CHAPTER 18

MULTIPLE CHOICE
18-1:

a
Equipment at original cost
Accumulated depreciation:
Time of sale
Current depreciation based on
Original cost (P500,000/10 years

18-2:

P500,000
P250,000
50,000

b
Net income Sol
Unrealized gain on sale of computer, Dec. 31
Adjusted net income
Minority interest proportionate share
Minority interest in net income of subsidiary (MINIS)

18-3:

P100,000
( 30,000)
P 70,000
30%
P 21,000

b
Net income from own operations Prime
Unrealized gain Downstream
Realized net income Prime
Second Company net income
Consolidated net income

18-4:

P300,000

2005
P200,000
(30,000)
P170,000
100,000
P270,000

2006
P250,000
__P250,000
150,000
P400,000

c
Net income Saw
Unrealized loss-Upstream
Realized loss ((P12,000 / 5) x 6/12
Adjusted net income Saw

P100,000
12,000
( 1,200)
P110,800

Minority interest in net income of subsidiary (P110,800 x 25%) P 27,700

18-5:

c
Equipment at original cost
Accumulated depreciation:
Time of sale
Current depreciation (P900,000/10)

P1,000,000
P360,000
90,000

P 450,000

100

18-6:

a
Adjusted net income Susie (P12,000 / 40%)
Add back: Unrealized gain Upstream
Net income of Susie 2008

18-7:

P 30,000
90,000
P120,000

a
Original cost
Amount debited to Truck account
Selling price of the truck Amount paid

18-8:

P100,000
(48,000)
P 52,000

c
Net income Po
Unrealized gain, Dec. 31 DS
Net income from own operation Po
Net income of So
Consolidated net income, Dec. 31, 2008
MINIS (P180,000 x 20%)
Attributable to parent

18-9:

P200,000
(30,000)
270,000
180,000
P350,000
(36,000)
P314,000

b
Stockholders equity, Jan. 1, 2008 Sy
Increase in earnings 2008 (P65,000 P30,000)
Stockholders equity, Dec. 31, 2008 Sy

P1,000,000
35,000
P1,035,000

Minority interest in net assets of subsidiary (P1,035,000 x 20%) P 207,000

18-10: b
Consolidated net income attributable to parent:
Net income Pink
Unrealized gain, July 1- Downstream
Realized gain, Dec. 31 (P50,000 / 10) x 6/12
Realized net income Pink
Sodas adjusted net loss:
Net loss
P(40,000)
Unrealized loss, 1/1 Upstream
15,000
Realized loss, 12/31 (P15,000/5)
( 3,000)
Consolidated net income, Dec. 31, 2008
MI in net loss of subsidiary (P28,000 x 20%)
Attributable to parent

P300,000
( 50,000)
2,500
P252,500

(28,000)
P224,500
5,600
P230,100

101

Minority interest in net assets of subsidiary

Net assets, Jan. 1, 2008 (P1,240,000 / 80%)
Decrease in earnings:
Net loss
Dividends paid
Net assets, Dec. 31, 2008
Unrealized loss, Dec. 31 (Upstream)
Adjusted net assets, Dec. 31, 2008

P1,550,000
P40,000
30,000

( 70,000)
P1,480,000
( 12,000)
P1,468,000

Minority interest in net assets of subsidiary (P1,468,000 x 20%) P 293,600

18-11: a
Net assets, Dec. 31, 2008
Minority interest, Dec. 31, 2008
Add: MI share of unrealized profit in ending inventory -Upstream
(P36,000 x 20%) x 20%
MI share of unrealized gain on sale of equipment- Upstream
(P60,000 x 20%) (P12,000 / 5)
Minority interest before adjustment
Net assets Steve, Dec.31, 2008 (P200,000 / 20%)
Investment in Steve Company stock Equity method
Acquisition cost:
Net assets, Dec. 31, 2008
Less: net income steve
MINIS
P36,960
MI share of unrealized profit in ending
Inventory Upstream
1,440
MI share of unrealized gain on sale of
Equipment Upstream
9,600
MINIS per book
P48,000
Divided by
20%
Net assets, Jan. 1, 2008
Parents proportionate share
Book value of interest acquired
Add: difference
Purchase price (acquisition cost)
Add: Investment income
Peters share of Steve net income (P240,000 x 80%)
Unrealized profit in ending inventory Downstream
(P24,000 x 20%/120%) x 100%
Unrealized profit in beginning inventory Upstream
(P36,000 x 25/125%) x 80%
Unrealized gain on sale of equipment Upstream
(P48,000 9,600)
Investment in Steve Company, Dec. 31, 2008

