chapter 16 advanced accounting solution manual

Chapter 16Problem I 1. P50,075

Consolidated Net Income for 20x4 Net income from own/separate operations Pill Company [P25,000 – (P9,000 x 85%)] P17,350 Sill Company 40,000 Total P57,350 Less: Non-controlling Interest in Net Income* P 5,775 Amortization of allocated excess 0 Goodwill impairment 1,500 7,275 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent………….. P50,075 Add: Non-controlling Interest in Net Income (NCINI) 5,775 Consolidated Net Income for 20x4 P55,850

*Net income of subsidiary – 20x4 P 40,000Amortization of allocated excess – 20x4 ( 0))

P 40,000Multiplied by: Non-controlling interest %.......... 15%

P 6,000Less: Non-controlling interest on impairment loss on full-goodwill (P1,500 x 15%)*

____225

Non-controlling Interest in Net Income (NCINI) P 5,775*this procedure would be not be applicable where the NCI on goodwill impairment loss would not be proportionate to NCI acquired.

2. P5,775 – refer to computation in No. 1

Problem II - Cost Model/Method versus Equity MethodPartial-Goodwill Approach: Fair value of Subsidiary Consideration transferred: P600,000.............................................. 600,000 Less: Carrying amount of Small’s net assets = Carrying amount of Small’s shareholders’ equity

Common/Ordinary shares – Small (400,000 x 75%)............ 300,000Retained earnings – Small (100,000 x 75%)......................... 75,000

375,000 Allocated Excess: Acquisition differential – Jan. 1, 20x4 225,000 Less: Over/under valuation of A/L (Allocated to): Increase in Inventory (40,000 x 75%)........................................ 30,000 Decrease in Patents (70,000 x 75%).......................................... (52,500) ( 22,500) Positive Excess: Goodwill - partial 247,500

Full-Goodwill Approach: Fair value of Subsidiary (Implied cost of 100% investment); P600,000/75% 800,000 Less: Carrying amount of Small’s net assets = Carrying amount of Small’s shareholders’ equity

Common/Ordinary shares 400,000Retained earnings 100,000

500,000 Allocated Excess: Acquisition differential – Jan. 1, 20x4 300,000 Less: Over/under valuation of A/L (Allocated to): Increase in Inventory 40,000 Decrease in Patents (70,000) (30,000) Positive Excess: Goodwill - full 330,000A summary or depreciation and amortization adjustments is as follows:

Account Adjustments to be amortized

Over/Under Life

Annual Amount

Current Year(20x4) 20x5 20x6

Inventory P40,000 1 P 40,000 P 40,000 P -P -

Subject to Annual AmortizationPatents (70,000) 5 (14,000) ( 14,000) (14,000) (14,000)

Amortization P 26,000 P 26,000P(14,000

)P(14,000

)

Impairment of goodwill (full) 330,000 - _____ _____ ________

19,300

P 26,000 P 26,000P(14,000

)P

5,300

For purposes of comparison between Cost Model/Method and Equity MethodCost MethodJournal Entries Year 1 Year 2 Year 3InvestmentInvestment in Small 600,000 Cash 600,000

Dividend of SubsidiaryCash 18,750 7,500 30,000 Dividend income 18,750 7,500 30,000

Equity Method1. Year 1 Year 2 Year 3InvestmentInvestment in Small 600,000 Cash 600,000

Net Income (Loss) of Subsidiary:Investment in Small (75% x Small’s profit) 60,000 67,500 Investment income 60,000 67,500

Investment income 26,,250 Investment in Small (75% x Small’s profit) 26,250

Dividend of SubsidiaryCash (75% x Small’s dividends) 18,750 7,500 30,000 Investment in Small 18,750 7,500 30,000

Amortization of Allocated ExcessInvestment income (75% x amortization of PD*) 19,500 3,975 Investment in Small 19,500 3,975

Investment in Small 10,500 Investment income 10,500

Investment in Son Dividend Income1/1/x4 CI…… 600,000

18,750 - Div–S (75 x80%)

12/31/x4 600,000

18,750

7,500 - Div–S (10 x80%)

12/31/x5 600,000

18,750

30,000 - Div–S (40 x80%)

12/31/x6 600,000

30,000

Reconciliation of Investment /Conversion of Investment Account from Cost to Equity Method:

Investment in Small under cost method......................................... 600,000 Small’s retained earnings, end of year.......................................160,000 Small’s retained earnings, date of acquisition..........................100,000 Change since acquisition............................................................60,000Less: Cumulative amortization of acquisition differential.............17,300

42,700x: Controlling Interest (75%).............................................................. 75%

32,025Investment in Small under equity method..................................... 632,025

2. a. Goodwill, 12/31/20x6 (P330,000 – P19,300) P 310,700 b. FV of NCI, 12/31/20x6:

Non-controlling interest (full-goodwill), December 31, 20x6 Common stock – Subsidiary Company, December 31, 20x6 . . . . . . . . . . . . . . . . . .

P 400,000

Retained earnings – Subsidiary Company, December 31, 20x6 Retained earnings – Subsidiary Company, January 1, 20x6 (P100,000 + P80,000 – P25,000 – P35,000 – P10,000)..............................

P110,000

Add: Net income of Small for 20x6……………………………………………….. 90,000 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

P200,000

Less: Dividends paid – 20x6…………………………………………………………. 40,000 160,000 Stockholders’ equity – Subsidiary Company, December 31, 20x5 . . . . . . . . . . . . .

P 560,000

Adjustments to reflect fair value - (over) undervaluation of assets and liabilities, date of acquisition (January 1, 20x4)- decreased in Net Assets . . . .

( 30,000)

Less: Amortization of allocated excess (refer to amortization above): 20x4 (P40,000 – P14,000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

P 26,000

20x5 and 20x6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

( 28,000)

( 2,000)

Fair value of stockholders’ equity of subsidiary, December 31, 20x6 . . . . . . . . . . .

P 532,000

Multiplied by: Non-controlling Interest percentage . . . . . . . . . . . . . . . . . . . . . . . . .

20

Investment in Son Investment Income (loss)1/1/x4: CI 600,000

NI of S 18,750 75% Div - Son NI of Son(80,000 x 75%)……. 60,000

75% Amort & 19,500 impairment

Amortization impairment 19,500

(80,000 60,000 x

75%) 12/31/x4 621,750

40,500

75% NL – Sub 75% NL – Sub26,250 (35,000 x 75%)

(35,000 x 75%) 26,250

7,500 75% Div - Son75% Amort &Impairment 10,500

75% Amort &

10,500 impairment

12/31/x5 598,500

15,750

NI of S 30,000 75% Div - Son NI of Son(90,000 x 75%)……. 67,500

75% Amort & 3,975 impairment

Amortization impairment 3,975

(90,000 67,500 x

75%)12/31/x6 632,025

63,525

FV of Non-controlling interest (partial goodwill), 12/31/20x6 . . . . . . . . . . . . . . . . .

P 133,000

Add: Non-controlling interest on full goodwill , net of impairment loss [(P330,000 full – P247,000, partial = P82,500………………………………….

P 82,500

Less: Impairment on the NCI (P19,300 x 25%)…………………………………

___4,825 ___*77,675

FV of Non-controlling interest (full-goodwill), 12/31/20x6. . . . . . . . . . . . . . . . . . . . .

P 210,675

*or P330,000 full – P247,000, partial = P82,500 – (impairment loss on full goodwill less (P19,300 x 25%)] = P77,625

Alternatively, NCI on December 31, 20x6 may also be computed as follows (Note: This is the American version of computing NCI, since they only allowed using Full-goodwill Method):

Common stock, 12/31/20x6………………………………………….. P 400,000 Retained earnings, 12/31/20x6 (P100,000+P80,000 – P25,000 – P35,000 – P10,000)………….. P 110,000

Add: NI – Subsidiary (20x6) ……………………………………….. 90,000 Dividends – Subsidiary 20x6……………………………………….. ( 40,000) 160,000Book value of SHE – S, 12/31/20x6…………………………………… P560,000Adjustments to reflect fair value (Increase in Net Assets)………..P 300,000Amortization of allocated excess:

Inventory – 20x4...…………………………………………………….( 40,000) Patent (P14,000 x 3 years)………………………………………….. 42,000

Impairment of goodwill – 20x6…………………………………….. ( 19,300) 282,700 FV of SHE of Small………………………………………………………… P 842,700Multiplied by: NCI%...............................................................................

25% FV of NCI, 12/31/20x6…………………………………………………….. P 210,675 Or, alternatively:

Common stock – Subsidiary Company, December 31, 20x6 . . . . . . . . . . . . . . . . . .

P 400,000

Retained earnings – Subsidiary Company, December 31, 20x6 Retained earnings – Subsidiary Company, January 1, 20x6 (P100,000 + P80,000 – P25,000 – P35,000 – P10,000)..............................

P110,000

Add: Net income of Small for 20x6……………………………………………….. 90,000 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

P200,000

Less: Dividends paid – 20x6…………………………………………………………. 40,000 160,000 Stockholders’ equity – Subsidiary Company, December 31, 20x6 . . . . . . . . . . . . .

P 560,000

Unamortized acquisition differential / allocated excess / increase in net assets: {P300,000, allocated excess – {P40,000 - (P14,000 x 3) + P19,300, full impairment

__282,500

P 842,500 Multiplied by: Non-controlling Interest percentage . . . . . . . . . . . . . . . . . . . . . . . . .

______25%

FV of Non-controlling interest (full-goodwill), 12/31/20x6. . . . . . . . . . . . . . . . . . . . .

P 210,675

c. Consolidated Retained Earnings, 1/1/20x6 – P498,500Consolidated Retained Earnings, January 1, 20x6 Retained earnings - Large Company, January 1, 20x6 (cost model) P500,000 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 – Small, January 1, 20x6 (P100,000 + P80,00 – P25,000 – P35,000 – P10,000) P 110,000 Less: Retained earnings – Small, January 1, 20x4 (date of 100,000

acquisition) Increase in retained earnings since date of acquisition P 10,000 Less: Amortization of allocated excess – 20x4 26,000 Amortization of allocated excess – 20x5 (14,000)

P ( 2,000) Multiplied by: Controlling interests %................... _____75%

P ( 1,500) Less: Goodwill impairment loss (full-goodwill) – 20x6 ________0 (___1,500) Consolidated Retained earnings, January 1, 20x6 P 498,500

The CRE, December 31, 20x6 would be as follows: Consolidated Retained earnings, January 1, 20x6 P498,500 Add: Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of Large for 20x6

233,525

Total P717,550 Less: Dividends paid – Large Company for 20x6 70,000 Consolidated Retained Earnings, December 31, 20x6 P662,025

Or, alternatively: to compute CRE, 12/31/20x6Consolidated Retained Earnings, December 31, 20x6 Retained earnings - Large Company, December 31, 20x6 (cost model) P630,000 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 – Small, December 31, 20x6 (P100,000 + P80,00 – P25,000 – P35,000 – P10,000 + P90,000 – P40,000)

P 160,000

Less: Retained earnings – Small, January 1, 20x4 (date of acquisition)

100,000

Increase in retained earnings since date of acquisition P 60,000 Less: Amortization of allocated excess – 20x4 26,000 Amortization of allocated excess – 20x5 and 20x6: P14,000 x 2 (28,000)

P 62,000 Multiplied by: Controlling interests %................... _____75%

P 46,500 Less: Goodwill impairment loss on full-goodwill) – 20x6 (P19,300 x 75%)

__14,475 __32,025

Consolidated Retained earnings, December 31, 20x6 P 662,025

d. P233.525Consolidated Net Income for 20x6 Net income from own/separate operations Parent Company: Large Company [P200,000 – (P40,000 x 75%)]

P170,000

Small Company 90,000 Total P260,000 Less: Non-controlling Interest in Net Income* P 21,175 Amortization of allocated excess (14,000) Goodwill impairment _19,300 __26,475 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent………….. P233,525Add: Non-controlling Interest in Net Income (NCINI) __21,175Consolidated Net Income for 20x6 P254,700

*Net income of subsidiary – 20x6 P 90,000Amortization of allocated excess – 20x6 ( 14,000)


P 26,000Less: Non-controlling interest on impairment loss on full-goodwill ( (P19,300 x 25%)*

___4,825

Non-controlling Interest in Net Income (NCINI) P 21,175

*this procedure would be not be applicable where the NCI on goodwill impairment loss would not be proportionate to NCI acquired.

e. P21,175 – refer to (d) for computationsNote: Regardless of the method used (cost or equity) answers for No. 2 (a) to (e) above are exactly the same.

Problem IIICost of 85% investment 646,000 Fair value of Subsidiary (Implied cost of 100% investment); P646,000/85%

760,000 Less: Carrying amount of Silk’s net assets = Carrying amount of Silk’s shareholders’ equity

Common/Ordinary shares 500,000Retained earnings 100,000

600,000 Allocated Excess: Acquisition differential – December 31, 20x4 160,000Less: Over/under valuation of A/L (Allocated to):Increase in Inventory 70,000 Patents 90,000Non-controlling interest (15% x 760,000, fair value of subsidiary),12/31/20x4

114,000

A summary or depreciation and amortization adjustments is as follows:Account Adjustments to be amortized

Over/under Life

Annual Amount

Current Year(20x5) 20x6 20x7

Inventory P70,000 1P

70,000 P 70,000 P - P -Subject to Annual AmortizationPatents 90,000 10 __9,000 ___9,000 ___9,000 ___9,000

P160,000P

79,000 P 79,000P

9,000P

9,000,

Unamortized balance of allocated excess:Balance BalanceDec. 31 Amortization Dec. 31

20x4 20x5 20x6 20x6Inventory 70,000 70,000Patents 90,000 9,000 9,000 72,000

160,000 79,000 9,000 72,000

1. NCI-CNI 20x5: P(7,350) 20x6: P6,450

20x5 20x6Consolidated Net Income Net income from own/separate operations Large Company 20x5 [P28,000 – P0)] P

28,000 20x6 [(P45,000, loss + (P15,000 x 85%)] P(57,75

0) Small Company 30,000 52,000 Total P

58,000P( 5,75

0) Less: Non-controlling Interest in Net Income* P(7,350) P 6,450 Amortization of allocated excess 79,000 9,000 Goodwill impairment _____0 71,650 _____0 15,450 CI-CNI (loss) or Profit (loss) attributable to equity P(13,65 P(21,20

holders of parent 0) 0)Add: Non-controlling Interest in Net Income (NCINI) ( 7,350) 6,450Consolidated Net Income/Loss(CNI) P(21,00

0)P(14,75

0)

20x5 20x6*Net income (loss) of subsidiary P 30,000 P 52,000Amortization of allocated excess ( 79,000) ( 9,000)

P(49,000) P43,000Multiplied by: Non-controlling interest %.......... 15% 15%

P(7,350) P 6,450Less: Non-controlling interest on impairment loss on full-goodwill _______- ___ _- Non-controlling Interest in Net Income (NCINI) P( 7,350) P6,450

*this procedure would be not be applicable where the NCI on goodwill impairment loss would not be proportionate to NCI acquired.

2. CI-CNI – refer to computation in No. 1 20x5: P(21,000) 20x6: P14,750 Or, alternatively: (1) Non-controlling interest in profit 20x5: 15% (30,000 – 79,000)............................................................. 7,350 20x6: 15% (52,000 – 9,000)............................................................... 6,450 (2)

20x5 20x6 NI (loss) Pen 28,000 (45,000) Less: Dividends from Silk 20x5 0 20x6 (85% 15,000) (12,750)

28,000 (57,750) Share of Silk’s profit

85% (30,000 – 79,000) (41,650) 85% (52,000 – 9,000) ________ 36,550_

Consolidated profit (loss) attributable to Pen’s shareholders (13,650) (21,200)

3. CRE, 12/31/20x6 – P73,150Consolidated Retained Earnings, December 31, 20x6 Retained earnings - Pen Company, December 31, 20x6 (cost model P 91,000 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 – Silk, December 31, 20x6: (P100,000 + P30,00 – P0 + P52,000 – P15,000) P 167,000 Less: Retained earnings – Silk, December 31, 20x4 (date of acquisition)

100,000

Increase in retained earnings since date of acquisition P 67,000 Less: Amortization of allocated excess – 20x5 79,000 Amortization of allocated excess – 20x6 __9,000

P (21,000) Multiplied by: Controlling interests %................... 85%

P (17,850) Less: Goodwill impairment loss (full-goodwill) – 20x5 _____0 ( 17,850) Consolidated Retained earnings, December 31, 20x6 P 73,150

4. NCI, 12/31/20x6: P110,850

FV of SHE of Silk:Common stock, 12/31/20x6 P 500,000

Retained earnings, 12/31/20x6:Retained earnings, 1/1/20x4 P 100,000NI – Subsidiary (20x5 and 20x6): P30,000 + P52,000 82,000Dividends – Subsidiary (20x5 and 20x6): P0 + P15,000 ( 15,000) 167,000

Book value of SHE – S, 12/31/20x6 P 667,000 Adjustments to reflect fair value, 12/31/20x4 160,000 Amortization of allocated excess (P79,000 + P9,000) ( 88,000) FV of SHE of S P 739,000 Multiplied by: NCI% _________15% FV of NCI (partial), 12/31/20x6 P 110,850

Add: NCI on full-goodwill _______ _0 FV of NCI (full),12/31/20x6 P 110,850

Or, alternatively: Non-controlling interest – date of acquisition,12/31/20x4 (1) P 114,000

Retained earnings Silk – Dec. 31, 20x6 (100,000 + 30,000 + 52,000 – 15,000) P167,000

Less: Retained earnings, 12/31/20x4 (date of acquisition) 100,000 Increase since acquisition P 67,000 Less: Amortization of allocated excess (79,000 + 9,000) 88,000

P( 21,000) Multiplied by: NCI’s share ____ 15% ( 3,150)

Non-controlling interest (full) 12/31/20x6 P 110,850

5. Consolidated Patents, 12/31/20x6: P72,000 Unamortized balance of allocated excess:

Balance BalanceDec. 31 Amortization Dec. 31

20x4 20x5 20x6 20x6 Inventory 70,000 70,000 Patents 90,000 9,000 9,000 72,000

160,000 79,000 9,000 72,000 Or, alternatively: Invest. account – equity Dec. 31, 20x6 628,150 Cost of investment, cost model 646,000 Retained earnings Silk – Dec. 31, 20x6

(100,000 + 30,000 + 52,000 – 15,000) 167,000 Retained earnings,12/31/20x4 (date of acquisition) 100,000 Increase since acquisition 67,000 Less: Accumulated amortization (79,000 + 9,000) 88,000

( 21,000) Multiplied by: CI share 85% ( 17,850)

Invest. account – equity method as at Dec. 31, 20x6 628,150 Implied value of 100% (628,150 / 85%) 739,000

Silk –Common shares 500,000Retained earnings – Silk, 12/31/20x6 167,000

667,000 Balance unamortized allocated excess – Patents 72,000

Problem IV1. (Full or partial-goodwill) – the same answer.

Consideration transferred by MM .................... P664,000Noncontrolling interest fair value..................... 166,000 * Fair value of Subsidiary………………………… P830,000Less: Book value of SHE – S…..……………………. (600,000)Positive excess ............................................... 230,000 Annual Excess

Life AmortizationsExcess fair value assigned to buildings 80,000 20 years P4,000

Goodwill - full P150,000 indefinite -0-Total.......................................................... P4,000

2. P150,000 – full goodwill (see No. 1 above) P120,000 – partial-goodwill:

Consideration transferred by MM .................... P 664,000Less: Book value of SHE – S (P600,000 x 80%)…….. 480,000

Allocated excess…………………………………….. P184,000 Less: Over/under valuation of A and L:

P80,000 x 80%................................................. 64,000Goodwill - partial.............................................. P120,000

3. Full-goodwillCommon Stock - TT .................................................... 300,000Additional Paid-in Capital - TT ..................................... 90,000Retained Earnings - TT................................................ 210,000

Investment in TT Company (80%) ......................... 480,000Non-controlling interest (20%) .............................. 120,000

Buildings ..................................................................... 80,000Goodwill ...................................................................... 150,000

Investment in TT Company (80%) ......................... 184,000Non-controlling interest (P166,000 – P120,000).... 46,000

Partial-goodwillCommon Stock - TT .................................................... 300,000Additional Paid-in Capital - TT ..................................... 90,000Retained Earnings - TT................................................ 210,000

Investment in TT Company (80%) ......................... 480,000Non-controlling interest (20%) .............................. 120,000

Buildings ..................................................................... 80,000Goodwill ...................................................................... 120,000

Investment in TT Company (80%) ......................... 184,000Non-controlling interest (20% x P80,000) ............. 16,000

4. Cost Model/Initial Value MethodDividends received (80%) ................................................ P 8,000Investment in Taylor—12/31/x4 (original value paid)………… P664,000

5. Cost Model/Initial Value Method – same answer with No. 4.

6. Using the acquisition method, the allocation will be the total difference (P80,000) between the buildings' book value and fair value. Based on a 20 year life, annual excess amortization is P4,000.

