Midterm Examination Advanced Accounting II
TEST I – THEORIES (30%)
1. When an asset is transferred to a branch from the home office, the accounting treatment will include a/an
a. Only a memo entry.
b. Credit to home office account
c. Debit to home office account
d. Credit to investment in branch account
2.
Which of the following statements is correct?
a. A sales agency normally accounts for its operations on its own set of books.
b. A branch normally maintains only minimum accounting records.
c. A sales agency generally operates with a greater degree of autonomy than does a branch.
d. A branch generally operates with a greater degree of autonomy than does a sales agency
3.
Which of the following statements is incorrect regarding branch accounting?
a. A branch’s home office account appears in the asset section of a balance sheet prepared for the company as
a whole.
b. A branch’s home office account appears in the equity section of the branch’s separate balance sheet.
c. Most branches maintain a complete set of books which includes a self-balancing set of accounts.
d. Sales agencies usually do not keep a complete self-balancing set of accounts.
4.
Remittances from a branch to its home office are recognized by the home office as:
Income
An increase in the Investment in Branch Account
a.
Yes
Yes
b.
No
No
c.
Yes
No
d.
No
Yes
5.
Sky Corp. has a branch operation located in Cebu. On the home office financial record, Sky reports Investment
in Cebu branch account with a P78,000 debit balance. At the same time, the branch operation is reporting a
Home Office account with an P81,000 credit balance.
Which of the following statements is true?
a.
b.
c.
d.
6.
Since two different sets of records are being kept, these two accounts are designed not to agree.
The difference indicates that inventory may be in transit from the home office to the branch.
The difference indicates that cash may be in transit from the branch to the home office.
Cash may have been collected by the home office for the branch but not yet reported to the branch.
Ocean Corp. operates a branch in Davao. On the home office financial records at the end of 2015, Ocean reports
Investment in Davao branch account with a P167,000 debit balance. The branch financial records report on the
same date a Home Office account with a P162,000 credit balance.
Which of the following statements is true?
a.
b.
c.
d.
Since two different sets of records are being kept, these two accounts are designed not to agree.
The difference indicates that inventory may be in transit from the home office to the branch.
The difference indicates that the home office might have assigned a P6,000 expense allocation to the
branch that was incorrectly recorded by the branch as P11,000.
Cash may have been collected by the home office for the branch but not yet reported to the branch.
7.
If all fixed assets are kept on the home office books, and the branch purchased equipment for P50,000 cash, the
appropriate journal entry for the branch is a debit to:
a. Home office account and a credit to cash for P50,000.
b. Investment in branch account and a credit to cash for P50,000.
c. Equipment and a credit to cash for P50,000.
d. Equipment and a credit to home office account for P50,000.
8.
A home office ships inventory to its branch at an amount above cost. By year-end, 75% of the inventory
shipped to the branch has been resold to outsiders. What entry must be made by the home office to record the
inter-company realized profit during the year?
a. Unrealized inter-company profit
Realized profit of branch transfers
b. Allowance for overvaluation of branch inventory
Branch income
c. Branch income
Unrealized inter-company profit
d. both a and b
9.
The home office ships merchandise to the branch at an amount above cost. How should the investment in
branch account be debited?
a. At cost
b. At billed price
c. At selling price
d. At billed price less cost
10. The allowance for overvaluation of inventory account is debited by the home office
a. When the home office ships merchandise to the branch at a billed price that exceeds cost
b. In a journal entry to close the account at the end of an accounting period
c. When the branch returns merchandise to an outside supplier
d. In a journal entry to adjust the account at the end of the accounting period.
11. When a home office ships merchandise to branch A which is later shipped to branch B. the additional freight
charges to ship the merchandise from branch A to branch B should:
a. Treated as an expense on the home office books
b. Included as part of the cost of merchandise to branch B
c. Included as part of the cost of merchandise to branch A
d. Both b and c
12. When the home office ships merchandise to the branch above its cost, the cost of goods sold on the branch
income statement is:
a. Understated by the overvaluation of the inventory.
b. Overstated by the overvaluation of the branch inventory acquired from outsiders.
c. Overstated by the overvaluation of the branch inventory acquired from home office.
d. Overstated by the difference between the unadjusted and post-closing balance in the allowance for
overvaluation in branch inventory account on the home office books.
