Chapter 16Multiple Choice Problems 1. b Full-Goodwill: (P600,000/70%) P640,000 = P217,143 P40,000 = P177,143 If partial goodwill: P600,000 (P640,000 x 70%) = P152,000 (P40,000 x 70%) = P124,000 2. b P500,000 + P3,461 3. b 4. d equivalent to consideration transferred, P320,000 5. d equivalent to consideration transferred, P380,000 6. a 20x4 Investment income: Dividend of P10,000 x 100%20x4 Investment balance: P500,000 7. d P45,000/15% = P300,000 8. cPigeons separate incomeP150,000

Less: 60% of Homes P10,000 loss =6,000

Less: Equipment depreciation P10,000/ 10 years =__1,000

Consolidated net incomeP143,000

9. aNon-controlling Interest in Net Income (NCINI) for Year 3

Net income of S CompanyP240,000

Less: Amortization of allocated excess 45,000

P195,000

Multiplied by: Non-controlling interest %.......... 30%

Non-controlling Interest in Net Income (NCINI) for Year 3P 58,500

10. c Net income from own/separate operations

P CompanyP 375,000

S Company 30,000

TotalP405,000

Less: Non-controlling Interest in Net Income* P5,250

Amortization of allocated excess (refer to amortization above)3,750

Goodwill impairment (impairment under full-goodwill approach) 0 9,000

Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent..P396,000

*Non-controlling Interest in Net Income (NCINI) for 20x4

Net income of S CompanyP30,000

Less: Amortization of allocated excess** 3,750

P26,250

Multiplied by: Non-controlling interest %.......... 20%

Non-controlling Interest in Net Income (NCINI) for 20x4P 5,250

**P270,000/80% = P337,500 (P150,000 + P150,000) = P37,500 / 10 years = P3,750 Note: Whether the partial or full-goodwill approach are used the amortization of excess are always the same.11. a*Non-controlling Interest in Net Income (NCINI) for Year 3

Net income of S CompanyP600,000

Less: Amortization of allocated excess 112,500

P487,500

Multiplied by: Non-controlling interest %.......... 30%

Non-controlling Interest in Net Income (NCINI) for Year 3P146,250

12. c Net income from own/separate operations

P CompanyP 625,000

S Company 50,000

TotalP675,000

Less: Non-controlling Interest in Net Income* P 8,750

Amortization of allocated excess (refer to amortization above)6,250

Goodwill impairment (impairment under full-goodwill approach) 0 15,000

Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent..P660,000

*Non-controlling Interest in Net Income (NCINI) for 20x4

Net income of S CompanyP50,000

Less: Amortization of allocated excess** 6,250

P43,750

Multiplied by: Non-controlling interest %.......... 20%

Non-controlling Interest in Net Income (NCINI) for 20x4P 8,750

**P450,000/80% = P562,500 (P250,000 + P250,000) = P62,500 / 10 years = P6,250 Note: Whether the partial or full-goodwill approach are used the amortization of excess are always the same.

13. bAs a general rule, if problem is silent It is assumed that expenses are generated evenly throughout the year, thus:Expenses (9/1/20x4-12/31/20x4): P620,000 x 4/12P206,667Amortization of allocated excess: P15,000 x 4/12 5,000P211,667

14. cNet income of S Company (P800,000 P620,000)P180,000

Less: Amortization of allocated excess 15,000

P165,000

Multiplied by: No of mos. (9/1-12/31) 4/12

P 55,000

15. aNet income of S Company (P800,000 P620,000)P180,000

Less: Amortization of allocated excess 15,000

P165,000

Multiplied by: No of mos. (9/1-12/31) 4/12

P 55,000

Multiplied by: Non-controlling interest %..........____20%

Non-controlling Interest in Net Income (NCINI) for 20x4P 22,000

16.bCombined revenues P1,100,000 Combined expenses(700,000)Excess acquisition-date fair value amortization(15,000)Consolidated net incomeP385,000 Less: noncontrolling interest (P85,000 40%)(34,000)Consolidated net income to controlling interestP351,000

17. cHH expenseP621,000 NN expenses714,000 Excess fair value amortization (70,000 10 yrs)7,000 Consolidated expensesP1,342,000

18. dUnder the cost method, an investor recognizes its investment in the investee at cost. Income is recognized only to the extent that the investor receives distributions from the accumulated net profits (or dividend declared/paid by the investee) of the investee arising after the date of acquisition by the investor. Distributions (dividends) received in excess of such profits are regarded as a recovery of investment and are accounted for as a reduction of the cost of the investment (i.e., as a return of capital or liquidating dividend).

Therefore, the investment balance of P500,000 on the acquisition date remains to be the same.

19. d refer to No. 18 for further discussion.20. b refer to No. 18 for further discussion.21. a P40,000 x 80% 22. b P50,000 x 80% 23. a P60,000 x 80% 23. c Full/Gross-up Goodwill Presentation: Non-controlling interest in Net Income:Subsidiary net income from own operations.P100,000 Less: Amortization of allocated excess* 7,000 Impairment of full-goodwill (if any)** 0 P 93,000 x: Non-controlling interests 20%Non-controlling interest in Net Income P 18,600*Amortization of allocated excess:Increase in equipment: P30,000 / 10 years = P 3,000Increase in buildings: P40,000 / 10 years = 4,000Total amortization P 7,000 ** In case, there is an impairment of goodwill then the amount impaired under the full-goodwill method should also be allocated between controlling and non-controlling interests Partial Goodwill Presentation:Non-controlling interest in Net Income:Subsidiary net income from own operations.P100,000 Less: Amortization of allocated excess*. 7,000 P 93,000 x: Non-controlling interests. 20%Non-controlling interest in Net Income. P 18,60024. c Full/Gross-up Goodwill Presentation: Non-controlling interest in Net Income:Subsidiary net income from own operations.P120,000 Less: Amortization of allocated excess* 7,000 Impairment of full-goodwill (if any)** 0 P113,000 x: Non-controlling interests. 20%Non-controlling interest in Net Income P 22,600