MM book value—buildings .......................................... P 800,000TT book value—buildings ............................................ 300,000Allocation ................................................................... 80,000Excess Amortizations for 20x4–20x5 (P4,000 × 2) …………. ( 8,000)

Consolidated buildings account ………………… P 1,172,000

7. Acquisition-date fair value allocated to goodwill:Goodwill-full ( see No. 1 above) ........................................ P 150,000

Goodwill-partial (see No. 1 above)……………………………… P 120,000

8. The common stock and additional paid-in capital figures to be reported are the parent balances only.

Common stock, P500,000Additional paid-in capital, P280,000

Problem V1. Partial Goodwill or Proportionate Basis a. Investment in S 225,000

Beginning Retained Earnings-Palm Inc. 225,000 To establish reciprocity/convert to equity (0.90 x(P1,250,000 – P1,000,000))

b. Common stock – S 3,000,000 Retained earnings – S 1,250.000 Investment in S Co 3,825,000 NCI (P4,250,000 x 10%) 425,000

c. Land 400,000 Investment in S 150,000 NCI [(P500,000 x 10%)– (P100,000 x 10%)] 40,000 Retained earnings – P (bargain purchase gain – closed to retained earnings since only balance sheets are being examined, P300,000 – P90,000 depreciation, 20x4) 210,000

FV of SHE of S: Common stock, 1/1/20x5 P3,000,000

Retained earnings, 1/1/20x5Retained earnings, 1/1/20x4 P1,000,000NI – Subsidiary (20x4) 250,000Dividends – Subsidiary 20x4 ( 0) 1,250,000

Book value of SHE – S, 1/1/20x5 P4,250,000 Adjustments to reflect fair value 500,000 Amortization of allocated excess (P100,000 x 1) ( 100,000) FV of SHE of S P4,650,000 Multiplied by: NCI% 10% FV of NCI P 465,000

Computation of Gain: Partial Goodwill or Proportionate Basis

Fair value of Subsidiary: Consideration transferred P3,750,000Less: BV of SHE of S (P3,000,000 + P1,000,000) x 90% _3,600,000Allocated excess P 150,000Less: Over/under valuation of A and L: Inc. (Dec.) Inventory (P800,000 – P700,000) x 90% P 90,000 Land (P2,000,000 – P1,600,000) x 90% 360,000 __450,000Gain – partial (attributable to parent) (P300,000)

Full Goodwill or Fair Value Basis a. Investment in S 225,000

Beginning Retained Earnings-P Inc. 225,000 To establish reciprocity/convert to equity (0.90 x(P1,250,000 – P1,000,000))

b. Common stock – S 3,000,000 Retained earnings – S 1,250.000

Investment in S 3,825,000 NCI (P4,250,000 x 10%) 425,000

c. Land 400,000 Investment in S 150,000 NCI [(P500,000 x 10%)– (P100,000 x 10%)] 40,000 Retained earnings – P (bargain purchase gain – closed to retained earnings since only balance sheets are being examined, P300,000 – P90,000 depreciation, 20x4) 210,000

FV of SHE of S: Common stock, 1/1/20x5 P3,000,000


Book value of SHE – S, 1/1/20x5 P4,250,000 Adjustments to reflect fair value 500,000 Amortization of allocated excess (P100,000 x 1) ( 100,000) FV of SHE of S P4,650,000 Multiplied by: NCI% 10% FV of NCI P 465,000

Full-goodwill or Fair Value BasisFair value of Subsidiary: Consideration transferred P3,750,000 / 90% P4,166,66

7Less: BV of SHE of S (P3,000,000 + P1,000,000) x 100%

4,000,000

Allocated excess P 166,667

Less: Over/under valuation of A and L: Inc. (Dec.) Inventory (P800,000 – P700,000) x 100% P 100,000 Land (P2,000,000 – P1,600,000) x 100% 400,000 __500,000Gain – full (attributable to parent) (P333,333

Note: In case of gain, the working paper eliminating entries under partial and full-goodwill approach are the same.

2. Consolidated Retained Earnings, December 31, 20x5 Retained earnings - Parent Company, December 31, 20x5 (cost model P2,000,000 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, December 31, 20x5 (P1,000,000 + P250,000 – P0 + P300,000 – P0) P1,550,000 Less: Retained earnings – Subsidiary, January 1, 20x4 1,000,00

0 Increase in retained earnings since date of acquisition P 550,000 Less: Amortization of allocated excess – 20x4 (inventory) 100,000

P 450,000 Multiplied by: Controlling interests %................... 90% P405,000 Add: Bargain purchase gain (Controlling interest – P300,000) 300,000 Less: Goodwill impairment loss _______0 __705,,000 Consolidated Retained earnings, December 31, 20x5 P

4,705,000

Problem VI

Computation of Goodwill: Partial Goodwill

Fair value of Subsidiary: Consideration transferred P2,800,00

0Less: BV of SHE of S (P1,000,000 + P500,000) x 80% _1,200,00

0Allocated excess P1,600,00

0Less: Over/under valuation of A and L: Inc. (Dec.) Prop., plant and eqpt. (P1,500,000 – P600,000) x 80%

__720,000

Goodwill – partial P 880,000

Full-goodwill:Fair value of Subsidiary: Consideration transferred P2,800,000 / 80% P3,500,0

00Less: BV of SHE of S (P1,500,000 x 100%) 1,500,00

0Allocated excess P2,000,0

00Less: Over/under valuation of A and L: Inc. (Dec.) Prop., plant and eqpt. (P1,500,000 – P600,000) x 80%

__900,000

Goodwill – full P1,100,000

Amortization of allocated excess: P900,000 / 10 years = P90,000 per year

1. Cost Model-Full Goodwill (Eliminating Entries) 20x4 a. Beginning Retained Earnings-S Co. 1,000,000 Capital Stock- S Co. 500,000 Property and Equipment (net) 900,000 Goodwill 1,100,000

Investment in S Co. 2,800,000 Non-controlling Interest 700,000

Common stock, 1/1/20x4 P 500,000 Retained earnings, 1/1/20x4 1,000,000 Book value of SHE – S, 1/1/20x5 P1,500,000

Adjustments to reflect fair value 900,000 FV of SHE of S1/1/x5 P2,400,000 Multiplied by: NCI% 20% FV of NCI (partial) P 480,000

Add: NCI on full-goodwill (P1,100,000 – P880,000) 220,000 FV of NCI (full) P 700,000

b. Depreciation Expense 90,000 Property and Equipment (net) 90,000

20x5

a. Investment in S Company (P300,000 x 0.80) 240,000 Beginning Retained Earnings-P Co. 240,000 To establish reciprocity/convert to equity as of 1/1/20x5

b. Beginning Retained Earnings-S Company 1,300,000 Capital Stock-S Company 500,000 Property and Equipment (net) 900,000 Goodwill 1,100,000

Investment in S Company (P2,800,000 + P240,000) 3,040,000 Non-controlling Interest P700,000 +

[(P1,300,000 – P1,000,000) x 0.20] 760,000FV of SHE of S: Common stock, 1/1/20x5 P 500,000


Book value of SHE – S, 1/1/20x5 P1,800,000 Adjustments to reflect fair value 900,000 FV of SHE of S1/1/x5 P2,700,000 Multiplied by: NCI% 20% FV of NCI (partial) P 540,000


c. Beginning Retained Earnings-P Co. (P90,000 x 80%) 72,000 Non-controlling Interest (P90,000, depreciation x 20%) 18,000 Depreciation Expense 90,000 Property and Equipment (net) 180,000

NCI (partial), 12/31/20x5: [(a) P760,000 – (b) P18,000 = P522,000]FV of SHE of S: Common stock, 1/1/20x5 P 500,000


Book value of SHE – S, 1/1/20x5 P1,800,000 Adjustments to reflect fair value 900,000 Amortization of allocated excess (P90,000 x 1) ( 90,000) FV of SHE of S P2,610,000 Multiplied by: NCI% 20% FV of NCI (partial) P 522,000


Cost Model-Partial Goodwill (Eliminating Entries) 20x4 a. Beginning Retained Earnings-S Co. 1,000,000 Capital Stock- S Co. 500,000 Property and Equipment (net) 900,000 Goodwill 880,000

Investment in S Co. 2,800,000 Non-controlling Interest 480,000

b. Depreciation Expense 90,000 Property and Equipment (net) 90,000

20x5 a. Investment in S Company (P300,000 x 0.80) 240,000

Beginning Retained Earnings-P Co. 240,000 To establish reciprocity/convert to equity as of 1/1/20x5

b. Beginning Retained Earnings-S Company 1,300,000 Capital Stock-S Company 500,000 Property and Equipment (net) 900,000 Goodwill 880,000

Investment in S Company (P2,800,000 + P240,000) 3,040,000 Non-controlling Interest P700,000 +

[(P1,300,000 – P1,000,000) x 0.20] – (P1,100,000 – P880,000) 540,000NCI:

FV of SHE of S: Common stock, 1/1/20x5 P 500,000


Book value of SHE – S, 1/1/20x5 P1,800,000 Adjustments to reflect fair value 900,000 FV of SHE of S1/1/x5 P2,700,000 Multiplied by: NCI% 20% FV of NCI (partial) P 540,000

c. Beginning Retained Earnings-P Co. (P90,000 x 80%) 72,000 Non-controlling Interest (P90,000 depreciation x 20%) 18,000 Depreciation Expense 90,000 Property and Equipment (net) 180,000

NCI (partial), 12/31/20x5: [(a) P540,000 – (b) P18,000 = P522,000]FV of SHE of S: Common stock, 1/1/20x5 P 500,000


Book value of SHE – S, 1/1/20x5 P1,800,000 Adjustments to reflect fair value 900,000 Amortization of allocated excess (P90,000 x 1) ( 90,000) FV of SHE of S P2,610,000 Multiplied by: NCI% 20% FV of NCI (partial) P 522,000

2. Consolidated Net Income (CNI) = Controlling Interest in CNI + NCI in CNI 20x4

Consolidated Net Income for 20x4 Net income from own/separate operations P Company P400,000 S Company 300,000 Total P700,000 Less: Non-controlling Interest in Net Income* P 42,000 Amortization of allocated excess 90,000 Goodwill impairment ____0 132,00

0 Controlling Interest in Consolidated Net Income or Profit

attributable to equity holders of P………….. P568,000 Add: Non-controlling Interest in Net Income (NCINI) 42,000 Consolidated Net Income for 20x4 P610,000

Net income of subsidiary…………………….. P 300,000Amortization of allocated excess …... ( 90,000)

P210,000Multiplied by: Non-controlling interest %.......... 20

% Non-controlling Interest in Net Income (NCINI) P 42,000

20x5 Consolidated Net Income for 20x5 Net income from own/separate operations P Company P425,000 S Company 400,000 Total P825,000 Less: Non-controlling Interest in Net Income* P 62,000 Amortization of allocated excess 90,000 Goodwill impairment ____0 152,00

0 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent………….. P673,000 Add: Non-controlling Interest in Net Income (NCINI) 62,000 Consolidated Net Income for 20x4 P735,000

Net income of subsidiary…………………….. P 400,000Amortization of allocated excess …... ( 90,000)



Problem VII1. Common stock of TT Company

on December 31, 20x4 P 90,000Retained earnings of TT Company January 1, 20x4 P 130,000 Sales for 20x4 195,000 Less: Expenses (160,000) Dividends paid (15,000 )Retained earnings of TT Company on December 31, 20x4 150,000 Net book value on December 31, 20x4 P240,000Proportion of stock acquired by QQ x .80 Purchase price P192,000

2. Net book value on December 31, 20x4 P240,000Proportion of stock held by noncontrolling interest x .20 Balance assigned to noncontrolling interest P 48,000

3. Consolidated net income is P143,000. None of the 20x4 net income of TT Company was earned after the date of purchase and, therefore, none can be included in consolidated net income.

4. Consolidate net income would be P178,000 [P143,000 + (P195,000 - P160,000)].

Problem VIII

Requirements 1 to 4:Date of Acquisition – January 1, 20x4

Fair value of Subsidiary (100%) Consideration transferred: Cash P 360,000 Notes payable 105,000 P 465,000Less: Book value of stockholders’ equity of S: Common stock (P200,000 x 100%)………………. P 240,000 Retained earnings (P100,000 x 100%)………... 120,000 360,000Allocated excess (excess of cost over book value)….. P 105,000Less: Over/under valuation of assets and liabilities: Increase in inventory (P5,000 x 100%)……………… P 6,000 Increase in land (P6,000 x 100%)……………………. 7,200 Increase in equipment (P80,000 x 100%) 96,000 Decrease in buildings (P20,000 x 100%)………..... ( 24,000) Decrease in bonds payable (P4,000 x 100%)…… 4,800 90,000Positive excess: Goodwill (excess of cost over fair value)………………………………………………... P 15,000

The over/under valuation of assets and liabilities are summarized as follows:S Co.

Book valueS Co.

Fair value (Over) Under

Valuation Inventory………………….…………….. P 24,000 P 30,000 P 6,000Land……………………………………… 48,000 55,200 7,200Equipment (net)......... 84,000 180,000 96,000Buildings (net) 168,000 144,000 (24,000)Bonds payable………………………… (120,000) ( 115,200) 4,800Net……………………………………….. P 204,000 P 294,000 P 90,000

The buildings and equipment will be further analyzed for consolidation purposes as follows:S Co.

Book valueS Co.

Fair value Increase

(Decrease)Equipment .................. 180,000 180,000 0Less: Accumulated depreciation….. 96,000 - ( 96,000)Net book value………………………... 84,000 180,000 96,000

S Co.Book value

S Co.Fair value (Decrease)

Buildings................ 360,000 144,000 ( 216,000)Less: Accumulated depreciation….. 192,000 - ( 192,000)Net book value………………………... 168,000 144,000 ( 24,000)


Over/under

Life

Annual Amount

Current Year(20x4) 20x5

InventoryP

6,000 1P

6,000 P 6,000P -

Subject to Annual Amortization

Equipment (net)......... 96,000 8 12,000 12,000 12,000

Buildings (net)(24,00

0) 4 ( 6,000) ( 6,000) (6,000)

Bonds payable… 4,80

0 4 1,20

0 1,200 1,20

0P

13,200 P 13,200 P 7,200

20x4 : First Year after Acquisition Parent Company Cost Model Entry

January 1, 20x4:(1) Investment in S Company…………………………………………… 465,000 Cash……………………………………………………………………..

360,000

Notes payable…………………………………… 105,000 Acquisition of S Company.

January 1, 20x4 – December 31, 20x4:(2) Cash……………………… 36,000 Dividend income (P36,000 x 100%)……………. 36,000 Record dividends from S Company.

On the books of S Company, the P36,000 dividend paid was recorded as follows: Dividends paid………… 36,000 Cash……. 36,000 Dividends paid by S Co..

Consolidation Workpaper – First Year after Acquisition

(E1) Common stock – S Co………………………………………… 240,000 Retained earnings – S Co…………………………………… 120,000 Investment in S Co…………………………………………… 360,000 To eliminate intercompany investment and equity accounts of subsidiary on date of acquisition. ; and to establish non-controlling interest (in net assets of subsidiary) on date of acquisition.

(E2) Inventory………………………………………………………………….

6,000

Accumulated depreciation – equipment……………….. 96,000 Accumulated depreciation – buildings………………….. 192,000 Land……………………………………………………………………….

7,200

Discount on bonds payable………………………………………….

4,800

Goodwill…………………………………………………………………. 15,000 Buildings……………………………………….. 216,000 Investment in S Co………………………………………………. 105,000 To allocate excess of cost over book value of identifiable assets acquired, with remainder to goodwill(E3) Cost of Goods Sold……………. 6,000 Depreciation expense……………………….. 6,000 Accumulated depreciation – buildings………………….. 6,000 Interest expense………………………………… 1,200 Goodwill impairment loss 3,600 Inventory………………………………………………………….. 6,000 Accumulated depreciation – equipment……………….. 12,000 Discount on bonds payable………………………… 1,200 Goodwill…………….. 3,600 To provide for 20x4 impairment loss and depreciation and amortization on differences between acquisition date fair value and book value of Son’s identifiable assets and liabilities as follows:

Cost of Goods Sold

Depreciation/Amortization

ExpenseAmortizatio

n-Interest

Inventory sold

P 6,000

Equipment P12,000Buildings ( 6,000)Bonds payable

_______ _______ P 1,200

Totals P 6,000 P 6,000 P1,200

(E4) Dividend income - P………. 36,000 Dividends paid – S…………………… 36,000 To eliminate intercompany dividends and non-controlling interest share of dividends.

Worksheet for Consolidated Financial Statements, December 31, 20x4. Cost Model100%-Owned Subsidiary December 31, 20x4 (First Year after Acquisition)

Income Statement P Co S Co. Dr. Cr. ConsolidatedSales P480,000 P240,000 P 720,000

Dividend income 36,000 -(4) 36,000

_________

Total Revenue P516,000 P240,000 P 720,000

Cost of goods sold P204,000 P138,000(3) 6,000

P 348,000

Depreciation expense 60,000 24,000(3) 6,000

90,000

Interest expense - -(3) 1,200

1,200

Goodwill impairment loss(3) 3,600

3,600

Other expenses 48,000 18,000 66,000 Total Cost and Expenses P312,000 P180,000 P508,800Net Income to Retained Earnings P204,000 P 60,000 P211,200

Statement of Retained EarningsRetained earnings, 1/1 P Company P360,000 P 360,000

S Company P120,000(1) 120,000

Net income, from above 204,000 60,000 211,200 Total P564,000 P180,000 P571,200Dividends paid P Company 72,000 72,000

S Company - 36,000(4) 36,000 ________

Retained earnings, 12/31 to Balance Sheet P492,000 P144,000 P 499,200

Balance Sheet

Cash……………………….P

147,000 P 90,000 P 237,000Accounts receivable…….. 90,000 60,000 150,000

Inventory…………………. 120,000 90,000(2) 6,000

(3) 6,000 210,000

Land……………………………. 210,000 48,000(2) 7,200 265,200

Equipment 240,000 180,000 420,000Buildings 720,000 540,000 (2) 216,000 1,044,000

Discount on bonds payable(2) 4,800 (3) 1,200 3,600

Goodwill……………………(2) 15,000 (3) 3,600 11,400

Investment in S Co……… 465,000 (1) 360,000(2) 105,00

0 -

Total P1,992,000P1,008,0

00 P2,341,200

Accumulated depreciation - equipment P 135,000 P 96,000

(2) 96,000

(3) 12,000 P 147,000

Accumulated depreciation - buildings

405,000 288,000

(2) 192,000

(3) 6,000 495,000

Accounts payable…………… 120,000 120,000 240,000Bonds payable………………… 240,000 120,000 360,000Common stock, P10 par……… 600,000 600,000

Common stock, P10 par……… 240,000(1) 240,000

Retained earnings, from above ___590,400 144,000 499,200

Total P1,992,00

0P1,008,0

00P 736,200

P 736,200 P2,341,200

20x5: Second Year after AcquisitionParent Company Cost Model Entry

Only a single entry is recorded by the parent in 20x5 in relation to its subsidiary investment:January 1, 20x5 – December 31, 20x5: Cash……………………… 48,000 Dividend income (P48,000 x 100%)……………. 48,000 Record dividends from S Company.

On the books of S Company, the P40,000 dividend paid was recorded as follows: Dividends paid………… 48,000 Cash 48,000 Dividends paid by S Co..

Consolidation Workpaper – Second Year after Acquisition(E1) Investment in S Company………………………… 24,000 Retained earnings – P Company……………………… 24,000 To provide entry to convert from the cost method to the equity method or the entry to establish reciprocity at the beginning of the year, 1/1/20x5.

Retained earnings – S Company, 1/1/20x5 P144,000Retained earnings – S Company, 1/1/20x4 120,000Increase in retained earnings…….. P 24,000Multiplied by: Controlling interest % 100%Retroactive adjustment P 24,000

(E2) Common stock – S Co………………………………………… 240,000 Retained earnings – S Co., 1/1/20x5 144,000 Investment in S Co ………………………… 384,000 To eliminate intercompany investment and equity accounts of subsidiary and to establish non-controlling interest (in net assets of subsidiary) on January 1, 20x5.

(E3) Inventory………………………………………………………………….

6,000


7,200


4,800

Goodwill…………………………………………………………………. 15,000 Buildings……………………………………….. 216,000 Investment in S Co………………………………………………. 105,000 To allocate excess of cost over book value of identifiable assets acquired, with remainder to goodwill; and to establish non- controlling interest (in net assets of subsidiary) on January 1, 20x5.

(E4) Retained earnings – P Company, 1/1/20x5 (P16,800 x 100%) 16,800 Depreciation expense……………………….. 6,000 Accumulated depreciation – buildings………………….. 12,000 Interest expense………………………………… 1,200 Inventory………………………………………………………….. 6,000 Accumulated depreciation – equipment……………….. 24,000 Discount on bonds payable………………………… 2,400 Goodwill…………………………………… 3,600 To provide for years 20x4 and 20x5 depreciation and amortization on differences between acquisition date fair value and book value of S’s identifiable assets and liabilities as follows: Year 20x4 amounts are debited to P’s retained earnings Year 20x5 amounts are debited to respective nominal accounts..

(20x4)Retaine

d earnings

,


expenseAmortizatio

n-Interest

Inventory sold P 6,000Equipment 12,000 P 12,000Buildings (6,000) ( 6,000)Bonds payable 1,200 P 1,200Impairment loss 3,60

0Totals P 16,800 P 6,000 P1,200

(E5) Dividend income - P………. 48,000 Dividends paid – S…………………… 48,000 To eliminate intercompany dividends and non-controlling interest share of dividends.

(E6) Non-controlling interest in Net Income of Subsidiary…………

16,560

Non-controlling interest ………….. 16,560 To establish non-controlling interest in subsidiary’s adjusted net income for 20x5 as follows:

Net income of subsidiary…………………….. P 90,000

Amortization of allocated excess [(E4)]…... ( 7,200)P 82,000

Multiplied by: Non-controlling interest %..........

