Chapter 16

Problem 16-5
a.
b.
Retained Earnings, Dec. 31, 2008 Sison

Stockholders equity, Dec. 31, 2008 Sison (P232,000/40%)
Stockholders equity, Jan. 1, 2005 Sison
Increase in earnings
Retained earnings, Jan. 1, 2005 Sison
Retained earnings, Dec. 31, 2008 Sison
Consolidated Retained Earnings Dec. 31, 2008
Retained earnings, Jan. 1, 2005 - Perez
Net income 2005 to 2008
Dividends paid 2005 to 2008
Retained earnings, Dec. 31, 2008
Add: Perez share of adjusted net increase in Sisons
Retained earnings
P80,000
Amortization (P8,333 x 4)
(33,332)
Adjusted
P46,668
Perez interest
60%
Total
Allocation Schedule
Acquisition cost
Less: Book value of interest acquired (P500,000 x 60%)
Difference
Allocation:
Depreciable assets (P50,000 / 60%)
P(83,333)
Minority interest (40%)
33,333
P 580,000
(500,000)
P 80,000
200,000
P 280,000
P 600,000
100,000
( 45,000)
P 655,000
28,000
P 683,000
P350,000
300,000
P 50,000
(50,000
Amortization per year (P83,333/10 years)
P 8,333
Problem 16-6
a.
Working Paper Elimination Entries, Dec. 31, 2008

(1)
(2)
(3)
(4)
Dividend income
Dividends declared Short
To eliminate intercompany dividends.
10,000
Common stock Short

Retained earnings Short
Investment in Short Company
To eliminate equity accounts of Short at
date of acquisition
100,000
50,000
Depreciable asset
Investment in Short Company
To allocate difference.
30,000
Depreciation expense
10,000
150,000
30,000
5,000
65
Depreciable asset
To amortize allocated difference
b.
5,000
Pony Corporation and Subsidiary

Consolidation Working Paper
December 31, 2008
Income Statement
Sales
Dividend income
Total
Depreciation
Other expenses
Total
Net income carried forward
Retained Earnings
Retained earnings, Jan. 1
Net income from above
Total
Dividends declared
Retained earnings, Dec. 31
Pony
Corporation
Short
Company
200,000
10,000
210,000
25,000
105,000
130,000
80,000
120,000
120,000
15,000
75,000
90,000
30,000
230,000
80,000
310,000
40,000
50,000
30,000
80,000
10,000
Adjustments
& Eliminations
Debit
Credit
Consolidated
320,000
320,000
45,000
180,000
225,000
95,000
(1) 10,000
(3) 5,000
(2) 50,000
(1) 10,000
230,000
95,000
325,000
40,000
66
Carried forward
270,000
70,000
285,000
Balance Sheet
Cash
Accounts receivable
Inventory
Depreciable asset (net)
Investment in Short stock
15,000
30,000
70,000
325,000
180,000
5,000
40,000
60,000
225,000
20,000
70,000
130,000
575,000
-
Total
620,000
330,000
795,000
Accounts payable
Notes payable
Common stock
Pony
Short
From above
Total
50,000
100,000
40,000
120,000
90,000
220,000
(3) 30,000
(4) 5,000
(2)150,000
(3) 30,000
200,000
200,000
270,000
620,000
100,000
(2)100,000
70,000
330,000
195,000
285,000
795,000
195,000
Problem 16-7
a.
Working Paper Elimination Entries

(1)
(2)
(3)
Dividend income
Minority interest in net assets of subsidiary
Dividends declared Sisa
8,000
2,000
10,000
Common stock Sisa

100,000
Retained earnings Sisa
50,000
Investment in Sisa stock
Minority interest in net income of subsidiary
120,000
30,000
6,000
6,000
b.
Popo Corporation and Subsidiary

Consolidated Working Paper
December 31, 2008
Popo
Corporation
Income Statement
Sales
200,000
Dividend income
8,000
Total revenue
208,000
25,000
Other expenses
105,000
Total expenses
130,000
Net income
78,000
MI in net income of Sub.
78,000
Retained Earnings
Retained earnings, 1/1
230,000
78,000
Sisa
Company
Adjustments
& Eliminations
Debit
Credit
120,000
(1) 8,000
120,000
15,000
75,000
90,000
30,000
(3) 6,000
30,000
50,000
30,000
(2) 50,000
Consolidated
320,000
320,000
40,000
180,000
220,000
100,000
( 6,000)
94,000
230,000
94,000
67
Total
Dividends declared
Carried forward
308,000
40,000
80,000
10,000
268,000
70,000
284,000
173,000
500,000
120,000
793,000
105,000
300,000
405,000
278,000
800,000
1,078,000
Accumulated depreciation
Current liabilities
Long-term debt
Common stock
Retained earnings , 12/31
From above
MI in net assets of Subsidiary
175,000
50,000
100,000
200,000
75,000
40,000
120,000
100,000
250,000
90,000
220,000
200,000
268,000
70,000
Total
793,000
Balance Sheet
Current assets
Depreciable assets
Investment in Sisa stock
Total
c.
(1) 10,000
(2)120,000
(2)100,000
(1) 2,000
405,000
166,000
(2) 30,000
(3) 6,000
166,000
324,000
40,000
284,000
34,000
1,078,000
Consolidated Financial Statements

