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EXERCISE 1
On January 1, 2017, BABA Co. acquired 80% of interest in BABY, Inc. by issuing
5,000 shares with fair value of P60 per share and par value of P40 per share.
The financial statements of BABA Co. and BABY, Inc. immediately before the
acquisition are shown below:
On January 1, 2017 the fair value of the assets and liabilities of BABY, Inc.
were determined by appraisal, as follows:
The equipment has a remaining useful life of 4 years from January 1, 2017.
EXERCISE 2
At Carrying amount
Share Capital 200,000
Retained Earnings 96,000
Total Equity 296,000
On January 1, 2017 the fair value of the assets and liabilities of House
Lannister, Inc. were determined by appraisal, as follows:
House Stark and House Lannister individual financial statements at year end
are shown below.
Stark Lannister
Cash 92,000 228,000
Accounts Receivable 300,000 88,000
Inventory 420,000 60,000
Investment in Subsidiary 300,000 -
Equipment 800,000 200,000
Accumulated Depreciation (240,000) (80,000)
TOTAL ASSETS 1,672,000 496,000
Stark Lannister
Sales 1,200,000 480,000
Cost of Goods Sold (660,000) (288,000)
Gross Profit 540,000 192,000
Depreciation Expense (160,000) (40,000)
Distribution Costs (128,000) (72,000)
Interest Expense (12,000) -
Profit for the year 240,000 80,000
EXERCISE 3
On January 1, 2017, Peter Co. acquired 90% ownership interest in Simon Co.
for P488,000. Peter Co elected to measure NCI at fair value. NCI was assigned
a fair value of P60,000.
On January 1, 2017, the fair values of the assets and liabilities of Simon
Co. were determined as follows:
The remaining useful life of the equipment is 5 years while the patent has a
remaining legal and useful life of 8 years. Simon’s share capital has a balance
of P200,000.
Among the transaction of Peter and Simon during 2017 were the following.
1. Peter’s accounts receivable includes a receivable from Simon amounting
to P12,000 while Simon’s accounts payable include a payable to Peter
amounting to P8,000. The difference was due to a check amounting to
P4,000 deposited by Simon directly to Peter’s bank account which was not
yet recorded by Peter in its books. The check has already cleared in
Simon’s bank account.
2. Peter sold goods costing P80,000 to Simon for P128,000. One-third of the
inventory remains as of December 31, 2017.
3. Simon sold goods costing P40,000 to Peter for P60,000. One-half of the
goods remain in inventory as of December 31, 2017.
4. On January 1, 2017, Simon sold to Peter equipment for P20,000. The
equipment had a historical cost of P40,000 and accumulated depreciation
of P16,000 and a remaining useful life of 5 years on the date of sale.
5. On July 1, 2017 Simon Co. purchased 50% of the outstanding bonds of Peter
Co. from the open market for P240,000. The interest income accruing on
the bonds for the year was received by Simon from Peter.
6. The bonds payable carry an interest rate of 10% and were originally
issued by Peter at face amount.
7. Peter declared dividends of P160,000.
8. Simon declared dividends of P80,000.
9. Goodwill is impaired by P8,000.
10. There have been no changes in Simon’s capital.
The individual financial statements of the entities at December 31, 2017 are
shown below.
Peter Simon
Sales 3,728,000 1,020,000
Cost of Goods Sold (1,700,000) (472,000)
Gross Profit 2,028,000 548,000
Interest Income 8,000
Depreciation Expense (644,000) (27,200)
Distribution Costs (256,000) (144,000)
Interest Expense (40,000)
Loss on sale of equipment (4,000)
Dividend Income 72,000
Profit for the year 1,160,000 380,800
1. Consolidated Sales
2. Consolidated Cost of Sales
3. Consolidated Ending Inventory
4. Goodwill in the December 31, 2017 consolidated financial statements.
5. How much is the NCI in net assets as of December 31, 2017?
6. Consolidated retained earnings as of December 31, 2017.
7. Consolidated profit or loss as of December 31, 2017.
8. How much is the attributable to the owners of the parent and to NCI
respectively?
9. Consolidated Assets as of December 31, 2017.
10. Consolidated Liabilities as of December 31, 2017.