 Theseare the financial statements of a group presented as

those of a single economic entity.

 Group is a parent and all of its subsidiaries.

A parent shall present consolidated financial statements, except
when (PAS 27)
 The parent is itself a wholly-owned subsidiary, or is a
partially-owned subsidiary of another entity
 The parent’s debt or equity instruments are not traded in a
public market
 The parent did not file, nor is in the process of filing, its
financial statements with a securities commission for the
purpose of issuing any class of instruments in a public market
 The ultimate parent produces consolidated financial
statements available for public use
 Consolidated statements are prepared from the
separate statements of the acquiring company and
acquired company(ies) from the standpoint of a single
economic entity.
 Consolidation procedures are necessary whenever a
parent and a subsidiary relationship existed, except if
the parent is exempted under PAS 27 to present
consolidated financial statements.
 The acquiring company, generally, is a parent if it
owns, directly and indirectly, more than 50% of the
outstanding voting shares of the acquired company. If
the controlling interest is not 100%, the difference
would represent the non-controlling interest.
Under revised provisions of IFRS3 (and also IFRS 10), the non-
controlling interest may be measured at either:

1. 1. full fair value or

(1) II. as a proportionate share in the fair value of identifiable

net assets at the date of acquisition.
 The following steps summarize the consolidation worksheet procedures.
a. Prepare a schedule of excess to determine if there is either goodwill, or,
income from acquisition. This will also be the basis in formulating the
working paper elimination entries.

b. If the working paper is to prepare post acquisition consolidated

statements, computations must show the amortization of
increase/decrease in value of net assets of the acquired company.

Increase/decrease to fair value of net asset items are recognized in full

regardless of the extent of the non-controlling interest. Such re-
measurement and amortization later will affect both the controlling
interest and the non-controlling interests. The same treatment is done
for grossed-up goodwill, re-measurement and amortization, if any, will
all be in the ownership ratios between the parent and the NCIs.
 Working paper elimination entries orchestrate the items and
balances that must comprise the consolidated statements.
Their two basic objectives are (1) to eliminate intercompany
balances and (2) to make adjustments to or set-up some
items in order to conform with purchase principles.

 Basically, in the working papers, similar items from the

parent’s records and from the subsidiary’s records are
simply combined, plus/minus any working paper
adjustments affecting such items. To simplify the
consolidation process, BCVR balances may be used instead
of WPEEs. The former will be prioritized to illustrate date of
acquisition and subsequent consolidations of financial
statements
Based on FV of shares outstanding:

(100,000 shares x 20%) x P22.00 = P440,000

Based on FV of identifiable NA of the subsidiary:

P2,000,000 x 20% = P400,000
(a) NCI is based on fair value of outstanding shares:

Total Parent NCI

Fair value P 2,200,000 P 1,760,000 P 440,000
Control premium 40,000 40,000 -
Revised amounts P 2,240,000 P 1,800,000 P 440,000
Book value (1,500,000) (1,200,000) (300,000)
Excess P 740,000 P 600,000 P140,000
BCVR ( 500,000) (400,000 ) (100,000)
Goodwill P 240,000 P 200,000 P 40,000
(b) NCI is based on the PS of the FV of the NA:

Total Parent NCI

Fair value P 2,160,000 P 1,760,000 P 400,000
Control premium 40,000 40,000 -
Revised amounts P 2,200,000 P 1,800,000 P 400,000
Book value (1,500,000) (1,200,000) (300,000)
Excess P 700,000 P 600,000 P100,000
BCVR ( 500,000) (400,000 ) (100,000)
Goodwill P 200,000 P 200,000 P -
A. Cost of investment @ fair value 5,500,000
Less Book Value acquired:
Common stocks P1,843,200
Retained earnings 2,764,800 (4,608,000)
Excess of cost over Book Value 892,000
BCVR - Decrease/Increase in value of net assets:
Inventory P( 276,480)
Building ( 92,160)
Equipment 184,320
LT investment in MS (829,440)
Bonds payable 450,800 (562,960)
Goodwill (Excess of Cost over FV of net assets) P329,040
B. Common stocks P 1,843,200
Retained earnings 2,764,800
Merchandise inventory 276,480
Buildings 92,160
Long-term investments in MS 829,440
Goodwill 329,040
Equipment P 184,320
Bonds payable 450,800
Investment in Stocks of S Co. 5,500,000
 Prob 2.2.0 PARTIALLY-OWNED SUBSIDIARY
2.2.1 Assigned Value to NCI: FV of shares acquired
A.
Total Parent NCI
FV of S Company P5,500,000 P 4,400,000 P 1,100,000
BV of net assets ( 4,608,000) (3,686,400) ( 921,600)
Excess of FV over BV P 892,000 713,600 178,400
+/- Decrease/Increase ( 562,960) ( 450,368) ( 112,592)

Goodwill P329,040 P 263,232 P 65,808

Problem 2.2.0 PARTIALLY-OWNED SUBSIDIARY
2.2.1 Assigned Value to NCI: FV of shares acquired

B.
Common stocks P1,843,200
Retained earnings 2,764,800
Merchandise inventory 276,480
Buildings 92,160
Long-term investments in MS 829,440
Goodwill 329,040
Equipment P 184,320
Bonds payable 450,800
Investment in S Company 4,400,000
Non-controlling interests 1,100,000
A. Total Parent NCI
FV of S Company P5,434,192 4,400,000 P1,034,192
BV of net assets ( 4,608,000) (3,686.400) ( 921,600)
Excess P 826,192 P 713,600 P 112,592
+/- Dec/Inc ( 562,960) ( 450,368) ( 112,592)

Goodwill P 263,232 P263,232 P -

B
Common stocks P1,843,200
Retained earnings 2,764,800
Merchandise inventory 276,480
Buildings 92,160
Long-term investments in MS 829,440
Goodwill 263,232
Equipment P 184,320
Bonds payable 450,800
Investment in S Company 4,400,000
Non-controlling interests 1,034,192
Cost of investment (@FV) P2,000,000

Book value acquired

Share capital P1,000,000
Retained profit 700,000 (1,700,000)
Excess of cost over book value 300,000
BCVR (Provision for litigation loss) 40,000
Goodwill 340,000
Share capital P1,000,000
Retained profit 700,000
Goodwill 340,000
Provision for litigation loss 40,000
Investment in equity shares 2,000,000
 WPEE
PACIFIC SEABED DEBIT CREDIT CONSOLIDATED
Land P4,000,000 P1,500,000 P5,500,000
Inv in ES 2,000,000 -- 2,000,000 --
A/R 1,000,000 200,000 1,200,000
Cash 600,000 300,000 900,000
Goodwill 340,000 340,000
P7,600,000 P2,000,000 P7,940,000
Share cap P5,000,000 P1,000,000 P1,000,000 P5,000,000
Retained profit 1,600,000 700,000 700,000 1,600,000
A/P 1,000,000 300,000 P1,300,000
Prov litigation loss 40,000 40,000
P7,600,000 P2,000,000 P2,040,000 P2,040,000 P7,940,000
Number of shares outstanding (P300,000 / P10) 30,000 shares

