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CONSOLIDATION SUBSEQUENT TO ACQUISITION & INTERCOMPANY TRANSACTIONS Problem 1. On January 2, 2014, Party Corporation purchase 80% of Summer Company's common stock for P810,000. P37,500 of the excess is attributable to goodwill and the balance to a depreciable asset with an economic life of ten years. Non-controlling interest is measured at its fair value on date of acquisition. On the date of acquisition, stockholders' equity of the two companies were as follows:
Ordinary shares Retained earnings
Party Corp. P1,312,500 1,950,000
Summer Co. P300,000 525,000
On December 31 2014, Summer Company reported net income of P131,250 and paid dividends of P45,000 to Party. Party reported earnings from its separate operations of P356,250 and paid dividend of P 172,500. Goodwill had been impaired and should be reported at P7,500 on December 31, 2014. 1. How much is the consolidated profit on December 31, 2014? A. B. C. D.
P447,187.50 P473,437.50 P450,000 P442,500
2. How much is the consolidated retained earnings attributable to parent’s shareholders equity on December 31, 2014? A. B. C. D.
P2,202,750 P2,197,500 P2,196,750 P2,599,687.50
3. How much is the non-controlling interest in profit of Summer Company on December 31, 2014? A. B. C. D.
P23,437.50 P23,250 P26,250 P17,250
4. What amount of non-controlling interest is to be presented in the consolidated statement of financial position on December 31, 2014? A. B. C. D.
P205,312.50 P208,500 P193,125 P181,875
5. How much is the consolidated profit attributable to parent shareholders on December 31, 2014? A. B. C. D.
P420,000 P445,500 P425,250 P450,000
Problem 2 Bacolod Company acquired 55% of the outstanding common stock of Silay Company on August 1, 2010 at a total cost of P5,005,000. At acquisition date, Silay's common stock and retained earnings amounted to P200,000 and P4,800,000, respectively. All of Silay's assets and liabilities had fair values equal to book values as of the acquisition date except for patents which had a fair value of and a book value of P400,000. The patents have a remaining life of five years. For 2010, Silay had the following earnings and dividends:
Jan – Jul P500,000 P300,000
Net income Dividends paid
Aug - Dec P1,100,000 P1,200,000
1. Compute the net income attributable to the non-controlling interest? A. B. C. D.
667,500 594,000 442,500 P369,000
Problem 3 Top Company owns 70% of Midway Corporation, which in turn possesses 60% of Bottom Company. Midway exercises control over Bottom and Top exercises control over Midway. The following information is available:
Separately calculated operating income excluding dividend income Cash dividends from: Subsidiary Associate(s) Others investments at fair value Net deferred inter-company gains within current year income Amortization expense relating to excess fair value over book value of investment
Top Company P600,000
Midway Company P300,000
Bottom Company P100,000
80,000 20,000 -0-
50,000 -0-0-
-0-030,000
P110,000
80,000
20,000
30,000
25,000
-0-
1. What is the consolidated net income attributable to Top Company stockholders? A. B. C. D.
735,000 646,100 658,700 630,100
2. How much is the dividend income in the consolidated statement of income? A. B. C. D.
180,000 150,000 50,000 30,000
Problem 4 GV Company purchased 70% ownership of DL Company on January 1, 2010, at underlying book value. While each company has its own sales forces and independent product lines, there are substantial inter-corporate sales of inventory each period. The following inter-corporate sales occurred during 2011 and 2012:
Year 2011 2012 2012
Seller GV Co. DL Co. GV Co.
Cost of Product Sold P448,000 P312,000 P350,000
Buyer DL Co. GV Co. DL Co.
Sales Price P640,000 P480,000 P437,500
Unsold at End of Year P140,000 P 77,000 P 63,000
Year Sold To Outsiders 2012 2012 2013
The following data summarized the results of their financial operations for the year
Sales Gross Profit Operating Expenses Ending Inventories Dividend Received from affiliate Dividend Received from non-affiliate
GV Company P3,850,000 1,904,000 770,000 336,000 126,000 -
DL Company P1,680,000 504,000 280,000 280,000 70,000
For the year ended 2012, compute: 1. Consolidated sales A. B. C. D.
P4,612,500 P4,612,500 P4,612,500 P5,530,000
2. Consolidated costs of goods sold A. B. C. D.
P2,457,550 P2,206,950 P2,202,050 P2,202,050
3. Consolidated net income attributable to parent's shareholders equity A. P1,301,335 B. P1,476,335 C. P1,476,225 D. P1,350,335 4. Non-controlling interest in net income A. B. C. D.