P188,960
1,440
9,600
P200,000
P1,000,000

P1,000,000

240,000
P 760,000
x 80%
P 608,000
20,000
P 628,000
P 192,000
( 4,000)
( 5,760)
( 38,400)
P 771,840

102

18-12: a
Net income from own operations Pipe
Pipes share of Smokers adjusted net income:
Net income
Unrealized gain, July 1, 2008 Upstream
Realized gain, Dec. 31, 2008 (P50,000/5)x
Consolidated net income, Dec. 31, 2008

P400,000
P100,000
(50,000)
5,000

55,000
P455,000

18-13: d
Net income from operations Parent
Parents share of adjusted net income of Sub:
Net income
Unrealized gain Upstream
Realized gain: 2007 (P9,000/3) x
2008 (P9,000/3)
Adjusted net income
Consolidated net income
MINIS
Attributable to parent

2007
P100,000

2008
P120,000

P 60,000
( 9,000)
750
P 51,750
P151,750
(10,350)
P141,400

P 75,000
3,000
P 78,000
P198,000
(15,600)
P182,400

18-14: d
Investment in Sili Company stock Equity method
Acquisition cost
Investment income net of dividends 2005 to 2007:
Increase in earnings (P500,000 P200,000) x 75%
Investment income, Dec. 31, 2007:
Share of Silis net income (P60,000 x 75%)
45,000
Unrealized gain on sale of land Downstream
(15,000)
Unrealized loss on sale of building Downstream
10,000
Realized loss on sale of building (P10,000 / 5) x 75% ( 1,500)
Investment income, Dec. 31, 2008:
Share of Silis net income (P70,000 x 75%)
52,500
Realized loss (P10,000 / 5)
(2,000)
Dividends received:
2007: (P10,000 x 75%)
7,500
2008: (P20,000 x 75%)
15,000
Investment in Sili Company stock, Dec. 31, 2008

P500,000
225,000

38,500
50,500
(22,500)
P791,500

103

18-15: a
Investment in Saw Company stock, Dec. 31, 2008
Acquisition cost
Investment income 2002 to 2006:
Increase in earnings (P500,000 P300,000) x 90%
Investment income 2007 (see above)
Investment income 2008:
Powers share of Saws net income (P120,000 x 90%) P108,000
Realized loss on sale of warehouse (P20,000/2) x 90%
(9,000)
Dividends received:
2007: ( P20,000 x 90%)
P 18,000
2008: ( P30,000 x 90%)
27,000
Investment in Saw Company stock account balance 12/31/08

P550,000
180,000
101,250
99,000
(45,000)
P885,250

104

PROBLEMS
Problem 18-1
Computation of the missing amounts in the working paper eliminations for P Corporation and S
Company:
(1)
P640 (P3,200 x 20%)
(2)
P2,560 (P3,200 x 80%)
(3)
P1,600 (P800 x 2)
(4)
P320 (P1,600 x 20%)
(5)
P1,280 (P1,600 x 80%)
(6)
P3,200 (P800 x 4)
Problem 18-2
a.
Consolidated Net Income
Net income from own operations P Company
Unrealized gain on sale of equipment, Dec. 31 Downstream
Adjusted net income P Co,
S Company net income
Consolidated net income

P200,000
(30,000)
P170,000
180,000
P350,000

b.

Minority interest in net income of subsidiary (P180,000 x 20%)

P 36,000

c.

