C.3 Multiple Choice

Multiple Choice Problems
1. b – P500,000 + P3,461
2. b
3. c P95,000 = (P956,000 / .80) - P1,000,000 - P100,000
4. c P251,000 = .20[(P956,000 + P239,000) + (P190,000 - P5,000 - P125,000)]
5 a Fair value of non-controlling interest on April 1 ................................................. P165,000
30% of net income for 9 months (¾ year×P240,000 × 30%) .............................. 54,000
Non-controlling interest December 31 ............................................................... P219,000
6. c
Non-controlling interest (full-goodwill), December 31, 20x4
Book value of SHE – S, 12/31/20x4 P1,000,000
Add: Net income of S – 20x4 ___150,000
Total P1,150,000
Less: Dividends paid – 20x4 ____90,000
Stockholders’ equity – S Company, December 31, Year 2 P1,060,000
Adjustments to reflect fair value - (over) undervaluation of assets and
liabilities, date of acquisition January 1, 20x4 200,000
Amortization of allocated excess (refer to amortization above: P200,000/10 _( 20,000)
Fair value of stockholders’ equity of subsidiary, December 31, 20x5…… P1,240,000
Multiplied by: Non-controlling Interest percentage…………... 30%
Non-controlling interest (partial) P372,000
Add: NCI on full-goodwill P85,714 – P60,000) ___25,714
Non-controlling interest (full) P397,714
*P900,000/70% = P1,285,714 – P1,000,000 = P285,714 – P200,000 = P85,714, full goodwill
*P900,000 – (P1,000,000 x 70%) = P200,000 – (P200,000 x 70%) = P60,000, partial goodwill
It is assumed that full-goodwill is used. But, it should be noted that PFRS 3 either partial or full-
goodwill approach are considered acceptable.
6. b – (P50,000 + P70,000) x 25% = P30,000
7. b – P only.
8. b - {(P250,000/.8) + [P75,000 + P90,000 - P25,000 - P50,000 - P30,000 - (P80,000/8)2]}.2
9. d - {(P420,000/.7) + [P160,000 + P210,000 - P60,000 - P80,000 - P50,000 - (P90,000/5)2]}.3
10. d
P: BV,12/31/20x6 P250,000
S:
BV of building, 12/31/20x4 P170,000
Add: Adjustments to reflect fair value, 1/1/20x4
(P350,000 – P240,000) 110,000
Less: Amortization of excess (P110,000/10) x 3 years 33,000 247,000
P497,000
11. b
P: BV,12/31/20x5 P 975,000
S:
Add: Adjustments to reflect fair value, 1/4/20x4
(P120,000 – P90,000) 30,000
Less: Amortization of excess (P30,000/10) x 2 years 6,000 129,000
P1,104,000
12. b
Adjustments to reflect fair value, 1/1/20x4 (P300,000 – P200,000) 100,000
Depreciation 1/1/20x4 – 12/31/20x6 (P100,000/20 x 3 years) ( 15,000)
P285,000
13. d – same with No. 12
14. d
BV of equipment, 1/1/20x4 P 80,000
Adjustments to reflect fair value, 1/1/20x4 (P80,000 – P75,000) ( 5,000)
Depreciation 1/1/20x4 – 12/31/20x6 (P5,000/10 x 3 years) 1,500
P 76,500
15. a
Adjustments to reflect fair value, 1/1/20x4 (P80,000 – P75,000) (P 5,000)
Depreciation 1/1/20x4 – 12/31/20x6 (P5,000/10 x 3 years) 1,500
(P 3,500)
16. d – 1/2/20x4:
BV of equipment, 1/1/20x4 P200,000
Adjustments to reflect fair value, 1/1/20x4 (P300,000 – P200,000) 100,000
P300,000
17. b
Decrease in Buildings account:
Fair value……………………………………………P 8,000
Book value………………………………………….. __10,000
Decrease…………………………………………….P 2,000
18. d
Decrease in buildings account (refer to No. 73)………… P 2,000
Less: Increase due to depreciation (P2,000/10)………… 200
Decrease in buildings accounts……………………………..P 1,800
19. d
Decrease in buildings account (refer to No. 74)………… P 1,800
Less: Increase due to depreciation (P2,000/10)………… 200
Decrease in buildings accounts……………………………..P 1,600
20. a
Increase in Equipment account:
Fair value……………………………………………P 14,000
Book value………………………………………….. __18,000
Increase…………………………………………….P 4,000
21. a
Increase in equipment account (refer to No. 76)………… P 4,000
Less: Decrease due to depreciation (P4,000/4)…………… 1,000
Increase in equipment accounts……………………………..P 3,000
22. a
Increase in equipment account (refer to No. 77)………… P 3,000
Less: Decrease due to depreciation (P4,000/4…………… 1,000
Increase in equipment accounts……………………………..P 2,000
23. a
Increase in Land account:
Fair value……………………………………………P 12,000
Book value………………………………………….. 5,000
Increase…………………………………………….. P 7,000
24. b – refer to No. 23, no depreciation/amortization

25. b – refer to No. 23, no depreciation/amortization
26. e
Increase in Patent account:
Fair value……………………………………………P 11,000
Book value………………………………………….. _ 0
Increase…………………………………………….P 11,000
(P234,000/90%) – (P160,000 + P80,000) = P20,000 – (P4,000 – P2,000 + P7,000) = P11,000.