*Amortization of allocated excess:Increase in equipment: P30,000 / 10 years = P 3,000Increase in buildings: P40,000 / 10 years = 4,000Total amortization. P 7,000

** In case, there is an impairment of goodwill then the amount impaired under the full-goodwill method should also be allocated between controlling and non-controlling interests

Partial Goodwill Presentation:Non-controlling interest in Net Income:Subsidiary net income from own operations.P120,000 Less: Amortization of allocated excess* 7,000 P113,000 x: Non-controlling interests. 20%Non-controlling interest in Net Income P 22,600

25. a Full/Gross-up Goodwill Presentation: Non-controlling interest in Net Income:Subsidiary net income from own operations.P130,000 Less: Amortization of allocated excess* 7,000 Impairment of full-goodwill (if any)** 0 P123,000 x: Non-controlling interests. 20%Non-controlling interest in Net Income P 24,600

*Amortization of allocated excess:Increase in equipment: P30,000 / 10 years = P 3,000Increase in buildings: P40,000 / 10 years = 4,000Total amortization. P 7,000

** In case, there is an impairment of goodwill then the amount impaired under the full-goodwill method should also be allocated between controlling and non-controlling interests

Partial Goodwill Presentation:Non-controlling interest in Net Income:Subsidiary net income from own operations.P130,000 Less: Amortization of allocated excess* 7,000 P123,000 x: Non-controlling interests. 20%Non-controlling interest in Net Income P 24,600

26. aBook value of Stockholders Equity of Subsidiary Common stock, 12/31/20x4 P 300,000 Retained earnings, 12/31/20x4: Retained earnings, 1/1/20x4.P200,000 Add: Net income 20x4.. 100,000 Less: Dividends paid, 20x4.. 40,000 260,000Book value of Stockholders Equity of Subsidiary, 12/31/x4 P 560,000Add: Adjustments to reflect fair value (P30,000 + P40,000).. 70,000Less: Accumulated amortization of allocated excess P7,000 x 1 year.. 7,000Fair value of Stockholders Equity of Subsidiary. 12/31/x4 P 623,000Multiplied by: Non-controlling Interest %........................... 20%Non-controlling Interest (partial goodwill).. P 124,600 Add: Non-controlling interest in Full Goodwill (P55,000, full P44,000 partial l) or (P55,00,000 x 20%)* 11,000 Non-controlling Interest (full) P 135,600

* this computation (i.e., P55,000 x 20%) should only be use when the fair value of the non-controlling interest of acquiree (subsidiary) is not given.

Partial Goodwill:Fair value of Subsidiary: Fair value of consideration transferred: Cash P 500,000 Less: Book value of Net Assets (Stockholders Equity - Subsidiary): (P300,000 + P200,000) x 80%.. 400,000 Allocated Excess.. P 100,000 Less: Over/Undervaluation of Assets and Liabilities: Increase in equipment: P30,000 x 80%................... P 24,000 Increase in building: P40,000 x 80%......................... 32,000 56,000 Goodwill (Partial).. P 44,000

Full-goodwill:(100%) Fair value of Subsidiary: (100%) Fair value of consideration transferred: P500,000 / 80%.......... P 625,000 Less: Book value of Net Assets (Stockholders Equity - Subsidiary)................................... 500,000 Allocated Excess.. P 125,000 Less: Over/Undervaluation of Assets and Liabilities (P40,000 + P30,000). 70,000 Goodwill (Full/Gross-up).... P 55,000

27. eBook value of Stockholders Equity of Subsidiary Common stock, 12/31/20x5 P 300,000 Retained earnings, 12/31/20x5: Retained earnings, 1/1/20x5 (refer to No. 94).P260,000 Add: Net income, 20x5. 120,000 Less: Dividends paid, 20x5 50,000 330,000Book value of Stockholders Equity of Subsidiary, 12/31/x5 P 630,000Add: Adjustments to reflect fair value (P30,000 + P40,000).. 70,000Less: Accumulated amortization of allocated excess 2 yrs 14,000Fair value of Stockholders Equity of Subsidiary. 12/31/x5 P 686,000Multiplied by: Non-controlling Interest %.............................. 20%Non-controlling Interest (partial goodwill).. P 137,200 Add: Non-controlling interest in Full Goodwill (P55,000, full P44,000 partial l) or (P55,00,000 x 20%)* 11,000 Non-controlling Interest (full) P 148,200

28. eBook value of Stockholders Equity of Subsidiary Common stock, 12/31/20x6 P 300,000 Retained earnings, 12/31/20x6: Retained earnings, 1/1/20x6.P 330,000 Add: Net income, 20x6 130,000 Less: Dividends paid, 20x6.. 60,000 400,000Book value of Stockholders Equity of Subsidiary, 12/31/x6 P 700,000Add: Adjustments to reflect fair value (P30,000 + P40,000).. 70,000Less: Accumulated amortization of allocated excess (1/1/20x4 12/31/20x6): P7,000 x 3 years 21,000Fair value of Stockholders Equity of Subsidiary. 12/31/x6 P 749,000Multiplied by: Non-controlling Interest %............................ 20%Non-controlling Interest (partial goodwill).. P 149,800 Add: Non-controlling interest in Full Goodwill (P55,000, full P44,000 partial l) or (P55,00,000 x 20%)* 11,000 Non-controlling Interest (full) P 160,800

* this computation (i.e., P55,000 x 20%) should only be use when the fair value of the non-controlling interest of acquiree (subsidiary) is not given.

