Multiple Choice Problems

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Multiple Choice Problems

1. a
Combined equipment amounts
Less: gain on sale
Consolidated equipment balance
Combined Accumulated Depreciation
Less: Depreciation on gain
Consolidated Accumulated Depreciation

P1,050,000
25,000
P1,025,000
P 250,000
5,000
P 245,000

2. a
Original cost of
Accumulated depreciation, 1/1/20x4
Add: Additional depreciation (P1,100,000 P100,000) / 20 years
Accumulated depreciation, 12/31/20x4

3. a

P1,100,000
P 250,000
____50,000
P 300,000

Combined building amounts


Less: Intercompany gain
Consolidated buildings

P650,000
__30,000
P620,000

Combined Accumulated Depreciation


Less: Piecemeal recognition of gain
Consolidated accumulated depreciation

P195,000
___3,000
P192,000

4. a the amount of land that will be presented in the presented in the CFS is the original
cost of P416,000 + P256,000 = P672,000.
5.

The costs incurred by BB to develop the equipment are research and development
costs and must be expensed as they are incurred. Transfer to another legal entity
does not cause a change in accounting treatment within the economic entity.

6. e
Original cost of
Accumulated depreciation, 1/1/20x6 (P100,000 x 50%)
Add: Additional depreciation (P100,000 P50,000) / 5 years
Accumulated depreciation, 12/31/20x6

100,000

50,000
___10,000
P 60,000

7. d
Sales price
Less: Book value
Cost
Less: Accumulated depreciation (50% x P100,000)
Unrealized gain on sale
Less: Realized gain - depreciation (P30,000 / 5 years)
Net unrealized gain, 12/31/20x6
8. e
Eliminating entries:
12/31/20x6: subsequent to date of acquisition
Realized Gain depreciation
Accumulated depreciation
Depreciation expense
[P80,000 - (P100,000 - {P100,000 x 50%])] = P30,000 / 5
years or P15,000 P8,000 = P7,000

P 80,000
P100,000
__50,000

__50,000
P 30,000
___6,000
P 24,000

6,000
6,000

Should be in CFS Parent Pylux


Depreciation expense
(P50,000 /5 years)
Acc. Depreciation

Recorded as Subsidiary - Sylux

10,000
8,000

Depreciation expense
(P80,000 / 5 years)
Acc. depreciation

16,000
16,000

9. d
Unrealized gain on sales of equipment (downstream sales)
Realized gain on sale of equipment (downstream sales)
depreciation
P90,000 / 10 years
Net

20x4
( 90,000)
through

20x5
-0-

___9,000

9,000

( 81,000)

9,000

10. d
Unrealized gain on sale of equipment (downstream sales)
Realized gain on sale of equipment (downstream
depreciation
P150,000 / 10 years
Net

20x4
( 150,000)
sales)

through

20x5
-0-

___15,000

15,000

( 135,000)

15,000

11. a
Unrealized gain on sale of equipment (upstream sales) : 50,000 30,000
Realized gain on sale of equipment (upstream sales) through depreciation
P20,000 / 5 years
Net

20x4
( 20,000)

20x5
-0-

___4,000
( 16,000)

__4,000
__4,000

12. e
Original cost of

P
100,000

Accumulated depreciation, 1/1/20x6

P
40,000
___20,00
0
P
70,000

Add: Additional depreciation (P100,000 P40,000) / 6 years x 2 years


Accumulated depreciation, 12/31/20x4
13. c
Sales price
Less: Book value
Cost
Less: Accumulated depreciation
Unrealized loss on sale
Add: Realized loss - depreciation (P12,000 / 6 years) x 2
years
Net unrealized loss, 12/31/20x7

14. a
Eliminating entries:
12/31/20x7: subsequent to date of acquisition
Realized Gain depreciation
Depreciation expense
Accumulated depreciation

P 48,000
P100,000
__40,000

__60,000
P(12,000)
___4,000
P( 8,000)

2,000
2,000

[P48,000 - (P100,000 - P40,000) = P(12,000) / 6 years or


P10,000 P8,000 = P2,000
Should be in CFS Parent Poxey
Depreciation expense
(P60,000 /6 years)
Acc. Depreciation

Recorded as Subsidiary - Soxey

10,000
10,000

Depreciation expense
(P48,000 / 6 years)
Acc. depreciation

8,000
8,000

15. c
Original cost of

P
100,000

Accumulated depreciation, 1/1/20x6 (P100,000 - P20,000)

P
80,000
____8,000
P
88,000

Add: Additional depreciation (P100,000 P80,000) / 5 years x 2 years


Accumulated depreciation, 12/31/20x7
16. c
Sales price
Less: Book value
Cost
Less: Accumulated depreciation
Unrealized gain on sale
Less: Realized gain - depreciation (P25,000 / 5 years) x 2
years
Net unrealized gain, 12/31/20x7

P 45,000
P100,000
__80,000

17. b
Eliminating entries:
12/31/20x7: subsequent to date of acquisition
Realized Gain depreciation
Accumulated depreciation
Depreciation expense
[P45,000 - (P100,000 - P80,000) = P25,000 / 5 years or P4,000
P9,000 = P5,000
Should be in CFS Parent Sayex
Depreciation expense
(P20,000 /5 years)
Acc. Depreciation

__20,000
P 25,000
__10,000
P 15,000

5,000
5,000

Recorded as Subsidiary - Payex

4,000
4,000

Depreciation expense
(P45,000 / 5 years)
Acc. depreciation

9,000
9,000

18. c
19. b
20.

c (P20,000/20 years = P1,000), the eliminating entry to recognize the gain


depreciation would be as follows:
Accumulated depreciation 1,000
Depreciation expenses..
1,000

21. a
The truck account will be debited for P3,000 in the eliminating entry:
Truck
3,000
Gain
15,000
Accumulated depreciation
18,000

Cash
Accumulated

Seller

Truck
Gain

50,000
18,000

Truck
Cash

Buyer
50,000
50,000

53,000
15,000

22. b
Consolidated Net Income for 20x5
P Companys net income from own/separate operations.
Realized gain on sale of equipment (downstream sales) through
depreciation
P Companys realized net income from separate operations*...
S Companys net income from own operations.
Unrealized gain on sales of equipment (upstream sales)
Realized gain on sale of equipment (upstream sales) through depreciation
(P15,000 / 3 years)
S Companys realized net income from separate operations*...
Total
Less: Amortization of allocated excess
Consolidated Net Income for 20x5
Less: Non-controlling Interest in Net Income* *
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent 20x5..

P 98,000
___0
P 98,000
P 55,000
(15,000)
5,000
P 45,000

45,000
P143,000
0
P143,000
18,000
P125,000

*that has been realized in transactions with third parties.