Partial or full-goodwill approach, the amortization remains the same.
27. e
Increase in patent account (refer to No. 159)……………… P 11,000
Less: Decrease due to depreciation (P11,000/5).………… 2,200
Increase in patent accounts…………………………………. P 8,800
28. d
Increase in patent account (refer to No. 160)……………… P 8,800
Less: Decrease due to depreciation (P11,000/5).………… 2,200
Increase in patent accounts…………………………………. P 6,600
29. d – equivalent to consideration transferred, P320,000
30. d – equivalent to consideration transferred, P380,000
31. a
32. P2,120,000
Podex’s separate earnings for 20x6 .................................................. P2,000,000
Dividend income from Sodex ............................................................ __120,000
Podex’s 20x6 net income.................................................................... P2,120,000
33. P2,260,000
Podex’s separate earnings for 20X6 P2,000,000
Podex’s equity in net income of Sodex ............................................ 300,000
Less: Amortization of cost in excess of book value .......................... (40,000)
Podex’s 20x6 net income.................................................................... P2,260,000
34. b
35. c
Retained earnings of Parent, 12/31/20x6, Cost Method 310,000
Add: Increased in Retained earnings of Subsidiary _80,000
RE of Parent, 12/31/20x6, Equity Method (same with Consolidated RE) 390,000
36. c
Investment balance 12/31/x6, Cost Method 200,000
Add: Increased in Retained earnings of Subsidiary 80,000
Investment balance 12/31/x6, Equity Method 280,000
37. d
Add: Increased in Retained earnings of Subsidiary _240,000
38. b – dividends of subsidiary considered as dividend income in the parent’s separate income
statement.
39. c - 20x4 = P86,400
Consolidated Net Income 20x4 20x5
Peters Company's reported net income 64,000 37,500
Less: dividend income from Smith (1,600) _____0
Peters' income from independent operations 62,400 37,500
Add: Peter's share of Smith's net income in 20x4 since acquisition
(.80)(8/12)(P45,000) 24,000
Less: Peter's share of Smith's net loss in 20x4 (.80 × P5,000 ______ (4,000)
Controlling Interest in Consolidated net income 86,400 33,500
40. c - 20x5 = P33,500 – refer to No. 39

41. b - 20x4 = P151,400
Consolidated Retained Earnings 20x4 20x5
Peter's 12/31 retained earnings (P80,000 + P64,000 - P15,000) P129,000 P161,500
Add: Peter's share of the increase in Smith's retained earnings
from the date of acquisition to the current date:
(.80 × (P53,000 – P25,000)) 22,400
(.80 × (P48,000 – P25,000) ________ 18,400
P151,400 P179,900
42. c - 20x5 = P179,900 – refer to No. 19
43. b
Less: Decreased in Retained earnings of Subsidiary _40,000
44. d – 20x3: P30,000 x 75% = P22,500

20x4: P40,000 x 75% = P30,000
45. a – no changes in investment unless there are dispositions of investment and permanent
impairment.
46. c
Consolidated Net Income for 20x4
Net income from own/separate operations
P Company P30,200 – (P150,0000 – P20,000 – P60,000) P70,000
S Company (P100,000 – P15,000 – P45,000) 40,000
Total P110,000
Less: Non-controlling Interest in Net Income P 0
Amortization of allocated excess 0
Goodwill impairment ____0 ____0
Controlling Interest in Consolidated Net Income or Profit
attributable to equity holders of parent………….. P110,000
Add: Non-controlling Interest in Net Income (NCINI) _____0
Consolidated Net Income for 20x4 P110,000
47. b
Plimsol: P100,000 + P200,000,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,P300,000
Shipping: P75,000 + P150,000………………………………………………………………... 225,000
P525,000
48.
Retained Earnings - Plimsol, 1/1/20x4 (cost method, same with equity method and
consoilidated retained earnings since it is the date of acquisition) P 150,000
Add: CI – CNI (refer to No. 46) 110,000
Less: CI – Dividends (Dividend of parent only) 25,000
Retained earnings, 12/31/20x4 (equity method same with CRE) P 235,000
49. d
Liabilities:
Plimsol (P40,000 + P75,000) P115,000
Shipping (P25,000 + P50,000) 75,000
P 190,000
50. d
Total assets (No. 47) P525,000
Les: Liabilities (No. 49) 190,000
Stockholders’ equity P335,000
51. c
Fair Value of Subsidiary:
Consideration Transferred (5,400 shares) P120,600
Less: Book value of SHE-S, 1/1:
Common stock – S: P50,000 x 90% P 45,000
APIC – S: P15,000 x 90% 13,500
RE – S: P41,000 x 90% 36,900 95,400
Allocated Excess P 25,200
Less: Over/undervaluation of A & L:
Increase in Inv. (P17,100–P16,100) x 90% P 900
Increase in Eqpt. (P48,000–P40,000) x 90% 7,200
Increase in Patents (P13,000–P10,000) x 90% 2,700 10,800
Positive Excess: Goodwill P 14,400
Amortization of allocated excess - Starting January 1:
Inventory: P1,000 / 1 year P 1,000
Equipment: P8,000 / 4 years 2,000
Patents: P3,000 / 10 years 300
P 3,300
52. c
Common stock – S P 50,000
APIC – S 15,000
RE – S 41,000
Stockholders’ equity – Subsidiary, 1/1 P106,000
Add: Adjustments to reflect fair value 12,000
Fair value of Stockholders’ Equity – S, 1/1 P118,000
x: Non-controlling) interests 10%
Non-controlling Interests (in net assets) P 11,800
53. a – P48,000, parent only.
54. a – P48,000. On the date of acquisition, the parent’s retained earnings is also the
consolidated retained earnings.
55. b – P120,600, the initial value

56 b – P4,000 x 90% = P3,600
57. c
P CompanyP30,200 – (P4,000 x 90%) P26,600
S Company 9,400
Total P36,000
Less: Non-controlling Interest in Net Income* P 610
Amortization of allocated excess 3,300
Goodwill impairment ____0 3,910
Add: Non-controlling Interest in Net Income (NCINI) 610
*Net income of subsidiary – 20x4 P 9,400