29. d Economic Unit or Entity Concept (as required by PFRS 10) Net income from own/separate operations

P CompanyP 500,000

S Company 100,000

TotalP600,000

Less: Non-controlling Interest in Net Income* P 20,000

Amortization of allocated excess 0

Goodwill impairment (impairment under full-goodwill approach)_ 0 20,000

Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent..P580,000

Add: NCINI__20,000

CNI - entity conceptP600,000

*Non-controlling Interest in Net Income (NCINI) for 20x4

Net income of S CompanyP100,000

Less: Amortization of allocated excess _______0

P100,000

Multiplied by: Non-controlling interest %.......... 20%

Non-controlling Interest in Net Income (NCINI) for 20x4P 20,000

30. c Parent Company Concept Parents Net Income only (not required by PFRS 10) Net income from own/separate operations

P CompanyP 500,000

S Company 100,000

TotalP600,000

Less: Non-controlling Interest in Net Income* P 20,000

Amortization of allocated excess 0

Goodwill impairment (impairment under full-goodwill approach)_ 0 20,000

CNI - entity conceptP580,000

*Non-controlling Interest in Net Income (NCINI) for 20x4

Net income of S CompanyP100,000

Less: Amortization of allocated excess _______0

P100,000

Multiplied by: Non-controlling interest %.......... 20%

Non-controlling Interest in Net Income (NCINI) for 20x4P 20,000

31. No requirement32. Podexs separate earnings for 20x6P2,000,000Dividend income from Sodex __120,000 Podexs 20x6 net incomeP2,120,000

33. P2,260,000 Podexs separate earnings for 20X6P2,000,000 Podexs equity in net income of Sodex 300,000Less: Amortization of cost in excess of book value (40,000) Podexs 20x6 net incomeP2,260,000

34. b

35. b Net Income from own operations: 20x4 20x5 Parent P 100,000 P100,000 Subsidiary... 25,000 35,000 P125,000 P135,000 Subsidiarys other comprehensive income.. 5,000 10,000 Total Comprehensive Income.....P130,000 P145,000 Less: Amortization of allocated excess. 6,250 6,250 Impairment of full- goodwill (if any). 0 0 Consolidated /Group Comprehensive Income P123,750 P138,750 Less: Non-controlling interest in Comprehensive Income * 4,750 7,750 Controlling Interest in Consolidated __________________ Comprehensive Income . P119,000 P131,000

*Non-controlling interest in Comprehensive Income: 20x4 2012 Subsidiarys: Net income from own operations.......P 25,000 P 35,000 Other Comprehensive Income (P30,000 P25,000).... 5,000 10,000 Subsidiarys Comprehensive Income........P 30,000 P 45,000Less: Amortization of allocated excess*.. 6,250 6,250 Impairment of full-goodwill (if any)..... 0 0 P 23,750 P 38,750 x: Non-controlling interests. 20% 20% Non-controlling interest in Comprehensive Income...P 4,750 P 7,750

*Amortization of allocated excess:Increase in other intangibles: P50,000 / 8 years = P 6,250

36. c refer to No. 3537. c refer to No. 3538. b- refer to No. 3539. d Inventory not yet sold in 20x4p 0 Building: (P390,000 P200,000)/ 10 years 19,000 Equipment (P280,000 P350,000)/ 5 years( 14,000)P 5,00040. a41. aCost of Goods Sold P80,000 debitDepreciation Expense (P192,000/120) 7 = P11,200 debit42. cCost of Goods Sold (P60,000 x 4/6) = P40,000 debitInterest Expense: (P15,000/5) = P3,000 debit43. a[(P250,000 - P180,000)/10]744. c[(P380,000 - P260,000)/120]8845. a 46. c P170,000 - {[P320,000 - (P300,000 - P170,000)]/10}247. b[P320,000 - (P300,000 - P170,000)]/1048. d49. dP105,000 - {[P405,000 - (P450,000 - P105,000)]/20}250. a[P405,000 - (P450,000 - P105,000)]/20

51. d - The acquisition method consolidates assets at fair value at acquisition date regardless of the parents percentage ownership.

52. bConsideration transferred P3,800Less: BV of SHE of S: P1,000 + P600 + P1,500 3,100Allocated excess /differential / excess of cost or fair value over book value P 70053. aAllocated excess /differential / excess of cost or fair value over book value P 700Less: O/U valuation of A and L Book value (P800 + P1,000 + P1,500 + P900 P1,800)P2,400 Fair value (P900 + P1,200 + P1,250 + P1,300 P1,700) 2,950 Net increase 550Goodwill P 150