Consolidated Balance Sheet
December 31, 2008
Assets
Current assets
Depreciable assets
Less: Accumulated depreciation
Total assets
Liabilities and Stockholders Equity
Current liabilities
Long-term debt
Total liabilities
Stockholders Equity
P278,000
P800,000
250,000
550,000
P828,000
P 90,000
220,000
P310,000
68
Common stock
Total liabilities and stockholders equity
P200,000
284,000
34,000
518,000
P828,000

Consolidated Income Statement
Year Ended December 31, 2008
Sales
Expenses:
Other expenses
Consolidated net income
Consolidated net income attributable to parent
P320,000
P 40,000
180,000
220,000
P100,000
6,000
P 94,000

Consolidated Retained Earnings
Retained earnings, Jan. 1 Popo
Consolidated net income attributable to parent
Total
Dividends paid Popo
Consolidated retained earnings, Dec. 31
P230,000
94,000
P324,000
40,000
P284,000
Problem 16-8
a.
Palo Corporation and Subsidiary

December 31, 2008
Income Statement
Sales
Investment Income
Total revenues
Cost of goods sold
Other expenses
Total cost and expenses
Palo
Corporation
Sebo
Company
300,000
19,000
319,000
210,000
25,000
23,000
258,000
61,000
150,000
Adjustments
& Eliminations
Debit
Credit
(1) 19,000
150,000
85,000
20,000
25,000
130,000
20,000
Consolidated
450,000
450,000
295,000
45,000
48,000
388,000
62,000
Retained Earnings
69

Total
Dividends declared
carried forward
230,000
61,000
291,000
20,000
50,000
20,000
70,000
10,000
271,000
60,000
272,000
Balance Sheet
Cash
Accounts receivable
Inventory
Buildings and equipment
Investment in Sebo stock
37,000
50,000
70,000
300,000
229,000
20,000
30,000
60,000
240,000
57,000
80,000
130,000
540,000
-
Goodwill
Total
686,000
350,000
20,000
827,000
105,000
40,000
70,000
200,000
65,000
20,000
55,000
150,000
(2)150,000
170,000
60,000
125,000
200,000
271,000
686,000
60,000
350,000
239,000
Accounts payable
Taxes payable
Common stock
from above
Total
b.
(2) 50,000
(1) 10,000
(1) 9,000
(2)200,000
(3) 20,000
(3) 20,000
239,000
230,000
62,000
292,000
20,000
272,000
827,000
Consolidated Financial Statements

Consolidated Income Statement
Sales
Cost of goods sold
Gross profit
Expenses:
Depreciation expenses
Other expenses
P450,000
295,000
155,000
P45,000
48,000
93,000
P 62,000

Consolidated Retained Earnings
70
Retained earnings, January 1 Palo

Total
Dividends paid Palo
Retained earnings, December 31
P230,000
62,000
292,000
20,000
P272,000

Consolidated Balance Sheet
December 31, 2008
Assets
Cash
Accounts receivable
Inventory
Less: Accumulated depreciation
Goodwill
Total
Liabilities and Stockholders Equity
Accounts payable
Taxes payable
Common stock
Total
P 57,000
80,000
130,000
P540,000
170,000
370,000
20,000
P657,000
P 60,000
125,000
200,000
272,000
P657,000
Problem 16-9
1.
Acquisition cost
Less: Book value of interest acquired (80%)
Common stock (P300,000 x 80%)
Retained earnings (P400,000 x 80%)
Difference
Allocation:
Inventories
Land
Building
Equipment
Patents
Total
Goodwill (not impaired)
P756,000
P240,000
320,000
P( 30,000)
( 50,000)
(100,000)
75,000
( 40,000)
P(145,000)
29,000
560,000
P196,000
(116,000)
P 80,000
Working Paper Elimination Entries - December 31, 2006(not required)
71
(1)
(2)
(3)
(4)
Investment income
Dividends declared S
Investment in S Company
94,800
10,000
50,000
54,800
Common stock S
300,000
Retained earnings, Jan. 1 S
400,000
Investment in S Co.
560,000
140,000
Inventories
30,000
Land
50,000
Building
100,000
Patents
40,000
Goodwill
80,000
Equipment
Investment in S Company
75,000
196,000
29,000
Cost of goods sold