% of control ( 24,000 shares / 30,000 shares) 80%

1. Using fair value of outstanding shares
(P756,000 / 80%) x 20% P 189,000

2. Using fair value of total identifiable

Net assets at DOA
Book value (P300,000 + P400,000) P 700,000
BCVR (P30,000 + P50,000 +
P70,000 + 20,000 + P40,000) 210,000
Total fair value P 910,000 x 20% P 182,000
 NCI @ FV NCI @ PS
Fair value of outstanding shares
Parent’s cost at fair value P 756,000 P 756,000
NCI 189,000 182,000
Totals P 945,000 P 938,000
FV of acquired net assets
Book value (P300,000 + P400,000) (700,000) (700,000)
BCVR (please see 2.b. above) (210,000) (210,000)
Goodwill P 35,000 P 28,000
Share capital (S Co.) P 300,000
Retained earnings (S Co.) 400,000
Inventories 30,000
Land 50,000
Buildings 70,000
Equipment 20,000
Patent 40,000
Goodwill 35,000
NCI (using fair value) P 189,000
Investment in S Co. 756,000
 ELIMINATIONS Consolidated
Particulars Parent Co. Subsidiary Co. Debits Credits Balance Sheet
Cash 109000 15000 124000
Accounts receivable 300,000 35,000 335,000
Inventories 140,000 40,000 30,000 210,000
Land 150,000 50,000 200,000
Buildings 200,000 70,000 270,000
Equipment 250,000 450,000 20,000 720,000
Investment in S Co. 756,000 - 756,000 -
Patent 40,000 40,000
Goodwill 35,000 35,000
TOTALS 1555000 890,000 1954000
Accounts payable 175000 190,000 385000
Share capital 200,000 300,000 300,000 200,000
Share premium 400,000 400,000
Retained earnings, Dec. 31 780,000 400,000 400,000 780,000
Non-controlling interest 189,000 189,000
TOTALS 1555000 890,000 945,000 945,000 1954000
 AMOUNT 20x8 20x9 and beyond 20x9
Inventories 30,000 30,000 P - none
Land 50,000 - - none
Buildings 70,000 3,500 3,500 thru year 2027
Equipment 20,000 2,000 2,000 thru year 2017
Patent 40,000 4,000 4,000 thru year 2017
Goodwill 35,000 5,000 8,000 actual impairment
TOTALS 245,000 44,500 17,500 loss
 1/01/x8 12/31/x8 12/31/x9
Inventories 30,000 - P -
Land 50,000 50,000 50,000
Buildings 70,000 66,500 63,000
Equipment 20,000 18,000 16,000
Patent 40,000 36,000 32,000
Goodwill 35,000 30,000 22,000
Unamortized excess 245,000 200,500 183,000
 Consolidated
Particulars Parent Co. Subsidiary Co. BCVR Balance Balance Sheet
Cash 109000 15000 124,000
Accounts receivable 300,000 35,000 335,000
Inventories 140,000 40,000 30,000 210,000

Land 150,000 50,000 200,000

Buildings 200,000 70,000 270,000
Equipment 250,000 450,000 20,000 720,000
Investment in S Co. 756,000 -
Patent 40,000 40,000
Goodwill 35,000 35,000
TOTALS 1555000 890,000 1,954,000
Accounts payable 175000 190,000 385,000
Share capital 200,000 300,000 200,000
Share premium 400,000 400,000
Retained earnings, Dec. 31 780,000 400,000 780,000
Non-controlling interest 189,000
TOTALS 1555000 890,000 245,000 1954000
 20x8 20x9
5.1 Investment income
Reported subsidiary net income P198,000 P285,000
Less adjustment for BCVR 44,500 17,500
Adjusted SNI 153,500 267,500
Multiply by 80% 80%
Investment income P 122,800 P214,000

5. 2. NCI in consolidated net income

Adjusted SNI P153,500 P267,500
Multiply by 20% 20%
NCI net income P 30,700 53,500
20x8 [(P348,000 - P48,000) + P198,000 - P44,500] P 453,500
To CI : P300,000 + P122,800 P 422,800

NCI : Please see item 2 30,700

Total : P 453,500

20x9 [(P512,000 - P92,000) + P285,000 - P17,500 P 687,500

To CI : P420,000 + P214,000 P 634,000

NCI : Please see item 2 53,500

Total : P 687,500
20X8 CONSOLIDATED STATEMENTS - Direct Method (using BCVRs)