54. c inventory at fair value55. b - (P1,500, book value (P1,500 P1,200) + (P300/5) = P1,26056. d (P1,000, book value + (P1,250 P1,000) (P250/2) = P1,12557. c (P900, book value + (P1,300 P900) = P1,30058. c (P1,800 (P1,800 P1,700) + (P100/4) = P1,72559. c - (P1,500, book value (P1,500 P1,200) + (P300/5) x 2 years = P1,32060. b - (P1,000, book value + (P1,250 P1,000) (P250/2) x 2 years = P1,00061. b - (P900, book value + (P1,300 P900) = P1,300062. d - (P1,800 (P1,800 P1,700) + (P100/4) x 2 years = P1,75063. d P: BV,12/31/20x6P250,000 S: BV of building, 12/31/20x4 P170,000 Add: Adjustments to reflect fair value, 1/1/20x4 (P350,000 P240,000) 110,000 Less: Amortization of excess (P110,000/10) x 3 years 33,000 247,000P497,000

64. b P: BV,12/31/20x5P 975,000 S: BV of building, 12/31/20x5 P105,000 Add: Adjustments to reflect fair value, 1/4/20x4 (P120,000 P90,000) 30,000 Less: Amortization of excess (P30,000/10) x 2 years 6,000 129,000P1,104,000

65. c - An asset acquired in a business combination is initially valued at 100% acquisition-date fair value and subsequently amortized its useful life.Patent fair value at January 1, 20x4P45,000Amortization for 2 years (10 year life)(9,000)Patent reported amount December 31, 20x5P36,000

66. b BV of building, 1/1/20x4P200,000 Adjustments to reflect fair value, 1/1/20x4 (P300,000 P200,000) 100,000 Depreciation 1/1/20x4 12/31/20x6 (P100,000/20 x 3 years)( 15,000)P285,00067. d same with No. 568. d BV of equipment, 1/1/20x4P 80,000 Adjustments to reflect fair value, 1/1/20x4 (P80,000 P75,000) ( 5,000) Depreciation 1/1/20x4 12/31/20x6 (P5,000/10 x 3 years) 1,500P 76,50069. a Adjustments to reflect fair value, 1/1/20x4 (P80,000 P75,000) (P 5,000) Depreciation 1/1/20x4 12/31/20x6 (P5,000/10 x 3 years) 1,500(P 3,500)70. d 1/2/20x4: BV of equipment, 1/1/20x4P200,000 Adjustments to reflect fair value, 1/1/20x4 (P300,000 P200,000) 100,000P300,00071. cConsolidated Net Income for 20x4

Net income from own/separate operations

P Company P30,200 (P150,0000 P20,000 P60,000)P 70,000

S Company (P100,000 P15,000 P45,000) 40,000

TotalP110,000

Less: Non-controlling Interest in Net Income P 0

Amortization of allocated excess 0

Goodwill impairment ____0 ____0

Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent..P110,000

Add: Non-controlling Interest in Net Income (NCINI) _____0

Consolidated Net Income for 20x4P110,000

72. b Plimsol: P100,000 + P200,000,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,P 300,000 Shipping: P75,000 + P150,000. 225,000 P 525,000

73. Retained Earnings - Plimsol, 1/1/20x4 (cost method, same with equity method and consoiidated retained earnings since it is the date of acdquisition) P 150,000 Add: CI CNI (refer to No. 71) 110,000 Less: CI Dividends (Dividend of parent only) 25,000 Retained earnings, 12/31/20x4 (equity method same with CRE) P 235,000

74. d Liabilities:

Plimsol (P40,000 + P75,000)P115,000

Shipping (P25,000 + P50,000)75,000

P 190,000

75. d Total assets (No. 72)P525,000

Les: Liabilities (No. 74)190,000

Stockholders equityP335,000

76. bDecrease in Buildings account:Fair value P 8,000Book value.. __10,000Decrease. P 2,000 77. dDecrease in buildings account (refer to No. 73) P 2,000Less: Increase due to depreciation (P2,000/10) 200Decrease in buildings accounts.. P 1,80078. dDecrease in buildings account (refer to No. 74) P 1,800Less: Increase due to depreciation (P2,000/10) 200Decrease in buildings accounts.. P 1,60079. aIncrease in Equipment account:Fair value P 14,000Book value.. __18,000Increase. P 4,000 80. aIncrease in equipment account (refer to No. 76) P 4,000Less: Decrease due to depreciation (P4,000/4) 1,000Increase in equipment accounts.. P 3,000

81. aIncrease in equipment account (refer to No. 77) P 3,000Less: Decrease due to depreciation (P4,000/4 1,000Increase in equipment accounts.. P 2,000

82. aIncrease in Land account:Fair valueP 12,000Book value.. 5,000Increase.. P 7,000

83. b refer to No. 82, no depreciation/amortization 84. b refer to No. 82, no depreciation/amortization85. eIncrease in Patent account:Fair value P 11,000Book value.. _ 0Increase. P 11,000

(P234,000/90%) (P160,000 + P80,000) = P20,000 (P4,000 P2,000 + P7,000) = P11,000. Partial or full-goodwill approach, the amortization remains the same. 86. eIncrease in patent account (refer to No. 85) P 11,000Less: Decrease due to depreciation (P11,000/5). 2,200Increase in patent accounts. P 8,80087. dIncrease in patent account (refer to No. 86) P 8,800Less: Decrease due to depreciation (P11,000/5). 2,200Increase in patent accounts. P 6,600

88. c Parents inventory of P132,000 plus subsidiarys book value of inventory of P38,000 plus 75% of the excess of the fair value over the book value = P132,000 + P38,000 + (75%) x (P22,000) = P186,500

89. dPurchase price minus 75% of Grasss underlying book value - P16,500 of excess cost over book value allocated to inventory (see 88) = P392,000 (75%) x (P400,000) - P16,500 = P75,500

90. d - Just add the liability amounts together

91. b- (25%) x (P400,000) = P100,000

92. a- The parents Retained Earnings is the amount of consolidated Retained Earnings93. c

