Page 1 of 9 | AFAR Handouts No.

04

Separate and Consolidated FS

Robert Carl Angelo B. Arrojo, CPA

SEPARATE AND CONSOLIDATED FS

Robert Carl Angelo B. Arrojo, CPA

PROBLEMS

1. On January 1,2021, Power Company acquired 90% of Excellence Company. In exchange for 5,400 shares of P10 par
common stock having a market value of P151,000, with control premium of 30,400. Power and Excellence condensed
statements of financial position were as follows,
Power Company and Excellence Company
Statements of Financial Position at January 1,2021
(Before Combination)

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ASSETS POWER Co. EXCELLENCE Co,
Cash P 30,900 P 37,400
Accounts receivable, net 34,200 19,100

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Inventories 22,900 28,100
Equipment, net 179,000 48,000
Patents 18,000
Total Assets P 267,000 P150,600
LIABILITIES and SHAREHOLDER’S EQUITY
Accounts payable
Bonds payable, 10%
Common stock, P10 par
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P 4,000

100,000
P 6,600
100,000
60,000
-
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Additional paid in capital 15,000 15,000
Retained earnings 48,000 69,000
Total Liabilities and Stockholder’s Equity P 267,000 P 150,600

At the date of acquisition, all assets and liabilities of Excellence Company have book value approximately equal to their
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respective market values except the following as determined by appraisal as follows:

Inventories (FIFO method) P 35,100
Equipment (net – 4 years remaining life) 32,000
Patents (remaining life of 10 years) 26,000
On December 31,2021, the following results were given:
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Dividends Paid Net Income

Power Company P15,000 P30,200
Excellence Company 4,000 9,400
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1.1 Compute the NCI at the end of the year

A. 13,560 C. 15,480
B. 14,460 D. 14,580

1.2 Compute the Profit attributable to Equity Holders

A. 31,640 C. 32,340
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B. 30,200 D. 32,040

2. Ez Corporation acquired 80 % of the outstanding common stock of GG Company on June 1, 2022 for P 2,345,000
• GG Company’s stockholder’s equity components at the end of this year are as follows: Ordinary Shares 100
par P 1,000,000, Share Premium P 450,000, Retained Earnings P 890,000
• Non-Controlling interest is measured at fair value. Fair value at the date of acquisition is P 555,000
• All the assets of GG were valued, except for inventory which was overstated by 40,000 and equipment which
was understated by P 100,000. Remaining useful life of equipment is 4 years. Original cost of equipment was,
and Both Corporation use Sum of the Digits depreciation
• Stockholder’s equity of PAPA on June 1, 2022 is computed of Ordinary Share P 3,000,0000
Share Premium P 700,000, Retained Earnings, P 2,100,000
• Goodwill, if any, should written down by 67,000 at year-end of 2022.
• Net Income and Dividends for EZ and GG were as follows. Assume income were earned evenly throughout the
years:
EZ GG

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Separate and Consolidated FS

Robert Carl Angelo B. Arrojo, CPA

Net Income Dividends Net Income Dividends

2022 300,000 40,000 240,000 40,000
2023 450,000 80,000 320,000 20,000
2.1 Compute for the NCI to be presented on the Consolidated Financial Statements on December 31, 2022
A. 568,283 C. 565,600
B. 568,950 D. 564,933

2.2 Compute for the Consolidated Stockholder’s equity on December 31, 2023
A. 6,886,000 C. 7,097,450
B. 6,885,500 D. 7,175,500

3 QOP Company purchased 75 % of the capital stock of Akasha Company on December 31, 2022 at P 750,000 more the
book value of its net assets. The book value of the net assets equal to fair values except for trademark with P 340,000
less than its fair value, land being overvalued by P 200,000 and the excess was allocated to goodwill for the balance.
The trademark has an estimated useful life of 10 years. For six years, Akasha Company reported cumulative earnings
of P 3,000,000 and paid P 792,500 in dividends. The 40 % of the overvalued land was sold and goodwill was impaired
by 25 % of its value. On January 2, 2029, NCI in net assets of Akasha Company amounts to P 1,050,625

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Assuming NCI is measured at estimated fair value and a control discount amounting to P 60,000 was paid, what is the
price paid by PP Company on the date of acquisition

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A. 1,703,625 C. 1,763,625
B. 1,643,525 D. 1,529,250

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On January 2, 2021, T-shirt Corporation purchase 80 percent of Pants Company’s common stock for P 216,000. P
10,000 of the excess is attributed to goodwill and the balance to a depreciable asset with an economic life of ten years.
On the date of acquisition Pants reported common stock outstanding of P 80,000 and retained earnings of P 140,000
and T shirt’s retained common stock outstanding of P 350,000 and retained earnings of P520,000.
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On December 31, 2021, Pants reported comprehensive income of P 35,000 and paid dividends of P 15,000, T shirt
reported CI from its separate operations of P 95,000 and paid dividends of P 46,000. Goodwill had been impaired by P
2,000 on December 31,2021.

