Chap 15
Chap 15
Chap 15
PROBLEM 15-1
The Pony Company acquired all of the outstanding stock of Stag Company on January 1, 2015, for P206,000 in
cash. Stag Company has a book value of only P140,000 on that date. However, equipment (having an
eightyear life) was undervalued by P40,000 on Stag Company’s financial records. A building with a 20-year life
was overvalued by P10,000. Subsequent to the acquisition, Stag Company reported the following:
CI Dividends paid
2015 P 50,000 P 10,000
2016 60,000 40,000
2017 30,000 20,000
In accounting for this investment, Pony Company uses the cost method. Selected accounts taken from the
financial records of these two companies as of December 31, 2017, are as follows:
Pony Company Stag Company
Revenues – operating P 310,000 P 104,000
Expenses 198,000 74,000
Equipment (net) 320,000 50,000
Buildings (net) 220,000 68,000
Common stock 290,000 50,000
Retained earnings, 12/31/2017 balance 410,000 160,000
Required:
Determine the following account balances as of December 31, 2017:
1. Investment in Stag Company (on Pony Company’s individual financial records)
2. Non-controlling interest
3. Consolidated CI
4. Consolidated equipment (net)
5. Consolidated buildings (net)
6. Consolidated goodwill (net)
7. Consolidated common stock
8. Consolidated retained earnings
SOLUTION:
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
3. 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)
Consolidated CI P 137,500
Chapter 15 – Consolidated Financial Statements – Subsequent to Date of Acquisition Page 2 of 17
4. 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
5. Consolidated Buildings
Total book value P 288,000
Allocation ( 10,000)
Amortization (P500 x 3 years) 1,500
Total P 279,500
PROBLEM 15-2
Pony Corporation purchased all the common shares of Short Company on January 1, 2017 for P180,000. On
that date, the book value of the net assets reported by Short Company was P150,000. The entire excess was
assigned to depreciable assets with a 6-year remaining economic life from January 1, 2017.
The adjusted trial balances for the two companies on December 31, 2017, are as follows:
PONY CORPORATION
Debit Credit
Cash P 15,000
Accounts Receivable 30,000
Inventory 70,000
Depreciable assets (net) 325,000
Investment in Short Company stock 180,000
Depreciation expense 25,000
Other expenses 105,000
Dividends declared 40,000
Accounts payable P 50,000
Notes payable 100,000
Common stock 200,000
Retained earnings 230,000
Sales 200,000
Dividend income ________ 10,000
P 835,000 P 835,000
SHORT COMPANY
Debit Credit
Cash P 5,000
Accounts Receivable 40,000
Inventory 60,000
Depreciable assets (net) 225,000
Depreciation expense 15,000
Other expenses 75,000
Dividends declared 10,000
Accounts payable P 40,000
Notes payable 120,000
Common stock 100,000
Retained earnings 50,000
Sales ________ 120,000
P 430,000 P 430,000
Pony Corporation uses the cost method in accounting for its investment in Short Company. Short Company
dividends were declared and paid on December 31, 2017.
Required:
1. Prepare the eliminating entries needed as of December 31, 2017 to complete a consolidated workpaper.
2. Prepare a three-part consolidation workpaper as of December 31, 2017.
SOLUTION:
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 31 270,000 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 0
______ ______ (3) 30,000 ______
Total 620,000 330,000 795,000
PROBLEM 15-3
Popo Corporation purchased 80 percent of the voting stock of Sisa Company on January 1, 2017, at underlying
book value. Popo Corporation uses the cost method in accounting for its ownership of Sisa Company. On
December 31, 2017, the trial balances of the two companies are as follows:
POPO CORPORATION
Debit Credit
Current assets P 173,000
Depreciable assets 500,000
Investment in Sisa Company stock 120,000
Depreciation expense 25,000
Other expenses 105,000
Dividends declared 40,000
Accumulated depreciation P 175,000
Chapter 15 – Consolidated Financial Statements – Subsequent to Date of Acquisition Page 6 of 17
Required:
1. Give all the eliminating entries required as of December 31, 2017, to prepare consolidated financial
statements.
2. Prepare a three-part consolidation workpaper.
3. Prepare a consolidated statement of financial position, statement of CI and retained earnings statement
for 2017.
SOLUTION:
1. Working Paper Elimination Entries
(1) Dividend income 8,000
NCI 2,000
Dividends declared – Sisa 10,000 To eliminate intercompany dividends.
