Chapter 16 Advanced Accounting Solution Manual

Problem I
1. P50,075
Chapter 16
Consolidated Net Income for 20x4

Net income from own/separate operations
Pill Company [P25,000 (P9,000 x 85%)]
Sill 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)
P17,350
40,000
P57,350
P 5,775
0
1,500
7,275
P50,075
5,775
P55,850
*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%)*
Non-controlling Interest in Net Income (NCINI)
P 40,000
(
0))
P 40,000
15%
P 6,000
____225
P 5,775
*this procedure would be not be applicable where the NCI on goodwill impairment loss would
not be proportionate to NCI acquired.
2. P5,775 refer to computation in No. 1
Problem II - Cost Model/Method versus Equity Method

Partial-Goodwill Approach:
Fair value of Subsidiary
Consideration transferred: P600,000..............................................
Less: Carrying amount of Smalls net assets =
Carrying amount of Smalls shareholders equity
Common/Ordinary shares Small (400,000 x 75%)............
Retained earnings Small (100,000 x 75%).........................
375,000
Allocated Excess: Acquisition differential Jan. 1, 20x4
Less: Over/under valuation of A/L (Allocated to):
Increase in Inventory (40,000 x 75%)........................................
Decrease in Patents (70,000 x 75%)..........................................
Positive Excess: Goodwill - partial
Full-Goodwill Approach:
Fair value of Subsidiary (Implied cost of 100% investment); P600,000/75%
Less: Carrying amount of Smalls net assets =
Carrying amount of Smalls shareholders equity
Common/Ordinary shares
Retained earnings
Allocated Excess: Acquisition differential Jan. 1, 20x4
Increase in Inventory
Decrease in Patents
Positive Excess: Goodwill - full
600,000
300,000
75,000
225,000
30,000
(52,500)
( 22,500)
247,500
800,000
400,000
100,000
500,000
300,000
40,000
(70,000)
(30,000)
330,000
A summary or depreciation and amortization adjustments is as follows:

Account
Adjustments
amortized
to
be
Inventory
Subject to Annual Amortization
Patents
Over/
Under
Life
Annual
Amount
P40,000
P 40,000
P 40,000
(70,000)
(14,000)
( 14,000)
P 26,000
P 26,000
_____
_____
P 26,000
P 26,000
Amortization
Impairment of goodwill (full)
330,000
Current
Year(20x4)
20x5
P
Investment in Son
1/1/x4
600,000
18,750
18,750
7,500
P
-
(14,000)
P(14,000
)
______
P(14,000
)
For purposes of comparison between Cost Model/Method and Equity Method

Cost Method
Journal Entries
Year 1
Year 2
Investment
Investment in Small
600,000
Cash
600,000
Dividend of Subsidiary
Cash
Dividend income
20x6
(14,000)
P(14,000
)
__
19,300
P
5,300
Year 3
30,000
7,500
30,000
Dividend Income
CI
18,750 - DivS (75

x80%)
12/31/x4
600,000
18,750
7,500 - DivS (10

x80%)
12/31/x5
600,000
18,750
30,000 - DivS (40

x80%)
12/31/x6
600,000
30,000
Equity Method
1.
Investment
Investment in Small
Cash
Net Income (Loss) of Subsidiary:
Investment in Small (75% x Smalls profit)
Investment income
Investment income
Investment in Small (75% x Smalls profit)
Year 1
Year 3
600,000
600,000
60,000
60,000
67,500
67,500
26,,250
26,250
Dividend of Subsidiary
Cash (75% x Smalls dividends)
Investment in Small
18,750
18,750
Amortization of Allocated Excess

Investment income (75% x amortization of PD*)
Investment in Small
19,500
19,500
Investment in Small
Investment income
Year 2
7,500
7,500
30,000
3,975
10,500
10,500
30,000
3,975
Investment in Son
1/1/x4:
600,000
CI
NI of S
(80,000
x
60,000
621,750
Investment Income (loss)
18,750
75%).
19,500
75% Div - Son
75% Amort &

impairment
NI of Son
Amortization
impairment
19,500
12/31/x4
26,250
75%)
(35,000 x
7,500
75% Div - Son
75% NL Sub
(35,000
26,250
75%)
75% Amort &

Impairment
10,500
10,500
impairment
50
12/31/x6
632,025
30,000
75%).
75% Amort
&
12/31/x5
598,500
(90,000
x
67,500
(80,000
x
40,500
75% NL Sub
NI of S
60,000
75%)
3,975
15,7
75% Div - Son
75% Amort &

impairment
NI of Son
Amortization
impairment
3,975
67,500
75%)
(90,000
x
63,525
Reconciliation of Investment /Conversion of Investment Account from Cost to

Equity Method:
Investment in Small under cost method.........................................
600,000
Smalls retained earnings, end of year.......................................160,000

Smalls retained earnings, date of acquisition..........................100,000
Change since acquisition............................................................60,000
Less: Cumulative amortization of acquisition differential.............17,300
42,700
x: Controlling Interest (75%)..............................................................
32,025
Investment in Small under equity method.....................................
632,025
2.
a. Goodwill, 12/31/20x6 (P330,000 P19,300)
P 310,700
b. FV of NCI, 12/31/20x6:
75%
Non-controlling interest (full-goodwill), December 31, 20x6

P 400,000
Common stock
20x6 . . . . . . . . . . . . . . . . . .
Subsidiary
Company,
December
31,
Retained earnings Subsidiary Company, December 31, 20x6

Retained earnings Subsidiary Company, January 1, 20x6
(P100,000 + P80,000 P25,000 P35,000
P110,000
P10,000)..............................
Add: Net income of Small for 20x6..
90,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
P200,000
.........
Less: Dividends paid 20x6.
40,000
Stockholders equity Subsidiary Company, December 31,
20x5 . . . . . . . . . . . . .
Adjustments to reflect fair value - (over) undervaluation of assets and
liabilities, date of acquisition (January 1, 20x4)- decreased in Net Assets
....
Less: Amortization of allocated excess (refer to amortization above):
20x4 (P40,000 P14,000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
P
........
26,000
20x5
and
( 28,000
20x6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
)
Fair value of stockholders equity of subsidiary, December 31,
20x6 . . . . . . . . . . .
Multiplied
by:
Non-controlling
Interest
percentage . . . . . . . . . . . . . . . . . . . . . . . . .
FV of Non-controlling interest (partial goodwill), 12/31/20x6 . . . . . . . . . . . . .
....
Add: Non-controlling interest on full goodwill , net of impairment loss
[(P330,000 full P247,000, partial
=
P 82,500
P82,500.
Less: Impairment on the NCI (P19,300 x 25%)
___4,825
FV of Non-controlling interest (full-goodwill), 12/31/20x6. . . . . . . . . . . . . . . .

.....
*or P330,000 full P247,000, partial = P82,500 (impairment loss on full goodwill less (P19,300 x
= P77,625
160,000
P 560,000
(
30,000)
2,000)
P 532,000
20
P 133,000
___*77,675
P 210,675
25%)]
Alternatively, NCI on December 31, 20x6 may also be computed as follows (Note: This
is the American version of computing NCI, since they only allowed using Full-goodwill
Method):
Common stock, 12/31/20x6..
P 400,000
Retained earnings, 12/31/20x6
(P100,000+P80,000 P25,000 P35,000 P10,000).. P 110,000
Add: NI Subsidiary (20x6)
..
90,000
Dividends Subsidiary 20x6.. ( 40,000) 160,000

Book value of SHE S, 12/31/20x6
P560,000
Adjustments to reflect fair value (Increase in Net Assets)..P 300,000
Amortization of allocated excess:
Inventory 20x4....( 40,000)
Patent (P14,000 x 3 years)..
42,000
Impairment of goodwill 20x6.. ( 19,300) 282,700
FV of SHE of Small
P 842,700
Multiplied by: NCI%...............................................................................
25%
FV of NCI, 12/31/20x6..
210,675
Or, alternatively:
P
P 400,000
Common stock
20x6 . . . . . . . . . . . . . . . . . .
Subsidiary
Company,
December
31,
Retained earnings Subsidiary Company, December 31, 20x6

Retained earnings Subsidiary Company, January 1, 20x6
(P100,000 + P80,000 P25,000 P35,000
P10,000)..............................
Add: Net income of Small for 20x6..
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.........
Less: Dividends paid 20x6.
20x6 . . . . . . . . . . . . .
Unamortized acquisition differential / allocated excess / increase in net
assets:
{P300,000, allocated excess {P40,000 - (P14,000 x 3) + P19,300, full
impairment
P110,000
90,000
P200,000
40,000
160,000
P 560,000
__282,500
P 842,500
______25%
Multiplied
by:
Non-controlling
Interest
percentage . . . . . . . . . . . . . . . . . . . . . . . . .
FV of Non-controlling interest (full-goodwill), 12/31/20x6. . . . . . . . . . . . . . . .
.....
P 210,675
c. Consolidated Retained Earnings, 1/1/20x6 P498,500

Consolidated Retained Earnings, January 1, 20x6
Retained earnings - Large Company, January 1, 20x6 (cost model)
Adjustment to convert from cost model to equity method for purposes of
consolidation or to establish reciprocity:/Parents share in adjusted
net
increased in subsidiarys retained earnings:
Retained earnings Small, January 1, 20x6
(P100,000 + P80,00 P25,000 P35,000 P10,000)
Less: Retained earnings Small, January 1, 20x4 (date of
acquisition)
Increase in retained earnings since date of acquisition
Less: Amortization of allocated excess 20x4
Multiplied by: Controlling interests %...................
Less: Goodwill impairment loss (full-goodwill) 20x6
Consolidated Retained earnings, January 1, 20x6
P500,000
P 110,000
100,000
P 10,000
26,000
(14,000)
P ( 2,000)
_____75%
P ( 1,500)
________0
(___1,500)
P 498,500
The CRE, December 31, 20x6 would be as follows:

Add: Controlling
Interest in Consolidated Net Income or Profit
attributable to
equity holders of Large for 20x6
Total
Less: Dividends paid Large Company for 20x6
P498,500
233,525
P717,550
70,000
Consolidated Retained Earnings, December 31, 20x6
P662,025
Or, alternatively: to compute CRE, 12/31/20x6

Retained earnings - Large Company, December 31, 20x6 (cost model)
net
Retained earnings Small, December 31, 20x6
(P100,000 + P80,00 P25,000 P35,000 P10,000 + P90,000
P40,000)
Less: Retained earnings Small, January 1, 20x4 (date of
acquisition)
Amortization of allocated excess 20x5 and 20x6: P14,000 x 2
Less: Goodwill impairment loss on full-goodwill) 20x6 (P19,300 x
75%)
Consolidated Retained earnings, December 31, 20x6
P630,000
P 160,000
100,000
P 60,000
26,000
(28,000)
P 62,000
_____75%
P 46,500
__14,475
__32,025
P 662,025
d. P233.525
Parent Company: Large Company [P200,000 (P40,000 x
75%)]
Small Company
Total
Goodwill impairment
P170,000
90,000
P260,000
P 21,175
(14,000)
_19,300
__26,475
P233,525
__21,175
P254,700

Less: Non-controlling interest on impairment loss on full-goodwill ( (P19,300 x
25%)*
P 90,000
( 14,000)
P 104,000
25%
P 26,000
___4,825
P 21,175
e. P21,175 refer to (d) for computations

Note: Regardless of the method used (cost or equity) answers for No. 2 (a) to (e)
above are exactly the same.
Problem III
Cost of 85% investment
646,000
Fair value of Subsidiary (Implied cost of 100% investment); P646,000/85%

760,000
Less: Carrying amount of Silks net assets =
Carrying amount of Silks shareholders equity
Common/Ordinary shares
500,000
Retained earnings
100,000
600,000
Allocated Excess: Acquisition differential December 31, 20x4
160,000
Increase in Inventory
70,000
Patents
90,000
Non-controlling interest (15% x 760,000, fair value of subsidiary),12/31/20x4
114,000
Account Adjustments
amortized
to
be
Inventory
Patents
Over/
under
Lif
e
P70,000
90,000
10
P160,000
Annual
Amount
P
70,000
Current
Year(20x5)
__9,000
P
79,000
___9,000
Unamortized balance of allocated excess:

Balance
Dec. 31
20x4
Inventory
70,000
Patents
90,000
160,000
20x6
P 70,000
P 79,000
20x7
-
___9,000
P
9,000
Amortization
20x5
20x6
70,000
9,000
9,000
79,000
9,000
___9,000
P
9,000,
Balance
Dec. 31
20x6
72,000
72,000
1. NCI-CNI
20x5: P(7,350)
20x6: P6,450
20x5
Consolidated Net Income
Large Company
20x5 [P28,000 P0)]
20x6
P
28,000
20x6 [(P45,000, loss + (P15,000 x 85%)]

Small Company
Total
Goodwill impairment
CI-CNI (loss) or Profit (loss) attributable to
equity
holders of parent
Consolidated Net Income/Loss(CNI)
P(57,75
0)
52,000
P( 5,75
0)
30,000
P
58,000
P(7,350)
79,000
_____0
71,650
P(13,6
50)
( 7,350)
P(21,00
0)
P 6,450
9,000
_____0
15,450
P(21,2
00)
6,450
P(14,75
0)
*Net income (loss) of subsidiary

Less: Non-controlling interest on impairment loss on full-goodwill
20x5
P 30,000
( 79,000)
P(49,000)
15%
P(7,350)
_______P( 7,350)
20x6
P 52,000
( 9,000)
P43,000
15%
P 6,450
___
_P6,450
2. CI-CNI refer to computation in No. 1

20x5: P(21,000)
20x6: P14,750
Or, alternatively:
(1) Non-controlling interest in profit
20x5: 15% (30,000 79,000)............................................................. 7,350
20x6: 15% (52,000 9,000)............................................................... 6,450
(2)
20x5
20x6
NI (loss) Pen
28,000
(45,000)
Less: Dividends from Silk
20x5
0
20x6 (85% 15,000)
(12,750)
28,000
(57,750)
Share of Silks profit
85% (30,000 79,000)
(41,650)
85% (52,000 9,000)
________
36,550_
Consolidated profit (loss) attributable to
Pens shareholders
(13,650)
(21,200)
3. CRE, 12/31/20x6 P73,150

Retained earnings - Pen Company, December 31, 20x6 (cost model
net
Retained earnings Silk, December 31, 20x6:
(P100,000 + P30,00 P0 + P52,000 P15,000)
Less: Retained earnings Silk, December 31, 20x4 (date of
acquisition)
Less: Goodwill impairment loss (full-goodwill) 20x5
P 91,000
P 167,000
100,000
P 67,000
79,000
__9,000
P (21,000)
85%
P (17,850)
_____0
4. NCI, 12/31/20x6: P110,850

FV of SHE of Silk:
Common stock, 12/31/20x6
P 500,000
( 17,850)
P 73,150
Retained earnings, 12/31/20x6:

P 100,000
NI Subsidiary (20x5 and 20x6): P30,000 + P52,000
82,000
Dividends Subsidiary (20x5 and 20x6): P0 + P15,000
(
15,000) 167,000
P 667,000
Adjustments to reflect fair value, 12/31/20x4
160,000
Amortization of allocated excess (P79,000 + P9,000)
(
88,000)
FV of SHE of S
P 739,000
Multiplied by: NCI%
_________15%
FV of NCI (partial), 12/31/20x6
P 110,850
Add: NCI on full-goodwill
_______ _0
FV of NCI (full),12/31/20x6
P 110,850
Or, alternatively:
Non-controlling interest date of acquisition,12/31/20x4 (1)

Retained earnings Silk Dec. 31, 20x6
(100,000 + 30,000 + 52,000 15,000)
Less: Retained earnings, 12/31/20x4 (date of acquisition)
Increase since acquisition
Less: Amortization of allocated excess (79,000 + 9,000)
Multiplied by: NCIs share
Non-controlling interest (full) 12/31/20x6
P 114,000
P167,000
100,000
P 67,000
88,000
P( 21,000)
____ 15% ( 3,150)
P 110,850
5. Consolidated Patents, 12/31/20x6: P72,000

Unamortized balance of allocated excess:
Inventory
Patents
Balance
Dec. 31
20x4
70,000
90,000
160,000
Amortization
20x5
20x6
70,000
9,000
9,000
79,000
9,000
Or, alternatively:
Invest. account equity Dec. 31, 20x6

Cost of investment, cost model
Retained earnings Silk Dec. 31, 20x6
(100,000 + 30,000 + 52,000 15,000)
Retained earnings,12/31/20x4 (date of acquisition)
Increase since acquisition
Less: Accumulated amortization (79,000 + 9,000)
Multiplied by: CI share
Invest. account equity method as at Dec. 31, 20x6
Implied value of 100% (628,150 / 85%)

Silk Common shares
Retained earnings Silk, 12/31/20x6
Balance unamortized allocated excess Patents
Balance
Dec. 31
20x6
72,000
72,000
628,150
646,000
167,000
100,000
67,000
88,000
( 21,000)
85%
( 17,850)
628,150
739,000
500,000
167,000
667,000
72,000
Problem IV
1.
(Full or partial-goodwill) the same answer.
Consideration transferred by MM .................... P664,000
Noncontrolling interest fair value..................... 166,000*
Fair value of Subsidiary
P830,000
Less: Book value of SHE S...
(600,000)
Positive excess ...............................................
230,000
Annual Excess
Life
Amortizations
Excess fair value assigned to buildings
80,000 20 years
P4,000
Goodwill - full
P150,000 indefinite
-0Total...........................................................
P4,000
2.
P150,000 full goodwill (see No. 1 above)

P120,000 partial-goodwill:
Consideration transferred by MM .................... P 664,000
Less: Book value of SHE S (P600,000 x 80%)..
480,000
Allocated excess..
P184,000
Less: Over/under valuation of A and L:
P80,000 x 80%.................................................
64,000
Goodwill - partial.............................................. P120,000
3.
Full-goodwill
Common Stock - TT ....................................................
Additional Paid-in Capital - TT .....................................
Retained Earnings - TT.................................................
Investment in TT Company (80%) .........................
Non-controlling interest (20%) ..............................
Buildings .....................................................................
Goodwill ......................................................................
Non-controlling interest (P166,000 P120,000)....
Partial-goodwill
Common Stock - TT ....................................................
Additional Paid-in Capital - TT .....................................
Retained Earnings - TT.................................................
Non-controlling interest (20%) ..............................
Buildings .....................................................................
Goodwill ......................................................................
Non-controlling interest (20% x P80,000) .............
4.
5.
6.
300,000
90,000
210,000
80,000
150,000
480,000
120,000
184,000
46,000
300,000
90,000
210,000
480,000
120,000
80,000
120,000
184,000
16,000
Cost Model/Initial Value Method

Dividends received (80%) ................................................
8,000
Investment in Taylor12/31/x4 (original value paid)
P
P664,000
Cost Model/Initial Value Method same answer with No. 4.

