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BUSCOM chapter 3 MC - Dayag
Bachelor of Science in Accountancy (Polytechnic University of the Philippines)
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Chapter 3
Multiple Choice Problems
1. b – P500,000 + P3,461
2. b
3. c P95,000 = (P956,000 / .80) - P1,000,000 - P100,000
4. c P251,000 = .20[(P956,000 + P239,000) + (P190,000 - P5,000 - P125,000)]
5 a
Fair value of non-controlling interest on April 1 ..................................................
30% of net income for 9 months (¾ year×P240,000 × 30%) ..............................
Non-controlling interest December 31 ................................................................
P165,000
54,000
P219,000
6. c
Non-controlling interest (full-goodwill), December 31, 20x4
Book value of SHE – S, 12/31/20x4
Add: Net income of S – 20x4
Total
Less: Dividends paid – 20x4
Stockholders’ equity – S Company, December 31, Year 2
Adjustments to reflect fair value - (over) undervaluation of assets and
liabilities, date of acquisition January 1, 20x4
Amortization of allocated excess (refer to amortization above: P200,000/10
Fair value of stockholders’ equity of subsidiary, December 31, 20x5……
Multiplied by: Non-controlling Interest percentage…………...
Non-controlling interest (partial)
Add: NCI on full-goodwill P85,714 – P60,000)
Non-controlling interest (full)
P1,000,000
___150,000
P1,150,000
____90,000
P1,060,000
200,000
_( 20,000)
P1,240,000
30%
P372,000
___25,714
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 fullgoodwill approach are considered acceptable.
6. b – (P50,000 + P70,000) x 25% = P30,000
7. b – P only.
8. b - {(P250,000/.8) + [P75,000 + P90,000 - P25,000 - P50,000 - P30,000 - (P80,000/8)2]}.2
9. d - {(P420,000/.7) + [P160,000 + P210,000 - P60,000 - P80,000 - P50,000 - (P90,000/5)2]}.3
10. d
P: BV,12/31/20x6
S:
BV of building, 12/31/20x4
Add: Adjustments to reflect fair value, 1/1/20x4
(P350,000 – P240,000)
Less: Amortization of excess (P110,000/10) x 3 years
P250,000
P170,000
110,000
33,000
247,000
P497,000
11. b
P: BV,12/31/20x5
S:
BV of building, 12/31/20x5
Add: Adjustments to reflect fair value, 1/4/20x4
(P120,000 – P90,000)
Less: Amortization of excess (P30,000/10) x 2 years
P 975,000
P105,000
30,000
6,000
129,000
P1,104,000
12. b
BV of building, 1/1/20x4
Adjustments to reflect fair value, 1/1/20x4 (P300,000 – P200,000)
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P200,000
100,000
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Depreciation 1/1/20x4 – 12/31/20x6 (P100,000/20 x 3 years)
( 15,000)
P285,000
13. d – same with No. 12
14. d
BV of equipment, 1/1/20x4
Adjustments to reflect fair value, 1/1/20x4 (P80,000 – P75,000)
Depreciation 1/1/20x4 – 12/31/20x6 (P5,000/10 x 3 years)
P 80,000
( 5,000)
1,500
P 76,500
15. a
Adjustments to reflect fair value, 1/1/20x4 (P80,000 – P75,000)
Depreciation 1/1/20x4 – 12/31/20x6 (P5,000/10 x 3 years)
(P 5,000)
1,500
(P 3,500)
16. d – 1/2/20x4:
BV of equipment, 1/1/20x4
Adjustments to reflect fair value, 1/1/20x4 (P300,000 – P200,000)
P200,000
100,000
P300,000
17. b
Decrease in Buildings account:
Fair value……………………………………………P 8,000
Book value…………………………………………..
__10,000
Decrease……………………………………………. P 2,000
18. d
Decrease in buildings account (refer to No. 73)…………
P 2,000
Less: Increase due to depreciation (P2,000/10)………… 200
Decrease in buildings accounts……………………………..P 1,800
19. d
Decrease in buildings account (refer to No. 74)…………
P 1,800
Less: Increase due to depreciation (P2,000/10)………… 200
Decrease in buildings accounts……………………………..P 1,600
20. a
Increase in Equipment account:
Fair value……………………………………………P 14,000
Book value…………………………………………..
__18,000
Increase…………………………………………….P 4,000
21. a
Increase in equipment account (refer to No. 76)…………
Less: Decrease due to depreciation (P4 ,000/4)……………
Increase in equipment accounts……………………………..P
P 4,000
1,000
3,000
22. a
Increase in equipment account (refer to No. 77)…………
P 3,000
Less: Decrease due to depreciation (P4 ,000/4…………… 1,000
Increase in equipment accounts……………………………..P 2,00 0
23. a
Increase in Land account:
Fair value……………………………………………P 12,000
Book value………………………………………….. 5,000
Increase…………………………………………….. P 7,000
24. b – refer to No. 23, no depreciation/amortization
25. b – refer to No. 23, no depreciation/amortization
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26. e
Increase in Patent account:
Fair value……………………………………………P 11,000
Book value………………………………………….. _
0
Increase…………………………………………….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.
27. e
Increase in patent account (refer to No. 159)………………
Less: Decrease due to depreciation (P11,000/5).…………
Increase in patent accounts………………………………….