Or, alternatively
Consolidated Net Income for 20x5
P Companys net income from own/separate operations.
Realized gain on sale of equipment (downstream sales) through
depreciation
P Companys realized net income from separate operations*...
S Companys net income from own operations.
Unrealized gain on sales of equipment (upstream sales)
Realized gain on sale of equipment (upstream sales) through depreciation
(P15,000 / 3 years)
S Companys realized net income from separate operations*...
Total
Less: Non-controlling Interest in Net Income* *
Amortization of allocated excess
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent..
Add: Non-controlling Interest in Net Income (NCINI)
Consolidated Net Income for 20x5

P 98,000
___0
P 98,000
P 55,000
(15,000)
5,000
P 45,000
P 18,000
____0

45,000
P143,000
18,000
P125,000
_ 18,000
P143,000

*that has been realized in transactions with third parties.

**Non-controlling Interest in Net Income (NCINI) for 20x5


S Companys net income of Subsidiary Company from its own operations
(Reported net income of S Company)
Unrealized gain on sales of equipment (upstream sales)
Realized gain on sale of equipment (upstream sales) through depreciation
S Companys realized net income from separate operations
Less: Amortization of allocated excess
Multiplied by: Non-controlling interest %..........
Non-controlling Interest in Net Income (NCINI) - partial goodwill

P 55,000
( 15,000)
5,000
P 45,000
0
P 45,000
40%
P 18,000

Less: NCI on goodwill impairment loss on full-goodwill . . . . . . . . . . . . . . . . . . . . .


Non-controlling Interest in Net Income (NCINI) full goodwill . . . . . . . . . . . . .

23.
24.
25.
26.
27.

0
P 18,000

a - refer to No. 22 computation


a
a
b
d the entry under the cost model would be as follows ;
Accumulated depreciation. 4,000
Depreciation expenses (current year) P6,000/3 years.
Retained earnings (prior year 20x4)..

2,000
2,000

28. d the entry under the cost model would be as follows ;


Accumulated depreciation. 10,000
Depreciation expenses (current year) P15,000/3 years..
Retained earnings (prior year 20x5)..
29. a
30. b
31. c P50,000/5 years = P10,000 per year starting January 1, 20x6.
32. b
Depreciation expense recorded by Pirn
Depreciation expense recorded by Scroll
Total depreciation reported
Adjustment for excess depreciation charged
by Scroll as a result of increase in
carrying value of equipment due to gain
on intercompany sale (P12,000 / 4 years)
Depreciation for consolidated statements
33. e
Depreciation expense:
Parent
Subsidiary
Total
Less: Over-depreciation due to realized gain:
[P115,000 (P125,000 P45,000)] = P35,000/8 years
Consolidated net income

5,000
5,000

P40,000
10,000
P50,000

(3,000)
P47,000

P 84,000
60,000
P144,000
__ 4,375
P139,625

34. c
Unrealized gain on sale of equipment
Realized gain on sale of equipment (upstream sales) through depreciation
Net
Selling price
Less: Book value, 1/1/20x6
Cost, 1/1/20x2
Less: Accumulated depreciation: P420,000/10 years x 2
years
Unrealized gain on sale of equipment
Realized gain depreciation: P56,000/8 years

20x6
( 56,000)
___7,000
( 49,000)
P
392,000

P420,000
84,000

336,00
0
P 56,000
P 7,000

35. c (P22,500 x 4/15 = P6,000)


36. a [P50,000 (P50,000 x 4/10) = P30,000]
37 b
The P39,000 paid to GG Company will be charged to depreciation expense by TLK
.
Corporation over the remaining 3 years of ownership. As a result, TLK Corporation
will debit depreciation expense for P13,000 each year. GG Company had charged

P16,000 to accumulated depreciation in 2 years, for an annual rate of P8,000.


Depreciation expense therefore must be reduced by P5,000 (P13,000 - P8,000) in
preparing the consolidated statements.
38
.

TLK Corporation will record the purchase at P39,000, the amount it paid. GG
Company had the equipment recorded at P40,000; thus, a debit of P1,000 will
raise the equipment balance back to its original cost from the viewpoint of the
consolidated entity.

39
.

Reported net income of GG Company

P 45,000

Reported gain on sale of equipment


Intercompany profit realized in 20x6
Realized net income of GG Company
Proportion of stock held by
non-controlling interest
Income assigned to non-controlling interests
40
.

P15,000
(5,000)

(10,000)
P 35,000
x
.40
P 14,000

Operating income reported by TLK Corporation

P 85,000

Net income reported by GG Company

45,000
P130,000

Less: Unrealized gain on sale of equipment


(P15,000 - P5,000)
Consolidated net income

(10,000)
P120,000

41. b
Eliminating entries:
12/31/20x5: date of acquisition
Restoration of BV and eliminate unrealized gain
Equipment
Gain

10,000
150,00
0

Accumulated depreciation

Granite

160,00
0

Parent Books Mortar

Cash
Accumulated depreciation
Equipment
Gain

390,000
160,000

Subsidiary Books
Equipment
Cash

390,000
390,000

400,000
150,000

Mortar
Selling price
Less: Book value, 12/31/20x5
Cost, 1/1/20x2
Less: Accumulated depreciation : P400,000/10 years x 4
years
Unrealized gain on sale of equipment
Realized gain depreciation: P150,000/6 years

42. a refer to No. 41 for computation


43. b - refer to No. 41 for computation
44. d
Eliminating entries:
12/31/20x6: subsequent to date of acquisition

P390,000
P400,000
160,000

240,00
0
P
150,000
P
25,000

Realized Gain depreciation


Accumulated depreciation
Depreciation expense
P150,000 / 6 years or P65,000 P40,000
Should be in CFS Parent Books Mortar
Granite
Depreciation expense
(P400,000 / 10 years)
Acc. Depreciation

40,000
40,000

25,000
25,000
Recorded as Subsidiary Books -

Depreciation expense
(P390,000 / 6 years)
Acc. depreciation

45. c
Eliminating entries:
12/31/20x6: subsequent to date of acquisition
Equipment
Retained earnings (150,000 25,000)

65,000
65,000

10,000
100,00
0

Accumulated depreciation (P160,000 P25,000)

135,00
0

46. a
Total gain on the sale = P1,000,000 (P500,000 - P150,000) = P650,000
Unconfirmed gain after three years = 2/5 x P650,000 = P260,000
47. d
Depreciation to 1/1/x3 is P25,000
Depreciation expense for 20x3 and 20x4 is (P85,000 - P25,000)/6 = P10,000 per year
Therefore accumulated depreciation at 12/31/x4 is P45,000.
Net equipment balance is P85,000 - P45,000 = P40,000.
48. b
At the end of two years, the subsidiary reports the equipment at original cost of
P2,500,000 and accumulated depreciation of (P2,500,000/10) x 2 = P500,000.
Depreciation expense is P250,000.
The consolidated balance sheet reports the equipment at original cost of P1,000,000
and accumulated depreciation of P200,000 + ([(P1,000,000 - P200,000)/10] x 2) =
P360,000.
Depreciation expense is P80,000.
Eliminating entries at the end of the second year are:
Accumulated depreciation
Investment in subsidiary

