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    Problem 1 Dream Co. and Theater Co

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    This document contains problems and solutions for the consolidated financial statements of several companies. Problem 1 involves consolidating the financial statements of Dream Co. and Theater Co., including their consolidated sales, cost of sales, ending inventory, and calculation of unrealized profit in inventory. Problem 2 involves Bright Co. and Dull Co., calculating the carrying amount of equipment sold between them, their consolidated equipment balance, and consolidated depreciation expense. Problem 3 involves Pare Co. and Kidd Co., calculating the non-controlling interest in net assets, the amount of common stock, and dividends paid in the consolidated financial statements.

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    Problem 1 Dream Co. and Theater Co

    Uploaded by

    sky
    225 views4 pages
    This document contains problems and solutions for the consolidated financial statements of several companies. Problem 1 involves consolidating the financial statements of Dream Co. and Theater Co., including their consolidated sales, cost of sales, ending inventory, and calculation of unrealized profit in inventory. Problem 2 involves Bright Co. and Dull Co., calculating the carrying amount of equipment sold between them, their consolidated equipment balance, and consolidated depreciation expense. Problem 3 involves Pare Co. and Kidd Co., calculating the non-controlling interest in net assets, the amount of common stock, and dividends paid in the consolidated financial statements.

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    This document contains problems and solutions for the consolidated financial statements of several companies. Problem 1 involves consolidating the financial statements of Dream Co. and Theater Co., including their consolidated sales, cost of sales, ending inventory, and calculation of unrealized profit in inventory. Problem 2 involves Bright Co. and Dull Co., calculating the carrying amount of equipment sold between them, their consolidated equipment balance, and consolidated depreciation expense. Problem 3 involves Pare Co. and Kidd Co., calculating the non-controlling interest in net assets, the amount of common stock, and dividends paid in the consolidated financial statements.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    225 views4 pages

    Problem 1 Dream Co. and Theater Co

    Uploaded by

    sky
    This document contains problems and solutions for the consolidated financial statements of several companies. Problem 1 involves consolidating the financial statements of Dream Co. and Theater Co., including their consolidated sales, cost of sales, ending inventory, and calculation of unrealized profit in inventory. Problem 2 involves Bright Co. and Dull Co., calculating the carrying amount of equipment sold between them, their consolidated equipment balance, and consolidated depreciation expense. Problem 3 involves Pare Co. and Kidd Co., calculating the non-controlling interest in net assets, the amount of common stock, and dividends paid in the consolidated financial statements.

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    of 4

    ASSESSMENT TASK 7

    PROBLEM 1 DREAM CO. AND THEATER CO.

    A. Consolidated Sales

    ANSWER: P 1,622,000

    SOLUTION:

    Sales by Dream Co. P 1,000,000


    Sales by Theater Co. 700,000
    LESS: Intercompany sales
    during the year ( P 38,000 +
    40,000) 78,000
    CONSOLIDATED SALES P 1,622,000

    B. CONSOLIDATED COST OF SALES

    ANSWER: P 682,500

    SOLUTION:

    Cost of sales of Dream Co. P 400,000


    Cost of sales of Theater Co. 350,000
    LESS: Intercompany sales during the year 78,000
    ADD: Unrealized profit in ending inventory
    ( P 4,500 + 6,000) 10,500
    LESS: Realized profit in beginning inventory -
    ADD: Depreciation of FVA on inventory -
    CONSOLIDATED COST OF SALES P 682,500

    DOWNSTREAM UPSTREAM TOTAL


    Sale price P 38,000 P 40,000 100%
    Cost of sales (20,000)   (32,000) 80%
    Gross profit P 18,000 P 8,000 20%
    Multiply by: unsold
    portion 9,500/38,000 3/4
    Unrealized profit in          
    ending inventory P 4,500   P 6,000   P 10,500
    C. CONSOLIDATED ENDING INVENTORY

    ANSWER: P 369,500

    SOLUTION:

    Ending inventory of Theater Co. P 300,000


    Ending inventory of Dream Co. 80,000
    LESS: Unrealized profit in ending inventory
    ( P 4,500 + 6,000) 10,500
    ADD: FVA, net 12/31 -
    CONSOLIDATED ENDING INVENTORY P 369,500

    PROBLEM 2 BRIGHT CO. AND DULL CO.

    A. What is the carrying amount of the equipment sold by Bright Co. to Dull Co. in the

    consolidated financial statements?

    ANSWER: P 36,000

    SOLUTION:

    Cost of the equipment P 120,000


    LESS: Accumulated depreciation P 72,000
    (P 120,000/10 years) 12,000 84,000
    CARRYING AMOUNT OF THE EQUIPMENT P 36,000

    B. How much is the consolidated Equipment – net?

    ANSWER: P 581,000

    SOLUTION:

    Parent's equipment, net P 400,000


    Subsidiary equipment,net 190,000
    FVA- net 12/31 -
    Deferred gain
    Gain on sale of equipment P 12,000
    Multiply by: 3/4 (9,000)
    CONSOLIDATED EQUIPMENT P 581,000
    C. How much is the consolidated Depreciation expense?

    ANSWER: P 49,000

    SOLUTION:

    Depreciation expense
    Bright Co. P 40,000
    Dull Co. 12,000 P 52,000
    Overstatement in depreciation
    ( P 120,000- 72,000/4 remaining years) P 12,000
    Dull Co. Depreciation ( P 60,000/4) (15,000) (3,000)
    Depreciation before FVA P 49,000
    FVA- depreciation -
    CONSOLIDATED DEPRECIATION EXPENSE   P 49,000

    PROBLEM 3 PARE CO. AND KIDD CO.

    3.1 In the December 31, 2020 consolidated balance sheet, what amount should be reported as

    non-controlling interest in net assets?

    ANSWER: B. P 30,000

    SOLUTION:

    1-Jan 31-Dec Net change


    Net assets at carrying amount
    Total assets P 180,000
    Liabilities 60,000  
    NET ASSETS AT FAIR VALUE P 120,000 P 120,000

    Kidd's net asset in December 31, 2020 P 120,000


    Multiply by: NCI percentage ( 100% -75%) 25%
    Non- controlling interest in net assets P 30,000
    3.2 In the December 31, 2020 consolidated balance sheet, what amount should be reported as common
    stock?

    ANSWER: B P 100,000

    SOLUTION: Same as the parent’s common stock.

    3.3 In the December 31, 2020 consolidated statement of retained earnings, what amount should be
    reported as dividends paid?

    ANSWER: B P 25,000

    SOLUTION: The amount dividend paid by the parent (PARE CO.) is recorded in the consolidated
    statement of retained earnings.

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