INCOME STATEMENT
Sales (P1,200,000 + P 700,000 P1,900,000
Cost of goods sold (P500,000 + P250,000) + P30,000 ( 780,000)
Gross profit P1,120,000
Expenses (P400,000 + P252,000) + P14,500 ( 666,500)
Consolidated net income P 453,500
Attributable to: Parent’s shareholders (P300,000 + P122,800) P 422,800
NCI [(P198,000 – P44,500) * 20% 30,700
Consolidated Net Income P 453,500
BALANCE SHEET
Cash P 233,600 P 48,000 - P 281,600
Accounts receivable 240,000 70,000 - 310,000
Inventories 150,000 80,000 - 230,000
Land 150,000 50,000 200,000
Buildings 190,000 66,500 256,500
Equipment 349,000 405,000 18,000 772,000
Investment in Stocks 756,000 -
Patent 36,000 36,000
Goodwill 30,000 30,000
Total assets
P2,116,100
Accounts payable P 150,600 P 105,000 P 255,600
Common stocks 200,000 * 200,000
APIC 400,000 * 400,000
Retained earnings 1,052,800 * 1,052,800
Equity of Parent’s shareholders 1,652,800
Equity of non-controlling interest 207,700
Total Liabilities and Stockholders’ equity P2,116,100

RE= 978,000 – 48,000 + 122,800= 1,052,800 NCI= 189,000 + 30,700 -12,000 = 207,700
20X9 CONSOLIDATED STATEMENTS – Direct Method (using BCVRs)

INCOME STATEMENT
Sales (P 1,500,000 + P900,000) P2,400,000
Cost of goods sold (P600,000 + P315,000) ( 915,000)
Gross profit P1,485,000
Expenses(P480,000+P300,000)+ P17,500 797,500
Consolidated net income P 687,500
Attr to: Parent [(P420,000 + P214,000) P 634,000
NCI (P285,000 – P17,500) X 20% 53,500
Total P687,500
BALANCE SHEET
Cash P 224,400 P 98,000 - P 322,400
Accounts receivable 300,000 160,000 - 460,000
Inventories 180,000 150,000 - 330,000
Land 150,000 P 50,000 200,000
Buildings 180,000 63,000 243,000
Equipment 500,000 360,000 16,000 876,000
Investment in Stocks 756,000 -
Patent 32,000 32,000
Goodwill 22,000 22,000
Total assets P1,960,400 P 1,098,000 P 183,000 P 2,485,400
Accounts payable P 80,400 P 90,000 P 170,400
Common stocks 200,000 * P 200,000
APIC 400,000 * 400,000
Retained earnings 1,476,800 * 1,476,800
Equity of Parent’s shareholders P2,076,800
Equity of non-controlling interests 238,200 2,315,000
Total Liabilities and stockholders’ equity P2,485,400

RE= 1,280,000 + 214,000 – 92,000 + ( 122,800 – 48,000)

NCI= 189,000 + 53,500 – 23,000 +( 30,700 -12,000)
 1/1/x8 (DOA) 12/31/x8 (1yr DOA) 12/31/x9 (2 yrs + DOA)
SC P 300,000 SC P 300,000
RE 400,000 RE 400,000
Inv. 30,000 Inv. 30,000
Land 50,000 Land 50,000
Bldg. 70,000 Bldg. 70,000
Equipt 20,000 Equipt 20,000
Patent 40,000 Patent 40,000
Goodwill 35,000 Goodwill 35,000
NCI 189,000 NCI 189,000
Investment 756,000 Investment 756,000

DI 48,000
NCI 12,000
Dividends 60,000
 1/1/x8 (DOA) 12/31/x8 (1yr + DOA) 12/31/x9 (2 yrs + DOA)
Cost of sales P 30,000
DE 5,500
Amortization of Patent4,000
GW Impairment Loss 5,000
Inv. 30,000
Buildings 3,500
Equipment 2,000
Patent 4,000
Goodwill 5,000
NCI - IS 30,700
NCI - BS 30,700