Inventory
30,000
30,000
Equipment (P75,000 / 10)

Expenses (amortization)
Buildings (P100,000 / 20)
Patents (P40,000 / 10)
(5)
2.
7,500
1,500
5,000
4,000

23,700
To established minority share in subsidiary net income.
Computed as follows:
Net income S Co.
P150,000
Amortization
31,500
Adjusted net income
P118,500
MINIS (P118,500 x 20%)
P 23,700
23,700
P Company and Subsidiary

Consolidated Working Paper
Income Statement
Sales
Cost of sales
Gross profit
Expenses
Operating income
Investment income
Net /consolidated income
MI interest in net income of
Subsidiary
P
Company
S
Company
1,000,000
400,000
600,000
360,000
240,000
94,800
334,800
500,000
150,000
350,000
200,000
150,000
150,000
334,800
150,000
Adjustments
& Eliminations
Debit
Credit
(4) 30,000
(4) 1,500
(1) 94,800
(5) 23,700
Consolidated
1,500,000
580,000
920,000
561,500
358,500
358,500
(23,700)
334,800
72
Retained earnings
Total
Dividends declared
Carried forward
Balance Sheet
Cash
Accounts receivable
Inventories
Land
Buildings (net)
Equipment (net)
Patent
Investment in S Co. stock
Goodwill
Total
Accounts payable
Common stock
Additional paid-in capital
from above
MI in net assets of subsidiary
Total
600,000
334,800
934,800
100,000
400,000
150,000
550,000
50,000
834,800
500,000
834,800
200,000
150,000
100,000
100,000
50,000
40,000
150,000
200,000
450,000
-
300,000
200,000
140,000
200,000
295,000
680,500
36,000
-
298,000
810,800
(2)400,000
(1) 50,000
(3) 30,000
(3) 50,000
(3)100,000
(4) 7,500
(3) 40,000
(4) 30,000
(4) 5,000
(3) 75,000
(4) 4,000
(1) 54,800
(2)560,000
(3)196,000
(3) 80,000
1,558,800
1,090,000
124,000
200,000
400,000
190,000
300,000
-
834,800
500,000
1,558,800
1,090,000
80,000
1,931,500
314,000
200,000
400,000
(2)300,000
(1) 10,000
466,200
600,000
334,800
934,800
100,000
(2)140,000
(3) 29,000
(5) 23,700
466,200
834,800
182,700
1,931,500
Problem 16-10
a.
Investment in Sally Products Co.

Cash
To record acquisition of 80% stock of Sally.
Cash
160,000
160,000
8,000
Dividend income
To record dividends received from Sally (P10,000 x 80%)
b.
8,000
Working Paper Eliminating Entries Dec. 31, 2008

Allocation schedule:
Acquisition cost
Less: Book value of interest acquired (P150,000 x 80%)
Difference
Allocated to building and equipment
P (50,000)
P160,000
120,000
40,000
73

(1)
(2)
(3)
(4)
(5)
(6)
c.
10,000
Dividend income
Dividends declared Sally
(40,000)
8,000
2,000
10,000
Common stock Sally

100,000
Retained earnings, 1/1 Sally
50,000
Investment in Sally Products
120,000
30,000
Building and equipment

50,000
Investment in Sally Products
40,000
10,000
Accumulated depreciation Bldg
Accounts payables
Cash and receivables
5,000
5,000
10,000
10,000

5,000
Computed as follows:
Net income Sally
P30,000
Amortization
(5,000)
Adjusted net income
P25,000
MINIS (P25,000 x 20%)
P 5,000
5,000
Pilar Corporation and Subsidiary

December 31, 2008
Pilar
Corporation
Sally Wood
Products
Income Statement
Sales
Dividend income
Total revenue
200,000
8,000
208,000
100,000
Cost of goods sold

Inventory losses
Total cost and expenses
Net /consolidated income
120,000
25,000
15,000
160,000
48,000
50,000
15,000
5,000
70,000
30,000
MI interest in net income of

subsidiary (MINIS
Adjustments
& Eliminations
Debit
Credit
(1) 8,000
100,000
(4) 5,000
(6) 5,000
Consolidated
300,000
300,000
170,000
45,000
20,000
235,000
65,000
(5,000)
74
48,000
30,000
298,000
48,000
346,000
30,000
90,000
30,000
120,000
10,000
316,000
110,000
81,000
260,000
80,000
500,000
160,000
65,000
90,000
80,000
150,000
1,081,000
385,000
205,000
60,000
200,000
300,000
316,000
105,000
20,000
50,000
100,000
110,000
60,000
Retained earnings statement