Using the acquisition method, the allocation will be the total difference (P80,000)
between the buildings' book value and fair value. Based on a 20 year life, annual excess
amortization is P4,000.
MM book valuebuildings ..........................................
P
800,000
TT book valuebuildings ............................................
300,000
Allocation ...................................................................
80,000
Excess Amortizations for 20x420x5 (P4,000 2) .
(
8,000)
Consolidated buildings account
P 1,172,000
7.
Acquisition-date fair value allocated to goodwill:

Goodwill-full ( see No. 1 above) ........................................
Goodwill-partial (see No. 1 above)
P
P
150,000
120,000
8. The common stock and additional paid-in capital figures to be reported are the parent
balances only.
Common stock, P500,000
Additional paid-in capital, P280,000
Problem V
1.
Partial Goodwill or Proportionate Basis
a.
Investment in S
225,000
Beginning Retained Earnings-Palm Inc.
225,000
To establish reciprocity/convert to equity (0.90 x(P1,250,000 P1,000,000))
b.
c.
Common stock S
Retained earnings S
Investment in S Co
NCI (P4,250,000 x 10%)
Land
Investment in S
NCI [(P500,000 x 10%) (P100,000 x 10%)]
Retained earnings P (bargain purchase gain
closed to retained earnings since only balance
sheets are being examined, P300,000 P90,000
depreciation, 20x4)
3,000,000
1,250.000
3,825,000
425,000
400,000
150,000
40,000
FV of SHE of S:
P3,000,000
P1,000,000
NI Subsidiary (20x4)
250,000
Dividends Subsidiary 20x4
(
0) 1,250,000
P4,250,000
Adjustments to reflect fair value
500,000
Amortization of allocated excess (P100,000 x 1)
( 100,000)
FV of SHE of S
P4,650,000
Multiplied by: NCI%
10%
FV of NCI
P 465,000
210,000
Computation of Gain:
Fair value of Subsidiary:
Consideration transferred
Less: BV of SHE of S (P3,000,000 + P1,000,000) x 90%
Allocated excess
Less: Over/under valuation of A and L: Inc. (Dec.)
Inventory (P800,000 P700,000) x 90%
Land (P2,000,000 P1,600,000) x 90%
Gain partial (attributable to parent)
P3,750,000
_3,600,000
P 150,000
P 90,000
360,000
__450,000
(P300,000)
Full Goodwill or Fair Value Basis

a.
Investment in S
225,000
Beginning Retained Earnings-P Inc.
225,000
To establish reciprocity/convert to equity (0.90 x(P1,250,000 P1,000,000))
b.
Common stock S
Retained earnings S
3,000,000
1,250.000
Investment in S
NCI (P4,250,000 x 10%)
c.
3,825,000
425,000
Land
Investment in S
NCI [(P500,000 x 10%) (P100,000 x 10%)]
Retained earnings P (bargain purchase gain
closed to retained earnings since only balance
sheets are being examined, P300,000 P90,000
depreciation, 20x4)
400,000
150,000
40,000
FV of SHE of S:
P3,000,000
P1,000,000
250,000
(
0) 1,250,000
P4,250,000
500,000
( 100,000)
FV of SHE of S
P4,650,000
Multiplied by: NCI%
10%
FV of NCI
P 465,000
Full-goodwill or Fair Value Basis

Consideration transferred P3,750,000 / 90%
P4,166,66
7
4,000,000
Less: BV of SHE of S (P3,000,000 + P1,000,000) x

100%
Allocated excess
Inventory (P800,000 P700,000) x 100%
Land (P2,000,000 P1,600,000) x 100%
Gain full (attributable to parent)
210,000
P
166,667
P 100,000
400,000
__500,000
(P333,333
Note: In case of gain, the working paper eliminating entries under partial and fullgoodwill approach are the same.
2.
Retained earnings - Parent Company, December 31, 20x5 (cost model
net
Retained earnings Subsidiary, December 31, 20x5
(P1,000,000 + P250,000 P0 + P300,000 P0)
Less: Retained earnings Subsidiary, January 1, 20x4
Less: Amortization of allocated excess 20x4 (inventory)
Add: Bargain purchase gain (Controlling interest P300,000)
Less: Goodwill impairment loss
P2,000,000
P1,550,000
1,000,00
0
P 550,000
100,000
P 450,000
90%
P405,000
300,000
_______0
__705,,000
P
4,705,000
Problem VI
Computation of Goodwill:
Partial Goodwill
P2,800,00
0
_1,200,00
0
P1,600,00
0
Less: BV of SHE of S (P1,000,000 + P500,000) x 80%

Allocated excess
Prop., plant and eqpt. (P1,500,000 P600,000) x
80%
Goodwill partial
__720,000
P
880,000
Full-goodwill:
P3,500,0
00
1,500,00
0
P2,000,0
00
Less: BV of SHE of S (P1,500,000 x 100%)

Allocated excess
Prop., plant and eqpt. (P1,500,000 P600,000) x
80%
Goodwill full
__900,00
0
P1,100,00
0

P900,000 / 10 years = P90,000 per year
1.
Cost Model-Full Goodwill (Eliminating Entries)

20x4
a. Beginning Retained Earnings-S Co.
Capital Stock- S Co.
Property and Equipment (net)
Goodwill
Investment in S Co.
Non-controlling Interest

FV of SHE of S1/1/x5
Multiplied by: NCI%
FV of NCI (partial)
Add: NCI on full-goodwill (P1,100,000 P880,000)
FV of NCI (full)
b. Depreciation Expense
1,000,000
500,000
900,000
1,100,000
2,800,000
700,000
P 500,000
1,000,000
P1,500,000
900,000
P2,400,000
20%
P 480,000
220,000
P 700,000
90,000
90,000
20x5
a. Investment in S Company (P300,000 x 0.80)
240,000
Beginning Retained Earnings-P Co.
To establish reciprocity/convert to equity as of 1/1/20x5
b. Beginning Retained Earnings-S Company
1,300,000
Capital Stock-S Company
500,000
900,000
Goodwill
1,100,000
Investment in S Company (P2,800,000 + P240,000)
Non-controlling Interest P700,000 +
[(P1,300,000 P1,000,000) x 0.20]
240,000
3,040,000
760,000
FV of SHE of S:
P 500,000
P1,000,000
300,000
(
0) 1,300,000
P1,800,000
900,000
P2,700,000
Multiplied by: NCI%
20%
FV of NCI (partial)
P 540,000
220,000
FV of NCI (full)
P 760,000
c. Beginning Retained Earnings-P Co. (P90,000 x 80%)

Non-controlling Interest (P90,000, depreciation x 20%)
Depreciation Expense
72,000
18,000
90,000
180,000
NCI (partial), 12/31/20x5: [(a) P760,000 (b) P18,000 = P522,000]

FV of SHE of S:
P 500,000
P1,000,000
300,000
(
0) 1,300,000
P1,800,000
900,000
(
90,000)
FV of SHE of S
P2,610,000
Multiplied by: NCI%
20%
FV of NCI (partial)
P 522,000
220,000
FV of NCI (full)
P 742,000
Cost Model-Partial Goodwill (Eliminating Entries)

20x4
a. Beginning Retained Earnings-S Co.
Capital Stock- S Co.
Goodwill
Investment in S Co.
1,000,000
500,000
900,000
880,000
2,800,000
480,000
b. Depreciation Expense
90,000
90,000
20x5
a. Investment in S Company (P300,000 x 0.80)
240,000
Beginning Retained Earnings-P Co.
To establish reciprocity/convert to equity as of 1/1/20x5
240,000
b. Beginning Retained Earnings-S Company

1,300,000
Capital Stock-S Company
500,000
900,000
Goodwill
880,000
Investment in S Company (P2,800,000 + P240,000)
3,040,000
Non-controlling Interest P700,000 +
[(P1,300,000 P1,000,000) x 0.20] (P1,100,000 P880,000)
540,000
NCI:
FV of SHE of S:
Multiplied by: NCI%
FV of NCI (partial)
P 500,000
P1,000,000
300,000
(
0) 1,300,000
P1,800,000
900,000
P2,700,000
20%
P 540,000
c. Beginning Retained Earnings-P Co. (P90,000 x 80%)

Non-controlling Interest (P90,000 depreciation x 20%)
72,000
18,000
90,000
180,000
NCI (partial), 12/31/20x5: [(a) P540,000 (b) P18,000 = P522,000]

FV of SHE of S:
P 500,000
P1,000,000
300,000
(
0) 1,300,000
P1,800,000
900,000
(
90,000)
FV of SHE of S
P2,610,000
Multiplied by: NCI%
20%
FV of NCI (partial)
P 522,000
2. Consolidated Net Income (CNI) = Controlling Interest in CNI + NCI in CNI

20x4
P Company
S Company
Total
P400,000
300,000
P700,000
P 42,000
90,000
Goodwill impairment
____0

attributable to equity holders of P..
132,00
0
P568,000
42,000
P610,000
Net income of subsidiary..

Amortization of allocated excess ...
P 300,000
( 90,000)
P210,000
20
%
P 42,000

20x5
P Company
S Company
Total
Goodwill impairment
P425,000
400,000
P825,000
P 62,000
90,000
____0

P673,000
62,000
P735,000

Amortization of allocated excess ...
P 400,000
( 90,000)
P310,000
20
%
P 62,000

Problem VII
1. Common stock of TT Company
on December 31, 20x4
Retained earnings of TT Company
January 1, 20x4
Sales for 20x4
Less: Expenses
Dividends paid
Retained earnings of TT Company
on December 31, 20x4
Net book value on December 31, 20x4
Proportion of stock acquired by QQ
Purchase price
2. Net book value on December 31, 20x4
Proportion of stock held by
noncontrolling interest
Balance assigned to noncontrolling interest
152,00
0
P 90,000
P 130,000
195,000
(160,000)
(15,000)
150,000
P240,000
x
.80
P192,000
P240,000
x
.20
P 48,000
3. Consolidated net income is P143,000. None of the 20x4 net income of TT Company was
earned after the date of purchase and, therefore, none can be included in consolidated
net income.
4. Consolidate net income would be P178,000 [P143,000 + (P195,000 - P160,000)].
Problem VIII
Requirements 1 to 4:
Date of Acquisition January 1, 20x4
Fair value of Subsidiary (100%)
Consideration transferred:
Cash
Notes payable
Less: Book value of stockholders equity of S:
Common stock (P200,000 x 100%)
.
Retained earnings (P100,000 x 100%)...
Allocated excess (excess of cost over book value)
..
Less: Over/under valuation of assets and liabilities:
Increase in inventory (P5,000 x 100%)
Increase in land (P6,000 x 100%)

.
Increase in equipment (P80,000 x 100%)
Decrease in buildings (P20,000 x 100%)
.....
Decrease in bonds payable (P4,000 x 100%)
Positive excess: Goodwill (excess of cost over

fair value)
...
P 360,000
105,000
P 465,000
P 240,000
120,000
360,000
P 105,000
6,000
7,200
96,000
( 24,000)
4,800
90,000
P 15,000
The over/under valuation of assets and liabilities are summarized as follows:

S Co.
Book value
Inventory.
..
Land
Equipment (net).........
Buildings (net)
Bonds payable
Net..
P 24,000
48,000
84,000
168,000
(120,000)
P 204,000
S Co.
Fair value
P
30,000
55,200
180,000
144,000
( 115,200)
P 294,000
(Over) Under
Valuation
P
6,000
7,200
96,000
(24,000)
4,800
P 90,000
The buildings and equipment will be further analyzed for consolidation purposes as follows:
Equipment ..................
S Co.
Book value
180,000
S Co.
Fair value
180,000
Increase
(Decrease)
0
Less: Accumulated
depreciation..
Net book
value...
Buildings................
Less: Accumulated
depreciation..
Net book
value...
96,000
( 96,000)
84,000
180,000
S Co.
Book value
360,000
S Co.
Fair value
144,000
(Decrease)
( 216,000)
192,000
( 192,000)
168,000
144,000
96,000
24,000)

Account
amortized
Adjustments
to
be
Inventory
Buildings (net)
Bonds payable
Over/
under
P
6,000
Lif
e
Current
Year(20x4)
Annual
Amount
P
6,000
P 6,000
P
-
96,000
(24,00
0)
4,80
0
12,000
12,000
12,000
( 6,000)
1,20
0
P
13,200
( 6,000)
1,200
(6,000)
1,20
0
P 13,200
P 7,200
20x5
20x4 : First Year after Acquisition

Parent Company Cost Model Entry
January 1, 20x4:
(1) Investment in S Company
Cash.
.
Notes payable
465,000
360,000
105,000
Acquisition of S Company.
January 1, 20x4 December 31, 20x4:

(2) Cash
Dividend income (P36,000 x 100%).
36,000
36,000
Record dividends from S Company.
On the books of S Company, the P36,000 dividend paid was recorded as follows:
Dividends paid
Cash.
Dividends paid by S Co..
Consolidation Workpaper First Year after Acquisition
36,000
36,000
(E1) Common stock S Co

Retained earnings S Co
Investment in S Co
240,000
120,000
360,000
To eliminate intercompany investment and equity accounts

of subsidiary on date of acquisition. ; and to establish noncontrolling
interest (in net assets of subsidiary) on date of acquisition.
(E2)
Inventory.
Accumulated depreciation equipment..
Accumulated depreciation buildings..
Land
.
Discount
on
bonds
payable.
Goodwill.
Buildings..
Investment in S Co.
6,000
96,000
192,000
7,200
4,800
15,000
216,000
105,000
To allocate excess of cost over book value of identifiable assets

acquired, with remainder to goodwill
(E3) Cost of Goods Sold.

Depreciation expense..
Interest expense
Goodwill impairment loss
Inventory..
Discount on bonds payable
Goodwill..
and
6,000
6,000
6,000
1,200
3,600
6,000
12,000
1,200
3,600
To provide for 20x4 impairment loss and depreciation and

amortization on differences between acquisition date fair value
book value of Sons identifiable assets and liabilities as follows:
Cost of
Goods Sold
Inventory
sold
Equipment
Buildings
Bonds
payable
Totals
Depreciation/
Amortization
Expense
Amortizatio
n
-Interest
P 6,000
_______
P12,000
( 6,000)
_______
P 1,200
P 6,000
P 6,000
P1,200
(E4) Dividend income - P.

Dividends paid S
To eliminate intercompany dividends and non-controlling interest
share of dividends.
36,000
36,000
Worksheet for Consolidated Financial Statements, December 31, 20x4.

Cost Model
100%-Owned Subsidiary
December 31, 20x4 (First Year after Acquisition)
Sales
Income Statement
P Co
P480,000
S Co.
P240,000
Dividend income
Total Revenue
36,000
P516,000
P240,000
Cost of goods sold

Depreciation expense
Interest expense
P204,000
P138,000
60,000
24,000

Other expenses
Total Cost and Expenses
Net Income to Retained Earnings
48,000
P312,000
P204,000
Statement of Retained Earnings

Retained earnings, 1/1
P Company
P360,000
S Company
Net income, from above
Total
Dividends paid
P Company
S Company
Retained earnings, 12/31 to Balance
Sheet
204,000
P564,000
Dr.
Cr.
(4)
36,000
Consolidated
P 720,000
_________
P 720,000
P 348,000
(3)
6,000
(3)
6,000
(3)
1,200
(3)
3,600
90,000
1,200
3,600
18,000
P180,000
P 60,000
66,000
P508,800
P211,200
P 360,000
P120,000
60,000
P180,000
(1)
120,000
211,200
P571,200
72,000
72,000
36,000
P492,000
P144,000
Cash.
Accounts receivable..
P
147,000
90,000
P 90,000
60,000
Inventory.
120,000
90,000
Land.
Equipment
Buildings
210,000
240,000
720,000
48,000
180,000
540,000
(4)
36,000
________
P 499,200
Balance Sheet
(2)
6,000
(2)
7,200
465,000
(3)
6,000
(3)
237,000
150,000
210,000
(2) 216,000
(2)
4,800
(2)
15,000

Goodwill
Investment in S Co
265,200
420,000
1,044,000
1,200
3,600
(3)
3,600
(1) 360,000
(2) 105,00
0
11,400
-
Total
Accumulated depreciation
equipment
P1,992,000
P1,008,0
00
P 135,000
P 96,000
buildings
Accounts payable
Bonds payable
Common stock, P10 par
Retained earnings, from above
Total
405,000
120,000
240,000
600,000
___590,400
P1,992,00
0
P2,341,200
(2)
(3)
96,000
12,000
(2)
192,000
288,000 (3)
6,000
120,000
120,000
240,000
144,000
P1,008,0
00
P 147,000
495,000
240,000
360,000
600,000
(1)
240,000
499,200
P
736,200
P
736,200
P2,341,200
20x5: Second Year after Acquisition

Only a single entry is recorded by the parent in 20x5 in relation to its subsidiary investment:
Cash
48,000
48,000
Dividends paid
Cash
48,000
48,000
Consolidation Workpaper Second Year after Acquisition

(E1) Investment in S Company
Retained earnings P Company
To provide entry to convert from the cost method to the equity
method or the entry to establish reciprocity at the beginning of
the
year, 1/1/20x5.
Retained earnings S Company, 1/1/20x5

Increase in retained earnings..
Multiplied by: Controlling interest %
Retroactive adjustment
P144,000
120,000
P 24,000
100%
P 24,000
24,000
24,000

Retained earnings S Co., 1/1/20x5
Investment in S Co
240,000
144,000
384,000

of subsidiary and to establish non-controlling interest (in net
assets of
subsidiary) on January 1, 20x5.
(E3)
Inventory.
Land
.
Discount
on
bonds
payable.
Goodwill.
Buildings..
Investment in S Co.
6,000
96,000
192,000
7,200
4,800
15,000
216,000
105,000

acquired, with remainder to goodwill; and to establish noncontrolling interest (in net assets of subsidiary) on January 1,
20x5.
(E4) Retained earnings P Company, 1/1/20x5

(P16,800 x 100%)
Interest expense
Inventory..
Goodwill
To provide for years 20x4 and 20x5 depreciation and
amortization on
differences between acquisition date fair value and book value
of
Ss identifiable assets and liabilities as follows:
Year 20x4 amounts are debited to Ps retained earnings
Year 20x5 amounts are debited to respective nominal
accounts..
(20x4)
Retaine
d
earnings
,
Depreciation/
Amortization
expense
Amortizatio
n
-Interest
16,800
6,000
12,000
1,200
6,000
24,000
2,400
3,600
Inventory sold
P
6,000
12,000
(6,000)
1,200
3,60
0
P
16,800
Equipment
Buildings
Bonds payable
Impairment loss
Totals
12,000
( 6,000)
P 1,200
P 6,000
P1,200

Dividends paid S
48,000
48,000

share of dividends.
(E6)
Non-controlling
interest
in
Subsidiary
Non-controlling interest ..
Net
Income
of
16,560
16,560
To establish non-controlling interest in subsidiarys adjusted net

income for 20x5 as follows:

Amortization of allocated excess [(E4)]...
Multiplied by:
%..........
Non-controlling
(NCINI)
Non-controlling
interest
Interest in Net Income
P 90,000
(
7,200)
P 82,000
20
%
P 16,560

Cost Model
Sales
Income Statement
P Co.
P540,000
S Co.
P360,000
Dividend income
Total Revenue
Cost of goods sold
48,000
P588,000
P216,000
P360,000
P192,000
Dr.
(5)
48,000
Cr.
Consolidated
P 900,000
___________
P
P
900,000
408,000
60,000
24,000
Interest expense
Other expenses
72,000
P348,000
P240,000
54,000
P270,000
P
90,000
(4)
6,000
(4)
1,200
90,000
1,200
P
P
126,000
625,200
274,800

P Company
S Company
Total
Dividends paid
P Company
S Company
Sheet
P492,000
240,000
P732,000
P144,000
90,000
P234,000
(4)
16,800
(2)
144,000
(1)
24,000
499,200
274,800
P 774,000
72,000
72,000
(5)
48,000
48,000
________
P660,000
P186,000
P 702,000
Cash.
P
189,000
180,000
P
102,000
960,000
P 291,000
276,000
Inventory.
216,000
108,000
Land.
Equipment
252,000
240,000
48,000
180,000
Buildings
720,000
540,000
Balance Sheet
(3)
4,800
(3)
15,000

Goodwill
Investment in S Co
Total
equipment
buildings
Accounts payable
Bonds payable
Total
5. 1/1/20x4
(3)
6,000
(3)
7,200
465,000
(1)
24,000
P2,220,000
P1,074,0
00
P 150,000
P
102,000
450,000
306,000
120,000
240,000
600,000
120,000
120,000
660,000
P2,220,000
240,000
186,000
P1,074,0
00
(4)
6,000
324,000
265,200
420,000
(3)
216,000
(4)
2,400
(4)
3,600
(2)
384,000
(3) 105,00
0
1,044,000
2,400
11,400
P2,634,000
(3)
96,000
(3)
192,000
(4)
12,000
(4)
24,000
P 180,000
552,000
240,000
360,000
600,000
(2)
240,000
702,000
P
783,120
P
783,120
P2,634,000
a.
On date of acquisition the retained earnings of P should always be considered as the

consolidated retained earnings, thus:
Retained earnings - P Company, January 1, 20x4 (date of acquisition)
P360,000
b. NCI not applicable, since it is 100% owned subsidiary
c.
Stockholders Equity
Retained earnings
Total Stockholders Equity (Total Equity)
P 600,000
360,000
P 960,000
6. 12/31/20x4:
a. P211,200 same with CNI since there is no NCI.
Net income from own/separate operations:
Pa Company
S Company
Total
Less: Amortization of allocated excess
P168,000
60,000
P228,000
P 13,200
3,600
16,800
P211,200
b. NCINI not applicable, since it is 100% owned subsidiary

c. P211,200 same with NCI-CNI since there is no NCI.
d.
Add: Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of P for 20x4 or Consolidated Net Income (CNI)*
Total
Less: Dividends paid P Company for 20x4
P360,000
211,200
P571,200
72,000
P499,200
*since it is a 100%-owned subsidiary, Controlling Interest in Net Income is the same with Consolidated Net
Income.
e. NCI not applicable, since it is 100% owned subsidiary

f.
Stockholders Equity
Retained earnings
P 600,000
499,200
P
1,099,200
12/31/20x5
a. P274,800 same with CNI since there is no NCI.
P Company
S Company
Total
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent or CNI
P192,000
90,000
P282,000
P 7,200
0
7,200
P274,800
b. NCINI not applicable, since it is 100% owned subsidiary
c. P274,800 same with NCI-CNI since there is no NCI.
d.
Retained earnings - P Company, January 1, 20x5 (cost model
consolidation or to establish reciprocity:/Ps share in adjusted net
Retained earnings S, January 1, 20x5
Less: Retained earnings S, January 1, 20x4
P492,000
P 144,000
120,000
P 24,000
16,800
7,200
100%
P
Add: Controlling
attributable to
equity holders of P for 20x5 or CNI
Total
274,800
P774,000
72,000
P702,000
e. NCI not applicable, since it is 100% owned subsidiary

f.
Stockholders Equity
Retained earnings
P 600,000
702,000
P1,302,000
Problem IX 80% Partial Goodwill - Cost Model

Schedule of Determination and Allocation of Excess (Partial-goodwill)
Consideration
transferred..
.
Retained earnings (P120,000 x 80%)
...
..

