Chapter 16

CHAPTER 16
MULTIPLE CHOICES - COMPUTATIONAL
16-1: c, [(P260,000/80%) x 20%]
16-2: d, consolidated CI will decrease by P6,000 due to amortization of the allocated excess
(P60,000 / 10 years).
16-3: a, because there is no NCI in a wholly owned subsidiary.
16-4: c
Investment cost (price paid) P500,000

Less: Book value of interest acquired 480,000
Excess P 60,000
Cost Method Equity Method

Investment cost P500,000 P500,000
Parents share of subsidiarys CI - 120,000
Dividends received from subsidiary - ( 48,000)
Amortization of allocated excess (P60,000/20) - ( 3,000)
Investment account balance, Dec. 31, 2013 P500,000 P569,000
16-5: a
NCI, January 2, 2013 [(P270,000/75%) x 25%] P 90,000

NCI in S Company dividends [(P60,000/75%) x 25%] (16,000)
NCI in S Company CI (P160,000 x 25%) 40,000
NCI balance, December 31, 2013 P114,000
16-6: a
Punos CI P 145,000
Dividend income (P40,000 x 90%) ( 36,000)
Punos CI from own operations 109,000
Salas CI from own operations 120,000
Consolidated CI P 229,000
16-7: b
Peters CI from own operations P1,000,000

Sellers CI from own operations 200,000
Consolidated CI 1,200,000
Attributable to NCI (P200,000 x 20%) 40,000
Attributable to parent P1,160,000
68
16-8: a
2011 2012 2013

Investment in Son, Jan. 1 P310,000 P396,200 P512,400
Pops share of Sons CI (100%) 150,000 180,000 200,000
Dividends received (100%) ( 60,000) (60,000) ( 60,000)
Amortization of allocated excess to
Equipment (P38,000 / 10) ( 3,800) ( 3,800) ( 3,800)
Investment in Son, Dec. 31 P396,200 P512,400
P648,600
16-9: a
Sys CI P300,000
Amortization of allocated excess ( 60,000)
Adjusted CI of Sy P240,000
NCI in CI of subsidiary (P240,000 x 10%) P 24,000
16-10: a. Under the equity method consolidated retained earnings is equal to the retained
earnings of the parent company.
16-11: c
Retained earnings, Jan. 2, 2013 Puzon P500,000

Consolidated CI attributable to parent:
CI Puzon P200,000
CI Suarez 40,000
Dividend income (P20,000 x 80%) (16,000)
NCI in Suarez CI (P40,000 x 20%) ( 8,000) 216,000
Dividends paid Puzon ( 50,000)

Consolidated retained earnings, Dec. 31, 2013 P666,000
16-12: c
Price price P1,700,000

Less book value of interest acquired: 1,260,000
Excess P 440,000
Allocation due to undervaluation of net assets ( 40,000)
Goodwill P 400,000
16-13: d
NCI, January 2, 2013 [(P975,000/80%) x 20%] P243,750

NCI in subsidiary dividends (P125,000 x20%) (25,000)
NCI in adjusted CI of subisidiary (P190,000 P10,000) x 20% 36,000
NCI, December 32, 2013 P182,750
69
16-14: b
Prestos CI from own operations P140,000

Storks CI March to December (P80,000 P23,000) 57,000
NCI share in Storks CI (P57,000 x 10%) ( 5,700)
Consolidated CI attributable to parent P191,300
16-15: b
Investment in Siso Company (at date of acquisition) P600,000
Dividend income (P30,000 x 5%) P 1,500
16-16 d
Consolidated CI:
Pepes CI from own operations P210,000
Sisons adjusted CI:
CI -2013 P67,000
Amortization of allocated excess
to equipment (P20,000 / 5) 4,000 63,000
Consolidated CI P273,000
Consolidated retained earnings:

Pepes retained earnings, Jan.2, 2012 P701,000
Consolidated CI attributable to parent 2012
Pepes CI from own operations P185,000
Sisons adjusted CI;
CI 2012 P40,000
Amortization -2012 4,000 36,000
NCI in Sisons CI (P36,000 x 30%) (10,800) 210,200
Dividends paid ,2012 - Pepe ( 50,000)
Pepes retained earnings, Jan. 2, 2013 P861,200
Consolidated CI attributable to parent 2013:
Consolidated CI (see above) P273,000
NCI in Sisons CI (P63,000 x 30%) ( 18,900) 254,100
Dividends paid, 2013 Pepe ( 60,000)