20%

Non-controlling Interest in Net Income (NCINI)

P 16,560

Worksheet for Consolidated Financial Statements, December 31, 20x5. Cost Model100%-Owned Subsidiary

Income Statement P Co. S Co. Dr. Cr. ConsolidatedSales P540,000 P360,000 P 900,000


___________

Total Revenue P588,000 P360,000 P 900,000Cost of goods sold P216,000 P192,000 P 408,000


90,000


1,200

Other expenses 72,000 54,000 126,000Goodwill impairment loss - - - Total Cost and Expenses P348,000 P270,000 P 625,200

Net Income to Retained Earnings P240,000P

90,000P 274,800

Statement of Retained EarningsRetained earnings, 1/1

P Company P492,000(4) 16,800

(1) 24,000 P 499,200

S Company P144,000(2) 144,000

Net income, from above 240,000 90,000 274,800 Total P732,000 P234,000 P 774,000Dividends paid P Company 72,000 72,000

S Company - 48,000(5) 48,000 _ ________


Balance Sheet

Cash……………………….P

189,000P

102,000 P 291,000Accounts receivable…….. 180,000 960,000 276,000

Inventory…………………. 216,000 108,000(3) 6,000 (4) 6,000 324,000

Land……………………………. 252,000 48,000(3) 7,200 265,200



Goodwill……………………(3) 15,000 (4) 3,600 11,400

Investment in S Co……… 465,000 (1) 24,000

(2) 384,000(3) 105,00

0 -

Total P2,220,000P1,074,0

00 P2,634,000

Accumulated depreciation - equipment P 150,000

P 102,000

(3) 96,000

(4) 24,000 P 180,000


450,000 306,000

(3) 192,000 (4) 12,000 552,000



Retained earnings, from above 660,000 186,000 702,000

Total P2,220,000

P1,074,000

P 783,120

P 783,120 P2,634,000

5. 1/1/20x4 a. On date of acquisition the retained earnings of P should always be considered as the

consolidated retained earnings, thus:Consolidated Retained Earnings, January 1, 20x4 Retained earnings - P Company, January 1, 20x4 (date of acquisition) P360,000

b. NCI – not applicable, since it is 100% owned subsidiary

c. Stockholders’ Equity Common stock, P10 par P 600,000 Retained earnings 360,000Total Stockholders’ Equity (Total Equity) P 960,000

6. 12/31/20x4: a. P211,200 – same with CNI since there is no NCI.

Consolidated Net Income for 20x4 Net income from own/separate operations: Pa Company P168,000 S Company 60,000 Total P228,000 Less: Amortization of allocated excess P 13,200 Goodwill impairment loss 3,600 16,800 Consolidated Net Income for 20x4 P211,200

b. NCINI – not applicable, since it is 100% owned subsidiary c. P211,200 – same with NCI-CNI since there is no NCI. d.

Consolidated Retained Earnings, December 31, 20x4 Retained earnings - P Company, January 1, 20x4 (date of acquisition) P360,000 Add: Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of P for 20x4 or Consolidated Net Income (CNI)* 211,200 Total P571,200 Less: Dividends paid – P Company for 20x4 72,000 Consolidated Retained Earnings, December 31, 20x4 P499,200

*since it is a 100%-owned subsidiary, Controlling Interest in Net Income is the same with Consolidated Net Income.

e. NCI – not applicable, since it is 100% owned subsidiary

f.Stockholders’ Equity Common stock, P10 par P 600,000 Retained earnings 499,200Total Stockholders’ Equity (Total Equity) P

1,099,200

12/31/20x5 a. P274,800 – same with CNI since there is no NCI.

Consolidated Net Income for 20x5 Net income from own/separate operations P Company P192,000 S Company 90,000 Total P282,000 Less: Amortization of allocated excess P 7,200 Goodwill impairment loss 0 7,200 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent or CNI P274,800

b. NCINI – not applicable, since it is 100% owned subsidiary c. P274,800 – same with NCI-CNI since there is no NCI.

d.Consolidated Retained Earnings, December 31, 20x5 Retained earnings - P Company, January 1, 20x5 (cost model P492,000 Adjustment to convert from cost model to equity method for purposes of consolidation or to establish reciprocity:/P’s share in adjusted net increased in subsidiary’s retained earnings: Retained earnings – S, January 1, 20x5 P 144,000 Less: Retained earnings – S, January 1, 20x4 120,000 Increase in retained earnings since date of acquisition P 24,000 Less: Amortization of allocated excess – 20x4 16,800

P 7,200 Multiplied by: Controlling interests %................... 100% 7,200 Consolidated Retained earnings, January 1, 20x5 P 499,200 Add: Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of P for 20x5 or CNI

274,800

Total P774,000 Less: Dividends paid – P Company for 20x5 72,000 Consolidated Retained Earnings, December 31, 20x5 P702,000

e. NCI – not applicable, since it is 100% owned subsidiaryf.

Stockholders’ Equity Common stock, P10 par P 600,000 Retained earnings 702,000Total Stockholders’ Equity (Total Equity) P1,302,000

Problem IX – 80% Partial Goodwill - Cost ModelRequirements 1 to 4:Schedule of Determination and Allocation of Excess (Partial-goodwill) Date of Acquisition – January 1, 20x4

Fair value of Subsidiary (80%) Consideration transferred……………………………….. P 372,000Less: Book value of stockholders’ equity of S: Common stock (P240,000 x 80%)……………………. P 192,000 Retained earnings (P120,000 x 80%)………………... 96,000 288,000Allocated excess (excess of cost over book value)….. P 84,000Less: Over/under valuation of assets and liabilities:

Increase in inventory (P6,000 x 80%)……………… P 4,800 Increase in land (P7,200 x 80%)……………………. 5,760 Increase in equipment (P96,000 x 80%) 76,800 Decrease in buildings (P24,000 x 80%)………..... ( 19,200) Decrease in bonds payable (P4,800 x 80%)…… 3,840 72,000Positive excess: Partial-goodwill (excess of cost over fair value)………………………………………………... P 12,000


Book valueS Co.




Book valueS Co.

Fair value Increase


S Co. Book value




Over/Under

Life

Annual Amount


InventoryP

6,000 1P

6,000 P 6,000P -

Subject to Annual Amortization Equipment (net)......... 96,000 8 12,000 12,000 12,000


0) 4 ( 6,000) ( 6,000) (6,000)


0 4 1,20

0 1,200 1,20

0P

13,200 P 13,200 P 7,200

The goodwill impairment loss of P3,125 based on 100% fair value would be allocated to the controlling interest and the NCI based on the percentage of total goodwill each equity interest received. For purposes of allocating the goodwill impairment loss, the full-goodwill is computed as follows:

Fair value of Subsidiary (100%)

Consideration transferred: Cash (80%) P 372,000 Fair value of NCI (given) (20%) 93,000 Fair value of Subsidiary (100%) P 465,000Less: Book value of stockholders’ equity of Son (P360,000 x 100%) __360,000Allocated excess (excess of cost over book value)….. P 105,000Add (deduct): (Over) under valuation of assets and liabilities (P90,000 x 100%) 90,000Positive excess: Full-goodwill (excess of cost over fair value)………………………………………………... P 15,000

20x4: First Year after Acquisition Parent Company Cost Model Entry


372,000

Acquisition of S Company.January 1, 20x4 – December 31, 20x4:(2) Cash……………………… 28,800 Dividend income (P36,000 x 80%)……………. 28,800 Record dividends from S Company.

On the books of S Company, the P30,000 dividend paid was recorded as follows: Dividends paid………… 36,000 Cash……. 36,000 Dividends paid by S Co..

Consolidation Workpaper – Year of Acquisition (E1) Common stock – S Co………………………………………… 240,000 Retained earnings – S Co…………………………………… 120.000 Investment in S Co…………………………………………… 288,000 Non-controlling interest (P360,000 x 20%)………………………..

72,000

To eliminate intercompany investment and equity accounts of subsidiary on date of acquisition; and to establish non-controlling interest (in net assets of subsidiary) on date of acquisition.

(E2) Inventory………………………………………………………………….

6,000


7,200


4,800

Goodwill………………………………………………………………….

12,000

Buildings……………………………………….. 216,000 Non-controlling interest (P90,000 x 20%)………………………..

18,000

Investment in S Co………………………………………………. 84,000 To allocate excess of cost over book value of identifiable assets acquired, with remainder to goodwill; and to establish non- controlling interest (in net assets of subsidiary) on date of acquisition.

(E3) Cost of Goods Sold……………. 6,000 Depreciation expense……………………….. 6,000 Accumulated depreciation – buildings………………….. 6,000 Interest expense………………………………… 1,200

Goodwill impairment loss……………………………………….

3,000

Inventory………………………………………………………….. 6,000 Accumulated depreciation – equipment……………….. 12,000 Discount on bonds payable………………………… 1,200 Goodwill…………………………………… 3,000 To provide for 20x4 impairment loss and depreciation and amortization on differences between acquisition date fair value and book value of Son’s identifiable assets and liabilities as follows:

Cost of Goods Sold


expenseAmortizatio

n-Interest

Total

Inventory sold P 6,000

Equipment P 12,000Buildings ( 6,000)Bonds payable _______ _______ P 1,200Totals P 6,000 P 6,000 P1,200 13,20

0

It should be observed that the goodwill computed above was proportional to the controlling interest of 80% and non-controlling interest of 20% computed as follows:

Value % of TotalGoodwill applicable to parent………………… P12,000 80.00%Goodwill applicable to NCI…………………….. 3,000 20.00%Total (full) goodwill……………………………….. P15,000 100.00%

Therefore, the goodwill impairment loss of P3,125 based on 100% fair value or full-goodwill would be allocated as follows:

Value % of TotalGoodwill impairment loss attributable to P or controlling Interest

P 3,000 80.00%

Goodwill impairment loss applicable to NCI…………………….. 750 20.00%Goodwill impairment loss based on 100% fair value or full- Goodwill P 3,750 100.00%

(E4) Dividend income - P………. 28,800 Non-controlling interest (P36,000 x 20%)……………….. 7,200 Dividends paid – S…………………… 36,000 To eliminate intercompany dividends and non-controlling interest share of dividends.


9,360


Net income of subsidiary…………………….. P 60,000Amortization of allocated excess [(E3)]…... ( 13,200)

P 46,800 Multiplied by: Non-controlling interest %..........

20%


P 9,360

Worksheet for Consolidated Financial Statements, December 31, 20x4. Cost Model (Partial-goodwill)80%-Owned Subsidiary December 31, 20x4 (First Year after Acquisition)



_________



P 348,000


90,000


1,200

Other expenses 48,000 18,000 66,000

Goodwill impairment loss - -(3) 3,000

3,000

Total Cost and Expenses P310,000 P180,000 P508,200Net Income P196,800 P 60,000 P211,800

NCI in Net Income - Subsidiary - -(5) 9,360

( 9,360)

Net Income to Retained Earnings P196,800 P 60,000 P202,440


P Company P360,000P

360,000

S Company P120,000(1) 120,000


S Company - 36,000(4) 36,000 _ ________

Retained earnings, 12/31 to Balance Sheet P484,800 P144,000

P 490,440

Balance Sheet

Cash……………………….P


Inventory…………………. 120,000 90,000(2) 6,000

(3) 6,000 210,000

Land……………………………. 210,000 48,000(2) 7,200 265,200



Goodwill……………………(2) 12,000

(3) 3,000 9,000

Investment in S Co……… 372,000 (4) 288,000(5) 84,000 -

Total P1,984,800P1,008,0

00 P2,424,600


(2) 96,000

(3) 12,000 P147,000


405,000 288,000

(2) 192,000

(3) 6,000 495,000



Retained earnings, from above 484,800 144,000 490,440Non-controlling interest………… _________ ______

___(4)

7,200(1 ) 72,000 (2)

____92,160

__________

18,000(5) 9,360

Total P1,984,800

P1,008,000

P 745,560

P 745,560 P2,424,600

20x5: Second Year after AcquisitionP Co. S Co.

Sales P 540,000 P 360,000Less: Cost of goods sold 216,000 192,000Gross profit P 324,000 P 168,000Less: Depreciation expense 60,000 24,000 Other expense 72,000 54,000Net income from its own separate operations P 192,000 P 90,000Add: Dividend income 38,400 -Net income P 230,400 P 90,000Dividends paid P 72,000 P 48,000

No goodwill impairment loss for 20x5.

Parent Company Cost Model EntryOnly a single entry is recorded by the P in 20x5 in relation to its subsidiary investment:

January 1, 20x5 – December 31, 20x5: Cash……………………… 38,400 Dividend income (P48,000 x 80%)……………. 38,400 Record dividends from S Company.

Consolidation Workpaper – Second Year after AcquisitionThe working paper eliminations (in journal entry format) on December 31, 20x5, are as follows:

(E1) Investment in S Company………………………… 19,200 Retained earnings – P Company……………………… 19,200 To provide entry to convert from the cost method to the equity method or the entry to establish reciprocity at the beginning of the year, 1/1/20x5, computed as follows:


(E2) Common stock – S Co………………………………………… 240,000 Retained earnings – S Co., 1/1/20x5 144,000 Investment in S Co (P384,000 x 80%)…………………………

307,200

Non-controlling interest (P384,000 x 20%)………………………..

76,800

To eliminate intercompany investment and equity accounts of subsidiary and to establish non-controlling interest (in net assets of subsidiary) on January 1, 20x5.

(E3) Inventory………………………………………………………………….

6,000


7,200


4,800

Goodwill……………………………………………………………… 12,000

…. Buildings……………………………………….. 216,000 Non-controlling interest (P90,000 x 20%) 18,000 Investment in S Co………………………………………………. 84,000 To allocate excess of cost over book value of identifiable assets acquired, with remainder to goodwill; and to establish non- controlling interest (in net assets of subsidiary) on January 1, 20x5.(E4) Retained earnings – P Company, 1/1/20x5 [(P13,200 x 80%) + P3,000, impairment loss on partial-goodwill] 13,560 Non-controlling interests (P13,200 x 20%)…………………….

2,640

Depreciation expense……………………….. 6,000 Accumulated depreciation – buildings………………….. 12,000 Interest expense………………………………… 1,200 Inventory………………………………………………………….. 6,000 Accumulated depreciation – equipment……………….. 24,000 Discount on bonds payable………………………… 2,400 Goodwill…………………………………… 3,000 To provide for years 20x4 and 20x5 depreciation and amortization on differences between acquisition date fair value and book value of S’s identifiable assets and liabilities as follows: Year 20x4 amounts are debited to P’s retained earnings & NCI; Year 20x5 amounts are debited to respective nominal accounts.

(20x4)Retaine

d earnings

,


expenseAmortizatio

n-Interest

Inventory sold P 6,000Equipment 12,000 P 12,000Buildings (6,000) ( 6,000)Bonds payable 1,20

0 ________ P 1,200

Sub-total P13,200 P 6,000 P 1,200Multiplied by: 80%To Retained earnings P

10,560Impairment loss 3,00

0Total P 13,560



16,560



P 82,800Multiplied by: Non-controlling interest %..........

20%

Non-controlling Interest in Net Income (NCINI

P 16,560

Worksheet for Consolidated Financial Statements, December 31, 20x5. Cost Model (Partial-goodwill)80%-Owned Subsidiary December 31, 20x5 (Second Year after Acquisition)



___________



90,000


1,200


Net Income P230,400P

90,000P 274,800


( 16,560)


90,000P 258,240


P Company P484,800(4) 13,56

0 (1) 19,200 P 490,440

S CompanyP

144,000

(2) 144,000


S Company - 48,000(5) 48,000 _ ________


Balance Sheet

Cash……………………….P

265,200P


Inventory…………………. 216,000 108,000(3) 6,000 (4) 6,000 324,000

Land……………………………. 210,000 48,000(3) 7,200 265,200

Equipment 240,000 180,000 420,000

Buildings 720,000 540,000(3) 216,000 1,044,000

Discount on bonds payable(3) 4,800

(4) 2,400 2,400

Goodwill……………………(3) 12,000

(4) 3,000 9,000

Investment in S Co……… 372,000(1) 19,200

(2) 307,200(3) 84,000 -

Total P2,203,200P1,074,0

00 P2,707,800


P 102,000

(3) 96,000

(4) 24,000 P180,000


450,000 306,000 (3) 192,000

552,000

(4) 12,000




Non-controlling interest…………

___ _____

_________

(5) 9,600

(4) 2,640

__________

(2 ) 76,800 (3) 18,000(6) 16,560 ____99,120

Total P2,203,200

P1,074,000

P 821,160

P 821,160 P2,707,800

5. 1/1/20x4 a. On date of acquisition the retained earnings of P should always be considered as the


b.Non-controlling interest (partial-goodwill), January 1, 20x4 Common stock – S Company, January 1, 20x4…… P 240,000 Retained earnings – S Company, January 1, 20x4 120,000 Stockholders’ equity – S Company, January 1, 20x4 P 360,000 Adjustments to reflect fair value - (over) undervaluation of assets and liabilities, date of acquisition (January 1, 20x4) 90,000 Fair value of stockholders’ equity of subsidiary, January 1, 20x4…… P450,000 Multiplied by: Non-controlling Interest percentage…………... 20 Non-controlling interest (partial-goodwill)………………………………….. P 90,000

c.Consolidated SHE: Stockholders’ Equity Common stock, P10 par P 600,000 Retained earnings 360,000 P’s Stockholders’ Equity / CI - SHE P 960,000 NCI, 1/1/20x4 ___90,000 Consolidated SHE, 1/1/20x4 P1,050,000

6.Note: The goodwill recognized on consolidation purely relates to the P’s share. NCI is measured as a proportion of identifiable assets and goodwill attributable to NCI share is not recognized.

12/31/20x4: a. CI-CNI

Consolidated Net Income for 20x4 Net income from own/separate operations P Company P168,000 S Company 60,000 Total P228,000 Less: Non-controlling Interest in Net Income* P 9,360 Amortization of allocated excess (refer to amortization above) 13,200 Goodwill impairment (impairment under partial-goodwill approach) 3,000 25,560 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent………….. P202,440 Add: Non-controlling Interest in Net Income (NCINI) 9,360 Consolidated Net Income for 20x4 P211.800

b. NCI-CNI*Non-controlling Interest in Net Income (NCINI) for 20x4 Net income of S Company P 60,000 Less: Amortization of allocated excess / goodwill impairment (refer to amortization table above) 13,200

P 46,800 Multiplied by: Non-controlling interest %.......... 20% Non-controlling Interest in Net Income (NCINI) P 9,360

c. CNI, P211,800 – refer to (a) d. On subsequent to date of acquisition, consolidated retained earnings would be

computed as follows:Consolidated Retained Earnings, December 31, 20x4 Retained earnings - P Company, January 1, 20x4 (date of acquisition) P360,000 Add: Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent for 20x4 202,440 Total P562,440 Less: Dividends paid – P Company for 20x4 72,000 Consolidated Retained Earnings, December 31, 20x4 P490,440

e. Non-controlling interest (partial-goodwill), December 31, 20x4 Common stock – S Company, December 31, 20x4…… P 240,000 Retained earnings – S Company, December 31, 20x4 Retained earnings – S Company, January 1, 20x4 P120,000 Add: Net income of S for 20x4 60,000 Total P180,000 Less: Dividends paid – 20x4 36,000 144,000 Stockholders’ equity – S Company, December 31, 20x4 P 384,000 Adjustments to reflect fair value - (over) undervaluation of assets and liabilities, date of acquisition (January 1, 20x4) 90,000 Amortization of allocated excess (refer to amortization above) – 20x4 ( 13,200) Fair value of stockholders’ equity of subsidiary, December 31, 20x4…… P460,000 Multiplied by: Non-controlling Interest percentage…………... 20 Non-controlling interest (partial-goodwill)………………………………….. P 92,160

f.Consolidated SHE: Stockholders’ Equity Common stock, P10 par P 600,000 Retained earnings 490,440 P’s Stockholders’ Equity / CI – SHE, 12/31/20x4 P1,090,440 NCI, 12/31/20x4 ___92,160 Consolidated SHE, 12/31/20x4 P1,182,600

12/31/20x5: a. CI-CNI

Consolidated Net Income for 20x5 Net income from own/separate operations: P Company P192,000 S Company 90,000 Total P282,000 Less: Non-controlling Interest in Net Income* P16,560 Amortization of allocated excess (refer to amortization above) __7,200 23,760 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent………….. P258,240 Add: Non-controlling Interest in Net Income (NCINI) 16,560 Consolidated Net Income for 20x5 P274,800

b. NCI-CNI*Non-controlling Interest in Net Income (NCINI) for 20x5 Net income of S Company P 90,000 Less: Amortization of allocated excess / goodwill impairment for 20x5 (refer to amortization table above) 80,400

P 82,800 Multiplied by: Non-controlling interest %.......... 20% Non-controlling Interest in Net Income (NCINI) for 20x5 P 16,560

c. CNI, P274,800 – refer to (a) d. On subsequent to date of acquisition, consolidated retained earnings would be computed as follows:

Consolidated Retained Earnings, December 31, 20x5 Retained earnings - P Company, January 1, 20x5 (cost model P484,800 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 – S, January 1, 20x5 P 144,000 Less: Retained earnings – S, January 1, 20x4 120,000 Increase in retained earnings since date of acquisition P 24,000 Less: Amortization of allocated excess – 20x4 13,200

P 10,800 Multiplied by: Controlling interests %................... 80% P 8,640 Less: Goodwill impairment loss (full-goodwill), net (P3,750– P750)* or (P3, 750 x 80%)

3,000 5,640

Consolidated Retained earnings, January 1, 20x5 P 490,440 Add: Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of P for 20x5

258,240


*this procedure would be more appropriate, instead of multiplying the full-goodwill impairment loss of P3,750 by 80%. There might be situations where the controlling interests on goodwill impairment loss would not be proportionate to NCI acquired.

e.Non-controlling interest (partial-goodwill), December 31, 20x5 Common stock – S Company, December 31, 20x5…… P 240,000 Retained earnings – S Company, December 31, 20x5 Retained earnings – S Company, January 1, 20x5 P14,000 Add: Net income of S for 20x5 90,000 Total P234,000 Less: Dividends paid – 20x5 48,000 186,000 Stockholders’ equity – S Company, December 31, 20x5 P 426,000 Adjustments to reflect fair value - (over) undervaluation of assets and liabilities, date of acquisition (January 1, 20x4) 90,000 Amortization of allocated excess (refer to amortization above) : 20x4 P

13,200 20x5 7,200 ( 20,400) Fair value of stockholders’ equity of S, December 31, 20x5…… P 495,600 Multiplied by: Non-controlling Interest percentage…………... 20 Non-controlling interest (partial goodwill)………………………………….. P 99,120

f.Consolidated SHE: Stockholders’ Equity Common stock, P10 par P 600,000 Retained earnings 676,680 Parent’s Stockholders’ Equity / CI – SHE, 12/31/20x5 P1,276,680 NCI, 12/31/20x5 ___99,120 Consolidated SHE, 12/31/20x5 P1,375,800

Problem X – 80% Full Goodwill – Cost ModelRequirements 1 to 4:Schedule of Determination and Allocation of Excess Date of Acquisition – January 1, 20x4

Fair value of Subsidiary (80%) Consideration transferred (80%)…………….. P 372,000 Fair value of NCI (given) (20%)……………….. 93,000 Fair value of Subsidiary (100%)………. P 465,000Less: Book value of stockholders’ equity of Son: Common stock (P240,000 x 100%)………………. P 240,000 Retained earnings (P120,000 x 100%)………... 120,000 360,000Allocated excess (excess of cost over book value)….. P 105,000

Less: Over/under valuation of assets and liabilities: Increase in inventory (P6,000 x 100%)……………… P 6,000 Increase in land (P7,200 x 100%)……………………. 7,200 Increase in equipment (P96,000 x 100%) 96,000 Decrease in buildings (P24,000 x 100%)………..... ( 24,000) Decrease in bonds payable (P4,800 x 100%)…… 4,800 90,000Positive excess: Full-goodwill (excess of cost over fair value)………………………………………………... P 15,000


Over/under

Life

Annual Amount


InventoryP

6,000 1P

6,000 P 6,000P -



0) 4 ( 6,000) ( 6,000) (6,000)


0 4 1,20

0 1,200 1,20

0P

13,200 P 13,200 P 7,200

20x4: First Year after Acquisition Parent Company Cost Model Entry


372,000

Acquisition of S Company.