NCI, 1/1/x8 P189,000 NCI, 12/31/x8 - P207,700

 1/1/x8 (DOA) 12/31/x8 (1yr DOA) 12/31/x9 (2 yrs + DOA)
SC P 300,000 SC P 300,000 SC P 300,000
RE 400,000 RE 400,000 RE 400,000
Inv. 30,000 Inv. 30,000 Inv. 30,000
Land 50,000 Land 50,000 Land 50,000
Bldg. 70,000 Bldg. 70,000 Bldg. 70,000
Equipt 20,000 Equipt 20,000 Equipt 20,000
Patent 40,000 Patent 40,000 Patent 40,000
Goodwill 35,000 Goodwill 35,000 Goodwill 35,000
NCI 189,000 NCI 189,000 NCI 189,000
Investment 756,000 Investment 756,000 Investment 756,000

DI 48,000 DI 92,000
NCI 12,000 NCI 23,000
Dividends 60,000 Dividends 115,000
1/1/x8 (DOA) 12/31/x8 (1yr + DOA) 12/31/x9 (2 yrs + DOA)
Cost of sales P 30,000 RE P 44,500
DE 5,500 DE 5,500
Amortization of Patent4,000 Amortization of Patent4,000
GW Impairment Loss 5,000 Impairment loss on GW8,000
Inv. 30,000 Inv. 30,000
Buildings 3,500 Buildings 7,000
Equipment 2,000 Equipment 4,000
Patent 4,000 Patent 8,000
Goodwill 5,000 Goodwill 13,000
NCI - IS 30,700 NCI - IS 53,500
NCI - BS 30,700 NCI - BS 53,500
RE 18,700
NCI - BS 18,700
NCI, 1/1/x8 P189,000 NCI, 12/31/x8 - P207,700 NCI, 12/31/x9 - P 238,200
 ELIMINATIONS Consolidated
Particulars Parent Co.Subsidiary Co. Debits Credits Balance Sheet
Sales 1,200,000 700,000 1,900,000
Dividend Income 48,000 - 48,000 -
Cost of Sales (500,000) (250,000) 30,000 (780,000)
Expenses (400,000) (252,000) 14,500 (666,500)
NET INCOME 348,000 198,000 453,500
Profit to NCI 30,700 (30,700)
Profit to CI 422,800
123,200

RETAINED EARNINGS STATEMENT

Retained Earnings 780,000 400,000 400,000 780,000
Net Income 348,000 198,000 123,200 422,800
Dividends (150,000) (60,000) 150,000
60,000
RE, DEC. 31 978,000 538,000 523,200 60,000 1,052,800
 P Company S Company Elimination CONSOLIDATED
Cash 233,600 48,000 281,600
Accounts receivable 240,000 70,000 310,000
Inventories 150,000 80,000 30,000 30,000 230,000
Land 150,000 50,000 200,000
Buildings 190,000 70,000 3,500 256,500
Equipment 349,000 405,000 20,000 2,000 772,000
Patent 40,000 4,000 36,000
Goodwill 35,000 5,000 30,000
Investment 756,000 756,000
1,728,600 943,000 2,116,100
Total
150,600 105,000 275600
Accounts payable
Share capital 200,000 300,000 300,000 200000
Share premium 400,000 400,000
Retained earnings* 978,000 538,000 523,200 60,000 1,052,800
NCI in subsidiary company 12,000 189,000 207,700
30,700
TOTAL 1,728,600 943,000 2,116,100
 ELIMINATIONS Consolidated
Particulars Parent Co.Subsidiary Co. Debits Credits Balance Sheet
Sales 1,500,000 900,000 2,400,000
Dividend Income 92,000 - 92,000 -
Cost of Sales (600,000) (315,000) (915,000)
Expenses (480,000) (300,000) 17,500 (797,500)
NET INCOME 512,000 285,000 687,500
Profit to NCI 30,700 (53,500)
Profit to CI 634,000
163,000