13. When the home office ships merchandise to the branch above its cost, the net income on the income statement
prepared by the branch is:
a. Overstated by the unadjusted balance in the allowance for overvaluation account on the home office books.
b. Understated by the unadjusted balance in the allowance for overvaluation account on the home office
books.
c. Understated by the post-closing balance in the allowance for overvaluation account on the home office
books.
d. Understated by the difference between the unadjusted and the post-closing balance in the allowance for
overvaluation account on the home office books.
14. The allowance for overvaluation account is:
a.
b.
c.
d.
Eliminated in the working paper used to combine the home office and branch accounts.
Credited for the realized portion of the mark-up.
Debited for the mark-up in the branch ending inventory.
Credited for the mark-up in the branch ending inventory.
15. The unadjusted balance in the allowance for overvaluation account at year-end represents:
a. The mark-up on merchandise shipped to the branch during the year.
b. The mark-up on merchandise shipped to the branch during the year less than mark-up on the merchandise
returned by the branch during the year.
c. The mark-up on the merchandise available for sale by the branch for the year.
d. The mark-up on the cost of goods sold by the branch for the year.
16. In stock acquisition resulting in a parent company – subsidiary relationship, difference between current fair
values and book values of the subsidiary’s identifiable net assets on the date of acquisition are:
a. Disregarded
b. Entered in the accounting records of the subsidiary
c. Accounted for in appropriately titled ledger accounts in the parent company’s accounting records.
d. Provided in a working paper elimination
17. Consolidated financial statements are prepared when a parent-subsidiary relationship exists, in recognition of
the accounting principle or concept of:
a. Materiality
b. Entity
c. Reliability
d. Going-concern
18. In acquisition of stock resulting in a parent-subsidiary relationships, the parent company’s Investment in
Subsidiary Stock account balance is:
a. Allocated to individual asset and liabilities accounts in a parent company journal entry.
b. Eliminated with a working paper elimination entry for consolidation purposes.
c. Displayed among noncurrent assets in the consolidated statement of financial position.
d. Used as a basis for adjusting the subsidiary’s asset and liability account balances in the subsidiary’s books
to current fair values.
19. Working paper eliminations are entered in:
a. Both the parent company’s and the subsidiary’s accounting records
b. Neither the parent company’s nor the subsidiary’s accounting records
c. The parent company’s accounting record only
d. The subsidiary company’s accounting record only
20. On the date of acquisition of stock, the difference between the fair values and book values of the subsidiary’s
identifiable net assets are:
a.
b.
c.
d.
Included to recognize in a working paper elimination entry.
Recognized in the applicable asset and liability accounts of the subsidiary
Recognized in the applicable asset and liability account of the parent
Not recognized at all.
21. Consolidated financial statements are intended primarily for the use of:
a. Stockholders of the parent company
b. Taxing authority
c. Management of the parent company
d. Creditors of the parent company
22. How is the non-controlling interest displayed in a consolidated statement of financial position?
a. As a separate item between the liabilities and stockholders’ equity
b. As a deduction from goodwill, if any
c. By means of a note to consolidated financial statements
d. As a separate item in the stockholders’ equity section
23. Shooks Company, a subsidiary acquired for cash, owned equipment with a fair value higher than the book value
as of the date of acquisition. A consolidated statement of financial position prepared immediately after the
acquisition would include this difference in:
a. Goodwill
b. Retained earnings
c. Income statement
d. Equipment
24. Anjoks Company acquired a subsidiary for cash in acquisition combination on January 2, 2016. The price paid
was greater than subsidiary interest at fair value. A consolidated statement of financial position prepared
immediately after the combination would:
a. Include part of the excess as gain on business combination
b. Include at least some of the excess as part of land
c. Include all of the excess as part of goodwill
d. Not include the excess
25. The consolidated stockholders’ equity for a parent and its partially owned subsidiary consists of:
a. The parent’s stockholders’ equity accounts only.
b. The parent’s and the subsidiary’s stockholders’ equity accounts.
c. The parent’s equity accounts and the non-controlling interest.
d. The parent’s equity accounts, the subsidiary’s equity accounts and the non-controlling interest.