Total
Dividends declared
carried forward
Balance Sheet
Cash and receivables
Inventory
Land
Investment in Sally
Total
Accounts payable
Notes payable
Common stock
Retained earnings from above
MI in net assets if subsidiary
Total
1,081,000
(2) 50,000
(1) 10,000
368,000
(5) 10,000
(3) 50,000
(2)120,000
(3) 40,000
385,000
338,000
60,000
398,000
30,000
136,000
350,000
160,000
700,000
1,346,000
(4) 5,000
(5) 10,000
(2)100,000
(1) 2,000
(2) 30,000
(3) 10,000
(6) 5,000
230,000
230,000
315,000
70,000
250,000
300,000
368,000
43,000
1,346,000
Problem 16-11
a.
Eliminating entries:
E(1)
E(2)
E(3)
Dividend Income
Dividends Declared
Eliminate dividend income from subsidiary.
20,000
Common Stock Star Company

Retained Earnings, January 1
Differential
Investment in Star Company Stock
Eliminate investment balance at date
of acquisition.
150,000
50,000
20,000
Goodwill
Retained Earnings, January 1
Differential
20,000
220,000
8,000
12,000
20,000
75
Assign differential at beginning of year

Porno Corporation and Star Company
Consolidated Workingpaper
December 31, 2008
Light
_____Item_____
Credit Consolidated
Income Statement
Sales
Dividend income
Credits
Cost of goods sold
Other expenses
Debits
Net income, carry forward
Retained Earnings Statement
Net income, from above
Dividends declared
Retained earnings, Dec. 31,
carry forward
Balance Sheet
Cash
Accounts receivable
Inventory
Investment in Star Company
stock
Differential
Goodwill
Debits
Accounts payable`
Taxes payable
Common stock
Light Corporation
Star Company
Star
Eliminations
Corporation
Company
350,000
20,000
370,000
270,000
25,000
21,000
(316,000)
54,000
200,000
200,000
135,000
20,000
10,000
(165,000)
35,000
262,000
60,000
54,000
316,000
(20,000)
35,000
95,000
(20,000)
296,000
75,000
46,000
55,000
75,000
300,000
30,000
40,000
65,000
240,000
__
20,000
____
550,000
_______
550,000
405,000
45,000
31,000
(481,000)
69,000
(2) 50,000
(3) 12,000
20,000
___
(1) 20,000
82,000
20,000
260,000
69,000
329,000
(20,000)
309,000
76,000
95,000
140,000
540,000
220,000
-
(1) 20,000
Debit
(2)220,000
(2) 20,000 (3) 20,000
(3) 8,000
696,000
375,000
8,000
859,000
130,000
20,000
50,000
85,000
30,000
35,000
215,000
50,000
85,000
200,000
200,000
150,000
(2)150,000
76
Retained earnings, from above

Credits
296,000
696,000
75,000
375,000
82,000
260,000
20,000
260,000
309,000
859,000
77

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Chapter 16

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Problem 16-5

Retained Earnings, Dec. 31, 2008 Sison

Amortization per year (P83,333/10 years)

Working Paper Elimination Entries, Dec. 31, 2008

Common stock Short

Pony Corporation and Subsidiary

Working Paper Elimination Entries

Common stock Sisa

Popo Corporation and Subsidiary

Consolidated Financial Statements

Popo Corporation and Subsidiary

Popo Corporation and Subsidiary

Palo Corporation and Subsidiary

Retained earnings, Jan. 1

Consolidated Financial Statements

Palo Corporation and Subsidiary

Retained earnings, January 1 Palo

Palo Corporation and Subsidiary

Working Paper Elimination Entries - December 31, 2006(not required)

Cost of goods sold

Equipment (P75,000 / 10)

Minority interest in net income of subsidiary

P Company and Subsidiary

Investment in Sally Products Co.

Working Paper Eliminating Entries Dec. 31, 2008

Minority interest (20%)

Common stock Sally

Building and equipment

Minority interest in net income of subsidiary

Pilar Corporation and Subsidiary

Cost of goods sold

MI interest in net income of

Net income carried forward

Retained earnings statement

Retained earnings, 1/1

Common Stock Star Company

Assign differential at beginning of year

Retained earnings, from above

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