Minority Interest in Net Assets of Subsidiary:

Stockholders equity, Jan. 1, 2008 S Company
Increase in earnings 2008 (P180,000 P60,000)
Stockholders equity, Dec. 31, 2008 S Company
Minority interest
Minority interest in net assets of subsidiary

P 900,000
120,000
P1,020,000
x 20%
P 204,000

Problem 18-3
Pony Corporation and Subsidiary
Consolidated Income Statement
Year Ended December 31, 2008
Sales (P500,000 + P300,000)
Gain on sale of machinery (schedule 1)
Total revenue
Cost of sales P200,000 + P130,000)
Gross profit
Expenses:
Depreciation (P50,000 +P30,000 P5,000)
P 75,000
Other expenses (P80,000 + P140,000)
220,000
Consolidated net income
Attributable to minority interest (P190,000 + P5,000) +10,000) x 25%
Attributable to parent

P800,000
20,000
820,000
330,000
490,000
295,000
785,000
(28,750)
P266,250

105

Schedule 1:
Selling price Dec. 28, 2008
Book value (P65,000 5) x3
Gain on sale
Unrealized gain (P25,000 P15,000)
Total gain

P36,000
26,000
10,000
10,000
P20,000

Problem 18-4
a.

b.

Consolidated Net Income

Net income from own operations P Company
Adjusted net income of S Company:
Net income S
Unrealized gain, 4/1/08 - Upstream
Realized gain, 12/31/08 (P30,000/5) x 9/12
Consolidated net income
MINIS (P124,500 x 20%)
Attributable to parent
Minority Interest in Net Assets of Subsidiary
Stockholders equity , Jan. 1, 2008 S Company
Increase in adjusted earnings 2008:
Net earnings (P150,000 P50,000)
Unrealized gain 12/31 (P30,000 P4.500)
Stockholders equity, Dec. 31, 2008
Minority interest
MINAS

P300,000
P150,000
( 30,000)
4,500

124,500
424,500
(24,900)
P399,600

P800,000
P100,000
(25,500)

74,500
P874,500
x 20%
P114,900

Problem 18-5
a.

b.

Consolidated Net Income - 2008

Net income from own operations BJ
Gain on sale of machine, July 1 - Downstream
Realized gain, Dec. 31 (P50,000 / 10) x 6/12
Adjusted net income BJ
Net income (loss) of DK:
Net income (loss) DK
Loss on sale of truck , Jan. 1 - Upstream
Realized loss, Dec. 31 (P15,000 / 5)
Consolidated net income
Minority Interest in Net Income of Subsidiary
Net loss from own operations DK
Upstream loss on sale of truck
Realized loss on sale of truck
Adjusted net loss
Minority interest
MI in net loss of subsidiary

P300,000
(50,000)
2,500
P252,500
P(40,000)
15,000
( 3,000)

(28,000)
P224,500
P (40,000)
15,000
( 3,000)
P ( 28,000)
x 20%
P ( 5,600)

106

c.

Minority Interest in Net Assets of Subsidiary

Net assets, Jan. 1, 2006 (P1,240,000 / 80%)
Increase in earnings (loss) -2006 (P40,000 + P30,000)
Net assets, Dec. 31, 2006
Unrealized loss Upstream (P15,000 P3,000)
Adjusted net assets
Minority interest
MINAS

P1,550,000
(70,000)
P1,480,000
12,000
P1,492,000
x 20%
P 298,400

Problem 18-6
Texas Company and Subsidiary
Consolidated Income Statement
Year Ended December 31, 2008
Sales
Cost of goods sold
Gross profit
Expenses (P200,000 + P100,000 P8,000 )
Consolidated net income
Attributable to minority interest (P150,000 x 25%)
Attributable to parent

P1,500,000
650,000
850,000
292,000
P 558,000
37,500
P 520,500

Adjustment for expenses (depreciation) = P40,000 / 5 years.

Problem 18-7
a.