Consolidated retained earnings, Dec. 31, 2013 P1,055,300
16-17: a
Price paid P 700,000

NCI, June 30, 2013 [(P700,000/70%) x 30%} 300,000
Total 1,000,000
Less book value of Susys net assets (P650,000 + P250,000) 900,000
Excess, allocated to building P 100,000
Amortization (P100,000 / 10) x 2/12 5,000
70
16-17, continued:
Consolidated retained earnings
Retained earnings, Jan. 1, 2013 Pepe P550,000
CI Precy P275,000
Adjusted CI of Susy:
CI of Susy P100,000
Amortization (P100,000 / 10) 2 ( 5,000) 95,000
NCI in Susys CI (P95,000 x 30%) (28,500) 341,500
Dividends paid Precy ( 70,000)
Non-controlling interest
NCI, June 30, 2013 P300,000
NCI in Susys dividends, July 1 to December 31 -0-
NCI in Susys CI (P100,000 P5,000) x 30% 28,500
NCI, December 31, 2013 P328,500
16-18: a
Goodwill
Price paid P1,200,000
Less: Book value of interest acquired (P1,320,000 P320,000) 1,000,000
Goodwill (not impaired) P 200,000
Consolidated retained earnings under the equity method is equal to the retained
earnings of the parent company, P1,240,000.
16-19: b
CI Pablo P130,000
Sitos CI 70,000
NCI in Sitos CI (P70,000 x 30%) (21,000)
Consolidated CI attributable to parent P151,000
16-20: c
Consolidated net income 2013

CI Ponce P 90,000
Solis CI 40,000
NCIin Solis CI (P40,000 x 40%) (16,000)
Consolidated CI attributable to parent 2013 P105,000
71
16-20, continued:
Consolidated retained earnings 2013
Retained earnings, Jan. 2, 2012- Ponce P 400,000
Consolidated CI attributable to parent 2012
CI Ponce P70,000
Solis CI 35,000
NCI in Soliss CI (P35,000 x 40%) ( 14,000) 75,000
Dividends paid, 2012 Ponce (25,000)
Consolidated CI attributable to parent 2013 105,000
Dividends paid. 2013 Ponce (30,000)
16.21 b
Price paid, January 2, 2013 P216,000

NCI, January 2, 2013 {(P216,000/80%) x 20%] 54.000
Total 270,000
Less book value of Seeds net assets (P80,000 + P140,000) 220,000
Excess 50,000
Allocated to:
Depreciable assets (40,000)
Goodwill 10,000
Consolidated CI, December 31, 2013:

Polo CI from own corporation P 95,000
Seed CI from own operation:
CI 35,000
Amortization (40,000 10%) (4,000)
GW impairment lost (8,000) 23,000
Total P118.000
16-22: c
Retained earnings 1/1/013 Polo P520,000

Consolidated CI attributed to parent:
Consolidated CI 118,000
NCI in Seeds adjusted CI (23,000x 20%) (4,600) 113,400
Total 633,400
Dividends paid- Polo (46,000)
Consolidated retained earnings 12/31/013 P587,400
16-23: b, P4,600 (see 16-22)
72
16-24: c
NCI, January 2, 2013 P 54,000

NCI ins Seeds dividends (P15,000 x 20%) (3,000)
NCI in Seeds CI 4,600
NCI, December 31, 2013 P 55,600
16-25: c (see no. 16-22)
16-26: a
Price paid, January 1, 2012 P231,000

NCI, January 1, 2012 [(P231,000/70%) x 30%] 99,000
Total 330,000
Less book value of Sisas net assets 280,000
Excess 50,000
Allocated to depreciable assets (10 years remaining life) (50,000)
Retained earnings, 1/1/13-Sisa company P230,000

