Subsidiar 

 y Consolidated    Profits before adjustments 80,000 20,000 100,000  Consolidation adjustments: Unrealized profits 

Retained earnings (Step 5) 242,500 Equity attributable to owners of parent 442,500 NCI in net assets (Step 4) 67,500 Total
n adjustments: Unrealized profits ( - ) ( - ) ( - ) Dividend income from subsidiary ( - ) N/A ( - ) Gain on extinguishment of bonds 50,000 ( - ) 5

net assets (Step 4) 67,500 Total equity 510,000 TOTAL LIABILITIES AND EQUITY 580,000 Consolidate d Revenues (300,000 + 120,000) 42
nguishment of bonds 50,000 ( - ) 50,000 Net consolidation adjustments 50,000 ( - ) 50,000 Profits before FVA 130,00  0 20,000 150,000    D

Revenues (300,000 + 120,000) 420,000 Operating expenses (217,000 + 100,000) (317,000) Interest expense (3,000* + 0) (3,000 ) Gain o
e FVA 130,00  0 20,000 150,000    Depreciation of FVA ( - ) ( - ) ( - )  Impairment loss on goodwill ( - ) ( - ) ( - )  Consolidated profit 130,000 2

ense (3,000* + 0) (3,000 ) Gain on extinguishment of bonds (Step 1) 50,000 Profit for the year 150,000 Profit attributable to owners of t
 - )  Consolidated profit 130,000 20,000 150,000  Step 7: Profit or loss attributable to owners of pare Profit or loss attributable to owners 

0 Profit attributable to owners of the parent (Step 7) 145,000 Profit attributable to NCI (Step 7) 5,00 0 Profit for the year 150,000 was pa
ofit or loss attributable to owners of parent and Owners nt and NCI of parent NCI   Consoli-  dated  Parent's profit before FVA (Step 6) 130

Profit for the year 150,000 was paid to unrelated parties, the previous holder *The interest expense is not eliminated because the interes
nt's profit before FVA (Step 6) 130,000 N/A 130,000 Share in Sub.’s profit before FVA (c) 15,000 5,000 20,000 Depreciation of FVA ( - ) ( - ) 

ot eliminated because the interest expense of the bonds (i.e., the bonds were acquired by the subsidiary only at year-end. SUMMARY OF
,000 Depreciation of FVA ( - ) ( - ) ( - ) Share in impairment loss on goodwill ( - ) ( - ) ( - ) Totals 145,000 5,000   150,000  (c) Shares in Sub.’s

y only at year-end. SUMMARY OF ANSWERS TO REQUIREMENTS a. Gain (loss) on extinguishment of bonds = 50,000 gain (Step 1) b. Conso
000   150,000  (c) Shares in Sub.’s profit before FVA (Step 6 ): (20,000 x 75%); (20,000 x 25%) Requirement (c): Consolidated financial stat

ds = 50,000 gain (Step 1) b. Consolidated bonds payable = 0 (Step 1) c. Consolidated financial statements (See above) PROBLEM 3: EXERCI
s (See above) PROBLEM 3: EXERCISES 1. Solutions: Requirement (a): Sales of Parent 1,000,000 Sales of Subsidiary