Use the following choices for numbers 26 - 30:
a. Both statements are true
b. Both statements are false
c. 1st statement is true; 2nd statement is false
d. 1st statement is false; 2nd statement is true
26. If the portion of equity owned by the parent is less than 100%, the share of the non-controlling interest in the net
assets of the subsidiary should be presented in the unconsolidated balance sheet of the parent. False
Non-controlling interest refers to equity over subsidiary other than interest of parent. True D
27. If the parent’s interest over subsidiary is 60% then retained earnings of the parent and 60% of the subsidiary’s
retained earnings should be consolidated.False
Parent’s shareholders’ equity is also the consolidated stockholders’ equity for as long as its percent of
ownership over the subsidiary is 100%.True D
28. Gain on bargain purchase is a reduction from consolidated stockholders’ equity.False
If parent acquires 75% interest and there is an excess of investment over subsidiary interest, then goodwill is
recognized in the consolidated reports also at 75%. False B
29. If A Co owns 90% of the shares of B Co who owns 60% shares of C Co then B Co need not prepare
consolidated reports even if C Co is its subsidiary.True
A Co prepares consolidated reports where the assets and liabilities of B Co and C Co are consolidated 100%
together with its own assets.True A
30. The excess of cost over subsidiary interest is considered goodwill from consolidation after considering asset
revaluation including contingent liabilities which are probable and can be measured reliably.True
Control is said to exist if one entity holds 50% or more of the subsidiary’s interest.False C
TEST II- Problem Solving 70%
Questions 1 and 2 are based on the following information:
The income statement submitted by Iloilo Branch to the Home Office for the month of December 31, 2016 follows:
Sales
Cost of Sales:
Inventory, December 1, 2016
Shipments from Home office
Purchased locally by branch
Total
Inventory, December 31, 2016
Gross Margin
Operating Expenses
Net Income for the month
P 600,000
P 80,000
350,000
30,000
P460,000
100,000
360,000
P 240,000
180,000
P 60,000
The Branch inventories consisted of:
Merchandise purchased from home
Local purchases
12/01/2016
P70,000
10,000
12/31/2016
P84,000
16,000
After effecting the necessary adjustments, the Home Office ascertained the true net income of the Branch to be
P156,000.
1.
2.
At what percentage of cost did the home office bill the branch for merchandise shipped to it?
What is the balance of the allowance for overvaluation in the branch inventory at December 31, 2016?
Questions 3 and 4 are based on the following:
The Manila Branch of the Mahusay Company is billed for merchandise by the home office at 20% above cost. The
branch in turn, prices merchandise for sales purposes at 25% above billed price. On February 29, all of the branch
merchandise is destroyed by fire. No insurance was maintained. Branch accounts show the following information:
Merchandise inventory, January 1 (at billed price)
Shipments from home office (January 1 – Feb. 29)
Sales
Sales returns
Sales allowances
Operating expenses (up to date)
3.
4.
P 36,960
28,000
21,000
2,800
1,400
3,000
What was the cost to Home Office of the merchandise destroyed by fire?
What was the correct branch profit from January 1 – February 29?
Question 5 is based on the following:
Skywalker Co. established a branch in Quezon City on February 1. Shipments were made to the branch at 125% of
cost. During the month, the following shipments were received by the branch from the home office: February 10,
P180,000; February 15, P75,000;February 20, P52,500. On February 25, the branch returned defective merchandise
worth P4,575 and on February 29, it reported a net loss of P9,300 and merchandise inventory of P127,500.