Retained earnings, 1/1/12-Sisa company (squeeze) 155,000
Increase 75,000
Amortization- prior years (50,000 10 years) (5,000)
Adjusted increase in earnings of Sisa (21,000/30% ) P70,000
16-27: a
Retained earnings 1/1/13- Pepe P520,000
Retained earnings 1/1/13- Sisa 230,000
Adjustment and elimination:
Date of acquisition (155,000)
Undistributed earnings to NCI (21,000)
Amortization- prior year (5,000) 49,000
16-28: a
Pepe company CI, 2013 P120,000
Sisa company CI, 2013 25,000
Dividend income (10,000 x 70%), 2013 (7,000)
Amortization- 2013 (5,000)
16-29: a
Consolidated retained earnings 1/1/13(see 16 27) P569,000
Consolidated CI (see 16-28) 133,000
NCI in Sisa CI (25,000 5,000) 30% (6,000) 127,000
Dividend paid- Pepe company ( 50,000)
73
16-30: a
Cash Proceeds P3,000,000

Fair value of retained NCI (40%) 1,750,000
Carrying amount of NCI before deconsolidation 500,000
Total 5,250,000
Less carrying value of Simon Company net assets 5,000,000
Gain on sale to profit or loss P 250,000
16-31: c
The gain is computed as follows:

Cash proceeds P280,000
Carrying value of interest sold (P2,400,000 x 10%) 240,000
Gain to APIC P 40,000
Since the APIC is only P30,000 on the date of sale, the remaining P10,000 is to be
credited to retained earnings account.
74
PROBLEMS
Problem 16-1
1. Determination and Allocation of Excess Schedule:
Implied Parent Price NCI Value

Fair Value (80%) (20%)
Fair value of subsidiary P 312,500 P 250,000 P 62,500

Less book value of interest acquired
Capital stock P 100,000
Retained earnings 150,000
Total equity P 250,000 P 250,000 P 250,000
Interest acquired 80% 20%
Book value P200,000 P 50,000
Excess P 62,500 P 50,000 P 12,500
Allocation to:
Fixed assets 62,500
2. Working Paper Elimination Entries:
a. Eliminate dividends declared by the subsidiary against dividend income and NCI:
Dividend income 4,000

NCI 1,000
Dividends declared Sulu 5,000
b. Eliminate equity accounts of the subsidiary against the investment account and
the NCI account.
Common stock Sulu 100,000

Retained earnings Sulu 150,000
Investment in Sulu Company 200,000
NCI 50,000
c Allocate excess to fixed assets:
Fixed assets 62,500

Investment in Sulu Company 50,000
NCI 12,500
d. Amortized fixed assets (P62,500 / 10)

Expenses 6,250
Fixed assets 6,250
e. Recognize NCI in subsidiary net income:

NCI in subsidiary CI 3,750
75
NCI 3,750
Probem 16-1 concluded
3. Pedro Company
Consolidated Statement of CI
Year Ended December 31, 2013
Sales P250,000
Expenses 191,250
Attributable to NCI 3,750
Attributable to controlling interest P 55,000
4. Pedro Company
Statement of Retained Earnings
Retained earnings, January 1 Pedro Company P200,000

Consolidated CI attributable to controlling interest 55,000
Retained earnings, December 31, 2011 P255,000
5. Pedro Company
Consolidated Statement of Financial Position
December 31, 2013
Assets
Current assets P190,000
Non-current assets
Fixed assets (P662,500 P132,250) 530,250
Total assets P720,250
Liabilities and Stockholders Equity

Current liabilities P100,000
Stockholders Equity:
Controlling interest:
Common stock P300,000
Total P555,000
Non-controlling interest (P62,500 P1,000 + P3,750) 65,250 620,250
Total liabilities and equity P720,250
76
Problem 16-2
1. Eliminations and adjustments:
a to c are the same as in Problem 16-1:
d. Depreciate the fixed asset for the current year and one prior year:
Retained earnings, Jan. 1 Sulu (prior year) 6,250

Expenses (current year) 6,250
Fixed assets 12,500
e. Recognize NCI in subsidiary CI:
NCI in subsidiary CI 1,750

NCI 1,750
e. Assign to the NCI their share of the increase in the subsidiarys

Adjusted undistributed earnings of prior year:
Retained earnings, January 1- Sulu 2,750