170,000
1,530,000
Equipment

Equipment

1,700,000
200,000

Accumulated
depreciation
Accumulated depreciation

170,000
Depreciation expense

49. d
50. d

200,000

170,000

The subsidiary reports depreciation expense for the year at P500,000 (P2,500,000/5)
and a gain on the sale at P1,750,000 [P2,750,000 - ((P2,500,000 - (3)(P500,000))].
The consolidated statements show depreciation expense for the year at P600,000
(P3,000,000/5) and a gain on the sale at P1,550,000 [P2,750,000 - ((P3,000,000 - (3)
(P600,000))]. Therefore the eliminating entries increase depreciation expense by

51. a

P100,000 and reduce the gain by P200,000, for a net effect on consolidated income
of: P300,000 decrease.
Consolidated Net Income for 20x9
P Companys net income from own/separate operations.
Realized gain on sale of equipment (downstream sales) through
depreciation
P Companys realized net income from separate operations*...
S Companys net income from own operations.
Unrealized loss on sale of equipment (upstream sales)
Realized loss on sale of equipment (upstream sales) through depreciation

none, since the date of sale is end of the year


S Companys realized net income from separate operations*...
Total
Less: Amortization of allocated excess
Consolidated Net Income for 20x9
Less: Non-controlling Interest in Net Income* *
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent 20x9..

P 140,000
___0
P 140,000
P 30,000
20,000
(

0)
P 50,000

50,000
P190,000
0
P190,000
15,000
P175,000

*that has been realized in transactions with third parties.

Selling price
Less: Book value, 12/31/20x9
Cost, 1/1/20x4
Less: Accumulated depreciation : P500,000/10 years x 6
years
Unrealized loss on sale of equipment

P180,000
P500,000
300,000

Realized loss depreciation: P20,000/4 years

200,00
0
P( 20,000
)
P( 5,000
)

Or, alternatively
Consolidated Net Income for 20x9
P Companys net income from own/separate operations.
Realized gain on sale of equipment (downstream sales) through
depreciation
P Companys realized net income from separate operations*...
S Companys net income from own operations.
Unrealized loss on sale of equipment (upstream sales)
Realized loss on sale of equipment (upstream sales) through depreciation
S Companys realized net income from separate operations*...
Total
Less: Non-controlling Interest in Net Income* *
Amortization of allocated excess
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent..
Add: Non-controlling Interest in Net Income (NCINI)
Consolidated Net Income for 20x9

P 140,000
___0
P 140,000
P 30,000
20,000
(
0)
P 50,000
P 15,000
____0

50,000
P190,000
15,000
P175,000
_ 15,000
P190,000

*that has been realized in transactions with third parties.

**Non-controlling Interest in Net Income (NCINI) for 20x9


S Companys net income of Subsidiary Company from its own operations
(Reported net income of S Company)
Unrealized loss on sale of equipment (upstream sales)

P 30,000
20,000

Realized loss on sale of equipment (upstream sales) through depreciation


S Companys realized net income from separate operations
Less: Amortization of allocated excess

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


Non-controlling Interest in Net Income (NCINI) - partial goodwill
Less: NCI on goodwill impairment loss on full-goodwill . . . . . . . . . . . . . . . . . . . . .
Non-controlling Interest in Net Income (NCINI) full goodwill . . . . . . . . . . . . .

0)
P 50,000
0
P 50,000
30%
P 15,000
0
P 15,000

52. b
Consolidated Net Income for 20y0
P Companys net income from own/separate operations.
Realized gain on sale of equipment (downstream sales) through
depreciation
P Companys realized net income from separate operations*...
S Companys net income from own operations.
Unrealized loss on sale of equipment (upstream sales)
Realized loss on sale of equipment (upstream sales) through depreciation
S Companys realized net income from separate operations*...
Total
Less: Amortization of allocated excess
Consolidated Net Income for 20y0
Less: Non-controlling Interest in Net Income* *
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent 20y0..

P 162,000
___0
P 162,000
P 45,000
( 5,000)
P 40,000

40,000
P202,000
0
P202,000
7,500
P194,500

*that has been realized in transactions with third parties.

Or, alternatively
Consolidated Net Income for 20y0
P Companys net income from own/separate operations.
Realized gain on sale of equipment (downstream sales) through
depreciation
P Companys realized net income from separate operations*...
S Companys net income from own operations.
Unrealized loss on sale of equipment (upstream sales)
Realized loss on sale of equipment (upstream sales) through depreciation
S Companys realized net income from separate operations*...
Total
Less: Non-controlling Interest in Net Income* *
Amortization of allocated excess
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent..
Add: Non-controlling Interest in Net Income (NCINI)
Consolidated Net Income for 20y0

P 162,000
___0
P 162,000
P 45,000
( 5,000)
P 40,000
P 7,500
____0

40,000
P202,000
7,500
P194,500
_ _ 7,500
P202,000

*that has been realized in transactions with third parties.

**Non-controlling Interest in Net Income (NCINI) for 20y0


S Companys net income of Subsidiary Company from its own operations
(Reported net income of S Company)
Unrealized loss on sale of equipment (upstream sales)
Realized loss on sale of equipment (upstream sales) through depreciation
S Companys realized net income from separate operations
Less: Amortization of allocated excess
Multiplied by: Non-controlling interest %..........

P 30,000
(
5,000)
P 25,000
0
P 25,000
30%

Non-controlling Interest in Net Income (NCINI) - partial goodwill


Less: NCI on goodwill impairment loss on full-goodwill . . . . . . . . . . . . . . . . . . . . .
Non-controlling Interest in Net Income (NCINI) full goodwill . . . . . . . . . . . . .

53. d
Eliminating entries:
1/1/20x5: date of acquisition
Restoration of BV and eliminate unrealized gain
Building
Gain
Accumulated depreciation
Parent Books Sky
Cash
Accumulated depreciation
Building
Gain

7,500
0
7,500

3,000
8,250
11,250

Subsidiary Books - Earth

33,000
11,250

Building
Cash

33,000
33,000

36,000
8,250

Sky, 7/1/20x4
Selling price
Less: Book value, 7/11/20x4
Cost, 1/1/20x2
Less: Accumulated depreciation : P36,000/8years x 2.5
years
Unrealized gain on sale of equipment
Realized gain depreciation: P8,250/5.5 years

P33,000
P36,000
11,250

24,750
P 8,250
P 1,500

54. a - refer to No. 53 for computation


55. b
Eliminating entries:
12/31/20x4: subsequent to date of acquisition
Realized Gain depreciation (July 1, 20x4 December 31, 20x4)
Accumulated depreciation
750
Depreciation expense
750
P8,250 / 5.5 x years or P3,000 P2,250
Should be in CFS Parent Books Sky
Recorded as Subsidiary Books Earth
Depreciation expense
(P24,750 / 5.5 x years)

