining life of 8 years.
 Net income of RDJ Co. and MCD Corp. for 2015 amounted to P720,000 and P310,000. Dividends paid totaled to P230,000
and P105,000 for RDJ Co. and MCD Corp, respectively.
Q1: Net income attributable to parent's shareholders equity and non-controlling interest net income:
Q2: Non-controlling interest in net assets and carrying value of the Property and equipment:

Problem 4: On January 1, 2015, P Corporation purchased 80% of S Company's outstanding stock for P3,100,000. At that date, all of
S Company's assets and liabilities had market values approximately equal to their book values and no goodwill was included in the
purchase price.
 The following information was available for 2015: Income from own operations of P Corporation, P750,000 ; Operating
loss of S Company, P100,000
 Dividends paid in 2015 by P Corporation, P375,000; by S Company to P Corporation, P60,000.
 On July 1, 2015, there was a downstream sale of equipment at a gain of P125,000. The equipment is expected to have a
remaining useful life of 10 years from the date of sale.
 Also, on January 2, 2015, there was an upstream sale of furniture at a loss of P37,500. The furniture is expected to have a
useful life of five years from the date of sale.
 Non-controlling interest is measured at fair market value.

How much is the consolidated net income attributable to parent shareholders' equity?