Leo Company and Subsidiary

Consolidated Balance Sheet Working Paper
December 31, 2007
Leo
Company
101,000
80,000
150,000
400,000
141,000

Taurus
Corporation
20,000
40,000
90,000
300,000

Total debits

872,000

450,000

Accumulated depreciation
Accounts payable
Notes payable
Common stock
Retained earnings

135,000
90,000
200,000
100,000
347,000

85,000
25,000
90,000
200,000
50,000

Cash and receivables

Inventory
Land
Building and equipment
Investment in stock Taurus

MI in net assets in Subsidiary

Total

872,000

450,000

Adjustments

& Eliminations

Debit

Credit

(2) 10,000
(3) 9,000
(3) 15,000

(1)150,000
(2) 6,000

Consolidated
121.000
120,000
250,000
709,000
1,200,000

(3) 24,000

244,000
115,000
290,000
100,000
347,000

(1)100,000
(2) 4,000

104,000

(1)200,000
(1) 50,000

1,200,000

107

(1) To eliminate equity accounts of subsidiary

(2) To intercompany gain on sale of land.
(3) To eliminate intercompany gain on sale of equipment debited to Investment account and restore equipment to
its original book value.

b.

Leo Company and Subsidiary

Consolidated Balance Sheet
December 31, 2008
Cash and receivables
Inventory
Land
Building and equipment
Less: Accumulated depreciation
Total assets

P121,000
120,000
250,000
P709,000
244,000
465,000
P956,000

Accounts payable
Notes payable
Common stock stock
Retained earnings
Minority interest in net assets of subsidiary
Total liabilities and equity

P115,000
290,000
100,000
347,000
104,000
P956,000

Problem 18-8
a.

Working Paper Elimination Entries Dec. 31, 2008

(1)

(2)

(3)

(4)

Dividend income
Minority interest in net assets of subsidiary
Dividends declared Jupiter
To eliminate intercompany dividends

4,000
1,000
5,000

Common stock Jupiter

100,000
Retained earnings Jupiter
50,000
Investment in Jupiter stock
Minority interest in net assets of subsidiary
To eliminate equity accounts of Jupiter as of the
date of acquisition
Goodwill
Investment in Jupiter Stock
To allocate difference to goodwill

120,000
30,000

40,000

Retained earnings Jan. 1

8,000
Minority interest in net assets of subsidiary
2,000
Land
To eliminate unrealized gain on sale of land Upstream.

40,000

10,000

108

(5)

(6)

(7)

(8)

Gain on sale of equipment

Building and equipment
Accumulated depreciation
To eliminate gain on sale of equipment
Accumulated depreciation
Depreciation
To adjust excess depreciation

20,000
5,000
25,000
2,000
2,000

Accounts payable
7,000
Accounts receivable
To eliminate intercompany payables and receivables.

7,000

Minority interest in net income of subsidiary

6,000
Minority interest in net assets of subsidiary
(P40,000 10,000) x 20%

6,000

109

b.

Vincent Company and Subsidiary

Consolidation Working Paper
December 31, 2008

Income Statement
Sales
Gain on sale of equipment
Dividend income
Total revenues
Cost of goods sold
Depreciation
Other expenses
Total cost and expenses
Net/consolidated income
MI in net income of subsidiary
Net income carried forward
Retained Earnings Statement
Retained earnings, Jan.1
Net income from above
Total
Dividends declared
Retained earnings, Dec. 31
Carried forward
Balance Sheet
Cash and receivables
Inventory
Land
Buildings and equipment
Investment in Jupiter stock
Goodwill
Total
Accumulated depreciation
Accounts payable
Bonds payable
Common stock
Retained earnings from above
MI in net assets of subsidiary
Total