2,250

Acc. Depreciation

2,250

Depreciation expense
(P33,000 / 5.5 years x
yrs)
Acc. depreciation

56. c
Eliminating entries:
12/31/20x5: subsequent to date of acquisition
Realized Gain depreciation
Accumulated depreciation
Depreciation expense
P8,250 / 5.5 x years or P6,000 P4,500
Should be in CFS Parent Books Sky

3,000
3,000

1,500
1,500
Recorded as Subsidiary Books -

Earth
Depreciation expense
(P24,750 / 5.5 years)
Acc. Depreciation

4,500
4,500

57. d
Eliminating entries:
1/1/20x5: subsequent to date of acquisition
Building
Retained earnings (8,250 750)

Depreciation expense
(P33,000 / 5.5 years)
Acc. depreciation

6,000
6,000

3,000
7,500

Accumulated depreciation (P11,250 P750)

10,500

58.
59.
60.
61.
62.

d - P60,000 - P36,000 = P24,000 debit


b - P36,000 - (P60,000 - P31,200) = P7,200 gain (debit)
c - (P36,000/6)(8/12) - [(P60,000 - P31,200)/6](8/12) = P800 credit
a - P31,200 - {(P36,000/6)(8/12) - [(P60,000 - P31,200)/6](8/12)} = P30,400 credit
c - P36,000 - (P60,000 - P31,200) = P7,200 gain (debit)
(P36,000/6)(8/12) - [(P60,000 - P31,200)/6](8/12) = P800 credit
63. b
P72,000 - (P96,000 - P36,600) = P12,600 gain (debit)
(P72,000/5)(4/12) - [(P96,000 - P36,600)/5](4/12) = P840 (credit)
(P12,600 - P840) .1 = P1,176 debit
64
.
65.
66.
67.
68.

When only retained earnings is debited, and not the non-controlling interest, a
gain has been recorded in a prior period on the parent's books.

d
a
b
b at its original cost or book value.

69. b
20x4: Any intercompany gain should be eliminated in the CFS.
20x5
Selling price unrelated party
Less: Original Book value, 9/26/20x5
Accumulated depreciation, 9/26/20x5

P 100,000
__60,000
P 40,000

70. d P30,000 + P40,000 = P70,000


S
Selling price
Less: Book value
Gain

P 30,000

Consolidated

40,000

P 70,000

71. d P110,000 P30,000 = P80,000


S
(Nectar)
P 50,000
_30,000
P 20,000

Selling price
Less: Book value
Gain

P (Lorikeet)

Consolidated

P 110,000
__50,000
P 60,000

P 110,000
_30,000
P 80,000

72. d
S
P1,980,0
00

Selling price
Less: Book value: Cost
Accumulat
ed
Unrealized gain on sale of
equipment

P2,000,00
0
___200,00
0

Realized Gain depreciation


(P180,000/9 x 6 yrs)
Net unrealized gain, 1/1/20x9
Gain on sale

1,800,00

P
P1,440,0
00
P1,980,0
00
*1,320,00
0

Consolidated
P1,440,000
P
1,800,000
**1,200,00
0

660,00
0

__600,000

P
180,000
120,000
P
60,000
P
60,000

P
780,000

P 840,000

*P1,980,000/ 9 x 6 years = P1,320,000


**P1,800,000/9 x 6 years = P1,200,000

73. d (P100,000 + P50,000 = P150,000)


S

Consolidated

Selling price
Less: Book value
Gain

P
100,000

50,000

P 150,000

74. c
S
Selling price
Less: Book value : Cost
Accumulat
ed
Unrealized gain on sale of
Equipment,1/1/20x4

P
P720,000

P
990,000
P1,000,0
00
100,000

P990,000
__900,00
0

Consolidated
P 720,000
P 900,000

*440,000

550,00
0

**400,000

__500,000

P
90,000

Realized Gain depreciation


(P90,000/9 x 4 yrs)
Net unrealized gain, 1/1/20x8

40,000
P
50,000
P
50,000

Gain on sale

_________
_
P
170,000

___________
P 220,000

*P990,000/ 9 x 4 years = P440,000


**P900,000/9 x 4 years = P400,000

75. d (P30,000 + P15,000)


76. c
Selling price unrelated party
Less: Original Book value, 12/31/20x5
Book value, 1/1/20x4
Less: Depreciation for 20x4 and 20x5: P20,000/4 years x 2 years
Accumulated depreciation, 12/31/20x4

P 14,000
P20,000
10,000

10,000
P 4,000

77. b
Sort
Selling price
Less: Book value : Cost
Accumulat
ed
Unrealized gain on sale of
Equipment, 12/30/20x3
Realized Gain depreciation
(P10,000/6 x 3 yrs)
Net
unrealized
gain,
12/31/20x6
Gain on sale
*P100,000/6 x 3 years = P48,000
***P90,000/6 x 3 years = P45,000

Fort
P 65,000

P
100,000
P
120,000
__30,000

P100,000
__90,000

**50,000

Consolidated
P 65,000
P 90,000

50,000

**45,000

__45,000

P
10,000
__
5,000
P
5,000
P 5,000

_________
_
P 15,000

_________
P 20,000

78. b
Depreciation expense: (P50,000 - P40,000) / 10 years = P1,000 over depreciation
79. b
**Non-controlling Interest in Net Income (NCINI) for 20x4
S Companys net income of Subsidiary Company from its own operations
(Reported net income of S Company)
Unrealized gain on sales of equipment (upstream sales) (P700,000 P600,000)
Realized gain on sale of equipment (upstream sales) through depreciation
(P100,000/10)
S Companys realized net income from separate operations
Less: Amortization of allocated excess
Multiplied by: Non-controlling interest %..........
Non-controlling Interest in Net Income (NCINI) - partial goodwill

P2,000,000
( 100,000)
10,000
P1,910,000
_
0
P1,910,00
0
__40
%
P

Less: NCI on goodwill impairment loss on full-goodwill . . . . . . . . . . . . . . . . . . . . .


Non-controlling Interest in Net Income (NCINI) full goodwill . . . . . . . . . . . . .

764,000
__
0
P
764,000

80. a
**Non-controlling Interest in Net Income (NCINI) for 20y2
S Companys net income of Subsidiary Company from its own operations
(Reported net income of S Company)
Unrealized gain on sale of equipment (downstream sales)
Realized gain on sale of equipment (downstream sales) through depreciation
S Companys realized net income from separate operations
Less: Amortization of allocated excess

P 135,000

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


Non-controlling Interest in Net Income (NCINI) - partial goodwill
Less: NCI on goodwill impairment loss on full-goodwill . . . . . . . . . . . . . . . . . . . . .
Non-controlling Interest in Net Income (NCINI) full goodwill . . . . . . . . . . . . .