Amortization of allocated excess – 20x4 ( 3,300)
P 6,100
Multiplied by: Non-controlling interest %.......... 10%
P 610
Less: Non-controlling interest on impairment loss on full-goodwill ____0
Non-controlling Interest in Net Income (NCINI) P 610
58. c
Noncontrolling Interests (in net assets):
Common stock - S, 12/31 P 50,000
Additional paid-in capital - S, 12/31 15,000
Retained earnings - S, 12/31:
RE-S, 1/1/2011 P 41,000
Add: NI-S, 2011 9,400
Less: Dividends – S 4,000 46,400
Book value of SHE - S, 12/31 P 111,400
Add: Adjustments to reflect fair value, 1/1 12,000
Less: Amortization of allocated excess (1 yr.) 3,300
Fair Value of Net Assets/SHE - S, 12/31 P 120,100
x: Noncontrolling Interest % 10%
Noncontrolling Interest (in net assets), 12/31 P 12,010
59. b – refer to 57 for computation
60. c – refer to 57 for computation
61. b
Controlling RE / RE Attributable to EH of Parent, 1/1 (refer to No. 53 P 48,000
Add: CI – CNI (refer to 57) 32,090
Less: CI – Dividends (Dividend of parent only) 15,000
Controlling RE / RE Attributable to EH of Parent, 12/31 P 65,090
62. b – same with No. 61
63. c
Consolidated Equity:
Controlling Interest / Equity Holders Attributable to Parent:
Common stock – P: [P100,000 + P120,600 – (5,400 shares x P10 par)] P154,000
APIC – P: [15,000 + [P120,600 – (5,400 x P10)] 81,600
RE – P (refer to No. 61/62) 65,090
Parent’s Stockholders Equity or Controlling Interest – Equity P300,690
Non-controlling Interest 12,010
Consolidated Equity P 312,700
64. c – P60,000 x 80% = P48,000
65. c
Investment.1/1/20x4 P105,000
Add: Share in net income – 20x4 (P45,000 x 80%) 36,000
Less: Dividends received 12,000
Investment, 12/31/20x4 P129,000
Add: Share in net income – 20x5 (P60,000 x 80%) 48,000
Less: Dividends received 18,000
Investment, 12/31/20x5 P159,000
66. a
Investment. 4/1/20x6 P500,000
Add: Share in net income – 20x6
(3 quarters x P30,000 x 90%) 81,000
Less: Dividends declared of Satz (3 quarters x P10,000 x 90%) 27,000
Amortization (the recorded amount which means it represents
only 9 months, no need to pro-rate) 10,000
Investment, 12/31/20x6 P544,000
67. c
Patz’s equity in net income of Sats (90% x P30,000 x 3 qtrs) P 81,000
Less: Amortization (the recorded amount which means it represents
only 9 months, no need to pro-rate) 10,000
Investment income – 20x4 (equity method) P 71,000
68. d - {(P190,000 - P160,000) 4/6 - [(P241,000 - P220,000)/60] 5}.7

69. b
Full—goodwill Aproach
Fair value of Subsidiary (100%)
Consideration transferred (80%)…………….. P 180,000
Fair value of NCI (given) (20%)……………….. 20,000
Fair value of Subsidiary (100%)………. P 200,000
Less: Book value of stockholders’ equity of Son:
Common stock (P100,000 x 100%)………………. P 100,000
Retained earnings (P60,000 x 100%)………... 60,000 160,000
Allocated excess (excess of cost over book value)….. P 40,000
Less: Over/under valuation of assets and liabilities:
Increase in land (P5,000 x 100%)……………………. P 5,000
Increase in equipment (P10,000 x 100%) ___10,000 15,000
Positive excess: Increase in Patent (excess of cost over
fair value)………………………………………………... P 25,000
A summary or depreciation and amortization adjustments is as follows:

Over/ Annual Current
Account Adjustments to be amortized under Life Amount Year(20x4)
Subject to Annual Amortization
Equipment (net)......... 10,000 5 P 2,000 P 2,000
Patent 25,000 5 5,000 5,000
P 7,000 P 7,000
70. d
Investment in Wisden
1/1/x4. 180,000 18,000 Dividends – S
(20,000 x 90%)
NI of S
(60,000 Amortization
x 90%)……. 54,000 12,600 (P14,000 x 90%)
1/1/x6203,400
71. c
Investment in Wisden
1/1/x6. 230,400 9,000 Dividends – S
(10,000 x 90%)
NI of S
(30,000 Amortization
x 90%)……. 27,000 6,300 (7,000 x 90%)
1/1/x6215,100
72. a – under equity method, the Parent’s retained earnings is the same with Consolidated RE.
73. a
Punn’s equity in net income of Sunn (3 months ended,12/31/x6)…… P 200,000
Amortization of cost in excess of book value ........................................ ( 60,000)
Increase in Parent’s retained earnings……………………………………. P 140,000
74. a
Punn’s net income from own operations, 12 months ended, 12/31/x6 P6,000,000
Add: Increase in RE of Sunn:
Punn’s equity in net income of Sunn (3 months ended,12/31/x6) P200,000
Amortization of cost in excess of book value ............................... ( 60,000)
Increase in Parent’s retained earnings……………………………… P 140,000
Punn’s net income for 20x6 under the equity method.………………… P6,140,000
75. b
Consideration transferred: 10,500 shares x P95 P997,500
Less: BV of SHE – S (?) 857,500
Allocated excess; P140,000
Less: O/U valuation of A and L:
Undervaluation of land P40,000
Overvaluation of buildings ( 30,000)
Undervaluation of equipment 80,000
Undervaluation/unrecorded trademark 50,000 140,000
P 0
76. a – P900,000 + P500,000 = P1,400,000
77. d – assumed that total expenses includes cost of goods sold which is different when the
question is “total operating expenses”
Cost of goods sold (P360,000 + P200,000) P 560,000
Depreciation expense (P140,000 + P40,000) 180,000
Other expenses (P100,000 + P60,000) 160,000
Amortization of allocated excess:
Buildings: (P30,000) / 20 (P1,500)
Equipment; P80,000 / 10 8,000
Trademark: P50,000 / 16 3,125 9,625
Total expenses P909,625
78. b – (P750,000 + P280,000) – P30,000 + (P1,500 x 5 years) = P1,007,500
79. c – (P300,000 + P500,000) + P80,000 – (P8,000 x 5 years) = P840,000
80. c – P450,000 + P180,000 + P40,000 = P670,000
81. d – P50,000 – P3,125 x 5 years) = P34,375
82. a – P only (the stock issued In 20x0 includes already in the December 31, 20x4 balance.
83. a – P only
84. a
Consolidated Retained Earnings, December 31, 20x4
Consolidated Retained earnings, January 1, 20x4 (equity method) P 1,350,000
Add: Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent for 20x4 490,375
Total P1,840,375
Less: Dividends paid – P Company for 20x4 195,000
Consolidated Retained Earnings, December 31, 20x4 (under equity method) P1,645,375
Net Income from own operations: P Co S Co