P 11,000
2,200
P 8,800
28. d
Increase in patent account (refer to No. 160)………………
P 8,800
Less: Decrease due to depreciation (P11,000/5).…………
2,200
Increase in patent accounts………………………………….
P 6,600
29. d – equivalent to consideration transferred, P320,000
30. d – equivalent to consideration transferred, P380,000
31. a
32. P2,120,000
Podex’s separate earnings for 20x6 ................................................... P2,000,000
Dividend income from Sodex ............................................................. __120,000
Podex’s 20x6 net income .................................................................... P2,120,000
33. P2,260,000
Podex’s separate earnings for 20X6
P2,000,000
Podex’s equity in net income of Sodex............................................. 300,000
Less: Amortization of cost in excess of book value .......................... (40,000)
Podex’s 20x6 net income .................................................................... P2,260,000
34. b
35. c
Retained earnings of Parent, 12/31/20x6, Cost Method
Add: Increased in Retained earnings of Subsidiary
RE of Parent, 12/31/20x6, Equity Method (same with Consolidated RE)
310,000
_80,000
390,000
Investment balance 12/31/x6, Cost Method
Add: Increased in Retained earnings of Subsidiary
Investment balance 12/31/x6, Equity Method
200,000
80,000
280,000
Retained earnings of Parent, 12/31/20x6, Cost Method
Add: Increased in Retained earnings of Subsidiary
RE of Parent, 12/31/20x6, Equity Method (same with Consolidated RE)
210,000
_240,000
450,000
36. c
37. d
38. b – dividends of subsidiary considered as dividend income in the parent’s separate income
statement.
39. 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)
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Controlling Interest in Consolidated net income
40. c - 20x5 = P33,500 – refer to No. 39
41. b - 20x4 = P151,400
Consolidated Retained Earnings
Peter's 12/31 retained earnings (P80,000 + P64,000 - P15,000)
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))
(.80  (P48,000 – P25,000)
86,400
33,500
20x4
P129,000
20x5
P161,500
22,400
________
P151,400
18,400
P179,900
42. c - 20x5 = P179,900 – refer to No. 19
43. b
Retained earnings of Parent, 12/31/20x6, Cost Method
Less: Decreased in Retained earnings of Subsidiary
RE of Parent, 12/31/20x6, Equity Method (same with Consolidated RE)
360,000
_40,000
320,000
44. d – 20x3: P30,000 x 75% = P22,500
20x4: P40,000 x 75% = P30,000
45. a – no changes in investment unless there are dispositions of investment and permanent
impairment.
46. c
Consolidated Net Income for 20x4
Net income from own/separate operations
P Company P30,200 – (P150,0000 – P20,000 – P60,000)
S Company (P100,000 – P15,000 – P45,000)
Total
Less: Non-controlling Interest in Net Income
Amortization of allocated excess
Goodwill impairment
Controlling Interest in Consolidated Net Income or Profit
attributable to equity holders of parent…………..
Add: Non-controlling Interest in Net Income (NCINI)
Consolidated Net Income for 20x4
P70,000
40,000
P110,000
P
0
0
____0
____0
P110,000
_____0
P110,000
47. b
Plimsol: P100,000 + P200,000,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,P300,0 00
Shipping: P75,000 + P150,000………………………………………………………………... 225,000
P525,000
48.
Retained Earnings - Plimsol, 1/1/20x4 (cost method, same with equity method and
consoilidated retained earnings since it is the date of acquisition)
P 150,000
Add: CI – CNI (refer to No. 46)
110,000
Less: CI – Dividends (Dividend of parent only)
25,000
Retained earnings, 12/31/20x4 (equity method same with CRE)
P 235,000
49. d
Liabilities:
Plimsol (P40,000 + P75,000)
Shipping (P25,000 + P50,000)
P115,000
75,000
P 190,000
50. d
Total assets (No. 47)
Les: Liabilities (No. 49 )
P525,000
190,000
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P335,000
Stockholders’ equity
51. c
Fair Value of Subsidiary:
Consideration Transferred (5,400 shares)
Less: Book value of SHE-S, 1/1:
Common stock – S: P50,000 x 90%
APIC – S: P15,000 x 90%
RE – S: P41,000 x 90%
Allocated Excess
Less: Over/undervaluation of A & L:
Increase in Inv. (P17,100–P16,100) x 90%
Increase in Eqpt. (P48,000–P40,000) x 90%
Increase in Patents (P13,000 –P10,000) x 90%
Positive Excess: Goodwill
Amortization of allocated excess - Starting January 1:
Inventory: P1,000 / 1 year
Equipment: P8,000 / 4 years
Patents: P3,000 / 10 years
P120,600
P 45,000
13,500
36,900
95,400
P 25,200
P
900
7,200
2,700
10,800
14,400
P
P 1,000
2,000
300
P 3,300
52. c
Common stock – S
APIC – S
RE – S
Stockholders’ equity – Subsidiary, 1/1
Add: Adjustments to reflect fair value
Fair value of Stockholders’ Equity – S, 1/1
x: Non-controlling) interests
Non-controlling Interests (in net assets)
P 50,000
15,000
41,000
P106,000
12,000
P118,000
10%
P 11,800
53. a – P48,000, parent only.
54. a – P48,000. On the date of acquisition, the parent’s retained earnings is also the
consolidated retained earnings.