(
0)
P 135,000
0
P 135,000
20%
P 27,000
0
P 27,000

81. a
Consolidated Net Income for 20y2
P Companys net income from own/separate operations.
Realized gain on sale of equipment (downstream sales) through
depreciation
P Companys realized net income from separate operations*...
S Companys net income from own operations.
Unrealized gain on sale of equipment (upstream sales)
Realized gain on sale of equipment (upstream sales) through depreciation
S Companys realized net income from separate operations*...
Total
Less: Amortization of allocated excess
Consolidated Net Income for 20y2
Less: Non-controlling Interest in Net Income* *(refer to No. 80)
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent 20y2..

P 200,800
_ 8,000
P 208,800
P 135,000
(
0)
P 135,000

135,000
P343,800
0
P343,800
27,000
P316,800

*that has been realized in transactions with third parties.


Net income from own operations:

Sales
Less: Cost of goods sold
Other expenses (including depreciation)
Income tax expense
Net income from own operations
Add: Dividend income
Net income

Sexton, 1/1/20y1
Selling price
Less: Book value, 1/1/20y1
Cost, 1/1/20x1
Less: Accumulated depreciation : P400,000/25 years x 10
years
Unrealized gain on sale of equipment
Realized gain depreciation: P120,000/15 years

Prout
P1,475,00
0
942,000
145,000
__187,200
P
200,800
____80,00
0
P
280,800

Sexton
P1,110,000
795,000
90,000
____90,000
P 135,000

P 135,000

P360,000
P400,000
160,000

240,000
P120,000
P
8,000

Or, alternatively
Consolidated Net Income for 20y2
P Companys net income from own/separate operations.
Realized gain on sale of equipment (downstream sales) through
depreciation
P Companys realized net income from separate operations*...
S Companys net income from own operations.
Unrealized gain on sale of equipment (upstream sales)
Realized gain on sale of equipment (upstream sales) through depreciation
S Companys realized net income from separate operations*...
Total
Less: Non-controlling Interest in Net Income* * (refer to No. 80)
Amortization of allocated excess
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent..
Add: Non-controlling Interest in Net Income (NCINI)
Consolidated Net Income for 20y2

P 200,800
_ 8,000
P 208,800
P 135,000
(
0)
P 135,000
P 27,000
____0

135,000
P343,800
27,000
P316,800
_ _27,000
P343,800

*that has been realized in transactions with third parties.

82. a refer to No. 81


83. c
Consolidated Retained Earnings, December 31, 20y2
Retained earnings - Parent Company, January 1, 20y1 (cost model)
Less: Downstream - net unrealized gain on sale of equipment prior to
20y1
[P120,000 (P8,000 x 1 year)]
Adjusted Retained Earnings Parent 1/1/20y1 (cost model ) Son
Companys
Retained earnings that have been realized in transactions with third
parties..
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, 20x9
Less: Retained earnings Subsidiary, January 1, 20y1
Increase in retained earnings since date of acquisition
Less: Amortization of allocated excess 20x9 to 20y0
Upstream - net unrealized gain on sale of equipment prior to
20y1
Multiplied by: Controlling interests %...................
Less: Goodwill impairment loss
Consolidated Retained earnings, January 1, 20x5
Add: Controlling
Interest in Consolidated Net Income or Profit
attributable to
equity holders of parent for 20x5
Total
Less: Dividends declared Parent Company for 20y1
Consolidated Retained Earnings, December 31, 20y1

Or, alternatively:

P1,300,000
112,000

P1,188,000

P 800,000
1,040,000
P 240,000
0
0
P 240,000
80%
P192,0
00
0

_192,000
P1,380,000
316,800
P1,696,800
120,000
P1,576,800
0

Consolidated Retained Earnings, December 31, 20y2


Retained earnings - Parent Company, December 31, 20y1 (cost model)
(P1,300,000 + P280,800 P120,000)
Less: Downstream - net unrealized gain on sale of equipment prior to
12/31/20y1 [P120,000 (P8,000 x 2 years)]
Adjusted Retained Earnings Parent 12/31/20x5 (cost model )
S Companys Retained earnings that have been realized in
transactions with third parties..
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, December 31, 20y2
(P1,040,000 + P135,000 P100,000)
Less: Retained earnings Subsidiary, January 1, 20x9
Increase in retained earnings since date of acquisition
Less: Accumulated amortization of allocated excess
Upstream - net unrealized gain on sale of equipment prior
to

P1,460,800
104,000
P1,356,800

P
1,075,000
800,000
P
275,000
0
_______0

12/31/20y2

P 275,000
80%
P 220,000
_____0

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


Less: Goodwill impairment loss
Consolidated Retained earnings, December 31, 20y2

220,000
P1,576,800

84. c
Non-controlling interest (fulll-goodwill), December 31, 20y2
P
1,200,000

Common stock Subsidiary Company, December 31, 20y2


Retained earnings Subsidiary Company, December 31, 20y2
Retained earnings Subsidiary Company, January 1, 20y2

P1,040,0
00
135,00
0
P1,175,0
00
100,00
0

Add: Net income of subsidiary for 20y2


Total
Less: Dividends paid 20y2
Stockholders equity Subsidiary Company, December 31, 20x5
Adjustments to reflect fair value - (over) undervaluation of assets and
liabilities, date of acquisition (January 1, 20x4)
Amortization of allocated excess (refer to amortization above) :
Fair value of stockholders equity of subsidiary, December 31, 20x5
Less: Upstream - net unrealized gain on sale of equipment prior to
12/31/20y2
Realized stockholders equity of subsidiary, December 31, 20x5.
Multiplied by: Non-controlling Interest percentage...
Non-controlling interest (partial goodwill)..

1,075,00
0
P
2,275,200
0
0
P2,275,200
_____)0
P 2,275,00
_
20
P 455,000

85. c
Prout
Selling price
Less: Book value : Cost

Sexton
P300,000

P
360,000
P

P360,000

Consolidated
P 300,000
P 240,000

Accumulat

400,000
*160,000

__240,00
0

ed
Unrealized gain on sale of
Equipment, 1/1/20y1

**48,000

312,00
0

***32,000

_208,000

P
120,000

Realized Gain depreciation


(P120,000/15 x 2 yrs)
Net unrealized gain, 1/1/20y3

__16,000
P
104,000
P
104,000

Gain on sale

_________
_
P( 12,000
)

_________
P 92,000

*P400,000/25 x 10 years = P160,000


**P360,000/15 x 2 years = P48,000
***P240,000/15 x 2years = P400,000

86. b refer to No. 85


87. a refer to No. 85
Analysis:
Workpaper entries (not required)
Intercompany Sale of Equipment
Original Cost
Intercompany Selling Price
Difference

Cost
P400,000
360,000
P 40,000

Accumulated
Depreciation
P160,000
_______
P160,000

Carrying Value
P240,000
360,000
P120,000

(1) Investment in Sexton Company


Retained Earnings - Prout

Remaining
Life
Depreciation
15 yr
P 16,000
15 yr
24,000
P 8,000
192,000

To establish reciprocity/convert to equity (.80 x (P1,040,000 - P800,000))

(2) Equipment
Beginning Retained Earnings - Prout
Accumulated Depreciation
160,000

192,000

40,000
120,000

To reduce beginning consolidated retained earnings by amount of unrealized profit at the beginning of
the year, to restate property and equipment to its book value to Prout Company on the date of the
intercompany sale.

