Advance Accounting 2 by Guerrero

CHAPTER 16
MULTIPLE CHOICE
16-1:
d, because no impairment of goodwill is recognized.
16-2:
d, consolidated net income will decrease due to amortization of the allocated difference
which is not the goodwill (P60,000 / 10 years).
16-3:
d, computed as follows:
Subsidiarys net income
Amortization of the allocated difference
Minority interest in net income of subsidiary
16-4:
16-5:
P150,000
( 20,000)
P130,000
c
Acquisition cost (P500,000 + P40,000)
Less: Book value of interest acquired
Difference
P540,000
480,000
P 60,000
Cost Method
Acquisition cost
P540,000
Parents share of subsidiarys net income
Dividends received from subsidiary
Amortization of allocated difference (P60,000/20) Investment account balance, Dec. 31, 2008
P540,000
Equity Method
P540,000
120,000
( 48,000)
( 3,000)
P609,000
a
Net assets of Sol, January 2, 2008
Increase in earnings:
Net income
Dividends paid (P60,000 / 75%)
Net assets of Sol, Dec. 31, 2008
P300,000
P160,000
80,000
80,000
P380,000
Minority interest in net assets of subsidiary (P380,000 x 25%) P 95,000

16-6:
a
Punos net income
Dividend income (P40,000 x 90%)
Salas net income
Consolidated net income
P145,000
(36,000)
120,000
P229,000
65
16-7:
d
Peters net income from own operation
Peters share of Sellers net income
MINIS (P200,000 x 25%)
Consolidated net income attributable to parent
16-8:
Investment in Son, Jan. 1

Pops share of Sons net income (100%)
Dividends received (100%)
Amortization of allocated difference to
Equipment (P38,000 / 10)
Investment in Son, Dec. 31
P648,600
16-9:
P1,000,000
200,000
( 50,000)
P1,150,000
2006
P310,000
150,000
( 60,000)
(
2007
P396,200
180,000
(60,000)
3,800)
( 3,800)
P396,200
2008
P512,400
200,000
( 60,000)
( 3,800)
P512,400
a
Sys net income
Amortization of allocated difference
Adjusted net income of Sy
P300,000
( 60,000)
P240,000
Minority interest in net income 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, 2008 Puzon
Consolidated net income attributable to parent:
Net income Puzon
P200,000
Net income Suarez
40,000
(16,000)
MINIS (P40,000 x 20%)
( 8,000)
P500,000
Dividends paid Puzon

Consolidated retained earnings, Dec. 31, 2008
( 50,000)
P666,000
216,000
16-12: c
Acquisition cost
Difference
Allocation due to undervaluation of net assets
Goodwill ( not impaired)
P1,700,000
1,260,000
P 440,000
( 40,000)
P 400,000
66
16-13: d
Net assets of Suazon, Jan. 2, 2008
Increase in earnings (P190,000 P125,000)
Net assets of Suazon, Dec. 31, 2008
Unamortized difference to plant assets (P100,000 P10,000)
Adjusted net assets of Suazon, Dec. 31, 2008
P1,000,000
65,000
P1,065,000
90,000
P1,175,000
Minority interest in net assets of subsidiary (1,175,000 x 20%) P 231,000

16-14: b
Prestos net income from own operations
Prestos share of Storks net income (P80,000 P23,000)
MINIS (P57,000 x 10%)
P140,000
57,000
( 5,700)
P191,300
16-15: b
Investment in Siso stock (at acquisition cost)
P600,000
P 1,500
16-16 d
Consolidated net income:
Pepes net income from own operations
Sisons adjusted net income:
Net income -2008
Amortization of allocated difference
to equipment (P20,000 / 5)
P210,000
P67,000
4,000
Consolidated retained earnings:

Pepes retained earnings, Jan.2, 2007
Consolidated net income attributable to parent 2007
Pepes NI from own operations
P185,000
Sisons adjusted NI;
Net income 2007
P40,000
Amortization -2007
4,000 36,000
MINIS (P36,000 x 30%)
(10,800)
Dividends paid ,2007 - Pepe
Pepes retained earnings, Jan. 2, 2008
Consolidated net income attributable to parent 2008:
Consolidated net income (see above)
P273,000
MINIS (P63,000 x 30%)
( 18,900)
Dividends paid, 2008 Pepe
63,000
P273,000
P701,000
210,200
( 50,000)
P861,200
254,100
( 60,000)
67
P1,055,300
16-17: b
Acquisition cost
Allocated to building
Consolidated retained earnings
Retained earnings, Jan. 1, 2008 Pepe
Net income Precy
Adjusted net income of Susy:
Net income of Susy
P100,000
Amortization (P70,000 / 10) 2
( 3,500)
MINIS (P96,500 x 30%)
Dividends paid Precy
P700,000
630,000
P 70,000
P550,000
P275,000
96,500
(28,950)
342,550
( 70,000)
P822,550
Minority interest in net assets of subsidiary

Stockholders equity of Susy, June 30, 2008
Increase in earnings- net income (7/1 to 12/31)
Stockholders equity, Dec. 31, 2008
Unamortized difference (P70,000 P3,500)
Adjusted net assets of Susy, Dec. 31, 2008
P 900,000
100,000
P1,000,000
66,500
P1,066,500
Minority interest in net assets of subsidiary (P1,066,500 x 30%)
P 319,950
16-18: a
Goodwill
Acquisition cost
Less: Book value of interest acquired (P1,320,000 P320,000)
Goodwill (not impaired)
P1,200,000
1,000,000
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
Net income Pablo
Sitos net income
MINIS (P70,000 x 30%)
P130,000
(28,000)
70,000
(21,000)
P151,000
68
16-20: c
Consolidated net income 2008
Net income Ponce
Solis net income
MINIS (P40,000 x 40%)
Consolidated retained earnings 2008
Retained earnings, Jan. 2, 2007- Ponce
Consolidated net income attributable to parent 2007:
Net income Ponce
Solis net income
MINIS (P35,000 x 40%)
Dividends paid, 2007 Ponce
Dividends paid. 2008 Ponce
(30,000)
P 90,000
(9,000)
40,000
(16,000)
P105,000
P 400,000
P70,000
(18,000)
35,000
( 14,000)
75,000
(25,000)
P450,000
105,000
P525,000
16-21 a
Acquisition cost
Less: Book value of interest acquired (220,000 x 80%)
Difference
Allocated to:
Depreciable assets (30,000 80%)
(37,500)
Minority interest ( 37,500 x 20%)
7,500
Goodwill
P216,000
176,000
40,000
Polo net income from own corporation