55. b – P120,600, the initial value
56 b – P4,000 x 90% = P3,600
57. c
Consolidated Net Income for 20x4
Net income from own/separate operations
P CompanyP30,200 – (P4,000 x 90%)
S Company
Total
Less: Non-controlling Interest in Net Income*
Amortization of allocated excess
Goodwill impairment
Controlling Interest in Consolidated Net Income or Profit
attributable to equity holders of parent…………..
Add: Non-controlling Interest in Net Income (NCINI)
Consolidated Net Income for 20x4
*Net income of subsidiary – 20x4
Amortization of allocated excess – 20x4
0
P26,600
9,400
P36,000
P
610
3,300
____0
3,910
P32,090
610
P32,700
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P 9,400
3,300)
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Multiplied by: Non-controlling interest %..........
Less: Non-controlling interest on impairment loss on full-goodwill
Non-controlling Interest in Net Income (NCINI)
P 6,100
10%
P 610
____0
P
610
58. 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 12,010
59. b – refer to 57 for computation
60. c – refer to 57 for computation
61. b
Controlling RE / RE Attributable to EH of Parent, 1/1 (refer to No. 53
P 48,000
Add: CI – CNI (refer to 57)
32,090
Less: CI – Dividends (Dividend of parent only)
15,000
Controlling RE / RE Attributable to EH of Parent, 12/31
P 65,090
62. b – same with No. 61
63. 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. 61/62)
65,090
Parent’s Stockholders Equity or Controlling Interest – Equity
P300,690
Non-controlling Interest
12,010
Consolidated Equity
P 312,700
64. c – P60,000 x 80% = P48,000
65. c
Investment.1/1/20x4
P105,000
Add: Share in net income – 20x4 (P45,000 x 80%)
36,000
Less: Dividends received
12,000
Investment, 12/31/20x4
P129,000
Add: Share in net income – 20x5 (P60,000 x 80%)
48,000
Less: Dividends received
18,000
Investment, 12/31/20x5
P159,000
66. a
Investment. 4/1/20x6
P500,000
Add: Share in net income – 20x6
(3 quarters x P30,000 x 90%)
81,000
Less: Dividends declared of Satz (3 quarters x P10,000 x 90%)
27,000
Amortization (the recorded amount which means it represents
only 9 months, no need to pro-rate)
10,000
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Investment, 12/31/20x6
67. c
Patz’s equity in net income of Sats (90% x P30,000 x 3 qtrs)
Less: Amortization (the recorded amount which means it represents
only 9 months, no need to pro-rate)
Investment income – 20x4 (equity method)
P544,000
P 81,000
10,000
P 71,000
68. d - {(P190,000 - P160,000) 4/6 - [(P241,000 - P220,000)/60] 5}.7
69. b
Full—goodwill Aproach
Fair value of Subsidiary (100%)
Consideration transferred (80%)……………..
Fair value of NCI (given) (20%)………………..
Fair value of Subsidiary (100%)……….
Less: Book value of stockholders’ equity of Son:
Common stock (P100,000 x 100%)……………….
Retained earnings (P60,000 x 100%)………...
Allocated excess (excess of cost over book value)…..
Less: Over/under valuation of assets and liabilities:
Increase in land (P5,000 x 100%)…………………….
Increase in equipment (P10,000 x 100%)
Positive excess: Increase in Patent (excess of cost over
fair value)………………………………………………...
P 180,000
20,000
P 200,000
P 100,000
60,000
160,000
P 40,000
P
5,000
___10,000
15,000
P 25,000
A summary or depreciation and amortization adjustments is as follows:
Account Adjustments to be amortized
Subject to Annual Amortization
Equipment (net).........
Patent
Over/
under
Life
10,000
25,000
5
5
Annual
Amount
Current
Year(20x4)
P 2,000
5,000
P 7,000
P 2,000
5,000
P 7,000
70. d
1/1/x4.
Investment in Wisden
180,000
18,000
Dividends – S
(20,000 x 90%)
NI of S
(60,000
x 90%)……. 54,000
1/1/x6203,400
12,600
Amortization
(P14,000 x 90%)
71. c
1/1/x6.
Investment in Wisden
230,400
9,000
Dividends – S
(10,000 x 90%)
NI of S
(30,000
x 90%)……. 27,000
1/1/x6215,100
Amortization
(7,000 x 90%)
6,300
72. a – under equity method, the Parent’s retained earnings is the same with Consolidated RE.
73. a
Punn’s equity in net income of Sunn (3 months ended,12/31/x6)……
P 200,000
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Amortization of cost in excess of book value .........................................
( 60,000)
Increase in Parent’s retained earnings…………………………………….
P 140,000
74. a
Punn’s net income from own operations, 12 months ended, 12/31/x6
P6,000,000
Add: Increase in RE of Sunn:
Punn’s equity in net income of Sunn (3 months ended,12/31/x6)
P200,000
Amortization of cost in excess of book value ................................
( 60,000)
Increase in Parent’s retained earnings………………………………
P 140,000
Punn’s net income for 20x6 under the equity method.…………………
P6,140,000
75. b
Consideration transferred: 10,500 shares x P95
P997,500
Less: BV of SHE – S (?)