4.1 Assuming the entities are SME, what is the consolidated NCI on December 31,2021?
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A. 54,750 C. 52,750
B. 54,350 D. 53,000

4.2 What is the consolidated net income attributable to T-Shirt on December 31, 2021?
A. 115,600 C. 125,300
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B. 117,000 D. 121,400

5 Peter Company acquired 95% interest from Griffin Company on January 2, 2017. The inventories acquired from affiliate
in 2021 are: Beginning inventory, P84,375 ; Ending inventory, P168,750. Intercompany sale of merchandise during
the year amounts to P337,500 at a gross profit rate of 30%. In 2021 the data relating to the operations of Peter Company
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and S Company are:

Peter Company Griffin Company
Sales P2,325,000 P1,275,000
Cost of sales 1,087,500 667,500
Ending inventory 230,000 210,000
Net income 843,750 506,250
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Dividends paid 337,500 168,750

How much is the consolidated gross profit?

A. 1,845,000 C. 1,482,182.75
B. 1,819,687.50 D. 1,870,312.50

6 P Corporation owns 80% of S Corporation’s common stock which was purchased at its underlying book value. The two
companies report the following information for 2021 and 2022.
Year 2021 selected data 2022 selected data
Company Peter Seven Peter Seven
Corporation Corporation Corporation Corporation
Sales revenue P1,200,000 P640,000 P1,160,000 P890,000
Cost of goods sold 640,000 310,000 600,000 360,000
Other Expenses 200,000 178,000 260,000 342,000

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Separate and Consolidated FS

Robert Carl Angelo B. Arrojo, CPA

Dividends 38,000 0 32,000 10,000

Intercompany sales for 2021 are upstream (from Seven to Perfect) total P100,000. Ps December 31,2020 and
December 31,2021 inventories contain unrealized profits of P5,000 and P10,000, respectively.
Intercompany sales for 2022 are downstream (from Seven to Perfect) total P200,000. S’s December 31,2021 and
December 31,2022 inventories contain unrealized profits of P8,000 and P9,000, respectively.

6.1 What is the amount of NCI share in Net Income of S Corporation for the year 2021?
A. 29,400 C. 30,400
B. 31,400 D. 32,600

6.2 What is the amount of consolidated net income attributable to P Corporation for the year 2022?
A. 299,000 C. 347,600
B. 336,600 D. 338,600

7 On January 1, 2021, Ceb acquires 80% of outstanding ordinary shares of Johan at a gain on bargain purchase of
P50,000. For the year ended December 31, 2021, Ceb and Johan reported sales revenue of P3,000,000 and
P1,600,000 in their respective separate income statements. At the same year, Ceb and Johan reported cost of sales of

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P2,000,000 and P1,200,000 in their respective separate income statements.
During 2022, Ceb sold inventory to Johan at a selling price of P300,000 with 25% markup on cost. On the other hand,
Johan sold inventory to Ceb at a selling price of P420,000 with gross profit rate of 30% based on sales during 202

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On December 31, 2021, 1/3 of the goods coming from Ceb remained in Johan’s inventory but all were eventually sold
to third persons during 2022. As of December 31, 2021, 2/5 of the goods coming from Johan were eventually sold to
third persons.

Johan while Johan reported net income of P200,000.

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For the year ended December 31, 2021, Ceb reported net income of P900,000 and received 40,000 dividends from

7.1 How much is the Consolidated Cost of Goods Sold for the year ended December 31, 2021?
A. 2,480,000
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B. 2,575,600
C. 2,550,400
D. 2,580,600
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7.2 How much is the Consolidated Net Income for the year ended December 31, 2021?
A. 959,400
B. 964,400
C. 1,004,400
D. 989,600
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8 MIRACLE Company purchased 70 % ownership of KUROKY Company on January 1,2020, with excess of P 450,000
allocated 60 % to equipment with 10 year useful life and 40 % to trademark with indefinite useful life. The following
intercompany sales happened during 2023 and 2024:
Year of Sale Seller Cost of Sales Sales Unsold at
end of year
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2022 KUROKY P 640,000 P800,000 150,000

2023 MIRACLE 750,000 1,000,000 200,000
2023 KUROKY 360,000 400,000 160,000
Assume remaining inventory unsold at the end of the year are sold the next year.