Seed net income from own operation:
Net income
Amortization (37,500 10%)
Total
Goodwill impairment lost
P 95,000
16-22: a
Retained earnings 1/1/08 Polo
Consolidated net income attributed to parent:
MINI (35,000 3,750) x 20%
Total
Dividends paid- Polo
Consolidated retained earnings 12/31/08
35,000
(3,750)
(30,000) = 80%
10,000
31,250
126,250
(8,000)
118,250
P520,000
118,250
6,250
112,000
632,000
(46,000)
586,000
69
16-23: a
(35,000 3750) x 20%
16-24: a
Seed stockholders equity, January 2, 2008 (80,000 + 140,000)
Undistributed earnings 2008 (35,000 15,000)
Unamortized difference (37,500 - 3750)
Seed stockholders equity (net asset), December 31, 2008
MINAS (273,750 20%)
16-25: a
220,000
20,000
33,750
273,750
54,750
(see no. 16-22)
16-26: a
Acquisition cost
Less: Book value of interest acquired (280,000 x 70%)
Difference
Allocation:
to depreciable assets
(50,000)
MINAS (30%)
15,000
Retained earnings, 1/1/08-Sisa company
Retained earnings, 1/1/07-Sisa company (squeeze)
Increase
Amortization- prior years (50,000 10 years)
Adjusted increase in earnings of Sisa (21,000/30% )
16-27: a
Retained earnings 1/1/08- Pepe
Retained earnings 1/1/08- Sisa
230,000
Adjustment and elimination:
Date of acquisition
(155,000)
Undistributed earnings to MINAS
(21,000)
Amortization- prior year
(5,000)
16-28: a
Pepe company net income
Sisa company net income
Dividend income (10,000 x 70%)
Amortization- 2008
16-29: a
Consolidated retained earnings 1/1/08(see 16 27)
Consolidated net income (see 16-28)
133,000
MINIS (25,000 5,000) 30%
(6,000)
Dividend paid- Pepe company
231,000
196,000
35,000
35,000
230,000
155,000
75,000
(5,000)
70,000
520,000
49,000
569,000
120,000
25,000
(7,000)
(5,000)
133,000
569,000
127,000
(50,000)
646,000
70
PROBLEMS
Problem 16-1
a.
Since Pasig paid more than the P240,000 fair value of Sibols net assets, all allocations
are based on fair value with the excess of P10,000 assigned to goodwill. The
amortizations of the allocated difference are as follows:
Annual
Allocated to
Allocation
Life
Amortization
Building
Equipment
P 50,000
(20,000)
10 years
5 years
P 5,000
(4,000)
Building:
Allocation, Jan. 1, 2004
Amortization during past years -2004 to 2005 (P5,000 x 2)
Amortization for the current year 2006
Allocation, Dec. 31, 2006
P 50,000
(10,000)
( 5,000)
P 35,000
Equipment
Allocation, Jan. 1, 2004
Amortization during past years 2004 to 2005 (P4,000 x 2)
Amortization for the current year 2006
Allocation, Dec. 31, 2006
P(20,000)
8,000
4,000
P( 8,000)
b.
Since Pasig paid P20,000 less than the P240,000 fair value of Sibols net assets, a
negative difference arises. Under PFRS 3 (Business combination), the allocation of the
negative difference to the non-current assets, excluding long-term investments in
marketable securities is no longer permitted. The negative difference is immediately
amortized in profit or loss (income from acquisition). Therefore, the allocation assigned
to building and equipment is the same as in (a) above.
c.
Same as in (a) above. Except that the negative goodwill amortized to income is P60,000.
d.
Neither allocations nor amortization are found in a pooling of interests.
Problem 16-2
a.
No entry is to be recorded by Holly during 2005 under the cost method.

Allocation schedule Date of acquisition
Difference
Allocation:
Inventory
Land
Equipment
Discount on notes payable
P240,000
P ( 5,000)
(75,000)
(60,000)
(50,000)
71
Total
Minority interest (10%)
Amortization of differential:
Inventory sold
Land sold
Equipment (P60,000/15 years)
Total
b.
P(190,000)
19,000
171,000
P 69,000
P 5,000
75,000
4,000
7,500
P91,500
Working paper elimination entries

(1)
(2)
(3)
(4)
Common stock State

500,000
Premium on common stock State
100,000
Retained earnings State
120,000
Investment in State stock
To eliminate equity accounts of State on the date
of acquisition.
Inventory
5,000
Land
75,000
Equipment
60,000
50,000
Goodwill
69,000
Investment in State stock
To allocate difference.
648,000
72,000
240,000
19,000
Cost of goods sold

5,000
Gain on sale of land
75,000
Operating expenses (depreciation)
4,000
Interest expense
7,500
Inventory
5,000
Land
75,000
Equipment
4,000
7,500
To amortize allocated difference.
Minority interest in net asset of subsidiary
2,350
2,350
To recognize minority share in the net income (loss)
of State.
Computed as follows:
Net income
P 68,000
Adjustments for total amortization
91,500
Adjusted net income (loss)
P(23,500)
Minority interest share (P23,500 x 10%)
P 2,350
72
Problem 16-3
a.
b.
c.
d.
Consolidated Buildings
Profit Company (at book value)
Simon Corporation (at fair value)
Amortization of differential (P120,000 / 6 years)
Total
P 900,000
560,000
( 20,000)
P1,440,000
Consolidated Retained Earnings, Dec. 31, 2008

Retained earnings, Jan. 1 Profit Company
Consolidated net income (per c below)
Dividends paid Profit Company
Total
P 600,000
380,000
(80,000)
P 900,000
Consolidated net income, Dec. 31, 2008