857,500
Allocated excess;
P140,000
Less: O/U valuation of A and L:
Undervaluation of land
P40,000
Overvaluation of buildings
( 30,000)
Undervaluation of equipment
80,000
Undervaluation/unrecorded trademark
50,000 140,000
P
0
76. a – P900,000 + P500,000 = P1,400,000
77. 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)
160,000
Amortization 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
78. b – (P750,000 + P280,000) – P30,000 + (P1,500 x 5 years) = P1,007,500
79. c – (P300,000 + P500,000) + P80,000 – (P8,000 x 5 years) = P840,000
80. c – P450,000 + P180,000 + P40,000 = P670,000
81. d – P50,000 – P3,125 x 5 years) = P34,375
82. a – P only (the stock issued In 20x0 includes already in the December 31, 20x4 balance.
83. a – P only
84. a
Consolidated Retained Earnings, December 31, 20x4
Consolidated Retained earnings, January 1, 20x4 (equity method)
Add: Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent for 20x4
Total
Less: Dividends paid – P Company for 20x4
Consolidated Retained Earnings, December 31, 20x4 (under equity method)
Net Income from own operations:
Sales
Less: cost of goods sold
Gross profit
Less: Depreciation expense
Other expenses
Net income
P 1,350,000
490,375
P1,840,375
195,000
P1,645,375
P Co
P900,000
360,000
P540,000
140,000
100,000
P300,000
Non-controlling interest (full-goodwill), December 31, 20x4
P Company
S Company
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S Co
P500,000
200,000
P300,000
40,000
60,000
P200,000
P300,000
200,000
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Total
Less: Non-controlling Interest in Net Income
Amortization of allocated excess (refer to amortization above)
Goodwill impairment (impairment under full-goodwill approach)
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent…………..
P500,000
P 0
9,625
_
0
9,625
P490,375
85. 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
9,625
P190,375
86. b
Net Income from own operations:
20x4
20x5
Parent …………………………………………………P 100,000 P100,000
Subsidiary……………………………………………... 25,000
35,000
P 125,000 P 135,000
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
P 45,000
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
87. c – refer to No. 86
88. c – refer to No. 86
89. b- refer to No. 86
90. a
20x4 Investment income: Dividend of P10,000 x 100% = P10,000
20x4 Investment balance: P500,000
91. b
Pedro’s equity in net income of Sanburn – x4 (100% x P80,000)..………. P 80,000
Less: Amortization of cost in excess of book value
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Inventory: P20,000 x 100%………………………………………………..
20,000
Patent [P500,000 – P380,000 = P120,000 – P20,000 = P100,000)
(P100,000/20 years) x 100%..........................................................
5,000
Investment income – 20x4 (equity method)………………………………. P 55,000
Investment balance, 1/1/20x4……………………………………………….. P500,000
Add: Pedro’s equity in net income of S anburn – x4 (100% x P80,000)..
80,000
Less: Dividends ( 100% x P10,000)…………………………………………….
10,000
Amortization of cost in excess of book value:
Inventory: P20,000 x 100%………………………………………………
20,000
Patent [P500,000 – P380,000 = P120,000 – P20,000 = P100,000)
(P100,000/20 years) x 100%.......................................................... __ _5,000
Investment balance, equity method, 12/31/20x4…………………………… P545,000
92. d
Under 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.
93. d – refer to No. 92 for further discussion.
94. b – refer to No. 92 for further discussion.
95. a – P40,000 x 80%
96. b – P50,000 x 80%
97. a – P60,000 x 80%
98. 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 3,000
Increase in buildings: P40,000 / 10 years =
4,000
Total amortization……………………………… P 7,000
** In case, there is an impairment of goodwill then the amount impaired under the fullgoodwill 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 %
0
0
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Non-controlling interest in Net Income………………….
P 18,600
99. 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 3,000
Increase in buildings: P40,000 / 10 years =
4,000
Total amortization……………………….
P 7,000
** In case, there is an impairment of goodwill then the amount impaired under the fullgoodwill 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……….P120,000
Less: Amortization of allocated excess*……………..
7,000
P113,000
x: Non-controlling interests…………………………….
20%
Non-controlling interest in Net Income…………………………P 22,600
100. 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
P123,000
x: Non-controlling interests…………………………..
20%
Non-controlling interest in Net Income……………………… P 24,600
*Amortization of allocated excess:
Increase in equipment: P30,000 / 10 years = P 3,000
Increase in buildings: P40,000 / 10 years =
4,000
Total amortization……………………….
P 7,000
** In case, there is an impairment of goodwill then the amount impaired under the fullgoodwill 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……….P130,000
Less: Amortization of allocated excess*……………… 7,000
P123,000
x: Non-controlling interests………………………………
20 %
Non-controlling interest in Net Income………………..P 24,600
0
0
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101. a
Book 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…………..………………40,000 260,000
Book value of Stockholders’ Equity of Subsidiary, 12/31/x4
P 560,000
Add: Adjustments to reflect fair value (P30,000 + P40,000)..
70,000
Less: Accumulated amortization of allocated excess
P7,000 x 1 year…………………………………….….
7,000
Fair value of Stockholders’ Equity of Subsidiary. 12/31/x4…
P623,000
Multiplied by: Non-controlling Interest %...........................
____ 20%
Non-controlling Interest (partial goodwill)…………………..
P124,600
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)………………………………
P135,600
* this computation (i.e., P55,000 x 20%) should only be use when the fair value of the noncontrolling 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
102. e
Book value of Stockholders’ Equity of Subsidiary
Common stock, 12/31/20x5………………………………
P 300,000
Retained earnings, 12/31/20x5:
Retained earnings, 1/1/20x5 …………………..……P260,000
Add: Net income, 20x5………………………………. 120,000
Less: Dividends paid, 20x5…………………………… 50,000 330,000
Book value of Stockholders’ Equity of Subsidiary, 12/31/x5
P 630,000
0
0
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Add: Adjustments to reflect fair value (P30,000 + P40,000)..