RETAINED EARNINGS STATEMENT

Retained Earnings 978,000 538,000 463,200 1,052,800
Net Income 512,000 285,000 163,000 634,000
Dividends (210,000) (115,000) 115,000 210,000
RE, DEC. 31 1,280,000 708,000 626,200 115,000 1,476,800
-400,000 -44,500 -18,700= (463,200)
 P Company S Company Elimination CONSOLIDATED
Cash 224,400 98,000 322,400
Accounts receivable 300,000 160,000 460,000
Inventories 180,000 150,000 30,000 30,000 330,000
Land 150,000 50,000 200,000
Buildings 180,000 70,000 7,000 243,000
Equipment 500,000 360,000 20,000 4,000 876,000
Patent 40,000 8,000 32,000
Goodwill 35,000 13,000 22,000
Investment 756,000 756,000
1,960,400 1,098,000 2,485,400
Total
80,400 90,000 170,400
Accounts payable
Share capital 200,000 300,000 300,000 200,000
Share premium 400,000 400,000
Retained earnings* 1,280,000 708,000 626,200 115,000 1,476,800
NCI in subsidiary company 23,000 189,000 238,200
53,500
TOTAL 1,960,400 1,098,000 18,700 2,485,400
 20x8 20x9
Book value (S Co.), December 31 P 838,000 P1,008,000

Unamortized BCVR, 12/31 200,500 183,000

Fair Value (S Co.), December 31 P1,038,500 P1,191,000

Multiply by NCI % 20% 20%

Non controlling interest, December 31 P 207,700 P 238,200
Problem 6. Inter-company sale of Merchandise

1. Investment Income 2019

Subsidiary net income P360,000

Upstream adjustments:
RGP on BI (of P Co.) (P 12,000 x 30%) 3,600
DGP on EI (of P Co.) (P 90,000 x 30%) ( 27,000)
Adjusted SNI P336,600
Multiply by CI% 75%
Investment Income P252,450

2. NCI – Income Statement

Adjusted SNI (See Item 1) P 336,600
Multiply by NCI % 25%
CNI attributable to NCI (See Item 4) P 84,150
Problem 6 Inter-company sale of Merchandise

3. CNI: [PNI (from O/O) + SNI] +/- all consolidation adjustments

= [(P660,000 – P144,000) + P360,000 + P3,600 – P27,000] P 852,600
Attributable to CI (P516,000 + P252,450) 768,450
NCI (See item 3) 84,150
Total P 852,600
4. WPEE

a. on RGP RE (75%) 2,700

NCI ( 25%) 900
Cost of Sales (100%) 3,600

b. on DGP Cost of Sales 27,000

MI, end 27,000

c. On current year’s inter-company sale

Sales 360,000
Cost of Sales 360,000
Problem 7 Inter-company sale of
non-depreciable fixed assets (Land)

1. Investment Income
2017 2018 2019
SNI 295,680 286,080 316,800
Multiply by CI% 80% 80% 80%
II before downstream adj . 236,544 228,864 253,440
Downstream adjustments
Deferred Gain ( 96,000)
Realized deferred gain 96,000
Investment Income 140,544 228,864 349,440

2. NCI 2017 2018 2019

SNI 295,680 286,080 316,800

Multiply by NCI% 20% 20% 20%
NCI in CNI 59,136 57,216 63,360
Problem 7 Inter-company sale of
non-depreciable fixed assets (Land)

3. CNI
2017: [(673,920-97,920) + 295,680] - 96,000 P 775,680
Attributable to CI: (673,920– 97,920) + 140,544 P 716,544
NCI (See Item 3) 59,136
Total P 775,680

2018 : [(643,200– 97,920) + 286,080] P 831,360

Attributable to CI: (643,200 – 97,920) + 228,864 P 774,144
NCI (See Item 3) 57,216
Total P 831,360