5. What is the correct branch income (loss)?
Questions 6 and 7 are based on the following:
Statement of financial position for Han Corporation and Solo Corporation before acquisition on December 31, 2015
are given below:
Han Corporation
Solo Corporation
Cash and cash equivalent
P 120,000
P 100,000
Inventory
100,000
60,000
Property and equipment
500,000
220,000
Goodwill
80,000
20,000
Total assets
800,000
P 400,000
Current liabilities
Long-term liabilities
Share Capital
Share Premium
Retained Earnings
Total Equities
P 150,000
180,000
220,000
120,000
130,000
P 800,000
P 100,000
90,000
100,000
60,000
50,000
P 400,000
Han Corporation purchased in cash 80% ownership of Solo Corporation on December 31, 2015, for P180,000. On
that date, Solo’s property and equipment had a fair value of P50,000 more than the book value shown, while its long
term liabilities has a market value of P120,000. All other book values approximated fair value.
6. In the consolidated statement of financial position, what is the amount of goodwill to be reported?
7. In the consolidated statement of financial position, what is the amount of Total Shareholders’ Equity to be
reported?
Questions 8 to 12 are based on the following:
On January 1, 2016 Kapamilya issued shares of its P5 par value stock to acquire all the share of Kapuso, which was
liquidated immediately thereafter. Kapamilya paid out-of-pocket costs totaling P50,000 of which P30,000 is paid for
stock registration. The book value Kapuso’s net assets are equal to their fair market value at the time of acquisition
except for the inventory which fair value is lower than P10,000 and the land with book value of P50,000. The
statement of financial position for Kapamilya Company before acquisition and statement of financial position for the
combined company are presented below:
Cash
Accounts Receivable
Inventory
Land
Buildings and Equipment
Accum. Depn. – Building and Equipment
Goodwill
Total Assets
Accounts Payable
Bonds Payable
Share Capital
Share Premium
Retained Earnings
Total liabilities and equity
8.
9.
10.
11.
12.
Kapamilya
P 70,000
130,000
100,000
100,000
400,000
150,000
20,000
670,000
Combined
100,000
180,000
220,000
175,000
550,000
150,000
75,000
1,150,000
40,000
100,000
200,000
60,000
270,000
670,000
80,000
160,000
240,000
420,000
250,000
1,150,000
How much is the current asset of Kapuso before acquisition of Kapamilya?
What was the value of the shares issued by Kapamilya to acquire Kapuso?
What was the fair value of the net assets held by Kapuso immediately before the combination?
How many shares of Kapamilya were issued in completing the combination?
What was the market price per share of Kapamilya stock at the date of combination?
Questions 13 and 14 are based on the following:
Ufficio A Casa & Co. is currently preparing its combined financial statements for the year ended December 31,
2015. As of this date, the “investment in branch” account has a balance of P190,000. The following information has
been gathered.
a. The home office allocated unpaid utilities expenses amounting to P20,000 to the branch which the branch
did not record in full. Instead the branch sent a wrong adjusting memo to the home office reducing the
charge by P5,000 and setting up a liability for the remaining amount.
b. The home office erroneously credited the branch for a return of shipments of merchandise worth P50,000.
The branch did not make any return of merchandise.
c. The branch mistakenly received a copy of the home office correcting entry for item (b) above dated January
3, 2016 and entered a credit in favor of the home office on December 31, 2015.
d. The branch mistakenly sent the home office a debit memo amounting to P6,000 for an apparent remittance
of collections which did not happen. The home office did not record the debit memo.
13. What is the correct balance of investment in branch account?
14. What is the unadjusted balance of home office equity account?
Questions 15 and 16 are based on the following:
The following items was determined during the reconciliation procedures for the reciprocal accounts of a home
office and its branch. Investment in Branch is P100,000.
a. The credit posting for an expense allocated to the branch amounting to P13,600 was erroneously recorded
by the branch as P16,300
b. Thee debit posting for an expense allocated to the branch amounting to P8,000 was expected was
erroneously recorded by the branch as of P10,000.
c. The debit posting for a cash remittance from the branch amounting to P14,000 was not recorded by the
home office.
d. The credit posting for a credit memo received from by the home office amounting to P10,000 was recorded
twice by the home office.
e. The credit posting for a debit memo received from the home office amounting to P6,000 was recorded by
the branch as a debit.
15. How much is the difference between the unadjusted “investment in branch” and “home office” accounts?
16. What is the correct balance of home office equity?
Questions 17 and 18 are based on the following:
The following information are taken from the books of Bill Company and its branch at the end of their second year
of operations.
