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EXERCISES
Exercise 12 -1
1. Investment in Stun Corp.
Cost of investment (800 shares @ P200)
Book value of interest acquired as of July 1, 2006
Ordinary Share Capital (1,000 shares x P100 x 80%)
Retained Earnings [(P50,000 + 1/2 of P30,000) 80%]
Goodwill
Grossed-up Goodwill (P28,000 / 80%)
2.
Exercise 12 - 2
1. Equity Method
a.
Investment in Stark Co.
Cash
b.
c.
d.
Cash
Investment in Stark Co.
P30,000 x 75% = P22,500
P80,000
52,000
P90,000
( 15,750)
74,250
P 15,750
P 17,500
240,000
240,000
11,250
11,250
500
500
22,500
22,500
7,500
1,500
no entry
Cash
132,000
P 28,000
P 35,000
P 90,000
Cost Method
a.
Investment in Stark Co.
Cash
b.
c.
P160,000
7,500
1,500
240,000
240,000
22,500
(AA2.2006)
page 2
Dividend Revenue
Investment in Stark Co.
d.
2.
11,250
11,250
no entry
P200,000
50,000
35,000
P285,000
x 75%
P213,750
3.
4.
5.
2008
Jan.
Dec.
1
31
31
800,000
800,000
64,000
64,000
500,000
620,000
P1,120,000
x 20%
P 224,000
800,000
160,000
Cash
Investment in Saturn Co.
P80,000 x 80% = P64,000
800,000
160,000
64,000
64,000
P800,000
160,000
( 64,000)
P896,000
P 40,000
P200,000
40,000
( 16,000)
P224,000
(AA2.2006)
page 3
Exercise 12 4
a. Investment in Saloon Corp.
Cash
750 shares @ P90 = P67,500
67,500
67,500
b.
c.
Cash
Investment in Saloon Corp.
825 shares @ P5 = P4,125
4,125
11,250
d.
e.
4,125
11,250
4,500
4,500
Exercise 12 5
Assuming the interest of Paxton is 60%
(a)
2006
2007
2008
(b)
2006
2007
2008
P300,000
P180,000
P750,000
P384,000
P228,000
P780,000
Exercise 12 - 6
Net income (loss) from own operations:
Pastel Corp.
Sly Corp. (90%-owned)
Sty Corp. (70%-owned)
Depreciation:
Excess of cost over book value of
investment in Sly (P10,000/90%/5 yrs.)
Excess of book value over cost of
investment in Sty (P5,000/70%/5 yrs.)
Consolidated net income
Case A
Case B
Case C
P 80,000
40,500
( 10,500)
P(20,000)
45,000
49,000
P40,000
27,000
24,500
( 2,220)
________
P110,000
Exercise 12 7
1. a.
Investment in Sat Co.
Retained Earnings, Pat Co.
To record the share of Pat in the net increase
in the retained earnings of Sat.
(P70,000 - P50,000) 80% = P16,000
________
P 74,000
1,430
P90,710
16,000
16,000
b.
c.
d.
2.
(AA2.2006)
page 4
160,000
56,000
216,000
Assets
Investment in Sat Co.
Minority Interest
To record excess of cost over book value of inv.
P208,000 - (P250,000 x 80%) = P8,000/80% = P100,000
(10,000)
Operating Expenses
Retained Earnings, Pat Co.
Assets
To record depreciation of adjustment for prior
years and current year at P1,000 per year.
Pat and Subsidiary Sat Co.
Consolidated Working Paper
For the Year Ended December 31, 2008
Pat Co.
Sat Co.
10,000
8,000
2,000
1,000
2,000
3,000
Cons.
IS
Minority
Interest
Cons.
BS
Debits
Cash and Other Assets
Cost of Sales
Operating
Expenses
Total
Credits
Liabilities
Ordinary
Share
Capital, P100par
Retained Earnings
Sales
452,000
208,000
440,000
300,000
200,000
90,000
1,050,000
50,000
690,000
150,000
120,000
300,000
100,000
200,000
70,000
500,000
1,050,000
300,000
690,000
c. 10,000
a. 16,000
d. 3,000
b. 216,000
c. 8,000
500,000
d.
1,000
141,000
899,000
270,000
b. 160,000
b. 56,000
d . 2,000
40,000
14,000
a. 16,000
(800,000)
159,000
10,000
149,000
Minority interest
Total
899,000
c.