Sales P900,000 P500,000
Less: cost of goods sold 360,000 200,000
Gross profit P540,000 P300,000
Less: Depreciation expense 140,000 40,000
Other expenses 100,000 60,000
Net income P300,000 P200,000
Non-controlling interest (full-goodwill), December 31, 20x4

P Company P300,000
S Company 200,000
Total P500,000
Less: Non-controlling Interest in Net Income P 0
Amortization of allocated excess (refer to amortization above) 9,625
Goodwill impairment (impairment under full-goodwill approach) _ 0 9,625
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent………….. P490,375
85. c
Note: Normally, the term used in the requirement “equity in subsidiary income”, is a term used
under equity method, but it should be noted that under PAS 27, it prohibits the use of equity
method for a parent to consolidate a subsidiary. But, assuming the use of equity method, the
answer would be, P190,375.
Share in net income: P200,000 x 100% P200,000
Less: Amortization of allocated excess 9,625
P190,375
86. b
Net Income from own operations: 20x4 20x5
Parent …………………………………………………P 100,000 P100,000
Subsidiary……………………………………………... 25,000 35,000
P 125,000 P 135,000
Subsidiary’s other comprehensive income………….. 5,000 10,000
Total Comprehensive Income……………………….....P130,000 P145,000
Less: Amortization of allocated excess…………….… 6,250 6,250
Impairment of full- goodwill (if any)…………. 0 0
Consolidated /Group Comprehensive Income…… P123,750 P138,750
Less: Non-controlling interest in Comprehensive
Income *…………………………………………… 4,750 7,750
Controlling Interest in Consolidated ___________________
Comprehensive Income …. ……………………………..P119,000 P131,000
*Non-controlling interest in Comprehensive Income: 20x4 20x5

Subsidiary’s:
Net income from own operations………….......P 25,000 P 35,000
Other Comprehensive Income (P30,000 –
P25,000)…………………………….…………... 5,000 10,000
Subsidiary’s Comprehensive Income…………........P 30,000 P 45,000
Less: Amortization of allocated excess*………….. 6,250 6,250
Impairment of full-goodwill (if any)....………. 0 0
P 23,750 P 38,750
x: Non-controlling interests……………………………. 20% 20%
Non-controlling interest in Comprehensive Income P 4,750 P 7,750
*Amortization of allocated excess:

Increase in other intangibles: P50,000 / 8 years = P 6,250
87. c – refer to No. 86

89. b- refer to No. 86
90. a
20x4 Investment income: Dividend of P10,000 x 100% = P10,000
20x4 Investment balance: P500,000
91. b
Pedro’s equity in net income of Sanburn – x4 (100% x P80,000)..………. P 80,000
Less: Amortization of cost in excess of book value
Inventory: P20,000 x 100%……………………………………………….. 20,000
Patent [P500,000 – P380,000 = P120,000 – P20,000 = P100,000)
(P100,000/20 years) x 100%.......................................................... 5,000
Investment income – 20x4 (equity method)………………………………. P 55,000
Investment balance, 1/1/20x4……………………………………………….. P500,000

Add: Pedro’s equity in net income of Sanburn – x4 (100% x P80,000).. 80,000
Less: Dividends (100% x P10,000)……………………………………………. 10,000
Amortization of cost in excess of book value:
Inventory: P20,000 x 100%……………………………………………… 20,000
Patent [P500,000 – P380,000 = P120,000 – P20,000 = P100,000)
(P100,000/20 years) x 100%.......................................................... __ _5,000
Investment balance, equity method, 12/31/20x4…………………………… P545,000
92. d
Under the cost method, an investor recognizes its investment in the investee at cost. Income
is recognized only to the extent that the investor receives distributions from the accumulated
net profits (or dividend declared/paid by the investee) of the investee arising after the date
of acquisition by the investor. Distributions (dividends) received in excess of such profits are
regarded as a recovery of investment and are accounted for as a reduction of the cost of
the investment (i.e., as a return of capital or liquidating dividend).
Therefore, the investment balance of P500,000 on the acquisition date remains to be the
same.
93. d – refer to No. 92 for further discussion.

94. b – refer to No. 92 for further discussion.
95. a – P40,000 x 80%
96. b – P50,000 x 80%
97. a – P60,000 x 80%
98. c
Full/Gross-up Goodwill Presentation:
Non-controlling interest in Net Income:
Subsidiary net income from own operations……….P100,000
Less: Amortization of allocated excess*…………… 7,000
Impairment of full-goodwill (if any)**………… 0
P 93,000
x: Non-controlling interests……………………………. 20%
Non-controlling interest in Net Income………………………..P 18,600
Increase in equipment: P30,000 / 10 years = P 3,000
Increase in buildings: P40,000 / 10 years = 4,000
Total amortization……………………………… P 7,000
** In case, there is an impairment of goodwill then the amount impaired under the full-
goodwill method should also be allocated between controlling and non-controlling
interests
Partial Goodwill Presentation:
Less: Amortization of allocated excess*……………… 7,000
P 93,000
Non-controlling interest in Net Income…………………. P 18,600
99. c
Less: Amortization of allocated excess*…………….. 7,000
Impairment of full-goodwill (if any)**………… 0
P113,000
Non-controlling interest in Net Income……………………….. P 22,600

Total amortization………………………. P 7,000
interests

Less: Amortization of allocated excess*…………….. 7,000
P113,000
Non-controlling interest in Net Income…………………………P 22,600
100. a
Less: Amortization of allocated excess*…………… 7,000
Impairment of full-goodwill (if any)**……… 0
P123,000
x: Non-controlling interests………………………….. 20%
Non-controlling interest in Net Income……………………… P 24,600
Total amortization………………………. P 7,000
interests