(3) Accumulated Depreciation


Depreciation Expense
Beginning Retained Earnings - Prout

16,000

8,000
8,000

To reverse amount of excess depreciation recorded during current year and recognize an equivalent
amount of intercompany profit as realized

(4) Dividend Income


Dividends Declared

80,000

To eliminate intercompany dividends

(5) Beginning Retained Earnings Sexton


Common Stock Sexton
Investment in Sexton Company (P1,600,000 + P192,000)
Noncontrolling Interest [P400,000 + (P1,040,000 - P800,000) x .20]

1,040,000
1,200,000

To eliminate investment account and create noncontrolling interest account

Entry analysis:
Journal Entry on the books of Sexton to record the sale
Cash
Accumulated Depreciation - Fixed Assets (P360,000/15) x 2 years)
Loss on Sale of Equipment
Plant and Equipment

300,000
48,000
12,000

80,000

1,792,000
448,000

360,000

Workpaper eliminating entry on December 31, 20y3 consolidated statement necessary


to prepare consolidated statements:
Beginning Retained Earnings Prout(P120,000 - P16,000)
104,000
Loss on Sale of Equipment
12,000
Gain on Sale of Equipment
92,000

Cost to the Affiliated Companies


Accumulated Depreciation Based on Original Cost ((12/25)x P400,000)
Book Value, 1/1/y3
Proceeds from Sale to Non-affiliate
Gain from consolidated point of view

P400,000
192,000
P 208,000
(300,000)
P 92,000

Note: As of Dec. 31, 20y3, the amount of profit recorded by the affiliates on their books
(P120,000 - P12,000 = P108,000) is equal to the amount of profit considered realized
in the consolidated financial statements (P8,000 + P8,000 + P92,000) = P108,000.
88. d - Investment in subsidiary, 12/31/20x5 (cost model) P700,000).
Date of Acquisition (1/1/20x4)
Partial
Fair value of consideration given.P 700,000
Less: Book value of SHE - Subsidiary):
(P300,000 + P500,000) x 80%........................... 640,000
Allocated Excess..P 60,000
Less: Over/Undervaluation of Assets & Liabilities
Increase in Bldg. (P75,000 x 80%) 60,000
Goodwill ..P
0

Full

Amortization of allocated excess: building - P75,000 / 25 years = P3,000


Upstream Sale of Equipment (date of sale 4/1/20x5):
Sales.......................................................................................................P 60,000
Less: Book value of equipment.
30,000
Unrealized Gain (on sale of equipment)P
30,000
Realized gain on sale of equipment:
20x5: P30,000/5 years = P6,000 x 9/12 (4/1/20x5-12/31/20x5)
. .P 4,500
20x6 ..P 6,000
Downstream Sale of Machinery (date of sale 9/30/20x5):
Sales....................................................................................................................................
P75,000
Less: Book value of machinery.
40,000
Unrealized Gain (on sale of machinery) P35,000
Realized gain on sale of machinery:
20x5: P35,000/10 years = P3,500 x 3/12 (9/30/20x5-12/31/20x5).
.P
875
20x6.. ...P 3,500

89. d
Dividend paid or declared SP 50,000
x: Controlling Interest %.
80%
Dividend income of Parent..P 40,000
90. d
Consolidated Net Income for 20x5
P Companys net income from own/separate operations.
Net unrealized gain on sale of equipment (downstream sales) through
depreciation P35,000 P875)
P Companys realized net income from separate operations*...
S Companys net income from own operations.
Unrealized gain on sales of equipment (upstream sales)
Realized gain on sale of equipment (upstream sales) through depreciation
S Companys realized net income from separate operations*...
Total
Less: Amortization of allocated excess
Consolidated Net Income for 20x5
Less: Non-controlling Interest in Net Income* *
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent 20x5..

P 300,000
34,125
P 265,875
P 150,000
(30,000)
4,500
P 124,500

124,500
P390,375
3,000
P387,375
24,300
P363,075

*that has been realized in transactions with third parties.

Or, alternatively
Consolidated Net Income for 20x5
P Companys net income from own/separate operations.
Net unrealized gain on sale of equipment (downstream sales) through
depreciation P35,000 P875)
P Companys realized net income from separate operations*...
S Companys net income from own operations.
Unrealized gain on sales of equipment (upstream sales)
Realized gain on sale of equipment (upstream sales) through depreciation
S Companys realized net income from separate operations*...
Total
Less: Non-controlling Interest in Net Income* *
Amortization of allocated excess
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent..
Add: Non-controlling Interest in Net Income (NCINI)
Consolidated Net Income for 20x5

P 300,000
34,125
P 265,875
P 150,000
(30,000)
4,500
P 124,500
P 24,300
3,000

124,500
P390,375
27,300
P363,075
_ 24,300
P387,375

*that has been realized in transactions with third parties.

**Non-controlling Interest in Net Income (NCINI) for 20x5


S Companys net income of Subsidiary Company from its own operations
(Reported net income of S Company)
Unrealized gain on sales of equipment (upstream sales)
Realized gain on sale of equipment (upstream sales) through depreciation
S Companys realized net income from separate operations
Less: Amortization of allocated excess
Multiplied by: Non-controlling interest %..........
Non-controlling Interest in Net Income (NCINI) - partial goodwill
Less: NCI on goodwill impairment loss on full-goodwill . . . . . . . . . . . . . . . . . . . . .
Non-controlling Interest in Net Income (NCINI) full goodwill . . . . . . . . . . . . .

P 150,000
( 30,000)
4,500
P 124,500
3,000
P 121,500
20%
P 24,300
0
P 24,300

91. c refer to No. 90 for computations


92. d refer to No. 90 for computations
93. a

Non-controlling Interests (in net assets):


20x5
20x6
Common stock - S, 12/31...
P 300,000
P 300,000
Retained earnings - S, 12/31:
RE- S, 1/1..P600,000
P 700,000
+: NI-S 150,000
200,000
-: Div S.. 50,000 700,000
70,000 830,000
Book value of Stockholders equity, 12/31....
P1,000,000
P1,130,000
Adjustments to reflect fair value of net assets
Increase in equipment, 1/1/2010....
75,000
75,000
Accumulated amortization (P3,000 per year)*.
(
6,000)
9,000)
Fair Value of Net Assets/SHE, 12/31..
P1,069,000
P1,196,000
Unrealized gain on sale of equipment (upstream)
(
30,000)
**(
25,500)
Realized gain thru depreciation (upstream)
4,500
6,000
Realized SHE S,12/31..
P1,043,500
P1,176,500
x: NCI %...........................................................
___
20%

20%
Non-controlling Interest (in net assets) partial...
+: NCI on full goodwill....
Non-controlling Interest (in net assets) full..
* 20x5: P3,000 x 2 years; 2012: P3,000 x 3 years;
** P30,000 P4,500 realized gain in 20x5 = P25,500.