245,000
2,000
245,000
300,000
114,000
10,000
64,000
149,000
66,000
899,000
3.
Pat Co. and Subsidiary Sat Co.
Consolidated Statement of Recognized Income and Expenses
For the Year Ended December 31, 2008
Sales (P500,000 + P300,000)
Cost of Sales (P300,000 + P200,000)
Gross Profit
Operating Expenses (P90,000 + P50,000 + P1,000)
Operating Income
P800,000
500,000
P300,000
141,000
P159,000
(AA2.2006)
page 5
Less Minority Interest net income (Sales Cost of Sales Operating Expenses)
Consolidated Net Income
10,000
P149,000
4.
Pat Co. and Subsidiary Sat Co.
Consolidated Statement of Financial Position
December 31, 2008
Assets
Liabilities and Shareholders Equity
Cash and Other Assets
P899,000
Liabilities
P270,000
Minority Interest
66000
Ordinary Share Capital, P100 par
300,000
Retained Earnings
263,00
_______
Total Liabilities and
________
Total Assets
P899,000
Shareholders Equity
P899,000
Exercise 12 - 8
a.
Advances from Pallet Co.
Advances to Stall Co.
15,000
b.
10,000
5,000
Dividends Payable
Dividends Receivable
1,600
c.
d.
Exercise 12 -9
September
August
August
August
August
1
16
27
31
31
15,000
10,000
5,000
1,600
PROBLEMS
Problem 12 - 1
Cost of investment
Book value of interest acquired :
Ordinary Share Capital (P100,000 x 80%)
Retained Earnings (P50,000 x 80%)
Excess of cost over book value
Percentage of ownership
Grossed-up excess
Allocation of excess:
Plant and equipment
Inventory
Goodwill
P280,000
P 80,000
40,000
P 50,000
20,000
120,000
P160,000
80%
P200,000
76,000
P130,000
(AA2.2006)
page 6
2007
P10,000
5,000
20,000
P35,000
2008
P10,000
4,000
---__
P14,000
31
31
2008
Dec.
31
31
c.
d.
2008
a.
280,000
48,000
35,000
40,000
14,000
280,000
48,000
35,000
40,000
14,000
80,000
40,000
120,000
13,000
13,000
50,000
130,000
20,000
160,000
40,000
Cost of Sales
Operating Expenses
Plant and Equipment
Goodwill
Inventory
20,000
15,000
80,000
88,000
10,000
5,000
20,000
b.
c.
d.
3.
(AA2.2006)
page 7
168,000
26,000
26,000
40,000
125,000
132,000
33,000
Operating Expenses
Plant and Equipment
Goodwill
14,000
10,000
4,000
P70,000
48,000
( 35,000)
P83,000
Problem 12 - 2
Original cost of investment (book value is also P294,000)
Equity in subsidiary income 2007 (P84,000 x 70%)
Dividends received from subsidiary 2007 (P63,000 x 70%)
Balance of investment, December 31, 2007
Equity in subsidiary income - Jan. 1 - June 30, 2008 (P105,000 x 1/2 x 70%)
Balance of investment, June 30, 2008
Cost of investment sold (P345,450 x 300/2,100)
Equity in subsidiary income, July 1 - Dec. 31, 2008 (P105,000 x 1/2 x 60%)
Dividends received from subsidiary 2008(P94,500 x 60%)
Balance of investment, December 31, 2008
Problem 12 - 3
Cost of investment
Book value of interest acquired:
Ordinary Share Capital (P1,000,000 x 80%)
Retained Earnings (P1,600,000 x 80%)
Goodwill
P 800,000
1,280,000
P294,000
58,500
( 44,100)
P308,400
367,750
P345,450
( 49,350)
31,500
( 56,700)
P270,900
2,080,000
P 200,000
P 250,000
P 80,000
40,000
( 14,000)
P 106,000
P2,280,000
Income Statement
Sales
2008
2,000,000
Minority
Interest
Consolidated
6,000,000
Cost of sales
Gross profit
Operating expenses
Operating income
Equity in sub. Income
Net income
MINI
NI-carried forward
(AA2.2006)
1,600,000
2,400,000
1,560,000
840,000
278,000
1,118,000
1,200,000
800,000
440,000
360,000
1,118,000
360,000
6,000,000
1,600,000
1,118,000
7,118,000
800,000
6,318,000
360,000
1,960,000
120,000
1,840,000
600,000
400,000
800,000
1,200,000
800,000
2,456,000
2,462,000
200,000
400,000
600,000
page 8
e.