Shipments from home office
Freight in for shipments
Branch Sales
Branch Expenses
Allowance for overvaluation
Branch Inventory, Jan. 1
Branch Inventory, Dec. 31
P 88,800
4,440
120,000
40,000
17,300
15,750
17,640
The branch acquires all of its merchandise from the home office with the freight paid by the home office. Inventory
includes allocated freight.
17. At what percentage does the home office bill the branch for merchandise shipments based on billed price?
18. How much is the true profit of the branch?
Questions 19 to 25 are based on the following:
BA Inc., YA Inc. and NI Inc., are parties to a consolidation agreement. Their respective net assets, retained earnings
and estimated earnings as of January 1, 2016 are as follows:
Net asset
BA Inc.
YA Inc.
NI Inc.
P491,400
P435,600
P333,000
176,400
75,600
108,000
41,742
35,568
27,990
Retained Earnings
Estimated annual earnings contribution
A new corporation, HERO Inc., shall issue a single class of shares. Book value of their respective net assets are
equal to their respective fair value. Earnings in excess of normal earnings of 8% are to be capitalized at 10% in
determining goodwill (earnings contribution) of each companies. HERO Inc. shall issue ordinary shares at P20 par
value equal to total net assets transferred plus goodwill. No Share Premium is recorded in all three Companies
before combination and each of them only has one class of share each having par value of P10. Assume that after
consolidation, HERO Inc. distributed cash dividends amounting to P240,000.
19. How much is the goodwill to be recorded?
20. Jose Rizal is a shareholder of Ya Inc.’s 5,400 shares. How many new shares will he receives?
21. Andres Bonifacio is a shareholder of Ba Inc.’s 6,300 shares. How much will he receive from the cash dividend
distribution?
22. Instead of giving ordinary shares to earnings contribution, HERO Inc. will give 8% fully-participating
Preference shares with par value P100. How many preference share will NI Inc. receive?
23. Using information in #22, how much will Emilio Aguinaldo, a shareholder of Ya Inc.’s 7,200 shares receive as
cash dividends?
24. Disregard the arrangements for the issuance of new shares given above. Assume instead that HERO Inc. plans
to issue 100,000 ordinary shares with par value P12 to be divided to each company based on their net assets and
earnings contributions. How many ordinary shares will BA Inc. receives?
25. Using information in #24, how much will Apolinario Mabini, a shareholder of NI Inc.’s 4,050 share, receive as
dividends?
Questions 26 to 28 are based on the following:
Presented below are items taken from the unadjusted trial balances of BERI Co. and its branch on Dec. 31, 2015.
Home Office Books
Shipments to branch
324,000
Allowance for overvaluation
107,892
Branch Books
Shipments from home office
421,200
Inventory, Jan. 1
58,968
Inventory, Dec. 31
52,650
Purchases
?
Sales
583,200
Expense
55,080
It is the company’s policy to bill all branches for merchandise shipments at 30% above cost. Realized profit on
overvaluation amounts to P99,792 for the year.
26. How much of the branch inventory in January 1 represents purchases from outsiders?
27. How much of the branch inventory in December 31 represents purchases from outsiders?
28. If the correct net income of the branch amounted to P70,632, how much is the purchases for 2015?
Questions 29 to 31 are based on the following:
Statements of financial position for Pull Corporation and Bear Company on December 31, 2015 are given below:
Pull Company
Cash and cash equivalents
Bear Company
264,000
72,000
80,000
48,000
Property and equipment (net)
400,000
200,000
Total Assets
744,000
320,000
Current Liabilities
144,000
48,000
Long-term liabilities
160,000
72,000
Common stock (par P10)
240,000
80,000
Retained Earnings
200,000
120,000
Total liabilities and Equity
744,000
320,000
Inventory
Pull Corporation purchased 6,400 shares of Bear Company on January 3, 2016. On that date, Bear Company’s stock
had a fair value of P32.50 while Pull Company’s stock was selling at P50. Bear Company’s property and equipment
had a fair value of P40,000 more than the book value shown, while its long-term liabilities has a market value of
P120,000. All other book values approximated fair values.