P 208,700
0
P 208,700

P 235,300
0
P 235,300

Note: Preferred solution - since what is given is the RE P, 1/1/20x5(beginning


balance of the current year) Retained earnings Parent, 1/1/20x5 (cost)
P 800,000
-: Downstream sale 20x4 or prior to 20x5, Net unrealized gain
0
Adjusted Retained earnings Parent, 1/1/20x5 (cost)
P 800,000
Retroactive Adjustments to convert Cost to Equity:
Retained earnings Subsidiary, 1/1/20x4.P 500,000
Less: Retained earnings Subsidiary, 1/1/20x5.. 600,000
Increase in Retained earnings since acquisition
(cumulative net income cumulative dividends)P 100,000
Accum. amortization (1/1/x4 1/1/x5): P2,000 x 1 year.. ( 3,000)
Upstream Sale 2010 or prior to 20x5,
Net unrealized gain...(
0)
P 97,000
X: Controlling Interests %..
80%
77,600
RE P, 1/1/20x5 (equity method) = CRE, 1/1/20x5
P
877,600
+: CI CNI or Profit Attributable to Equity Holders of Parent.
363,075
-: Dividends P..
100,000
RE P, 12/31/20x5 (equity method) = CRE, 12/31/20x5..
P 1,140,675
Or, if RE P is not given on January 1, 20x5, then RE P on December 31, 20x5 should
be use.
Retained earnings Parent, 12/31/20x5 (cost model):
(P800,000 + P340,000, Ps reported NI P100,000)
P1,040,000
-: Downstream sale 20x5 or prior to 12/31/20x5,
Net unrealized gain - (P35,000 P875).
34,125
Adjusted Retained earnings Parent, 1/1/20x5 (cost model)..
P1,005,875
Retroactive Adjustments to convert Cost to Equity:
Retained earnings Subsidiary, 1/1/20x4.P 500,000
Less: Retained earnings Subsidiary, 12/31/20x5
(P600,000 + P150,000 P50,000)..... 700,000
Increase in Retained earnings since acquisition
(cumulative net income cumulative dividends). .P 200,000
Accumulated amortization (1/1/20x4 12/31/20x5):

P 3,000 x 2 years. .(
6,000)
Upstream Sale 20x5 or prior to 12/31/20x5,
Net unrealized gain (P30,000 P4,500).
( 25,500)
P 168,500
x: Controlling Interests %..
80%
134,800
RE P, 12/31/20x5 (equity method) = CRE, 12/31/20x5.
P1,140,675
94. c refer to No, 93 computations.
95. b refer to No. 93 for computations
96. d refer to No. 93 for computations

97. b

Consolidated Stockholders Equity, 12/31/20x5:


Controlling Interest / Parents Interest / Parents Portion /
Equity Holders of Parent SHE, 12/31/20x5:
Common stock P (P only).. .P 1,000,000
Retained Earnings P (equity method), 12/31/20x5. 1,140,675
Controlling Interest / Parents Stockholders EquityP2,140,675
Non-controlling interest, 12/31/20x5 (partial/full)
208,700
Consolidated Stockholders Equity, 12/31/20x5.P2,349,375

98. d the original cost of land


99. b no intercompany gain or loss be presented in the CFS.
100. a
Consolidated Net Income for 20x4
P Companys net income from own/separate operations.
Realized gain on sale of equipment (downstream sales) through
depreciation
P Companys realized net income from separate operations*...
S3 Companys net income from own operations.
S2 Companys net income from own operations.
S1 Companys net income from own operations.
Unrealized loss on sale of equipment (upstream sales) S3
Unrealized gain on sale of equipment (upstream sales) S2
Unrealized gain on sale of equipment (upstream sales) - S1
S Companys realized net income from separate operations*...
Total
Less: Amortization of allocated excess
Consolidated Net Income for 20x4
Less: Non-controlling Interest in Net Income* * (P23,000 + P5,400 +
P7,200)
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent 20x4..

P 200,000
___0
P 200,000
P100,000
70,000
95,000
15,000
( 52,000)
( 23,000)
P205,000

205,000
P405,000
0
P405,000
35,600
P369,400

*that has been realized in transactions with third parties.

Sales price
Less: Cost
Unrealized (loss) gain

S3
145,000
160,000
( 15,000)

S2
197,000
145,000
52,000

S1
220,000
197,000
23,000

Or, alternatively
Consolidated Net Income for 20x4
P Companys net income from own/separate operations.
Realized gain on sale of equipment (downstream sales) through
depreciation
P Companys realized net income from separate operations*...
S3 Companys net income from own operations.

P 200,000
___0
P 200,000
P100,000

S2 Companys net income from own operations.


S1 Companys net income from own operations.
Unrealized loss on sale of equipment (upstream sales) S3
Unrealized gain on sale of equipment (upstream sales) S2
Unrealized gain on sale of equipment (upstream sales) - S1
S Companys realized net income from separate operations*
Total
Less: Non-controlling Interest in Net Income* * (P23,000 + P5,400 +
P7,200)
Amortization of allocated excess
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent..
Add: Non-controlling Interest in Net Income (NCINI)
Consolidated Net Income for 20y0

70,000
95,000
15,000
( 52,000)
( 23,000)
P205,000

205,000
P405,000

P 35,600
____0

_ 35,600
P369,400
_ _35,600
P405,000

*that has been realized in transactions with third parties.

**Non-controlling Interest in Net Income (NCINI)


S Companys net income of Subsidiary Company from its own
operations (Reported net income of S Company)
Unrealized (gain) loss on sale of land (upstream sales)
S Companys realized net income from separate operations
Less: Amortization of allocated excess
Multiplied by: Non-controlling interest %..........
Non-controlling Interest in Net Income (NCINI) - partial
goodwill
Less: NCI on goodwill impairment loss on full-goodwill
Non-controlling Interest in Net Income (NCINI) full goodwill

S3

S2

S1

P
100,000
15,000
P
115,000
0
P
115000
20%
P 23,000

P
70,000
( 52,000)
P
18,000
0
P
18,000
30%
P
5,400
0
P
5,400

P 95,000

0
P 23,000

( 23,000)
P 72,000
0
P
72,000
10%
P
7,200
P

0
7,200

101. b
Non-controlling Interest in Net Income (NCINI) for 20y2
S Companys net income of Subsidiary Company from its own operations
(Reported net income of S Company)
Unrealized gain on sales of equipment (upstream sales) year of sale
Realized gain on sale of equipment (upstream sales) through depreciation
(P14,500 P9,000) / 5 years
S Companys realized net income from separate operations
Less: Amortization of allocated excess
Multiplied by: Non-controlling interest %..........
Non-controlling Interest in Net Income (NCINI) - partial goodwill
Less: NCI on goodwill impairment loss on full-goodwill . . . . . . . . . . . . . . . . . . . . .
Non-controlling Interest in Net Income (NCINI) full goodwill . . . . . . . . . . . . .