2019: [(758,400 – 97,920) + 316,800] + 96,000 P1,073,280

Attributable to CI: (758,400-97,920) + 349,440 P1,009,920
NCI : (See Item 3) 63,360
Total P1,073,280
Problem 7 Inter-company sale of
non-depreciable fixed assets (Land)

3. WPEE

2017: Gain on sale 96,000

Land 96,000

2018: RE 96,000
Land 96,000

2019: RE 96,000
Gain on sale 96,000
Problem 8 Inter-company sale of Depreciable Fixed Assets

1. Investment Income
2018 2019

SNI 253,440 378,240

Upstream adjustments
Deferred gain on sale (26,880)
Realized deferred gain 3,840 3,840
Adjusted SNI 230,400 382,080
Multiply by 90% 90%
Investment Income 207,360 343,872

2. NCI – Income Statement

2018 : 230,400 x 10% P 23,040

2019 : 382,080 x 10% 38,208
Problem 8 Inter-company sale of Depreciable Fixed Assets

3. CNI
2018 : [(422,400 – 86,400) + 253,440] – 26,880 + 3,840 P 566,400

Attributable to: CI (422,400 – 86,400) + 207,360 P 543,360

NCI: (See Item 3) 23,040
Total P 566,400

2019 [(566,400– 86,400) + 378,240] + 3,840 P 862,080

Attributable to: CI (566,400 – 86,400) + 343,872 P 823,872

NCI : (See Item 3) 38,208
Total P 862,080
Problem 8 Inter-company sale of Depreciable Fixed Assets

4. WPEE

2018 Gain on sale 26,880 Gain on sale 26,880

Equipment 59,520 Equipment 26,880
A/D 86,400

A/D 3,840 Equipment 3,840

Depn expense 3,840 Depn expense 3,840

2019 RE 24,192 RE 24,192

NCI 2,688 NCI 2,688
Equipment 59,520 Equipment 26,880
A/D 86,400

A/D 7,680 Equipment 7,680

Depn expense 3,840 Depn expense 3,840
RE 3,456 RE 3,456
NCI 384 NCI 384
Problem 9 Inter-company Transactions: Comprehensive Problem

1. Computation of Controlling Interest and Non-controlling Interest Shares in

Consolidated Net Income.
2019
SNI P 143,360
Amort. of understated plant asset ( 4,267)
Upstream adjustments:
RGP on BI (of P Co.) 20,480
DGP on EI (of P Co.) (15,360)
Deferred gain on sale ( 8,960)
Realized deferred gain 1,280
Adjusted SNI P 136,533 x 25% = P 34,133 NCI/IS
Multiply by CI% 75%
Inv. Income before dwnstrm adj. P 102,400
Downstream adjustment
Realized deferred gain 32,000 PNI(0/0)
Investment Income P 134,400 + P307,200 = 441,600. CNI: Parent

CNI P 475,733
2. Working Paper Elimination Entries

1) RE 3,200
NCI 1,067
Depreciation expense 4,267
Plant assets 8,534

2) RE 15,360
NCI 5,120
Cost of Sales 20,480
3) Cost of Sales 15,360
MI, end 15,360
4) Sales 256,000
Cost of Sales 256,000
5) Gain on Sale 8,960
Equipment 19,840
Accumulated Depreciation 28,800
6) Accumulated Depreciation 1,280
Depreciation expense 1,280
7) RE 32,000
Gain on Sale 32,000
Problem 9 Inter-company Transactions: Comprehensive Problem

.3 Working Papers to Prepare Consolidated Income Statement

WPEE
P Company S Company Debit Credit CIS
Sales 1,280,000 640,000 256,000 1,664,000
Cost of Sales 512,000 320,000 15,360 20,480
256,000 570,880
Gross Profit 768,000 320,000 1,093,120
OE 460,800 204,800 4,267 1,280 668,587
Operating profit 307,200 115,200 424,533
Gain on Sale of L 19,200 32,000 51,200
Gain on Sale of E 8,960 8,960