.
.....
Positive excess: Partial-goodwill (excess of cost over

fair value)
...
P 372,000
P 192,000
96,000
288,000
P
84,000
P 4,800
5,760
76,800
( 19,200)
3,840
72,000
P 12,000

S Co.
Book value
Inventory.
..
Land
Buildings (net)
Bonds payable
P 24,000
48,000
84,000
168,000
(120,000)
S Co.
Fair value
P
30,000
55,200
180,000
144,000
( 115,200)
7,200
P 499,200
(Over) Under
Valuation
P
6,000
7,200
96,000
(24,000)
4,800
Net..
P 204,000
P 294,000
P 90,000
Equipment ..................
Less: Accumulated
depreciation..
Net book
value...
Buildings................
Less: Accumulated
depreciation..
Net book
value...
S Co.
Book value
180,000
S Co.
Fair value
180,000
Increase
(Decrease)
0
96,000
( 96,000)
84,000
S Co.
Book value
360,000
180,000
S Co.
Fair value
144,000
96,000
(Decrease)
( 216,000)
192,000
( 192,000)
168,000
144,000
24,000)

Account
amortized
Adjustments
to
Inventory
Buildings (net)
Bonds payable
be
Over/
Under
P
6,000
Lif
e
Current
Year(20x4)
Annual
Amount
P
6,000
P 6,000
P
-
96,000
(24,00
0)
4,80
0
12,000
12,000
12,000
( 6,000)
1,20
0
P
13,200
( 6,000)
1,200
(6,000)
1,20
0
P 13,200
P 7,200
20x5
The goodwill impairment loss of P3,125 based on 100% fair value would be allocated to the
controlling interest and the NCI based on the percentage of total goodwill each equity
interest received. For purposes of allocating the goodwill impairment loss, the full-goodwill is
computed as follows:
Consideration transferred: Cash (80%)
Fair value of NCI (given) (20%)
Less: Book value of stockholders equity of Son (P360,000 x 100%)
Allocated excess (excess of cost over book value)..
Add (deduct): (Over) under valuation of assets and liabilities
(P90,000 x 100%)
Positive excess: Full-goodwill (excess of cost over
fair value)...
P 372,000
93,000
P 465,000
__360,000
P 105,000
90,000
P
15,000
20x4: First Year after Acquisition

January 1, 20x4:
372,000
Cash.
372,000
.
(2) Cash
28,800
28,800
Dividends paid
36,000
Cash.
36,000
Consolidation Workpaper Year of Acquisition

Investment in S Co
Non-controlling interest (P360,000 x 20%)
..
240,000
120.000
288,000
72,000

of subsidiary on date of acquisition; and to establish noncontrolling
interest (in net assets of subsidiary) on date of acquisition.
(E2)
Inventory.
Land
.
Discount
on
bonds
payable.
Goodwill
.
Buildings..
..
Investment in S Co.
acquired, with remainder to goodwill; and to establish noncontrolling interest (in net assets of subsidiary) on date of
acquisition.
6,000
96,000
192,000
7,200
4,800
12,000
216,000
18,000
84,000

Interest expense
Goodwill
impairment
loss.
Inventory..
Goodwill
6,000
6,000
6,000
1,200
3,000
6,000
12,000
1,200
3,000
To provide for 20x4 impairment loss and depreciation and

amortization on differences between acquisition date fair value
and
book value of Sons identifiable assets and liabilities as follows:

Cost of
Goods
Sold
Inventory sold
Equipment
Buildings
Bonds payable
Totals
Depreciation/
Amortization
expense
Amortizatio
n
-Interest
Total
P
6,000
_______
P 6,000
P 12,000
( 6,000)
_______
P 6,000
P 1,200
P1,200
13,20
0
It should be observed that the goodwill computed above was proportional to the controlling
interest of 80% and non-controlling interest of 20% computed as follows:
Value
P12,000
3,000
P15,000
Goodwill applicable to parent

Goodwill applicable to NCI..
Total (full) goodwill..
% of Total
80.00%
20.00%
100.00%
Therefore, the goodwill impairment loss of P3,125 based on 100% fair value or full-goodwill
would be allocated as follows:
Goodwill impairment loss attributable to P or controlling
Interest
Goodwill impairment loss applicable to NCI..
Goodwill impairment loss based on 100% fair value or fullGoodwill

Non-controlling interest (P36,000 x 20%)..
Dividends paid S
Value
P 3,000
% of Total
80.00%
750
20.00%
P 3,750
100.00%
28,800
7,200
36,000

share of dividends.
(E5)
Non-controlling
interest
in
Subsidiary
Net
Income
of

9,360
9,360

Multiplied by:
%..........
Non-controlling
(NCINI)
interest
P 60,000
( 13,200)
P 46,800
20%
P 9,360
Non-controlling

Cost Model (Partial-goodwill)
Sales
Income Statement
P Co
P480,000
S Co.
P240,000
Dividend income
Total Revenue
28,800
P508,800
P240,000
Cost of goods sold
P204,000
P138,000
60,000
28,000
Interest expense
Other expenses
48,000
18,000

Net Income
P310,000
P196,800
P180,000
P 60,000
NCI in Net Income - Subsidiary

P196,800
P 60,000
Dr.
Cr.
(4)
28,800
Consolidated
P 720,000
_________
P 720,000
P 348,000
(3)
6,000
(3)
6,000
(3)
1,200
90,000
1,200
66,000
3,000
(3)
3,000
P508,200
P211,800
( 9,360)
(5)
9,360
P202,440

P Company
S Company
Total
Dividends paid
P Company
S Company
Sheet
P
360,000
P360,000
196,800
P552,000
P120,000
60,000
P180,000
(1)
120,000
202,440
P562,440
72,000
72,000
36,000
P484,800
P144,000
Cash.
P
232,800
90,000
P 90,000
60,000
Inventory.
120,000
90,000
(4)
36,000
________
P
490,440
Balance Sheet
P
(2)
6,000
(3)
6,000
322,800
150,000
210,000
Land.
Equipment
210,000
240,000
48,000
180,000
Buildings
720,000
540,000
(2)
4,800
(2)
12,000

Goodwill
Investment in S Co
Total
equipment
buildings
Accounts payable
Bonds payable
372,000
P1,984,800
P1,008,0
00
P 135,000
P 96,000
405,000
120,000
240,000
600,000
484,800
240,000
144,000
_________
P1,984,800
(2)
216,000
(3)
1,200
(3)
3,000
(4) 288,000
(5) 84,000
1,044,000
3,600
9,000
-
(3)
12,000
P147,000
495,000
240,000
360,000
600,000
(1)
240,000
490,440
(4)
______
___
P1,008,0
00
265,200
420,000
P2,424,600
(2)
96,000
(2)
192,000
288,000 (3)
6,000
120,000
120,000
Non-controlling interest
Total
(2)
7,200
7,200
__________
P
745,560
(1 )
72,000
(2)
18,000
(5)
9,360
P
745,560
____92,160
P2,424,600

Sales
Less: Cost of goods sold
Gross profit
Less: Depreciation expense
Other expense
Net income from its own separate operations
Add: Dividend income
Net income
Dividends paid
P Co.
P 540,000
216,000
P 324,000
60,000
72,000
P 192,000
38,400
P 230,400
P 72,000
S Co.
P 360,000
192,000
P 168,000
24,000
54,000
P 90,000
P 90,000
P 48,000
No goodwill impairment loss for 20x5.

Only a single entry is recorded by the P in 20x5 in relation to its subsidiary investment:

Cash
38,400
38,400

The working paper eliminations (in journal entry format) on December 31, 20x5, are as
follows:

the
19,200
19,200

year, 1/1/20x5, computed as follows:

P144,000
120,000
P 24,000
80%
P 19,200

Investment in S Co (P384,000 x 80%)

..
240,000
144,000
307,200
76,800

of subsidiary and to establish non-controlling interest (in net
assets of
subsidiary) on January 1, 20x5.
(E3)
Inventory.
Land
.
Discount
on
bonds
payable.
Goodwill
.
Buildings..
Investment in S Co.
acquired, with remainder to goodwill; and to establish noncontrolling interest (in net assets of subsidiary) on January 1,
20x5.
6,000
96,000
192,000
7,200
4,800
12,000
216,000
18,000
84,000
[(P13,200 x 80%) + P3,000, impairment loss on

partial-goodwill]
Non-controlling interests (P13,200 x 20%)
.
Interest expense
Inventory..
Goodwill
13,560
2,640
6,000
12,000
1,200
6,000
24,000
2,400
3,000
To provide for years 20x4 and 20x5 depreciation and

amortization on
differences between acquisition date fair value and book value
of
Ss identifiable assets and liabilities as follows:
Year 20x4 amounts are debited to Ps retained earnings &
NCI;
Year 20x5 amounts are debited to respective nominal
accounts.
Inventory sold
Equipment
Buildings
Bonds payable
Sub-total
Multiplied by:
To Retained earnings
Impairment loss
Total
(20x4)
Retaine
d
earnings
,
P
6,000
12,000
(6,000)
1,20
0
P13,200
80%
P
10,560
3,00
0
P
13,560
Depreciation/
Amortization
expense
Amortizatio
n
-Interest
P 12,000
( 6,000)
________
P 1,200
P 6,000
P 1,200

Dividends paid S
38,400
9,600
48,000

share of dividends.
(E6)
Non-controlling
interest
in
Subsidiary
Net
Income
of
16,560


Multiplied
by:
Non-controlling
16,560
interest
P 90,000
(
7,200)
P 82,800
20
%..........
Non-controlling
(NCINI
%
P 16,560

Cost Model (Partial-goodwill)
December 31, 20x5 (Second Year after Acquisition)
Sales
Income Statement
P Co
P540,000
S Co.
P360,000
Dividend income
Total Revenue
Cost of goods sold
38,400
P578,400
P216,000
P360,000
P192,000
60,000
24,000
Interest expense
Other expenses
72,000
P348,000
Net Income
P230,400
54,000
P270,000
P
90,000

P Company
S Company
Total
Dividends paid
P Company
S Company
Sheet
Balance Sheet
P230,400
P484,800
230,400
P715,200
P
90,000
Dr.
Cr.
(5)
38,400
Consolidated
P 900,000
___________
P
P
900,000
408,000
90,000
(4)
6,000
(4)
1,200
1,200
126,000
P 625,200
P 274,800
(6)
16,560
( 16,560)
P 258,240
(4) 13,56
0
(2)
P
144,00
144,000
0
90,000
P234,000
(1) 19,200
P 490,440
258,240
P 748,680
72,000
72,000
(5)
48,000
48,000
P643,200
P186,000
P 676,680
Cash.
P
265,200
180,000
P
114,000
96,000
P 367,200
276,000
Inventory.
216,000
108,000
Land.
Equipment
210,000
240,000
48,000
180,000
Buildings
720,000
540,000

Goodwill
(3)
6,000
(3)
7,200
(3)
4,800
(3)
12,000
(4)
6,000
________
324,000
265,200
420,000
(3)
216,000
(4)
2,400
(4)
3,000
1,044,000
2,400
9,000
Investment in S Co
Total
equipment
buildings
Accounts payable
Bonds payable
372,000
(1)
19,200
P2,203,200
P1,074,0
00
P 150,000
P
102,000
450,000
306,000
120,000
240,000
600,000
120,000
120,000
643,200
240,000
186,000
(2)
307,200
(3)
84,000
P2,707,800
(3)
96,000
(3)
192,000
(4)
12,000
(4)
24,000
P180,000
552,000
240,000
360,000
600,000
(2)
240,000
676,680
(5)
___
_____
Total
P2,203,200
______
___
P1,074,0
00
9,600
(4)
2,640
__________
P
821,160
(2 )
76,800 (3)
18,000
(6)
16,560
P
821,160
____99,120
P2,707,800
5. 1/1/20x4
a. On date of acquisition the retained earnings of P should always be considered as the consolidated
retained earnings, thus:
P360,000
b.
Non-controlling interest (partial-goodwill), January 1, 20x4
P 240,000
Common stock S Company, January 1, 20x4
Retained earnings S Company, January 1, 20x4
Stockholders equity S Company, January 1, 20x4
liabilities, date of acquisition (January 1, 20x4)
Fair value of stockholders equity of subsidiary, January 1, 20x4
Multiplied by: Non-controlling Interest percentage...
Non-controlling interest (partial-goodwill)..
120,000
P 360,000
90,000
P450,000
20
P 90,000
c.
Consolidated SHE:
Stockholders Equity
Retained earnings
Ps Stockholders Equity / CI - SHE
P 600,000
360,000
P 960,000
NCI, 1/1/20x4
Consolidated SHE, 1/1/20x4
___90,000
P1,050,000
6.
Note: The goodwill recognized on consolidation purely relates to the Ps share. NCI is
measured as a proportion of identifiable assets and goodwill attributable to NCI share is
not recognized.
12/31/20x4:
a. CI-CNI
P Company
S Company
Total
Amortization of allocated excess (refer to amortization above)
Goodwill impairment (impairment under partial-goodwill approach)
equity holders of parent..
P168,000
60,000
P228,000
P 9,360
13,200
3,000
25,560
P202,440
9,360
P211.800
b. NCI-CNI
*Non-controlling Interest in Net Income (NCINI) for 20x4
Net income of S Company
Less: Amortization of allocated excess / goodwill impairment
(refer to amortization table above)
P 60,000
13,200
P 46,800
20%
P 9,360
c. CNI, P211,800 refer to (a)

d. On subsequent to date of acquisition, consolidated retained earnings would be
equity holders of parent for 20x4
Total
P360,000
202,440
P562,440
72,000
P490,440
e.
Non-controlling interest (partial-goodwill), December 31, 20x4
P 240,000
Common stock S Company, December 31, 20x4
Retained earnings S Company, December 31, 20x4

Add: Net income of S for 20x4
Total
Less: Dividends paid 20x4
Stockholders equity S Company, December 31, 20x4
Amortization of allocated excess (refer to amortization above) 20x4
Fair value of stockholders equity of subsidiary, December 31, 20x4
P120,000
60,000
P180,000
36,000
144,000
P 384,000
90,000
( 13,200)
P460,000
20
P 92,160
f.
Consolidated SHE:
Stockholders Equity
Retained earnings
Ps Stockholders Equity / CI SHE, 12/31/20x4
NCI, 12/31/20x4
P 600,000
490,440
P1,090,440
___92,160
P1,182,600
12/31/20x5:
a. CI-CNI
P Company
S Company
Total
P192,000
90,000
P282,000
P16,560
__7,200
23,760
P258,240
16,560
P274,800
b. NCI-CNI
Less: Amortization of allocated excess / goodwill impairment for 20x5
Non-controlling Interest in Net Income (NCINI) for 20x5
P 90,000
80,400
P 82,800
20%
P 16,560

d. On subsequent to date of acquisition, consolidated retained earnings would be computed as follows:
net
P484,800

or
P 144,000
120,000
P 24,000
13,200
P
10,800
80%
P
8,640
Less: Goodwill impairment loss (full-goodwill), net (P3,750 P750)*
3,000
(P3, 750 x 80%)

Add: Controlling
attributable to
equity holders of P for 20x5
Total
5,640
P 490,440
258,240
P748,680
72,000
P676,680
*this procedure would be more appropriate, instead of multiplying the full-goodwill impairment loss of
P3,750 by 80%. There might be situations where the controlling interests on goodwill impairment loss would
e.
P 240,000
Total
Amortization of allocated excess (refer to amortization above) :
20x4
20x5
Fair value of stockholders equity of S, December 31, 20x5
Non-controlling interest (partial goodwill)..
P14,000
90,000
P234,000
48,000
186,000
P 426,000
90,000
P
13,200
7,200
( 20,400)
P 495,600
20
P 99,120
f.
Consolidated SHE:
Stockholders Equity
Retained earnings
Parents Stockholders Equity / CI SHE, 12/31/20x5
NCI, 12/31/20x5
Problem X 80% Full Goodwill Cost Model
P 600,000
676,680
P1,276,680
___99,120
P1,375,800
Schedule of Determination and Allocation of Excess
Consideration transferred (80%)..
Fair value of NCI (given) (20%)..
Fair value of Subsidiary (100%).
Less: Book value of stockholders equity of Son:
.
..

.
.....

fair value)
...
P 372,000
93,000
P 465,000
P 240,000
120,000
360,000
P 105,000
6,000
7,200
96,000
( 24,000)
4,800
90,000
P 15,000

Account
amortized
Adjustments
to
Inventory
Buildings (net)
Bonds payable

be
Over/
under
P
6,000
Lif
e
Current
Year(20x4)
Annual
Amount
P
6,000
P 6,000
P
-
96,000
(24,00
0)
4,80
0
12,000
12,000
12,000
( 6,000)
1,20
0
P
13,200
( 6,000)
1,200
(6,000)
1,20
0
P 13,200
P 7,200
20x5
January 1, 20x4:
Cash.
.
(2) Cash
Dividend income (P36,000x 80%).
372,000
372,000
28,800
28,800
No entries are made on the Ps books to depreciate, amortize or write-off the portion of the
allocated excess that expires during 20x4.

Investment in S Co
..
240,000
120.000
(E2)
Inventory.
Land
.
Discount
on
bonds
payable.
Goodwill
.
Buildings..
Non-controlling interest (P90,000 x 20%) +
[(P15,000, full
P12,000, partial goodwill)]
Investment in S Co.
6,000

Interest expense
Goodwill
impairment
loss.
Inventory..
Goodwill
288,000
72,000
96,000
192,000
7,200
4,800
15,000
216,000
21,000
84,000
6,000
6,000
6,000
1,200
3,750
6,000
12,000
1,200
3,750
Cost of Goods
Sold
Inventory sold
Equipment
Buildings
Bonds payable
Totals
Depreciation/ Amortization
Expense
P 6,000
P12,000
( 6,000)
_______
P 6,000
_______
P 6,000
P 1,200
P1,200

Dividends paid S
(E5)
Non-controlling
interest
in
Subsidiary
Net
by:
Non-controlling
28,800
7,200
36,000
Income
of
8,610
8,610

Multiplied
%..........
Amortizatio
n
-Interest
interest
P 60,000
( 13,200)
P 46,800
20%
P
Less: Non-controlling interest on impairment

loss on full-goodwill (P3,125 x 20%) or
(P3,125 impairment on full-goodwill
less
P2,500,
impairment on partialgoodwill)*
Non-controlling
(NCINI)
9,360
750
P
8,610
P3,125 by 20%. There might be situations where the NCI on goodwill impairment loss would not be
proportionate to NCI acquired (refer to Illustration 15-6).

Cost Model (Full-goodwill)
Sales
Income Statement
P Co
P480,000
S Co.
P240,000
Dividend income
Total Revenue
28,800
P508,800
P240,000
Cost of goods sold
P204,000
P138,000
60,000
24,000
Interest expense
Other expenses
48,000
18,000

P312,000
P180,000
Dr.
(4)
28,800
(3)
6,000
(3)
6,000
(3)
1,200
(3)
3,750
Cr.
Consolidated
P 720,000
_________
P 720,000
P 348,000
90,000
1,200
66,000
3,750
P508,950
Net Income
P Company
S Company
Total
Dividends paid
P Company
S Company
Sheet
P196,800
P196,800
P 60,000
P 60,000
(5)
8,610
P211,050
8,610)
P202,680
P
360,000
P360,000
196,800
P556,800
P120,000
60,000
P180,000
(1)
120,000
202,680
P562,440
72,000
86,400
36,000
P484,800
P144,000
Cash.
P
232,800
90,000
P 90,000
60,000
Inventory.
120,000
90,000
Land.
Equipment
210,000
240,000
48,000
180,000
Buildings
720,000
540,000
(4)
36,000
________
P
490,440
Balance Sheet
Total
equipment
buildings
Accounts payable
Bonds payable
372,000
P1,984,800
P 135,000
405,000
120,000
240,000
600,000

(2)
6,000
(2)
7,200
(2)
4,800
(2)
15,000

Goodwill
Investment in S Co
484,800
_________
Total
P1,984,800
______
___
P1,984,8
00
210,000
265,200
420,000
(2)
216,000
(3)
1,200
(3)
3,750
(3) 288,000
(4) 84,000
1,044,000
3,600
11,250
P2,426,850
(2)
P 96,000 96,000
(5)
192,000
288,000 (6)
6,000
120,000
120,000
(3)
12,000
P147,000
495,000
240,000
360,000
600,000
(1)
240,000
490,440
(7)
(3)
6,000
P1,008,0
00
240,000
144,00
0
322,800
150,000
7,200
__________
P
748,560
(1 )
72,000
(2)
21,000
(5)
8,610
P
748,560
____94,410
P2,426,850

Sales
P Co.
P 540,000
S Co.
P 360,000

Gross profit
Other expense
Add: Dividend income
Net income
Dividends paid
216,000
P 324,000
60,000
72,000
P 192,000
38,400
P 230,400
P 72,000
192,000
P 168,000
24,000
54,000
P 90,000
P 90,000
P 48,000

Only a single entry is recorded by the parent in 20x5 in relation to its subsidiary investment:

Cash
Dividend income (P48,000x 80%).
38,400
38,400

the
19,200
19,200

year, 1/1/20x5.