Cash P 230,000

Accounts Receivable170,000

Inventory $132,000+$38,000+$16,500=186,500

Land100,000

Plant assets-net700,000

Goodwill____75,500

Total assetsP 1,472,000

94. c Fair Value of Subsidiary: Consideration Transferred (5,400 shares) P120,600 Less: Book value of SHE-S, 1/1: Common stock S: P50,000 x 90% P 45,000 APIC S: P15,000 x 90% 13,500 RE S: P41,000 x 90% 36,900 95,400 Allocated Excess P 25,200 Less: Over/undervaluation of A & L: Increase in Inv. (P17,100P16,100) x 90% P 900 Increase in Eqpt. (P48,000P40,000) x 90% 7,200 Increase in Patents (P13,000P10,000) x 90% 2,700 10,800 Positive Excess: Goodwill P 14,400 Amortization of allocated excess - Starting January 1:Inventory: P1,000 / 1 year P 1,000Equipment: P8,000 / 4 years 2,000Patents: P3,000 / 10 years 300 P 3,300

95. c Common stock S P 50,000 APIC S 15,000 RE S 41,000 Stockholders equity Subsidiary, 1/1 P106,000Add: Adjustments to reflect fair value 12,000 Fair value of Stockholders Equity S, 1/1 P118,000x: Non-controlling) interests 10%Non-controlling Interests (in net assets) P 11,800

96. a P48,000, parent only. 97. a P48,000. On the date of acquisition, the parents retained earnings is also the consolidated retained earnings.98. No requirement.99. b P120,600, the initial value100. b P4,000 x 90% = P3,600101. cConsolidated Net Income for 20x4

Net income from own/separate operations

P Company P30,200 (P4,000 x 90%)P26,600

S Company 9,400

TotalP36,000

Less: Non-controlling Interest in Net Income* P 610

Amortization of allocated excess 3,300

Goodwill impairment ____0 3,910

Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent..P32,090

Add: Non-controlling Interest in Net Income (NCINI) 610

Consolidated Net Income for 20x4P32,700

*Net income of subsidiary 20x4P 9,400

Amortization of allocated excess 20x4( 3,300)

P 6,100

Multiplied by: Non-controlling interest %.......... 10%

P 610

Less: Non-controlling interest on impairment loss on full-goodwill ____0

Non-controlling Interest in Net Income (NCINI)P 610

102. c Noncontrolling Interests (in net assets): Common stock - S, 12/31 P 50,000 Additional paid-in capital - S, 12/31 15,000 Retained earnings - S, 12/31: RE-S, 1/1/2011 P 41,000 Add: NI-S, 2011 9,400 Less: Dividends S 4,000 46,400 Book value of SHE - S, 12/31 P 111,400 Add: Adjustments to reflect fair value, 1/1 12,000 Less: Amortization of allocated excess (1 yr.) 3,300 Fair Value of Net Assets/SHE - S, 12/31 P 120,100 x: Noncontrolling Interest % 10% Noncontrolling Interest (in net assets), 12/31 P 12,010103. b refer to 101 for computation104. c refer to 101 for computation105. b Controlling RE / RE Attributable to EH of Parent, 1/1 (refer to No. 102 P 48,000 Add: CI CNI (refer to 106 and 109) 32,090 Less: CI Dividends (Dividend of parent only) 15,000 Controlling RE / RE Attributable to EH of Parent, 12/31 P 65,090106. b same with No. 105107. c Consolidated Equity: Controlling Interest / Equity Holders Attributable to Parent: Common stock P: [P100,000 + P120,600 (5,400 shares x P10 par)] P154,000 APIC P: [15,000 + [P120,600 (5,400 x P10)] 81,600 RE P (refer to No. 105) 65,090 Parents Stockholders Equity or Controlling Interest Equity P300,690 Noncontrolling Interest 12,010 Consolidated Equity P312,700

108. c P95,000 = (P956,000 / .80) - P1,000,000 - P100,000

109. c P251,000 = .20[(P956,000 + P239,000) + (P190,000 - P5,000 - P125,000)]

110. bCombined revenuesP1,300,000 Combined expenses(800,000)Trademark amortization(6,000)Patented technology amortization(8,000)Consolidated net incomeP486,000

111. c NCI-CNI - P34,400; NCI P260,800 Subsidiary income (P100,000 P14,000 excess amortizations)P86,000 Non-controlling interest percentage 40%Non-controlling interest in subsidiary incomeP34,400 Fair value of non-controlling interest at acquisition dateP180,000 40% change in Scott book value since acquisition52,000 Excess fair value amortization (P14,000 40%)(5,600)40% current year income34,400 Non-controlling interest at end of yearP260,800

112. aMM trademark balanceP260,000 SS trademark balance200,000 Excess fair value60,000 Two years amortization (10-year life)(12,000)Consolidated trademarksP508,000

113. aFair value of non-controlling interest on April 1P165,000 30% of net income for 9 months ( year P240,000 30%)54,000 Non-controlling interest December 31P219,000

114. cNon-controlling interest (full-goodwill), December 31, 20x4

Book value of SHE S, 12/31/20x4P1,000,000

Add: Net income of S 20x4___150,000

TotalP1,150,000

Less: Dividends paid 20x4____90,000

Stockholders equity S Company, December 31, Year 2P1,060,000

Adjustments to reflect fair value - (over) undervaluation of assets and liabilities, date of acquisition January 1, 20x4 200,000