Net Income P 307,200 P 143,360 P 475,733

Attribute to CI 441,600
NCI 34,133
Total 475,733
 CONSOLIDATED STATEMENTS
SUGGESTED SOLUTION – MULTIPLE CHOICE
1. A
Any inter-company gain or loss is deferred and realized over the remaining life
of the fixed asset transferred, in terms of usage (1/6 in the current year)

2. B
Recorded equipment – net (P500,000 + P300,000) P 800,000
Consolidation adjustments: Deferred gain P (20,000)
Realized deferred gain 5,000 (15,000)
Consolidated equipment, net P 785,000
CONSOLIDATED STATEMENTS
SUGGESTED SOLUTION – MULTIPLE CHOICE
3. D
Controlling interest
Common Stock P 300,000
Retained Earnings 250,000 P 550,000
Non-controlling interest (260,000/ 80% * 20%) 65,000
Total Stockholders’ Equity P 615,000

4. D
SHE @ Book Value P 250,000
+ Unamortized increase in net assets 75,000
SHE @ Fair Value P 325,000
X by NCI% 20%
Non-controlling interest P 65,000
CONSOLIDATED STATEMENTS
SUGGESTED SOLUTION – MULTIPLE CHOICE

5. D
Cost (P196,000 / 75%) P261,333
Less BV acquired (P150,000 + P50,000) 200,000
Understated inventory 11,000 211,000
Goodwill (Excess of Cost over FV) P 50,333

6. A
Sabina’s accounts payable P 103,000
Argo’s accounts payable 71,000
Consolidated liabilities P 174,000
CONSOLIDATED STATEMENTS
SUGGESTED SOLUTION – MULTIPLE CHOICE

7. C
Sabina’s assets @ Book Values less Investment account P 419,000
Argo’s assets @ Fair Values (P271,000 + P11,00) 282,000
Goodwill recognized upon acquisition 50,333
Total assets P 751,333

Proof:
Liabilities P 174,000
Stockholders’ equity
CI P 512,000
NCI (P196,000/75%) x 25% 65,333 577,333
Total Liabilities and SHE P 751,333
CONSOLIDATED STATEMENTS
SUGGESTED SOLUTION – MULTIPLE CHOICEc

8. D
Parent’s net income from its own operations P 527,200
Plus Subsidiary NI 264,800
Adjustment on understated land (P64,800/90%) ( 72,000)
Consolidated net income P 720,000
Attributable to CI [P527,200 + (P264,800– P72,000) x 90%] P 700,720
NCI (P264,800 – P72,000) x 10% 19,280
Total P 720,000
CONSOLIDATED STATEMENTS
SUGGESTED SOLUTION – MULTIPLE CHOICE

9. D
If the transferred fixed asset’s acquisition cost is given (together with
its accumulated depreciation or book carrying value), the superior
objective is to show the fixed asset at its original acquisition cost, and
the accumulated depreciation and depreciation expense accounts are
to be reported on the consolidated FS as if no transfer had taken place.

10. C
Subsidiary net income in 2018 P 260,000
Less: Deferred gross profit (P12,800 x 2/5) 5,120
Adjusted SNI P 254,880
X by NCI% 35%
NCI net income P 89,208
CONSOLIDATED STATEMENTS
SUGGESTED SOLUTION – MULTIPLE CHOICE

11. A
Subsidiary net income in 2019 P 312,000
Add : RGP (P12,800 x 2/5) 5,120
Adjusted SNI P 317,120
X by NCI% 35%
NCI net income P 110,992

12. C
Recorded equipment-net (P 800,000 + P480,000) P1,280,000
Consolidation adjustments:
Deferred intercompany loss P 32,000
Realized deferred loss (P32,000/4) x 9/12 ( 6,000) 26,000
Consolidated equipment, net P1,306,000