Problem 2

Parent PAM
Stake 100%
Acquisition Date 1/2/20x2
Consideration 360,000

FV of Business 360,000
FV of Net Assets 300,000 Useful Life Amortization
Undervaluation of Equipment 60,000 5 12,000
*no goodwill

Journal Entries
1/2/20x2 Investment to 360,000
Cash 360,000

Cash 20,000
Dividend Income 20,000

PAM SAM
Cash 30,000 10,000
Accounts Receivable 60,000 80,000
Inventory 140,000 120,000
Depreciation Assets, net 650,000 450,000
Investnebt in Subsidiary 360,000
Accounts Payable -100,000 -80,000
Notes Payable -200,000 -240,000
Ordinary Shares -400,000 -200,000
Retained Earnings, Beg. -460,000 -100,000
Dividends 80,000 20,000
Sales -400,000 -240,000
Dividends Income -20,000
Depreciation 50,000 30,000
Other Expenses 210,000 150,000

Retained Earnings
Beginning 460,000 100,000
Net Income 160,000 60,000
Dividends -80,000 -20,000
Ending 540,000 140,000

Consolidated Balance Sheet Consolidated Income Statement

For the Year Ended December 31, 20x2 For the Year Ended December 31, 20x2
Cash 40,000 Sales
Accounts Receivable 140,000
Inventory 260,000 Expenses
Depreciation Assets, net 1,148,000 Depreciation 92,000
Other Expenses 360,000
Total Assets 1,588,000
Net Income
Accounts Payable 180,000
Notes Payable 440,000
Total Liabilities 620,000 Consolidated Income Statement
For the Year Ended December 31, 20x2
Ordinary Shares 400,000
Retained Earnings, End. 568,000 Ordinary S
Total Equity 968,000 Beginning 400,000
Net Income
Total Liabilities & Equity 1,588,000 Dividends
Ending 400,000
 JE
12/31/20x2 Ordinary Shares 200,000
Retained Earnings 100,000
Depreciable Assets, net 60,000
Investment in Subsidiary 360,000
To eliminate the investment in subsidiary account

Dividend Income 20,000

Dividend 20,000
To eliminate the dividend income in parent account

Depreciation Expense 12,000

Accumulated Depreciation 12,000
To record additional depreciation on undervalued assets

PAM SAM Consolidating Entries

Cash 30,000 10,000
Accounts Receivable 60,000 80,000
Inventory 140,000 120,000
Depreciation Assets, net 650,000 450,000 48,000
Investnebt in Subsidiary 360,000 -360,000
Accounts Payable -100,000 -80,000
Notes Payable -200,000 -240,000
Ordinary Shares -400,000 -200,000 200,000
Retained Earnings, Beg. -460,000 -100,000 100,000
Dividends 80,000 20,000 -20,000
Sales -400,000 -240,000
Dividends Income -20,000 20,000
Depreciation 50,000 30,000 12,000
Other Expenses 210,000 150,000

Retained Earnings
Beginning 460,000 100,000 -100,000
Net Income 160,000 60,000 -32,000
Dividends -80,000 -20,000 20,000
Ending 540,000 140,000 -112,000

come Statement
ded December 31, 20x2
 640,000

452,000

188,000

come Statement
ded December 31, 20x2

Retained Earnings Total

460,000 860,000
188,000 188,000
-80,000 -80,000
568,000 968,000
 Problem 1
5,000,000 4,000,000 Investment
2,400,000 2,400,000 Goodwill
2,600,000 1,600,000 Cash
70%
1,820,000 1,120,000 Investment
Goodwill
2,400,000 2,400,000 Cash
-1,820,000 -1,120,000
580,000 1,280,000 Investment
Goodwill
Cash
2,400,000 70% 1,680,000
5,000,000 70% 3,500,000
4,000,000 70% 2,800,000
Consolidated Accounts
40,000
140,000
260,000
1,148,000
-
-180,000
-440,000
-400,000
-460,000
80,000
-640,000
-
92,000
360,000

460,000
188,000
-80,000
568,000
1,820,000
580,000
2,400,000

1,820,000
580,000
2,400,000

1,120,000
1,280,000
2,400,000
Problem 3
Acquisition cost 750,000
Less: Book value of interest acquired
ordinary shares (P100,000 x 80%) 80,000.00
APIC (P200,000 x 80%) 160,000
Retained earnings (P230,000 x 80%) 184,000 424,000
Difference 76,000
Allocation
Accounts receivable -20,000
Inventory -10,000
Equipment 50,000
Accumulated Depreciation 60,000
Accounts payable -50,000
Total 106,000
Minority interest (20%) 21,200
Goodwill 54,800