P144,000
120,000
P 24,000
80%
P 19,200


..
240,000
144,000
(E3)
Inventory.
Land
.
Discount
on
bonds
payable.
6,000
307,200
76,800
96,000
192,000
7,200
4,800
Goodwill
15,000
.
Buildings..
Non-controlling interest (P90,000 x 20%) +
[(P15,000, full
Investment in S Co.

(P16,950 x 80%)
Non-controlling interests (P16,950 x 20%)
.
Interest expense
Inventory..
Goodwill
Inventory sold
Equipment
Buildings
Bonds payable
Impairment loss
Totals
Multiplied by: CI%....
To Retained earnings
(20x4)
Retaine
d
earnings
,
P
6,000
12,000
(6,000)
1,200
3,75
0
P
16,950
80
%
P13,560
Depreciation/
Amortization
expense
216,000
21,000
84,000
13,560
3,390
6,000
12,000
1,200
6,000
24,000
2,400
3,750
Amortizatio
n
-Interest
12,000
( 6,000)
P 1,200
P 6,000
P1,200

Dividends paid S
38,400
9,600
48,000

share of dividends.
(E6)
Non-controlling
interest
in
Subsidiary
Net

Income
of
16,560
16,560
P 90,000
(
7,200)
P 82,800
Multiplied
%..........
Less:
full-
by:
Non-controlling
interest
20
%
P 16,560
NCI on goodwill impairment loss on
Goodwill
Non-controlling
(NCINI)
0
P 16,560

Cost Model (Full-goodwill)
Income Statement
P Co
P540,000
S Co.
P360,000
38,400
P578,400
P216,000
P360,000
P192,000
60,000
24,000
Interest expense
Other expenses
72,000
P348,000
Net Income
P230,400
54,000
P270,000
P
90,000
Sales
Dividend income
Total Revenue
Cost of goods sold
P230,400
P
90,000
Dr.
Cr.
(5)
38,400
Consolidated
P 900,000
___________
P
P
900,000
408,000
90,000
(4)
6,000
(4)
1,200
1,200
126,000
P 625,200
P 274,800
(
(6)
16,560
16,560)
P 258,240

P Company
S Company
Total
Dividends paid
P Company
S Company
Sheet
P484,800
230,400
P715,200
(5) 13,56
0
(6)
P
144,00
144,000
0
90,000
P234,000
(5) 19,200
P 490,440
258,240
P 748,680
72,000
72,000
(5)
57,600
48,000
________
P643,200
P186,000
P 676,680
P
265,200
180,000
216,000
P
102,000
96,000
108,000
P 367,200
276,000
324,000
Balance Sheet
Cash.
Inventory.
(3)
(4)
6,000
Land.
Equipment
210,000
240,000
48,000
180,000
Buildings
720,000
540,000
(3)
4,800
(3)
15,000
(1)
19,200

Goodwill
Investment in S Co
Total
equipment
buildings
Accounts payable
Bonds payable
372,000
P2,203,200
P1,074,0
00
P 150,000
P
102,000
450,000
306,000
120,000
240,000
600,000
120,000
120,000
643,200
6,000
(3)
7,200
240,000
186,000
Total
P2,203,200
______
___
P1,074,0
00
1,044,000
2,400
11,250
-
(4)
24,000
P180,000
552,000
240,000
360,000
600,000
(2)
240,000
676,680
(8)
___
_____
(3)
216,000
(4)
2,400
(4)
3,750
(2)
307,200
(7) 84,000
P2,710,050
(3)
96,000
(3)
192,000
(4)
12,000
(6)
265,200
420,000
9,600
3,390
__________
P
824,910
(2 )
76,800
(3)
21,000
(6)
16,560
P
824,910
____101,37
0
P2,710,050
5. 1/1/20x4
a. On date of acquisition the retained earnings of parent should always be considered as the
consolidated retained earnings, thus:
P360,000
b.
Non-controlling interest (full-goodwill), January 1, 20x4
P 240,000
Fair value of stockholders equity of S, January 1, 20x4
Add: NCI on full-goodwill (P15,000 P12,000)
120,000
P 360,000
90,000
P450,000
20
P 90,000
___3,000
P 93,000
c.
Consolidated SHE:
Stockholders Equity
Retained earnings
Parents Stockholders Equity / CI - SHE
NCI, 1/1/20x4
P 600,000
360,000
P 960,000
___93,000
P1,053,000
6.
Note: The goodwill recognized on consolidation purely relates to the parents share. NCI is measured
as a proportion of identifiable assets and goodwill attributable to NCI share is not recognized.
12/31/20x4:
a. CI-CNI P202,440
P Company
S Company
Total
Goodwill impairment (impairment under full-goodwill approach)
equity holders of P..
P168,000
60,000
P228,000
P 8,610
13,200
3,750
P202,440
8,610
P211.050
b. NCI-CNI P8,610
Less: Amortization of allocated excess (refer to amortization table above)
Less: Non-controlling int. on impairment loss on full-goodwill
(P3,750 x 20%)
or (P3,750 impairment on full-goodwill less P3,000,
impairment on
partial-goodwill)*
25,560
P 60,000
13,200
P 46,800
20%
P
9,360
750
8,610
*this procedure would be more appropriate, instead of multiplying the full-goodwill impairment
loss of P3,750 by 20%. There might be situations where the NCI on goodwill impairment loss
would not be proportionate to NCI acquired.
d. On subsequent to date of acquisition, consolidated retained earnings would be computed as

follows:
Total
P360,000
202,440
P562,440
72,000
P490,440
e.
P 240,000
Total
Non-controlling interest (partial-goodwill, 12/31/20x4..
Add: Non-controlling interest on full goodwill , net of impairment
loss, 12/31/x4:
[(P15,000 full P12,000, partial = P3,000) P750
impairment loss
Non-controlling interest (full-goodwill), 12/31/20x4..
P120,000
60,000
P180,000
36,000
144,000
P 384,000
90,000
( 13,200)
P460,800
20
P 92,160
2,250
P
94,410
f.
Consolidated SHE:
Stockholders Equity
Retained earnings
NCI, 12/31/20x4
P 600,000
490,440
P1,090,440
___94,410
P1,184,85
0
12/31/20x5:
a. CI-CNI P258,240
P Company
S Company
Total
P192,000
90,000
P282,000
P16,560
7,200
0
23,760
P258,240
16,560
P274,800
b. NCI-CNI P16,560
P 90,000
80,400
P 82,800
20%
P 16,560

follows:
Retained earnings Subsidiary, January 1, 20x5
or
(P3, 750 x 80%)

Add: Controlling
attributable to
Total
P484,800
P 144,000
120,000
P 24,000
13,200
P
10,800
80%
P
8,640
3,000
5,640
P 490,440
258,240
P748,680
72,000
P676,680
e.
P 240,000
Total
20x4
20x5
Add: Non-controlling interest on full goodwill , net of impairment
loss
[(P15,000 full P12,000, partial = P3,000) P750
impairment loss
Non-controlling interest (full-goodwill)..
P144,000
90,000
P234,000
48,000
186,000
P 426,000
90,000
P
13,200
7,200
( 20,400)
P 495,600
20
P 99,120
2,250
P
101,370
f.
Consolidated SHE:
Stockholders Equity
Retained earnings
NCI, 12/31/20x4
P 600,000
676,680
P1,276,680
__101,370
P1,378,05
0
Problem XI
Under the acquisition method, the shares issued by WW are recorded at fair value:
Investment in BB (value of debt and shares issued)...................
Common Stock (par value)....................................................
Additional Paid-in Capital (excess over par value).................
Liabilities...............................................................................
900,000
150,000
450,000
300,000
The payment to the broker is accounted for as an expense. The stock issue cost is a
reduction in additional paid-in capital.
Acquisition expense....................................................................
Additional Paid-in Capital............................................................
Cash ..................................................................................
30,000
40,000
70,000
Allocation of Acquisition-Date Excess Fair Value:

Consideration transferred (fair value) for BB Stock ...................
Book Value of BB, 6/30................................................................
Fair Value in Excess of Book Value.........................................
P900,000
770,000
P130,000
Excess fair value (undervalued equipment)................................

Excess fair value (overvalued patented technology)...................
Goodwill................................................................................
100,000
(20,000)
P 50,000
Consolidated Balances:
1. Net income (adjusted for combination expenses. The
figures earned by the subsidiary prior to the takeover
are not included)..............................................................................
2. Retained Earnings, 1/1 (the figures earned by the subsidiary
prior to the takeover are not included).............................................
3. Patented Technology (the parent's book value plus the fair
value of the subsidiary)....................................................................
4. Goodwill (computed above)...............................................................
5. Liabilities (the parent's book value plus the fair value
of the subsidiary's debt plus the debt issued by the parent
in acquiring the subsidiary)..............................................................
6.
Common Stock (the parent's book value after recording
the newly-issued shares)..................................................................
7.
Additional Paid-in Capital (the parent's book value
after recording the two entries above).............................................
Problem XII
1.
Investment in WP, Inc.
Contingent performance obligation
Cash
2.
12/31/x5 Loss from increase in contingent performance

obligation
10,000
Common stock
Retained earnings-WP
Investment in WP
1,180,000
50,000
1,210,000
35,000
465,000
5,000
3. Cost Model/Initial Value Method

Investment in WP
Retained earnings-BS
800,000
500,000
12/31/x4 Loss from increase in contingent performance

obligation
12/31/x5 Contingent performance obligation

Cash
P210,000
5,000
10,000
50,000
50,000
30,000
200,000
180,000
Royalty agreements
Goodwill
Investment in WP
90,000
60,000
Dividend income
Dividends paid
35,000
Amortization expense
Royalty agreements
10,000
30,000
380,000
150,000
35,000
10,000
510,000
680,000
Problem XIII (Consolidated accounts one year after acquisition)

SS acquisition fair value ($10,000 in
stock issue costs reduce
additional paid-in capital) .......................... P680,000
Book value of subsidiary
(1/1/x4stockholders' equity balances).......... (480,000)
Fair value in excess of book value ................... P200,000
Excess fair value allocated to copyrights
Life
Amortizations
based on fair value .................................... 120,000
6 yrs.
P20,000
Goodwill .......................................................... P 80,000 indefinite
Total ...........................................................
_____-0P20,000
1. Consolidated copyrights
PP (book value) .....................................................
P900,000
SS (book value) .....................................................
400,000
Allocation (above) .................................................
120,000
Excess amortizations, 20x4 ..................................
(20,000)
Total ................................................................ P1,400,000
2. Consolidated net income, 20X4
Revenues (add book values) .................................
Expenses:
Add book values ..............................................
Excess amortizations .......................................
Consolidated net income.......................................
P1,100,000
P700,000
20,000
720,000
P380,000
3. Consolidated retained earnings, 12/31/x4

Retained earnings 1/1/x4 (PP) ...............................
P600,000
Net income 20x4 (above) ......................................
380,000
Dividends paid 20x4 (PP) ......................................
(80,000)
Total ................................................................
P900,000
SSs retained earnings balance as of January 1, 20x4, is not included because
these operations occurred prior to the purchase. SS's dividends were paid to PP
and therefore are excluded because they are intercompany in nature.
4. Consolidated goodwill, 12/31/x4
Allocation (above) ................................................
P80,000
Problem XIV
Consolidated balances three years after the date of acquisition. Includes questions about
parent's method of recording investment for internal reporting purposes.)
1. Acquisition-Date Fair Value Allocation and Amortization:
Consideration transferred 1/1/09 ..................... P600,000
Book value (given) .......................................... (470,000)
Annual
Fair value in excess of book value ............. 130,000
Excess
Allocation to equipment based on
Life Amortizations
difference in fair value and
book value .................................................
90,000 10 yrs.
P9,000
Goodwill .......................................................... P40,000 indefinite
-0Total ...........................................................
P9,000
Consolidated Balances
Depreciation expense = P659,000 (book values plus P9,000 excess

depreciation)
Dividends Paid = P120,000 (parent balance only. Subsidiary's dividends are
eliminated as intercompany transfer)
Revenues = P1,400,000 (add book values)
Equipment = P1,563,000 (add book values plus P90,000 allocation less three
years of excess depreciation [P27,000])
Buildings = P1,200,000 (add book values)
Goodwill = P40,000 (original residual allocation)
Common Stock = P900,000 (parent balance only)
2. The parent's choice of an investment method has no impact on the consolidated

totals. The choice of an investment method only affects the internal reporting of
the parent. Under PAS 27, it requires a choice between cost model or under PFRS
9 (known as fair value model)
3. The cost model or initial value method is used. The parent's Investment in
Subsidiary account still retains the original consideration transferred of P600,000.
In addition, the Investment Income account equals the amount of dividends paid
by the subsidiary.
4. If the equity method had been applied which is not allowed under PAS 27 for a
parent to consolidate, the Investment Income account would have included both
the equity accrual of P100,000 and excess amortizations of P9,000 for a balance
of P91,000.
Problem XV
1. Net income for 20x4:
QQ
Operating income
P 90,000
Income from subsidiary
24,500
Net income
P114,500
2. Consolidated net income is P125,000 (P90,000 + P35,000).
3. Retained earnings reported at December 31, 20x4:
QQ
Retained earnings, January 1, 20x4
P290,000
Net income for 20x4
114,500
Dividends paid in 20x4
(30,000)
Retained earnings, December 31, 20x4
P374,500
NN
P35,000
P35,000
NN
P40,000
35,000
(10,000)
P65,000
4. Consolidated retained earnings at December 31, 20x4, is equal to the P374,500 retained
earnings balance reported by QQ.
5. When the cost method is used, the parent's proportionate share of the increase in
retained earnings of the subsidiary subsequent to acquisition is not included in the
parent's retained earnings. Thus, this amount must be added to the total retained
earnings reported by the parent in arriving at consolidated retained earnings.
Problem XVI
(Several valuation and income determination questions for a business combination involving
a non-controlling interest.)
Business combinations are recorded generally at the fair value of the consideration
transferred by the acquiring firm plus the acquisition-date fair value of the non-controlling
interest.
PSs consideration transferred (P31.25 80,000 shares)............................. P2,500,000

Non-controlling interest fair value (P30.00 20,000 shares)........................
P600,000
SRs total fair value 1/1/09............................................................................ P3,100,000
1.
Each identifiable asset acquired and liability assumed in a business combination should
initially be reported at its acquisition-date fair value.
2.
In periods subsequent to acquisition, the subsidiarys assets and liabilities are reported
at their acquisition-date fair values adjusted for amortization and depreciation. Except for
certain financial items, they are not continually adjusted for changing fair values.
3. SRs total fair value 1/1/09............................................................................ P3,100,000

SRs net assets book value............................................................................ 1,290,000
Excess acquisition-date fair value over book value....................................... P1,810,000
Adjustments from book to fair values............................................................
Buildings and equipment.............................................
(250,000)
Trademarks.................................................................
200,000
Patented technology................................................... 1,060,000
Unpatented technology...............................................
600,000
1,610,000
Goodwill
............................................................................................... P 200,000
4. Combined revenues...................................................................................... P4,400,000
Combined expenses...................................................................................... (2,350,000)
Building and equipment excess depreciation................................................
50,000
Trademark excess amortization.....................................................................
(20,000)
Patented technology amortization.................................................................
(265,000)
Unpatented technology amortization............................................................
(200,000)
Consolidated net income............................................................................... P1,615,000
To non-controlling interest:
SRs revenues.......................................................................................... P1,400,000
SRs expenses.........................................................................................
(600,000)
Total excess amortization expenses (above)............................................
(435,000)
SRs adjusted net income........................................................................
P365,000
Non-controlling interest percentage ownership.......................................
20%
Non-controlling interest share of consolidated net income......................
P73,000
To controlling interest:
Consolidated net income......................................................................... P1,615,000
Non-controlling interest share of consolidated net income......................
(73,000)
Controlling interest share of consolidated net income............................. P1,542,000
-ORrevenues.......................................................................................... P3,000,000
expenses.......................................................................................... 1,750,000
separate net income........................................................................ P1,250,000
share of SRs adjusted net income
(80% P365,000)........................................................................
292,000
Controlling interest share of consolidated net income............................. P1,542,000
5. Fair value of non-controlling interest January 1, 20x4...................................
P600,000
20x4 income ............................................................................................... ..73,000
Dividends (20% P30,000)..........................................................................
(6,000)
Non-controlling interest December 31, 20x4................................................. P 667,000
PSs
PSs
PSs
PSs
6. If SRs acquisition-date total fair value was P2,250,000, then a bargain purchase has
occurred.
SRs total fair value 1/1/09............................................................................ P2,250,000
Collective fair values of SRs net assets........................................................ P2,300,000
Bargain purchase..........................................................................................
P50,000
The acquisition method requires that the subsidiary assets acquired and liabilities
assumed be recognized at their acquisition date fair values regardless of the assessed fair
value. Therefore, none of SRs identifiable assets and liabilities would change as a result
of the assessed fair value. When a bargain purchase occurs, however, no goodwill is
recognized.
Problem XVII (Full-Goodwill)
A variety of consolidated balances-midyear acquisition)
Book value of RR, 1/1 (stockholders' equity accounts)
(P100,000 + P600,000 + P700,000)...........
P1,400,000
Increase in book value:
Net Income (revenues less cost of
goods sold and expenses) .........................
P120,000
Dividends ................................................
(20,000)
Change during year .........................................
P100,000
Change during first six months of year .....
50,000
Book value of RR, 7/1 (acquisition date)
P1,450,000
(Full-Goodwill)
Consideration transferred by KL (P1,330,000 +
P30,000)................................................... P1,360,000
Non-controlling interest fair value .........................
300,000
RRs fair value (given)............................................ P1,630,000
Note: The fair value of subsidiary amounting P1,630,000, indicates a fair value of NCI
amounting to P300,000 (refer to above computation), which is lower compared to the
FV of the NCI based on FV of SHE of Subsidiary (RR), computed as follows:
BV of SHE of Subsidiary (RR).......................
P1,450,000
Adjustments to reflect fair value (undervaluation)
150,000
FV of SHE of Subsidiary (RR).......................
P 1,600,000
Multiplied by: NCI%........................
20%
FV of NCI.
P 320,000
Consideration transferred by KL (P1,330,000 +
P30,000)................................................... P1,360,000
Non-controlling interest fair value ......................... ___320,000
RRs fair value (given)............................................ P1,680,000
Book value of RR, 7/1............................................ (1,450,000)
Fair value in excess of book value.......................... P 230,000
Annual Excess
Excess fair value assigned
Life
Amortizations
Trademarks ........................................................
150,000 5 years
P30,000
Goodwill (full-goodwill) ....................................... P
80,000 indefinite
-0Total
.............................................................
P30,000
It should be carefully noted, that NCI can never be less than its share of fair value of
net identifiable assets (which is P320,000). Thus, the NCI share of company value is
raised to P320,000 (replacing the P300,000 NCI computed as residual amount refer
to computation above). The rationale behind such rule is to avoid having a lower
amount of goodwill under the full-goodwill approach as compared to goodwill
computed under the partial-goodwill approach.
(Partial-Goodwill)
Consideration transferred by KL............................. P 1,360,000
Less: Book value of SHE RR (P1,450,000 x 80%)..
1,160,000
Allocated excess.
P 200,000
P150,000 x 80%..............................................
120,000
Goodwill - partial.................................................. P
80,000
Note that the goodwill under the full-goodwill and partial-goodwill approach are the
same because the FV of the NCI based on the FV of SHE of subsidiary (P320,000) is
higher compared to the imputed or the computed residual amount of NCI (P300,000).
Consolidation Totals:
Expenses, P265,000 = P200,000 KK operating expenses plus P50,000 (postacquisition subsidiary operating expenses) plus year excess amortization of
P15,000.
Dividends paid = P80,000
Sales, P1,050,000 = P800,000 KK revenues plus P250,000 (post-acquisition
subsidiary revenue, P500,000 x 1/2)
Equipment, none
Depreciation expense, none
Subsidiarys net income, P60,000 = [(P500,000 P280,000 P100,000) x 1/2]
Buildings, none
Goodwill (full), P80,000; Goodwill (partial), P80,000
Consolidated Net Income, P245,000
Sales (1)
P1,050,000
Cost of goods sold (2)
540,000
Operating expenses (3)
__265,000
Net Income
P 245,000
Non-controlling Interest in Sub. Income (4)
P
9,000
Controlling Interest in CNI
P 236,000
(1) P800,000 KK revenues plus P250,000 (post-acquisition subsidiary revenue)
(2) P400,000 KK COGS plus P140,000 (post-acquisition subsidiary COGS)
(3) P200,000 KK operating expenses plus P50,000 (post-acquisition
subsidiary operating expenses) plus year excess amortization of
P15,000
(4) 20% of post-acquisition subsidiary income less excess fair value
amortization [20% (120,000 30,000) year] = P9,000
Retained Earnings, 1/1 = P1,400,000 (the parents balance because the
subsidiary was acquired during the current year)
Trademark = P935,000 (add the two book values and the excess fair value
allocation after taking one-half year excess amortization)
Goodwill (full)= P80,000 (the original allocation)
Goodwill (partial) = P80,000 (the original allocation)
Problem XVIII (Consolidated balances after a mid-year acquisition)
Note: Investment account balance indicates the initial value method.
Consideration transferred ................................
Non-controlling interest fair value ...................
FV of SHE - subsiary ........................................
Less: Book value of DD (below)........................
Fair value in excess of book value (positive).
Excess assigned
P526,000
300,000
P826,000
(765,000)
P 61,000
Annual Excess
based on fair value:

Life
Amortizations
Equipment............................................
(30,000) 5 years
P(6,000)
Goodwill (full)........................................ P 91,000 indefinite
-0Total ...........................................................
P(6,000)
Amortization for 9 months .........................
P(4,500)
Acquisition-Date Subsidiary Book Value
Book value of Duncan, 1/1/x4 (CS + 1/1 RE) ....................
Increase in book value-net income (dividends
were paid after acquisition) ........................................
Time prior to purchase (3 months) ...................................
Book value of DD, 4/1/x4 (acquisition date) .....................
P740,000
P100,000
25,000
P765,000
* The fair value of NCI amounting to P300,000 is higher compared to the FV of

the NCI based on FV of SHE of Subsidiary (RR), computed as follows:
BV of SHE of Subsidiary (DD)
P765,000
Adjustments to reflect fair value (undervaluation) ( 30,000)
FV of SHE of Subsidiary (DD)..................
P735,000
Multiplied by: NCI%..........................
40%
FV of NCI.
P294,000
(Partial-Goodwill)
Consideration transferred ..........................
Less: Book value of SHE DD (P765,000 x 60%)
Allocated excess
(P30,000 x 60%)...........................................
Goodwill - partial...................................
(2)
(4)
P 526,000
459,000
P 67,000
( 18,000)
P 85,000
1. Consolidated Income Statement:

Revenues (1)
P825,000
Cost of goods sold (2)
P405,000
Operating expenses (3)
214,500
619,500
Consolidated net income
P 205,500
Noncontrolling interest in CNI (4)
28,200
Controlling interest in CNI
P 177,300
(1) P900,000 combined revenues less P75,000 (preacquisition subsidiary
revenue)
P440,000 combined COGS less P35,000 (preacquisition subsidiary COGS)
(3) P234,000 combined operating expenses less P15,000 (preacquisition
subsidiary operating expenses) less nine month excess overvalued equipment
depreciation reduction of P4,500
40% of post-acquisition subsidiary income less excess amortization
2.
Goodwill, full = P91,000 (original allocation); Goodwill , partial = P85,000
Equipment = P774,500 (add the two book values less P30,000 reduction to fair value
plus P4,500 nine months excess amortization)
Common Stock = P630,000 (P company balance only)
Buildings = P1,124,000 (add the two book values)
Dividends Paid = P80,000 (P company balance only)
Problem XIX
(Determine consolidated balances for a step acquisition).
1. AD fair value implied by price paid by MM

P560,000 70% =
P800,000
2. Revaluation gain
1/1 equity investment in AD (book value)
25% income for 1st 6 months
Investment book value at 6/30
Fair value of investment
Gain on revaluation to fair value
P178,000
8,750
186,750
200,000
P13,250
3. Goodwill at 12/31
Fair value of AD at 6/30
Book value at 6/30 (700,000 + [70,000 2])
Excess fair value
Allocation to goodwill (no impairment)
P800,000
735,000
P65,000
P65,000
4. Non-controlling interest
5% fair value balance at 6/30
5% Income from 6/30 to 12/31
5% dividends
Non-controlling interest 12/31
P40,000
1,750
(1,000)
P40,750
Problem XX
Ps gain on sale of subsidiary stock is computed as follows:
Cash proceeds
Fair value of retained non-controlling interest equity investment (35%)
Carrying value of the non-controlling interest before deconsolidation
(15% or prior outside non-controlling interest in Subsidiary)
Less: Carrying value of Subsidiarys net assets
Gain on disposal or deconsolidation
P
720,000
420,000
120,000
P1,260,000
1,200,000
P
60,000
Read discussion on step-acquisition regarding the initial treatment of investment as

FVTOCI or FVTPL and its disposition. It is assumed that the investment above is FVTPL.
Problem XXI
P Companys additional paid-in capital arising sale of subsidiary shares is computed as
follows:
Cash proceeds
Less: Carrying value of non-controlling interest (P720,000* x 10%)
Gain transfer within equity in Additional paid-in capital
account
P
P
84,000
72,000
12,000
*the P720,000 is already the gross-up amount since it is the amount presented in the consolidated balance
sheet.
Because P Company continues to have the ability to control S Company, the sale of Ss
shares is treated as an equity transaction. Therefore, no gain or loss is recognized. Instead,
Palmer Companys additional paid-in capital increases by P60,000.
Problem XXII
P Companys additional paid-in capital arising sale of subsidiary shares is computed as
follows:
Cash proceeds from issuance of additional shares ..
Less: Carrying Value of non-controlling from issuance
of additional shares:
P 210,000
Non-controlling interest prior to issuance

of additional shares:
Book value of SHE before issuanceP720,000
x: Non-controlling interest.
20%* P 144,000
Non-controlling interest after issuance of
additional shares:
Book value of SHE before
issuance.P720,000
Additional issuance.. 210,000
BV of SHE after issuance.P930,000
x: Non-controlling interest...
36%** 334,800
190,800
Gain transfer within equity in
Additional paid-in capital account...............
P 19,200
* (120,000 96,000) / 120,000 = 20% ownership before additional issuance of shares.
** [(24,000 + 30,000) / (120.000 + 30,000)] = 36% ownership after additional issuance
of shares
P Company recognizes an increases in its Investment in S from P576,000 (P720,000x 80%)
to P595,200 [P930,000 x (96,000/150,000) and in additional paid-in capital of P19,200.
Problem XXIII
1. Equity Method
Income accrual (80%) ......................................................
Excess amortization expense ...........................................
Investment income .....................................................
P56,000
(3,200)
P52,800
Initial fair value paid........................................................

Income accrual 20x420x6 (P260,000 80%) .................
Dividends 20x420x6 (P45,000 80%) ...........................
Excess Amortizations 20x420x6 (P3,200 3) ................
Investment in TT12/31/x6 ........................................
P664,000
208,000
(36,000)
(9,600)
P826,400
2.
3.
Equity Method same with No. 1

Using the acquisition method, the allocation will be the total difference (P80,000)
between the buildings' book value and fair value. Based on a 20 year life, annual excess
amortization is P4,000.
MM book valuebuildings .......................................... P 800,000
TT book valuebuildings ............................................
300,000
Allocation ...................................................................
80,000
Excess Amortizations for 20x420x5 (P4,000 2)
(8,000)
Consolidated buildings account ...................... P1,172,000
4.
5.
Acquisition-date fair value allocated to goodwill
Goodwill-full ( see Problem I above) ..........................................

Goodwill-partial (see Problem I above)
P
P
150,000
120,000
If the parent has been applying the equity method, the stockholders' equity accounts on
its books will already represent consolidated totals. The common stock and additional
paid-in capital figures to be reported are the parent balances only.
Common stock, P500,000
Additional paid-in capital, P280,000
Problem XXIV
(Consolidated balances three years after purchase. Parent has applied the equity method.)
1. Schedule 1Acquisition-Date Fair Value Allocation and Amortization

JJs acquisition-date fair value P206,000
Book value of JJ ....................................
(140,000)
Fair value in excess of book value ........
66,000
Excess fair value assigned to specific
accounts based on individual fair values
Equipment ......................................
Buildings (overvalued) ....................
Goodwill .........................................
Total ...............................................
54,400
(10,000)
P21,600
Life
8 yrs.
20 yrs.
indefinite
Annual Excess
Amortization
P6,800
(500)
-0P6,300
Investment in JJ Company12/31/x6
JJs acquisition-date fair value.................................................
20x4 Increase in book value of subsidiary
20x4 Excess amortizations (Schedule 1) ...............................
20x5 Increase in book value of subsidiary .............................
20x6 Increase in book value of subsidiary .............................
Investment in J Company .................................................
P206,000
40,000
(6,300)
20,000
(6,300)
10,000
(6,300)
P257,100
2. Equity in Subsidiary Earnings

Income accrual.................................................................................
Excess amortizations (Schedule 1) ...................................................
Equity in subsidiary earnings .....................................................
P30,000
(6,300)
P23,700
3. Consolidated Net Income

Consolidated revenues (add book values) .............................
Consolidated expenses (add book values) .............................
Excess amortization expenses (Schedule 1) ..........................
Consolidated net income .......................................................
P414,000
(272,000)
(6,300)
P135,700
4. Consolidated Equipment
Book values added together ..................................................
Allocation of purchase price ...................................................
Excess depreciation (P6,800 3) ..........................................
Consolidated equipment ..................................................
P370,000
54,400
(20,400)
P404,000
5. Consolidated Buildings.......................................................................
Book values added together ..................................................
Allocation of purchase price ...................................................
Excess depreciation (P500 3) .............................................
Consolidated buildings......................................................
6. Consolidated goodwill
Allocation of excess fair value to goodwill..............................
P288,000
(10,000)
1,500
P279,500
P21,600
7. Consolidated Common Stock..............................................................

P290,000
As a purchase, the parent's balance of P290,000 is used (the acquired company's
common stock will be eliminated each year on the consolidation worksheet).
8. Consolidated Retained Earnings.........................................................
P410,000
Tyler's balance of P410,000 is equal to the consolidated total because the equity
method has been applied.
Problem XXV

P1,970,00
0
_1,440,00
0
P
530,000
Less: BV of SHE of S (P1,200,000 + P600,000) x 80%

Allocated excess
Inventory (P725,000 P600,000) x 80%
Equipment (P1,075,000 P900,000) x 80%
Goodwill partial
P 100,000
140,000
Full-goodwill or Fair Value Basis

P2,467,50
0
1,800,000
Less: BV of SHE of S (P1,200,000 + P600,000) x

100%
Allocated excess
Inventory (P725,000 P600,000) x 100%
Equipment (P1,075,000 P900,000) x 100%
Goodwill full
__240,000
P 290,000
P
662,500
P125,000
175,000
__300,000
P362,500
Amortization
Inventory: P125,000 x 60%
P125,000 x 40%
Equipment: P175,000 / 7 years
20x4
P 75,000
25,000
P
100,000
20x5
P 50,000
25,000
P 75,000
1.
20x4
Investment in S Company
Cash
1,970,000
1,970,000
Cash (0.8 x P150,000)

120,000
Equity in Subsidiary Income (.80)(P750,000)
600,000
Equity in Subsidiary Income

20x5
Cash (0.8 x P225,000)
120,000
600,000
80,000
80,000
180,000
180,000
720,000
Equity in Subsidiary Income (.80)(P900,000)

720,000
Equity in Subsidiary Income
60,000
60,000
2.
20x4
(1) Equity in Subsidiary Income ((.80)(P750,000) -P80,000) 520,000
Dividends Declared (0.80 x P150,000)
400,000
(2) Beginning Retained Earnings - S Company
Common Stock- S Company
Noncontrolling Interest
(3) Inventory (P125,000 P75,000)
Cost of Goods Sold
Equipment (net)
Goodwill
(4)
Equipment (net)
120,000
600,000
1,200,000
1,307,500
492,500
50,000
75,000
175,000
362,500
662,500
25,000
25,000
20x5
(1) Equity in Subsidiary Income ((.80)(P900,000) - P60,000) 660,000
Dividends Declared (0.80 x P225,000)
Investment in Superstition Company
180,000
480,000
(2) Beginning Retained Earnings-Superstition Company 1,200,000

Common Stock - Superstition Company.
1,200,000
Investment in Superstition Company
(P492,500 + (P1,200,000 P600,000) x .20)
612,500

Cost of Goods Sold
Equipment (net)
Goodwill
662,500

Equipment (net)
60,000
15,000
50,000
175,000
362,500
20,000
5,000
25,000
50,000
3.
P Company (P1,000,000 P120,000)
S Company
P
880,000
__
750,000
P1,630,00
0
Total
Goodwill impairment
P130,000
100,000
____0

230,00
0
P1,400,00
0
130,000
P1,530,00
0


Amortization of allocated excess (P25,000 + P75,000)
P 750,000
( 100,000)
P650,000
20
%
P 130,000

Note: Regardless on the method used in recording investments (cost model or equity
method) the manner of computing CI-CNI, NCI-CNI and CNI are exactly the same.
Problem XXVI 80% Partial Goodwill Equity Method
Schedule of Determination and Allocation of Excess (Partial-goodwill)
Consideration
transferred..
.
...
..

.
.....
Positive excess: Partial-goodwill (excess of cost over

fair value)
...
P 372,000
P 192,000
96,000
288,000
P
84,000
P 4,800
5,760
76,800
( 19,200)
3,840
72,000
P 12,000

S Co.
S Co.
(Over) Under
Book value
Inventory.
..
Land
Buildings (net)
Bonds payable
Net..
Fair value
P 24,000
48,000
84,000
168,000
(120,000)
P 204,000
Valuation
30,000
55,200
180,000
144,000
( 115,200)
P 294,000
6,000
7,200
96,000
(24,000)
4,800
P 90,000
Equipment ..................
Less: Accumulated
depreciation..
Net book
value...
Buildings................
Less: Accumulated
depreciation..
Net book
value...
S Co.
Book value
180,000
S Co.
Fair value
180,000
Increase
(Decrease)
0
96,000
( 96,000)
84,000
S Co.
Book value
360,000
180,000
S Co.
Fair value
144,000
96,000
(Decrease)
( 216,000)
192,000
( 192,000)
168,000
144,000
24,000)

Account
amortized
Adjustments
to
Inventory
Buildings (net)
be
Over/
Under
P
6,000
96,000
(24,00
0)
4,80
0
Lif
e
Current
Year(20x4)
Annual
Amount
P
6,000
P 6,000
P
-
12,000
12,000
12,000
20x5
( 6,000)
( 6,000) (6,000)
1,20
1,20
Bonds payable
4
0
1,200
0
P
13,200
P 13,200 P 7,200
The goodwill impairment loss of P3,125 based on 100% fair value would be allocated to the controlling
interest and the NCI based on the percentage of total goodwill each equity interest received. For
purposes of allocating the goodwill impairment loss, the full-goodwill is computed as follows:
P 372,000
93,000
P 465,000
Less: Book value of stockholders equity of S (P360,000 x 100%)
__360,000
P 105,000
(P90,000 x 100%)
90,000
fair value)...
P 15,000

Parent Company Equity Method Entry
The following are entries recorded by the P in 20x4 in relation to its subsidiary investment:
January 1, 20x4:
Cash.
.
372,000
372,000

(2) Cash
Investment in S Company (P36,000 x 80%).
28,800
28,800
December 31, 20x4:

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

(4) Investment income [(P13,200 x 80%) + P3,000*, goodwill
impairment loss)]
13,560
13,560
Record amortization of allocated excess of inventory, equipment,

buildings and bonds payable and goodwill impairment loss.
Thus, the investment balance and investment income in the books of P Company is as
follows:
Investment in S
Cost,
372,000
1/1/x4
28,800
80%)
NI of S
48,000
Dividends S (36,000x
Amortization &
(60,000
80%)
13,560
impairment
Investment Income
Balance,
377,640
Amortization &
12/31/x4
NI of S
impairment
48,000
(P60,000 x 80%)
13,560
34,440
Balance, 12/31/x4

The schedule of determination and allocation of excess presented above provides complete
guidance for the worksheet eliminating entries on January 1, 20x4:
Investment in Son Co
..
240,000
120.000
(E2)
Inventory.
Land
.
Discount
on
bonds
payable.
Goodwill.
Buildings..
..
Investment in S Co.
6,000

Interest expense
Goodwill impairment loss.
Inventory..
Goodwill
Cost of
Goods
Sold
Inventory sold
Equipment
Buildings
Bonds payable
Totals
Depreciation/
Amortization
Expense
Amortizatio
n
-Interest
288,000
72,000
96,000
192,000
7,200
4,800
12,000
216,000
18,000
84,000
6,000
6,000
6,000
1,200
3,000
6,000
12,000
1,200
3,000
Total
P
6,000
_______
P 6,000
P 12,000
( 6,000)
_______
P 6,000
P 1,200
P1,200
13,20
0
It should be observed that the goodwill computed above was proportional to the controlling
interest of 80% and non-controlling interest of 20% computed as follows:
Goodwill applicable to parent
Value
P12,000
% of Total
80.00%
Goodwill applicable to NCI..

Total (full) goodwill..
3,000
P15,000
20.00%
100.00%
Therefore, the goodwill impairment loss of P3,750 based on 100% fair value or full-goodwill
would be allocated as follows:
Goodwill impairment loss attributable to parent or controlling
Interest
Goodwill impairment loss applicable to NCI..
Goodwill impairment loss based on 100% fair value or fullGoodwill
Value
P 3,000
% of Total
80.00%
625
20.00%
P 3,750
100.00%
(E4) Investment income

..
Dividends paid S
34,440
7,200
36,000
5,640
To eliminate intercompany dividends and investment income
under
equity method and establish share of dividends, computed as

follows:
Investment in S
Investment Income
NI of S
28,800
(60,000
Dividends - S
Amortization
NI of S
Amortization
(60,000
&
48,000
40
80%).
5,6
13,560
impairment
impairment
13,560
48,000
80%)
34,440
After the eliminating entries are posted in the investment account, it should be observed that from
consolidation point of view the investment account is totally eliminated. Thus,
Investment in S
Cost,
372,000
1/1/x4
28,800
80%)
NI of Son
Amortization &
(60,000
80%)
13,560
(E5)
Non-controlling
interest
in 12/31/x4
Net
Balance,
377,640
Subsidiary
Income
288,000
impairment
48,000
of (E1) Investment,
9,360 1/1/20x4
9,360

84,000

Multiplied by:
%..........
Non-controlling
(NCINI)
Non-controlling
interest

377,640
(E2) Investment, 1/1/20x4
P 5,640
60,000
( 13,200)
P 46,800
20%
(E4) Investment Income

and dividends
P 9,360
377,640

Equity Method (Partial-goodwill)
Sales
Income Statement
P Co
P480,000
S Co.
P240,000
Investment income
Total Revenue
34,440
P513,600
P240,000
Cost of goods sold
P204,000
P138,000
60,000
24,000
Interest expense
Other expenses
48,000
18,000

Net Income
P312,000
P202,440
P180,000
P 60,000

P202,440
P 60,000
Dr.
(4)
34,440
(3)
6,000
(3)
6,000
(3)
1,200
(3)
3,000
(5)
9,360
Cr.
Consolidated
P 720,000
_________
P 720,000
P 348,000
90,000
1,200
66,000
3,000
P508,200
P211,800
( 9,360)
P202,440

P Company
S Company
Total
Dividends paid
P Company
S Company
Sheet
Balance Sheet
P360,000
202,440
P562,440
P360,000
P120,000
60,000
P180,000
72,000
36,000
P490,440
P144,000
Cash.
P
232,800
90,000
P 90,000
60,000
Inventory.
120,000
90,000
Land.
Equipment
210,000
240,000
48,000
180,000
Buildings
720,000
540,000
equipment
buildings
Accounts payable
Bonds payable
P1,990,440
P1,008,0
00
P 135,000
P 96,000
405,000
120,000
240,000
600,000
P
(2)
6,000
(2)
7,200
490,440
_________
P1,990,440
______
___
P1,008,0
00
322,800
150,000
(3)
6,000
210,000
265,200
420,000
(2)
216,000
(3)
1,200
(3)
3,000
(2)
288,000
(2)
84,000
(4)
5,640
1,044,000
3,600
9,000
P2,424,600
(2)
96,000
(8)
192,000
288,000 (9)
6,000
120,000
120,000
240,000
144,000
P490,440
377,640
Total
(4)
36,000
(2)
4,800
(2)
12,000
Total
202,440
P562,440
72,000
-
Goodwill
Investment in S Co
(1)
120,000
(3)
12,000
P147,000
495,000
240,000
360,000
600,000
(1)
240,000
490,440
(1 )
72,000 (2)
(10) 7,200 18,000
(5)
__________
9,360
P
P
751,200
751,200
____92,160
P2,424,600

Sales
P Co.
P 540,000
216,000
S Co.
P 360,000
192,000
Gross profit
Other expense
Add: Investment income
Net income
Dividends paid
P 324,000
60,000
72,000
P 192,000
66,240
P 258,240
P 72,000
P 168,000
24,000
54,000
P 90,000
P 90,000
P 48,000

The following are entries recorded by the parent in 20x5 in relation to its subsidiary
investment:
(2) Cash
38,400
38,400
December 31, 20x5:

72,000
72,000
December 31, 20x5:

(4) Investment income (P7,200 x 80%)
5,760
5,760

buildings and bonds payable
follows:
Investment in S
Cost,
377,640
1/1/x5
38,400
80%)
NI of S
72,000
Amortization
(90,000
80%)
5,760
(P7,200 x 80%)
Investment Income
Balance,
405,480
Amortization
12/31/x5
NI of S
(7,200
80%)
72,000
(90,000 x 80%)
5,760
66,240
Balance, 12/31/x4

The schedule of determination and allocation of excess presented above provides complete guidance
for the worksheet eliminating entries:
Retained earnings S Co, 1/1/x5.
..
240,000
144.000
(E2) Accumulated depreciation equipment (P96,000

P12,000)
Accumulated depreciation buildings (P192,000 + 6,000)
Land
.
Discount on bonds payable (P4,800 P1,200).
Goodwill (P12,000 P3,000)..
Buildings..
Non-controlling interest [(P90,000 P13,200) x 20%]
Investment in S Co.
84,000
(E3) Depreciation expense..

