Problem 17-1 Consolidated inventory P 988,000

The computation of the selected consolidation balances are affected by the inter-company profit in
downstream intercompany sales as computed below:
Problem 17-1, continued:
Unrealized profit in ending inventory, Dec. 31, 2012 – Downstream g. NCI
Intercompany profit (P120,000 – P72,000) P 48,000 NCI, December 31, 2012 [ (P902,000/80%) x 20%] P225,500
Inventory left at year end x 30% NCI in dividends paid by Bicol (P50,000 x 20%) (10,000)
Unrealized profit, Dec. 31, 2012 P 14,400 NCI in CI of subsidiary (P100,000 x 20%) 20,000
Total NCI, 12/31/13 P235,500
Unrealized profit in ending inventory, Dec. 31, 2013 – Downstream
Intercompany profit (P250,000 – P200,000) P 50,000
Inventory left at year end x 20% Problem 17-2
Unrealized profit, Dec. 31, 2013 P 10,000
P Company and Subsidiary
a. Consolidated Sales Consolidated Statement of Comprehensive Income
Apo P800,000 Year Ended December 31, 2013
Bicol 600,000
Intercompany sales – 2013 (250,000) Sales (P2,000,000 + P1,000,000 – P600,000) P2,400,000
Total P1,150,000 Cost of goods sold (Schedule 1) 704,000
b. Cost of goods sold Gross profit 1,696,000
Apo’s book value P 535,000 Expenses 600,000
Bicol’s book value 400,000 Income before income tax 1,096,000
Intercompany sales-2013 (250,000) Provision for income tax 440,000
Realized profit in beginning inventory – 2013 ( 14,400) Consolidated CI after income tax 656,000
Unrealized profit in ending inventory – 2013 10,000 Attributable to NCI (Schedule 2) 44,000
Consolidated cost of goods sold P 680,600 Attributable to parent P 612,000
c. Operating expenses
Apo P 100,000 Schedule 1:
Bicol 100,000 Cost of sales – P Company P 800,000
Total P 200,000 Purchases from S Company (600,000)
Intercompany profit in beginning inventory (P60,000 x 25%) ( 15,000)
d. Dividend Income – 0 (eliminated) Intercompany profit in ending inventory (P76,000 x 25%) 19,000
Total P 204,000
e. NCI in CI of Subsidiary (P100,000 x 20%) P 20,000 Cost of sales – S Company 500,000
Consolidated cost of sales P 704,000
f. Inventory
Apo P 298,000 Schedule 2:
Bicol 700,000 CI – S Company P 180,000
Unrealized profit in ending inventory, Dec. 31, 2013 (10,000) Realized profit in beginning inventory – Upstream 15,000
Unrealized profit in ending inventory – Upstream (19,000) Sales P200,000
Adjusted CI P 176,000 Cost and expenses (P140,000 +P20,000) 160,000
NCI proportionate share x 25% CI 40,000
NCI in CI of subsidiary P 44,000 Realized profit in beginning inventory – Upstream 20,000
Unrealized profit in ending inventory – Upstream (15,000)
Adjusted CI P 45,000
Problem 17-3 NCI proportionate share x 20%
NCI in CI of subsidiary P 9,000
a. Working Paper Eliminating Entries
b. Consolidated CI
(1) Dividend income 32,000 P Company CI from own operations (P250,000 – P32,000) P 218,000
NCI (20%) 8,000 S Company adjusted CI 45,000