Total revenues (P700,000 + P400,000)
Total expenses (P400,000 + P300,000)
Amortization
Total
P1,100,000
(700,000)
( 20,000)
P 380,000
Consolidated Goodwill [(P680,000 P480,000)- P120,000]
80,000
Problem 16-4
Allocation Schedule
Acquisition cost
Difference
Allocation:
Equipment
Buildings
P206,000
140,000
P 66,000
P(40,000)
10,000
(30,000)
P 36,000
a.
Investment in Stag Company 12/31/06 (at acquisition cost)
P 206,000
b.
Minority Interest in Net Assets of Subsidiary (MINAS)
P -0-
c.
Consolidated Net Income

Net income from own operations Pony (P310,000 P198,000) P 112,000
Net income from own operations Stag (P104,000 P74,000)
30,000
Amortization
( 4,500)
Total
P 137,500
d.
Consolidated Equipment
Total book value (P320,000 + P50,000)
P 370,000
73
Allocation
Amortization (P5,000 x 3 years
Total
40,000
(15,000)
P 395,000
Consolidated Buildings
Total book value
Allocation
Amortization (P500 x 3 years)
Total
P 288,000
( 10,000)
1,500
P 279,500
f.
Consolidated Goodwill (not impaired)
g.
Consolidated Common Stock (Pony)
P 290,000
h.
Consolidated Retained Earnings

Retained earning, Dec. 31, 2008 Pony
P 410,000
Add: Ponys share of Stags adjusted increase in earnings
Net earnings 2008 (P30,000 P20,000)
P10,000
Amortization
( 4,500)
5,500
Total
P 415,500
e.
36,000
Problem 16-5
a.
b.
Retained Earnings, Dec. 31, 2008 Sison

Stockholders equity, Dec. 31, 2008 Sison (P232,000/40%)
Stockholders equity, Jan. 1, 2005 Sison
Increase in earnings
Retained earnings, Jan. 1, 2005 Sison
Retained earnings, Dec. 31, 2008 Sison
Consolidated Retained Earnings Dec. 31, 2008
Retained earnings, Jan. 1, 2005 - Perez
Net income 2005 to 2008
Dividends paid 2005 to 2008
Retained earnings, Dec. 31, 2008
Add: Perez share of adjusted net increase in Sisons
Retained earnings
P80,000
Amortization (P8,333 x 4)
(33,332)
Adjusted
P46,668
Perez interest
60%
Total
Allocation Schedule
Acquisition cost
Less: Book value of interest acquired (P500,000 x 60%)
Difference
Allocation:
Depreciable assets (P50,000 / 60%)
P(83,333)
33,333
P 580,000
(500,000)
P 80,000
200,000
P 280,000
P 600,000
100,000
( 45,000)
P 655,000
28,000
P 683,000
P350,000
300,000
P 50,000
(50,000
74
Amortization per year (P83,333/10 years)
P 8,333
Problem 16-6
a.
Working Paper Elimination Entries, Dec. 31, 2008

(1)
(2)
(3)
(4)
Dividend income
Dividends declared Short
To eliminate intercompany dividends.
10,000
Common stock Short

Retained earnings Short
Investment in Short Company
To eliminate equity accounts of Short at
date of acquisition
100,000
50,000
Depreciable asset
Investment in Short Company
To allocate difference.
Depreciation expense
Depreciable asset
To amortize allocated difference
10,000
150,000
30,000
30,000
5,000
5,000
75
b.
Pony Corporation and Subsidiary

Consolidation Working Paper
December 31, 2008
Adjustments
& Eliminations
Debit
Credit
Pony
Corporation
Short
Company
200,000
10,000
210,000
25,000
105,000
130,000
80,000
120,000
120,000
15,000
75,000
90,000
30,000
230,000
80,000
310,000
40,000
50,000
30,000
80,000
10,000
270,000
70,000
285,000
Balance Sheet
Cash
Accounts receivable
Inventory
Depreciable asset (net)
Investment in Short stock
15,000
30,000
70,000
325,000
180,000
5,000
40,000
60,000
225,000
20,000
70,000
130,000
575,000
-
Total
620,000
330,000
795,000
Accounts payable
Notes payable
Common stock
Pony
Short
Retained earnings, Dec. 31
From above
Total
50,000
100,000
40,000
120,000
90,000
220,000
Income Statement
Sales
Dividend income
Total
Depreciation
Other expenses
Total
Net income carried forward
Retained Earnings
Retained earnings, Jan. 1
Net income from above
Total
Dividends declared
Carried forward
320,000
320,000
45,000
180,000
225,000
95,000
(1) 10,000
(3) 5,000
(2) 50,000
(1) 10,000
(3) 30,000
(4) 5,000
(2)150,000
(3) 30,000
200,000
270,000
620,000
Consolidated
230,000
95,000
325,000
40,000
200,000
100,000
(2)100,000
70,000
330,000
195,000
195,000
285,000
795,000
Problem 16-7
a.
Working Paper Elimination Entries