Interest expense
Depreciation/
Amortization
Expense
Inventory
sold
Equipment
Buildings
Bonds
payable
Totals
Amortizatio
n
-Interest
P 12,000
( 6,000)
_______
P 1,200
P 6,000
P1,200
198,000
7,200
3,600
9,000
216,000
15,360
70,440
6,000
6,000
1,200
12,000
1,200
Total
P7,,20
0

..
Dividends paid S
To eliminate intercompany dividends and investment income
under
307,200
76,800
equity method and establish share of dividends, computed as

follows:
66,240
9,600
48,000
27,840
Investment in S
NI of S
Investment Income
38,400
(90,000
Dividends S
Amortization
80%).
72,000
5,760
80%)
(P7,200 x
NI of S
Amortization
(P7,200
5,760
27,8
(90,000
x
80%)
72,000
80%)
66,240
40
After the eliminating entries are posted in the investment account, it should be observed
that from consolidation point of view the investment account is totally eliminated. Thus,
Investment in S
Cost,
377,640
NI of S
(E5)
Non-controlling
interest
in
Subsidiary
1/1/x5
38,400
80%)
Net
Income
of Amortization
16,560
16,560
To establish non-controlling
interest in subsidiarys
(90,000
x
80%) adjusted
5,760 net
income 72,000
for 20x4 as follows:
Balance,
12/31/x5
Net 405,480
income of subsidiary..
Multiplied by:
%..........
Non-controlling
(NCINI)
Non-controlling
interest
307,200
P 90,000
( 7,200)
P 82,800
20%
70,440
P 16,560
27,840
(7,200 x 80%)

and dividends
405,480
405,480

Equity Method (Partial-goodwill)
Sales
Income Statement
P Co
P540,000
S Co.
P360,000
Investment income
Total Revenue
Cost of goods sold
66,240
P606,000
P216,000
P360,000
P192,000
60,000
24,000
Interest expense
Other expenses
72,000
P348,000
Net Income
P258,240
54,000
P270,000
P
90,000
P258,240

P Company
P490,440
S Company
Total
Dividends paid
P Company
S Company
Sheet
258,240
P748,680
P
90,000
Dr.
Cr.
(4)
66,240
Consolidated
P 900,000
___________
P
P
(3)
6,000
(3)
1,200
900,000
408,000
90,000
1,200
126,000
P 625,200
P 274,800
(5)
16,560
( 16,560)
P258,240
P490,440
P144,000
90,000
P234,000
(1)
144,000
258,240
P748,680
72,000
72,000
(4)
48,000
48,000
P676,680
P186,000
P676,680
Cash.
Inventory.
P
265,200
180,000
216,000
P
102,000
96,000
108,000
P 367,200
276,000
324,000
Land.
Equipment
210,000
240,000
48,000
180,000
Buildings
720,000
540,000
Balance Sheet
(2)
3,600
(2)
9,000

Goodwill
Investment in S Co
(2)
7,200
405,480
265,200
420,000
(3)
216,000
(3)
1,200
1,044,000
2,400
9,000
(1)
307,200
(2) 70,440
(4)
27,840
Total
equipment
buildings
Accounts payable
Bonds payable
P2,236,680
P1,074,0
00
P 150,000
P
102,000
450,000
306,000
120,000
240,000
600,000
120,000
120,000
676,680
240,000
186,000
(2)
84,000
___
_____
P2,236,680
______
___
P1,074,0
00
(3)
12,000
(2)
198,000
(3)
6,000
P180,000
552,000
240,000
360,000
600,000
(1)
240,000
676,680
(7)
Total
P2,707,800
9,600
__________
P
794,400
(2 )
76,800 (2)
15,360
(5)
16,560
P
794,400
____99,120
P2,707,800
Note: Using cost model or equity method, the consolidated net income, consolidated retained earnings,
non-controlling interests, consolidated equity on December 31, 20x4 and 20x5 are exactly the same
(refer to Problem VI solution).
5. 1/1/20x4
a. On date of acquisition the retained earnings of parent should always be considered as
the consolidated retained earnings, thus:
P360,000
b.
Non-controlling interest (partial-goodwill), January 1, 20x4
P 240,000
120,000
P 360,000
90,000
P450,000
20
P 90,000
c.
Consolidated SHE:
Stockholders Equity
Retained earnings
NCI, 1/1/20x4
P 600,000
360,000
P 960,000
___90,000
P1,050,000
6.
12/31/20x4:
a. CI-CNI
P Company
S Company
Total
Goodwill impairment (impairment under partial-goodwill approach)
equity holders of P..
P168,000
60,000
P228,000
P 9,360
13,200
3,000
25,560
P202,440
9,360
P211.800
b. NCI-CNI
Less: Amortization of allocated excess / goodwill impairment
P 60,000
13,200
P 46,800
20%
P 9,360

Total
P360,000
202,440
P562,440
72,000
P490,440
e.
P 240,000

Total
P120,000
60,000
P180,000
36,000
144,000
P 384,000
90,000
( 13,200)
P460,000
20
P 92,160
f.
Consolidated SHE:
Stockholders Equity
Retained earnings
NCI, 12/31/20x4
P 600,000
490,440
P1,090,440
___92,160
P1,182,600
12/31/20x5:
a. CI-CNI
P Company
S Company
Total
P192,000
90,000
P282,000
P16,560
__7,200
P258,240
16,560
P274,800
b. NCI-CNI
23,760
P 90,000
80,400
P 82,800
20%
P 16,560

follows:
net
or
P484,800
P 144,000
120,000
P 24,000
13,200
P
10,800
80%
P
8,640
3,000
(P3, 750 x 80%)

Add: Controlling
attributable to
Total
5,640
P 490,440
258,240
P748,680
72,000
P676,680
e.
P 240,000
Total
20x4
20x5
P14,000
90,000
P234,000
48,000
186,000
P 426,000
90,000
P
13,200
7,200
( 20,400)
P 495,600
20
P 99,120
f.
Consolidated SHE:
Stockholders Equity
Retained earnings
NCI, 12/31/20x4
P 600,000
676,680
P1,276,680
___99,120
P1,1375,80
0
Problem XXVII - 80% Full Goodwill Equity Method

Schedule of Determination and Allocation of Excess
.
..

.
.....

fair value)
...
P 372,000
93,000
P 465,000
P 240,000
120,000
360,000
P 105,000
6,000
7,200
96,000
( 24,000)
4,800
90,000
P 15,000

Account
amortized
Adjustments
to
Inventory
Buildings (net)
Bonds payable
be
Over/
under
P
6,000
96,000
(24,00
0)
4,80
0
Lif
e
Current
Year(20x4)
Annual
Amount
P
6,000
P 6,000
P
-
12,000
12,000
12,000
( 6,000)
1,20
0
P
13,200
( 6,000)
1,200
(6,000)
1,20
0
P 13,200
P 7,200
20x5

investment:
January 1, 20x4:
Cash.
.
372,000
372,000

(2) Cash
28,800
28,800
December 31, 20x4:

48,000
48,000
December 31, 20x4:

(4) Investment income [(P13,200 x 80%) + (P3,750 P750)*,
goodwill impairment loss)]
13,560
13,560

buildings and bonds payable and goodwill impairment loss.
follows:
Investment in S
Cost,
372,000
1/1/x4
28,800
80%)
NI of S
Amortization &
(60,000
80%)
13,560
Impairment
48,000
Investment Income
Balance,
377,640
Amortization &
13,560
12/31/x4
NI of S
Impairment
48,000
34,440
(P60,000 x 80%)
Balance, 12/31/x4

guidance for the worksheet eliminating entries on January 1, 20x4:
Investment in S Co
..
(E2)
Inventory.
Land
.
Discount
on
bonds
payable.
Goodwill.
Buildings..
Non-controlling interest (P90,000 x 20%) + [(P15,000,
full
Investment in S Co.

Interest expense
Goodwill impairment loss.
Inventory..
Goodwill
Cost of
Goods
Sold
Inventory sold
Equipment
Buildings
Bonds payable
Totals
Depreciation/
Amortization
Expense
Amortizatio
n
-Interest
240,000
120.000
288,000
72,000
6,000
96,000
192,000
7,200
4,800
15,000
216,000
21,000
84,000
6,000
6,000
6,000
1,200
3,750
6,000
12,000
1,200
3,750
Total
P
6,000
_______
P 6,000
P 12,000
( 6,000)
_______
P 6,000
P 1,200
P1,200
13,20
0

..
Dividends paid S
37,440
7,200
36,000
8,640
Investment in S
Investment Income
NI of S
28,800
(60,000
Dividends S
NI of Son
Amortization
Amortization &
Impairment
13,560
(60,000
&
48,000
80%).
13,560
Impairment
5,6
40
48,000
80%)
34,440
After the eliminating entries are posted in the investment account, it should be observed that from
consolidation point of view the investment account is totally eliminated. Thus,
Investment in S
Cost,
372,000
1/1/x4
28,800
80%)
NI of S
Amortization &
(60,000
80%)
13,560
12/31/x4
288,000
Impairment
40,000
Balance,
377,640
(E5)
Non-controlling
interest
in
Subsidiary
Net

Multiplied by:
%..........
Non-controlling
(NCINI)
Less: Non-controlling interest on impairment
loss on full-goodwill (P3,750 x 20%) or
(P3,750 impairment on full-goodwill
377,640
less
P3,000,
impairment on partialgoodwill)*
Non-controlling
(NCINI)
Income
84,000
P 60,000
( 13,200)
P 46,800
5,640
20%
P
9,360
377,640
750
P
8,610
of
8,610
8,610

and dividends
P3,750 by 20%. There might be situations where the NCI on goodwill impairment loss would not be
proportionate to NCI acquired (refer to Illustration 15-6).

Equity Method (Full-goodwill)
Sales
Income Statement
P Co
P480,000
S Co.
P240,000
Investment income
Total Revenue
34,440
P514,440
P240,000
Cost of goods sold
P204,000
P138,000
60,000
24,000
Interest expense
Other expenses
48,000
18,000

Net Income
P312,000
P202,440
P180,000
P 60,000

P202,440
P 60,000

P Company
P360,000
S Company
Total
Dividends paid
P Company
S Company
Sheet
202,440
P562,440
Dr.
Cr.
(4)
34,440
Consolidated
P 720,000
_________
P 720,000
P 348,000
(3)
6,000
(3)
6,000
(3)
1,200
90,000
1,200
66,000
3,750
(3)
3,750
P508,950
P211,050
( 8,610)
(5)
8,610
P202,440
P360,000
P120,000
60,000
P180,000
(1)
120,000
202,440
P562,440
72,000
72,000
36,000
P490,440
P144,000
Cash.
P
232,800
90,000
P 90,000
60,000
Inventory.
120,000
90,000
Land.
Equipment
210,000
240,000
48,000
180,000
Buildings
720,000
540,000
(4)
36,000
P490,440
Balance Sheet

Goodwill
P
(2)
6,000
(2)
7,200
(2)
4,800
(2)
15,000
(3)
6,000
322,800
150,000
210,000
265,200
420,000
(2)
216,000
(3)
1,200
(3)
3,750
1,044,000
3,600
11,250
Investment in S Co
Total
equipment
377,640
(2)
288,000
(2)
84,000
(4)
5,640
P1,990,440
P1,008,0
00
P 135,000
P 96,000
buildings
Accounts payable
Bonds payable
405,000
120,000
240,000
600,000

490,440
_________
Total
P1,990,440
P2,426,850
(2)
96,000
(2)
192,000
288,000 (3)
6,000
120,000
120,000
240,000
144,000
______
___
P1,008,0
00
(3)
12,000
P147,000
495,000
240,000
360,000
600,000
(1)
240,000
490,440
(1 )
72,000 (2)
(4) 7,200 21,000
(5)
__________
8,610
P
P
754,200
754,200
____94,410
P2,426,850

Sales
Gross profit
Other expense
Net income
Dividends paid
P Co.
P 540,000
216,000
P 324,000
60,000
72,000
P 192,000
66,240
P 258,240
P 72,000
S Co.
P 380,000
192,000
P 168,000
24,000
54,000
P 90,000
P 90,000
P 48,000

investment:
(2) Cash
38,400
38,400
December 31, 20x5:

December 31, 20x5:
72,000
72,000
(4) Investment income (P7,200 x 80%)

5,760
5,760

buildings and bonds payable
P Companys P12,000 portion of the differential related to goodwill related to goodwill is not
adjusted on the parents books following Option 2 as referred to above for goodwill
impairment loss. Even though the goodwill of the consolidated entity is impaired,
follows:
Investment in S
Cost,
377,640
1/1/x5
38,400
80%)
NI of S
72,000
Amortization
(90,000
80%)
5,760
(P7,200 x 80%)
Investment Income
Balance,
405,480
Amortization
12/31/x5
NI of S
(7,200
80%)
72,000
(90,000 x 80%)
5,760
66,240
Balance, 12/31/x4

guidance for the worksheet eliminating entries.
Retained earnings S Co, 1/1/x5.
..
240,000
144.000
307,200
76,800
To eliminate investment on January 1, 20x5 and equity accounts

of subsidiary on date of acquisition; and to establish noncontrolling interest (in net assets of subsidiary) on 1/1/20x5.
(E2) Accumulated depreciation equipment (P96,000

P12,000)
Accumulated depreciation buildings (P192,000 + P6,000)
Land
.
Discount on bonds payable (P4,800 P1,200).
84,000
198,000
7,200
3,600
Goodwill (P15,000 P3,750)..

Buildings..
Non-controlling interest [(P90,000 P13,200) x 20%] +
[P3,000, full goodwill - [(P3,750, full-goodwill
impairment
P3,000, partial- goodwill impairment)*
or (P3,750 x 20%)]
Investment in S Co.
11,250
216,000
17,610
70,440
(E3) Depreciation expense..

Interest expense
Depreciation/
Amortization
Expense
Inventory
sold
Equipment
Buildings
Bonds
payable
Totals
Amortizatio
n
-Interest
P 12,000
( 6,000)
_______
P 1,200
P 6,000
P1,200
6,000
6,000
1,200
12,000
1,200
Total
P7,20
0

Dividends paid S
Investment in S
NI of S
38,400
(90,000
72,000
40
27,8
5,760
80%)
48,000
27,840
Investment Income
Dividends - S
Amortization
80%).
66,240
9,600
(P7,200 x
NI of S
Amortization
(P7,200
5,760
(90,000
x
80%)
72,000
80%)
66,240
After the eliminating entries are posted in the investment account, it should be observed
that from consolidation point of view the investment account is totally eliminated. Thus,
Investment in S
Cost,
377,640
1/1/x5
38,400
80%)
NI of S
Amortization
(90,000
72,000
(E5)
Non-controlling
interest
in
Subsidiary
80%)
Net
5,760
(7,200 x 80%)
Income
of
16,560
16,560
Balance,
12/31/x5 adjusted
307,200 net
To establish
non-controlling interest in subsidiarys
income 405,480
for 20x5 as follows:
70,440
Multiplied by:
%..........
Non-controlling
(NCINI)
Less: NCI on goodwill impairment loss on
full405,480
Goodwill
Non-controlling
(NCINI)
P 90,000
( 7,200)
P 82,800
27,840
20%

and dividends
P 16,560
0
405,480
P 16,560

Equity Method (Full-goodwill)
Sales
Income Statement
P Co
P540,000
S Co.
P360,000
Investment income
Total Revenue
Cost of goods sold
66,240
P606,000
P216,000
P360,000
P192,000
60,000
24,000
Interest expense
Dr.
(4)
66,240
Cr.
Consolidated
P 900,000
___________
P
P
(3)
6,000
(3)
1,200
900,000
408,000
90,000
1,200
Other expenses
72,000
P348,000
Net Income
P258,240
P258,240

P Company
P490,440
S Company
Total
Dividends paid
P Company
S Company
Sheet
258,240
P748,680
54,000
P270,000
P
90,000
P
90,000
P
P
(5)
16,560
126,000
625,200
274,800
( 16,560)
P 258,240
P490,440
P144,000
90,000
P234,000
(1)
144,000
258,240
P748,680
72,000
72,000
(4)
48,000
48,000
P676,680
P186,000
P676,680
Cash.
Inventory.
P
265,200
180,000
216,000
P
102,000
960,000
108,000
P 367,200
276,000
324,000
Land.
Equipment
210,000
240,000
48,000
180,000
Buildings
720,000
540,000
Balance Sheet
(2)
3,600
(2)
11,250

Goodwill
Investment in S Co
Total
equipment
buildings
Accounts payable
Bonds payable
405,9480
P2,236,680
P1,074,0
00
P 150,000
P
102,000
450,000
306,000
120,000
240,000
600,000
120,000
120,000
676,680
P2,236,680
(3)
216,000
(3)
1,200
240,000
186,000
_________
_
P1,074,0
00
1,044,000
2,400
11,250
P2,634,000
(2)
84,000
(3)
12,000
(2)
198,000
(3)
6,000
P 180,000
552,000
240,000
360,000
600,000
(1)
240,000
676,680
(3)
9,600
___
_____
265,200
420,000
(1)
307,200
(5) 70,440
(4)
27,840
Total
(2)
7,200
__________
P
796,650
(2 )
76,800
(2)
17,610
(5)
16,560
P
796,650
__________
P2,634,000
Note: Using cost model or equity method, the consolidated net income, consolidated retained
earnings, non-controlling interests, consolidated equity on December 31, 20x4 and 20x5 are exactly
the same (refer to Problem VII solution).
5. 1/1/20x4
a. On date of acquisition the retained earnings of parent should always be considered as
the consolidated retained earnings, thus:
P360,000
b.
Non-controlling interest (full-goodwill), January 1, 20x4
P 240,000
Add: NCI on full-goodwill (P15,000 P12,000)
120,000
P 360,000
90,000
P450,000
20
P 90,000
___3,000
P 93,000
c.
Consolidated SHE:
Stockholders Equity
Retained earnings
NCI, 1/1/20x4
P 600,000
360,000
P 960,000
___93,000
P1,053,000
6.
a. CI-CNI P202,440
P Company
S Company
Total
b. NCI-CNI P8,610
P168,000
60,000
P228,000
P 8,610
13,200
3,750
25,560
P202,440
8,610
P211.050

Less: Amortization of allocated excess (refer to amortization table above)
Less: Non-controlling interest on impairment loss on full-goodwill (P3,750
x 20%)
or (P3,750 impairment on full-goodwill less P3,000, impairment on
partial-goodwill)*
P 60,000
13,200
P 46,800
20%
P
9,360
750
P 8,610

follows:
Total
P360,000
202,440
P562,440
72,000
P490,440
e.
P 240,000
Retained earnings SCompany, January 1, 20x4
Total
Non-controlling interest (partial-goodwill, 12/31/20x4..
Add: Non-controlling interest on full goodwill , net of impairment loss,
12/31/x4:
[(P15,000 full P12,000, partial = P3,000) P750 impairment loss
Non-controlling interest (full-goodwill), 12/31/20x4..
P120,000
60,000
P180,000
36,000
144,000
P 384,000
90,000
( 13,200)
P460,800
20
P 92,160
2,250
P 94,410
f.
Consolidated SHE:
Stockholders Equity
Retained earnings
P 600,000
490,440

NCI, 12/31/20x4
P1,090,440
___94,410
P1,184,850
12/31/20x5:
a. CI-CNI P258,240
P Company
S Company
Total
P192,000
90,000
P282,000
P16,560
7,200
0
23,760
P258,240
16,560
P274,800
b. NCI-CNI P16,560
P 90,000
80,400
P 82,800
20%
P 16,560