P59,115 P59,115 P80,115 P80,115
Problem 5 On January 1, 2015, RX Company purchased 80% of the stocks of MB Corporation at book value. The stockholders' equity of MB Corporation on this date showed: Common stock — P570,000 and Retained earnings — P490,000. On April 30, 2015, RX Company acquired a used machinery for P84,000 from MB Corp. that was being carried in the latter's books at P105,000. The asset still has a remaining useful life of 5 years. On the other hand, on August 31, 2015, MB Corp. purchased an equipment that was already 20% depreciated from RX Co. for P345,000. The original cost of this equipment was P375,000 and had a remaining life of 8 years. Net income of RX Co. and MB Corp. for 2015 amounted to P360,000 and P155,000. Dividends paid totaled to P115,000 and P52,500 for RX Co. and MB Corp., respectively. On the consolidated financial statements in 2015, how much would be the: 1. non-controlling interest in net assets A. B. C. D.
P236,140 P232,500 P232,500 P236,140
2. carrying value of the property and equipment A. B. C. D.
P405,000 P378,500 P405,000 P378,500
Problem 6 On January 2, 2014, Power Company acquired 90% of the outstanding shares of Solar Inc. at book value. During 2014 and 2015, intercompany sales amounted to P2,000,000 and P4,000,000, respectively. Power Company consistently recognized a 25% mark-up based on cost while Solar Inc. had a 25% gross profit on sales. The inventories of the buying affiliate, which all came from inter-company transactions show:
Power Solar
December 31, 2014 P240,000 100,000
December 31, 2015 P160,000 40,000
On October 1, 2014, Solar Inc., purchased a piece of land costing P1,000,000 from Power Company for P1,500,000. On December 1, 2015, Solar Inc., sold this land to unrelated party for P1,500,000. On the other hand, on July 1, 2015, Solar Inc., sold a used photo-copier with a carrying value of P60,000 and remaining life of 3years to Power Company for P42,000. Separate Statement of Comprehensive Income for the two companies for the year 2015 follow:
Sales Cost of Sales Gross Profit Operating Expenses Operating Profit Loss on Sale of Office Equipment Dividend Revenue Net Income
Power Company P25,000,000 (15,000,000) P10,000,000 ( 6,000,000) P 4,000,000
P4,000,000
Compute the following amounts for/as of December 31, 2015
1. Consolidated Gross Profit A. B. C. D.
P19,632,000 P15,712,000 P15,632,000 P15,584,000
2. Consolidated Net Income attributable to Parent A. B. C. D.
P6,183,300 P6,369,000 P6,169,800 P6,191,300
3. Non-controlling interest in Net Income A. B. C. D.
P189,700 P185,700 P188,200 P184,200
4. Consolidated Operating Expense A. B. C. D.
P9,800,000 P9,788,000 P9,803,000 P9,789,500
Solar Inc. P14,000,000 ( 8,400,000) P 5,600,000 (3,800,000) P 1,800,000 ( 18,000) 40,000 P 1,822,000
Ordinary shares Retained earnings
Party Corp. P1,312,500 1,950,000
Summer Co. P300,000 525,000
On December 31 2014, Summer Company reported net income of P131,250 and paid dividends of P45,000 to Party. Party reported earnings from its separate operations of P356,250 and paid dividend of P 172,500. Goodwill had been impaired and should be reported at P7,500 on December 31, 2014. 1. How much is the consolidated profit on December 31, 2014? A. B. C. D.
P447,187.50 P473,437.50 P450,000 P442,500
2. How much is the consolidated retained earnings attributable to parent’s shareholders equity on December 31, 2014? A. B. C. D.
P2,202,750 P2,197,500 P2,196,750 P2,599,687.50
3. How much is the non-controlling interest in profit of Summer Company on December 31, 2014? A. B. C. D.
P23,437.50 P23,250 P26,250 P17,250
4. What amount of non-controlling interest is to be presented in the consolidated statement of financial position on December 31, 2014? A. B. C. D.
P205,312.50 P208,500 P193,125 P181,875
5. How much is the consolidated profit attributable to parent shareholders on December 31, 2014? A. B. C. D.
P420,000 P445,500 P425,250 P450,000
Problem 2 Bacolod Company acquired 55% of the outstanding common stock of Silay Company on August 1, 2010 at a total cost of P5,005,000. At acquisition date, Silay's common stock and retained earnings amounted to P200,000 and P4,800,000, respectively. All of Silay's assets and liabilities had fair values equal to book values as of the acquisition date except for patents which had a fair value of and a book value of P400,000. The patents have a remaining life of five years. For 2010, Silay had the following earnings and dividends:
Jan – Jul P500,000 P300,000
Net income Dividends paid
Aug - Dec P1,100,000 P1,200,000
1. Compute the net income attributable to the non-controlling interest? A. B. C. D.
667,500 594,000 442,500 P369,000
Problem 3 Top Company owns 70% of Midway Corporation, which in turn possesses 60% of Bottom Company. Midway exercises control over Bottom and Top exercises control over Midway. The following information is available:
Separately calculated operating income excluding dividend income Cash dividends from: Subsidiary Associate(s) Others investments at fair value Net deferred inter-company gains within current year income Amortization expense relating to excess fair value over book value of investment