(1)
(2)
Dividend income
Dividends declared Sisa
8,000
2,000
Common stock Sisa

100,000
Retained earnings Sisa
50,000
Investment in Sisa stock
10,000
120,000
30,000
76
(3)

6,000
6,000
b.
Popo Corporation and Subsidiary

Consolidated Working Paper
December 31, 2008
Popo
Corporation
Income Statement
Sales
200,000
Dividend income
8,000
Total revenue
208,000
25,000
Other expenses
105,000
Total expenses
130,000
Net income
78,000
MI in net income of Sub.
78,000
Retained Earnings
Retained earnings, 1/1
Total
Dividends declared
Carried forward
Sisa
Company
Adjustments
& Eliminations
Debit
Credit
120,000
Consolidated
320,000
320,000
40,000
180,000
220,000
100,000
( 6,000)
94,000
(1) 8,000
120,000
15,000
75,000
90,000
30,000
(3) 6,000
30,000
230,000
78,000
308,000
40,000
50,000
30,000
80,000
10,000
268,000
70,000
284,000
173,000
500,000
120,000
793,000
105,000
300,000
405,000
278,000
800,000
1,078,000
Accumulated depreciation
Current liabilities
Long-term debt
Common stock
Retained earnings , 12/31
From above
MI in net assets of Subsidiary
175,000
50,000
100,000
200,000
75,000
40,000
120,000
100,000
250,000
90,000
220,000
200,000
268,000
70,000
Total
793,000
Balance Sheet
Current assets
Depreciable assets
Investment in Sisa stock
Total
(2) 50,000
(1) 10,000
(2)120,000
(2)100,000
(1) 2,000
405,000
166,000
(2) 30,000
(3) 6,000
166,000
230,000
94,000
324,000
40,000
284,000
34,000
1,078,000
77
c.
Consolidated Financial Statements

Consolidated Balance Sheet
December 31, 2008
Assets
Current assets
Depreciable assets
Less: Accumulated depreciation
Total assets
Liabilities and Stockholders Equity
Current liabilities
Long-term debt
Total liabilities
Stockholders Equity
Common stock
Total liabilities and stockholders equity
P278,000
P800,000
250,000
550,000
P828,000
P 90,000
220,000
P310,000
P200,000
284,000
34,000
518,000
P828,000

Consolidated Income Statement
Year Ended December 31, 2008
Sales
Expenses:
Other expenses
P320,000
P 40,000
180,000
220,000
P100,000
6,000
P 94,000

Retained earnings, Jan. 1 Popo
Total
Dividends paid Popo
Consolidated retained earnings, Dec. 31
P230,000
94,000
P324,000
40,000
P284,000
78
Problem 16-8
a.
Palo Corporation and Subsidiary

December 31, 2008
Adjustments
& Eliminations
Debit
Credit
Palo
Corporation
Sebo
Company
300,000
19,000
319,000
210,000
25,000
23,000
258,000
61,000
150,000
230,000
61,000
291,000
20,000
50,000
20,000
70,000
10,000
271,000
60,000
272,000
Balance Sheet
Cash
Accounts receivable
Inventory
Buildings and equipment
Investment in Sebo stock
37,000
50,000
70,000
300,000
229,000
20,000
30,000
60,000
240,000
57,000
80,000
130,000
540,000
-
Goodwill
Total
686,000
350,000
20,000
827,000
105,000
40,000
70,000
200,000
65,000
20,000
55,000
150,000
(2)150,000
170,000
60,000
125,000
200,000
271,000
686,000
60,000
350,000
239,000
Income Statement
Sales
Investment Income
Total revenues
Cost of goods sold
Other expenses
Total cost and expenses
Retained Earnings
Total
Dividends declared
carried forward
Accounts payable
Taxes payable
Common stock
from above
Total
Consolidated
450,000
450,000
295,000
45,000
48,000
388,000
62,000
(1) 19,000
150,000
85,000
20,000
25,000
130,000
20,000
(2) 50,000
(1) 10,000
(1) 9,000
(2)200,000
(3) 20,000
(3) 20,000
239,000
230,000
62,000
292,000
20,000
272,000
827,000
79
b.
Consolidated Financial Statements