January 1, 20x4 – December 31, 20x4:(2) Cash……………………… 28,800 Dividend income (P36,000x 80%)……………. 28,800 Record dividends from S Company.

No entries are made on the P’s books to depreciate, amortize or write-off the portion of the allocated excess that expires during 20x4.

Consolidation Workpaper – First Year after Acquisition (E1) Common stock – S Co………………………………………… 240,000 Retained earnings – S Co…………………………………… 120.000 Investment in S Co…………………………………………… 288,000 Non-controlling interest (P360,000 x 20%)………………………..

72,000

(E2) Inventory………………………………………………………………….

6,000


7,200


4,800

Goodwill………………………………………………………………….

15,000

Buildings……………………………………….. 216,000 Non-controlling interest (P90,000 x 20%) + [(P15,000, full – P12,000, partial goodwill)]…………

21,000

Investment in S Co………………………………………………. 84,000

(E3) Cost of Goods Sold……………. 6,000 Depreciation expense……………………….. 6,000 Accumulated depreciation – buildings………………….. 6,000 Interest expense………………………………… 1,200 Goodwill impairment loss……………………………………….

3,750

Inventory………………………………………………………….. 6,000 Accumulated depreciation – equipment……………….. 12,000 Discount on bonds payable………………………… 1,200 Goodwill…………………………………… 3,750

Cost of Goods Sold

Depreciation/ AmortizationExpense

Amortization

-InterestInventory sold P 6,000Equipment P12,000Buildings ( 6,000)Bonds payable _______ _______ P 1,200Totals P 6,000 P 6,000 P1,200

(E4) Dividend income - P………. 28,800 Non-controlling interest (P36,000 x 20%)……………….. 7,200 Dividends paid – S…………………… 36,000


8,610

Non-controlling interest ………….. 8,610Net income of subsidiary…………………….. P 60,000Amortization of allocated excess [(E3)]…... ( 13,200)


20%

P 9,360Less: Non-controlling interest on impairment loss on full-goodwill (P3,125 x 20%) or (P3,125 impairment on full-goodwill less P2,500, impairment on partial-goodwill)*

750


P 8,610

*this procedure would be more appropriate, instead of multiplying the full-goodwill impairment loss of P3,125 by 20%. There might be situations where the NCI on goodwill impairment loss would not be proportionate to NCI acquired (refer to Illustration 15-6).

Worksheet for Consolidated Financial Statements, December 31, 20x4. Cost Model (Full-goodwill)80%-Owned Subsidiary December 31, 20x4 (First Year after Acquisition)



_________



P 348,000


90,000


1,200

Other expenses 48,000 18,000 66,000


3,750



( 8,610)

Net Income to Retained Earnings P196,800 P 60,000 P202,680Statement of Retained Earnings

Retained earnings, 1/1

P Company P360,000P

360,000

S Company P120,000(1) 120,000


S Company - 36,000(4) 36,000 _ ________

Retained earnings, 12/31 to Balance Sheet P484,800 P144,000

P 490,440

Balance Sheet

Cash……………………….P


Inventory…………………. 120,000 90,000(2) 6,000

(3) 6,000 210,000

Land……………………………. 210,000 48,000(2) 7,200 265,200



Goodwill……………………(2) 15,000 (3) 3,750 11,250

Investment in S Co……… 372,000 (3) 288,000(4) 84,000 -

Total P1,984,800P1,008,0

00 P2,426,850


(2) 96,000

(3) 12,000 P147,000


405,000 288,000

(5) 192,000

(6) 6,000 495,000



Retained earnings, from above 484,800 144,00

0 490,440


_________ ______

___

(7) 7,200

__________

(1 ) 72,000 (2) 21,000(5) 8,610 ____94,410

Total P1,984,800

P1,984,800

P 748,560

P 748,560 P2,426,850


Sales P 540,000 P 360,000Less: Cost of goods sold 216,000 192,000Gross profit P 324,000 P 168,000Less: Depreciation expense 60,000 24,000 Other expense 72,000 54,000Net income from its own separate operations P 192,000 P 90,000Add: Dividend income 38,400 -Net income P 230,400 P 90,000Dividends paid P 72,000 P 48,000


Parent Company Cost Model EntryOnly a single entry is recorded by the parent in 20x5 in relation to its subsidiary investment:

January 1, 20x5 – December 31, 20x5: Cash……………………… 38,400 Dividend income (P48,000x 80%)……………. 38,400 Record dividends from S Company.

Consolidation Workpaper – Second Year after Acquisition (E1) Investment in S Company………………………… 19,200 Retained earnings – P Company……………………… 19,200 To provide entry to convert from the cost method to the equity method or the entry to establish reciprocity at the beginning of the year, 1/1/20x5.


(E2) Common stock – S Co………………………………………… 240,000 Retained earnings – S Co., 1/1/20x5 144,000 Investment in S Co (P384,000 x 80%)…………………………

307,200

Non-controlling interest (P384,000 x 20%)………………………..

76,800

(E3) Inventory………………………………………………………………….

6,000


7,200


4,800

Goodwill………………………………………………………………….

15,000

Buildings……………………………………….. 216,000 Non-controlling interest (P90,000 x 20%) + [(P15,000, full – P12,000, partial goodwill)]…………

21,000


(E4) Retained earnings – P Company, 1/1/20x5 (P16,950 x 80%) 13,560 Non-controlling interests (P16,950 x 20%)…………………….

3,390

Depreciation expense……………………….. 6,000 Accumulated depreciation – buildings………………….. 12,000 Interest expense………………………………… 1,200 Inventory………………………………………………………….. 6,000

Accumulated depreciation – equipment……………….. 24,000 Discount on bonds payable………………………… 2,400 Goodwill…………………………………… 3,750

(20x4)Retaine

d earnings

,


expenseAmortizatio

n-Interest

Inventory sold P 6,000Equipment 12,000 P 12,000Buildings (6,000) ( 6,000)Bonds payable 1,200 P 1,200Impairment loss 3,75

0Totals P 16,950 P 6,000 P1,200Multiplied by: CI%.... 80

%To Retained earnings P13,560



16,560

Non-controlling interest ………….. 16,560


P 82,800Multiplied by: Non-controlling interest %..........

20%

P 16,560Less: NCI on goodwill impairment loss on full- Goodwill

0


P 16,560

Worksheet for Consolidated Financial Statements, December 31, 20x5. Cost Model (Full-goodwill)80%-Owned Subsidiary December 31, 20x5 (Second Year after Acquisition)



___________



90,000


1,200



90,000P 274,800


( 16,560)


90,000P 258,240


P Company P484,800(5) 13,56

0 (5) 19,200 P 490,440

S CompanyP

144,000

(6) 144,000


S Company - 48,000(5) 57,600 _ ________


Balance Sheet

Cash……………………….P

265,200P


Inventory…………………. 216,000 108,000(3) 6,000 (4) 6,000 324,000

Land……………………………. 210,000 48,000(3) 7,200 265,200

Equipment 240,000 180,000 420,000

Buildings 720,000 540,000(3) 216,000 1,044,000


(4) 2,400 2,400

Goodwill……………………(3) 15,000

(4) 3,750 11,250

Investment in S Co……… 372,000 (1) 19,200

(2) 307,200(7) 84,000 -

Total P2,203,200P1,074,0

00 P2,710,050


P 102,000

(3) 96,000

(4) 24,000 P180,000


450,000 306,000

(3) 192,000 (4) 12,000 552,000





___ _____

_________

(6) 9,600

(8) 3,390

__________

(2 ) 76,800 (3) 21,000(6) 16,560 ____101,370

Total P2,203,200P1,074,0

00P 824,910

P 824,910 P2,710,050

5. 1/1/20x4 a. On date of acquisition the retained earnings of parent should always be considered as the


b.Non-controlling interest (full-goodwill), January 1, 20x4 Common stock – S Company, January 1, 20x4…… P 240,000 Retained earnings – S Company, January 1, 20x4 120,000

Stockholders’ equity – S Company, January 1, 20x4 P 360,000 Adjustments to reflect fair value - (over) undervaluation of assets and liabilities, date of acquisition (January 1, 20x4) 90,000 Fair value of stockholders’ equity of S, January 1, 20x4…… P450,000 Multiplied by: Non-controlling Interest percentage…………... 20 Non-controlling interest (partial-goodwill)………………………………….. P 90,000 Add: NCI on full-goodwill (P15,000 – P12,000) ___3,000 Non-controlling interest (partial-goodwill)………………………………….. P 93,000

c.Consolidated SHE: Stockholders’ Equity Common stock, P10 par P 600,000 Retained earnings 360,000 Parent’s Stockholders’ Equity / CI - SHE P 960,000 NCI, 1/1/20x4 ___93,000 Consolidated SHE, 1/1/20x4 P1,053,000

6.Note: The goodwill recognized on consolidation purely relates to the parent’s share. NCI is measured as a proportion of identifiable assets and goodwill attributable to NCI share is not recognized.

12/31/20x4: a. CI-CNI – P202,440

Consolidated Net Income for 20x4 Net income from own/separate operations: P Company P168,000 S Company 60,000 Total P228,000 Less: Non-controlling Interest in Net Income* P 8,610 Amortization of allocated excess (refer to amortization above) 13,200 Goodwill impairment (impairment under full-goodwill approach) 3,750 25,560 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of P………….. P202,440 Add: Non-controlling Interest in Net Income (NCINI) 8,610 Consolidated Net Income for 20x4 P211.050

b. NCI-CNI – P8,610*Non-controlling Interest in Net Income (NCINI) for 20x4 Net income of S Company P 60,000 Less: Amortization of allocated excess (refer to amortization table above) 13,200

P 46,800 Multiplied by: Non-controlling interest %.......... 20% Non-controlling Interest in Net Income (NCINI) P 9,360 Less: Non-controlling int. on impairment loss on full-goodwill (P3,750 x 20%) or (P3,750 impairment on full-goodwill less P3,000, impairment on partial-goodwill)*

750

Non-controlling Interest in Net Income (NCINI) P 8,610*this procedure would be more appropriate, instead of multiplying the full-goodwill impairment loss of P3,750 by 20%. There might be situations where the NCI on goodwill impairment loss would not be proportionate to NCI acquired.

c. CNI, P211,050 – refer to (a) d. On subsequent to date of acquisition, consolidated retained earnings would be computed as

follows:Consolidated Retained Earnings, December 31, 20x4 Retained earnings - P Company, January 1, 20x4 (date of acquisition) P360,000

Add: Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent for 20x4 202,440 Total P562,440 Less: Dividends paid – P Company for 20x4 72,000 Consolidated Retained Earnings, December 31, 20x4 P490,440

e. Non-controlling interest (full-goodwill), December 31, 20x4 Common stock – S Company, December 31, 20x4…… P 240,000 Retained earnings – S Company, December 31, 20x4 Retained earnings – S Company, January 1, 20x4 P120,000 Add: Net income of S for 20x4 60,000 Total P180,000 Less: Dividends paid – 20x4 36,000 144,000 Stockholders’ equity – S Company, December 31, 20x4 P 384,000 Adjustments to reflect fair value - (over) undervaluation of assets and liabilities, date of acquisition (January 1, 20x4) 90,000 Amortization of allocated excess (refer to amortization above) – 20x4 ( 13,200) Fair value of stockholders’ equity of S, December 31, 20x4…… P460,800 Multiplied by: Non-controlling Interest percentage…………... 20 Non-controlling interest (partial-goodwill, 12/31/20x4………………………….. P 92,160 Add: Non-controlling interest on full goodwill , net of impairment loss, 12/31/x4: [(P15,000 full – P12,000, partial = P3,000) – P750 impairment loss

2,250

Non-controlling interest (full-goodwill), 12/31/20x4…………….. P 94,410


0 12/31/20x5: a. CI-CNI – P258,240

Consolidated Net Income for 20x5 Net income from own/separate operations P Company P192,000 S Company 90,000 Total P282,000 Less: Non-controlling Interest in Net Income* P16,560 Amortization of allocated excess (refer to amortization above) 7,200 Goodwill impairment (impairment under full-goodwill approach) 0 23,760 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent………….. P258,240 Add: Non-controlling Interest in Net Income (NCINI) 16,560 Consolidated Net Income for 20x5 P274,800

b. NCI-CNI – P16,560*Non-controlling Interest in Net Income (NCINI) for 20x5 Net income of S Company P 90,000 Less: Amortization of allocated excess / goodwill impairment for 20x5 (refer to amortization table above) 80,400


c. CNI, P274,800 – refer to (a) d. On subsequent to date of acquisition, consolidated retained earnings would be computed as

follows:Consolidated Retained Earnings, December 31, 20x5 Retained earnings - P Company, January 1, 20x5 (cost model P484,800 Adjustment to convert from cost model to equity method for purposes of consolidation or to establish reciprocity:/P’s share in adjusted net

increased in subsidiary’s retained earnings: Retained earnings – Subsidiary, January 1, 20x5 P 144,000 Less: Retained earnings – Subsidiary, January 1, 20x4 120,000 Increase in retained earnings since date of acquisition P 24,000 Less: Amortization of allocated excess – 20x4 13,200


3,000 5,640

Consolidated Retained earnings, January 1, 20x5 P 490,440 Add: Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent for 20x5

258,240




13,200 20x5 7,200 ( 20,400) Fair value of stockholders’ equity of S, December 31, 20x5…… P 495,600 Multiplied by: Non-controlling Interest percentage…………... 20 Non-controlling interest (partial goodwill)………………………………….. P 99,120 Add: Non-controlling interest on full goodwill , net of impairment loss [(P15,000 full – P12,000, partial = P3,000) – P750 impairment loss

2,250

Non-controlling interest (full-goodwill)………………………………….. P 101,370

f.Consolidated SHE: Stockholders’ Equity Common stock, P10 par P 600,000 Retained earnings 676,680 P’s Stockholders’ Equity / CI – SHE, 12/31/20x4 P1,276,680 NCI, 12/31/20x4 __101,370 Consolidated SHE, 12/31/20x4 P1,378,05

0

Problem XIUnder the acquisition method, the shares issued by WW are recorded at fair value:

Investment in BB (value of debt and shares issued)................... 900,000Common Stock (par value).................................................... 150,000Additional Paid-in Capital (excess over par value)................. 450,000Liabilities............................................................................... 300,000

The payment to the broker is accounted for as an expense. The stock issue cost is a reduction in additional paid-in capital.

Acquisition expense.................................................................... 30,000Additional Paid-in Capital............................................................ 40,000

Cash .................................................................................. 70,000

Allocation of Acquisition-Date Excess Fair Value:

Consideration transferred (fair value) for BB Stock ................... P900,000Book Value of BB, 6/30............................................................... 770,000

Fair Value in Excess of Book Value........................................ P130,000Excess fair value (undervalued equipment)................................ 100,000Excess fair value (overvalued patented technology)................... (20,000)

Goodwill................................................................................ P 50,000

Consolidated Balances:1. Net income (adjusted for combination expenses. The

figures earned by the subsidiary prior to the takeover are not included).............................................................................. P210,000

2. Retained Earnings, 1/1 (the figures earned by the subsidiaryprior to the takeover are not included)............................................. 800,000

3. Patented Technology (the parent's book value plus the fair value of the subsidiary).................................................................... 1,180,000

4. Goodwill (computed above)............................................................... 50,0005. Liabilities (the parent's book value plus the fair value

of the subsidiary's debt plus the debt issued by the parentin acquiring the subsidiary).............................................................. 1,210,000

6. Common Stock (the parent's book value after recordingthe newly-issued shares).................................................................. 510,000

7. Additional Paid-in Capital (the parent's book valueafter recording the two entries above)............................................. 680,000

Problem XII1. Investment in WP, Inc. 500,000

Contingent performance obligation 35,000Cash 465,000

2. 12/31/x4 Loss from increase in contingent performance obligation 5,000

Contingent performance obligation 5,000

12/31/x5 Loss from increase in contingent performance obligation 10,000

Contingent performance obligation 10,000

12/31/x5 Contingent performance obligation 50,000Cash 50,000

3. Cost Model/Initial Value MethodInvestment in WP 30,000

Retained earnings-BS 30,000

Common stock 200,000Retained earnings-WP 180,000

Investment in WP 380,000

Royalty agreements 90,000Goodwill 60,000

Investment in WP 150,000

Dividend income 35,000Dividends paid 35,000

Amortization expense 10,000Royalty agreements 10,000

Problem XIII (Consolidated accounts one year after acquisition)SS acquisition fair value ($10,000 in

stock issue costs reduce additional paid-in capital) .......................... P680,000

Book value of subsidiary (1/1/x4stockholders' equity balances).......... (480,000)Fair value in excess of book value ................... P200,000Excess fair value allocated to copyrights Life Amortizations

based on fair value .................................... 120,000 6 yrs. P20,000Goodwill .......................................................... P 80,000 indefinite _____-0-

Total .......................................................... P20,000

1. Consolidated copyrightsPP (book value) ..................................................... P900,000SS (book value) ..................................................... 400,000Allocation (above) ................................................. 120,000Excess amortizations, 20x4 .................................. (20,000)

Total ................................................................ P1,400,000

2. Consolidated net income, 20X4Revenues (add book values) ................................. P1,100,000Expenses:

Add book values .............................................. P700,000Excess amortizations ....................................... 20,000 720,000

Consolidated net income....................................... P380,000

3. Consolidated retained earnings, 12/31/x4Retained earnings 1/1/x4 (PP) ............................... P600,000Net income 20x4 (above) ...................................... 380,000Dividends paid 20x4 (PP) ...................................... (80,000)

Total ................................................................ P900,000SS’s retained earnings balance as of January 1, 20x4, is not included because these operations occurred prior to the purchase. SS's dividends were paid to PP and therefore are excluded because they are intercompany in nature.

4. Consolidated goodwill, 12/31/x4 Allocation (above) ................................................ P80,000

Problem XIV Consolidated balances three years after the date of acquisition. Includes questions about parent's method of recording investment for internal reporting purposes.)

1. Acquisition-Date Fair Value Allocation and Amortization:Consideration transferred 1/1/09 .................... P600,000Book value (given) .......................................... (470,000) Annual

Fair value in excess of book value ............. 130,000 ExcessAllocation to equipment based on Life Amortizations

difference in fair value and book value ................................................. 90,000 10 yrs. P9,000

Goodwill .......................................................... P40,000 indefinite -0-Total .......................................................... P9,000

Consolidated Balances Depreciation expense = P659,000 (book values plus P9,000 excess

depreciation) Dividends Paid = P120,000 (parent balance only. Subsidiary's dividends are

eliminated as intercompany transfer) Revenues = P1,400,000 (add book values) Equipment = P1,563,000 (add book values plus P90,000 allocation less three

years of excess depreciation [P27,000]) Buildings = P1,200,000 (add book values) Goodwill = P40,000 (original residual allocation) Common Stock = P900,000 (parent balance only)

2. The parent's choice of an investment method has no impact on the consolidated totals. The choice of an investment method only affects the internal reporting of the parent. Under PAS 27, it requires a choice between cost model or under PFRS 9 (known as fair value model)

3. The cost model or initial value method is used. The parent's Investment in Subsidiary account still retains the original consideration transferred of P600,000. In addition, the Investment Income account equals the amount of dividends paid by the subsidiary.

4. If the equity method had been applied which is not allowed under PAS 27 for a parent to consolidate, the Investment Income account would have included both the equity accrual of P100,000 and excess amortizations of P9,000 for a balance of P91,000.