In the consolidated statement of financial position on January 3, 2016:
29. How much is the total current assets?
30. How much is the total non-current assets?
31. Give the stockholders’ equity in detail.
Questions 32 to 35 are based on the following:
Statements of financial position for Pan Corporation and Sal Company on December 31, 2015 are given below:
Pan Company
Cash and cash equivalents
Inventory
San Company
260,000
72,000
80,000
48,000
Goodwill
50,000
Property and equipment (net)
400,000
150,000
Total Assets
740,000
320,000
Current Liabilities
140,000
48,000
Long-term liabilities
160,000
70,000
Common stock (par P10)
240,000
80,000
Retained Earnings
200,000
122,000
Total liabilities and Equity
740,000
320,000
Pan Corporation purchased 4,000 shares of Sal Company on January 3, 2016. Additionally, Pan purchased
additional stocks from Sal out of its unissued shares at the current market price of P30. This gave Pan a P75%
controlling interest. Sal paid P7,000 for the cost of issuing and registering the securities. Pal paid P75,000 cash for
business combination expenses. Sal Company’s property and equipment had a fair value of P80,000 more than the
book value shown, while its long-term liabilities has a market value of P90,000. All other book values approximated
fair values. Pan borrowed enough cash for this acquisition and still had P50,000 cash and cash equivalents
balance after all the transactions.
In the consolidated statement of financial position on January 3, 2016:
32. How much is the non-controlling interest if the parent company used the Partial Approach in recognizing gain
or goodwill?
33. How much is total current assets?
34. How much is total non-current assets?
35. How much is retained earnings?
- END –
SOLUTION
TEST I
1. B
2.D
11. A
12. C
21. A
22. D
3.A
13. D
23. D
4. B
14. A
24. B
5. D
15. C
25. C
6. B
16. D
26. D
7. A
17. B
27. D
8. B
18. B
28. B
9. B
19. B
29. A
10. D
20. A
30. C
TEST II
1. 140% of cost
18. P3,150
2. P 24,000
19. P45,000
3. P 42,000
20. 3,321 shares
4. P 1,667
21. P18,968
5. P 25,785
22. 3,330 preference shares/135 shares
6. P 15,000
23. P16,287
7. P 515,000
24. 39,517 shares
8. P 260,000
25. P11,470
9. P 430,000
26. P12,636
10. P 375,000
27. P17,550
11. 8,000 shares
28. P129,762
12. P 53.75 per share
29. P256,000
13. P 235,000 / P240,000
30. P708,000
14. P 170,000
31. Share Capital 240 RE 200 NCI 52
15. P 35,300
32. P111,250
16. P 76,000
33. 483,000
17. Mark Up is 16.67%
34. P656,250
Based in billed price
35. P125,000
1. Net income reported P60,000 against true of P15,000= realized gross profit P96,000
CGS: 70,000 +350,000=84,000=336,000 – RGP 96,000= True CGS 240,000
96,000/240,000= 40% of cost or billed at 140% of cost.
2. Invty end of 84,000/1.4 x .4= P24,000
3. 36,960 + 28,000= 64,960 -14,560 (21,000-2,800=18,200/1.25) = P50,400 /1.2= P42,000
4. Cost of sales (beg and ship of P64,960-mdse destroyed 50,400= 14,560/1.2 x .2= realized 2,427.
Gross profit (16,800-14,560 – 3,000)= 760 loss - 2,427= 1,667
5.
Net Cost of shipments 302,925 – invty end 127,500= cost of saled 175,425 / 1.25 x .25=
realized 35,085 – net loss 9,300= 25,785 true profit
6.
180 / .8 = 225 – 210 (SHE 210- AR-10 + 50) = 210 -225= P15,000
7.
225 x .2= 45 NCI plus controlling interest SHE of 470= P515,000
8.
500 consolidated + AR 10 – Parent 250 (300-50)= P260,000
9.