Vincent
Company

Jupiter
Company

240,000
20,000
4,000
264,000
140,000
25,000
15,000
180,000
84,000

120,000

84,000

40,000

294,000

105,000

84,000
378,000
30,000

40,000
145,000
5,000

348,000

140,000

113,000
260,000
80,000
500,000
160,000

35,000
90,000
80,000
150,000

1,113,000

355,000

205,000
60,000
200,000
300,000
348,000

45,000
20,000
50,000
100,000
140,000

Adjustments

& Eliminations

Debit

Credit

(5) 20,000
(1) 4,000
120,000
60,000
15,000
5,000
80,000
40,000

(6) 2,000

(8) 6,000

(2) 50,000
(4) 8,000
(1) 5,000

96,000
437,000
30,000
407,000

(7) 7,000
(4) 10,000
(5) 5,000
(2)120,000
(3) 40,000

355,000

360,000
360,000
200,000
38,000
20,000
258,000
102,000
(6,000)
96,000
341,000

(3) 40,000

1,113,000

Consolidated

(6) 2,000
(7) 7,000

141,000
350,000
150,000
655,000
40,000
1,336,000

(5) 25,000

(2)100,000
(1) 1,000
(4) 2,000

(2) 30,000
(8) 6,000

245,000

245,000

273,000
73,000
250,000
300,000
407,000
33,000
1,336,000

110

c.

Consolidated Financial Statements

Vincent Company and Subsidiary
Consolidated Balance Sheet
December 31, 2008
Assets
Cash and receivables
Inventory
Land
Buildings and equipment
Less: Accumulated depreciation
Goodwill
Total assets
Liabilities and Stockholders equity
Liabilities
Accounts payable
Bonds payable
Total liabilities
Stockholders Equity
Common stock
Retained earnings
Minority interest in net assets of subsidiary
Total liabilities and stockholders equity

P 141,000
350,000
150,000
P655,000
273,000

382,000
40,000
P1,063,000

73,000
250,000
P 323,000
P300,000
407,000
33,000

740,000
P1,063,000

Vincent Company and Subsidiary

Consolidated Income Statement
Year Ended December 31, 2008
Sales
Cost of goods sold
Gross profit
Expenses: Depreciation
Other expenses
Consolidated net income
Attributable to minority interest
Attributable to parent

P 360,000
200,000
160,000
P 38,000
20,000

58,000
102,000
6,000
P 96,000

Vincent Company and Subsidiary

Consolidated Retained Earnings
Year Ended December 31, 2008
Retained earnings, Jan. 1 Vincent
Retained earnings, Jan. 1 Jupiter
Total
Consolidated net income attributable to parent
Dividends declared Vincent
Consolidated retained earnings

P 294,000
47,000
341,000
96,000
( 30,000)
P 407,000

111

Problem 18-9
(a)

P100,000 (the common stock of Phantom only)

(b)

P140,000

P250,000 (P593,000 P343,000)

(d)

P100,000 (P126,000 P35,000) + [(P25,000 + P85,000) - P101,000]

(e)

(f)

Purchase price, Jan. 1, 2008

Undistributed earnings from 1/1/05 to 1/1/08:
(P80,000 P30,000) x 60%
Undistributed income for 2008 (P30,000 P20,000) x 60%
Total
Adjustments:
Unrealized gain on sale of land Downstream (g)
Unrealized gain on sale of equipment Upstream
(P9,000 P3,000) x 60%
Adjusted Investment account balance, Dec. 31, 2008

(g)

P7,000 (P70,000 + P90,000) P153,000

(h)

(i)

P510,000 [P345,000 + P150,000 + (P60,000 P45,000)]

(j)

P278,000 = P180,000 + P80,000 + [(P60,000/5) x 4 ]

Less [(P45,000 / 3) x 2 years]

(k)

Retained earnings, Dec. 31, 2008

Less: Share of unrealized profit on sale of equipment:
Gain record [P45,000 (P60,000 x 3/5)]
Realized in 2008 (P9,000 / 3)
Unrealized
Phantoms interest
Consolidated retained earnings

(l)

P105,000
30,000
6,000
P141,000
(7,000)
(3,600)
P 70,400

P380,000
P9,000
3,000
P6,000
x 60%

Net income Shadow, 2008 (P250,000 P220,000)

Realized gain on sale of building c Dec. 31, 2006 Upstream
Adjusted net income
Minority interest
Minority interest in net income of subsidiary

3,600
P376,400
P 30,000
3,000
P 33,000
x 40%
P 13,200

112

Problem 18-10
Supporting computations
(1)

Allocation schedule (purchase price)

Less: Book value of interest acquired (P350,000 x 60%)
Difference
Allocated to patents (P120,000 x 60%)
Goodwill