Problem XV1. Net income for 20x4:

QQ NN Operating income P 90,000 P35,000 Income from subsidiary 24,500 Net income P114,500 P35,000

2. Consolidated net income is P125,000 (P90,000 + P35,000).3. Retained earnings reported at December 31, 20x4:

QQ NN Retained earnings, January 1, 20x4 P290,000 P40,000 Net income for 20x4 114,500 35,000 Dividends paid in 20x4 (30,000 ) (10,000 )Retained earnings, December 31, 20x4 P374,500 P65,000

4. Consolidated retained earnings at December 31, 20x4, is equal to the P374,500 retained earnings balance reported by QQ.

5. When the cost method is used, the parent's proportionate share of the increase in retained earnings of the subsidiary subsequent to acquisition is not included in the

parent's retained earnings. Thus, this amount must be added to the total retained earnings reported by the parent in arriving at consolidated retained earnings.

Problem XVI(Several valuation and income determination questions for a business combination involving a non-controlling interest.)

Business combinations are recorded generally at the fair value of the consideration transferred by the acquiring firm plus the acquisition-date fair value of the non-controlling interest.

PS’s consideration transferred (P31.25 × 80,000 shares)............................. P2,500,000Non-controlling interest fair value (P30.00 × 20,000 shares)........................ P600,000SR’s total fair value 1/1/09............................................................................ P3,100,000

1. Each identifiable asset acquired and liability assumed in a business combination should initially be reported at its acquisition-date fair value.

2. In periods subsequent to acquisition, the subsidiary’s assets and liabilities are reported at their acquisition-date fair values adjusted for amortization and depreciation. Except for certain financial items, they are not continually adjusted for changing fair values.

3. SR’s total fair value 1/1/09............................................................................ P3,100,000SR’s net assets book value............................................................................ 1,290,000Excess acquisition-date fair value over book value....................................... P1,810,000Adjustments from book to fair values............................................................

Buildings and equipment............................................. (250,000)Trademarks................................................................. 200,000Patented technology................................................... 1,060,000Unpatented technology............................................... 600,000 1,610,000

Goodwill ............................................................................................... P 200,000

4. Combined revenues...................................................................................... P4,400,000 Combined expenses...................................................................................... (2,350,000)Building and equipment excess depreciation................................................ 50,000Trademark excess amortization.................................................................... (20,000)Patented technology amortization................................................................ (265,000)Unpatented technology amortization............................................................ (200,000 )Consolidated net income............................................................................... P1,615,000

To non-controlling interest:SR’s revenues.......................................................................................... P1,400,000SR’s expenses......................................................................................... (600,000)Total excess amortization expenses (above)........................................... (435,000)SR’s adjusted net income........................................................................ P365,000Non-controlling interest percentage ownership....................................... 20 % Non-controlling interest share of consolidated net income...................... P73,000

To controlling interest:Consolidated net income......................................................................... P1,615,000 Non-controlling interest share of consolidated net income...................... (73,000 ) Controlling interest share of consolidated net income............................. P1,542,000

-OR-PS’s revenues.......................................................................................... P3,000,000

PS’s expenses.......................................................................................... 1,750,000PS’s separate net income........................................................................ P1,250,000PS’s share of SR’s adjusted net income

(80% × P365,000)........................................................................ 292,000Controlling interest share of consolidated net income............................. P1,542,000

5. Fair value of non-controlling interest January 1, 20x4................................... P600,00020x4 income ...............................................................................................……..73,000 Dividends (20% × P30,000).......................................................................... (6,000)Non-controlling interest December 31, 20x4................................................. P 667,000

6. If SR’s acquisition-date total fair value was P2,250,000, then a bargain purchase has occurred.SR’s total fair value 1/1/09............................................................................ P2,250,000Collective fair values of SR’s net assets........................................................ P2,300,000Bargain purchase.......................................................................................... P50,000

The acquisition method requires that the subsidiary assets acquired and liabilities assumed be recognized at their acquisition date fair values regardless of the assessed fair value. Therefore, none of SR’s identifiable assets and liabilities would change as a result of the assessed fair value. When a bargain purchase occurs, however, no goodwill is recognized.

Problem XVII (Full-Goodwill)A variety of consolidated balances-midyear acquisition)

Book value of RR, 1/1 (stockholders' equity accounts) (P100,000 + P600,000 + P700,000)........... P1,400,000

Increase in book value:Net Income (revenues less cost ofgoods sold and expenses) ......................... P120,000Dividends ................................................ (20,000)

Change during year ......................................... P100,000Change during first six months of year ..... 50,000

Book value of RR, 7/1 (acquisition date) P1,450,000(Full-Goodwill)

Consideration transferred by KL (P1,330,000 + P30,000)................................................... P1,360,000

Non-controlling interest fair value ......................... 300,000RRs’ fair value (given)............................................ P1,630,000

Note: The fair value of subsidiary amounting P1,630,000, indicates a fair value of NCI amounting to P300,000 (refer to above computation), which is lower compared to the FV of the NCI based on FV of SHE of Subsidiary (RR), computed as follows:

BV of SHE of Subsidiary (RR)....................... P1,450,000Adjustments to reflect fair value (undervaluation) 150,000FV of SHE of Subsidiary (RR)....................... P 1,600,000Multiplied by: NCI%........................ 20 %

FV of NCI………………………………………………. P 320,000

Consideration transferred by KL (P1,330,000 + P30,000)................................................... P1,360,000

Non-controlling interest fair value ......................... ___320,000RRs’ fair value (given)............................................ P1,680,000Book value of RR, 7/1............................................ (1,450,000)Fair value in excess of book value......................... P 230,000 Annual ExcessExcess fair value assigned Life Amortizations

Trademarks ........................................................ 150,000 5 years P30,000 Goodwill (full-goodwill) ....................................... P 80,000 indefinite -0-Total ............................................................. P30,000

It should be carefully noted, that NCI can never be less than its share of fair value of net identifiable assets (which is P320,000). Thus, the NCI share of company value is raised to P320,000 (replacing the P300,000 NCI computed as residual amount – refer to computation above). The rationale behind such rule is to avoid having a lower amount of goodwill under the full-goodwill approach as compared to goodwill computed under the partial-goodwill approach.

(Partial-Goodwill)Consideration transferred by KL............................ P 1,360,000Less: Book value of SHE – RR (P1,450,000 x 80%)…….. 1,160,000Allocated excess…………………………………………. P 200,000Less: Over/under valuation of A and L:

P150,000 x 80%.............................................. 120,000 Goodwill - partial.................................................. P 80,000

Note that the goodwill under the full-goodwill and partial-goodwill approach are the same because the FV of the NCI based on the FV of SHE of subsidiary (P320,000) is higher compared to the imputed or the computed residual amount of NCI (P300,000).

Consolidation Totals: Expenses, P265,000 = P200,000 KK operating expenses plus P50,000 (post-

acquisition subsidiary operating expenses) plus ½ year excess amortization of P15,000.

Dividends paid = P80,000 Sales, P1,050,000 = P800,000 KK revenues plus P250,000 (post-acquisition

subsidiary revenue, P500,000 x 1/2) Equipment, none Depreciation expense, none Subsidiary’s net income, P60,000 = [(P500,000 – P280,000 – P100,000) x 1/2] Buildings, none Goodwill (full), P80,000; Goodwill (partial), P80,000 Consolidated Net Income, P245,000

Sales (1) P1,050,000 Cost of goods sold (2) 540,000 Operating expenses (3) __265,000 Net Income P 245,000 Non-controlling Interest in Sub. Income (4) P 9,000 Controlling Interest in CNI P 236,000

(1) P800,000 KK revenues plus P250,000 (post-acquisition subsidiary revenue)(2) P400,000 KK COGS plus P140,000 (post-acquisition subsidiary COGS) (3) P200,000 KK operating expenses plus P50,000 (post-acquisition

subsidiary operating expenses) plus ½ year excess amortization of P15,000

(4) 20% of post-acquisition subsidiary income less excess fair value amortization [20% × (120,000 – 30,000) × ½ year] = P9,000

Retained Earnings, 1/1 = P1,400,000 (the parent’s balance because the subsidiary was acquired during the current year)

Trademark = P935,000 (add the two book values and the excess fair value allocation after taking one-half year excess amortization)

Goodwill (full)= P80,000 (the original allocation) Goodwill (partial) = P80,000 (the original allocation)

Problem XVIII (Consolidated balances after a mid-year acquisition)Note: Investment account balance indicates the initial value method.

Consideration transferred ............................... P526,000Non-controlling interest fair value ................... 300,000FV of SHE - subsiary ........................................ P826,000Less: Book value of DD (below)........................ (765,000 )

Fair value in excess of book value (positive). P 61,000Excess assigned Annual Excessbased on fair value: Life Amortizations

Equipment............................................ (30,000) 5 years P(6,000)Goodwill (full)........................................ P 91,000 indefinite -0-

Total .......................................................... P(6,000)Amortization for 9 months ......................... P(4,500)

Acquisition-Date Subsidiary Book ValueBook value of Duncan, 1/1/x4 (CS + 1/1 RE) .................... P740,000Increase in book value-net income (dividends

were paid after acquisition) ........................................ P100,000Time prior to purchase (3 months) ................................... × ¼ 25,000Book value of DD, 4/1/x4 (acquisition date) ..................... P765,000

* The fair value of NCI amounting to P300,000 is higher compared to the FV of the NCI based on FV of SHE of Subsidiary (RR), computed as follows:

BV of SHE of Subsidiary (DD)…………………… P765,000 Adjustments to reflect fair value (undervaluation) ( 30,000) FV of SHE of Subsidiary (DD).................. P735,000 Multiplied by: NCI%.......................... 40 %

FV of NCI……………………………………………. P294,000

(Partial-Goodwill)Consideration transferred .......................... P 526,000Less: Book value of SHE – DD (P765,000 x 60%) 459,000Allocated excess………………………………… P 67,000Less: Over/under valuation of A and L:

(P30,000 x 60%)........................................... ( 18,000) Goodwill - partial................................... P 85,000

1. Consolidated Income Statement:Revenues (1) P825,000Cost of goods sold (2) P405,000Operating expenses (3) 214,500 619,500Consolidated net income P 205,500Noncontrolling interest in CNI (4) 28,200Controlling interest in CNI P 177,300

(1) P900,000 combined revenues less P75,000 (preacquisition subsidiary revenue)

(2) P440,000 combined COGS less P35,000 (preacquisition subsidiary COGS)(3) P234,000 combined operating expenses less P15,000 (preacquisition

subsidiary operating expenses) less nine month excess overvalued equipment depreciation reduction of P4,500

(4) 40% of post-acquisition subsidiary income less excess amortization2. Goodwill, full = P91,000 (original allocation); Goodwill , partial = P85,000

Equipment = P774,500 (add the two book values less P30,000 reduction to fair value plus P4,500 nine months excess amortization)

Common Stock = P630,000 (P company balance only) Buildings = P1,124,000 (add the two book values) Dividends Paid = P80,000 (P company balance only)

Problem XIX(Determine consolidated balances for a step acquisition).

1. AD fair value implied by price paid by MMP560,000 ÷ 70% = P800,000

2. Revaluation gain1/1 equity investment in AD (book value) P178,00025% income for 1st 6 months 8,750Investment book value at 6/30 186,750Fair value of investment 200,000Gain on revaluation to fair value P13,250

3. Goodwill at 12/31Fair value of AD at 6/30 P800,000Book value at 6/30 (700,000 + [70,000 ÷ 2]) 735,000Excess fair value P65,000Allocation to goodwill (no impairment) P65,000

4. Non-controlling interest5% fair value balance at 6/30 P40,0005% Income from 6/30 to 12/31 1,7505% dividends (1,000 ) Non-controlling interest 12/31 P40,750

Problem XXP’s gain on sale of subsidiary stock is computed as follows:

Cash proceeds……………………………………… P 720,000

Fair value of retained non-controlling interest equity investment (35%)

420,000

Carrying value of the non-controlling interest before deconsolidation (15% or prior outside non-controlling interest in Subsidiary) 120,000

P1,260,000Less: Carrying value of Subsidiary’s net assets 1,200,000Gain on disposal or deconsolidation P 60,000

Read discussion on step-acquisition regarding the initial treatment of investment as FVTOCI or FVTPL and its disposition. It is assumed that the investment above is FVTPL.

Problem XXIP Company’s additional paid-in capital arising sale of subsidiary shares is computed as follows:

Cash proceeds……………………………………… P 84,000Less: Carrying value of non-controlling interest (P720,000* x 10%) 72,000“Gain” – transfer within equity in “Additional paid-in capital” account

P 12,000

*the P720,000 is already the gross-up amount since it is the amount presented in the consolidated balance sheet.

Because P Company continues to have the ability to control S Company, the sale of S’s shares is treated as an equity transaction. Therefore, no gain or loss is recognized. Instead, Palmer Company’s additional paid-in capital increases by P60,000.

Problem XXIIP Company’s additional paid-in capital arising sale of subsidiary shares is computed as follows:

Cash proceeds from issuance of additional shares ….. P 210,000 Less: Carrying Value of non-controlling from issuance of additional shares:

Non-controlling interest prior to issuance of additional shares:

Book value of SHE before issuance…P720,000 x: Non-controlling interest……………. 20%* P 144,000

Non-controlling interest after issuance of additional shares:

Book value of SHE before issuance……………………………….P720,000

Additional issuance…………………..… 210,000 BV of SHE after issuance……………….P930,000 x: Non-controlling interest……………... 36%** 334,800 190,800

“Gain” – transfer within equity in “Additional paid-in capital” account.…….............. P 19,200 * (120,000 – 96,000) / 120,000 = 20% ownership before additional issuance of shares. ** [(24,000 + 30,000) / (120.000 + 30,000)] = 36% ownership after additional issuance

of shares

P Company recognizes an increases in its Investment in S from P576,000 (P720,000x 80%) to P595,200 [P930,000 x (96,000/150,000) and in additional paid-in capital of P19,200.

Problem XXIII1. Equity Method

Income accrual (80%) ...................................................... P56,000Excess amortization expense ........................................... (3,200)

Investment income ..................................................... P52,800

Initial fair value paid........................................................ P664,000Income accrual 20x4–20x6 (P260,000 × 80%) ................. 208,000Dividends 20x4–20x6 (P45,000 × 80%) ........................... (36,000)Excess Amortizations 20x4–20x6 (P3,200 × 3) ................ (9,600)

Investment in TT—12/31/x6 ........................................ P826,400

2. Equity Method – same with No. 1

3. Using the acquisition method, the allocation will be the total difference (P80,000) between the buildings' book value and fair value. Based on a 20 year life, annual excess amortization is P4,000.

MM book value—buildings .......................................... P 800,000TT book value—buildings ............................................ 300,000Allocation ................................................................... 80,000Excess Amortizations for 20x4–20x5 (P4,000 × 2) (8,000)

Consolidated buildings account ...................... P1,172,000

4. Acquisition-date fair value allocated to goodwill

Goodwill-full ( see Problem I above) .......................................... P 150,000 Goodwill-partial (see Problem I above)………………………… P 120,000

5. If the parent has been applying the equity method, the stockholders' equity accounts on its books will already represent consolidated totals. The common stock and additional paid-in capital figures to be reported are the parent balances only.

Common stock, P500,000Additional paid-in capital, P280,000

Problem XXIV(Consolidated balances three years after purchase. Parent has applied the equity method.)

1. Schedule 1—Acquisition-Date Fair Value Allocation and AmortizationJJ’s acquisition-date fair value P206,000Book value of JJ .................................... (140,000)Fair value in excess of book value ....... 66,000

Excess fair value assigned to specificaccounts based on individual fair values Annual Excess

Life AmortizationEquipment ...................................... 54,400 8 yrs. P6,800Buildings (overvalued) .................... (10,000) 20 yrs. (500)Goodwill ......................................... P21,600 indefinite -0-Total ............................................... P6,300

Investment in JJ Company—12/31/x6JJ’s acquisition-date fair value................................................. P206,00020x4 Increase in book value of subsidiary 40,00020x4 Excess amortizations (Schedule 1) ............................... (6,300)20x5 Increase in book value of subsidiary ............................. 20,00020x5 Excess amortizations (Schedule 1) ............................... (6,300)20x6 Increase in book value of subsidiary ............................. 10,00020x6 Excess amortizations (Schedule 1) ............................... (6,300)

Investment in J Company ................................................. P257,100

2. Equity in Subsidiary EarningsIncome accrual................................................................................... P30,000Excess amortizations (Schedule 1) ................................................... (6,300)

Equity in subsidiary earnings ...................................................... P23,700

3. Consolidated Net IncomeConsolidated revenues (add book values) ............................. P414,000Consolidated expenses (add book values) ............................. (272,000)Excess amortization expenses (Schedule 1) .......................... (6,300)Consolidated net income ....................................................... P135,700

4. Consolidated EquipmentBook values added together .................................................. P370,000Allocation of purchase price ................................................... 54,400Excess depreciation (P6,800 × 3) .......................................... (20,400)

Consolidated equipment .................................................. P404,000

5. Consolidated Buildings.......................................................................Book values added together .................................................. P288,000Allocation of purchase price ................................................... (10,000)Excess depreciation (P500 × 3) ............................................. 1,500

Consolidated buildings...................................................... P279,5006. Consolidated goodwill

Allocation of excess fair value to goodwill.............................. P21,600

7. Consolidated Common Stock.............................................................. P290,000

As a purchase, the parent's balance of P290,000 is used (the acquired company's common stock will be eliminated each year on the consolidation worksheet).

8. Consolidated Retained Earnings......................................................... P410,000Tyler's balance of P410,000 is equal to the consolidated total because the equity method has been applied.

Problem XXV Computation of Goodwill: Partial Goodwill or Proportionate Basis

Fair value of Subsidiary: Consideration transferred P1,970,00

0Less: BV of SHE of S (P1,200,000 + P600,000) x 80% _1,440,00

0Allocated excess P

530,000Less: Over/under valuation of A and L: Inc. (Dec.) Inventory (P725,000 – P600,000) x 80% P 100,000 Equipment (P1,075,000 – P900,000) x 80% 140,000 __240,000Goodwill – partial P 290,000

Full-goodwill or Fair Value BasisFair value of Subsidiary: Consideration transferred P1,970,000 / 80% P2,467,50

0Less: BV of SHE of S (P1,200,000 + P600,000) x 100%

1,800,000

Allocated excess P 662,500

Less: Over/under valuation of A and L: Inc. (Dec.) Inventory (P725,000 – P600,000) x 100% P125,000 Equipment (P1,075,000 – P900,000) x 100% 175,000 __300,000Goodwill – full P362,500

Amortization20x4 20x5

Inventory: P125,000 x 60% P 75,000 P125,000 x 40% P 50,000Equipment: P175,000 / 7 years 25,000 25,000

P 100,000

P 75,000

1. 20x4

Investment in S Company 1,970,000 Cash 1,970,000

Cash (0.8 x P150,000) 120,000 Investment in S Company 120,000

Investment in S Company 600,000

Equity in Subsidiary Income (.80)(P750,000) 600,000

Equity in Subsidiary Income 80,000 Investment in S Company 80,000

20x5Cash (0.8 x P225,000) 180,000


Investment in S Company 720,000 Equity in Subsidiary Income (.80)(P900,000)

720,000

Equity in Subsidiary Income 60,000 Investment in S Company 60,000

2. 20x4

(1) Equity in Subsidiary Income ((.80)(P750,000) -P80,000) 520,000 Dividends Declared (0.80 x P150,000) 120,000 Investment in S Company

400,000

(2) Beginning Retained Earnings - S Company 600,000Common Stock- S Company 1,200,000

Investment in S Company 1,307,500 Noncontrolling Interest 492,500

(3) Inventory (P125,000 – P75,000) 50,000 Cost of Goods Sold 75,000 Equipment (net) 175,000 Goodwill 362,500


(4) Depreciation Expense 25,000 Equipment (net) 25,000

20x5(1) Equity in Subsidiary Income ((.80)(P900,000) - P60,000) 660,000

Dividends Declared (0.80 x P225,000) 180,000 Investment in Superstition Company 480,000

(2) Beginning Retained Earnings-Superstition Company 1,200,000 Common Stock - Superstition Company. 1,200,000

Investment in Superstition Company Non-controlling Interest

(P492,500 + (P1,200,000 – P600,000) x .20) 612,500

(3) Investment in S Company 60,000 Non-controlling Interest 15,000Cost of Goods Sold 50,000 Equipment (net) 175,000 Goodwill 362,500


(4) Investment in S Company 20,000Non-controlling Interest 5,000Depreciation Expense 25,000

Equipment (net) 50,000

3. Consolidated Net Income for 20x5 Net income from own/separate operations P Company (P1,000,000 – P120,000) P

880,000 S Company __

750,000 Total P1,630,00

0 Less: Non-controlling Interest in Net Income* P130,000 Amortization of allocated excess 100,000 Goodwill impairment ____0 230,00

0 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent………….. P1,400,00

0 Add: Non-controlling Interest in Net Income (NCINI) 130,000 Consolidated Net Income for 20x4 P1,530,00

0

Net income of subsidiary…………………….. P 750,000Amortization of allocated excess (P25,000 + P75,000) ( 100,000)



Note: Regardless on the method used in recording investments (cost model or equity method) the manner of computing CI-CNI, NCI-CNI and CNI are exactly the same.

Problem XXVI – 80% Partial Goodwill – Equity MethodRequirements 1 to 4:Schedule of Determination and Allocation of Excess (Partial-goodwill) Date of Acquisition – January 1, 20x4

Fair value of Subsidiary (80%) Consideration transferred……………………………….. P 372,000Less: Book value of stockholders’ equity of S: Common stock (P240,000 x 80%)……………………. P 192,000 Retained earnings (P120,000 x 80%)………………... 96,000 288,000Allocated excess (excess of cost over book value)….. P 84,000Less: Over/under valuation of assets and liabilities: Increase in inventory (P6,000 x 80%)……………… P 4,800 Increase in land (P7,200 x 80%)……………………. 5,760 Increase in equipment (P96,000 x 80%) 76,800 Decrease in buildings (P24,000 x 80%)………..... ( 19,200) Decrease in bonds payable (P4,800 x 80%)…… 3,840 72,000Positive excess: Partial-goodwill (excess of cost over P 12,000

fair value)………………………………………………...