Amortization of allocated excess (refer to amortization above: P200,000/10_( 20,000)

Fair value of stockholders equity of subsidiary, December 31, 20x5P1,240,000

Multiplied by: Non-controlling Interest percentage... 30%

Non-controlling interest (partial) P 372,000

Add: NCI on full-goodwill P85,714 P60,000)___25,714

Non-controlling interest (full) P397,714

*P900,000/70% = P1,285,714 P1,000,000 = P285,714 P200,000 = P85,714, full goodwill *P900,000 (P1,000,000 x 70%) = P200,000 (P200,000 x 70%) = P60,000, partial goodwill It is assumed that full-goodwill is used. But, it should be noted that PFRS 3 either partial or full-goodwill approach are considered acceptable.115. b (P50,000 + P70,000) x 25% = P30,000116. b P only.117. b{(P250,000/.8) + [P75,000 + P90,000 - P25,000 - P50,000 - P30,000 - (P80,000/8)2]}.2118. d{(P420,000/.7) + [P160,000 + P210,000 - P60,000 - P80,000 - P50,000 - (P90,000/5)2]}.3119. a - P650,000 =P500,000 + P200,000 - P50,000120. a assume the use of equity method Punns equity in net income of Sunn (3 months ended,12/31/x6) P 200,000 Amortization of cost in excess of book value ( 60,000) Increase in Parents retained earnings. P 140,000 e - If cost model/cost method, the answer would be P100,000.Dividend income. P 100,000121. c P120,000 x 70%122. c Investment.1/1/20x4P210,000Add: Share in net income 20x4 (P90,000 x 70%) 63,000Less: Dividends received 24,000Investment, 12/31/20x4P249,000Add: Share in net income 20x5 (P120,000 x 70%) 84,000Less: Dividends received 36,000Investment, 12/31/20x5P297,000

Note: The term received means that is the amount attributable to parent. If the term declared or paid were used then it should be multiplied further by controlling interest.

123. c P60,000 x 80% = P48,000124. cInvestment.1/1/20x4P105,000Add: Share in net income 20x4 (P45,000 x 80%) 36,000Less: Dividends received 12,000Investment, 12/31/20x4P129,000Add: Share in net income 20x5 (P60,000 x 80%) 48,000Less: Dividends received 18,000Investment, 12/31/20x5P159,000125. d Investment balance, 1/1/20x4.. P 150,000 Add: Pumas equity in net income of Slume (30% x P25,000).. 7,500 Less: Dividends (P30% x P10,000). 3,000 Amortization of cost in excess of book value (P50,000/10 years) x 30%.............................................................. 1,500 Pumas 20x6 net income (equity method) P 153,000126. b Pumas equity in net income of Slume (30% x P25,000).... P 7,500 Less: Amortization of cost in excess of book value (P50,000/10 years) x 30%.............................................................. 1,500 Investment income 20x4 (equity method). P 6,000127. b Fullgoodwill AproachFair value of Subsidiary (100%)

Consideration transferred (80%).. P 180,000

Fair value of NCI (given) (20%).. 20,000

Fair value of Subsidiary (100%).P 200,000

Less: Book value of stockholders equity of Son:

Common stock (P100,000 x 100%).P 100,000

Retained earnings (P60,000 x 100%)... 60,000 160,000

Allocated excess (excess of cost over book value)..P 40,000

Less: Over/under valuation of assets and liabilities:

Increase in land (P5,000 x 100%).P 5,000

Increase in equipment (P10,000 x 100%)___10,00015,000

Positive excess: Full-goodwill (excess of cost over fair value)... P 25,000

Partial-Goodwill ApproachFair value of Subsidiary (90%)

Consideration transferred.. P 180,000

Less: Book value of stockholders equity of S:

Common stock (P100,000 x 90%).P 90,000

Retained earnings (P60,000 x 90%)... 54,000 144,000

Allocated excess (excess of cost over book value)..P 36,000

Less: Over/under valuation of assets and liabilities:

Increase in land (P5,000 x 90%).P 4,500

Increase in equipment (P10,000 x 90%)___9,00013,500

Positive excess: partial-goodwill (excess of cost over fair value)... P 22,500

A summary or depreciation and amortization adjustments is as follows:Account Adjustments to be amortizedOver/underLifeAnnual AmountCurrent Year(20x4)

Subject to Annual Amortization

Equipment (net).........10,0005P 2,000P 2,000

Patent25,000 5 5,000 5,000

P 7,000P 7,000

128. dInvestment in Wisden

1/1/x4. 180,000 18,000 Dividends S

(20,000 x 90%)

NI of S

(60,000 x 90%). 54,000 Amortization 12,600 (P14,000 x 90%)

1/1/x6 203,400

129. cInvestment in Wisden

1/1/x6. 230,400 9,000 Dividends S

(10,000 x 90%)

NI of S

(30,000 x 90%). 27,000 Amortization 6,300 (7,000 x 90%)

1/1/x6 215,100

130. d 20x3: P30,000 x 75% = P22,500 20x4: P40,000 x 75% = P30,000

131. a no changes in investment unless there are dispositions of investment and permanent impairment.132. None no answer available. Under the cost model share in net income or earnings of subsidiary does not affect investment.133. d Investment account, December 31, 20x7:Original investment P 550,000Tinys earnings, 20x4-20x77: 100% x P166,000 166,000Less: Dividends received: 100% x P114,000 114,000Balance, December 31, 20x7.. P602,000134. a The adjusting entry required in 20x7 to convert from the cost to the equity method is:Investment in Tiny.52,000Retained earnings beg.. 4,000Dividend revenue 54,000Equity in subsidiary income of Tiny. 110,000135. b136. b Dividend paid S, P70,000 x 60% = P42,000137. d CNI amounted to P265,000 [CI-CNI, P235,000 and NCI-CNI, P30,000 Consolidated Net Income for 20x5