MIRACLE Company had ending inventory amounting to P 943,000 and income from own operations amounting to P
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620,000 for the end of the year, while KUROKY Company had ending inventory amounting to P 546,000 and net income
of P 694,200.
The stockholder’s equity of KUROKY amounts to P 432,000 on January 1, 2023. NCI was measured proportionate to
fair value of net assets.

8.1 How much is the consolidated ending inventory for the year 2023?
A. 1,423,000
B. 1,489,000
C. 1,393,000
D. 877,000

8.2 How much is the consolidated NCI for the year 2023?
A. 417,350
B. 444,660
C. 443,760

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Separate and Consolidated FS

Robert Carl Angelo B. Arrojo, CPA

D. 435,660

9 On January 1, 2021, PMA Company purchased a computer with an expected life of 5 years. On January 1,2019, PMA
Company sold the computer to NEGA Corporation and recorded the following entry:
Cash 39,000
Accumulated depreciation 16,000
Computer equipment 40,000
Gain on sale of equipment 15,000

NEGA Corporation holds 60% of the voting shares of PMA Company. PMA Company and NEGA Corporation reported
income from its own operations of P45,000 and P85,000 for 2009 respectively. There is no change in the estimated life
of the equipment because of the intercompany sale. What is the consolidated net income attributable to parent for 2019?
a. P103,000 c. P112,000
b. P106,000 d. P130,000

10 The following transactions occurred for the years ended December 31, 2020 and December 30,2021 regarding Super
Bear Corp. and its three subsidiaries, Papa Bear, Mama Bear and Teddy Bear:

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On January 1 ,2020, Super Bear Corp acquired 80 % of the outstanding common stocks of Papa Bear. On this date,
the equipment of Papa with remaining useful life of (6) five years has book value of P 300,000 but its fair value is

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estimated to be P 420,000

On March 16, 2020, Super Bear Cor. acquired 51 % of the outstanding common stocks of MAMA BEAR and Teddy
Bear

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On January 1,2021, PAPA BEAR sold this undervalued equipment to Super Bear Corp. at a price of P 180,000

On May 1, 2021, Super Bear Corp resold the said equipment to MAMA BEAR at a price of P 480,000
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On June 1, 2021 MAMA BEAR resold the said equipment to Teddy Bear at a price of P 250,000

On October 1, 2021, Teddy Bear resold the equipment to Teletubbies at a price of 340,000
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All of the entities use double declining method of depreciation.

What is the consolidated gain (loss)on sale of equipment to be reported by Super Bear Corp. in its consolidated income
statement for the year ended December 31, 2021?

A. P 150,000 C. P 120,000
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B. P 130,000 D. P 105,000

11 On January 1, 2023, FLY acquires 80% of outstanding ordinary shares of Notail at a gain on bargain purchase of
P180,000. The following intercompany transactions occurred for between the two entities:
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• On January 1, 2023, Notail sold a land to FLY with a cost of P2,000,000 at a selling price of P1,600,000. The land
was eventually sold by FLY to third person during 2024.

• On July 1, 2023, FLY sold Equipment A to Notail with a cost of P230,000 and accumulated depreciation of P50,000
at a selling price of P240,000. The machinery is already 4 years old at the date of sale. The residual value of
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Equipment A is immaterial.

• On April 1, 2022, Notail sold Equipment B to FLY at with a cost of P300,000 and accumulated depreciation of
P150,000 at a selling price of P120,000. The machinery is already 6 years old at the date of sale. The residual value
of Equipment B is immaterial.