660 -260 + 30= P430,000
10. 500 – 250 + 175 -100 + 400 -250 – 240 + 140= 375,000
11. Share capital 240-200=40,000/5 / = 8,000/ shares
12. P430,000 / 8,000= P53.75
13. Investment 190 + b) 50= P240,000 – P5,000 = P235,000
14. 240 – c)-50- b) 20 = P170,000
15. 100- 45,300 = P35,300
16. 100 – c)14- d)10= adjusted of Investment P76,000
Adjusted of HO Equity 76 - a)2.7 - b) 2 - e) 12- c) 14= unadjusted 45,300
17. Invty 1/1 15,750/1.05= 15,000 + shiipments 88,800=103,800
17,300 allow/103,800= 16.67%
18. Invty End 17,640/1.05= 16,800 x.16666= 2800 unrealized – 17,300= realized 14,500
Net loss reported (120 – 91.35-40,000= -11,350 + 14,500= P3,150 net profit
19. Total consideration is P1,305,000 – net assets of P1,260,000= P45,000 goodwill
Net Assets
Earnings Contributions
Total
Shares issued
BA
491,400
24,300
515,700
25,785
YA
435,600
7,200
442,800
22,140
NI
333,000
13,500
346,500
17,325
TOTAL
1,260,000
45,000
1,305,000
65,250
20. 435,600-75,600= 360/10= 36,000 outstanding shares 5,400/36,000 x 22,140=3,321 shares
21. 25,785/65,250 x 240,000= P94,841 cash dividends .
491400-176,400= 315,000 outstanding
22.
6,300/315,000 x P94,841= P18,968
P333,000/100= 3,330 preference shares.
If applied to earnings contribution as per problem P13,500/100= 135
Net Assets
Preference shares
Earnings Contributions
Common Shares
BA
P491,400
4,914
P24,300
1,215
YA
P435,600
4,356
P7,200
360
23.
Preferred (P1,260,000 x .08)
Common (45,000 x .08)
Remainder (240 -104.4) 135,600
Preferred (135,600 x 1,260/1,315)
Common (135,600-129,929)
NI
P333,000
3,330
P13,500
675
Preferred
100,800
TOTAL
P1,260,000
12,600
P45,000
2,250
Common
3,600
129,929
230,729
5,671
9,271
230,729 x 4,356/12,600= 79,766 x 7200/36000= P15,953
9271 x 360/2,250= 1,483 x 7,200/36,000 =
297
Total
P16,250
24.
Net Assets
Earnings Contributions
Total
Total shares issued
Total cost
BA
491,400
24,300
515,700
39,517
YA
435,600
7,200
442,800
33,931
NI
333,000
13,500
346,500
26,552
TOTAL
1,260,000
45,000
1,305,000
100,000
23. 240,000 x 26,552/100,000= P63,725 total dividends x 4,050 /22,500 outstanding= P11,470
24. Total allowance of 107,892- allowance for shipments 97,200= allow beg 10,692/.3= 35,640 invty beg at
cost x 1.3= invty beg at billed 46,332- total invty beg of 58,968= P12,636 purchases
25. realized 99792 – total allow 107,892= allow end 8,100 / .3= 27,000 at cost x 1.3=35,100- total ending invty
of 52,650= 17,550 purchases
26. Correct net income 70,632 – realized 99,792= reported Net loss 29,160 – expenses 55,080= 25,920 – sales
583,200= cost of sales 557,280 + invty end 52,650- shipment 421,200- invty beg58,968= purchases
129,762
27. 264 +80 +72 + 48 – 208 consideration=P256,000
28. 208/.8= 260 – 200 -40 + 48= 68,000 goodwill
400 + 240 + 68= P708,000
29. 260 x .2 = NCI 52,000 + Share Capital P240,000 + Retained Earnings P200,000
30. 4,000 / .25 for NCI= total outstanding of 16,000 – 4,000= 12,000 total shares bought by parent
Subsidiary interest= 202 + 240 (8,000 x P30) – 7 = 435-50 GW + Net Asset Rev + 60= 445 x .25=
111,250
31. 50 + 72 + 240 – 7 + 128= P483,000
32. 400 + 230 + 26.25= P656.25
Consideration 360 (12 x 30) –subsidiary interest at fair value 333.75 (445,000 x .75)= 26,250 GW
33. 200 – 75= P125,000