Net income from own/separate operations

P Company P190,000

S Company 90,000

TotalP280,000

Less: Non-controlling Interest in Net Income* P 30,000

Amortization of allocated excess 15,000

Goodwill impairment ____0 45,000

Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent..P235,000

Add: Non-controlling Interest in Net Income (NCINI) 30,000

Consolidated Net Income for 20x4P265,000

*Net income of subsidiary 20x4P 90,000

Amortization of allocated excess 20x4( 15,000_

P 75,000

Multiplied by: Non-controlling interest %.......... 40%

P 30,000

Less: Non-controlling interest on impairment loss on full-goodwill (P1,500 x 15%)*______0

P 30,000

20x5 results of operations are as follows: PeerSea-Breeze

SalesP 600,000P 300,000

Less: Cost of goods sold Operating expenses 410,000 210,000

Net income from its own separate operationsP 190,000P 90,000

Add: Investment income 45,000 -

Net incomeP 235,000P 90,000

Computation of Goodwill:Fair value of Subsidiary (100%)

Consideration transferred: Cash (60%) P 414,000

Fair value of NCI (given) (40%) 276,000

Fair value of Subsidiary (100%)P 690,000

Less: Book value of stockholders equity of Sea (P550,000 x 100%)__550,000

Allocated excess (excess of cost over book value)..P 140,000

Add (deduct): (Over) under valuation of assets and liabilities (P140,000 x 100%) 140,000

Positive excess: Full-goodwill (excess of cost over fair value)P 0

Amortization of Allocated ExcessBook ValueFair ValueOver/underAmort.

Buildings (net)- 6300,000360,000P 60,000P 10,000

Equipment (net) 4300,000280,000(20,000)(5,000)

Patent -10-0-100,000 100,000 10,000

Net P 140,000P 15,000

138. c refer to No. 137 for computations139. b refer to No. 137 for computations140. c - P811,000.Consolidated Retained Earnings, December 31, 20x5

Retained earnings - Parent Company, January 1, 20x5 (cost model)P700,000

Adjustment to convert from cost model to equity method for purposes of consolidation or to establish reciprocity:/Parents share in adjusted net increased in subsidiarys retained earnings:

Retained earnings Subsidiary, January 1, 20x5P 300,000

Less: Retained earnings Subsidiary, January 1, 20x2 70,000

Increase in retained earnings since date of acquisitionP 230,000

Less: Amortization of allocated excess 20x2 20x4 (P15,000 x 3 years) 45,000

P 185,000

Multiplied by: Controlling interests %................... 60%

P 111,000

Less: Goodwill impairment loss (full-goodwill), 0 111,000

Consolidated Retained earnings, January 1, 20x5P 811,000

Note: a. Date of acquisition: RE of Parent = Consolidated RE Regardless of the method used in the books of the subsidiary, the following rule should always be applied b. Subsequent to date of acquisition: Retained earnings of Parent under equity method = CRE

Since, the P811,000 is the retained earnings of parent under the equity method, it should also be considered as the parents portion or interest in consolidated retained earnings or simply the consolidated retained earnings.

141. c - P811,000 refer to note (b) of No. 140142. b P111,000 refer to No. 140143. dConsolidated Retained earnings, January 1, 20x5 (refer to Nos. 118 and 119)P 811,000

Add: Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent for 20x5 235,000

TotalP1,046,000

Less: Dividends paid Parent Company for 20x5 92,000

Consolidated Retained Earnings, December 31, 20x5P 954,000

144. d refer to No.143145. cNon-controlling interest (partial-goodwill), December 31, 2015

Common stock Subsidiary Company, December 31, 2015 P 480,000

Retained earnings Subsidiary Company, December 31, 2015

Retained earnings Subsidiary Company, January 1, 2015P300,000

Add: Net income of subsidiary for 2015 90,000

Less: Dividends paid Subsidiary - 2015 70,000 320,000

Stockholders equity Subsidiary Company, December 31, 2015P 800,000

Adjustments to reflect fair value - (over) undervaluation of assets and liabilities, date of acquisition (January 1, 2012) 140,000

Amortization of allocated excess (refer to amortization above) (P15,000 x 4) ( 60,000)

Fair value of stockholders equity of subsidiary, 12/31/ 2015P 880,000

Multiplied by: Non-controlling Interest percentage. 40

Non-controlling interest (partial)P 352,000

Add: NCI on full-goodwill.____0

Non-controlling interest (full)P 352,000

146. c Stockholders Equity

Common stock - Peer P 724,000

Retained earnings 954,000

Parents Stockholders Equity/Equity Attributable to the Owners of the ParentP 1,678,000

Non-controlling interest** 352,000

Total Stockholders Equity (Total Equity)P 985,500

Total Liabilities and Stockholders Equity P2,030,000

147. cInvestment in Sea-BreezeInvestment Income

1/1/x2. 414,00042,000 Dividends SNI of S

Retro 111,000 (70,000 x 60%

NI of S

(90,000 x 60%). 54,000 Amortization 9,000 (P15,000 x 60%)Amortization (P15,000 x 60%) 9,000(90,000 54,000 x 60%)