Top Company P600,000
Midway Company P300,000
Bottom Company P100,000
80,000 20,000 -0-
50,000 -0-0-
-0-030,000
P110,000
80,000
20,000
30,000
25,000
-0-
1. What is the consolidated net income attributable to Top Company stockholders? A. B. C. D.
735,000 646,100 658,700 630,100
2. How much is the dividend income in the consolidated statement of income? A. B. C. D.
180,000 150,000 50,000 30,000
Problem 4 GV Company purchased 70% ownership of DL Company on January 1, 2010, at underlying book value. While each company has its own sales forces and independent product lines, there are substantial inter-corporate sales of inventory each period. The following inter-corporate sales occurred during 2011 and 2012:
Year 2011 2012 2012
Seller GV Co. DL Co. GV Co.
Cost of Product Sold P448,000 P312,000 P350,000
Buyer DL Co. GV Co. DL Co.
Sales Price P640,000 P480,000 P437,500
Unsold at End of Year P140,000 P 77,000 P 63,000
Year Sold To Outsiders 2012 2012 2013
The following data summarized the results of their financial operations for the year
Sales Gross Profit Operating Expenses Ending Inventories Dividend Received from affiliate Dividend Received from non-affiliate
GV Company P3,850,000 1,904,000 770,000 336,000 126,000 -
DL Company P1,680,000 504,000 280,000 280,000 70,000
For the year ended 2012, compute: 1. Consolidated sales A. B. C. D.
P4,612,500 P4,612,500 P4,612,500 P5,530,000
2. Consolidated costs of goods sold A. B. C. D.
P2,457,550 P2,206,950 P2,202,050 P2,202,050
3. Consolidated net income attributable to parent's shareholders equity A. P1,301,335 B. P1,476,335 C. P1,476,225 D. P1,350,335 4. Non-controlling interest in net income A. B. C. D.
P59,115 P59,115 P80,115 P80,115
Problem 5 On January 1, 2015, RX Company purchased 80% of the stocks of MB Corporation at book value. The stockholders' equity of MB Corporation on this date showed: Common stock — P570,000 and Retained earnings — P490,000. On April 30, 2015, RX Company acquired a used machinery for P84,000 from MB Corp. that was being carried in the latter's books at P105,000. The asset still has a remaining useful life of 5 years. On the other hand, on August 31, 2015, MB Corp. purchased an equipment that was already 20% depreciated from RX Co. for P345,000. The original cost of this equipment was P375,000 and had a remaining life of 8 years. Net income of RX Co. and MB Corp. for 2015 amounted to P360,000 and P155,000. Dividends paid totaled to P115,000 and P52,500 for RX Co. and MB Corp., respectively. On the consolidated financial statements in 2015, how much would be the: 1. non-controlling interest in net assets A. B. C. D.
P236,140 P232,500 P232,500 P236,140
2. carrying value of the property and equipment A. B. C. D.
P405,000 P378,500 P405,000 P378,500
Problem 6 On January 2, 2014, Power Company acquired 90% of the outstanding shares of Solar Inc. at book value. During 2014 and 2015, intercompany sales amounted to P2,000,000 and P4,000,000, respectively. Power Company consistently recognized a 25% mark-up based on cost while Solar Inc. had a 25% gross profit on sales. The inventories of the buying affiliate, which all came from inter-company transactions show:
Power Solar
December 31, 2014 P240,000 100,000
December 31, 2015 P160,000 40,000
On October 1, 2014, Solar Inc., purchased a piece of land costing P1,000,000 from Power Company for P1,500,000. On December 1, 2015, Solar Inc., sold this land to unrelated party for P1,500,000. On the other hand, on July 1, 2015, Solar Inc., sold a used photo-copier with a carrying value of P60,000 and remaining life of 3years to Power Company for P42,000. Separate Statement of Comprehensive Income for the two companies for the year 2015 follow:
Sales Cost of Sales Gross Profit Operating Expenses Operating Profit Loss on Sale of Office Equipment Dividend Revenue Net Income
Power Company P25,000,000 (15,000,000) P10,000,000 ( 6,000,000) P 4,000,000
P4,000,000
Compute the following amounts for/as of December 31, 2015
1. Consolidated Gross Profit A. B. C. D.
P19,632,000 P15,712,000 P15,632,000 P15,584,000
2. Consolidated Net Income attributable to Parent A. B. C. D.
P6,183,300 P6,369,000 P6,169,800 P6,191,300
3. Non-controlling interest in Net Income A. B. C. D.
P189,700 P185,700 P188,200 P184,200
4. Consolidated Operating Expense A. B. C. D.
P9,800,000 P9,788,000 P9,803,000 P9,789,500
Solar Inc. P14,000,000 ( 8,400,000) P 5,600,000 (3,800,000) P 1,800,000 ( 18,000) 40,000 P 1,822,000
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