For the year ended December 31, 2023, the following are extracted from separate financial statements
Fly Notail
Income from operations, 900,000 640,000
including gain(loss) on
sale
Dividend Income 120,000 30,000
Net Income 1,020,000 360,000
Dividends 140,000
The combined depreciation expense amounted to P 500,000 while the combined book value for all PPE is P 4,300,000

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Separate and Consolidated FS

Robert Carl Angelo B. Arrojo, CPA

11.1 How much is the consolidated depreciation expense and PPE for year 2023?
A. 500,000 and 4,300,000, respectively
B. 490,000 and 4,668,750, respectively
C. 497,500 and 4,798,750, respectively
D. 497,500 and 4,668,750, respectively

11.2 How much is the net income attributable to parent for the year 2023?
A. 1,006,500
B. 1,059,000
C. 999,000
D. 998,500

12 Skrull Inc., a wholly owned subsidiary of Pirn Inc. began operations on January 1,2021. The following information is
from the condensed 2021 income statements of Pirn and Skrull:
Pirn Skrull
Sales to Skrull P100,000 P-
Sales to others 400,000 300,000

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P500,000 P300,000
Cost of goods sold:
Acquired from Pirn - 80,000

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Acquired from others 350,000 190,000
Gross profit P150,000 P 30,000
Depreciation 40,000 10,000
Other expenses 60,000 15,000
Income from operations
Gain on sale of equipment to Skrull
Income before income taxes
Additional information:
ev P 50,000
12,000
P 62,000
P 5,000

P 5,000
-
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• Sales by Pirn to Skrull are made on the same terms as those made to third parties.
• Equipment purchased by Skrull from Pirn for P36,000 on January 1,2021 is depreciated using the straight line
method over four years.
For purposes of consolidation on December 31,2021, what amount of intercompany profit that should be eliminated
from Skrull’s inventory and the amount of depreciation expense in the consolidated financial statements, respectively?
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a. P12,000 and P50,000 c. P10,000 and P44,000

b. P20,000 and P43,000 d. P6,000 and P47,000

13 On June 1, 2021, PNG Corporation sold equipment costing P100,000 with accumulated depreciation of P25,000 to its
wholly owned subsidiary, SM Inc. The selling price was P90,000. PG was depreciating the equipment on the straight-
C

line method over 20 years with no salvage value. SM Continued this depreciation. What are the cost and accumulated
depreciation, respectively, of this equipment in the December 31,2021 Consolidated Statement of Financial Position?
a. P90,000 and P2,333 c. P100,000 and P27,500
b. P90,000 and P2,200 d. P100,000 and P27,916
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14 On January 1, 2020, Mortred acquired 90% of outstanding ordinary shares of Spectre at a price of P900,000. Mortred
paid P20,000 costs related to acquisition of shares.
At the acquisition date, the net asset of Spectre is reported at P950,000. All the assets of Spectre are properly valued
except for a machinery which is undervalued by P150,000. The machinery has a remaining useful life of 5 years.
For the year ended December 31, 2020, Spectre reported net income of P200,000 and declared dividends in the amount
of P30,000.
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Based on the data given by the qualified appraiser, the fair value of Investment in Spectre on December 31, 2020 is
P1,000,000 while the cost to sell is 5%.
Mortred voluntarily prepares its separate financial statements.

Which of the following is incorrect?

A. If Mortred elects to use the fair value model, he will report Investment in Spectre at year end for P 1,000,000 and
have net effect in profit or loss amounting to P 107,000
B. If Mortred elects to use the cost model, the net effect in profit or loss is P27,000
C. If Mortred elects to use the equity model, the Investment account will show P 1,116,000
D. If Mortred elects to use the equity model, the net effect in profit or loss is P 57,000

15 On April 1, 2024, NIGMA Corp. acquired 80% of the outstanding stocks of LIQUID Corp. for P3,200,000. LIQUID Corp.’s
stockholders’ equity at the end of 2024 is as follows: Common stock, P80 par P2,000,000, Additional paid-in capital
P500,000, and Retained Earnings P750,000. NCI is measured at fair value. All the assets of LIQUID were fairly valued
except for the following.
• Inventories which are overvalued by P90,000

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• Land which is undervalued by P50,000

• Patent which is undervalued by P125,000, with remaining useful life of five years

Both companies use the straight-line method for depreciation and amortization.

Shareholders’ equity of NIGMA Corp. on April 1, 2024 is composed of: Common stock, P50 par P3,500,000, APIC
P750,000, and Retained Earnings P2,460,000. Goodwill, if any, should be decreased by P22,500 every year-end. No
additional issuance of capital stocks occurred.