70,000
Less: Accumulated amortization of allocated excess – 2 yrs 14,000
Fair value of Stockholders’ Equity of Subsidiary. 12/31/x5…
P 686,000
Multiplied 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
103. e
Book 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………………………….. 60,000 400,000
Book value of Stockholders’ Equity of Subsidiary, 12/31/x6
P 700,000
Add: Adjustments to reflect fair value (P30,000 + P40,000)..
70,000
Less: Accumulated amortization of allocated excess
(1/1/20x4 – 12/31/20x6): P7,000 x 3 years……………
21,000
Fair value of Stockholders’ Equity of Subsidiary. 12/31/x6…
P 749,000
Multiplied 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 noncontrolling interest of acquiree (subsidiary) is not given.
104. P542,400
Investment balance, 1/1/20x4……………………………………………….. P500,000
Add: Bell’s equity in net income of Demers – x4 (80% x P100,000)..……
80,000
Less: Dividends (80% x P40,000)……………………………………………….
32,000
Amortization of cost in excess of book value:
Equipment: P30,000/10 years x 80%…………………………………
2,400
Building: P40,000/10 years x 80%.................................................
3,200
Investment balance, equity method, 12/31/20x4…………………………. P542,400
105. c
Investment balance, 12/3/20x4……………………………………………….. P542,400
Add: Bell’s equity in net income of Demers – x4 (80% x P120,000)..……
96,000
Less: Dividends (80% x P50,000)……………………………………………….
40,000
Amortization of cost in excess of book value:
Equipment: P30,000/10 years x 80%…………………………………
2,400
Building: P40,000/10 years x 80%............................ .....................
3,200
Investment balance, equity method, 12/31/20x5…………………………. P592,800
106. b
Investment balance, 12/3/20x5……………………………………………….. P592,800
Add: Bell’s equity in net income of Demers – x4 (80% x P130,000)..…… 104,000
Less: Dividends (80% x P60,000)……………………………………………….
48,000
Amortization of cost in excess of book value:
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Equipment: P30,000/10 years x 80%…………………………………
2,400
Building: P40,000/10 years x 80%.................................................
3,200
Investment balance, equity method, 12/31/20x6…………………………. P643,200
107. a
Bell’s equity in net income of Demers (80% x P100,000)………………. P 80,000
Less: Amortization of cost in excess of book value (refer to No. 104):
(P2,400 + P3,200)
5,600
Investment income – 20x4 (equity method)………………………………. P 74,400
108. a
Bell’s equity in net income of Demers (80% x P120,000)………………. P 96,000
Less: Amortization of cost in excess of book value (refer to No. 104):
(P2,400 + P3,200)
5,600
Investment income – 20x5 (equity method)………………………………. P 90,400
109. c
Bell’s equity in net income of Demers (80% x P130,000)………………. P 104,000
Less: Amortization of cost in excess of book value (refer to No. 104):
(P2,400 + P3,200)
5,600
Investment income – 20x6 (equity method)………………………………. P 98,400
110. c
Non-controlling interest in Net Income:
Subsidiary net income from own operations…………………………… P100,000
Less: Amortization of allocated excess (refer to No. 104)
(P3,000 + P4,000)………………………………………..…………….
7,000
P 93,000
x: Non-controlling interests………………………………………………..
20%
Non-controlling interest in Net Income………………………………… P 18,600
111. Ignore
112. c
Non-controlling interest in Net Income:
Subsidiary net income from own operations…………………………… P120,000
Less: Amortization of allocated excess (refer to No. 104)
(P3,000 + P4,000)………………………………………..…………….
7,000
P 113,000
x: Non-controlling interests………………………………………………..
20%
Non-controlling interest in Net Income………………………………… P 22,600
113. c
Non-controlling interest in Net Income:
Subsidiary net income from own operations…………………………… P130,000
Less: Amortization of allocated excess (refer to No. 104)
(P3,000 + P4,000)………………………………………..…………….
7,000
P 123,000
x: Non-controlling interests………………………………………………..
20%
Non-controlling interest in Net Income………………………………… P 24,600
114. a – same with No. 101 (cost model)
115. e – same with No. 102 (cost model)
116. d – same with No. 103 (cost model)
117. b
118. b – Dividend paid – S, P70,000 x 60% = P42,000
119. 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
SCompany
0
P190,000
90,000
0
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Total
Less: Non-controlling Interest in Net Income*
Amortization of allocated excess
Goodwill impairment
Controlling Interest in Consolidated Net Income or Profit
attributable to equity holders of parent…………..
Add: Non-controlling Interest in Net Income (NCINI)
Consolidated Net Income for 20x4
P280,000
P 30,000
15,000
____0
45,000
P235,000
30,000
P265,000
P 90,000
( 15,000_
P75,000
40%
P 30,000
______0
P 30,000
*Net income of subsidiary – 20x4
Amortization of allocated excess – 20x4
Multiplied by: Non-controlling interest %..........