P 40,000
1,100
P 41,100
0
P 41,100
20%
P 8,220
0
P 8,220

102. d the unrealized gain amounted to P15,000 (P60,000 P45,000).


It should be noted that PAS 27 allow the use of cost model in accounting for
investment in subsidiary in the books of parent company but not the equity method.
Since, the cost model is presumed to be the method used, the unrealized gain of
P15,000 (P60,000 P45,000) will not be recorded in the books of parent company,
which give rise to no equity-adjustments at year-end.
103. c
Cliff reported income
Less: Intercompany gain on truck
Plus: Piecemeal recognition of gain = P45,000/10
years
Cliffs adjusted income

P225,000
45,000
___4,500
P184,500

104. c

105 c

Majority percentage
Income from Cliff

90%
P166,050

Pied Imperial-Pigeons share of Rogers income = (P320,000 x 90%)


=
Less: Profit on intercompany sale (P130,000 - P80,000) x 90% =
Add: Piecemeal recognition of deferred profit ($50,000/4 years)90%
=
Income from Offshore

P288,00
0
45,000
11,250

P30,000 - (1/4 x P30,000) =

P
22,500

P254,25
0

106. d - P60,000 P48,000)/4 years = P3,000


107. a
Simon, 4/1/20x4
Selling price
Less: Book value, 4/1/20x4
Cost, 1/1/20x4
Less: Accumulated depreciation : P50,000/10 years x 3/12
Unrealized gain on sale of equipment
Realized gain depreciation: P19,500/9.75 years

108.
109.
110.
111.

P68,250
P50,000
__1,250

48,750
P19,500
P 2,000

c P2,000 x 9/12 (April 1, 20x4 December 31, 20x4) = P1,500


c P19,500 / 9.75 years = P2,000
c P19,500 / 9.75 years = P2,000
d
Share in subsidiary net income (100,000 x 90%)
Unrealized gain on sale of equipment (downstream sales)
Realized gain on sale of equipment (downstream sales) through depreciation
P2,000 x 9/12 (April 1, 20x4 December 31, 20x4) = P1,500
Net

20x4
90,000
( 19,500)
_ 1,500
72,000

112. b
Share in subsidiary net income (120,000 x 90%)
Realized gain on sale of equipment (downstream sales) through depreciation
Net

20x5
108,000
_ 2,000
110,000

Share in subsidiary net income (130,000 x 90%)


Realized gain on sale of equipment (downstream sales) through depreciation
Net

20x6
117,000
_ 2,000
119,000

113. d

114. c
Smeder, 1/1/20x4
Selling price
Less: Book value, 1/1/20x4
Cost, 1/1/20x4
Less: Accumulated depreciation
Unrealized gain on sale of equipment
Realized gain depreciation: P12,000/6 years

115. b

P84,000
P120,000
__48,000

72,000
P12,000
P 2,000

Share in subsidiary net income (28,000 x 80%)


Unrealized gain on sale of equipment (upstream sales); 12,000 x 80%
Realized gain on sale of equipment (upstream sales) through depreciation
P2,000 x 80%
Net

20x4
22,400
( 9,600)
_ 1,600
14,400

116. c
Share in subsidiary net income (32,000 x 80%)
Realized gain on sale of equipment (upstream sales) through depreciation
P2,000 x 80%
Net

117. d
Eliminating entries:
1/1/20x4: date of acquisition
Restoration of BV and eliminate unrealized gain
Equipment
Gain
Accumulated depreciation
Parent Smeder
Cash
Accumulated depreciation
Equipment
Gain

20x5
25,600
_ 1,600
27,200

36,000
12,000
48,000
Subsidiary - Collins

84,000
48,000

Equipment
Cash

84,000
84,000

120,000
12,000

Smeder, 1/1/20x4
Selling price
Less: Book value, 1/1/20x4
Cost, 1/1/20x4
Less: Accumulated depreciation
Unrealized gain on sale of equipment
Realized gain depreciation: P12,000/6 years

P84,000
P120,000
__48,000

Eliminating entries:
12/31/20x4: subsequent to date of acquisition
Realized Gain depreciation
Accumulated depreciation
Depreciation expense
P12,000 / 6 years or P14,000 P12,000
Should be in CFS Parent Smeder
Depreciation expense
(P72,000 /6 years)
Acc. Depreciation

12,000
12,000

72,000
P12,000
P 2,000

2,000
2,000
Recorded as Subsidiary - Collins
Depreciation expense
(P84,000 / 6 years)
Acc. depreciation

14,000
14,000

Combining the eliminating entries for 1/1/20x4 and 12/31/200x4, the net effect
of accumulated depreciation would be a net credit of P46,000 (P48,000
P2,000).
118. c
Unrealized gain on sale of equipment

20x4
( 12,00
0)

Realized gain on sale of equipment through depreciation


Net

___2,000
( 10,000)

119. d
Eliminating entries:
5/1/20x4: date of acquisition
Restoration of BV and eliminate unrealized gain
Cash
Loss

5,000
5,000

Parent Stark
Cash
Loss
Land

Subsidiary - Parker

80,000
5,000

Land
Cash

85,000
85,000

85,000

Selling price
Less: Book value, 5/1/20x4
Unrealized gain on sale of equipment

Stark
P 80,000
_85,000
P ( 5,000)

Parker
P 92,000
__80,000
P 12,000

Consolidated
P 92,000
_85,000
P 7,000

120. b refer to No. 119 for eliminating entry


121. b
Cash
Retained earnings

5,000
5,000

122. e
Share in subsidiary net income (200,000 x 90%)
Unrealized loss on sale of land (upstream sales): P5,000 x 90%
Net

20x4
180,000
_ 4,500
184,500

Share in subsidiary net income (200,000 x 90%)


Unrealized loss on sale of land (upstream sales): P5,000 x 90%
Net

20x4
180,000
_ 4,500
184,500

123. d

124. b
Selling price
Less: Book value, 5/1/20x4
Unrealized gain on sale of equipment

Stark
P 80,000
_85,000
P ( 5,000)

Parker
P 92,000
__80,000
P
12,000

Consolidated
P 92,000
_85,000
P 7,000

125. a refer to No. 124 for computation


126. e None, the loss was already recognized in the books of Stark in the year of sale 20x4 but not in the subsequent years.
127. c
Share in subsidiary net income (220,000 x 90%)
Intercompany realized loss on sale of land (upstream sales): P5,000 x 90%
Net

20x6
198,000
_ ( 4,500)
193,500

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