Dividends declared- D (P32,000 / 80%) 40,000 Consolidated CI P 263,000
To eliminate intercompany dividends.
c. Non-controlling Interest
NCI, August 30, 2013 [(P248,000/80%) x 20%] P 62,000
Problem 17-3, Continued NCI in subsidiary dividends [(P32,000/80%) x 20%] ( 8,000)
NCI in CI of subsidiary 9,000
(2) Common stock – S 90,000 NCI P 63,000
Retained earnings – S 220,000
Investment in S Co. stock 248,000
NCI 62,000 Problem 17-4
To eliminate equity accounts of S on the date of
acquisition. a. Consolidated Sales
Reported total sales (P600,000 + P510,000) P1,170,000
(3) NCI 4,000 Intercompany sales (P140,000 + P240,000) (380,000)
Retained earnings, Jan. 1 16,000 Consolidated sales P 790,000
Cost of goods sold 20,000
To eliminate realized profit in beginning inventory b. Consolidated Cost of Goods Sold
Cost of goods sold:
(4) Sales 150,000 Pato (P660,000 / 140%) P 471,429
Cost of goods sold 135,000 Sales (P510,000 / 120% 425,000
Inventory, Dec. 31 (P45,000 x 33.33%) 15,000 Amount to be eliminated (P128,000 + P232,000) see entry below ( 360,000)
To eliminated intercompany sales and unrealized Total P 536,429
profit in ending inventory.
Elimination of intercompany sales and intercompany profit in inventory:
(5) NCI in net income of subsidiary 9,000
NCI 9,000 Downstream Sales
To establish NCI in CI of S Co. Sales 140,000
computed as follows: Inventory (P42,000 x 40/140) 12,000
 Cost of goods sold 128,000
Problem 17-5
Upstream Sales
Sales 240,000 P Company and Subsidiary S Company
Inventory (P48,000 x 20/120) 8,000 Consolidation Working Paper
Year Ended December 31, 2013
Cost of goods sold 232,000
Eliminations Adjustments Consoli-
c. Consolidated Comprehensive Income P Company S Company Debit Credit dated
CI from own operations – Pato P 70,000
Statement of CI
Unrealized profit in ending inventory – Downstream (12,000) Sales 12,000,000 1,300,000 (5) 400,000 12,900,000
Adjusted CI – Pato P 58,000 Dividend income 210,000 (1) 210,000 -
Adjusted CI of Sales Co. Total revenue 12,210,000 1,300,000 12,900,000
CI P20,000 Cost of goods sold 7,000,000 750,000 (7) 30,000 (5) 400,000 7,380,000
Operating expenses 4,210,000 50,000 (4) 40,000 4,300,000
Unrealized profit in ending inventory – Upstream (8,000) 12,000
Total cost and expenses 11,210,000 800,000 11,680,000
Consolidated CI P 70,000
CI to retained earnings 1,000,000 500,000 1,220,000
d. Consolidated Inventory, Dec. 31, 2013
Inventory reported – Pato P 48,000 Statement of Retained
Earnings
Inventory reported – Sales 42,000 Retained earnings, January 1 5,500,000 2,200,000 (2)2,200,000 5,500,000
Unrealized profit in ending inventory (P8,000 + P12,000) (20,000) CI from above 1,000,000 500,000 1,220,000
Consolidated inventory P 70,00 Total 6,500,000 2,700,000 6,720,000
Dividends declared - 210,000 (1) 210,000 -
Retained earnings,12/31 to BS 6,500,000 2,490,000 6,720,000