10,000
b.
278,000
72,000
72,000
2,800,000
3,200,000
2,010,000
1,190,000
-----1,190,000
72,000
1,118,000
320,000
6,000,000
72,000
392,000
24,000
368,000
1,118,000
7,118,000
800,000
6,318,000
360,000
Retained Earnings
Statement
Balance, January 1
Net
incomebrought forward
Total
Less Div. declared
Balance, Dec. 31
Balance Sheet
Cash
Accounts recl
Inventories
Land
Building (net of AD)
Equipment (net of AD)
8,718,000
604,000
196,000
Bonds payable
OS - Peach
(P100 par)
a. 1,280,000
c.
96,000
f.
10,000
800,000
790,000
1,400,000
1,200,000
800,000
4,456,000
2,000,000
3,200,000
360,000
c.
96,000
d.
250,000
f.
10,000
a. 2,080,000
b. 278,000
d. 200,000
e.
10,000
240,000
9,686,000
954,000
196,000
Co.
OS - Silver Co.
(P20 par)
APIC
RE-brought forward
Total
Minority interest
1,000,000
1,000,000
1,000,000
600,000
6,318,000
8,718,000
a.
800,000
200,000
1,840,000
3,200,000
368,000
2,724,000
d. 50,000
2,724,000
50,000
P6,000,000
2,800,000
P3,200,000
2,010,000
P1,190,000
72,000
600,000
6,318,000
618,000
9,636,000
(AA2.2006)
page 9
P1,118,000
P 800,000
790,000
1,400,000
1,200,000
800,000
4,456,000
240,000
P9,686,000
P 954,000
196,000
618,000
1,000,000
600,000
6,318,000
P9,686,000
Problem 12 - 4
Cost of investment
Book value of interest acquired:
Ordinary Share Capital (P600,000 x 80%)
Retained Earnings (P800,000 x 80%)
Excess of cost over book value of acquired investment
Grossed-up excess (P392,000 /80%0
Allocation of excess:
Inventories
Land
Building
Equipment
Patent (P80,000 x 80%)
Goodwill
Charges to expense for asset adjustments:
Inventories
Building
Equipment
Patent
Goodwill
P1,512,000
P480,000
640,000
1,120,000
P 392,000
P490,000
p 60,000
100,000
200,000
(150,000)
80,000
P60,000
10,000
( 15,000)
8,000
5,000
290,000
P 200,000
(AA2.2006)
page
Total
P68,000
P260,000
60,000
P200,000
P156,670
6,670
P150,000
400,000
300,000
200,000
1,400,000
1,617,600
Slope
Co.
200,000
100,000
80,000
300,000
520,000
940,000
d. 60,000
d. 100,000
d. 260,000
c.
Cost of sales
Expenses
800,000
720,000
300,000
400,000
Dividends paid
200,000
100,000
Patents
Goodwill
80,000
2,940,000
Minority
Interest
Balance
Sheet
600,000
400,000
280,000
400,000
780,000
2,183,330
60,000
d. 156,670
a. 1,120,000
b. 185,600
d. 392,000
e. 60,000
e.
8,400
f. 110,000
d. 80,000
d. 200,000
5,637,600
e.
IS
Dr. (Cr.)
1,160,000
1,238,000
c.
e.
e.
80,000
8,000
5,000
(20,000)
200,000
72,000
195,000
5,110,330
(AA2.2006)
page
Credits
AP & accrued exp.
248,000
AD - Bldg.
AD - Equipt.
804,000
OS - P100 par
OS - P20 par
APIC
RE - Prose Co.
RE - Slope Co.
Sales
Equity in SI
Totals
400,000
380,000
120,000
40,000
d.
6,670
e.
15,000
d.
e.
f.
f.
628,000
196,000
60,000
10,000
20,000
90,000
916,667
400,000
600,000
a. 480,000
120,000
800,000
1,200,000
2,000,000
185,600
5,637,600
800,000
1,200,000
800,000
1,000,000
a. 640,000
160,000
(3,000,000)
b. 185,600
2,940,000
MINI
60,000
542,000
CNI
Minority interest
2,285,279
d. 98,000
2,285,270
60,000
542,000
418,000
5,110,330
98,000
P3,000,000
1,160,000
P1,840,000
1,238,000
P 602,000
60,000
P 542,000
Prose Co. and Subsidiary Slope Co.
