Professional Documents
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Materials:
Student Activity Sheet, Calculator
References:
QUIZ (Written Assessment) Millan, Zeus Vernon B.; Accounting
for Business Combinations; 2020
Edition;
Dayag, Antonio J.; Advanced
Financial Accounting and
Reporting, 2016 Edition
Instruction: Provide what is required.
Jan. 1, 20x1
ABC Co. XYZ, Inc.
Cash 20,000 10,000
Accounts receivable 60,000 24,000
Inventory 80,000 46,000
Investment in subsidiary 150,000
Equipment 400,000 100,000
Accumulated depreciation (40,000) (20,000)
Total assets 670,000 160,000
On January 1, 20x1, the fair value of the assets and liabilities of XYZ, Inc. were determined by appraisal, as
follows:
XYZ, Inc. Carrying amounts Fair values Fair value increment
Cash 10,000 10,000 -
Requirement: Prepare the consolidated statement of financial position as at January 1, 20x1. ABC Co. elects
to measure non-controlling interest as its proportionate share in XYZ’s net identifiable assets.
3. How much is the non-controlling interest in the net assets of the subsidiary on December 31, 20x1?
a. 106,500 b. 116,500 c. 136,500 d. 146,500
The December 31, 20x1 statements of profit or loss of Laughter Co. and Tears Co. are summarized below:
Statements of profit or loss
For the year ended December 31, 20x1
Laughter Co. Tears Co.
Revenues 1,200,000 480,000
Operating expenses (960,000) (400,000)
Profit for the year 240,000 80,000
7. How much is the consolidated profit attributable to owners of the parent in 20x1?
a. 292,500 b. 310,000 c. 320,000 d. 232,500
Rainy Sunny
Inventory 1,260,000 380,000
13. How much is the total assets in the consolidated financial statements?
a. 1,476,000 b. 1,580,000 c. 1,465,000 d. 1,528,000
14. How much is the consolidated “Equipment – net” in the December 31, 20x2 financial statements?
a. 880,000 b. 846,000 c. 852,000 d. 832,000
15. The consolidation journal entry for the depreciation of the fair value adjustment on December 31, 20x2
includes which of the following?
a. 16,000 debit to depreciation expense c. 32,000 credit to accumulated depreciation
b. 12,800 credit to retained earnings of Lion d. 16,000 credit to depreciation expense
16. On January 1, 20x1, Kangaroo Co. acquired 75% of Joey Co. At that time, Joey’s equipment has a
carrying amount of ₱100,000 and a fair value of ₱120,000. The equipment has a remaining useful life of 10
years. On December 31, 20x2, Kangaroo and Joey reported equipment with carrying amounts of ₱500,000 and
₱300,000, respectively. How much is the consolidated “equipment – net” in the December 31, 20x2 financial
statements?
a. 800,000
b. 816,000
c. 784,000
d. 826,000
17. On January 1, 20x1, ABC Co. acquired 80% interest in XYZ, Inc. by issuing 5,000 shares with fair value
of ₱15 per share. On this date, XYZ’s equity comprised of ₱50,000 share capital and ₱24,000 retained earnings.
NCI was measured at its proportionate share in XYZ’s net identifiable assets.
XYZ’s assets and liabilities on January 1, 20x1 approximate their fair values except for the following:
XYZ, Inc. Carrying amounts Fair values Fair value adjustments (FVA)
Inventory 23,000 31,000 8,000
Equipment (4 yrs. remaining life) 50,000 60,000 10,000
Accumulated depreciation (10,000) (12,000) (2,000)
Totals 63,000 79,000 16,000
XYZ, Inc. declared and paid dividends of ₱6,000 during 20x1. There was no impairment in goodwill. The year-
end individual statements of profit or loss are shown below:
18. ABC Co. owns 80% interest in XYZ, Inc. The individual statements of financial position of the entities as
of December 31, 20x1 are shown below:
Statements of financial position
As at December 31, 20x1
ABC Co. XYZ, Inc.
ASSETS
Cash 23,000 44,000
Accounts receivable 75,000 22,000
Inventory 105,000 15,000
Investment in subsidiary (at cost) 75,000 -
Investment in bonds - 13,000
Equipment 200,000 50,000
Accumulated depreciation (60,000) (20,000)
TOTAL ASSETS 418,000 124,000
LIABILITIES AND EQUITY
Accounts payable 43,000 30,000
Bonds payable (at face amount) 30,000 -
Total liabilities 73,000 30,000
Share capital 170,000 50,000
Share premium 65,000 -
Retained earnings 110,000 44,000
Total equity 345,000 94,000
TOTAL LIABILITIES AND EQUITY 418,000 124,000
On December 31, 20x1, XYZ, Inc. purchased 50% of the outstanding bonds of ABC Co. from the open market
for ₱13,000. There were no other intercompany transactions during the year.
The consolidation journal entry to eliminate the intercompany bond transaction includes which of the following?
a. debit to bonds payable for ₱30,000
b. credit to gain on extinguishment of debt for ₱4,000
c. credit to investment in bonds for ₱15,000
d. credit to gain on extinguishment of debt for ₱2,000