Retained Earnings
Retained earnings, Jan 1 230,000 50,000 (2)50,000 230,000
CI 78,000 30,000 94,000
Total 308,000 80,000 324,000
Dividends declared 40,000 10,000 (1)10,000 40,000
Retained earnings, Dec 31 268,000 70,000 284,000
Statement of FP
Current assets 173,000 105,000 278,000
Depreciable assets 500,000 300,000 800,000
Accumulated Depreciation 175,000 75,000 (250,000)
Investments in Sisa Company 120,000 ______ (2)120,000 0
Total 618,000 330,000 828,000
Assets
Current assets P278,000
Depreciable assets P800,000
Less: Accumulated depreciation 250,000 550,000
Total assets P828,000
Chapter 15 – Consolidated Financial Statements – Subsequent to Date of Acquisition Page 9 of 17
Sales P320,000
Expenses:
Depreciation expense P 40,000
Other expenses 180,000 220,000
Consolidated CI P100,000
NCI in CI of subsidiary 6,000
Attributable to parent P 94,000
PROBLEM 15-4
Trial balance data for Palo Corporation and Sebo Company on December 31, 2017, are as follows:
PALO CORPORATION
Debit Credit
Cash P 37,000
Accounts Receivable 50,000
Inventory 70,000
Buildings and Equipment 300,000
Investment in Sebo Company Stock 229,000
Cost of Goods Sold 210,000
Depreciation Expense 25,000
Other Expenses 23,000
Dividends Declared 20,000
Accumulated Depreciation P 105,000
Accounts Payable 40,000
Taxes Payable 70,000
Common Stock 200,000
Retained Earnings, January 1 230,000
Sales 300,000
Investment Income ________ 19,000
P 964,000 P 964,000
SEBO COMPANY
Debit Credit
Cash P 20,000
Accounts Receivable 30,000
Inventory 60,000
Buildings and Equipment 240,000
Cost of Goods Sold 85,000
Depreciation Expense 20,000
Other Expenses 25,000
Dividends Declared 10,000
Accumulated Depreciation P 65,000
Accounts Payable 20,000
Taxes Payable 55,000
Common Stock 150,000
Retained Earnings, January 1 Sales 50,000
________ 150,000
P 490,000 P 490,000
Palo Corporation purchased all the shares of Sebo Company on January 1, 2017 for P220,000. The full excess is
assigned to goodwill.
Required:
Prepare consolidation workpaper in good form as of December 31, 2017, and prepare a consolidated
statement of CI, retained earnings statement, and statement of financial position.
Chapter 15 – Consolidated Financial Statements – Subsequent to Date of Acquisition Page 11 of 17
SOLUTION:
NOT REQUIRED:
Retained earnings
Retained earnings, Jan 1 230,000 50,000 (2)50,000 230,000
CI 61,000 20,000 62,000
Total 291,000 70,000 292,000
Dividends declared 20,000 10,000 (1)10,000 20,000
Retained earnings, Dec 31 271,000 60,000 272,000
Statement of FP
Cash 37,000 20,000 57,000
Accounts receivable 50,000 30,000 80,000
Inventory 70,000 60,000 130,000
Buildings and equipment 300,000 240,000 540,000
Accumulated depreciation 105,000 65,000 170,000
Investment in Sebo Company 229,000 (1)9,000 0
(2)200,000
(3)20,000
Goodwill ______ ______ (3)20,000 20,000
Total 581,000 285,000 657,000
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 CI P 62,000
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
PROBLEM 15-5
Trial balance data for Porno Corporation and Star Company on December 31, 2017 are as follows:
PORNO CORPORATION
Debit Credit
Cash P 46,000
Accounts Receivable 55,000
Inventory 75,000
Equipment 300,000
Investment in Star Company (at cost) 220,000
Cost of Goods Sold 270,000
Depreciation Expense 25,000
Other Expenses 21,000
Dividends Declared 20,000
Accumulated Depreciation P 130,000
Accounts Payable 20,000
Taxes Payable 50,000
Common Stock 200,000
Retained Earnings, January 1 262,000
Sales 350,000
Dividend Income __________ 20,000
P 1,032,000 P 1,032,000
STAR COMPANY
Debit Credit
Cash P 30,000
Accounts Receivable 40,000
Inventory 65,000
Equipment 240,000
Cost of Goods Sold 135,000
Depreciation Expense 20,000
Other Expenses 10,000
Dividends Declared 20,000
Accumulated Depreciation P 85,000
Chapter 15 – Consolidated Financial Statements – Subsequent to Date of Acquisition Page 15 of 17
Required:
Present all eliminating entries needed to prepare consolidated financial statements for the year 2017, and
prepare three-part consolidation workpaper in good form as of December 31, 2017.
SOLUTION:
Eliminating entries:
Retained earnings
Retained earnings, Jan 1 262,000 60,000 (2)50,000 260,000
(3)12,000
CI 54,000 35,000 20,000 69,000
Total 316,000 95,000 329,000
Dividends declared 20,000 20,000 (1)20,000 20,000
Retained earnings, Dec 31 296,000 75,000 309,000
Statement of FP
Chapter 15 – Consolidated Financial Statements – Subsequent to Date of Acquisition Page 17 of 17