Statement of FP
Cash 810,000 170,000 980,000
Accounts receivable 425,000 445,000 (6) 25,000 845,000
Inventory 600,000 275,000 (7) 30,000 845,000
Property, plant and equipment 4,000,000 2,300,000 (3) 400,000 (4) 40,000 6,660,000
Investment in S Company 3,200,000 (2)2,800,000 -
(3) 400,000

Total assets 9,035,000 3,1900,000 9,330,000

Accounts payable 35,000 100,000 (6) 25,000 110,000

Common stock 1,000,000 400,000 (2) 400,000 1,000,000
Additional paid in capital 1,500,000 200,000 (2) 200,000 1,500,000
Retained earnings from above 6,500,000 2,490,000 6,720,000

9,035,000 3,190,000 3,905,000 3,905,000 9,330,000

Eliminations and Adjustments

Eliminate intercompany dividends Excess allocated to goodwill P131,250
Eliminate subsidiary’s equity balances
Allocate excess to equipment
Amortize allocated excess to equipment
Eliminate intercompany sale of P400,000 Fair Value Analysis:
Eliminate intercompany trade balances of P25,000 Company Parent NCI
Eliminate intercompany profit (30%) applicable to P100,000 (P400,000 – P300,000) Implied Price Value
of intercompany goods in P Company.
Fair Value (80%) (20%)

Company fair value P531,250 P425,000 P106,250

Fair value of net assets excluding goodwill 400,000 320,000 80,000
Problem 17-5, Continued
Goodwill P131,250 P105,000 P 26,250
Determination and Allocation of Excess Schedule

Price paid by the parent P3,200,000

Less book value of interest acquired (100%) Po Company and Subsidiary So Company
Common stock – S Company P 400,000 Consolidation Working Paper
Additional paid in capital – S Company 200,000 Year Ended December 31, 2013
Eliminations Adjustments Consoli-
Retained earnings, Jan. 1 – S Company 2.200,000 2,800,000 Po Company So Company Debit Credit dated
Excess allocated to equipment P 400,000 Statement of CI
Sales 880,000 630,000 (6) 32,000
Amortization (P400,000/10) P 40,000 (8) 30,000 1,448,000
Dividend income 24,000 (2) 24,000 -
Total revenue 904,000 630,000 1,448,000
Note: There is no NCI since this is a wholly-owned subsidiary. Cost of goods sold 704,000 504,000 (7) 1,320 (5) 1,350
(10) 750 (6) 32,000
(8) 700
(9) 30,000 1,146,020
Other expenses 130,000 81,000 211,000
Problem 17-6 Total cost and expenses 834,000 585,000 1,357,020
CI 70,000 45,000 90,980
Determination and Allocation of Excess Schedule: NCI in CI of Subsidiary (12) 8,990 (8,990)
CI to retained earnings 70,000 45,000 81,990
Price paid by the parent (80%) P425,000
Statement of Retained
Non-controlling interest [(P425,000/80%) x 20%] 106,250 Earnings
Total 531,250 Retained earnings, January 1 1,105,000 140,000 (1) 8,000
Less book value of interest acquired: (3)100,000
Common stock – So P200,000 (5) 1,350
(8) 560 1,135,090
APIC – So 100,000 CI from above 70,000 45,000 81,990
Retained earnings 100,000 Total 1,175,000 185,000 1,217,080
Total equity P400,000 Dividends declared 25,000 30,000 (2) 30,000 25,000
Interest acquired 80% 320,000 Retained earnings,12/31 to BS 1,150,000 155,000 1,192,080
 Statement of FP Po Company and Subsidiary So Company
Cash 216,200 44,300 260,500 Consolidated Statement of Comprehensive Income
Accounts receivable 290,000 97,000 (11) 15,000 372,000
Inventory 310,000 80,000 (7) 1,320
Fiscal Year Ended March 31, 2013
(10) 750 387,930
Pant assets (net) 1,991,000 340,000 2,331,000 Sales P1,448,000
Investment in S Company 425,000 (3)320,000 Cost of goods sold 1,146,020
(4)105,000 -
Gross profit 301,980
Goodwill 60,000 (4)131,250 191,250
Total assets 3,292,200 561,300 3,542,680 Expenses 211,000
Consolidated CI P 90,980
Accounts payable 642,200 106,300 (11) 15,000 733,500 Attributable to NCI 8,990
Common stock 250,000 200,000 (3)200,000 250,000 Attributable to controlling interest P 81,990
Additional paid in capital 1,250,000 100,000 (3)100,000 1,250,000
Retained earnings from above 1,150,000 155,000 1,192,080
Non-controlling interest (NCI) (2) 6,000 (1) 8,000
(8) 140 (3) 80,000 Problem 17-7
(4) 26,250
(12) 8,990 117,100
a. Unrealized Profit in Beginning Inventory
3,292,200 561,300 659,360 659,360 3,542,680
Beginning inventory - Downstream P 100,000
Gross profit rate (P240,000/ P400,000) x 60%
Eliminations and Adjustments Unrealized profit in beginning inventory P 60,000
Recognize NCI in subsidiary’s increase in undistributed earnings (P40,000 x 20%)
Eliminate intercompany dividends. Unrealized Profit in Ending Inventory
Eliminate subsidiary’s equity at date of acquisition Ending inventory – Downstream (P200,000 x 80%) P 160,000
Allocate excess to goodwill. Gross profit rate x 60%
Eliminate realized profit in beginning inventory (P9,000 x 15%) = P1,350 (Downstream) Unrealized profit in ending inventory P 96,000
Eliminate intercompany downstream sales from April 1, 2012 to March 31, 2013, P32,000.
Eliminated unrealized profit in ending inventory (downstream), P6,000 x 22% = P1,320. b. Intercompany Sales
Eliminate realized profit in beginning inventory (upstream) P3,500 x 20% = P700. Sales – P Company P2,000,000
Eliminate intecompany upstream sales on March 31, 2013, P30,000. Sales – S Company 1,000,000
Eliminate unrealized profit in ending inventory (upstream), P3,000 x 25% = P750. Intercompany sales – 2013 (400,000)
Eliminate intercompany payables and receivables ,P10,000 + P5,000 = P15,000. Consolidated sales P2,600,000
Recognized non-controlling interest (NCI) in CI of subsidiary computed as follows:
Intercompany Cost of Sales
CI of So Company P45,000 Cost of sales – P Company P 800,000
Realized profit in beginning inventory (upstream) 700 Cost of sales – S Company 600,000
Unrealized profit in ending inventory (upstream) (750) Intercompany purchases (400,000)
Adjusted CI P44,950 Intercompany profit in beginning inventory ( 60,000)
NCI share 20% Intercompany profit in ending inventory 96,000
NCI in CI of subsidiary P 8,990 Consolidated cost of sales P1,036,000