P484,800
P 144,000
120,000
P 24,000
13,200
P
10,800
80%
P
8,640

or
(P3, 750 x 80%)

Add: Controlling
3,000
5,640
P 490,440
attributable to
Total
258,240
P748,680
72,000
P676,680
e.
P 240,000
Total
20x4
20x5
Add: Non-controlling interest on full goodwill , net of impairment loss
[(P15,000 full P12,000, partial = P3,000) P750 impairment loss
Non-controlling interest (full-goodwill)..
P144,000
90,000
P234,000
48,000
186,000
P 426,000
90,000
P
13,200
7,200
( 20,400)
P 495,600
20
P 99,120
2,250
P 101,370
f.
Consolidated SHE:
Stockholders Equity
Retained earnings
NCI, 12/31/20x4
P 600,000
676,680
P1,276,680
__101,370
P1,378,050
Problem XXVIII
1. AA should report income from its subsidiary of P15,000 (P20,000 x .75) rather than
dividend income of P9,000.
2. A total of P5,000 (P20,000 x .25) should be assigned to the non-controlling interest in the
20x4 consolidated income statement.
3. Consolidated net income of P70,0000 should be reported for 20X4, computed as follows:
Reported net income of AA
P59,000
Less: Dividend income from KR
(9,000)
Operating income of AA
P50,000
Net income of KR
20,000
Consolidated net income
P70,000
4. Income of P79,000 would be attained by adding the income reported by AA (P59,000) to
the income reported by KR (P20,000). However, the dividend income from KR recorded
by AA must be excluded from consolidated net income.
Multiple Choice Problems

1. b
Full-Goodwill: (P600,000/70%) P640,000 = P217,143 P40,000 = P177,143
If partial goodwill: P600,000 (P640,000 x 70%) = P152,000 (P40,000 x 70%) =
P124,000
2. b P500,000 + P3,461
3. b
4. d equivalent to consideration transferred, P320,000
5. d equivalent to consideration transferred, P380,000
6. a
20x4 Investment income: Dividend of P10,000 x 100%
20x4 Investment balance: P500,000
7. d P45,000/15% = P300,000
8. No answer available
Pigeons separate income
P150,00
0
Less: 60% of Homes P10,000 loss =
6,000
Less: Equipment depreciation
P10,000/ 10 years =
__1,000
Controlling Interest in Consolidated Net Income
P143,00
0
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)
P138,333
9. a
Non-controlling Interest in Net Income (NCINI) for Year 3
P240,000
45,000
P195,000
30%
P 58,500
10. c
P Company
S Company
Total
Less: Amortization of allocated excess**
P 375,000
30,000
P405,000
P5,250
3,750
0
9,000
P396,000
P30,000
3,750
P26,250
20%
P 5,250
**P270,000/80% = P337,500 (P150,000 + P150,000) = P37,500 / 10 years = P3,750
Note: Whether the partial or full-goodwill approach are used the amortization of excess are
always the same.
11. a
*Non-controlling Interest in Net Income (NCINI) for Year 3

P600,000
112,500
P487,500
30%
P146,250
12. c
P Company
S Company
Total
P 625,000
50,000
P675,000
P 8,750
6,250
0
15,000
P660,000

Less: Amortization of allocated excess**
P50,000
6,250
P43,750
20%
P 8,750
**P450,000/80% = P562,500 (P250,000 + P250,000) = P62,500 / 10 years = P6,250
Note: Whether the partial or full-goodwill approach are used the amortization of excess are
always the same.
13. 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
14. c
Net income of S Company (P800,000 P620,000)
Multiplied by: No of mos. (9/1-12/31)
P180,000
15,000
P165,000
4/12
P 55,000
15. a
Net income of S Company (P800,000 P620,000)
Multiplied by: No of mos. (9/1-12/31)
16. b
P180,000
15,000
P165,000
4/12
P 55,000
____20%
P 22,000
Combined revenues................................................................................ P1,100,000

Combined expenses................................................................................
(700,000)
Excess acquisition-date fair value amortization.......................................
(15,000)
Consolidated net income.........................................................................
P385,000
Less: noncontrolling interest (P85,000 40%)........................................
(34,000)
Consolidated net income to controlling interest......................................
P351,000
17. c HH expense.............................................................................................
P621,000
NN expenses............................................................................................
714,000
Excess fair value amortization (70,000 10 yrs)....................................
7,000
Consolidated expenses............................................................................ P1,342,000
18. b
Step-acquisition, either full-goodwill or partial goodwill approach, the answer remains
the same.
Full-Goodwill Presentation:
Net income from own operations;
Parent - Keefe
P 300,000
Subsidiary - George (P500,000 P400,000)..
100,000
P 400,000
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).
19. c - 20x4 = P86,400
20x4
20x5
Peters Company's reported net income
64,000
37,500
Less: dividend income from Smith
(1,600)
0
Peters' income from independent operations
62,400
37,500
Add: Peter's share of Smith's net income in 20x4 since acquisition
(.80)(8/12)(P45,000)
24,000
Less: Peter's share of Smith's net loss in 20x4 (.80 P5,000
(4,000)
Controlling Interest in Consolidated net income
86,400 33,500
20. c - 20x5 = P33,500 refer to No. 19
21. b - 20x4 = P151,400
Consolidated Retained Earnings
20x4
20x5
Peter's 12/31 retained earnings (P80,000 + P64,000 - P15,000)
P129,000
P161,500
Add: Peter's share of the increase in Smith's retained earnings
18,400
from the date of acquisition to the current date:

(.80 (P53,000 P25,000))
(.80 (P48,000 P25,000)
P179,900
22. c - 20x5 = P179,900 refer to No. 21
22,400
P151,400
23. 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.
24.
25.
26.
27.
28.
d refer to No. 23 for further discussion.

b refer to No. 23 for further discussion.
a P40,000 x 80%
b P50,000 x 80%
a P60,000 x 80%
29. c
Full/Gross-up Goodwill Presentation:
Non-controlling interest in Net Income:
Subsidiary net income from own operations.P100,000
Less: Amortization of allocated excess*
7,000
Impairment of full-goodwill (if any)**
0
P 93,000
x: Non-controlling interests.
20%
Non-controlling interest in Net Income
P 18,600
*Amortization of allocated excess:
Increase in equipment: P30,000 / 10 years = P 3,000
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:
Less: Amortization of allocated excess*.
7,000
P 93,000
20%
Non-controlling interest in Net Income.
P 18,600
30. c

7,000
0
P113,000
20%
P 22,600

4,000
Total amortization.
P 7,000
interests
7,000
P113,000
20%
P 22,600
31. a
7,000
0
P123,000
20%
P 24,600
4,000
Total amortization.
P 7,000
interests
7,000
P123,000
20%
P 24,600
32. a
Book value of Stockholders Equity of Subsidiary

P 300,000
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
P 623,000
Multiplied by: Non-controlling Interest %...........................
20%
Non-controlling Interest (partial goodwill)..
P 124,600
Add: Non-controlling interest in Full Goodwill
(P55,000, full P44,000 partial l) or
(P55,00,000 x 20%)*
11,000
Non-controlling Interest (full)
P 135,600
* this computation (i.e., P55,000 x 20%) should only be use when the fair
value of the non-controlling interest of acquiree (subsidiary) is not given.
Partial Goodwill:
Fair value of 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%..........
Less: Book value of Net Assets (Stockholders
Equity - Subsidiary)...................................
Allocated Excess..
Less: Over/Undervaluation of Assets and
Liabilities (P40,000 + P30,000).
Goodwill (Full/Gross-up)....
P 625,000
500,000
P 125,000
P
70,000
55,000
33. e
P
Retained earnings, 1/1/20x5 (refer to No. 32)
P260,000
Add: Net income, 20x5.
120,000
Less: Dividends paid, 20x5
50,000
P
Less: Accumulated amortization of allocated excess 2 yrs
300,000
330,000
630,000
70,000
14,000

Multiplied by: Non-controlling Interest %..............................
(P55,00,000 x 20%)*
34. e
P 686,000
20%
P 137,200
11,000
P 148,200

P 300,000
Retained earnings, 1/1/20x6.P330,000
Add: Net income, 20x6
130,000
Less: Dividends paid, 20x6..
60,000
400,000
P 700,000
70,000
Less: Accumulated amortization of allocated excess
(1/1/20x4 12/31/20x6): P7,000 x 3 years
21,000
P 749,000
Multiplied by: Non-controlling Interest %............................
20%
P 149,800
(P55,00,000 x 20%)*
11,000
P 160,800
* this computation (i.e., P55,000 x 20%) should only be use when the fair
value of the non-controlling interest of acquiree (subsidiary) is not given.
35. d Economic Unit or Entity Concept (as required by PFRS 10)

P Company
S Company
Total
Add: NCINI
CNI - entity concept
P 500,000
100,000
P600,000
P 20,000
0
_
0
20,000
P580,000
__20,000
P600,000
P100,000
_______0
P100,000
20%
P 20,000
36. c Parent Company Concept Parents Net Income only (not required by PFRS
10)
P Company
S Company
Total
P 500,000
100,000
P600,000
P 20,000
0

CNI - entity concept
20,000
P580,000
P100,000
_______0
P100,000
20%
P 20,000
37. Podexs separate earnings for 20x6.............................................. P2,000,000

Dividend income from Sodex................................................... __120,000
Podexs 20x6 net income..................................................... P2,120,000
38.
P2,260,000
Podexs separate earnings for 20X6
P2,000,000
Podexs equity in net income of Sodex.....................................
300,000
Less: Amortization of cost in excess of book value...................
(40,000)
Podexs 20x6 net income..................................................... P2,260,000
39. b
40. b
Net Income from own operations:
20x4
20x5
Parent P 100,000 P100,000
Subsidiary...
25,000
35,000
P125,000
P135,000
Subsidiarys 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
Subsidiarys:
Net income from own operations.......P 25,000
P 35,000
Other Comprehensive Income (P30,000
P25,000)....
5,000
10,000
Subsidiarys Comprehensive Income........P 30,000
P45,000
Less: Amortization of allocated excess*..
6,250
6,250
Impairment of full-goodwill (if any).....
0
0
P 23,750
P 38,750
20%
20%
Non-controlling interest in Comprehensive Income...P
4,750
P 7,750
Increase in other intangibles: P50,000 / 8 years = P 6,250
41.
42.
43.
44.
c refer to No. 40
c refer to No. 40
b- refer to No. 40
d
Inventory not yet sold in 20x4
Building: (P390,000 P200,000)/ 10 years

Equipment (P280,000 P350,000)/ 5 years
19,000
( 14,000)
P 5,000
45. c
Plochmans acquisition entry is:

Investment in Shure40,000,000
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
PIC in excess of par [(1,000,000 x P39) P800,000)
Cash (P800,000 + P1,000,000)..
1,000,000
32,000,000
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
46. d refer to No. 45

47. a
48. a
Cost of Goods Sold P80,000 debit
Depreciation Expense (P192,000/120) 7 = P11,200 debit
49. c
Cost of Goods Sold (P60,000 x 4/6) = P40,000 debit
Interest Expense: (P15,000/5) = P3,000 debit
50. a [(P250,000 - P180,000)/10]7
51. c
[(P380,000 - P260,000)/120]88
52. a
53. c
P170,000 - {[P320,000 - (P300,000 - P170,000)]/10}2
54. b
[P320,000 - (P300,000 - P170,000)]/10
55. d
56. d
P105,000 - {[P405,000 - (P450,000 - P105,000)]/20}2
57. a
[P405,000 - (P450,000 - P105,000)]/20
58. d - The acquisition method consolidates assets at fair value at acquisition date
regardless of the parents percentage ownership.
59. d
P: BV,12/31/20x6
P250,000
S:
BV of building, 12/31/20x4
P170,000
Add: Adjustments to reflect fair value, 1/1/20x4
(P350,000 P240,000)
110,000
Less: Amortization of excess (P110,000/10) x 3 years
33,000
247,000
P497,000
60. b
P: BV,12/31/20x5
P 975,000
S:
P105,000
Add: Adjustments to reflect fair value, 1/4/20x4
(P120,000 P90,000)
30,000
Less: Amortization of excess (P30,000/10) x 2 years
6,000
129,000
P1,104,000
61. c - An asset acquired in a business combination is initially valued at 100% acquisitiondate 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...........................................
P45,000
(9,000)
P36,000
62. b
63.
64.
65.
66.
67.
P200,000
Adjustments to reflect fair value, 1/1/20x4 (P300,000 P200,000) 100,000
Depreciation 1/1/20x4 12/31/20x6 (P100,000/20 x 3 years)
( 15,000)
P285,000
d same with No. 62
d
BV of equipment, 1/1/20x4
P 80,000
Adjustments to reflect fair value, 1/1/20x4 (P80,000 P75,000) ( 5,000)
1,500
P 76,500
a
Adjustments to reflect fair value, 1/1/20x4 (P80,000 P75,000) (P 5,000)
1,500
(P 3,500)
d 1/2/20x4:
BV of equipment, 1/1/20x4
P200,000
Adjustments to reflect fair value, 1/1/20x4 (P300,000 P200,000)
100,000
P300,000
c
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
Goodwill impairment
P 70,000
40,000
P110,000
P
0
0
____0
____0
P110,000
_____0
P110,000
68. b
Plimsol: P100,000 +
P200,000,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,P 300,000
Shipping: P75,000 + P150,000.
225,000
P 525,000
69.
Retained Earnings - Plimsol, 1/1/20x4 (cost method, same with equity method and
consoiidated retained earnings since it is the date of acdquisition)
P
150,000
Add: CI CNI (refer to No. 71)
110,000
Less: CI Dividends (Dividend of parent only)
25,000
Retained earnings, 12/31/20x4 (equity method same with CRE)
P 235,000
70. d
Liabilities:
Plimsol (P40,000 + P75,000)
Shipping (P25,000 + P50,000)
P115,000
75,000
P 190,000
71. d
Total assets (No. 72)
Les: Liabilities (No. 74)
Stockholders equity
P525,000
190,000
P335,000
72. b
73. d
74. d
Decrease in Buildings account:

Fair value
Book value..
Decrease.
P 8,000
__10,000
P 2,000
Decrease in buildings account (refer to No. 73)

Less: Increase due to depreciation (P2,000/10)
Decrease in buildings accounts..
P 2,000
200
P 1,800
Decrease in buildings account (refer to No. 74)

Less: Increase due to depreciation (P2,000/10)
Decrease in buildings accounts..
P 1,800
200
P 1,600
Increase in Equipment account:

Fair value
Book value..
Increase.
P 14,000
__18,000
P 4,000
75. a
76. a
Increase in equipment account (refer to No. 76)

Less: Decrease due to depreciation (P4,000/4)
Increase in equipment accounts..
77. a
Increase in equipment account (refer to No. 77)

Less: Decrease due to depreciation (P4,000/4
Increase in equipment accounts..
P
P
P 3,000
1,000
P 2,000
78. a
Increase in Land account:
Fair valueP 12,000
Book value..
5,000
Increase.. P 7,000
79. b refer to No. 78, no depreciation/amortization
4,000
1,000
3,000
80. b refer to No. 78, no depreciation/amortization

81. e
Increase in Patent account:
Fair value
Book value..
Increase.
P 11,000
_
0
P 11,000
(P234,000/90%) (P160,000 + P80,000) = P20,000 (P4,000 P2,000 + P7,000) =

P11,000.
Partial or full-goodwill approach, the amortization remains the same.
82. e
83. d
Increase in patent account (refer to No. 85)

Less: Decrease due to depreciation (P11,000/5).
Increase in patent accounts.
P 11,000
2,200
P 8,800
Increase in patent account (refer to No. 86)

Less: Decrease due to depreciation (P11,000/5).
Increase in patent accounts.
84. 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. (P17,100P16,100) x 90%
Increase in Eqpt. (P48,000P40,000) x 90%
Increase in Patents (P13,000P10,000) 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
85. 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)
8,800
2,200
6,600
P120,600
P 45,000
13,500
36,900 95,400
P 25,200
P
900
7,200
2,700 10,800
P 14,400
P 1,000
2,000
300
P 3,300
P 50,000
15,000
41,000
P106,000
12,000
P118,000
10%
P 11,800
86. a P48,000, parent only.

87. a P48,000. On the date of acquisition, the parents retained earnings is also the
consolidated retained earnings.
88. No requirement.
89. b P120,600, the initial value
90. b P4,000 x 90% = P3,600

91. c
P Company P30,200 (P4,000 x 90%)
S Company
Total
Goodwill impairment
P26,600
9,400
P36,000
P
610
3,300
____0
3,910
P32,090
610
P32,700

P 9,400
3,300)
P 6,100
10%
P
610
____0
P
610

Less: Non-controlling interest on impairment loss on full-goodwill
92. c
Noncontrolling Interests (in net assets):
Common stock - S, 12/31
Additional paid-in capital - S, 12/31
15,000
Retained earnings - S, 12/31:
RE-S, 1/1/2011
Add: NI-S, 2011
Less: Dividends S
Book value of SHE - S, 12/31
Add: Adjustments to reflect fair value, 1/1
Less: Amortization of allocated excess (1 yr.)
Fair Value of Net Assets/SHE - S, 12/31
x: Noncontrolling Interest %
P 50,000
P 41,000
9,400
4,000
46,400
P 111,400
12,000
3,300
P 120,100
10%
Noncontrolling Interest (in net assets), 12/31

P 12,010
93. b refer to 91 for computation
94. c refer to 91 for computation
95. b
Controlling RE / RE Attributable to EH of Parent, 1/1 (refer to No. 102
P 48,000
Add: CI CNI (refer to 106 and 109)
32,090
Less: CI Dividends (Dividend of parent only)
15,000
Controlling RE / RE Attributable to EH of Parent, 12/31
P 65,090
96. b same with No. 95
97. c
Consolidated Equity:
Controlling Interest / Equity Holders
Attributable to Parent:
Common stock P: [P100,000 + P120,600 (5,400 shares x P10 par)] P154,000
APIC P: [15,000 + [P120,600 (5,400 x P10)]
81,600
RE P (refer to No. 105)
65,090
Parents Stockholders Equity or Controlling Interest Equity
P300,690
Noncontrolling Interest
12,010
Consolidated Equity
P312,700
98. c
P95,000 = (P956,000 / .80) - P1,000,000 - P100,000
99. c
P251,000 = .20[(P956,000 + P239,000) + (P190,000 - P5,000 - P125,000)]
100. b Combined revenues................................................................................. P1,300,000

Combined expenses................................................................................
(800,000)
Trademark amortization...........................................................................
(6,000)
Patented technology amortization...........................................................
(8,000)
Consolidated net income.........................................................................
P486,000
101. No answer available
NCI-CNI - P34,400; NCI P280,800
Subsidiary income (P100,000 P14,000 excess amortizations).............
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....................................................
P200,000
52,000
(5,600)
__34,400
P280,800
102. a MM trademark balance............................................................................

SS trademark balance............................................................................
Excess fair value......................................................................................
Two years amortization (10-year life).......................................................
Consolidated trademarks.........................................................................
P260,000
200,000
60,000
(12,000)
P508,000
103. a Fair value of non-controlling interest on April 1.......................................