Book valueS Co.




Book valueS Co.

Fair value Increase


S Co. Book value




Over/Under

Life

Annual Amount


InventoryP

6,000 1P

6,000 P 6,000P -



0) 4 ( 6,000) ( 6,000) (6,000)


0 4 1,20

0 1,200 1,20

0P

13,200 P 13,200 P 7,200The goodwill impairment loss of P3,125 based on 100% fair value would be allocated to the controlling interest and the NCI based on the percentage of total goodwill each equity interest received. For purposes of allocating the goodwill impairment loss, the full-goodwill is computed as follows:

Fair value of Subsidiary (100%) Consideration transferred: Cash (80%) P 372,000 Fair value of NCI (given) (20%) 93,000 Fair value of Subsidiary (100%) P 465,000Less: Book value of stockholders’ equity of S (P360,000 x 100%) __360,000Allocated excess (excess of cost over book value)….. P 105,000Add (deduct): (Over) under valuation of assets and liabilities (P90,000 x 100%) 90,000Positive excess: Full-goodwill (excess of cost over fair value)………………………………………………... P 15,000

20x4: First Year after Acquisition Parent Company Equity Method Entry

The following are entries recorded by the P in 20x4 in relation to its subsidiary investment:


372,000


January 1, 20x4 – December 31, 20x4:(2) Cash……………………… 28,800 Investment in S Company (P36,000 x 80%)……………. 28,800 Record dividends from S Company.

December 31, 20x4:(3) Investment in S Company 48,000 Investment income (P60,000 x 80%) 48,000 Record share in net income of subsidiary.

December 31, 20x4:(4) Investment income [(P13,200 x 80%) + P3,000*, goodwill impairment loss)]

13,560

Investment in S Company 13,560 Record amortization of allocated excess of inventory, equipment,

buildings and bonds payable and goodwill impairment loss.

Thus, the investment balance and investment income in the books of P Company is as follows:

Consolidation Workpaper – First Year after Acquisition The schedule of determination and allocation of excess presented above provides complete guidance for the worksheet eliminating entries on January 1, 20x4:

(E1) Common stock – S Co………………………………………… 240,000 Retained earnings – S Co…………………………………… 120.000 Investment in Son Co…………………………………………… 288,000 Non-controlling interest (P360,000 x 20%)………………………..

72,000

(E2) Inventory………………………………………………………………….

6,000


7,200


4,800

Goodwill…………………………………………………………………. 12,000 Buildings……………………………………….. 216,000 Non-controlling interest (P96,000 x 20%)………………………..

18,000


(E3) Cost of Goods Sold……………. 6,000 Depreciation expense……………………….. 6,000 Accumulated depreciation – buildings………………….. 6,000

Investment in SCost, 1/1/x4 372,000

28,800 Dividends – S (36,000x 80%)

NI of S Amortization & (60,000 x 80%) 48,000

13,560 impairment

Balance, 12/31/x4 377,640

Investment Income Amortization & NI of S impairment 13,560

48,000 (P60,000 x 80%)

34,440 Balance, 12/31/x4

Interest expense………………………………… 1,200 Goodwill impairment loss………………………………………. 3,000 Inventory………………………………………………………….. 6,000 Accumulated depreciation – equipment……………….. 12,000 Discount on bonds payable………………………… 1,200 Goodwill…………………………………… 3,000

Cost of Goods Sold


ExpenseAmortizatio

n-Interest

Total



0

It should be observed that the goodwill computed above was proportional to the controlling interest of 80% and non-controlling interest of 20% computed as follows:

Value % of TotalGoodwill applicable to parent………………… P12,000 80.00%Goodwill applicable to NCI…………………….. 3,000 20.00%Total (full) goodwill……………………………….. P15,000 100.00%

Therefore, the goodwill impairment loss of P3,750 based on 100% fair value or full-goodwill would be allocated as follows:

Value % of TotalGoodwill impairment loss attributable to parent or controlling Interest

P 3,000 80.00%

Goodwill impairment loss applicable to NCI…………………….. 625 20.00%Goodwill impairment loss based on 100% fair value or full- Goodwill P 3,750 100.00%

(E4) Investment income 34,440 Non-controlling interest (P36,000 x 20%)………………..

7,200

Dividends paid – S…………………… 36,000 Investment in S Company 5,640 To eliminate intercompany dividends and investment income under equity method and establish share of dividends, computed as follows:

After the eliminating entries are posted in the investment account, it should be observed that from consolidation point of view the investment account is totally eliminated. Thus,

Investment in S Investment IncomeNI of S 28,800 Dividends - S NI of S(60,000 x 80%)……. 48,000

Amortization & 13,560 impairment

Amortizationimpairment 13,560

(60,00048,000 x

80%)

5,640

34,440


28,800 Dividends – S (36,000x 80%)

NI of Son Amortization & (60,000 x 80%) 48,000

13,560 impairment

Balance, 12/31/x4 377,640

288,000 (E1) Investment, 1/1/20x4

84,000 (E2) Investment, 1/1/20x4 5,640 (E4) Investment Income and dividends

377,640 377,640


9,360




20%


P 9,360

Worksheet for Consolidated Financial Statements, December 31, 20x4. Equity Method (Partial-goodwill)80%-Owned Subsidiary December 31, 20x4 (First Year after Acquisition)


Investment income 34,440 -(4) 34,440

_________



P 348,000


90,000


1,200

Other expenses 48,000 18,000 66,000


3,000



( 9,360)


Statement of Retained EarningsRetained earnings, 1/1 P Company P360,000 P360,000

S Company P120,000(1) 120,000


S Company - 36,000(4) 36,000 -

Retained earnings, 12/31 to Balance Sheet P490,440 P144,000 P490,440

Balance Sheet

Cash……………………….P


Inventory…………………. 120,000 90,000(2) 6,000

(3) 6,000 210,000

Land……………………………. 210,000 48,000(2) 7,200 265,200

Equipment 240,000 180,000 420,000

Buildings 720,000 540,000(2) 216,000 1,044,000


(3) 1,200 3,600

Goodwill……………………(2) 12,000

(3) 3,000 9,000

Investment in S Co……… 377,640 (2) 288,000(2) 84,000(4) 5,640 -

Total P1,990,440P1,008,0

00 P2,424,600


(2) 96,000

(3) 12,000 P147,000


405,000 288,000

(8) 192,000

(9) 6,000 495,000





_________ ______

___

(10) 7,200

__________

(1 ) 72,000 (2) 18,000(5) 9,360 ____92,160

Total P1,990,440P1,008,0

00P 751,200

P 751,200 P2,424,600


Sales P 540,000 P 360,000Less: Cost of goods sold 216,000 192,000Gross profit P 324,000 P 168,000Less: Depreciation expense 60,000 24,000 Other expense 72,000 54,000Net income from its own separate operations P 192,000 P 90,000Add: Investment income 66,240 -Net income P 258,240 P 90,000Dividends paid P 72,000 P 48,000


Parent Company Equity Method EntryThe following are entries recorded by the parent in 20x5 in relation to its subsidiary investment:

January 1, 20x5 – December 31, 20x5:(2) Cash……………………… 38,400 Investment in S Company (P48,000 x 80%)……………. 38,400 Record dividends from S Company.December 31, 20x5:(3) Investment in S Company 72,000 Investment income (P90,000 x 80%) 72,000 Record share in net income of subsidiary.December 31, 20x5:(4) Investment income (P7,200 x 80%) 5,760 Investment in S Company 5,760 Record amortization of allocated excess of inventory, equipment,

buildings and bonds payable



38,400 Dividends – S (48,000x 80%)

NI of S Amortization (90,000 x 80%) 72,000

5,760 (P7,200 x 80%)

Balance, 12/31/x5 405,480

Consolidation Workpaper – Second Year after AcquisitionThe schedule of determination and allocation of excess presented above provides complete guidance for the worksheet eliminating entries:

(E1) Common stock – S Co………………………………………… 240,000 Retained earnings – S Co, 1/1/x5…………………………. 144.000 Investment in S Co (P384,000 x 80%) 307,200 Non-controlling interest (P384,000 x 20%)………………………..

76,800

(E2) Accumulated depreciation – equipment (P96,000 – P12,000)

84,000

Accumulated depreciation – buildings (P192,000 + 6,000) 198,000 Land……………………………………………………………………….

7,200

Discount on bonds payable (P4,800 – P1,200)…. 3,600 Goodwill (P12,000 – P3,000)…………………………….. 9,000 Buildings……………………………………….. 216,000 Non-controlling interest [(P90,000 – P13,200) x 20%] 15,360 Investment in S Co………………………………………………. 70,440

(E3) Depreciation expense……………………….. 6,000 Accumulated depreciation – buildings………………….. 6,000 Interest expense………………………………… 1,200 Accumulated depreciation – equipment……………….. 12,000 Discount on bonds payable………………………… 1,200


ExpenseAmortizatio

n-Interest

Total

Inventory soldEquipment P 12,000Buildings ( 6,000)Bonds payable

_______ P 1,200

Totals P 6,000 P1,200 P7,,200


9,600

Dividends paid – S…………………… 48,000 Investment in S Company 27,840 To eliminate intercompany dividends and investment income under equity method and establish share of dividends, computed as follows:

Investment Income Amortization NI of S (7,200 x 80%) 5,760

72,000 (90,000 x 80%)

66,240 Balance, 12/31/x4

Investment in S Investment IncomeNI of S 38,400 Dividends – S NI of S(90,000 x 80%)……. 72,000

Amortization 5,760 (P7,200 x 80%)

Amortization (P7,200 x 80%) 5,760

(90,000 72,000 x

80%)

27,840

66,240



16,560




20%


P 16,560

Worksheet for Consolidated Financial Statements, December 31, 20x5. Equity Method (Partial-goodwill)80%-Owned Subsidiary December 31, 20x5 (Second Year after Acquisition)



___________



90,000


1,200



90,000P 274,800


( 16,560)


90,000P258,240


S Company P144,000(1)

144,000 Net income, from above 258,240 90,000 258,240 Total P748,680 P234,000 P748,680Dividends paid P Company 72,000 72,000

S Company - 48,000(4) 48,000 -


Balance Sheet

Cash……………………….P

265,200P



38,400 Dividends – S (48,000x 80%)


5,760 (7,200 x 80%)

Balance, 12/31/x5 405,480

307,200 (E1) Investment, 1/1/20x5


405,480 405,480

Inventory…………………. 216,000 108,000 324,000

Land……………………………. 210,000 48,000(2) 7,200 265,200



Goodwill……………………(2) 9,000 9,000


(4) 27,840

-

Total P2,236,680P1,074,0

00 P2,707,800


P 102,000

(2) 84,000

(3) 12,000 P180,000


450,000 306,000(2) 198,000 (3) 6,000 552,000





___ _____

_________

(7) 9,600

__________

(2 ) 76,800 (2) 15,360(5) 16,560 ____99,120

Total P2,236,680

P1,074,000

P 794,400

P 794,400 P2,707,800

Note: Using cost model or equity method, the consolidated net income, consolidated retained earnings, non-controlling interests, consolidated equity on December 31, 20x4 and 20x5 are exactly the same (refer to Problem VI solution).5. 1/1/20x4 a. On date of acquisition the retained earnings of parent should always be considered as

the consolidated retained earnings, thus:Consolidated Retained Earnings, January 1, 20x4 Retained earnings - P Company, January 1, 20x4 (date of acquisition) P360,000

b.Non-controlling interest (partial-goodwill), January 1, 20x4 Common stock – S Company, January 1, 20x4…… P 240,000 Retained earnings – S Company, January 1, 20x4 120,000 Stockholders’ equity – S Company, January 1, 20x4 P 360,000 Adjustments to reflect fair value - (over) undervaluation of assets and liabilities, date of acquisition (January 1, 20x4) 90,000 Fair value of stockholders’ equity of subsidiary, January 1, 20x4…… P450,000 Multiplied by: Non-controlling Interest percentage…………... 20 Non-controlling interest (partial-goodwill)………………………………….. P 90,000


6. 12/31/20x4: a. CI-CNI

Consolidated Net Income for 20x4 Net income from own/separate operations P Company P168,000 S Company 60,000 Total P228,000 Less: Non-controlling Interest in Net Income* P 9,360 Amortization of allocated excess (refer to amortization above) 13,200 Goodwill impairment (impairment under partial-goodwill approach) 3,000 25,560 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of P………….. P202,440 Add: Non-controlling Interest in Net Income (NCINI) 9,360 Consolidated Net Income for 20x4 P211.800

b. NCI-CNI*Non-controlling Interest in Net Income (NCINI) for 20x4 Net income of S Company P 60,000 Less: Amortization of allocated excess / goodwill impairment (refer to amortization table above) 13,200

P 46,800 Multiplied by: Non-controlling interest %.......... 20% Non-controlling Interest in Net Income (NCINI) P 9,360

c. CNI, P211,800 – refer to (a)

d. On subsequent to date of acquisition, consolidated retained earnings would be computed as follows:

Consolidated Retained Earnings, December 31, 20x4 Retained earnings - P Company, January 1, 20x4 (date of acquisition) P360,000 Add: Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent for 20x4 202,440 Total P562,440 Less: Dividends paid – P Company for 20x4 72,000 Consolidated Retained Earnings, December 31, 20x4 P490,440

e. Non-controlling interest (partial-goodwill), December 31, 20x4 Common stock – S Company, December 31, 20x4…… P 240,000 Retained earnings – S Company, December 31, 20x4 Retained earnings – S Company, January 1, 20x4 P120,000 Add: Net income of S for 20x4 60,000 Total P180,000 Less: Dividends paid – 20x4 36,000 144,000 Stockholders’ equity – S Company, December 31, 20x4 P 384,000 Adjustments to reflect fair value - (over) undervaluation of assets and liabilities, date of acquisition (January 1, 20x4) 90,000 Amortization of allocated excess (refer to amortization above) – 20x4 ( 13,200) Fair value of stockholders’ equity of subsidiary, December 31, 20x4…… P460,000 Multiplied by: Non-controlling Interest percentage…………... 20 Non-controlling interest (partial-goodwill)………………………………….. P 92,160


12/31/20x5: a. CI-CNI

Consolidated Net Income for 20x5 Net income from own/separate operations: P Company P192,000 S Company 90,000

Total P282,000 Less: Non-controlling Interest in Net Income* P16,560 Amortization of allocated excess (refer to amortization above) __7,200 23,760 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent………….. P258,240 Add: Non-controlling Interest in Net Income (NCINI) 16,560 Consolidated Net Income for 20x5 P274,800

b. NCI-CNI*Non-controlling Interest in Net Income (NCINI) for 20x5 Net income of S Company P 90,000 Less: Amortization of allocated excess / goodwill impairment for 20x5 (refer to amortization table above) 80,400


c. CNI, P274,800 – refer to (a)


Consolidated Retained Earnings, December 31, 20x5 Retained earnings - P Company, January 1, 20x5 (cost model P484,800 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 – S, January 1, 20x5 P 144,000 Less: Retained earnings – S, January 1, 20x4 120,000 Increase in retained earnings since date of acquisition P 24,000 Less: Amortization of allocated excess – 20x4 13,200


3,000 5,640


258,240




13,200 20x5 7,200 ( 20,400)

Fair value of stockholders’ equity of subsidiary, December 31, 20x5…… P 495,600 Multiplied by: Non-controlling Interest percentage…………... 20 Non-controlling interest (partial goodwill)………………………………….. P 99,120


0

Problem XXVII - 80% Full Goodwill – Equity MethodRequirements 1 to 4:Schedule of Determination and Allocation of Excess Date of Acquisition – January 1, 20x4

Fair value of Subsidiary (80%) Consideration transferred (80%)…………….. P 372,000 Fair value of NCI (given) (20%)……………….. 93,000 Fair value of Subsidiary (100%)………. P 465,000Less: Book value of stockholders’ equity of Son: Common stock (P240,000 x 100%)………………. P 240,000 Retained earnings (P120,000 x 100%)………... 120,000 360,000Allocated excess (excess of cost over book value)….. P 105,000Less: Over/under valuation of assets and liabilities: Increase in inventory (P6,000 x 100%)……………… P 6,000 Increase in land (P7,200 x 100%)……………………. 7,200 Increase in equipment (P96,000 x 100%) 96,000 Decrease in buildings (P24,000 x 100%)………..... ( 24,000) Decrease in bonds payable (P4,800 x 100%)…… 4,800 90,000Positive excess: Full-goodwill (excess of cost over fair value)………………………………………………... P 15,000


Over/under

Life

Annual Amount


InventoryP

6,000 1P

6,000 P 6,000P -



0) 4 ( 6,000) ( 6,000) (6,000)


0 4 1,20

0 1,200 1,20

0P

13,200 P 13,200 P 7,2002x4: First Year after Acquisition Parent Company Equity Method Entry

The following are entries recorded by the parent in 20x4 in relation to its subsidiary investment:


372,000




December 31, 20x4:(4) Investment income [(P13,200 x 80%) + (P3,750 – P750)*, goodwill impairment loss)]

13,560

Investment in S Company 13,560 Record amortization of allocated excess of inventory, equipment,

buildings and bonds payable and goodwill impairment loss.


Consolidation Workpaper – First Year after Acquisition The schedule of determination and allocation of excess presented above provides complete guidance for the worksheet eliminating entries on January 1, 20x4:

(E1) Common stock – S Co………………………………………… 240,000 Retained earnings – S Co…………………………………… 120.000 Investment in S Co…………………………………………… 288,000 Non-controlling interest (P360,000 x 20%)………………………..

72,000

(E2) Inventory………………………………………………………………….

6,000


7,200


4,800

Goodwill…………………………………………………………………. 15,000 Buildings……………………………………….. 216,000 Non-controlling interest (P90,000 x 20%) + [(P15,000, full – P12,000, partial goodwill)]…………

21,000


(E3) Cost of Goods Sold……………. 6,000 Depreciation expense……………………….. 6,000


28,800 Dividends – S (36,000x 80%)


13,560 Impairment

Balance, 12/31/x4 377,640

Investment Income Amortization & NI of S Impairment 13,560

48,000 (P60,000 x 80%)

34,440 Balance, 12/31/x4

Accumulated depreciation – buildings………………….. 6,000 Interest expense………………………………… 1,200 Goodwill impairment loss………………………………………. 3,750 Inventory………………………………………………………….. 6,000 Accumulated depreciation – equipment……………….. 12,000 Discount on bonds payable………………………… 1,200 Goodwill…………………………………… 3,750

Cost of Goods Sold


ExpenseAmortizatio

n-Interest

Total



0


7,200

Dividends paid – S…………………… 36,000 Investment in S Company 8,640



8,610

Non-controlling interest ………….. 8,610



20%


P 9,360

Less: Non-controlling interest on impairment loss on full-goodwill (P3,750 x 20%) or (P3,750 impairment on full-goodwill less P3,000, impairment on partial-goodwill)*

750


P 8,610

*this procedure would be more appropriate, instead of multiplying the full-goodwill impairment loss of P3,750 by 20%. There might be situations where the NCI on goodwill impairment loss would not be proportionate to NCI acquired (refer to Illustration 15-6).

Investment in S Investment IncomeNI of S 28,800 Dividends – S NI of Son(60,000 x 80%)……. 48,000

Amortization & 13,560 Impairment

Amortization & Impairment 13,560

(60,000 48,000 x

80%)

5,640

34,440


28,800 Dividends – S (36,000x 80%)


13,560 Impairment

Balance, 12/31/x4 377,640

288,000 (E1) Investment, 1/1/20x4


377,640 377,640

Worksheet for Consolidated Financial Statements, December 31, 20x4. Equity Method (Full-goodwill)80%-Owned Subsidiary December 31, 20x4 (First Year after Acquisition)



_________



P 348,000


90,000


1,200

Other expenses 48,000 18,000 66,000


3,750



( 8,610)



S Company P120,000(1) 120,000


S Company - 36,000(4) 36,000 -


Balance Sheet

Cash……………………….P


Inventory…………………. 120,000 90,000(2) 6,000

(3) 6,000 210,000

Land……………………………. 210,000 48,000(2) 7,200 265,200

Equipment 240,000 180,000 420,000

Buildings 720,000 540,000(2) 216,000 1,044,000


(3) 1,200 3,600

Goodwill……………………(2) 15,000

(3) 3,750 11,250

Investment in S Co……… 377,640 (2) 288,000(2) 84,000(4) 5,640 -

Total P1,990,440P1,008,0

00 P2,426,850


(2) 96,000

(3) 12,000 P147,000


405,000 288,000 (2) 192,000

495,000

(3) 6,000

Accounts payable…………… 120,000 120,000 240,000Bonds payable………………… 240,000 120,000 360,000Common stock, P10 par……… 600,000 600,000Common stock, P10 par……… 240,000 (1)

240,000Retained earnings, from above 490,440 144,000 490,440


_________ ______

___

(4) 7,200

__________

(1 ) 72,000 (2) 21,000(5) 8,610 ____94,410

Total P1,990,440 P1,008,000

P 754,200

P 754,200

P2,426,850


Sales P 540,000 P 380,000Less: Cost of goods sold 216,000 192,000Gross profit P 324,000 P 168,000Less: Depreciation expense 60,000 24,000 Other expense 72,000 54,000Net income from its own separate operations P 192,000 P 90,000Add: Investment income 66,240 -Net income P 258,240 P 90,000Dividends paid P 72,000 P 48,000


Parent Company Equity Method EntryThe following are entries recorded by the parent in 20x5 in relation to its subsidiary investment:



December 31, 20x5:(4) Investment income (P7,200 x 80%) 5,760 Investment in S Company 5,760 Record amortization of allocated excess of inventory, equipment,

buildings and bonds payable

P Company’s P12,000 portion of the differential related to goodwill related to goodwill is not adjusted on the parent’s books following Option 2 as referred to above for goodwill impairment loss. Even though the goodwill of the consolidated entity is impaired,



38,400 Dividends – S (48,000x 80%)


5,760 (P7,200 x 80%)

Balance, 12/31/x5 405,480

Investment Income Amortization NI of S (7,200 x 80%) 5,760

72,000 (90,000 x 80%)

66,240 Balance, 12/31/x4

Consolidation Workpaper – Second Year after AcquisitionThe schedule of determination and allocation of excess presented above provides complete guidance for the worksheet eliminating entries.