NCI 2,750
Retained earnings, January 1, 2013 P170,000
Retained earnings, January 2, 2012 150,000
Increase in undistributed earnings P 20,000
Amortization in prior years 6,250
Adjusted undistributed earnings P 13,750
NCI % 20%
NCI P 2,750
2. Pedro Company
Sales P300,000
Expenses (P245,000 + P6,250) 251,250
Attributable to NCI 1,750
Attributable to controlling interest P 47,000
77
Problem 16-3
Amortization Schedule
Annual
Accounts Adjustments Life Amount 2010 2011 2012 2013
Inventory 1 P 6,250 P 6,250
Amortization:
Investments 3 5,000 5,000 5,000 5,000 5,000
Buildings 20 12,500 12,500 12,500 12,500 12,500
Equipment 5 34,500 34,500 34,500 34,500 34,500
Patent 10 2,250 2,250 2,250 2,250 2,250
Trademark 10 2,000 2,000 2,000 2,000 2,000
Discount on bonds payable 5 2,500 2,500 2,500 2,500 2,500
Total P 65,000 P 65,000 P 58,750 P 58,750 P58,750
Problem 16-4
Allocation Schedule
Price paid P206,000
Less: Book value of interest acquired 140,000
Excess P 66,000
Allocation:
Equipment P(40,000)
Buildings 10,000 (30,000)
Goodwill (not impaired) P 36,000
a. Investment in Stag Company 12/31/13 (at acquisition cost) P 206,000
b. Non-controlling interest P -0-
c. Consolidated CI
CI from own operations Pony (P310,000 P198,000) P 112,000
CI from own operations Stag (P104,000 P74,000) 30,000
Amortization: Equipment (P40,000/8) P5,000
Buildings (P10,000/20) (500) ( 4,500)
d. Consolidated Equipment
Total book value (P320,000 + P50,000) P 370,000
Allocation 40,000
Amortization (P5,000 x 3 years) (15,000)
Total P 395,000
78
Problem 16-4 concluded
e. Consolidated Buildings
Total book value P 288,000
Allocation ( 10,000)
Amortization (P500 x 3 years) 1,500
Total P 279,500
f. Consolidated Goodwill (not impaired) P 36,000
g. Consolidated Common Stock (Pony) P 290,000
h. Consolidated Retained Earnings

Retained earning, Dec. 31, 2013 Pony P 410,000
Add: Ponys share of Stags adjusted increase in earnings
Net earnings 2013 (P30,000 P20,000) P10,000
Amortization ( 4,500) 5,500
Retained earnings, December 31, 2013 P 415,500
Problem 16-5
a. Working Paper Elimination Entries, Dec. 31, 2013
(1) Dividend income 10,000

Dividends declared Short 10,000
To eliminate intercompany dividends.
(2) Common stock Short 100,000

Retained earnings Short 50,000
Investment in Short Company 150,000
To eliminate equity accounts of Short at
date of acquisition
(3) Depreciable asset 30,000

Investment in Short Company 30,000
To allocate excess
(4) Depreciation expense 5,000

Depreciable asset 5,000
To amortize allocatedexcess
79
Problem 16-5 concluded
b. Pony Corporation and Subsidiary

Consolidation Working Paper
December 31, 2013
Pony Short Adjustments & Eliminations Consoli-

Corporation Company Debit Credit dated
Statement of CI
Sales 200,000 120,000 320,000
Dividend income 10,000 (1) 10,000 -
Total 210,000 120,000 320,000
Depreciation 25,000 15,000 (3) 5,000 45,000
Other expenses 105,000 75,000 180,000
Total 130,000 90,000 225,000
CI carried forward 80,000 30,000 95,000
Retained Earnings
Retained earnings, Jan. 1 230,000 50,000 (2) 50,000 230,000
CI from above 80,000 30,000 95,000
Total 310,000 80,000 325,000
Dividends declared 40,000 10,000 (1) 10,000 40,000
Retained earnings, Dec. 31
Carried forward 270,000 70,000 285,000
Statement of FP
Cash 15,000 5,000 20,000
Accounts receivable 30,000 40,000 70,000
Inventory 70,000 60,000 130,000
Depreciable asset (net) 325,000 225,000 (3) 30,000 (4) 5,000 575,000
Investment in Short company 180,000 (2)150,000 -
(3) 30,000
Total 620,000 330,000 795,000
Accounts payable 50,000 40,000 90,000

Notes payable 100,000 120,000 220,000
Common stock
Pony 200,000 200,000
Short 100,000 (2)100,000
From above 270,000 70,000 285,000
Total 620,000 330,000 195,000 195,000 795,000
80
Problem 16-6
a. Working Paper Elimination Entries