12/31/x5 528,000 45,000

148. c149. d refer to No. 137150. c refer to No. 137151. b refer to No. 137152. c refer to No. 140153. c refer to No. 140154. a not applicable under equity method.155. d refer to No. 143156. d refer to No. 143157. d refer to No. 145158. c refer to No. 146159. b Consideration transferred: 10,500 shares x P95 P997,500Less: BV of SHE S (?) 857,500Allocated excess; P140,000Less: O/U valuation of A and L: Undervaluation of landP40,000 Overvaluation of buildings( 30,000) Undervaluation of equipment 80,000 Undervaluation/unrecorded trademark 50,000 140,000 P 0160. a P900,000 + P500,000 = P1,400,000161. d assumed that total expenses includes cost of goods sold which is different when the question is total operating expensesCost of goods sold (P360,000 + P200,000) P 560,000Depreciation expense (P140,000 + P40,000) 180,000Other expenses (P100,000 + P60,000) 160,000Amortization of allocated excess: Buildings: (P30,000) / 20(P1,500) Equipment; P80,000 / 10 8,000 Trademark: P50,000 / 16 3,125 9,625 Total expenses P909,625162. b (P750,000 + P280,000) P30,000 + (P1,500 x 5 years) = P1,007,500163. c (P300,000 + P500,000) + P80,000 (P8,000 x 5 years) = P840,000164. c P450,000 + P180,000 + P40,000 = P670,000165. d P50,000 P3,125 x 5 years) = P34,375166. a P only (the stock issued In 20x0 includes already in the December 31, 20x4 balance.167. a P only168. aConsolidated Retained Earnings, December 31, 20x4

Consolidated Retained earnings, January 1, 20x4 (equity method)P 1,350,000

Add: Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent for 20x4 490,375

TotalP1,840,375

Less: Dividends paid P Company for 20x4 195,000

Consolidated Retained Earnings, December 31, 20x4 (under equity method)P1,645,375

Net Income from own operations:P CoS Co

SalesP900,000P500,000

Less: cost of goods sold360,000200,000

Gross profitP540,000P300,000

Less: Depreciation expense140,00040,000

Other expenses100,00060,000

Net incomeP300,000P200,000

Non-controlling interest (full-goodwill), December 31, 20x4

P CompanyP300,000

S Company 200,000

TotalP500,000

Less: Non-controlling Interest in Net Income P 0

Amortization of allocated excess (refer to amortization above)9,625

Goodwill impairment (impairment under full-goodwill approach)_ 0 9,625

Controlling Interest in Consolidated Net Income or Profit attributable to equity holders of parent..P490,375

169. c Note: Normally, the term used in the requirement equity in subsidiary income, is a term used under equity method, but it should be noted that under PAS 27, it prohibits the use of equity method for a parent to consolidate a subsidiary. But, assuming the use of equity method, the answer would be, P190,375.Share in net income: P200,000 x 100% P200,000 Less: Amortization of allocated excess 9,625P190,375170. c P3,1250 / .20 = P15,750171. a Punns separate earnings for 20x6 P6,000,000 Add: Punns equity in net income of Sunn (3 months ended,12/31/x6) 200,000 Less: Amortization of cost in excess of book value ( 60,000) Punns 20x6 net income (equity method) P6,140,000172. a assume the use of equity method Punns equity in net income of Sunn (3 months ended,12/31/x6) P 200,000 Amortization of cost in excess of book value ( 60,000) Increase in Parents retained earnings. P 140,000 E - If cost model/cost method, the answer would be P100,000.Dividend income. P 100,000

173. a Net income of S (5/1/x5 12/31/x5): P840,000 x 8/12P560,000 Less: Dividend S (11/1/20x5 no need to pro-rate) 300,000 Cumulative net income less dividends since date of acquisition, 1/1/20x6 (date to establish reciprocity not 12/31/x6)P260,000 x: Controlling interests 80%P208,000174. a Net income of S (5/1/x5 12/31/x5): P210,000 x 8/12P140,000 Less: Dividend S (11/1/20x5 no need to pro-rate) 75,000 Cumulative net income less dividends since date of acquisition, 12/31/20x5 (date to establish reciprocity not or 1/1/20x6)P 65,000 x: Controlling interests 80%P 52,000175. b Retained earnings S Company, 1/1/20x4 P 60,000 Less: Retained earnings S Company, 12/31/20x6 190,000 Cumulative net income less dividends since date of acquisition, 1/1/20x6 (date to establish reciprocity should always be beginning of the year, not 12/31/x6)P130,000 x: Controlling interests 90%P117,000176. b{(P260,000 - P230,000) + [(P650,000 - P590,000)/120] 8}.8177. d{(P190,000 - P160,000) 4/6 - [(P241,000 - P220,000)/60] 5}.7178. c[{(P15,000 + P22,000) - [(P80,000 - P60,000)/10]2} - (P6,000 + P9,000)].7179. b[{(P84,000 + P105,000) - [(P310,000 - P220,000)/20]2} - (P30,000 + P50,000)].8180. b building account in the books of subsidiary at fair value181. e building account in the books of subsidiary at book value 182. d push-down accounting: equipment account in the books of subsidiary is at fair value183. b184. a P540,000 = (P500,000 + P150,000 P90,000 P20,000)185. c equivalent to the original cost 186. d - In consolidating the subsidiary's figures, all intercompany balances must be eliminated in their entirety for external reporting purposes. Even though the subsidiary is less than fully owned, the parent nonetheless controls it.187. b - Intercompany receivables and payables from unconsolidated subsidiaries would not be eliminated.