Consolidated Statement of Financial Position
December 31, 2008
Assets
Cash
Accounts Receivable
Inventories
Land
Buildings
Less Accumulated Depreciation
Equipment
Less Accumulated Depreciation
P 600,000
400,000
280,000
400,000
P 780,000
210,000
P2,183,330
912,330
570,000
1,271,000
(AA2.2006)
page
Patents
Goodwill
Total Assets
72,000
195,000
P3,788,000
Liabilities and Shareholders Equity
2.
Sales
Interest revenue
Expenses
Interest expense
Net income
Minority net income [(P20,000 - P17,000 - P600) x 10%]
Consolidated net income
Problem 12 6
1.
Minority net income (P100,000 x 20%)
P628,000
418,000
400,000
800,000
1,542,000
P3,788,000
10,000
10,000
600
600
P 70,000
600
( 53,000)
(
600)
P 17,000
(
240)
P 16,760
P 20,000
2.
3.
4.
5.
6.
P 200,000
76,000
Cost of investment
Book value of interest acquired (P500,000 x 80%)
P560,000
400,000
7.
P558,000
16,000
P542,000
(AA2.2006)
page
P160,000
P200,000
8.
Goodwill
Less Impairment loss for 2007 and 2008
Goodwill as of December 31, 2008
P200,000
16,000
P184,000
9.
P400,000
276,000
(120,000)
P556,000
10.
P600,000
100,000
( 50,000)
184,000
P834,000
x 20%
P166,800
MULTIPLE CHOICE
12-A
1.
2.
C
B
12-B
1.
Cost
Excess of BV over cost (14,000 x 80%)
BV of interest purchased
P290,000
11,200
P301,200
2.
P58,400 20%
P292,000
3.
P426,000
270,000
P156,000
12-C
1.
P100,000
34,000
( 8,500)
P125,500
12-D
1.
12-E
3. A
4. D
5.
6.
C
A
7. A
P220,000
80,000
( 1,600)
P298,400
1.
Investment cost
P756,000
2.
36,000 x 80%
P 28,800
12-F
page
3.
50,000 x 80%
P 40,000
4.
Investment cost
Dividends
(P60,000 + P36,000 P50,000 P50,000) x 80%
Investment balance, December 31, 2008
P756,000
P540,000
54,000
( 27,000)
P567,000
1.
R
B
2.
12-G
1.
2.
12-H
(AA2.2006)
3,200
P752,800
P820,000
720,000
P100,000
P111,111
P400,000
200,000
P200,000
x 90%
P180,000
P500,000
40,000
P140,000
P144,000
11,111
132,889
P632,889
3.
P1,000,000
160,000
( 100,000)
111,111
P1,171,111
x 10%
P 117,111
4.
P 100,000 x 10%
1.
P207,500
45,000
10,000
( 2,667)
( 30,000)
P219,833
12-I
12-J
12-K
1.
1.
2.
1.
2.
(AA2.2006)
page
P290,000
54,000
( 18,000)
( 2,000)
( 18,000)
(
9,000)
P297,000
P350,000
( 200,000)
50,000
P200,000
x 80%
P160,000
50,000
P210,000
P210,000
160,000
( 12,500)
( 40,000)
P317,500
P 67,500
40,500
P108,000
P110,000
4,500
(
200)
( 4,050)
P110,250
3.
P4,500 x 90%
P 4,050
4.
P180,000
45,000
4,300
( 30,000)
P199,300
12-L
1.
P 80,000
( 4,000)
P 76,000
12-M
1.
P 90,000
P 1,110,000
2.
(AA2.2006)
page
350,000
P1,460,000
( 315,000)
P300,000
247,500
P 52,500
5,000
47,500
P1,192,500
3.
4.
5.
D
D
P52,500 P5,000
Total Stockholders equity of parent company
12-N
1.
P 6,000,000
4,000,000
1,550,000
( 100,000)
( 450,000)
P 11,000,000
12-O
1.
(P 6,500,000 + 630,000 @ 5
P 9,650,000
2.
(P 4,400,000 + 630,000 @ 3
P 6,290,000
3.
4.
5.
12-P
1.
P47,500
P980,000
2,100,000
244,900
2,344,900
P 9,450,00
780,000
P10,230,000
x 50%
P5,115,000
(AA2.2006)
x = P75,680/.86
x = P88,000
2.
page