Lecture Cases on Consolidation with Intercompany Transactions
MODADV2
Problem 1
Charmander is a 90% subsidiary of Squirtle. Squirtle acquired the shares of Charmander at
book value on January 1, 2020. Separate income statements for Squirtle and Charmander for
2020 and 2021 are as follows:
Sales
Less: Cost of sales
Less: Other expenses
Net income from own operations
Squirtle
2020
2021
P1,000,000 P1,200,000
600,000
720,000
200,000
250,000
P 200,000 P 230,000
Charmander
2020
2021
P500,000
P700,000
250,000
350,000
100,000
100,000
P150,000
P250,000
Intercompany sales were P80,000 during 2020 and P120,000 during 2021. 20% of the 2020
intercompany sales were still unsold at the end of 2020 and 30% of the intercompany sales in
2021 were still unsold at the end of 2021.
Case 1: Assume that all intercompany sales are from Charmander to Squirtle.
Required:
1. How much is the consolidated cost of sales for 2020?
2. How much is the non-controlling interest in net income for 2020?
3. How much is the consolidated net income attributable to parent for 2020?
4. How much is the non-controlling interest in net income for 2021?
5. How much is the consolidated net income attributable to net income for 2021?
Case 2: Assume that all intercompany sales are from Squirtle to Charmander.
Required:
6. How much is the non-controlling interest in net income for 2020?
7. How much is the consolidated net income attributable to net income for 2020?
8. How much is the consolidated cost of sales for 2021?
9. How much is the non-controlling interest in net income for 2021?
10. How much is the consolidated net income attributable to parent for 2021?
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Problem 2
On January 2, 2020, Raichu acquired 90% of the outstanding shares of Pikachu at underlying
book value. On October 1, 2020, an intercompany sale of land costing P1,000,000 was sold for
P1,500,000. On December 1, 2021, this land was sold to unrelated party for P1,500,000. On the
other hand, on July 1, 2021, anintercompany sale of equipment with a carrying value of P60,000
and remaining life of 3 years was sold for P42,000.
Separate statements of comprehensive income for the two companies for the year 2021 follow:
Raichu
Pikachu
Sales
P25,000,000
P14,000,000
Less: Cost of sales
15,000,000
8,400,000
Gross profit
P10,000,000
P5,600,000
Less: Operating expenses
6,000,000
3,800,000
Operating profit
P4,000,000
P1,800,000
Dividend income
40,000
Less: Loss on sale of equipment
18,000
Net income
P4,000,000
P1,822,000
Case 1: Assume that all intercompany sales of property, plant and equipment are from Raichu
to Pikachu.
Required:
11. How much is the consolidated net income attributable to parent?
12. How much is the non-controlling interest in net income?
13. How much is the consolidated operating expense?
Case 2: Assume that all intercompany sales of property, plant and equipment are from Pikachu
to Raichu.
Required:
14. How much is the consolidated net income attributable to parent?
15. How much is the non-controlling interest in net income?
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