Consolidated Income Statement
Sales
Cost of goods sold
Gross profit
Expenses:
Depreciation expenses
Other expenses
P450,000
295,000
155,000
P45,000
48,000
93,000
P 62,000

Retained earnings, January 1 Palo
Total
Dividends paid Palo
Retained earnings, December 31
P230,000
62,000
292,000
20,000
P272,000

Consolidated Balance Sheet
December 31, 2008
Assets
Cash
Accounts receivable
Inventory
Less: Accumulated depreciation
Goodwill
Total
Liabilities and Stockholders Equity
Accounts payable
Taxes payable
Common stock
Total
P 57,000
80,000
130,000
P540,000
170,000
370,000
20,000
P657,000
P 60,000
125,000
200,000
272,000
P657,000
80
Problem 16-9
1.
Acquisition cost
Less: Book value of interest acquired (80%)
Common stock (P300,000 x 80%)
Retained earnings (P400,000 x 80%)
Difference
Allocation:
Inventories
Land
Building
Equipment
Patents
Total
P756,000
P240,000
320,000
P( 30,000)
( 50,000)
(100,000)
75,000
( 40,000)
P(145,000)
29,000
560,000
P196,000
(116,000)
P 80,000
Working Paper Elimination Entries - December 31, 2006(not required)

(1)
(2)
(3)
(4)
Investment income
Dividends declared S
Investment in S Company
50,000
54,800
Common stock S
300,000
Retained earnings, Jan. 1 S
400,000
Investment in S Co.
560,000
140,000
Inventories
30,000
Land
50,000
Building
100,000
Patents
40,000
Goodwill
80,000
Equipment
Investment in S Company
75,000
196,000
29,000
Cost of goods sold

Inventory
Equipment (P75,000 / 10)
Expenses (amortization)
Buildings (P100,000 / 20)
Patents (P40,000 / 10)
(5)
94,800
10,000

30,000
30,000
7,500
1,500
5,000
4,000
23,700
23,700
81
To established minority share in subsidiary net income.

Net income S Co.
P150,000
Amortization
31,500
Adjusted net income
P118,500
MINIS (P118,500 x 20%)
P 23,700
2.
P Company and Subsidiary

Consolidated Working Paper
Income Statement
Sales
Cost of sales
Gross profit
Expenses
Operating income
Investment income
Net /consolidated income
MI interest in net income of
Subsidiary
Retained earnings
Total
Dividends declared
Carried forward
Balance Sheet
Cash
Accounts receivable
Inventories
Land
Buildings (net)
Equipment (net)
Patent
Investment in S Co. stock
Goodwill
Total
Accounts payable
Common stock
Additional paid-in capital
from above
MI in net assets of subsidiary
Adjustments
& Eliminations
Debit
Credit
P
Company
S
Company
1,000,000
400,000
600,000
360,000
240,000
94,800
334,800
500,000
150,000
350,000
200,000
150,000
150,000
334,800
150,000
600,000
334,800
934,800
100,000
400,000
150,000
550,000
50,000
834,800
500,000
834,800
200,000
150,000
100,000
100,000
50,000
40,000
150,000
200,000
450,000
-
300,000
200,000
140,000
200,000
295,000
680,500
36,000
-
298,000
810,800
1,500,000
580,000
920,000
561,500
358,500
358,500
(4) 30,000
(4) 1,500
(1) 94,800
(5) 23,700
(23,700)
334,800
(2)400,000
600,000
334,800
934,800
100,000
(1) 50,000
(3) 30,000
(3) 50,000
(3)100,000
(4) 7,500
(3) 40,000
(4) 30,000
(4) 5,000
(3) 75,000
(4) 4,000
(1) 54,800
(2)560,000
(3)196,000
(3) 80,000
1,558,800
1,090,000
124,000
200,000
400,000
190,000
300,000
-
834,800
500,000
Consolidated
80,000
1,931,500
314,000
200,000
400,000
(2)300,000
(1) 10,000
(2)140,000
(3) 29,000
834,800
182,700
82
Total
1,558,800
1,090,000
466,200
(5) 23,700
466,200
1,931,500
Problem 16-10
a.
Investment in Sally Products Co.