NCI 2,000
Dividends declared Sisa 10,000
(2) Common stock Sisa 100,000

Retained earnings Sisa 50,000
Investment in Sisa stock 120,000
NCI 30,000
(3) NCI in CI of subsidiary 6,000

NCI 6,000
b. Popo Corporation and Subsidiary

Consolidated Working Paper
December 31, 2013
Popo Sisa Adjustments & Eliminations Consoli-
Statement of CI
Sales 200,000 120,000 320,000
Total revenue 208,000 120,000 320,000
Depreciation expense 25,000 15,000 40,000
Other expenses 105,000 75,000 180,000
Total expenses 130,000 90,000 220,000
CI 78,000 30,000 100,000
NCI in CI of Sub. (3) 6,000 ( 6,000)
Retained Earnings
Retained earnings, 1/1 230,000 50,000 (2) 50,000 230,000
CI from above 78,000 30,000 94,000
Total 308,000 80,000 324,000
Retained earnings, 12/31
Carried forward 268,000 70,000 284,000
Statement of FP
Current assets 173,000 105,000 278,000
Depreciable assets 500,000 300,000 800,000
Investment in Sisa Company 120,000 (2)120,000 -
Total 793,000 405,000 1,078,000
Accumulated depreciation 175,000 75,000 250,000

Current liabilities 50,000 40,000 90,000
Long-term debt 100,000 120,000 220,000
Common stock 200,000 100,000 (2)100,000 200,000
Retained earnings , 12/31
From above 268,000 70,000 284,000
NCI (1) 2,000 (2) 30,000 34,000
81
(3) 6,000
Total 793,000 405,000 166,000 166,000 1,078,000
Problem 16-6 - Concluded

c. Consolidated Financial Statements
Popo Corporation and Subsidiary

December 31, 2013
Assets
Current assets P278,000
Depreciable assets P800,000
Less: Accumulated depreciation 250,000 550,000
Total assets P828,000

Current liabilities P 90,000
Long-term debt 220,000
Total liabilities P310,000
Stockholders Equity
Common stock P200,000
Retained earnings, 12/31 284,000
Minority interest in net assets of subsidiary 34,000 518,000
Total liabilities and stockholders equity P828,000

Sales P320,000
Expenses:
Depreciation expense P 40,000
Other expenses 180,000 220,000
NCI in CI of subsidiary 6,000
Attributable to parent P 94,000

Consolidated Retained Earnings
Retained earnings, Jan. 1 Popo P230,000

Consolidated CI attributable to parent 94,000
Total P324,000
Dividends paid Popo 40,000
Consolidated retained earnings, Dec. 31 P284,000
82
Problem 16-7
a. Palo Corporation and Subsidiary

December 31, 2013
Palo Sebo Adjustments & Eliminations Consoli-

Statement of CI
Sales 300,000 150,000 450,000
Investment Income 19,000 (1) 19,000 -
Total revenues 319,000 150,000 450,000
Cost of goods sold 210,000 85,000 295,000
Other expenses 23,000 25,000 48,000
Total cost and expenses 258,000 130,000 388,000
Retained Earnings
Retained earnings, Jan. 1 230,000 50,000 (2) 50,000 230,000
CI from above 61,000 20,000 62,000
Total 291,000 70,000 292,000
carried forward 271,000 60,000 272,000
Statement of FP
Cash 37,000 20,000 57,000
Inventory 70,000 60,000 130,000
Buildings and equipment 300,000 240,000 540,000
Investment in Sebo Company 229,000 (1) 9,000 -
(2)200,000
(3) 20,000
Goodwill (3) 20,000 20,000
Total 686,000 350,000 827,000

Taxes payable 70,000 55,000 125,000
Common stock 200,000 150,000 (2)150,000 200,000
from above 271,000 60,000 272,000
Total 686,000 350,000 239,000 239,000 827,000
83
Problem 16-7 - Concluded
b. Consolidated Financial Statements
Palo Corporation and Subsidiary

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

Consolidated Retained Earnings
Retained earnings, January 1 Palo P230,000

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

December 31, 2013
Assets
Cash P 57,000
Accounts receivable 80,000
Inventory 130,000
Buildings and equipment P540,000
Less: Accumulated depreciation 170,000 370,000
Goodwill 20,000
Total P657,000

Accounts payable P 60,000
Taxes payable 125,000
Common stock 200,000
Retained earnings, Dec. 31 272,000
Total P657,000
84
Problem 16-8
1. Determination and Allocation of Excess Schedule:

Company Parent Price NCI Value
Estimated FV (80%) (20%)
Fair value of subsidiary P945,000 P756,000 P189,000
Less book value of interest acquired:
Common stock S Company 300,000
Retained earnings S Company 400,000
Total equity 700,000 700,000 700,000
Interest acquired 80% 20%
Book value 560,000 140,000
Excess of fair value over book value 245,000 196,000 49,000
Allocations:
Inventory (30,000)
Land (50,000)
Building (100,000)
Equipment 75,000
Patent (40,000)
Total 145,000
Goodwill P 100,000
Working Paper Elimination Entries - December 31, 2013(not required)
(1) Investment income 94,800

NCI 10,000
Dividends declared S Company 50,000
Investment in S Company 54,800
(2) Common stock S 300,000

Retained earnings, Jan. 1 S 400,000
NCI 140,000
(3) Inventories 30,000

Land 50,000
Building 100,000
Patents 40,000
Goodwill 100,000
Equipment 75,000
NCI 49,000
(4) Cost of goods sold 30,000

Inventory 30,000
Equipment (P75,000 / 10) 7,500

Expenses (amortization) 1,500
Buildings (P100,000 / 20) 5,000
Patents (P40,000 / 10) 4,000
85
NCI 23,700
To recognize NCI in subsidiary CI (P150,000 31,500)x 20%
Problem 16-8, Concluded

2. P Company and Subsidiary
P S Adjustments & Eliminations Consoli-
Company Company Debit Credit dated
Statement of CI
Sales 1,000,000 500,000 1,500,000
Cost of sales 400,000 150,000 (4) 30,000 580,000
Gross profit 600,000 350,000 920,000
Expenses 360,000 200,000 (4) 1,500 561,500
Operating income 240,000 150,000 358,500
Investment income 94,800 - (1) 94,800 -
Net /consolidated income 334,800 150,000 358,500
NCI in CI of
Subsidiary (5) 23,700 (23,700)
Retained earnings
Retained earnings, 1/1 600,000 400,000 (2)400,000 600,000
CI from above 334,800 150,000 334,800
Total 934,800 550,000 934,800
Carried forward 834,800 500,000 834,800
Statement of FP
Cash 200,000 100,000 300,000
Inventories 100,000 40,000 (3) 30,000 (4) 30,000 140,000
Land 150,000 (3) 50,000 200,000
Buildings (net) 200,000 (3)100,000 (4) 5,000 295,000
Equipment (net) 298,000 450,000 (4) 7,500 (3) 75,000 680,500
Patent - - (3) 40,000 (4) 4,000 36,000
Investment in S Company 810,800 (1) 54,800 -
(2)560,000
(3)196,000
Goodwill (3) 100,000 100,000
Total 1,558,800 1,090,000 1,951,500

Common stock 200,000 300,000 (2)300,000 200,000
Additional paid-in capital 400,000 - 400,000
from above 834,800 500,000 834,800
NCI (1) 10,000 (2)140,000 2022,700
(3) 49,000
(5) 23,700
Total 1,558,800 1,090,000 486,200 486,200 1,951,500
86
Problem 16-9
a. Investment in Sally Products Co. 160,000

Cash 160,000
To record acquisition of 80% stock of Sally.
Cash 8,000
Dividend income 8,000
To record dividends received from Sally (P10,000 x 80%)
b. Working Paper Eliminating Entries Dec. 31, 2011

NCI 2,000
Dividends declared Sally 10,000
(2) Common stock Sally 100,000

Retained earnings, 1/1/08 Sally 50,000
Investment in Sally Products 120,000
NCI 30,000
(3) Building and equipment 50,000

Investment in Sally Products 40,000
NCI 10,000
(4) Retained earnings, 1/1 Sally (prior year) 5,000

Depreciation expense (current year) 5,000
Accumulated depreciation Bldg 10,000
(5) Accounts payables 10,000

Cash and receivables 10,000

NCI 5,000
(P30,000 P5,000) x 20%
(7) Retained earnings, 1/1 Sally 7,000

NCI 7,000
To recognize NCI in subsidiarys prior year earnings
[(P50,000 P90,000) P5,000] x 20%
87
c. Pilar Corporation and Subsidiary
December 31, 2013
Pilar Sally Wood Adjustments & Eliminations Consoli-