Less: Amortization of allocated excess*……………… 7,000
P123,000
x: Non-controlling interests……………………………… 20%
Non-controlling interest in Net Income………………..P 24,600
101. a
Book value of Stockholders’ Equity of Subsidiary
Common stock, 12/31/20x4……………………………… P 300,000
Retained earnings, 12/31/20x4:
Retained earnings, 1/1/20x4………………………….P200,000
Add: Net income – 20x4…………………………….. 100,000
Less: Dividends paid, 20x4…………..………………40,000 260,000
Book value of Stockholders’ Equity of Subsidiary, 12/31/x4 P 560,000
Add: Adjustments to reflect fair value (P30,000 + P40,000).. 70,000
Less: Accumulated amortization of allocated excess
P7,000 x 1 year…………………………………….…. 7,000
Fair value of Stockholders’ Equity of Subsidiary. 12/31/x4… P623,000
Multiplied by: Non-controlling Interest %........................... ____ 20%
Non-controlling Interest (partial goodwill)………………….. P124,600
Add: Non-controlling interest in Full Goodwill
(P55,000, full – P44,000 partial l) or
(P55,00,000 x 20%)*……………………………… 11,000
Non-controlling Interest (full)……………………………… P135,600
* this computation (i.e., P55,000 x 20%) should only be use when the fair value of the non-
controlling interest of acquiree (subsidiary) is not given.
Partial Goodwill:
Fair value of Subsidiary:
Fair value of consideration transferred: Cash………… P 500,000
Less: Book value of Net Assets (Stockholders’
Equity - Subsidiary): (P300,000 + P200,000) x 80%.. 400,000
Allocated Excess.…………………………………………. P 100,000
Less: Over/Undervaluation of Assets and Liabilities:
Increase in equipment: P30,000 x 80%................... P 24,000
Increase in building: P40,000 x 80%......................... 32,000 56,000
Goodwill (Partial)………………………………………….. P 44,000
Full-goodwill:
(100%) Fair value of Subsidiary:
(100%) Fair value of consideration transferred:
P500,000 / 80%........………………………….. P 625,000
Equity - Subsidiary)…………................................... 500,000
Less: Over/Undervaluation of Assets and
Liabilities (P40,000 + P30,000)……………………. 70,000
Goodwill (Full/Gross-up)..……………………………….. P 55,000
102. e
Common stock, 12/31/20x5……………………………… P 300,000
Retained earnings, 1/1/20x5 …………………..……P260,000
Add: Net income, 20x5………………………………. 120,000
Less: Dividends paid, 20x5…………………………… 50,000 330,000
Less: Accumulated amortization of allocated excess – 2 yrs 14,000
Fair value of Stockholders’ Equity of Subsidiary. 12/31/x5… P 686,000
Multiplied by: Non-controlling Interest %.............................. 20%
Non-controlling Interest (partial goodwill)………………….. P 137,200
(P55,00,000 x 20%)*……………………………… 11,000
Non-controlling Interest (full)……………………………… P 148,200
103. e
Common stock, 12/31/20x6……………………………… P 300,000
Retained earnings, 1/1/20x6………………………….P330,000
Add: Net income, 20x6……………………………… 130,000
Less: Dividends paid, 20x6………………………….. 60,000 400,000
Less: Accumulated amortization of allocated excess
(1/1/20x4 – 12/31/20x6): P7,000 x 3 years…………… 21,000
Fair value of Stockholders’ Equity of Subsidiary. 12/31/x6… P 749,000
Multiplied by: Non-controlling Interest %............................ 20%
Non-controlling Interest (partial goodwill)………………….. P 149,800
(P55,00,000 x 20%)*……………………………… 11,000
Non-controlling Interest (full)……………………………… P 160,800
* this computation (i.e., P55,000 x 20%) should only be use when the fair value of the non-
controlling interest of acquiree (subsidiary) is not given.
104. P542,400
Add: Bell’s equity in net income of Demers – x4 (80% x P100,000)..…… 80,000
Less: Dividends (80% x P40,000)………………………………………………. 32,000
Equipment: P30,000/10 years x 80%………………………………… 2,400
Building: P40,000/10 years x 80%................................................. 3,200
Investment balance, equity method, 12/31/20x4…………………………. P542,400
105. c
106. b
107. a
Bell’s equity in net income of Demers (80% x P100,000)………………. P 80,000
Less: Amortization of cost in excess of book value (refer to No. 104):
(P2,400 + P3,200) 5,600
108. a
(P2,400 + P3,200) 5,600
109. c
(P2,400 + P3,200) 5,600
110. c
Subsidiary net income from own operations…………………………… P100,000
Less: Amortization of allocated excess (refer to No. 104)
(P3,000 + P4,000)………………………………………..……………. 7,000
P 93,000
x: Non-controlling interests……………………………………………….. 20%
Non-controlling interest in Net Income………………………………… P 18,600
111. Ignore
112. c
(P3,000 + P4,000)………………………………………..……………. 7,000
P 113,000
113. c
(P3,000 + P4,000)………………………………………..……………. 7,000
P 123,000
114. a – same with No. 101 (cost model)
115. e – same with No. 102 (cost model)
116. d – same with No. 103 (cost model)
117. b
118. b – Dividend paid – S, P70,000 x 60% = P42,000
119. d – CNI amounted to P265,000 [CI-CNI, P235,000 and NCI-CNI, P30,000
P Company P190,000
SCompany 90,000
Total P280,000
Less: Non-controlling Interest in Net Income* P 30,000
Goodwill impairment ____0 45,000
Add: Non-controlling Interest in Net Income (NCINI) 30,000
*Net income of subsidiary – 20x4 P 90,000

Amortization of allocated excess – 20x4 ( 15,000_
P75,000
P 30,000
Less: Non-controlling interest on impairment loss on full-goodwill (P1,500 x 15%)* ______0
P 30,000
20x5 results of operations are as follows:

Peer Sea-Breeze
Sales P 600,000 P 300,000
Less: Cost of goods sold Operating expenses 410,000 210,000
Net income from its own separate operations P 190,000 P 90,000
Add: Investment income 45,000 -
Net income P 235,000 P 90,000
Computation of Goodwill:
Fair value of Subsidiary (100%)
Consideration transferred: Cash (60%) P 414,000
Fair value of NCI (given) (40%) 276,000
Fair value of Subsidiary (100%) P 690,000
Less: Book value of stockholders’ equity of Sea (P550,000 x 100%) __550,000
Allocated excess (excess of cost over book value)….. P 140,000
Add (deduct): (Over) under valuation of assets and liabilities
(P140,000 x 100%) 140,000
Positive excess: Full-goodwill (excess of cost over fair value) P 0
Amortization of Allocated Excess
Book Value Fair Value Over/under Amort.
Buildings (net)- 6 300,000 360,000 P 60,000 P 10,000
Equipment (net)– 4 300,000 280,000 (20,000) (5,000)
Patent -10 -0- 100,000 100,000 10,000
Net P 140,000 P 15,000
120. c – refer to No. 119 for computations
121. b – refer to No. 119 for computations
122. c - P811,000.
Consolidated Retained Earnings, December 31, 20x5
Retained earnings - Parent Company, January 1, 20x5 (cost model) P700,000
Adjustment to convert from cost model to equity method for
purposes of consolidation or to establish reciprocity:/Parent’s
share in adjusted net increased in subsidiary’s retained earnings:
Retained earnings – Subsidiary, January 1, 20x5 P 300,000
Less: Retained earnings – Subsidiary, January 1, 20x2 70,000
Increase in retained earnings since date of acquisition P 230,000
Less: Amortization of allocated excess – 20x2 – 20x4
(P15,000 x 3 years) 45,000
P 185,000
Multiplied by: Controlling interests %................... 60%
P 111,000
Less: Goodwill impairment loss (full-goodwill), 0 111,000
Consolidated Retained earnings, January 1, 20x5 P 811,000
Note:
a. Date of acquisition: RE of Parent = Consolidated RE
Regardless of the method used in the books of the subsidiary, the following rule should always be
applied –
b. Subsequent to date of acquisition:
Retained earnings of Parent under equity method = CRE
Since, the P811,000 is the retained earnings of parent under the equity method, it should also be
considered as the parent’s portion or interest in consolidated retained earnings or simply the
consolidated retained earnings.
123. c - P811,000 – refer to note (b) of No. 122

124. b – P111,000 – refer to No. 122
125. d
Consolidated Retained earnings, January 1, 20x5 (refer to Nos. 122 and 123) P 811,000
Add: Controlling Interest in Consolidated Net Income or
Profit attributable to equity holders of parent for 20x5 235,000
Total P1,046,000
Less: Dividends paid – Parent Company for 20x5 92,000
Consolidated Retained Earnings, December 31, 20x5 P 954,000
126. d – refer to No. 125
127. c
Non-controlling interest (partial-goodwill), December 31, 20x5
Common stock – Subsidiary Company, December 31, 20x5…… P 480,000
Retained earnings – Subsidiary Company, December 31, 20x5
Retained earnings – Subsidiary Company, January 1, 20x5 P300,000
Add: Net income of subsidiary for 20x5 90,000
Less: Dividends paid – Subsidiary – 20x5 70,000 320,000
Stockholders’ equity – Subsidiary Company, December 31, 20x5 P 800,000
Adjustments to reflect fair value - (over) undervaluation
of assets and liabilities, date of acquisition (January 1, 20x2) 140,000
Amortization of allocated excess (refer to amortization above) –
(P15,000 x 4) ( 60,000)
Fair value of stockholders’ equity of subsidiary, 12/31/ 20x5 P 880,000
Multiplied by: Non-controlling Interest percentage. 40
Non-controlling interest (partial) P 352,000
Add: NCI on full-goodwill……………………. ____0
Non-controlling interest (full) P 352,000
128. c
Stockholders’ Equity
Common stock - Peer P 724,000
Retained earnings 954,000
Parent’s Stockholders’ Equity/Equity Attributable to the
Owners of the Parent P 1,678,000
Non-controlling interest** 352,000
Total Stockholders’ Equity (Total Equity) P 985,500
Total Liabilities and Stockholders’ Equity P2,030,000
129. c
Investment in Sea-Breeze Investment Income
1/1/x2. 414,000 42,000 Dividends – S NI of S
Retro 111,000 (70,000 x 60%
NI of S
(90,000 Amortization Amortization (90,000
x 60%)……. 54,000 9,000 (P15,000 x 60%) (P15,000 x 60%) 9,000 54,000 x 60%)
12/31/x5528,000 45,000
130. Ignore
131. c
133. b – refer to No. 119
136. a – not applicable under equity method.
141. a
Net income of S (5/1/x5 – 12/31/x5): P840,000 x 8/12 P560,000
Less: Dividend – S (11/1/20x5 – no need to pro-rate) 300,000
Cumulative net income less dividends since
date of acquisition, 1/1/20x6 (date to establish reciprocity –
not 12/31/x6) P260,000
x: Controlling interests 80%
P208,000
142. b
Retained earnings – S Company, 1/1/20x4 P 60,000
Less: Retained earnings – S Company, 12/31/20x6 190,000
Cumulative net income less dividends since
date of acquisition, 1/1/20x6 (date to establish reciprocity –
should always be beginning of the year, not 12/31/x6) P130,000
x: Controlling interests 90%
P117,000
143. (b)
Net income of Subsidiary – 2015 and 2016 (P15,000 + P22,000)…………………………………….P 37,000
Less: Dividends of Subsidiary – 2015 and 2016 (P6,000 + P9,000)……………………………………... 15,000
Cumulative net income less dividends since date of acquisition, 1/1/2017 (date to establish
reciprocity –should always be beginning of the year, not 12/31/17) / Increase in
Retained earnings………………………………………………………………………………………... P 22,000
x: Controlling interests……………………………………………………………………………………. .70%
P 15,400
It should be noted that the amortization/depreciation and any unrealized/realized profits (in case of
intercompany sales of inventory/fixed assets) should not be included (refer to next number) as part of the entry to
established reciprocity since there will be separate eliminating entry to be made at the end of the year (2017) for
amortization and depreciation.
Further, the eliminating entry to establish reciprocity for the year 20x7 should be made on January 1, 2017 not
December 31, 2017
Incidentally, the entry to convert from cost method to equity method or the entry to establish reciprocity at the
beginning of the year, 1/1/2017 would be as follows:
Investment in Subsidiary………………………………………………………………… 15,400