2. P Company and Subsidiary

Consolidated Working Paper

P Company S Company Adjustments & Eliminations

Debit Credit
Debits
Cash 1,000,000 465,000 241,400
Accounts receivable 360,000 200,000
Inventory 250,000 80,000 20,000
Equipment 600,000 170,000 10,000 50,000
Accumulated Depreciation -100,000 -60,000
Investment in S Company 752,704 200,000 131,200

Goodwill 54,800

Total 2,862,704 1,055,000 326,200 181,200

Credits
Accounts payable 500,000 250,000 60,000
Ordinary shares 1,000,000 500,000 50,000 497,600
Share Premiums 100,000 50,000
Retained earnings – P 1,262,704
Retained earnings – S 255,000 255,000
Minority interest in net
APIC – S Co. 21,200 121,200

Total 2,862,704 1,055,000 326,200 181,200

Problem 4
Parent Paul
Stake 60%
Acquisition Date 1/2/20x2
Consideration 1,750,000

FV of Business 1,000,000
FV of Net Assets 1,030,000
-280,000

Journal Entries
1/2/20x2 Investment to 1,750,000
Cash 1,750,000

Cash 90,000
Dividend Income 90,000

Paul Marie
Cash 3,500,000 1,370,000
Accounts Receivable 1,000,000 500,000
Inventory 800,000 700,000
Depreciation Assets, net 800,000 360,000
Investnebt in Subsidiary 1,750,000
Accounts Payable -1,000,000 -400,000
Ordinary Shares -3,000,000 -1,000,000
Share Premiums -500,000 -500,000
Retained Earnings, Beg. -3,350,000 -1,030,000
Dividends 80,000 20,000
Sales -2,500,000 -900,000
Dividends Income -90,000
Depreciation 150,000 120,000
Other Expenses 500,000 150,000

Retained Earnings
Beginning 3,350,000 1,030,000
Net Income 1,590,000 380,000
Dividends -90,000
Ending 4,850,000 1,410,000

Consolidated Balance Sheet Consolidated Income Statement

For the Year Ended December 31, 20x2 For the Year Ended December 31, 20x2

Cash 4,870,000 Sales

Accounts Receivable 1,500,000
Inventory 1,500,000 Expenses
Depreciation Assets, net 1,160,000 Depreciation 270,000
Other Expenses 650,000
Total Assets 9,030,000
Net Income
Accounts Payable -1,400,000
Total Liabilities -1,400,000
Consolidated Income Statement
Ordinary Shares -3,000,000 For the Year Ended December 31, 20x2
Share Premiums -1,000,000
Retained Earnings, End. -4,430,000 Ordinary Shares
Total Equity -8,430,000 Beginning 1,000,000
Net Income
Total Liabilities & Equity 9,030,000 Dividends
Ending 1,000,000
Consolidated

1,706,400
560,000
350,000
830,000
-160,000
1,083,904

54,800

4,370,304

810,000
2,047,600
150,000
1,262,704
0
 100,000

4,370,304

JE
12/31/20x2 Ordinary Shares 1,000,000
Retained Earnings 1,030,000
Goodwill 280,000
Investment in Subsidiary 1,750,000
To eliminate the investment in subsidiary account

Dividend Income 90,000

Dividend 90,000
To eliminate the dividend income in parent account

Paul Marie Consolidating Entries

Cash 3,500,000 1,370,000
Accounts Receivable 1,000,000 500,000
Inventory 800,000 700,000
Depreciation Assets, net 800,000 360,000
Investment in Subsidiary 1,750,000 -1,750,000
Accounts Payable -1,000,000 -400,000
Ordinary Shares -3,000,000 -1,000,000 1,000,000
Share Premiums -500,000 -500,000
Retained Earnings, Beg. -3,350,000 -1,030,000 1,030,000
Dividends 80,000 20,000 -20,000
Sales -2,500,000 -900,000
Dividends Income -90,000 20,000
Depreciation 150,000 120,000
Other Expenses 500,000 150,000
Goodwill 280,000
Retained Earnings
Beginning 3,350,000 1,030,000 -1,030,000
Net Income 1,590,000 380,000
Dividends -90,000 90,000
 Ending 4,850,000 1,410,000 -940,000

ember 31, 20x2

3,400,000

920,000

2,480,000

ember 31, 20x2

Retained Earnings Total

1,030,000 2,030,000
2,480,000 2,480,000
-80,000 -80,000
3,430,000 4,430,000
Consolidated Accounts
4,870,000
1,500,000
1,500,000
1,160,000
-
-1,400,000
-3,000,000
-1,000,000
-3,350,000
80,000
-3,400,000
-70,000
270,000
650,000
280,000

3,350,000
1,970,000
-
5,320,000