(E1) Common stock – S Co………………………………………… 240,000 Retained earnings – S Co, 1/1/x5…………………………. 144.000 Investment in S Co (P384,000 x 80%) 307,200 Non-controlling interest (P384,000 x 20%)………………………..

76,800

To eliminate investment on January 1, 20x5 and equity accounts of subsidiary on date of acquisition; and to establish non- controlling interest (in net assets of subsidiary) on 1/1/20x5.

(E2) Accumulated depreciation – equipment (P96,000 – P12,000)

84,000

Accumulated depreciation – buildings (P192,000 + P6,000) 198,000 Land……………………………………………………………………….

7,200

Discount on bonds payable (P4,800 – P1,200)…. 3,600 Goodwill (P15,000 – P3,750)…………………………….. 11,250 Buildings……………………………………….. 216,000 Non-controlling interest [(P90,000 – P13,200) x 20%] + [P3,000, full goodwill - [(P3,750, full-goodwill impairment – P3,000, partial- goodwill impairment)* or (P3,750 x 20%)]

17,610


(E3) Depreciation expense……………………….. 6,000 Accumulated depreciation – buildings………………….. 6,000 Interest expense………………………………… 1,200 Accumulated depreciation – equipment……………….. 12,000 Discount on bonds payable………………………… 1,200


ExpenseAmortizatio

n-Interest

Total

Inventory soldEquipment P 12,000Buildings ( 6,000)Bonds payable

_______ P 1,200

Totals P 6,000 P1,200 P7,200

(E4) Investment income 66,240 Non-controlling interest (P48,000 x 20%)……………….. 9,600 Dividends paid – S…………………… 48,000 Investment in S Company 27,840


Investment in S Investment IncomeNI of S 38,400 Dividends - S NI of S(90,000 x 80%)……. 72,000



(90,000 72,000 x

80%)

27,840

66,240


16,560




20%


P 16,560

Less: NCI on goodwill impairment loss on full- Goodwill

0


P 16,560

Worksheet for Consolidated Financial Statements, December 31, 20x5. Equity Method (Full-goodwill)80%-Owned Subsidiary December 31, 20x5 (Second Year after Acquisition)



___________



90,000


1,200



90,000P 274,800


( 16,560)


90,000P 258,240


S Company P144,000(1)

144,000 Net income, from above 258,240 90,000 258,240 Total P748,680 P234,000 P748,680Dividends paid P Company 72,000 72,000

S Company - 48,000(4) 48,000 -


Balance SheetCash………………………. P P P 367,200


38,400 Dividends – S (48,000x 80%)


5,760 (7,200 x 80%)

Balance, 12/31/x5 405,480

307,200 (E1) Investment, 1/1/20x5


405,480 405,480

265,200 102,000Accounts receivable…….. 180,000 960,000 276,000Inventory…………………. 216,000 108,000 324,000

Land……………………………. 210,000 48,000(2) 7,200 265,200



Goodwill……………………(2) 11,250 11,250


(4) 27,840 -

Total P2,236,680P1,074,0

00 P2,634,000


P 102,000

(2) 84,000

(3) 12,000 P 180,000


450,000 306,000

(2) 198,000 (3) 6,000 552,000



Retained earnings, from above 676,680 186,000 676,680Non-controlling interest…………

___ _____ __________

(3) 9,600

__________

(2 ) 76,800 (2) 17,610(5) 16,560 __________

Total P2,236,680

P1,074,000

P 796,650

P 796,650 P2,634,000

Note: Using cost model or equity method, the consolidated net income, consolidated retained earnings, non-controlling interests, consolidated equity on December 31, 20x4 and 20x5 are exactly the same (refer to Problem VII solution).5. 1/1/20x4 a. On date of acquisition the retained earnings of parent should always be considered as

the consolidated retained earnings, thus:Consolidated Retained Earnings, January 1, 20x4 Retained earnings - P Company, January 1, 20x4 (date of acquisition) P360,000

b.Non-controlling interest (full-goodwill), January 1, 20x4 Common stock – S Company, January 1, 20x4…… P 240,000 Retained earnings – S Company, January 1, 20x4 120,000 Stockholders’ equity – S Company, January 1, 20x4 P 360,000 Adjustments to reflect fair value - (over) undervaluation of assets and liabilities, date of acquisition (January 1, 20x4) 90,000 Fair value of stockholders’ equity of subsidiary, January 1, 20x4…… P450,000 Multiplied by: Non-controlling Interest percentage…………... 20 Non-controlling interest (partial-goodwill)………………………………….. P 90,000 Add: NCI on full-goodwill (P15,000 – P12,000) ___3,000 Non-controlling interest (partial-goodwill)………………………………….. P 93,000


6. a. CI-CNI – P202,440

Consolidated Net Income for 20x4 Net income from own/separate operations: P Company P168,000 S Company 60,000 Total P228,000 Less: Non-controlling Interest in Net Income* P 8,610 Amortization of allocated excess (refer to amortization above) 13,200 Goodwill impairment (impairment under full-goodwill approach) 3,750 25,560 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent………….. P202,440 Add: Non-controlling Interest in Net Income (NCINI) 8,610 Consolidated Net Income for 20x4 P211.050

b. NCI-CNI – P8,610*Non-controlling Interest in Net Income (NCINI) for 20x4 Net income of S Company P 60,000 Less: Amortization of allocated excess (refer to amortization table above) 13,200

P 46,800 Multiplied by: Non-controlling interest %.......... 20% Non-controlling Interest in Net Income (NCINI) P 9,360 Less: Non-controlling interest on impairment loss on full-goodwill (P3,750 x 20%) or (P3,750 impairment on full-goodwill less P3,000, impairment on partial-goodwill)*

750

Non-controlling Interest in Net Income (NCINI) P 8,610 c. CNI, P211,050 – refer to (a)


Consolidated Retained Earnings, December 31, 20x4 Retained earnings - P Company, January 1, 20x4 (date of acquisition) P360,000 Add: Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent for 20x4 202,440 Total P562,440 Less: Dividends paid – P Company for 20x4 72,000 Consolidated Retained Earnings, December 31, 20x4 P490,440

e. Non-controlling interest (full-goodwill), December 31, 20x4 Common stock – S Company, December 31, 20x4…… P 240,000 Retained earnings – S Company, December 31, 20x4 Retained earnings – SCompany, January 1, 20x4 P120,000 Add: Net income of S for 20x4 60,000 Total P180,000 Less: Dividends paid – 20x4 36,000 144,000 Stockholders’ equity – S Company, December 31, 20x4 P 384,000 Adjustments to reflect fair value - (over) undervaluation of assets and liabilities, date of acquisition (January 1, 20x4) 90,000 Amortization of allocated excess (refer to amortization above) – 20x4 ( 13,200) Fair value of stockholders’ equity of subsidiary, December 31, 20x4…… P460,800 Multiplied by: Non-controlling Interest percentage…………... 20 Non-controlling interest (partial-goodwill, 12/31/20x4………………………….. P 92,160 Add: Non-controlling interest on full goodwill , net of impairment loss, 12/31/x4: [(P15,000 full – P12,000, partial = P3,000) – P750 impairment loss

2,250

Non-controlling interest (full-goodwill), 12/31/20x4…………….. P 94,410

f.Consolidated SHE: Stockholders’ Equity Common stock, P10 par P 600,000 Retained earnings 490,440 P’s Stockholders’ Equity / CI – SHE, 12/31/20x4 P1,090,440 NCI, 12/31/20x4 ___94,410

Consolidated SHE, 12/31/20x4 P1,184,850

12/31/20x5: a. CI-CNI – P258,240

Consolidated Net Income for 20x5 Net income from own/separate operations P Company P192,000 S Company 90,000 Total P282,000 Less: Non-controlling Interest in Net Income* P16,560 Amortization of allocated excess (refer to amortization above) 7,200 Goodwill impairment (impairment under full-goodwill approach) 0 23,760 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent………….. P258,240 Add: Non-controlling Interest in Net Income (NCINI) 16,560 Consolidated Net Income for 20x5 P274,800

b. NCI-CNI – P16,560*Non-controlling Interest in Net Income (NCINI) for 20x5 Net income of S Company P 90,000 Less: Amortization of allocated excess / goodwill impairment for 20x5 (refer to amortization table above) 80,400


c. CNI, P274,800 – refer to (a) d. On subsequent to date of acquisition, consolidated retained earnings would be

computed as follows:Consolidated Retained Earnings, December 31, 20x5 Retained earnings - P Company, January 1, 20x5 (cost model P484,800 Adjustment to convert from cost model to equity method for purposes of consolidation or to establish reciprocity:/P’s share in adjusted net increased in subsidiary’s retained earnings: Retained earnings – S, January 1, 20x5 P 144,000 Less: Retained earnings – S, January 1, 20x4 120,000 Increase in retained earnings since date of acquisition P 24,000 Less: Amortization of allocated excess – 20x4 13,200


3,000 5,640


258,240


e.Non-controlling interest (full-goodwill), December 31, 20x5 Common stock – S Company, December 31, 20x5…… P 240,000 Retained earnings – S Company, December 31, 20x5 Retained earnings – S Company, January 1, 20x5 P144,000 Add: Net income of S for 20x5 90,000 Total P234,000 Less: Dividends paid – 20x5 48,000 186,000 Stockholders’ equity – S Company, December 31, 20x5 P 426,000 Adjustments to reflect fair value - (over) undervaluation of assets and liabilities, date of acquisition (January 1, 20x4) 90,000 Amortization of allocated excess (refer to amortization above) : 20x4 P

13,200 20x5 7,200 ( 20,400) Fair value of stockholders’ equity of subsidiary, December 31, 20x5…… P 495,600 Multiplied by: Non-controlling Interest percentage…………... 20 Non-controlling interest (partial goodwill)………………………………….. P 99,120 Add: Non-controlling interest on full goodwill , net of impairment loss [(P15,000 full – P12,000, partial = P3,000) – P750 impairment loss 2,250 Non-controlling interest (full-goodwill)………………………………….. P 101,370

f.Consolidated SHE: Stockholders’ Equity Common stock, P10 par P 600,000 Retained earnings 676,680 P’s Stockholders’ Equity / CI – SHE, 12/31/20x4 P1,276,680 NCI, 12/31/20x4 __101,370 Consolidated SHE, 12/31/20x4 P1,378,050

Problem XXVIII1. AA should report income from its subsidiary of P15,000 (P20,000 x .75) rather than

dividend income of P9,000.2. A total of P5,000 (P20,000 x .25) should be assigned to the non-controlling interest in the

20x4 consolidated income statement.3. Consolidated net income of P70,0000 should be reported for 20X4, computed as follows:

Reported net income of AA P59,000 Less: Dividend income from KR (9,000 )Operating income of AA P50,000 Net income of KR 20,000 Consolidated net income P70,000

4. Income of P79,000 would be attained by adding the income reported by AA (P59,000) to the income reported by KR (P20,000). However, the dividend income from KR recorded by AA must be excluded from consolidated net income.

Multiple Choice Problems 1. b Full-Goodwill: (P600,000/70%) – P640,000 = P217,143 – P40,000 = P177,143 If partial goodwill: P600,000 – (P640,000 x 70%) = P152,000 – (P40,000 x 70%) =

P124,000 2. b – P500,000 + P3,461 3. b 4. d – equivalent to consideration transferred, P320,000 5. d – equivalent to consideration transferred, P380,000 6. a

20x4 Investment income: Dividend of P10,000 x 100%20x4 Investment balance: P500,000

7. d – P45,000/15% = P300,000 8. No answer available

Pigeon’s separate income P150,000

Less: 60% of Home’s P10,000 loss = 6,000Less: Equipment depreciation P10,000/ 10 years = __1,000Controlling Interest in Consolidated Net Income P143,00

0Add: 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 IncomeP138,333

9. aNon-controlling Interest in Net Income (NCINI) for Year 3 Net income of S Company P240,000 Less: Amortization of allocated excess 45,000

P195,000 Multiplied by: Non-controlling interest %.......... 30% Non-controlling Interest in Net Income (NCINI) for Year 3 P 58,500

10. c Net income from own/separate operations P Company P 375,000 S Company 30,000 Total P405,000 Less: Non-controlling Interest in Net Income* P5,250 Amortization of allocated excess (refer to amortization above) 3,750 Goodwill impairment (impairment under full-goodwill approach) 0 9,000 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent………….. P396,000

*Non-controlling Interest in Net Income (NCINI) for 20x4 Net income of S Company P30,000 Less: Amortization of allocated excess** 3,750

P26,250 Multiplied by: Non-controlling interest %.......... 20% 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.11. a

*Non-controlling Interest in Net Income (NCINI) for Year 3 Net income of S Company P600,000 Less: Amortization of allocated excess 112,500

P487,500 Multiplied by: Non-controlling interest %.......... 30% Non-controlling Interest in Net Income (NCINI) for Year 3 P146,250

12. c Net income from own/separate operations P Company P 625,000 S Company 50,000 Total P675,000 Less: Non-controlling Interest in Net Income* P 8,750 Amortization of allocated excess (refer to amortization above) 6,250 Goodwill impairment (impairment under full-goodwill approach) 0 15,000 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent………….. P660,000

*Non-controlling Interest in Net Income (NCINI) for 20x4 Net income of S Company P50,000 Less: Amortization of allocated excess** 6,250


**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.

13. bAs 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 P206,667Amortization of allocated excess: P15,000 x 4/12 5,000

P211,667

14. cNet income of S Company (P800,000 – P620,000) P180,000Less: Amortization of allocated excess 15,000

P165,000Multiplied by: No of mos. (9/1-12/31) 4/12

P 55,000

15. aNet income of S Company (P800,000 – P620,000) P180,000Less: Amortization of allocated excess 15,000

P165,000Multiplied by: No of mos. (9/1-12/31) 4/12

P 55,000Multiplied by: Non-controlling interest %.......... ____20%Non-controlling Interest in Net Income (NCINI) for 20x4 P 22,000

16. b Combined revenues................................................................................ P1,100,000 Combined expenses................................................................................ (700,000)Excess acquisition-date fair value amortization....................................... (15,000)Consolidated net income......................................................................... P385,000 Less: noncontrolling interest (P85,000 × 40%)........................................ (34,000)Consolidated net income to controlling interest...................................... P351,000

17. c HH expense............................................................................................. P621,000 NN expenses............................................................................................ 714,000 Excess fair value amortization (70,000 ÷ 10 yrs).................................... 7,000 Consolidated expenses............................................................................ P1,342,000

18. 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 300,000Subsidiary - George (P500,000 – P400,000)…….. 100,000

P 400,000Less: Amortization of allocated excess…………………… 6,000

Impairment of goodwill (if any)……………………. 0Consolidated/Group Net Income…………………………. P 394,000Less: 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).

19. 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

20. c - 20x5 = P33,500 – refer to No. 1921. 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 P 151,400

P 179,900 22. c - 20x5 = P179,900 – refer to No. 21

23. dUnder 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.

24. d – refer to No. 23 for further discussion.25. b – refer to No. 23 for further discussion.26. a – P40,000 x 80% 27. b – P50,000 x 80% 28. a – P60,000 x 80%

29. 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*Amortization of allocated excess:

Increase in equipment: P30,000 / 10 years = P 3,000Increase in buildings: P40,000 / 10 years = 4,000Total 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:Non-controlling interest in Net Income:

Subsidiary net income from own operations……….P100,000 Less: Amortization of allocated excess*……………. 7,000

P 93,000 x: Non-controlling interests………………………. 20%

Non-controlling interest in Net Income…………………. P 18,60030. c Full/Gross-up Goodwill Presentation:

Non-controlling interest in Net Income:Subsidiary net income from own operations……….P120,000 Less: Amortization of allocated excess*…………… 7,000 Impairment of full-goodwill (if any)**……… 0

P113,000 x: Non-controlling interests………………………. 20%

Non-controlling interest in Net Income…………………… P 22,600

*Amortization of allocated excess:Increase in equipment: P30,000 / 10 years = P 3,000Increase in buildings: P40,000 / 10 years = 4,000Total amortization………………………. P 7,000



Subsidiary net income from own operations……….P120,000 Less: Amortization of allocated excess*…………… 7,000



31. a Full/Gross-up Goodwill Presentation:

Non-controlling interest in Net Income:Subsidiary net income from own operations……….P130,000 Less: Amortization of allocated excess*…………… 7,000 Impairment of full-goodwill (if any)**……… 0



*Amortization of allocated excess:Increase in equipment: P30,000 / 10 years = P 3,000Increase in buildings: P40,000 / 10 years = 4,000Total amortization………………………. P 7,000



Subsidiary net income from own operations……….P130,000 Less: Amortization of allocated excess*…………… 7,000



32. aBook 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…………..……………… 40,000 260,000Book value of Stockholders’ Equity of Subsidiary, 12/31/x4 P 560,000Add: Adjustments to reflect fair value (P30,000 + P40,000).. 70,000Less: Accumulated amortization of allocated excess P7,000 x 1 year…………………………………….…. 7,000Fair value of Stockholders’ Equity of Subsidiary. 12/31/x4… P 623,000Multiplied by: Non-controlling Interest %........................... 20%Non-controlling Interest (partial goodwill)………………….. P 124,600

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)……………………………… P 135,600

* 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

Less: Book value of Net Assets (Stockholders’ Equity - Subsidiary)…………................................... 500,000 Allocated Excess.…………………………………………. P 125,000 Less: Over/Undervaluation of Assets and

Liabilities (P40,000 + P30,000)……………………. 70,000 Goodwill (Full/Gross-up)..……………………………….. P 55,000

33. eBook value of Stockholders’ Equity of Subsidiary Common stock, 12/31/20x5……………………………… P 300,000 Retained earnings, 12/31/20x5: Retained earnings, 1/1/20x5 (refer to No. 32)…… P260,000 Add: Net income, 20x5………………………………. 120,000 Less: Dividends paid, 20x5…………………………… 50,000 330,000Book value of Stockholders’ Equity of Subsidiary, 12/31/x5 P 630,000Add: Adjustments to reflect fair value (P30,000 + P40,000).. 70,000Less: Accumulated amortization of allocated excess – 2 yrs 14,000Fair value of Stockholders’ Equity of Subsidiary. 12/31/x5… P 686,000Multiplied by: Non-controlling Interest %.............................. 20%Non-controlling Interest (partial goodwill)………………….. P 137,200

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)……………………………… P 148,200

34. eBook value of Stockholders’ Equity of Subsidiary Common stock, 12/31/20x6……………………………… P 300,000 Retained earnings, 12/31/20x6: Retained earnings, 1/1/20x6………………………….P330,000 Add: Net income, 20x6……………………………… 130,000 Less: Dividends paid, 20x6………………………….. 60,000 400,000Book value of Stockholders’ Equity of Subsidiary, 12/31/x6 P 700,000Add: Adjustments to reflect fair value (P30,000 + P40,000).. 70,000Less: Accumulated amortization of allocated excess (1/1/20x4 – 12/31/20x6): P7,000 x 3 years…………… 21,000Fair value of Stockholders’ Equity of Subsidiary. 12/31/x6… P 749,000Multiplied by: Non-controlling Interest %............................ 20%Non-controlling Interest (partial goodwill)………………….. P 149,800

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)……………………………… 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.

35. d – Economic Unit or Entity Concept (as required by PFRS 10) Net income from own/separate operations P Company P 500,000 S Company 100,000 Total P600,000 Less: Non-controlling Interest in Net Income* P 20,000 Amortization of allocated excess 0 Goodwill impairment (impairment under full-goodwill approach) _ 0 20,000 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent………….. P580,000 Add: NCINI __20,000 CNI - entity concept P600,000

*Non-controlling Interest in Net Income (NCINI) for 20x4 Net income of S Company P100,000 Less: Amortization of allocated excess _______0


36. c – Parent Company Concept – Parent’s Net Income only (not required by PFRS 10)

Net income from own/separate operations P Company P 500,000 S Company 100,000 Total P600,000 Less: Non-controlling Interest in Net Income* P 20,000 Amortization of allocated excess 0 Goodwill impairment (impairment under full-goodwill approach) _ 0 20,000 CNI - entity concept P580,000

*Non-controlling Interest in Net Income (NCINI) for 20x4 Net income of S Company P100,000 Less: Amortization of allocated excess _______0


37. Podex’s separate earnings for 20x6.............................................. P2,000,000Dividend income from Sodex................................................... __120,000 Podex’s 20x6 net income..................................................... P2,120,000

38. P2,260,000 Podex’s separate earnings for 20X6 P2,000,000

Podex’s equity in net income of Sodex.................................... 300,000Less: Amortization of cost in excess of book value.................. (40,000) Podex’s 20x6 net income..................................................... P2,260,000

39. b

40. b Net Income from own operations: 20x4 20x5 Parent …………………………………………………P 100,000 P100,000

Subsidiary……………………………………………... 25,000 35,000 P125,000 P135,000

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 P45,000

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

41. c – refer to No. 4042. c – refer to No. 4043. b- refer to No. 4044. 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

45. 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………………………………………………………. 2,000,000Investment in Shure………………………………………………… 34,000,000

46. d –refer to No. 45 47. a48. a

Cost of Goods Sold P80,000 debit

Depreciation Expense (P192,000/120) 7 = P11,200 debit49. c

Cost of Goods Sold (P60,000 x 4/6) = P40,000 debitInterest Expense: (P15,000/5) = P3,000 debit

50. a [(P250,000 - P180,000)/10]751. c

[(P380,000 - P260,000)/120]8852. a 53. c

P170,000 - {[P320,000 - (P300,000 - P170,000)]/10}254. b

[P320,000 - (P300,000 - P170,000)]/1055. d56. d

P105,000 - {[P405,000 - (P450,000 - P105,000)]/20}257. a

[P405,000 - (P450,000 - P105,000)]/20

58. d - The acquisition method consolidates assets at fair value at acquisition date regardless of the parent’s percentage ownership.