(2) c. Parent’s interest (40,000 shares / 50,000 shares) 80%

 (3) Goodwill 60,000
P Company Entries – 2013: Investment in S Company 60,000
(1) Investment in S Company stock 96,000 To allocate excess to goodwill.
Income from subsidiary 96,000
To record P’s share of S Co. income (4) Retained earnings – Jan. 1 60,000
(P120,000 x 80%) Cost of sales 60,000
To eliminate realized profit in beginning inventory-
(2) Cash 48,000 Downstream.
Investment in S Company stock 48,000
To record dividends received from S (5) Cost of sales 96,000
(P60,000 x 80%) Inventories 96,000
To eliminate unrealized profit in ending inventory-
(2) Income from subsidiary 36,000 Downstream.
Investment in S Company 36,000
To adjust income from subsidiary for intercompany (6) Sales 400,000
profit in : Cost of sales 400,000
Ending inventory (96,000) To eliminate intercompany sales.
Beginning inventory 60,000
Net adjustment ( 36,000) (7) Accounts payable 50,000
Accounts receivable 50,000
To eliminate intercompany payables and receivables.

NCI in CI of subsidiary 24,000

NCI 24,000
Problem 17-7, continued: To recognize NCI share in S Company CI
d. Working Paper Eliminating Entries: (P120,000 x 20%)

(1) Income from subsidiary 60,000 e. Consolidated Comprehensive Income

NCI (P60,000 x 20%) 12,000 CI from own operations – P Company (P480,000 – P60,000) P420,000
Dividends declared – S 60,000 Realized profit in beginning inventory 60,000
Investment in S Company 12,000 Unrealized profit in ending inventory ( 96,000)
To eliminate intercompany dividends. Adjusted CI – P Compay P384,000
S Company CI 120,000
(2) Common stock – S Co. 500,000 Consolidated CI P504,000
Retained earnings – S Co. 860,000
Investment in S Company stock 1,088,000
NCI 272,000
To eliminate equity accounts of S Company as of
beginning of year.