FABULAR, SHEILA FAYE

BSA 3

Requirement 1. Prepare the Working paper Elimination Entries on December 31, 2021.

Step 1: Analysis of effects of intercompany transactions

The dividends declared by XYZ are allocated as follows:

Share of ABC (P 6,000 x 80%) = P 4,800 share of dividend

Share of XYZ (P 6,000 x 20%) = P 1,200 share of dividend

The investment in subsidiary is measured at cost. Therefore, ABC recognized the dividend in
profit or loss.

Step 2: Analysis of subsidiary's net assets

XYZ, Inc. January 1, 2021 December 31, 2021 Net Change

Net assets at carrying amount 74,000 88,000

Fair Value Adjustments (FVA) 16,000 10,000

Net Assets at Fair Value 90,000 98,000 8,000

FVA, Useful FVA,

Depreciation
1/1/2021 Life 12/31/2021
Inventory 4,000 N/A 4,000
Equipment, net 12,000 6 years 2,000 10,000
Totals 16,000 6,000 10,000

Step 3: Goodwill Computation

Consideration transferred 75,000

Non-controlling interest in the acquiree (90,000 x 20%) 18,000
Total 93,000
Fair value of net identifiable assets acquired (90,000)
Goodwill - January 1, 2021 3,000
Less: Accumulated impairment losses -
Goodwill - December 31, 2021 3,000

Step 4: Non-controlling interest in net assets

Subsidiary's net assets at fair value- December 31, 2021 98,000

Multiply by: NCI percentage 20%
Non-controlling interest in net assets- December 31, 2021 19,600

Step 5: Consolidated retained earnings

Parent's retained earnings- December 31, 2021 114,800

Parent's share in the net change in subsidiary's net assets 6,400
Consolidated retained earnings - December 31, 2021 121,200

*Net change in ABC's net assets 8,000

Multiply by: XYZ's interest in ABC 80%
XYZ's share in the net change in subsidiary's net assets 6,400

Step 6: Consolidated profit or loss

Parent Subsidiary Consolidated

Profits before adjustments 64,800 20,000 84,800

Effects of intercompany transactions:

Dividends Income (4,800) - (4,800)

Profits before FVA 60,000 20,000 80,000

Depreciation of FVA* (4,800) (1,200) (6,000)

Consolidated profit 74,000

*(6,000 x 80% = 4,800 share of Parent); (6,000 x 20% = 1,200 share of Subsidiary)
 Owners of parent NCI Consolidated

Parent's profit before FVA 60,000 N/A 60,000

Share in ABC's profit before FVA* 16,000 4,000 20,000

Depreciation of FVA (4,800) (1,200) (6,000)

Total 71,200 2,800 74,000

*(20,000 x 80% = 16,000); (20,000 x 20% = 4,000)

CJE # 1 Eliminate investment in subsidiaries

Inventory 4,000
Equipment 12,000
Share capital 40,000
Share premium 10,000
Retained earnings (74,000 - 10,000 - 40,000) 24,000
Goodwill 3,000
Investment in subsidiary 75,000
Non-controlling interest (90,000 × 20%) 18,000

CJE # 2 Recognize depreciation after FVA

Cost of goods sold 4,000
Depreciation expense 2,000
Inventory 4,000
Accumulated depreciation 2,000

CJE # 3 Adjust parent’s and subsidiary’s retained earnings for

the depreciation of FVA
Retained earnings - ABC (6,000 × 80%) 4,800
Retained earnings - XYZ (6,000 × 20%) 1,200
Income summary - Working paper 6,000

CJE # 4 Recognize NCI in post-acquisition

Retained earnings - XYZ 17,600
Retained earnings - ABC 16,000
Non-controlling interest – post-acquisition
(19,600 - 18,000) 1,600
CJE # 5 Eliminate dividend income
Dividend income 4,800
Income summary - Working paper 4,800
 Requirement 2 Prepare the Consolidated Worksheet.
Consolidation Adjustments
ABC XYZ CJE # CJE# Consolidated
Dr Cr
ASSETS
Cash 27,800 51,000 78,800
Accounts receivable 75,000 22,000 97,000
Inventory 105,000 15,000 1 4,000 4,000 2 120,000
Investment in subsidiary 75,000 - 75,000 1 0
Equipment, net 140,000 30,000 1 12,000 2,000 2 180,000
Goodwill - - 1 3,000 3,000
Total Assets 422,800 118,000 478,800
LIABILITIES AND EQUITY
Accounts payable 73,000 30,000 103,000
Total Liability 73,000 30,000 103,000
Share capital 170,000 40,000 1 40,000 170,000
Share premium 65,000 10,000 1 10,000 65,000
Retained earnings 114,800 38,000 1,3+4 47,600 16,000 4 121,200
Non-controlling interest - - 19,600 1+4 19,600
Total Equity 344,800 88,000 375,800
Total Liabilities and Equity 422,800 118,000 116,600 116,600 478,800

Sales 300,000 120,000 420,000

Cost of sales (165,000) (72,000) 2 4,000 (241,000)
Gross profit 135,000 48,000 179,000
Depreciation expense (40,000) (10,000) 2 2,000 (52,000)
Distribution cost (35,000) (18,000) (53,000)
Dividend income 4,800 - 5 4,800 0
Profit of the Year 64,800 20,000 74,000
Requirement 3 - Prepare the December 31, 2021 consolidated financial statements.

ABC Group
Consolidated Statement of Financial Position
As of December 31, 2021

ASSETS
Cash (27,800 + 51,000) P 78,800
Accounts receivable (75,000 + 22,000) 97,000
Inventory (105,000 +15,000) 120,000
Equipment, net (140,000 + 30,000 + 10,000) 180,000
Goodwill 3,000
TOTAL ASSETS P 478,800
LIABILITIES AND EQUITY
Accounts payable (73,000 + 30,000) P 103,000
Total liabilities P 103,000
Equity
Share capital (Parent only) 170,000
Share premium (Parent only) 65,000
Retained earnings (Parent only) 121,200
Owners of parent 356,200
Non-controlling interest 19,600
Total equity 375,800
TOTAL LIABILITIES AND EQUITY P 478,800

ABC Group
Statement of Profit or Loss
For the year ended December 31, 2021

Sales (300,000 + 120,000) P420,000

Cost of goods sold (165,000 + 72,000 + 4,000) (241,000)
Gross profit P179,000
Depreciation expense (40,000 + 10,000 + 2,000) (52,000)
Distribution costs (35,000 + 18,000) (53,000)
Profit for the year P 74,000

Profit attributable to:

Owners of the parent P 71,200
Non-controlling interests 2,800
P 74,000