P 372,000
210,000
P 162,000
( 72,000)
P 90,000

Amortization of patents (P120,000 / 12)

P 10,000

(2)

Unrealized gain on intercompany sale of building Upstream, Jan. 1, 2006:

Unrealized gain at date of sale (P80,000 P30,000)
P 50,000
Realized gain (P50,000 / 5) x 2 years
(20,000)
Unrealized gain as of Jan. 1, 2008
P 30,000

(3)

Realized profit from intercompany sale of inventory Downstream, 1/1/08:

Remaining inventory as of Dec. 31, 2007
P 50,000
Gross profit rate on sales 2007 (P30,000 / P150,000)
x 20%
Realized profit as of Jan. 1, 2008
P 10,000

(4)

Unrealized profit from intercompany sale of inventory Downstream, 12/31/08

Remaining inventory as of Dec. 31, 2008
P 40,000
Gross profit rate on sales 2008 (P48,000 / P160,000)
x 30%
Unrealized profit as of Dec. 31, 2008
P 12,000

Consolidated balances 2008

a.

b.

Cost of goods Sold

Cost of goods sold Apex
Cost of goods sold Small
Intercompany sale of inventory 2008
Realized profit on beginning inventory
Unrealized profit on ending inventory
Consolidated

P 460,000
205,000
(160,000)
( 10,000)
12,000)
P 507,000

Operating Expenses
Operating expenses Apex
Operating expenses Small
Amortization (No. 1 above)
Excess depreciation (P50,000 / 5 years)
Consolidated

P 170,000
70,000
10,000
(10,000)
P 240,000

113

c.

Consolidated Net Income

Sales (after elimination of intercompany sales)
Cost of goods sold (a)
Operating expenses (b)
Minority interest in net income of subsidiary:
Net income Small
Realized gain on sale of building Upstream
Adjusted net income
Minority interest
Attributable to parent

P 840,000
(507,000)
(240,000)
P25,000
10,000
P35,000
x 40%

( 14,000)
P 79,000

d.

Consolidated Retained Earnings, Jan. 1, 2008

Retained earnings, Jan. 1, 2008 Apes
P 690,000
Amortization of patents 2002 to 2007 (P10,000 x 6)
(60,000)
Unrealized profit on inventory, 2007 Downstream
(10,000)
Unrealized gain on sale of building, 1/1/08 - Upstream (P30,000 x 60%)
(18,000)
Consolidated retained earnings, Jan. 1, 2008
P 602,000

e.

Consolidated Inventory
Inventory Apex
Inventory Small
Unrealized profit in inventory Dec. 31, 2008
Consolidated inventory

P 233,000
229,000
( 12,000)
P 450,000

Consolidated Building
Buildings Apex
Buildings Small
Unrealized gain, Jan. 1, 2006
Realized gain, 2006 2008 (P10,000 x 3 )
Consolidated buildings

P 308,000
202,000
(50,000)
30,000
P 490,000

Consolidated Patents
Patents Small
Allocation
Amortization, 2002 2008 (P10,000 x 7)
Consolidated patents (net)

P 20,000
120,000
( 70,000)
P 70,000

f.

g.

h.

Consolidated Common Stock = P300,000 (Apex common stock)

i.

Minority Interest in Net Assets of Subsidiary

Stockholders equity Small, Dec. 31, 2008 (P100,000 + P420,000)
Unrealized gain on sale of building, Dec. 31,2008 Upstream
Adjusted net assets, Dec. 31, 2008
Minority interest
Minority interest in net assets of subsidiary

P 520,000
(20,000)
P 500,000
x 40%
P
200,000

114

Problem 18-11
a.

Working Paper Elimination Entries

(1)

(2)

(3)

(4)

(5)

(6)

Retained earnings Jan. 1

Investment in Duke
To adjust Investment account for unrealized profit
in inventory on Dec. 31, 2005 (P10,000 x 60%)

6,000

Income from Duke Company

Minority interest in net assets of subsidiary
Dividends declared Duke
Investment in Duke
To eliminate intercompany dividends.