Corporation Products Debit Credit dated
Statement of CI
Sales 200,000 100,000 300,000
Total revenue 208,000 100,000 300,000

Depreciation expense 25,000 15,000 (4) 5,000 45,000
Inventory losses 15,000 5,000 20,000
Total cost and expenses 160,000 70,000 235,000
Net /consolidated CI 48,000 30,000 65,000
NCI in CI of
subsidiary (6) 5,000 (5,000)
Retained earnings statement

Retained earnings, 1/1 298,000 90,000 (2) 50,000 326,000
(4) 5,000
(7) 7,000
CI from above 48,000 30,000 60,000
Total 346,000 120,000 386,000
carried forward 316,000 110,000 356,000
Statement of FP
Cash and receivables 81,000 65,000 (5) 10,000 136,000
Inventory 260,000 90,000 350,000
Land 80,000 80,000 160,000
Buildings and equipment 500,000 150,000 (3) 50,000 700,000
Investment in Sally 160,000 (2)120,000 -
(3) 40,000
Total 1,081,000 385,000 1,346,000
Accumulated depreciation 205,000 105,000 (4) 10,000 300,000

Accounts payable 60,000 20,000 (5) 10,000 70,000
Notes payable 200,000 50,000 250,000
Common stock 300,000 100,000 (2)100,000 300,000
Retained earnings from above 316,000 110,000 356,000
NCI (1) 2,000 (2) 30,000 50,000
(3) 10,000
(6) 5,000
(7) 7,000
Total 1,081,000 385,000 242,000 242,000 1,346,000
88
Problem 16-10
Determination and Allocation of Excess Schedule (not required)
Price paid P220,000

Common stock Star Company P150,000
Retained earnings, 1/1 Star Company 50,000 200,000
Goodwill P 20,000
a. Eliminating entries:
E(1) Dividend Income 20,000

Dividends Declared
20,000
Eliminate dividend income from subsidiary.
E(2) Common Stock Star Company 150,000

Retained Earnings, January 1 50,000
Investment in Star Company Stock
200,000
Eliminate subsidiary equity accounts.
E(3) Goodwill 8,000

Retained Earnings, January 1 12,000
Investment in Star Company
20,000
Assign excess at beginning of year
Porno Corporation and Star Company

December 31, 2013
Porno Star Eliminations

_____Item_____ Corporation Company Debit
Credit Consolidated Statement of CI
Sales 350,000 200,000 550,000
Dividend income 20,000 - (1) 20,000 _______
Credits 370,000 200,000 550,000
Other expenses 21,000 10,000 31,000
Debits (316,000) (165,000) __ - ____ (481,000)
CI, carry forward 54,000 35,000 20,000 - 69,000
Retained Earnings Statement

Retained earnings, Jan. 1 262,000 60,000 (2) 50,000
(3) 12,000 260,000
CI, from above 54,000 35,000 20,000 69,000
316,000 95,000 329,000
89
Dividends declared (20,000) (20,000) ___ - (1) 20,000 (20,000)
Retained earnings, Dec. 31,
carry forward 296,000 75,000 82,000 20,000 309,000
Statement of FP
Cash 46,000 30,000 76,000
Inventory 75,000 65,000 140,000
Buildings and equipment 300,000 240,000 540,000
Investment in Star Company 220,000 (2)200,000
(3) 20,000
Goodwill - - (3) 8,000 8,000
Debits 696,000 375,000 859,000

Accounts payable` 20,000 30,000 50,000
Taxes payable 50,000 35,000 85,000
Common stock
Light Corporation 200,000 200,000
Star Company 150,000 (2)150,000
Retained earnings, from above 296,000 75,000 82,000 20,000 309,000
Credits 696,000 375,000 240,000 240,000 859,000
Problem 16-11
(1) Determination and Distribution of Excess Schedule:
Company Parent NCI

Implied Price Value
Common stock (P10 Par) 100,000
Total equity 350,000 315,000 35,000
Excess of fair value over book value P115,000 P103,500 P11,500
Adjustments: Amortization Life

Equipment P115,000 P5,750/yr 20 yrs.
(2) Entries:
Investment in Venus Company 195,300