Retained earnings – Parent Company, 1/1/2017………………………………. 15,400
144. (a)
Net income of Subsidiary – 2015 and 2016 (P15,000 + P22,000)……………………………………. P 37,000
Less: Dividends of Subsidiary – 2015 and 2016 (P6,000 + P9,000)…………………………………… 15,000
Increase in Retained earnings for 2 years……………………………………………………………… P 22,000
Less: Amortization of allocated excess [(P80,000 – P60,000)/10 years x 2 years]………………… 4,000
P 18,000
x: Controlling interests………………………………………………………………………………………. 70%
Retroactive amount, December 31, 20x6 or January 1, 2017……………………………………… P 12,600
145. b
[{(P84,000 + P105,000) - [(P310,000 - P220,000)/20]2} - (P30,000 + P50,000)].8
146. a - under the cost model share in net income or earnings of subsidiary does not affect
investment.
147. d
Investment account, December 31, 20x7:
Original investment …………………………………………..P 550,000
Tiny’s earnings, 20x4-20x77: 100% x P166,000…………… 166,000
Less: Dividends received: 100% x P114,000……………… 114,000
Balance, December 31, 20x7…………………………….. P602,000
148. a
The adjusting entry required in 20x7 to convert from the cost to the equity method is:
Investment in Tiny………………………………….52,000
Retained earnings beg………………………….. 4,000
Dividend revenue………………………………… 54,000
Equity in subsidiary income of Tiny……. 110,000
149. d – P45,000/15% = P300,000

150. d
Pigeon’s separate income P150,000
Less: 60% of Home’s P10,000 loss = 6,000
Less: Equipment depreciation
P10,000/ 10 years = __1,000
Controlling Interest in Consolidated Net Income P143,000
Add: NCI in CNI
NL of S Company P( 10,000)
Less: Amortization of allocated excess (P1,000/60%) 1,667
P (11,667)
Multiplied by: NCI% 40% ( 4,667)
Consolidated Net Income P138,333
151. a
Non-controlling Interest in Net Income (NCINI) for Year 3
Net income of S Company P240,000
P195,000
Non-controlling Interest in Net Income (NCINI) for Year 3 P 58,500
152. c
P Company P 375,000
S Company 30,000
Total P405,000
Less: Non-controlling Interest in Net Income* P5,250
Goodwill impairment (impairment under full-goodwill approach) 0 9,000
*Non-controlling Interest in Net Income (NCINI) for 20x4
Less: Amortization of allocated excess** 3,750
P26,250
Non-controlling Interest in Net Income (NCINI) for 20x4 P 5,250
**P270,000/80% = P337,500 – (P150,000 + P150,000) = P37,500 / 10 years = P3,750
Note: Whether the partial or full-goodwill approach are used the amortization of excess are always
the same.
153. a
*Non-controlling Interest in Net Income (NCINI) for Year 3
P487,500
Non-controlling Interest in Net Income (NCINI) for Year 3 P146,250
154. c
P Company P 625,000
S Company 50,000
Total P675,000
Goodwill impairment (impairment under full-goodwill approach) 0 15,000

Less: Amortization of allocated excess** 6,250
P43,750
**P450,000/80% = P562,500 – (P250,000 + P250,000) = P62,500 / 10 years = P6,250
Note: Whether the partial or full-goodwill approach are used the amortization of excess are always
the same.
155. b
As a general rule, if problem is silent It is assumed that expenses are generated evenly
throughout the year, thus:
Expenses (9/1/20x4-12/31/20x4): P620,000 x 4/12 P206,667
Amortization of allocated excess: P15,000 x 4/12 5,000
P211,667
156. c
Net income of S Company (P800,000 – P620,000) P180,000
P165,000
Multiplied by: No of mos. (9/1-12/31) 4/12
P 55,000
157. a
Net income of S Company (P800,000 – P620,000) P180,000
P165,000
Multiplied by: No of mos. (9/1-12/31) 4/12
P 55,000
Multiplied by: Non-controlling interest %.......... ____20%
158. b Combined revenues ............................................................................................. P1,100,000
Combined expenses ............................................................................................. (700,000)
Excess acquisition-date fair value amortization ................................................ (15,000)
Consolidated net income .................................................................................... P385,000
Less: Non-controlling interest (P85,000 × 40%) .................................................... (34,000)
Consolidated net income to controlling interest .............................................. P351,000
159. c HH expense ............................................................................................................ P621,000
NN expenses .......................................................................................................... 714,000
Excess fair value amortization (70,000 ÷ 10 yrs) .................................................. 7,000
Consolidated expenses ........................................................................................ P1,342,000
160. b
Step-acquisition, either full-goodwill or partial goodwill approach, the answer remains the
same.
Full-Goodwill Presentation:
Net income from own operations;
Parent - Keefe…………………………………… P 300,000
Subsidiary - George (P500,000 – P400,000)…….. 100,000
P 400,000
Less: Amortization of allocated excess…………………… 6,000
Impairment of goodwill (if any)……………………. 0
Consolidated/Group Net Income…………………………. P 394,000
Less: Non-controlling interest in Net Income
Subsidiary net income from own operations:
1/1/20y0 - 4/1/20y0 (3 months):
P100,000 x 3/12 = P25,000 x 30%................ P 7,500
4/1/20y0 – 12/31/20y0 (9 months):
P100,000 x 9/12 = P75,000 x 20%................ 15,000
Total…………………………………………….. P 22,500
Less: Amortization of allocated excess:
1/1/20y0 – 4/1/20y0 (3 months)
P6,000 x 3/12 = P1,500 x 30%.......... 450
4/1/20y0 – 12/31/20y0 (9 months)
P6,000 x 9/12 = P4,500 x 20%........... 900
Impairment of goodwill (if any):
First 3 months: P 0 x 30%.......………… 0
Remaining 9 months: P 0 x 20%............... 0 21,150
CNI attributable to the controlling interest (CI-CNI)/ Profit
attributable to equity holders of parent…………………. P372,850
* It should be noted that the phrase without regard for this investment means that
excluding any income arising from investment in subsidiary (i.e., dividend income).
161. d – Economic Unit or Entity Concept (as required by PFRS 10)
P Company P 500,000
S Company 100,000
Total P600,000
Add: NCINI __20,000
CNI - entity concept P600,000

Less: Amortization of allocated excess _______0
P100,000
162. c – Parent Company Concept – Parent’s Net Income only (not required by PFRS 10)
P Company P 500,000
S Company 100,000
Total P600,000