84,000
24,000

6,000

60,000
48,000

Common stock Duke

320,000
APIC Duke
90,000
Retained earnings, 1/1 Duke
620,000
Investment in Duke (60%)
Minority interest in net assets of subsidiary (40%)
To eliminate equity accounts of Duke as of beginning of year.
Goodwill
Investment in Duke
To allocate difference
Impairment loss
Goodwill
To reduce goodwill for impairment.
Sales

100,000
100,000
5,000
5,000
200,000

Cost of goods sold

To eliminated intercompany sales
(7)

(8)

(9)

(10)

(11)

Investment in Duke
Minority interest in net assets of subsidiary
Cost of goods sold
To eliminate realized profit in beginning inventory Upstream

618,000
412,000

200,000
6,000
4,000
10,000

Cost of goods sold

12,000
Inventory
To eliminate unrealized profit in ending inventory Upstream

12,000

Investment in Duke
Land
To eliminate gain on sale of land Downstream

40,000
40,000

Liabilities
Accounts receivable
To eliminate intercompany debt.

40,000

Minority interest in net income of subsidiary

Minority interest in net assets of subsidiary
(P140,000 + 10,000 P12,000 P5,000) x 40%

53,200

40,000

53,200

115

b.

c.

d.

Minority Interest in Net Income of Subsidiary

Net income Duke
Realized profit in beginning inventory Upstream
Unrealized profit in ending inventory Upstream
Impairment loss
Adjusted net income Duke
Minority interest
MINIS

P140,000
10,000
( 12,000)
( 5,000)
P133,000
x 40%
P 53,200

Minority Interest in Net Assets of Subsidiary

Stockholders equity, 1/1/08 Duke (P320,000 + P90,000 + 620,000)
Increase in earnings 2008 (P140,000 P60,000)
P80,000
Unrealized profit in ending inventory
(12,000)
Realized profit in beginning inventory
10,000
Goodwill impairment loss
( 5,000)

P1,030,000

73,000

Adjusted net assets, 12/31/08

Minority interest
MINAS

P1,103,000
x 40%
P 441,200

Consolidated Net Income

Net income from own operations Baron (P284,000 P84,000)
Unrealized gain on sale of land
Adjusted net income- Baron
Adjusted net income of Duke (P133,000 x 60%)
Consolidated net income

P 200,000
(10,000)
P 190,000
133,000
P 323,000

Problem 18 12
Pluto Corporation and Subsidiary Star Corporation
Comparative Consolidated Income Statement
Years Ended December 31, 2007 and 2008
.
.
Sales
Cost of goods sold
Gross profit
Operation expenses
Consolidated net income
Minority interest in net income of subsidiary
Attributable to equity holders of Pluto
Supporting computations:
.
.
Consolidated sales:
Combined sales
Less: intercompany sales
Consolidated sales

December 31
2008
P800,000
442,000
358,000
178,000
180,000
10,000
P170,000

2007
P660,000
368,000
292,000
138,000
154,000
10,000
P144,000

2008

2007

P850,000
(50,000)
P800,000

P700,000
(40,000)
P660,000

.
.
.
.
.
.
.
.
.
.

116

Consolidated cost of goods sold:

Combined costs of good sold
Intercompany sales
Unrealized profit in ending inventory
Unrealized profit in beginning inventory
Consolidated cost of goods sold

P490,000
(50,000)
10,000
(8,000)
P442,000

P400,000
(40,000)
8,000
P368,000

.
.

Consolidated operating expenses

Combined operating expenses
Realized gain on sale of equipment (P10,000/.2)
Consolidated operating expenses

P180,000
(2,000)
P178,000

P140,000
(2,000)
P138,000

.
.

Minority interest in net income of subsidiary

Star Companys reported net income
Gain on upstream sale of land
Unrealized gain in upstream, inventory sales
Realized net income
Minority interest
Minority interest in net income of subsidiary

P65,000
(5,000)
(10,000)
P50,000
20%
P10,000

P50,000
.
P50,000
20%
P10,000

.
.

117

118