Cash
To record acquisition of 80% stock of Sally.
160,000
Cash
160,000
8,000
Dividend income
To record dividends received from Sally (P10,000 x 80%)
b.
8,000
Working Paper Eliminating Entries Dec. 31, 2008

Allocation schedule:
Acquisition cost
Less: Book value of interest acquired (P150,000 x 80%)
Difference
Allocated to building and equipment
P (50,000)
10,000
(1)
(2)
(3)
(4)
(5)
(6)
Dividend income
Dividends declared Sally
P160,000
120,000
40,000
(40,000)
8,000
2,000
10,000
Common stock Sally

100,000
Retained earnings, 1/1 Sally
50,000
Investment in Sally Products
120,000
30,000
Building and equipment

50,000
Investment in Sally Products
40,000
10,000
Accumulated depreciation Bldg
Accounts payables
Cash and receivables
5,000
5,000
10,000

5,000
Net income Sally
P30,000
10,000
5,000
83
Amortization
Adjusted net income
MINIS (P25,000 x 20%)
c.
(5,000)
P25,000
P 5,000
Pilar Corporation and Subsidiary

December 31, 2008
Pilar
Corporation
Sally Wood
Products
Income Statement
Sales
Dividend income
Total revenue
200,000
8,000
208,000
100,000
Cost of goods sold

Inventory losses
Total cost and expenses
Net /consolidated income
120,000
25,000
15,000
160,000
48,000
50,000
15,000
5,000
70,000
30,000
& Eliminations
Debit
Credit
100,000
170,000
45,000
20,000
235,000
65,000
(4) 5,000
(6) 5,000
48,000
30,000
298,000
48,000
346,000
30,000
90,000
30,000
120,000
10,000
316,000
110,000
81,000
260,000
80,000
500,000
160,000
65,000
90,000
80,000
150,000
1,081,000
385,000
205,000
60,000
200,000
300,000
316,000
105,000
20,000
50,000
100,000
110,000
Consolidated
300,000
300,000
(1) 8,000
MI interest in net income of

subsidiary (MINIS
Adjustments
(5,000)
60,000
Retained earnings statement

Total
Dividends declared
carried forward
Balance Sheet
Cash and receivables
Inventory
Land
Investment in Sally
Total
Accounts payable
Notes payable
Common stock
Retained
earnings
from
above
MI in net assets if subsidiary
(2) 50,000
(1) 10,000
338,000
60,000
398,000
30,000
368,000
(5) 10,000
(3) 50,000
(2)120,000
(3) 40,000
136,000
350,000
160,000
700,000
1,346,000
(4) 5,000
315,000
70,000
250,000
300,000
368,000
(2) 30,000
(3) 10,000
(6) 5,000
43,000
(5) 10,000
(2)100,000
(1) 2,000
84
Total
1,081,000
385,000
230,000
230,000
1,346,000
Problem 16-11
a.
Eliminating entries:
E(1)
E(2)
E(3)
Dividend Income
Dividends Declared
Eliminate dividend income from subsidiary.
20,000
Common Stock Star Company

Retained Earnings, January 1
Differential
Investment in Star Company Stock
Eliminate investment balance at date
of acquisition.
150,000
50,000
20,000
20,000
220,000
Goodwill
Retained Earnings, January 1
Differential
Assign differential at beginning of year
8,000
12,000
20,000
Porno Corporation and Star Company