59. 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

P497,00060. b P: BV,12/31/20x5 P 975,000 S:

BV of building, 12/31/20x5 P105,000 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

P1,104,00061. 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........................................................ P45,000Amortization for 2 years (10 year life)..................................................... (9,000)Patent reported amount December 31, 20x5.......................................... P36,000

62. b BV of building, 1/1/20x4 P200,000 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)

P285,00063. d – same with No. 6264. 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

65. 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)66. 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

P300,00067. c

Consolidated Net Income for 20x4 Net income from own/separate operations P Company P30,200 – (P150,0000 – P20,000 – P60,000) P 70,000 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

68. b Plimsol: P100,000 + P200,000,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,P 300,000

Shipping: P75,000 + P150,000………………………………………………………………. 225,000

P 525,00069. Retained Earnings - Plimsol, 1/1/20x4 (cost method, same with equity method and consoiidated retained earnings since it is the date of acdquisition) P 150,000 Add: CI – CNI (refer to No. 71) 110,000 Less: CI – Dividends (Dividend of parent only) 25,000 Retained earnings, 12/31/20x4 (equity method same with CRE) P 235,000

70. d Liabilities: Plimsol (P40,000 + P75,000) P115,000 Shipping (P25,000 + P50,000) 75,000

P 190,000

71. d Total assets (No. 72) P525,000Les: Liabilities (No. 74) 190,000Stockholders’ equity P335,000

72. bDecrease in Buildings account:

Fair value…………………………………………… P 8,000Book value………………………………………….. __10,000Decrease……………………………………………. P 2,000

73. dDecrease in buildings account (refer to No. 73)………… P 2,000Less: Increase due to depreciation (P2,000/10)………… 200

Decrease in buildings accounts…………………………….. P 1,80074. d

Decrease in buildings account (refer to No. 74)………… P 1,800Less: Increase due to depreciation (P2,000/10)………… 200Decrease in buildings accounts…………………………….. P 1,600

75. aIncrease in Equipment account:

Fair value…………………………………………… P 14,000Book value………………………………………….. __18,000Increase……………………………………………. P 4,000

76. aIncrease in equipment account (refer to No. 76)………… P 4,000Less: Decrease due to depreciation (P4,000/4)…………… 1,000Increase in equipment accounts…………………………….. P 3,000

77. aIncrease in equipment account (refer to No. 77)………… P 3,000Less: Decrease due to depreciation (P4,000/4…………… 1,000Increase in equipment accounts…………………………….. P 2,000

78. aIncrease in Land account:

Fair value……………………………………………P 12,000Book value………………………………………….. 5,000Increase…………………………………………….. P 7,000

79. b – refer to No. 78, no depreciation/amortization 80. b – refer to No. 78, no depreciation/amortization81. e

Increase in Patent account:Fair value…………………………………………… P 11,000Book value………………………………………….. _ 0Increase……………………………………………. 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. 82. e

Increase in patent account (refer to No. 85)……………… P 11,000Less: Decrease due to depreciation (P11,000/5).………… 2,200Increase in patent accounts…………………………………. P 8,800

83. dIncrease in patent account (refer to No. 86)……………… P 8,800Less: Decrease due to depreciation (P11,000/5).………… 2,200Increase in patent accounts…………………………………. P 6,600

84. 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 1,000Equipment: P8,000 / 4 years 2,000Patents: P3,000 / 10 years 300

P 3,30085. 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 P118,000x: Non-controlling) interests 10%Non-controlling Interests (in net assets) P 11,800

86. a – P48,000, parent only.

87. a – P48,000. On the date of acquisition, the parent’s retained earnings is also the consolidated retained earnings.

88. No requirement.

89. b – P120,600, the initial value

90. b – P4,000 x 90% = P3,600

91. cConsolidated Net Income for 20x4 Net income from own/separate operations P Company P30,200 – (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 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent………….. P32,090 Add: Non-controlling Interest in Net Income (NCINI) 610 Consolidated Net Income for 20x4 P32,700

*Net income of subsidiary – 20x4 P 9,400Amortization of allocated excess – 20x4 ( 3,300)


P 610Less: Non-controlling interest on impairment loss on full-goodwill ____0 Non-controlling Interest in Net Income (NCINI) P 610

92. 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 12,01093. b – refer to 91 for computation94. c – refer to 91 for computation95. b Controlling RE / RE Attributable to EH of Parent, 1/1 (refer to No. 102 P 48,000 Add: CI – CNI (refer to 106 and 109) 32,090 Less: CI – Dividends (Dividend of parent only) 15,000 Controlling RE / RE Attributable to EH of Parent, 12/31 P 65,09096. b – same with No. 9597. 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. 105) 65,090 Parent’s Stockholders Equity or Controlling Interest – Equity P300,690 Noncontrolling Interest 12,010 Consolidated Equity P312,700

98. c P95,000 = (P956,000 / .80) - P1,000,000 - P100,000

99. c P251,000 = .20[(P956,000 + P239,000) + (P190,000 - P5,000 - P125,000)]

100. bCombined revenues................................................................................. P1,300,000 Combined expenses................................................................................ (800,000)Trademark amortization.......................................................................... (6,000)Patented technology amortization........................................................... (8,000 )Consolidated net income......................................................................... P486,000

101. No answer available NCI-CNI - P34,400; NCI – P280,800 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

102. aMM 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

103. aFair 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

104. cNon-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) P 372,000 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.105. b – (P50,000 + P70,000) x 25% = P30,000106. b – P only.107. b

{(P250,000/.8) + [P75,000 + P90,000 - P25,000 - P50,000 - P30,000 - (P80,000/8)2]}.2

108. d{(P420,000/.7) + [P160,000 + P210,000 - P60,000 - P80,000 - P50,000 - (P90,000/5)2]}.3

109. a - P650,000 =P500,000 + P200,000 - P50,000110. a – assume the use of equity method

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 e - If cost model/cost method, the answer would be P100,000.

Dividend income……………………………………………………………. P 100,000

111. c – P60,000 x 80% = P48,000112. c

Investment.1/1/20x4 P105,000Add: Share in net income – 20x4 (P45,000 x 80%) 36,000Less: Dividends received 12,000

Investment, 12/31/20x4 P129,000Add: Share in net income – 20x5 (P60,000 x 80%) 48,000Less: Dividends received 18,000

Investment, 12/31/20x5 P159,000

113. d Investment balance, 1/1/20x4……………………………………………….. P 150,000 Add: Puma’s equity in net income of Slume (30% x P25,000)..………… 7,500 Less: Dividends (P30% x P10,000)……………………………………………. 3,000

Amortization of cost in excess of book value (P50,000/10 years) x 30%..............................................................

1,500 Puma’s 20x6 net income (equity method).................................... P 153,000

114. b Puma’s equity in net income of Slume (30% x P25,000)..……………….. P 7,500 Less: Amortization of cost in excess of book value

(P50,000/10 years) x 30%.............................................................. 1,500

Investment income – 20x4 (equity method)………………………………. P 6,000

115. 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 200,000Less: Book value of stockholders’ equity of Son: Common stock (P100,000 x 100%)………………. P 100,000 Retained earnings (P60,000 x 100%)………... 60,000 160,000Allocated excess (excess of cost over book value)….. P 40,000Less: 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 15,000Positive excess: Full-goodwill (excess of cost over fair value)………………………………………………... P 25,000

Partial-Goodwill ApproachFair value of Subsidiary (90%) Consideration transferred……………………………….. P 180,000Less: Book value of stockholders’ equity of S: Common stock (P100,000 x 90%)……………………. P 90,000 Retained earnings (P60,000 x 90%)………………... 54,000 144,000Allocated excess (excess of cost over book value)….. P 36,000Less: Over/under valuation of assets and liabilities: Increase in land (P5,000 x 90%)……………………. P 4,500 Increase in equipment (P10,000 x 90%) ___9,000 13,500Positive excess: partial-goodwill (excess of cost over fair value)………………………………………………... P 22,500


Over/under Life

Annual Amount

Current Year(20x4)

Subject to Annual Amortization Equipment (net)......... 10,000 5 P 2,000 P 2,000

Patent 25,000 5 5,00

0 5,000P 7,000 P 7,000

116. d

117. c

118. d – 20x3: P30,000 x 75% = P22,500 20x4: P40,000 x 75% = P30,000

119. a – no changes in investment unless there are dispositions of investment and permanent impairment.

120. None – no answer available. Under the cost model share in net income or earnings of subsidiary does not affect investment.

121. d Investment account, December 31, 20x7:

Original investment …………………………………………P 550,000Tiny’s earnings, 20x4-20x77: 100% x P166,000…………… 166,000Less: Dividends received: 100% x P114,000……………… 114,000Balance, December 31, 20x7…………………………….. P602,000

122. a The adjusting entry required in 20x7 to convert from the cost to the equity method is:

Investment in Tiny………………………………….52,000Retained earnings beg………………………….. 4,000Dividend revenue………………………………… 54,000

Equity in subsidiary income of Tiny……. 110,000

123. b

124. b – Dividend paid – S, P70,000 x 60% = P42,000

Investment in Wisden1/1/x4. 180,000

18,000 Dividends – S (20,000 x 90%)

NI of S(60,000 x 90%)……. 54,000


1/1/x6 203,400

Investment in Wisden1/1/x6. 230,400

9,000 Dividends – S

(10,000 x 90%)

NI of S(30,000 x 90%)……. 27,000

Amortization 6,300 (7,000 x 90%)

1/1/x6 215,100

125. d – CNI amounted to P265,000 [CI-CNI, P235,000 and NCI-CNI, P30,000 Consolidated Net Income for 20x5 Net income from own/separate operations P Company P190,000 S Company 90,000 Total P280,000 Less: Non-controlling Interest in Net Income* P 30,000 Amortization of allocated excess 15,000 Goodwill impairment ____0 45,000 Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent………….. P235,000 Add: Non-controlling Interest in Net Income (NCINI) 30,000 Consolidated Net Income for 20x4 P265,000

*Net income of subsidiary – 20x4 P 90,000Amortization of allocated excess – 20x4 ( 15,000_


P 30,000Less: 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 300,000Less: Cost of goods sold Operating expenses 410,000 210,000Net income from its own separate operations P 190,000 P 90,000Add: 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 690,000Less: Book value of stockholders’ equity of Sea (P550,000 x 100%) __550,000Allocated excess (excess of cost over book value)….. P 140,000Add (deduct): (Over) under valuation of assets and liabilities (P140,000 x 100%) 140,000Positive excess: Full-goodwill (excess of cost over fair value) P 0

Amortization of Allocated ExcessBook Value Fair Value Over/under Amort.

Buildings (net)- 6 300,000 360,000 P 60,000 P 10,000Equipment (net)– 4 300,000 280,000 (20,000) (5,000)Patent -10 -0- 100,000 100,000 10,000Net P 140,000 P 15,000

126. c – refer to No. 125 for computations127. b – refer to No. 125 for computations

128. 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), 0 111,00

0 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.

129. c - P811,000 – refer to note (b) of No. 128130. b – P111,000 – refer to No. 128131. d

Consolidated Retained earnings, January 1, 20x5 (refer to Nos. 118 and 119) P 811,000Add: Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent for 20x5 235,00

0Total P1,046,00

0Less: Dividends paid – Parent Company for 20x5 92,00

0Consolidated Retained Earnings, December 31, 20x5 P

954,000132. d – refer to No.131133. c

Non-controlling interest (partial-goodwill), December 31, 2015 Common stock – Subsidiary Company, December 31, 2015…… P

480,000 Retained earnings – Subsidiary Company, December 31, 2015 Retained earnings – Subsidiary Company, January 1, 2015 P300,00

0 Add: Net income of subsidiary for 2015 90,00

0 Less: Dividends paid – Subsidiary - 2015 70,00

0 320,000

Stockholders’ equity – Subsidiary Company, December 31, 2015

P 800,000

Adjustments to reflect fair value - (over) undervaluation of assets and liabilities, date of acquisition (January 1, 2012)

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/ 2015 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

134. c Stockholders’ Equity Common stock - Peer P

724,000 Retained earnings 954,000Parent’s Stockholders’ Equity/Equity Attributable to the Owners of the Parent P

1,678,000Non-controlling interest** 352,000Total Stockholders’ Equity (Total Equity) P 985,500Total Liabilities and Stockholders’ Equity P2,030,000

135. c

136. c137. d – refer to No. 125138. c – refer to No. 125139. b – refer to No. 125140. c – refer to No. 128141. c – refer to No. 128142. a – not applicable under equity method.143. d – refer to No. 131144. d – refer to No. 131145. d – refer to No. 133146. c – refer to No. 134147. b

Consideration transferred: 10,500 shares x P95 P997,500Less: BV of SHE – S (?) 857,500Allocated excess; P140,000Less: O/U valuation of A and L: Undervaluation of land P40,000 Overvaluation of buildings ( 30,000)

Investment in Sea-Breeze Investment Income1/1/x2. 414,000

42,000 Dividends – S NI of S

Retro 111,000

(70,000 x 60%

NI of S(90,000 x 60%)……. 54,000



(90,000 54,000 x

60%)12/31/x5 528,000

45,000

Undervaluation of equipment 80,000 Undervaluation/unrecorded trademark 50,000 140,000

P 0148. a – P900,000 + P500,000 = P1,400,000149. 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) 160,000Amortization 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

150. b – (P750,000 + P280,000) – P30,000 + (P1,500 x 5 years) = P1,007,500151. c – (P300,000 + P500,000) + P80,000 – (P8,000 x 5 years) = P840,000152. c – P450,000 + P180,000 + P40,000 = P670,000153. d – P50,000 – P3,125 x 5 years) = P34,375154. a – P only (the stock issued In 20x0 includes already in the December 31, 20x4 balance.155. a – P only156. 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

157. 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 9,625P190,375

158. c – P3,1250 / .20 = P15,750159. a Punn’s separate earnings for 20x6.............................................. P 6,000,000

Add: Punn’s equity in net income of Sunn (3 months ended,12/31/x6) 200,000 Less: Amortization of cost in excess of book value....................... ( 60,000) Punn’s 20x6 net income (equity method)..................................... P 6,140,000

160. a – assume the use of equity method 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

E - If cost model/cost method, the answer would be P100,000.Dividend income……………………………………………………………. P 100,000

161. 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

162. 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

163. (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 earning – Parent Company, 1/1/2017………………………………. 15,400

164. (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

165. b{(P260,000 - P230,000) + [(P650,000 - P590,000)/120] 8}.8

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

167. b[{(P84,000 + P105,000) - [(P310,000 - P220,000)/20]2} - (P30,000 + P50,000)].8

168. b – building account in the books of subsidiary at fair value169. e – building account in the books of subsidiary at book value 170. d – push-down accounting: equipment account in the books of subsidiary is at fair value171. b172. a – P540,000 = (P500,000 + P150,000 – P90,000 – P20,000)173. c – equivalent to the original cost 174. 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.

175. b - Intercompany receivables and payables from unconsolidated subsidiaries would not be eliminated.

Quiz - XVI 1. b

{P150,000 - [(P550,000 - P450,000)/10] - [(P300,000 - P280,000)/5]}.8 2. P36,925

{P110,000 - (P250,000 - P160,000 - P50,000) - [(P130,000 - P100,000) 3/5] + [(P215,000 - P200,000)/5] (3/12)}.7

3. P545,500P500,000 + [P110,000 + P130,000 - P30,000 - P40,000 - P55,000 - (P200,000/8)2].7

4. P388,000P320,000 + [P100,000 + P140,000 - P40,000 - P50,000 - P35,000 - (P75,000/5)2].8

5. P15,400{P80,000 - [(P290,000 - P250,000)/8] + [(P160,000 - P150,000)/5]}.2

6. P13,200{P150,000 - (P470,000 - P300,000 - P90,000) - [(P190,000 - P160,000) 4/5] - [(P520,000 -P400,000)/10] (4/12) + [(P380,000 - P350,000)/5] (4/12)}.3

7. P70,500{(P250,000/.8) + [P75,000 + P90,000 - P25,000 - P50,000 - P30,000 - (P80,000/8)2]}.2

8. 20x5: P56,000 20x6: P14,000

Purchase differential amortization to investment income 20x5 20x6Inventory (P300,000 - P240,000).7 P42,000 P 0Plant Assets [(P700,000 - P560,000)/7].7 14,000 14,000

P56,000 P14,0009. Consolidation worksheet:

Cost of Goods Sold P60,000Depreciation Expense 20,000

10. P2,900

Sandpiper’s share of Shore net income (P18,000 x 30%) P 5,400 Add: Overvalued accounts receivable collected in 20x5 600 Undervalued accounts payable paid in 20x5 300 Less: Undervalued inventories sold in 20x5 ( 2,400) Depreciation on building undervaluation P3,600/6 ( 600) Amortization on patent P3,200/8 years ( 400) Income from Shore/Income from subsidiary 2,900

11. P1,050,000 Parrco’s income from its own separate operations for 20x6 P 900,000 Subbco’s net income for the nine months ended 12/31/x6 200,000 Less: Amortization of cost in excess of book value (P30,000 ÷ 60%) ___50,000) Consolidated net income for 20x6 (economic unit concept) P1,050,000 Division of consolidated net income:

To controlling interest (Parrco’s stockholders) P 990,000 To non-controlling interest (stockholders of Subbco) ___60,000

P1,050,00012. P990,000 Parrco’s income from its own separate operations for 20x6 P 900,000

Parrco’s equity in net income of Subbco Company for nine months ended 12/31/x6 (P200,000 60%) 120,000 Less: Parrco’s amortization of cost in excess of book value ( 30,000)

Consolidated net income for 20x6 (parent company concept) P 990,000

13. P400,000 (P100,000 + P300,000)

14. P3,600,000 Plyco’s separate earnings for 20x6 P 3,500,000 Add:Dividend income from Slyco................................................. 100,000 Plyco’s 20x6 net income P 3,600,000

15. P3,867,000 Plyco’s separate earnings for 20x6............................................. P3,500,000

Add:Plyco’s equity in net income of Slyco.................................... 400,000 Less: Amortization of cost in excess of book value....................... ( 33,000) Plyco’s 20x6 net income............................................................... P3,867,000

16. P3,867,000 (same amount as calculated in Requirement 16).

17. P52,000 Net income of S (5/1/x5 – 12/31/x5): P210,000 x 8/12 P140,000 Less: Dividend – S (11/1/20x5 – no need to pro-rate) 75,000

Cumulative net income less dividends since date of acquisition, 12/31/20x5 (date to establish reciprocity –not or 1/1/20x6) P 65,000

x: Controlling interests 80%P 52,000

18. P12,600[{(P15,000 + P22,000) - [(P80,000 - P60,000)/10]2} - (P6,000 + P9,000)].7 = P12,600

19. 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

20. 20x5 = P33,500 – refer to No. 1921. 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 P 151,400

P 179,900 22. 20x5 = P179,900 – refer to No. 2119. P9,200 Pinta Company 20y4 equity-method income:

Proportionate share of reported income (P30,000 x .40) P 12,000 Amortization of differential assigned to: Buildings and equipment [(P35,000 x .40) / 5 years] ( 2,800) Goodwill (P8,000: not impaired) -0- Investment Income P 9,200

Assignment of differentialPurchase price P150,000 Proportionate share of book value of

net assets (P320,000 x .40) (128,000)Proportionate share of fair value increase in

buildings and equipment (P35,000 x .40) (14,000 )Goodwill P 8,000

20. P3,600 - Dividend income, 20y4 (P9,000 x .40) P 3,600

21. Cost-method account balance (unchanged): P150,000 Equity-method account balance: Balance, January 1, 20y4 P150,000 Investment income 9,200 Dividends received (3,600 ) Balance, December 31, 20y4 P155,600

Theories 1.

c 6. b 11. C**

16. c 21. d 26. c 31 c 36. d 41. a

2.

d 7. c 12. b 17. c 22. a 27. d 32. b 37. b 42. c

3.

d 8. d 13. d 18. d 23. b 28. c 33. c 38. b 43. a

4.

d* 9. d 14. c 19. d 24. c 29. c 34. c 39. c 44.

5.

d 10, a 15, c 20. b 25. c 30. b 35. d 40. d 45.

*under PAS 27, cost model recognizes any dividend declared/paid by the subsidiary is classified as income regardless of retained earnings balance, which means there is no such thing as liquidating dividend under the cost model. On the other hand, under FASB ruling, a liquidating dividend still exists under the cost method. **partial equity is the same with equity method except that amortization of allocated excess is not recognized in the investment and income account.

chapter 16 advanced accounting solution manual

Documents

consolidated net income

20x4 net income

net income ncinip

net income loss of subsidiary

net income of subsidiary

smalls net assets

goodwill partial

goodwill impairment