Less: Amortization of allocated excess _______0
P100,000
163. d
Inventory – not yet sold in 20x4 P 0
Building: (P390,000 – P200,000)/ 10 years 19,000
Equipment (P280,000 – P350,000)/ 5 years ( 14,000)
P 5,000
164. c
Plochman’s acquisition entry is:
Investment in Shure……………………………………………………………40,000,000
Retained earnings (acquisition-related expense – close to
retained since only balance sheet accounts are being
examined)…………………………………………………………………… 1,000,000
Common stock, 1,000,000 x P1 par……………………………… 1,000,000
PIC in excess of par [(1,000,000 x P39) – P800,000)…………… 32,000,000
Cash (P800,000 + P1,000,000)…………………………………….. 1,800,000
Eliminating entries are:

Book value of stockholders’ equity:
Stockholders’ equity-Shure………………………………………………… 6,000,000
Investment in Shure………………………………………………… 6,000,000
Allocated excess (acquisition/purchase differential):
Identifiable assets……………………………………………………………. 7,000,000
Long-term debt………………………………………………………………. 500,000
Goodwill………………………………………………………………………..28,500,000
Lawsuit liability………………………………………………………. 2,000,000
Investment in Shure………………………………………………… 34,000,000
165. d –refer to No. 164

166. a
167. a
Cost of Goods Sold P80,000 debit
Depreciation Expense (P192,000/120) 7 = P11,200 debit
168. c
Cost of Goods Sold (P60,000 x 4/6) = P40,000 debit
Interest Expense: (P15,000/5) = P3,000 debit
169. a [(P250,000 - P180,000)/10]7
170. c
[(P380,000 - P260,000)/120]88
171. d
P Company P 200,000
S Company 100,000
Total P300,000
Add: NCINI __21,000

Less: Amortization of allocated excess __30,000
P 70,000
Full-goodwill:
(100%) Fair value of Subsidiary:
(100%) Fair value of consideration transferred:
P469,000 / 70%........………………………….. P 670,000
Equity - Subsidiary)…………................................... 500,000
Less: Over/Undervaluation of Assets and Liabilities
(P20,000 + P10,000 + P40,000)……………………. 70,000
Goodwill (Full/Gross-up)..……………………………….. P 100,000
Amortization:
Inventory: P20,000 / 1 year = P20,000
Land…………………………….. 0
Equipment (P40,000/4)……… 10,000
P30,000
172. a
173. c - P170,000 - {[P320,000 - (P300,000 - P170,000)]/10}2
174. b - [P320,000 - (P300,000 - P170,000)]/10
175. d
176. d - P105,000 - {[P405,000 - (P450,000 - P105,000)]/20}2
177. a - [P405,000 - (P450,000 - P105,000)]/20
178. d - The acquisition method consolidates assets at fair value at acquisition date regardless
of the parent’s percentage ownership.
179. c - An asset acquired in a business combination is initially valued at 100% acquisition-date
fair value and subsequently amortized its useful life.
Patent fair value at January 1, 20x4.................................................................... P45,000
Amortization for 2 years (10 year life).................................................................. (9,000)
Patent reported amount December 31, 20x5 ................................................... P36,000
180. a - P650,000 =P500,000 + P200,000 - P50,000
181. b Combined revenues ............................................................................................. P1,300,000
Combined expenses ............................................................................................. (800,000)
Trademark amortization ....................................................................................... (6,000)
Patented technology amortization .................................................................... (8,000)
Consolidated net income .................................................................................... P486,000
182. c
Subsidiary income (P100,000 – P14,000 excess amortizations) ......................... P86,000
Non-controlling interest percentage .................................................................. __40%
Non-controlling interest in subsidiary income .................................................... P34,400
Fair value of non-controlling interest at acquisition date ................................. P200,000

40% change in Scott book value since acquisition........................................... 52,000
Excess fair value amortization (P14,000 × 40%) .................................................. (5,600)
40% current year income ..................................................................................... __34,400
Non-controlling interest at end of year .............................................................. P280,800
183. a MM trademark balance ....................................................................................... P260,000
SS trademark balance ......................................................................................... 200,000
Excess fair value .................................................................................................... 60,000
Two years amortization (10-year life) .................................................................. (12,000)
Consolidated trademarks .................................................................................... P508,000
184. b
185. a – P540,000 = (P500,000 + P150,000 – P90,000 – P20,000)
186. c – equivalent to the original cost
187. d - In consolidating the subsidiary's figures, all intercompany balances must be eliminated in
their entirety for external reporting purposes. Even though the subsidiary is less than fully
owned, the parent nonetheless controls it.
188. b - Intercompany receivables and payables from unconsolidated subsidiaries would not be
eliminated.

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Multiple Choice Problems

24. b – refer to No. 23, no depreciation/amortization

(P234,000/90%) – (P160,000 + P80,000) = P20,000 – (P4,000 – P2,000 + P7,000) = P11,000.

40. c - 20x5 = P33,500 – refer to No. 39

44. d – 20x3: P30,000 x 75% = P22,500

53. a – P48,000, parent only.

55. b – P120,600, the initial value

*Net income of subsidiary – 20x4 P 9,400

68. d - {(P190,000 - P160,000) 4/6 - [(P241,000 - P220,000)/60] 5}.7

A summary or depreciation and amortization adjustments is as follows:

Net Income from own operations: P Co S Co

Non-controlling interest (full-goodwill), December 31, 20x4

*Non-controlling interest in Comprehensive Income: 20x4 20x5

*Amortization of allocated excess:

87. c – refer to No. 86

Investment balance, 1/1/20x4……………………………………………….. P500,000

93. d – refer to No. 92 for further discussion.

*Amortization of allocated excess:

Partial Goodwill Presentation:

Partial Goodwill Presentation:

*Net income of subsidiary – 20x4 P 90,000

20x5 results of operations are as follows:

123. c - P811,000 – refer to note (b) of No. 122

Investment in Subsidiary………………………………………………………………… 15,400

149. d – P45,000/15% = P300,000

*Non-controlling Interest in Net Income (NCINI) for 20x4

*Non-controlling Interest in Net Income (NCINI) for 20x4

*Non-controlling Interest in Net Income (NCINI) for 20x4

Eliminating entries are:

165. d –refer to No. 164

*Non-controlling Interest in Net Income (NCINI) for 20x4

Fair value of non-controlling interest at acquisition date ................................. P200,000

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