Consolidated Workingpaper
December 31, 2008
Light
_____Item_____
Credit Consolidated
Income Statement
Sales
Dividend income
Credits
Cost of goods sold
Other expenses
Debits
Net income, carry forward
Retained Earnings Statement
Net income, from above
Dividends declared
Star
Eliminations
Corporation
Company
350,000
20,000
370,000
270,000
25,000
21,000
(316,000)
54,000
200,000
200,000
135,000
20,000
10,000
(165,000)
35,000
262,000
60,000
54,000
316,000
(20,000)
35,000
95,000
(20,000)
(1) 20,000
__
20,000
____
Debit
550,000
_______
550,000
405,000
45,000
31,000
(481,000)
69,000
(2) 50,000
(3) 12,000
20,000
___
(1) 20,000
260,000
69,000
329,000
(20,000)
85
Retained earnings, Dec. 31,

carry forward
Balance Sheet
Cash
Accounts receivable
Inventory
Investment in Star Company
stock
Differential
Goodwill
Debits
Accounts payable`
Taxes payable
Common stock
Light Corporation
Star Company
Retained earnings, from above
Credits
296,000
75,000
46,000
55,000
75,000
300,000
30,000
40,000
65,000
240,000
82,000
309,000
76,000
95,000
140,000
540,000
220,000
-
20,000
(2)220,000
(2) 20,000 (3) 20,000
(3) 8,000
696,000
375,000
8,000
859,000
130,000
20,000
50,000
85,000
30,000
35,000
215,000
50,000
85,000
200,000
296,000
696,000
200,000
150,000
75,000
375,000
(2)150,000
82,000
260,000
20,000
260,000
309,000
859,000
86
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Advance Accounting 2 by Guerrero

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CHAPTER 16

d, because no impairment of goodwill is recognized.

Minority interest in net assets of subsidiary (P380,000 x 25%) P 95,000

Investment in Son, Jan. 1

Minority interest in net income of subsidiary (P240,000 x 10%) P 24,000

Dividends paid Puzon

Minority interest in net assets of subsidiary (1,175,000 x 20%) P 231,000

Dividend income (P30,000 x 5%)

Consolidated retained earnings:

Consolidated retained earnings, Dec. 31, 2008

Minority interest in net assets of subsidiary

Minority interest in net assets of subsidiary (P1,066,500 x 30%)

Polo net income from own corporation

(35,000 3750) x 20%

(see no. 16-22)

Neither allocations nor amortization are found in a pooling of interests.

No entry is to be recorded by Holly during 2005 under the cost method.

Working paper elimination entries

Common stock State

Cost of goods sold

Consolidated Retained Earnings, Dec. 31, 2008

Consolidated net income, Dec. 31, 2008

Consolidated Goodwill [(P680,000 P480,000)- P120,000]

Investment in Stag Company 12/31/06 (at acquisition cost)

Minority Interest in Net Assets of Subsidiary (MINAS)

Consolidated Net Income

Consolidated Goodwill (not impaired)

Consolidated Common Stock (Pony)

Consolidated Retained Earnings

Retained Earnings, Dec. 31, 2008 Sison

Amortization per year (P83,333/10 years)

Working Paper Elimination Entries, Dec. 31, 2008

Common stock Short

Pony Corporation and Subsidiary

Working Paper Elimination Entries

Common stock Sisa

Minority interest in net income of subsidiary

Popo Corporation and Subsidiary

Consolidated Financial Statements

Popo Corporation and Subsidiary

Popo Corporation and Subsidiary

Palo Corporation and Subsidiary

Consolidated Financial Statements

Palo Corporation and Subsidiary

Palo Corporation and Subsidiary

Working Paper Elimination Entries - December 31, 2006(not required)

Cost of goods sold

Minority interest in net income of subsidiary

To established minority share in subsidiary net income.

P Company and Subsidiary

Investment in Sally Products Co.

Working Paper Eliminating Entries Dec. 31, 2008

Common stock Sally

Building and equipment

Minority interest in net income of subsidiary

Pilar Corporation and Subsidiary

Cost of goods sold

MI interest in net income of

Retained earnings statement

Retained earnings, 1/1

Common Stock Star Company

Porno Corporation and Star Company

Retained earnings, Dec. 31,