Retained earnings* 137,475
Investment income** 57,825
To adjust the investment to its carrying amount (equity method)
Retained earnings account = 90% x P170,000 change in retained earnings 3 years of
90
Equipment depreciation (3 x 90% x P5,750) = P137,475.
** Investment income = 90% x (P70,000 - P5,750 equipment depreciation) = P57,825.
Problem 16-11 continued:
Cash 700,000
Investment in Venus Company (8/9 x P418,500 cost
+ P195,300 adjustment) 545,600
Gain on sale of investment 154,400
To record the sale of the 8,000 shares of Venus stock.
Problem 16-12
Entries on Plutos books, January 1, 2014:
Investment in Saturn Company 2,960*

Retained earnings Pluto 2,960
To adjust investment carrying amount of shares sold (equity
method). Remaining shares remain at cost, because they will be
consolidated.
Cash 40,000
Investment in Saturn Company 10,960
Additional paid-in capital Pluto 29,040
To record sale of shares. Investment eliminated =
[(2,000 40,000) x P160,000 original cost] plus P2,960
equity adjustment.
Determination and Allocation of Excess Schedule:
Company Parent NCI

Implied Price Value
Total equity 150,000 120,000 30,000
Excess of fair value over book value P50,000 P40,000 P10,000
Adjustment of identifiable accounts: Adjustment Amortization Life

Machine P20,000 P4,000/yr 5 yrs.
Goodwill 30,000
Total P50,000
*Equity adjustment
Income P110,000
Amortization of excess (4 years x P4,000) (16,000)
Dividends (20,000)
Total P74,000
Interest sold (2,000 50,000) x P74,000 P2,960
91
92

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Chapter 16

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CHAPTER 16

MULTIPLE CHOICES - COMPUTATIONAL

16-1: c, [(P260,000/80%) x 20%]

16-3: a, because there is no NCI in a wholly owned subsidiary.

Investment cost (price paid) P500,000

Cost Method Equity Method

NCI, January 2, 2013 [(P270,000/75%) x 25%] P 90,000

Peters CI from own operations P1,000,000

2011 2012 2013

NCI in CI of subsidiary (P240,000 x 10%) P 24,000

Retained earnings, Jan. 2, 2013 Puzon P500,000

Dividends paid Puzon ( 50,000)

Price price P1,700,000

NCI, January 2, 2013 [(P975,000/80%) x 20%] P243,750

Prestos CI from own operations P140,000

Investment in Siso Company (at date of acquisition) P600,000

Dividend income (P30,000 x 5%) P 1,500

Consolidated retained earnings:

Dividends paid, 2013 Pepe ( 60,000)

Price paid P 700,000

Amortization (P100,000 / 10) x 2/12 5,000

Consolidated net income 2013

Price paid, January 2, 2013 P216,000

Consolidated CI, December 31, 2013:

Retained earnings 1/1/013 Polo P520,000

16-23: b, P4,600 (see 16-22)

NCI, January 2, 2013 P 54,000

16-25: c (see no. 16-22)

Price paid, January 1, 2012 P231,000

Retained earnings, 1/1/13-Sisa company P230,000

Cash Proceeds P3,000,000

The gain is computed as follows:

1. Determination and Allocation of Excess Schedule:

Implied Parent Price NCI Value

Fair value of subsidiary P 312,500 P 250,000 P 62,500

2. Working Paper Elimination Entries:

Dividend income 4,000

Common stock Sulu 100,000

c Allocate excess to fixed assets:

Fixed assets 62,500

d. Amortized fixed assets (P62,500 / 10)

e. Recognize NCI in subsidiary net income:

Probem 16-1 concluded

Retained earnings, January 1 Pedro Company P200,000

Liabilities and Stockholders Equity

1. Eliminations and adjustments:

a to c are the same as in Problem 16-1:

Retained earnings, Jan. 1 Sulu (prior year) 6,250

e. Recognize NCI in subsidiary CI:

NCI in subsidiary CI 1,750

e. Assign to the NCI their share of the increase in the subsidiarys

Retained earnings, January 1- Sulu 2,750

a. Investment in Stag Company 12/31/13 (at acquisition cost) P 206,000

b. Non-controlling interest P -0-

f. Consolidated Goodwill (not impaired) P 36,000

g. Consolidated Common Stock (Pony) P 290,000

h. Consolidated Retained Earnings

a. Working Paper Elimination Entries, Dec. 31, 2013

(1) Dividend income 10,000