30% of net income for 9 months ( year P240,000 30%)................
Non-controlling interest December 31.....................................................
P165,000
54,000
P219,000
104. c
Add: Net income of S 20x4
Total
Stockholders equity S Company, December 31, Year 2
liabilities, date of acquisition January 1, 20x4
Amortization of allocated excess (refer to amortization above: P200,000/10
Non-controlling interest (partial)
Add: NCI on full-goodwill P85,714 P60,000)
P1,000,000
___150,000
P1,150,000
____90,000
P1,060,000
200,000
_( 20,000)
P1,240,000
30
%
P 372,000
___25,714
Non-controlling interest (full)
P397,714
*P900,000/70% = P1,285,714 P1,000,000 = P285,714 P200,000 = P85,714, full goodwill

*P900,000 (P1,000,000 x 70%) = P200,000 (P200,000 x 70%) = P60,000, partial
goodwill
It is assumed that full-goodwill is used. But, it should be noted that PFRS 3 either partial or
full-goodwill approach are considered acceptable.
105. b (P50,000 + P70,000) x 25% = P30,000

106. b P only.
107. b
{(P250,000/.8) + [P75,000 + P90,000 - P25,000 - P50,000 - P30,000 (P80,000/8)2]}.2
108. d
{(P420,000/.7) + [P160,000 + P210,000 - P60,000 - P80,000 - P50,000 (P90,000/5)2]}.3
109. a - P650,000 =P500,000 + P200,000 - P50,000
110. a assume the use of equity method
Punns equity in net income of Sunn (3 months ended,12/31/x6)
P 200,000
Amortization of cost in excess of book value................................
(
60,000)
Increase in Parents retained earnings.
P 140,000
e - If cost model/cost method, the answer would be P100,000.
Dividend income.
P 100,000
111. c P60,000 x 80% = P48,000
112. 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
113. d
Investment balance, 1/1/20x4.. P 150,000
Add: Pumas equity in net income of Slume (30% x P25,000)..
7,500
Less: Dividends (P30% x P10,000).
3,000
Amortization of cost in excess of book value
(P50,000/10 years) x 30%..............................................................
1,500
Pumas 20x6 net income (equity method)....................................
P 153,000
114. b
Pumas equity in net income of Slume (30% x P25,000)....
P
7,500
Less: Amortization of cost in excess of book value
(P50,000/10 years) x 30%..............................................................
1,500
Investment income 20x4 (equity method).
P
6,000
115. b
Fullgoodwill Aproach
.
P 180,000
20,000
P 200,000
P 100,000
60,000
160,000

..
.
fair value)
...
P 40,000
P
5,000
___10,000
15,000
P 25,000
Partial-Goodwill Approach
Consideration
transferred..
.
...
..
.
Positive excess: partial-goodwill (excess of cost over
fair value)
...
P 180,000
P 90,000
54,000
144,000
P
4,500
___9,000
36,000
13,500
P 22,500

Account
Adjustments
to
amortized
Patent
116. d
be
Over/
under
10,000
25,000
Lif
e
5
5
Annual
Amount
Current
Year(20x4)
P 2,000
5,00
0
P 7,000
P 2,000
5,000
P 7,000
Investment in Wisden
1/1/x4.
180,000
18,000
Dividends
(20,000 x
90%)
NI of S
(60,000
54,000
Amortization
90%).
12,600
90%)
(P14,000 x
1/1/x6
203,400
117. c
Investment in Wisden
1/1/x6.
230,400
9,000
118. d 20x3: P30,000

20x4: P40,000 x
119. a no changes in
there
are
investment
and
120. None no answer
cost model share in
of subsidiary does
121. d
Investment
20x7:
Original
Dividends S
(10,000 x
90%)
investment
unless
dispositions
of
permanent impairment.
NI of S
(30,000
x
27,000
Amortization
90%).
6,300
x 75% = P22,500
75% = P30,000
available. Under the

net income or earnings
not affect investment.
(7,000 x 90%)
account, December 31,

investment
1/1/x6
215,100
P 550,000
Tinys earnings, 20x4-20x77: 100% x P166,000 166,000
Less: Dividends received: 100% x P114,000 114,000
Balance, December 31, 20x7.. P602,000
122. a
The adjusting entry required in 20x7 to convert from the cost to the equity method is:
Investment in Tiny.52,000
Retained earnings beg.. 4,000
Dividend revenue 54,000
Equity in subsidiary income of Tiny.
110,000
123. b
124. b Dividend paid S, P70,000 x 60% = P42,000
125. d CNI amounted to P265,000 [CI-CNI, P235,000 and NCI-CNI, P30,000

P Company
S Company
Total
Goodwill impairment
P190,000
90,000
P280,000
P 30,000
15,000
____0
45,000
P235,000
30,000
P265,000

Less: Non-controlling interest on impairment loss on full-goodwill (P1,500 x
15%)*
P 90,000
( 15,000_
P 75,000
40%
P 30,000
______0
P 30,000
20x5 results of operations are as follows:
Sales
Less: Cost of goods sold Operating expenses
Net income
Peer
P 600,000
410,000
P 190,000
45,000
P 235,000
Sea-Breeze
P 300,000
210,000
P 90,000
P 90,000
P 414,000
276,000
P 690,000
Less: Book value of stockholders equity of Sea (P550,000 x

100%)
(P140,000 x 100%)
Positive excess: Full-goodwill (excess of cost over fair value)
Amortization of Allocated Excess
Book Value
Buildings (net)- 6
300,000
Equipment (net) 4
300,000
Patent -10
-0Net
Fair Value
360,000
280,000
100,000
__550,000
140,000
140,000
0
Over/under
P 60,000
(20,000)
100,000
P 140,000
Amort.
P 10,000
(5,000)
10,000
P 15,000
126. c refer to No. 125 for computations

127. b refer to No. 125 for computations
128. c - P811,000.
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:/Parents
share in adjusted net increased in subsidiarys retained
earnings:
Retained earnings Subsidiary, January 1, 20x5
Less: Amortization of allocated excess 20x2 20x4
(P15,000 x 3 years)
Less: Goodwill impairment loss (full-goodwill),
Note:
a. Date of acquisition: RE of Parent = Consolidated RE
Regardless of the method used in the books of the subsidiary,
always be applied
b. Subsequent to date of acquisition:
Retained earnings of Parent under equity method = CRE
P700,000
P 300,000
70,000
P 230,000
45,000
P 185,000
60%
P
111,000
0
111,00
0
P 811,000
the following rule should
Since, the P811,000 is the retained earnings of parent under the equity method, it should also be
considered as the parents portion or interest in consolidated retained earnings or simply the
consolidated retained earnings.
129. c - P811,000 refer to note (b) of No. 128

130. b P111,000 refer to No. 128
131. d
Consolidated Retained earnings, January 1, 20x5 (refer to Nos. 118 and 119)
Add: Controlling Interest in Consolidated Net Income or
Profit attributable to equity holders of parent for 20x5
Total
P 811,000
235,00
0
P1,046,00
0
92,00
0
P
954,000
Less: Dividends paid Parent Company for 20x5

132. d refer to No.131

133. c
Non-controlling interest (partial-goodwill), December 31, 2015
P
480,000
Common stock Subsidiary Company, December 31, 2015

Retained earnings Subsidiary Company, December 31, 2015
Retained earnings Subsidiary Company, January 1, 2015
Add: Net income of subsidiary for 2015
Less: Dividends paid Subsidiary - 2015
2015
Adjustments to reflect fair value - (over) undervaluation
of assets and liabilities, date of acquisition (January 1,
2012)
(P15,000 x 4)
Fair value of stockholders equity of subsidiary, 12/31/ 2015
Multiplied by: Non-controlling Interest percentage.
Non-controlling interest (partial)
Add: NCI on full-goodwill.
Non-controlling interest (full)
P300,00
0
90,00
0
70,00
0
320,000
P
800,000
140,000
( 60,000
)
P
880,000
4
0
P
352,000
____0
P
352,000
134. c
Stockholders Equity
Common stock - Peer
Retained earnings
Parents Stockholders Equity/Equity Attributable to the
Owners of the Parent
Non-controlling interest**
Total Liabilities and Stockholders Equity
135. c
P
724,000
954,000
P
1,678,000
352,000
P 985,500
P2,030,000
Investment in Sea-Breeze
1/1/x2.
414,000
42,000
Retro
111,000
60%
Investment Income
Dividends S
NI of S
(70,000 x
NI of S
(90,000
54,000
Amortization
60%).
9,000
60%)
(P15,000 x
Amortization
(P15,000 x 60%)
9,000
12/31/x5
528,000
136.
137.
138.
139.
140.
141.
142.
143.
144.
145.
146.
147.
(90,000
c
d refer to No. 125
c refer to No. 125
b refer to No. 125
c refer to No. 128
c refer to No. 128
a not applicable under equity method.
d refer to No. 131
d refer to No. 131
d refer to No. 133
c refer to No. 134
b
Consideration transferred: 10,500 shares x P95
Less: BV of SHE S (?)
Allocated excess;
Less: O/U valuation of A and L:
Undervaluation of land
Overvaluation of buildings
Undervaluation of equipment
Undervaluation/unrecorded trademark
54,000
60%)
45,000
P997,500
857,500
P140,000
P40,000
( 30,000)
80,000
50,000 140,000
P
0
148. a P900,000 + P500,000 = P1,400,000

149. 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
Buildings: (P30,000) / 20
(P1,500)
Equipment; P80,000 / 10
8,000
Trademark: P50,000 / 16
3,125
9,625
Total expenses
P909,625
150. b (P750,000 + P280,000) P30,000 + (P1,500 x 5 years) = P1,007,500
151. c (P300,000 + P500,000) + P80,000 (P8,000 x 5 years) = P840,000
152. c P450,000 + P180,000 + P40,000 = P670,000
153. d P50,000 P3,125 x 5 years) = P34,375
154. a P only (the stock issued In 20x0 includes already in the December 31, 20x4
balance.
155. a P only
156. a
Consolidated Retained earnings, January 1, 20x4 (equity method)
P
1,350,000
Add: Controlling
attributable to
Total
Consolidated Retained Earnings, December 31, 20x4 (under equity
method)
Net Income from own operations:
Sales
Less: cost of goods sold
Gross profit
Other expenses
Net income
P Company
S Company
Total
Less: Non-controlling Interest in Net Income
490,375
P1,840,375
195,000
P1,645,375
P Co
P900,000
360,000
P540,000
140,000
100,000
P300,000
S Co
P500,000
200,000
P300,000
40,000
60,000
P200,000
P300,000
200,000
P500,000
P
0
9,625
_
0
9,625
P490,375
157. c
Note: Normally, the term used in the requirement equity in subsidiary income, is a
term used under equity method, but it should be noted that under PAS 27, it prohibits the
use of equity method for a parent to consolidate a subsidiary. But, assuming the use of
equity method, the answer would be, P190,375.
Share in net income: P200,000 x 100%
P200,000
9,625
P190,375
158. c P3,1250 / .20 = P15,750
159. a
Punns separate earnings for 20x6..............................................
P 6,000,000
Add: Punns equity in net income of Sunn (3 months ended,12/31/x6)
200,000
Less: Amortization of cost in excess of book value.......................
(
60,000)
Punns 20x6 net income (equity method).....................................
P 6,140,000
160. a assume the use of equity method
Punns equity in net income of Sunn (3 months ended,12/31/x6)
P 200,000
Amortization of cost in excess of book value................................
(
60,000)
Increase in Parents retained earnings.
P 140,000
E - If cost model/cost method, the answer would be P100,000.

Dividend income.
P 100,000
161. a
Net income of S (5/1/x5 12/31/x5): P840,000 x 8/12

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
162. b
Less: Retained earnings S Company, 12/31/20x6
should always be beginning of the year, not 12/31/x6)
P560,000
300,000
P260,000
P208,000
80%
P 60,000
190,000
P130,000
P117,000
90%
163. (b)
Net income of Subsidiary 2015 and 2016 (P15,000 + P22,000).P 37,000
Less: Dividends of Subsidiary 2015 and 2016 (P6,000 + P9,000).. . 15,000
Cumulative net income less dividends since date of acquisition, 1/1/2017 (date to establish
reciprocity should always be beginning of the year, not 12/31/17) / Increase in
Retained earnings...P 22,000
70%
P 15,400
It should be noted that the amortization/depreciation and any unrealized/realized profits (in case of
intercompany sales of inventory/fixed assets) should not be included (refer to next number) as part of the
entry to established reciprocity since there will be separate eliminating entry to be made at the end of the
year (2017) for amortization and depreciation.
Further, the eliminating entry to establish reciprocity for the year 20x7 should be made on January 1, 2017
not December 31, 2017
Incidentally, the entry to convert from cost method to equity method or the entry to establish reciprocity at
the beginning of the year, 1/1/2017 would be as follows:
Investment in Subsidiary 15,400
Retained earning Parent Company, 1/1/2017.
15,400
164. (a)
Net income of Subsidiary 2015 and 2016 (P15,000 + P22,000). P 37,000
Less: Dividends of Subsidiary 2015 and 2016 (P6,000 + P9,000)
15,000
Increase in Retained earnings for 2 years P 22,000
Less: Amortization of allocated excess [(P80,000 P60,000)/10 years x 2 years]
4,000
P 18,000
x: Controlling interests.
70%
Retroactive amount, December 31, 20x6 or January 1, 2017 P 12,600
165. b
{(P260,000 - P230,000) + [(P650,000 - P590,000)/120] 8}.8
166. d
{(P190,000 - P160,000) 4/6 - [(P241,000 - P220,000)/60] 5}.7
167. b
168.
169.
170.
171.
172.
173.
174.
[{(P84,000 + P105,000) - [(P310,000 - P220,000)/20]2} - (P30,000 + P50,000)].8

b building account in the books of subsidiary at fair value
e building account in the books of subsidiary at book value
d push-down accounting: equipment account in the books of subsidiary is at fair value
b
a P540,000 = (P500,000 + P150,000 P90,000 P20,000)
c equivalent to the original cost
d - In consolidating the subsidiary's figures, all intercompany balances must be
eliminated in their entirety for external reporting purposes. Even though the subsidiary
is less than fully owned, the parent nonetheless controls it.
175. b - Intercompany receivables and payables from unconsolidated subsidiaries would not
be eliminated.
Quiz - XVI
1.
2.
3.
4.
5.
6.
7.
8.
9.
b
{P150,000 - [(P550,000 - P450,000)/10] - [(P300,000 - P280,000)/5]}.8
P36,925
{P110,000 - (P250,000 - P160,000 - P50,000) - [(P130,000 - P100,000) 3/5] +
[(P215,000 - P200,000)/5] (3/12)}.7
P545,500
P500,000 + [P110,000 + P130,000 - P30,000 - P40,000 - P55,000 - (P200,000/8)2].7
P388,000
P320,000 + [P100,000 + P140,000 - P40,000 - P50,000 - P35,000 - (P75,000/5)2].8
P15,400
{P80,000 - [(P290,000 - P250,000)/8] + [(P160,000 - P150,000)/5]}.2
P13,200
{P150,000 - (P470,000 - P300,000 - P90,000) - [(P190,000 - P160,000) 4/5] [(P520,000 -P400,000)/10] (4/12) + [(P380,000 - P350,000)/5] (4/12)}.3
P70,500
{(P250,000/.8) + [P75,000 + P90,000 - P25,000 - P50,000 - P30,000 (P80,000/8)2]}.2
20x5: P56,000
20x6: P14,000
Purchase differential amortization to investment income
20x5
20x6
Inventory (P300,000 - P240,000).7
P42,000
P
0
Plant Assets [(P700,000 - P560,000)/7].7
14,000
14,000
P56,000
P14,000
Consolidation worksheet:
Cost of Goods Sold
P60,000
20,000
10. P2,900
Sandpipers share of Shore net income (P18,000 x 30%)
Add: Overvalued accounts receivable collected in 20x5
Undervalued accounts payable paid in 20x5
Less: Undervalued inventories sold in 20x5
Depreciation on building undervaluation P3,600/6
Amortization on patent P3,200/8 years
Income from Shore/Income from subsidiary
11. P1,050,000
Parrcos income from its own separate operations for 20x6
Subbcos net income for the nine months ended 12/31/x6
P
(
(
(
P 900,000
200,000
5,400
600
300
2,400)
600)
400)
2,900
Less: Amortization of cost in excess of book value (P30,000 60%)

___50,000)
Consolidated net income for 20x6 (economic unit concept)
P1,050,000
Division of consolidated net income:
To controlling interest (Parrcos stockholders)
P 990,000
To non-controlling interest (stockholders of Subbco)
___60,000
P1,050,000
12. P990,000
Parrcos income from its own separate operations for 20x6
P 900,000
Parrcos equity in net income of Subbco Company for
nine months ended 12/31/x6 (P200,000 60%)
120,000
Less: Parrcos amortization of cost in excess of book value
( 30,000)
Consolidated net income for 20x6 (parent company concept)
P 990,000
13. P400,000 (P100,000 + P300,000)
14.
P3,600,000
Plycos separate earnings for 20x6
P 3,500,000
Add:Dividend income from Slyco.................................................
100,000
Plycos 20x6 net income
P 3,600,000
15.
P3,867,000
Plycos separate earnings for 20x6.............................................
Add:Plycos equity in net income of Slyco.....................................
Less: Amortization of cost in excess of book value.......................
Plycos 20x6 net income...............................................................
16.
P3,500,000
400,000
(
33,000)
P3,867,000
P3,867,000 (same amount as calculated in Requirement 16).
17. P52,000
Net income of S (5/1/x5 12/31/x5): P210,000 x 8/12
Less: Dividend S (11/1/20x5 no need to pro-rate)
not or 1/1/20x6)
P140,000
75,000
P 65,000
80%
P 52,000
18. P12,600
[{(P15,000 + P22,000) - [(P80,000 - P60,000)/10]2} - (P6,000 + P9,000)].7 =
P12,600
19. 20x4 = P86,400

20x4
20x5
Peters Company's reported net income
64,000
37,500
Less: dividend income from Smith
(1,600)
0
Peters' income from independent operations
62,400
37,500
Add: Peter's share of Smith's net income in 20x4 since acquisition
(.80)(8/12)(P45,000)
24,000
Less: Peter's share of Smith's net loss in 20x4 (.80 P5,000
(4,000)
Controlling Interest in Consolidated net income

20. 20x5 = P33,500 refer to No. 19
21. 20x4 = P151,400
Consolidated Retained Earnings
20x5
Peter's 12/31 retained earnings (P80,000 + P64,000 - P15,000)
P161,500
Add: Peter's share of the increase in Smith's retained earnings
from the date of acquisition to the current date:
(.80 (P53,000 P25,000))
(.80 (P48,000 P25,000)
18,400
P179,900
22. 20x5 = P179,900 refer to No. 21
19. P9,200
Pinta Company 20y4 equity-method income:
Proportionate share of reported income (P30,000 x .40)
Amortization of differential assigned to:
Buildings and equipment [(P35,000 x .40) / 5 years]
Goodwill (P8,000: not impaired)
Investment Income
Assignment of differential
Purchase price
Proportionate share of book value of
net assets (P320,000 x .40)
Proportionate share of fair value increase in
buildings and equipment (P35,000 x .40)
Goodwill
86,400
33,500
20x4
P129,000
22,400
P151,400
P 12,000
( 2,800)
-0P 9,200
P150,000
(128,000)
P
(14,000)
8,000
20.
P3,600 - Dividend income, 20y4 (P9,000 x .40)
3,600
21.
Cost-method account balance (unchanged):

Equity-method account balance:
Balance, January 1, 20y4
Investment income
Dividends received
Balance, December 31, 20y4
P150,000
P150,000
9,200
(3,600)
P155,600
Theories
1
.
2
.
3
.
4
.
5
.
6.
7.
8.
d*
9.
10
,
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
.
31
32
.
33
.
34
.
35
.
c
c
b
c
c
d
36
.
37
.
38
.
39
.
40
.
d
b
b
c
d
41
.
42
.
43
.
44
.
45
.
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.

Chapter 16 Advanced Accounting Solution Manual

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Chapter 16 Advanced Accounting Solution Manual

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Problem I

Consolidated Net Income for 20x4

*Net income of subsidiary 20x4

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

Problem II - Cost Model/Method versus Equity Method

A summary or depreciation and amortization adjustments is as follows:

For purposes of comparison between Cost Model/Method and Equity Method

18,750 - DivS (75

7,500 - DivS (10

30,000 - DivS (40

Amortization of Allocated Excess

Investment Income (loss)

75% Div - Son

75% Amort &

75% Div - Son

75% Amort &

75% Div - Son

75% Amort &

Reconciliation of Investment /Conversion of Investment Account from Cost to

Smalls retained earnings, end of year.......................................160,000

Non-controlling interest (full-goodwill), December 31, 20x6

Retained earnings Subsidiary Company, December 31, 20x6

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

Dividends Subsidiary 20x6.. ( 40,000) 160,000

Retained earnings Subsidiary Company, December 31, 20x6

c. Consolidated Retained Earnings, 1/1/20x6 P498,500

The CRE, December 31, 20x6 would be as follows:

Consolidated Retained Earnings, December 31, 20x6

Or, alternatively: to compute CRE, 12/31/20x6

*Net income of subsidiary 20x6

e. P21,175 refer to (d) for computations

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

Unamortized balance of allocated excess:

20x6 [(P45,000, loss + (P15,000 x 85%)]

*Net income (loss) of subsidiary

2. CI-CNI refer to computation in No. 1

3. CRE, 12/31/20x6 P73,150

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

Retained earnings, 12/31/20x6:

Non-controlling interest date of acquisition,12/31/20x4 (1)

5. Consolidated Patents, 12/31/20x6: P72,000

Invest. account equity Dec. 31, 20x6

Implied value of 100% (628,150 / 85%)

P150,000 full goodwill (see No. 1 above)

Cost Model/Initial Value Method

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

Acquisition-date fair value allocated to goodwill:

Full Goodwill or Fair Value Basis

Full-goodwill or Fair Value Basis

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

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

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

Amortization of allocated excess:

Cost Model-Full Goodwill (Eliminating Entries)

Common stock, 1/1/20x4

c. Beginning Retained Earnings-P Co. (P90,000 x 80%)

NCI (partial), 12/31/20x5: [(a) P760,000 (b) P18,000 = P522,000]

Cost Model-Partial Goodwill (Eliminating Entries)

b. Beginning Retained Earnings-S Company

c. Beginning Retained Earnings-P Co. (P90,000 x 80%)

NCI (partial), 12/31/20x5: [(a) P540,000 (b) P18,000 = P522,000]

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

Controlling Interest in Consolidated Net Income or Profit