Less: Non-controlling interest on impairment loss on full-goodwill (P1,500 x 15%)*
20x5 results of operations are as follows:
Sales
Less: Cost of goods sold Operating expenses
Net income from its own separate operations
Add: Investment income
Net income
Peer
P 600,000
410,000
P 190,000
45,000
P 235,000
Computation of Goodwill:
Fair value of Subsidiary (100%)
Consideration transferred: Cash (60%)
Fair value of NCI (given) (40%)
Fair value of Subsidiary (100%)
Less: Book value of stockholders’ equity of Sea (P550,000 x 100%)
Allocated excess (excess of cost over book value)…..
Add (deduct): (Over) under valuation of assets and liabilities
(P140,000 x 100%)
Positive excess: Full-goodwill (excess of cost over fair value)
Amortization of Allocated Excess
Book Value
Fair Value
Over/under
Buildings (net)- 6
300,000
360,000
P 60,000
300,000
280,000
(20,000)
Equipment (net) – 4
Patent -10
-0100,000
100,000
Net
P 140,000
120. c – refer to No. 119 for computations
121. b – refer to No. 119 for computations
122. c - P811,000.
Consolidated Retained Earnings, December 31, 20x5
Retained earnings - Parent Company, January 1, 20x5 (cost model)
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
Less: Retained earnings – Subsidiary, January 1, 20x2
Increase in retained earnings since date of acquisition
0
0
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Sea-Breeze
P 300,000
210,000
P 90,000
P 90,000
P 414,000
276,000
P 690,000
__550,000
P 140,000
P
140,000
0
Amort.
P 10,000
(5,000)
10,000
P 15,000
P700,000
P 300,000
70,000
P 230,000
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Less: Amortization of allocated excess – 20x2 – 20x4
(P15,000 x 3 years)
45,000
P 185,000
60%
P 111,000
0
Multiplied by: Controlling interests %...................
Less: Goodwill impairment loss (full-goodwill),
Consolidated Retained earnings, January 1, 20x5
Note:
a. Date of acquisition: RE of Parent = Consolidated RE
Regardless of the method used in the books of the subsidiary,
applied –
b. Subsequent to date of acquisition:
Retained earnings of Parent under equity method = CRE
111,000
P 811,000
the following rule should always be
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.
123. c - P811,000 – refer to note (b) of No. 122
124. b – P111,000 – refer to No. 122
125. d
Consolidated Retained earnings, January 1, 20x5 (refer to Nos. 122 and 123)
Add: Controlling Interest in Consolidated Net Income or
Profit attributable to equity holders of parent for 20x5
Total
Less: Dividends paid – Parent Company for 20x5
Consolidated Retained Earnings, December 31, 20x5
P 811,000
235,000
P1,046,000
92,000
P 954,000
126. d – refer to No. 125
127. c
Non-controlling interest (partial-goodwill), December 31, 20x5
Common stock – Subsidiary Company, December 31, 20x5……
Retained earnings – Subsidiary Company, December 31, 20x5
Retained earnings – Subsidiary Company, January 1, 20x5
Add: Net income of subsidiary for 20x5
Less: Dividends paid – Subsidiary – 20x5
Stockholders’ equity – Subsidiary Company, December 31, 20x5
Adjustments to reflect fair value - (over) undervaluation
of assets and liabilities, date of acquisition (January 1, 20x2)
Amortization of allocated excess (refer to amortization above) –
(P15,000 x 4)
Fair value of stockholders’ equity of subsidiary, 12/31/ 20x5
Multiplied by: Non-controlling Interest percentage.
Non-controlling interest (partial)
Add: NCI on full-goodwill…………………….
Non-controlling interest (full)
P 480,000
P300,000
90,000
70,000
320,000
P 800,000
140,000
( 60,000)
P 880,000
40
P 352,000
____0
P 352,000
128. c
Stockholders’ Equity
Common stock - Peer
Retained earnings
Parent’s Stockholders’ Equity/Equity Attributable to the
Owners of the Parent
Non-controlling interest**
Total Stockholders’ Equity (Total Equity)
Total Liabilities and Stockholders’ Equity
P
P 1,678,000
352,000
P 985,500
P2,030,000
129. c
Investment in Sea-Breeze
Investment Income
0
724,000
954,000
0
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1/1/x2.
414,000
Retro
111,000
NI of S
(90,000
x 60%)……. 54,000
12/31/x5528,000
42,000
9,000
Dividends – S
(70,000 x 60%
Amortization
(P15,000 x 60%)
NI of S
Amortization
(P15,000 x 60%) 9,000
130. Ignore
131. c
131. d – refer to No. 119
132. c – refer to No. 119
133. b – refer to No. 119
134. c – refer to No. 122
135. c – refer to No. 122
136. a – not applicable under equity method.
137. d – refer to No. 125
138. d – refer to No. 125
139. d – refer to No. 127
140. c – refer to No. 128
141. a
Net income of S (5/1/x5 – 12/31/x5): P840,000 x 8/12
Less: Dividend – S (11/1/20x5 – no need to pro-rate)
Cumulative net income less dividends since
date of acquisition, 1/1/20x6 (date to establish reciprocity –
not 12/31/x6)
x: Controlling interests
142. b
Retained earnings – S Company, 1/1/20x4
Less: Retained earnings – S Company, 12/31/20x6
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)
x: Controlling interests
54,000
45,000
(90,000
x 60%)
P560,000
300,000
P260,000
80%
P208,000
P 60,000
190,000
P130,000
90%
P117,000
143. (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 earnings – Parent Company, 1/1/2017……………………………….
