ASSIGNMENT 03
Name:
Date:
On January 1, 20x4, P Company acquires 80% of the common stock of S Company for P372,000. At that time, the following assets
and liabilities of S Company had book values that were different from their respective market values:
Inventory
…………………………………………
Land
…………………………………………
Equipment
…………………………………………
Accum. depreciation – equipment ………………….
Buildings
…………………………………………
Accum. depreciation – buildings ……………………….
Bonds payable (5 years) ………………………………
S Co. (BV)
P24,000
48,000
180,000
(96,000)
360,000
(192,000)
120,000
S Co. (FV)
P30,000
55,200
180,000
144,000
115,200
All other assets and liabilities had book values approximately equal to their respective fair values. On January 1, 20x4, the equipment
and buildings had a remaining life of 4 and 8 years respectively. Inventory is sold in 20x4 and FIFO inventory costing is used.
Goodwill, if any, is reduced annually by a P3,000 impairment loss.
The were no intercompany sales prior to 20x4, information resulting from intercompany sales of equipment are summarized below
Date of sale
4/1/20x4
1/2/20x4
Seller
P Co.
S Co.
Selling Price
P90,000
60,000
Orig. Cost
P120,000
72,000
Accum. Depr.
P45,000
43,200
Remaining Life
6 years
4 years
Additional information resulting from intercompany sales, ending inventory and gross profit rates are summarized below:
Year
20x4
20x5
Sales of P Co. to S Co.
P150,000
120,000
12/31 Intercompany Invty of S Co.
60%
80%
Intercompany Profit on Sales
25%
20%
Year
20x4
20x5
Sales of S Co. to P Co.
P60,000
75,000
12/31 Intercompany Invty of P Co.
50%
40%
Intercompany Profit on Sales
20%
40%
Trial balances for the companies for the year ended December 31, 20x4 are as follows:
Debits
Cash
………………………………………………
Accounts receivable
……………………………………
Inventory
………………………………………………
Land
………………………………………………
Equipment
………………………………………………
Building
………………………………………………
Investment in S Co.
……………………………………
Cost of goods sold
……………………………………
Depreciation expense
……………………………………
Other expenses ………………………………………………
Dividends paid
………………………………………………
Totals
Credits
Accum. Depreciation – equipment ………………………..
Accum. Depreciation – buildings
…………………………
Accounts payable
…………………………………….
Bonds payable ……………………………………………….
Common stock, P10 par …………………………………….
Retained earnings
……………………………………
Sales
…………………………………………………………
Gain on sale of equipment
………………………………..
Dividend income
……………………………………
Totals
P Co.
232,800
90,000
120,000
210,000
240,000
720,000
372,000
204,000
60,000
48,000
72,000
2,368,800
135,000
405,000
105,000
240,000
600,000
360,000
480,000
15,000
28,800
2,368,800
S Co.
90,000
60,000
90,000
48,000
180,000
540,000
138,000
24,000
18,000
36,000
1,224,000
96,000
288,000
88,800
120,000
240,000
120,000
240,000
31,200
.
1,224,000
ASSIGNMENT 03
Trial balances for the companies for the year ended December 31, 20x5 are as follows:
Debits
Cash
………………………………………………
Accounts receivable
……………………………………
Inventory
………………………………………………
Land
………………………………………………
Equipment
………………………………………………
Building
………………………………………………
Investment in S Co.
……………………………………
Cost of goods sold
……………………………………
Depreciation expense
……………………………………
Other expenses ………………………………………………
Dividends paid
………………………………………………
Totals
Credits
Accum. Depreciation – equipment ………………………..
Accum. Depreciation – buildings
…………………………
Accounts payable
…………………………………….
Bonds payable ……………………………………………….
Common stock, P10 par …………………………………….
Retained earnings
……………………………………
Sales
…………………………………………………………
Dividend income
……………………………………
Totals
REQUIRED:
P Co.
265,200
180,000
216,000
210,000
240,000
720,000
372,000
216,000
60,000
72,000
72,000
2,623,200
150,000
450,000
105,000
240,000
600,000
499,800
540,000
38,400
2,623,200
S Co.
102,000
96,000
108,000
48,000
180,000
540,000
192,000
24,000
54,000
48,000
1,392,000
102,000
306,000
88,800
120,000
240,000
175,200
360,000
.
1,392,000
Using cost model – full goodwill method, prepare the consolidated working paper entries for the following:
a. December 31, 20x4
b. December 31, 20x5