15,400
144. (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
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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
145. b
[{(P84,000 + P105,000) - [(P310,000 - P220,000)/20]2} - (P30,000 + P50,000)].8
146. a - under the cost model share in net income or earnings of subsidiary does not affect
investment.
147. d
Investment account, December 31, 20x7:
Original investment …………………………………………..P 550,000
Tiny’s earnings, 20x4-20x77: 100% x P166,000…………… 166,000
Less: Dividends received: 100% x P114,000……………… 114,000
Balance, December 31, 20x7…………………………….. P602,000
148. a
The adjusting entry required in 20x7 to convert from the cost to the equity method is:
Investment in Tiny ………………………………….52,000
Retained earnings beg ………………………….. 4,000
Dividend revenue ………………………………… 54,000
Equity in subsidiary income of Tiny …….
110,000
149. d – P45,000/15% = P300,000
150. d
P150,000
Pigeon’s separate income
6,000
Less: 60% of Home’s P10,000 loss =
Less: Equipment depreciation
P10,000/ 10 years =
__1,000
Controlling Interest in Consolidated Net Income
P143,000
Add: 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 Income
P138,333
151. a
Non-controlling Interest in Net Income (NCINI) for Year 3
Net income of S Company
Less: Amortization of allocated excess
Multiplied by: Non-controlling interest %..........
Non-controlling Interest in Net Income (NCINI) for Year 3
P240,000
45,000
P195,000
30%
P 58,500
152. c
Net income from own/separate operations
P Company
S Company
Total
Less: Non-controlling Interest in Net Income*
Amortization of allocated excess (refer to amortization above)
Goodwill impairment (impairment under full-goodwill approach)
0
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P 375,000
30,000
P405,000
P5,250
3,750
0
9,000
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Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent…………..
*Non-controlling Interest in Net Income (NCINI) for 20x4
Net income of S Company
Less: Amortization of allocated excess**
P396,000
P30,000
3,750
P26,250
20%
P 5,250
Multiplied by: Non-controlling interest %..........
Non-controlling Interest in Net Income (NCINI) for 20x4
**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.
153. a
*Non-controlling Interest in Net Income (NCINI) for Year 3
Net income of S Company
Less: Amortization of allocated excess
Multiplied by: Non-controlling interest %..........
Non-controlling Interest in Net Income (NCINI) for Year 3
P600,000
112,500
P487,500
30%
P146,250
154. c
Net income from own/separate operations
P Company
S Company
Total
Less: Non-controlling Interest in Net Income*
Amortization of allocated excess (refer to amortization above)
Goodwill impairment (impairment under full-goodwill approach)
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent…………..
*Non-controlling Interest in Net Income (NCINI) for 20x4
Net income of S Company
Less: Amortization of allocated excess**
P 625,000
50,000
P675,000
P 8,750
6,250
0
15,000
P660,000
P50,000
6,250
P43,750
20%
P 8,750
Multiplied by: Non-controlling interest %..........
Non-controlling Interest in Net Income (NCINI) for 20x4
**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.
155. b
As 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
P206,667
Amortization of allocated excess: P15,000 x 4/12
5,000
P211,667
156. c
Net income of S Company (P800,000 – P620,000)
Less: Amortization of allocated excess
P180,000
15,000
P165,000
4/12
P 55,000
Multiplied by: No of mos. (9/1-12/31)
157. a
Net income of S Company (P800,000 – P620,000)
Less: Amortization of allocated excess
Multiplied by: No of mos. (9/1-12/31)
Multiplied by: Non-controlling interest %..........
Non-controlling Interest in Net Income (NCINI) for 20x4
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P180,000
15,000
P165,000
4/12
P 55,000
____20%
P 22,000
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158. b Combined revenues ............................................................................................. P1,100,000
Combined expenses .............................................................................................
(700,000)
Excess acquisition-date fair value amortization.................................................
(15,000)
Consolidated net income ....................................................................................
P385,000
Less: Non-controlling interest (P85,000 × 40%) ....................................................
(34,000)
Consolidated net income to controlling interest ...............................................
P351,000
159. c HH expense.............................................................................................................
P621,000
NN expenses ...........................................................................................................
714,000
Excess fair value amortization (70,000 ÷ 10 yrs) ..................................................
7,000
Consolidated expenses ........................................................................................ P1,342,000
160. 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 300,000
Subsidiary - George (P500,000 – P400,000)……..
100,000
P 400,000
Less: Amortization of allocated excess……………………
6,000
Impairment of goodwill (if any)…………………….
0
Consolidated/Group Net Income………………………….
P 394,000
Less: 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).
161. d – Economic Unit or Entity Concept (as required by PFRS 10)
Net income from own/separate operations
P Company
S Company
Total
Less: Non-controlling Interest in Net Income*
Amortization of allocated excess
Goodwill impairment (impairment under full-goodwill approach)
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent…………..
Add: NCINI
CNI - entity concept
*Non-controlling Interest in Net Income (NCINI) for 20x4
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0
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P 500,000
100,000
P600,000
P20,000
0
_
0
20,000
P580,000
__20,000
P600,000
lOMoARcPSD|19984294
Net income of S Company
Less: Amortization of allocated excess
P100,000
_______0
P100,000
20%
P 20,000
Multiplied by: Non-controlling interest %..........
Non-controlling Interest in Net Income (NCINI) for 20x4
162. c – Parent Company Concept – Parent’s Net Income only (not required by PFRS 10)
Net income from own/separate operations
P Company
S Company
Total
Less: Non-controlling Interest in Net Income*
Amortization of allocated excess
Goodwill impairment (impairment under full-goodwill approach)
CNI - entity concept
P 500,000
100,000
P600,000
P 20,000
0
_
0
*Non-controlling Interest in Net Income (NCINI) for 20x4
Net income of S Company
Less: Amortization of allocated excess
P100,000
_______0
P100,000
20%
P 20,000
Multiplied by: Non-controlling interest %..........
Non-controlling Interest in Net Income (NCINI) for 20x4
163. d
Inventory – not yet sold in 20x4
Building: (P390,000 – P200,000)/ 10 years
Equipment (P280,000 – P350,000)/ 5 years
P
0
19,000
( 14,000)
P 5,000
164. 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……………………………………………………….
2,000,000
Investment in Shure…………………………………………………
34,000,000
165. d –refer to No. 164
166. a
167. a
Cost of Goods Sold P80,000 debit
Depreciation Expense (P192,000/120) 7 = P11,200 debit
168. c
Cost of Goods Sold (P60,000 x 4/6) = P40,000 debit
Interest Expense: (P15,000/5) = P3,000 debit
169. a [(P250,000 - P180,000)/10]7
170. c
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20,000
P580,000
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[(P380,000 - P260,000)/120]88
171. d
Net income from own/separate operations
P Company
S Company
Total
Less: Non-controlling Interest in Net Income*
Amortization of allocated excess
Goodwill impairment (impairment under full-goodwill approach)
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent…………..
Add: NCINI
CNI - entity concept
*Non-controlling Interest in Net Income (NCINI) for 20x4
Net income of S Company
Less: Amortization of allocated excess
P 200,000
100,000
P300,000
P21,000
30,000
_
0
51,000
P249,000
__21,000
P270,000
P100,000
__30,000
P 70,000
30%
P 21,000
Multiplied by: Non-controlling interest %..........
Non-controlling Interest in Net Income (NCINI) for 20x4
Full-goodwill:
(100%) Fair value of Subsidiary:
(100%) Fair value of consideration transferred:
P469,000 / 70%........…………………………..
Less: Book value of Net Assets (Stockholders’
Equity - Subsidiary)…………...................................
Allocated Excess.………………………………………….
Less: Over/Undervaluation of Assets and Liabilities
(P20,000 + P10,000 + P40,000)…………………….
Goodwill (Full/Gross-up)..………………………………..
P 670,000
500,000
P 170,000
70,000
P 100,000
Amortization:
Inventory: P20,000 / 1 year = P20,000
Land……………………………..
0
Equipment (P40,000/4)……… 10,000
P30,000
172. a
173. c - P170,000 - {[P320,000 - (P300,000 - P170,000)]/10}2
174. b - [P320,000 - (P300,000 - P170,000)]/10
175. d
176. d - P105,000 - {[P405,000 - (P450,000 - P105,000)]/20}2
177. a - [P405,000 - (P450,000 - P105,000)]/20
178. d - The acquisition method consolidates assets at fair value at acquisition date regardless
of the parent’s percentage ownership.
179. 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 ....................................................................
Amortization for 2 years (10 year life) ..................................................................
Patent reported amount December 31, 20x5....................................................
180. a - P650,000 =P500,000 + P200,000 - P50,000
181. b Combined revenues .............................................................................................
Combined expenses .............................................................................................
Trademark amortization ........................................................................................
Patented technology amortization .....................................................................
Consolidated net income ....................................................................................
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P45,000
(9,000)
P36,000
P1,300,000
(800,000)
(6,000)
(8,000)
P486,000
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182. c
Subsidiary income (P100,000 – P14,000 excess amortizations) .........................
Non-controlling interest percentage...................................................................
Non-controlling interest in subsidiary income .....................................................
P86,000
__40%
P34,400
Fair value of non-controlling interest at acquisition date .................................
40% change in Scott book value since acquisition ...........................................
Excess fair value amortization (P14,000 × 40%) ..................................................
40% current year income ......................................................................................
Non-controlling interest at end of year ...............................................................
183. a MM trademark balance .......................................................................................
SS trademark balance .........................................................................................
Excess fair value .....................................................................................................
Two years amortization (10-year life)...................................................................
Consolidated trademarks .....................................................................................
P200,000
52,000
(5,600)
__34,400
P280,800
P260,000
200,000
60,000
(12,000)
P508,000
184. b
185. a – P540,000 = (P500,000 + P150,000 – P90,000 – P20,000)
186. c – equivalent to the original cost
187. 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.
188. b - Intercompany receivables and payables from unconsolidated subsidiaries would not be
eliminated.
Theories
1.
2.
3.
4.
5.
c
d
d
d*
d
6.
7.
8.
9.
10,
b
c
d
d
a
11.
12.
13.
14.
15,
C**
b
d
c
c
16.
17.
18.
19.
20.
c
c
d
d
b
21.
22.
23.
24.
25.
d
a
b
c
c
26.
27.
28.
29.
30.
c
d
c
c
b
31
32.
33.
34.
35.
c
b
c
c
d
36.
37.
38.
39.
40.
d
b
b
c
d
41.
42.
43.
a
c
a
*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.
0
0
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