For the two years ended, December 31, 2024 and 2025, NIGMA Corp. and LIQUID Corp. reported the following:
NIGMA Corp. LIQUID Corp.
2024 2025 2024 2025
Net income from own operations P525,000(earned P550,000 P485,000 (from date P520,000
evenly of acquisition)
throughout the
year)
Dividends declared at year-end P 50,000 P 35,000 P35,000 P 50,000

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During 2025, NIGMA and LIQUID started selling inventories to each other. Of the P2,850,000 total sales of NIGMA,
25% were sold to LIQUID, and LIQUID also sold inventories to NIGMA at a sales price of P250,000. Gross profit rates

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of NIGMA and LIQUID are 30% of sales and 20% above cost, respectively. As of year-end, P225,000 worth of
inventories from LIQUID are still left with NIGMA and inventories amounting to P75,000 from NIGMA are still left with
LIQUID.

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Also, on October 31, 2025, LIQUID sold to NIGMA a piece of equipment for P350,000. The book value of the said
equipment was P275,000. The gain was reflected in the income statement of LIQUID. The equipment has remaining
useful life of four years from the date of sale.
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For the year ended December 31, 2025, compute the retained earnings on the separate financial statement of NIGMA
assuming NIGMA uses cost model; assuming NIGMA uses equity model, respectively
A. 3,318,750, and 3,303,750, respectively
B. 3,318,750 and 4,013,750, respectively
C. 3,435,000 and 4,085,000, respectively
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D. 4,085,000 and 4,085,000 respectively

15.1 For the year ended December 31, 2025, compute the consolidated Retained Earnings
A. 4,085,000
B. 4,013,750
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C. 3,303,750
D. 3,435,000

15.2 For the year ended December 31, 2025, compute the consolidated Shareholder’s Equity
A. 7,525,125
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B. 7,500,000
C. 7,416,125
D. 7,392,625

16 On January 2, 2021, Converge Company acquired 90% of the outstanding shares of PLDT Inc. with excess of P200,000
allocated to inventories (sold equally for the next two years) and goodwill of P 50,000. NCI was measured at fair value
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amounting. 20% of total goodwill was allocated to NCI. During 2021 and 2022, intercompany sales amounted to
P2,000,000 and P4,000,000, respectively. Converge Company consistently recognized a 25% mark-up based on cost
while PLDT Inc. had a 25% gross profit on sales. The inventories of the buying affiliate, which all came from inter-
company transactions show:

December 31, 2021 December 31, 2022

Converge P240,000 P160,000
PLDT 100,000 40,000

On October 1, 2021, PLDT Inc., purchased a piece of land costing P1,000,000 from Converge Company for P1,500,000.

On December 1, 2022, PLDT Inc., sold this land to unrelated party for P1,500,000. On the other hand, on July 1, 2022,
PLDT Inc., sold a used photocopier with a carrying value of P60,000 and remaining life of 3 years to Converge Company
for P42,000.

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Separate Statement of Comprehensive Income for the two companies for the year 2022 follow:

Converge PLDT
Sales 25,000,000 14,000,000
Cost of Sales 15,000,000 (8,400,000)
Gross Profit 10,000,000 5,600,000
Operating Expenses (6,000,000) 3,760,000
Operating Profit 4,000,000 1,840,000
Loss on Sale of Office (18,000)
Equipment
Dividend Revenue 40,000
Net Income 4,000,0000 1,822,000

PLDT declared dividends amounting to P 30,000. Goodwill is valued at P 30,000 at year end.

16.1 What is the consolidated income attributable to Converge for the year ending and the consolidated net income on
December 31, 2022?

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A. 6,050,300 and 6,222,000, respectively
B. 6,140,300 and 6,326,000, respectively
C. 6,047,600 and 6,223,000, respectively

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D. 6,068,300 and 6,226,000, respectively

16.2 If the total shareholder’s equity of PLDT is P 5,200,000 was on December 31, 2021, what is the consolidated NCI
for the year ending December 31, 2022?
A. 710,500
B. 720,400
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C. 705,700
D. 702,700

17 Topson Company’s current receivables from affiliated companies at December 31, 2025 are
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1. A P 75,000 cash advance to Ana Corporation (Topson owns 40 % of the voting stock of Ana and accounts for the
investment by the equity method)
2. A receivable of P 280,000 from Jerax Corporation for administrative and selling expenses (Jerax is 80 % owned by
Topson)
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3. A receivable of P 250,000 from Saksa Corporation ( Topson owns 30 % of the voting stock of Ana but Topson was
deemed to have control over the investee in accordance with IFRS 10)
4. A receivable of P 320.000 from Ceb Corporation for merchandise sales on credit (Ceb is 90 % owned
unconsolidated subsidiary of Topson accounted for equity method)

Current receivable of the following corporations are as follows.

C

Topson P 800,000, excluding those above

Ana P 300,000
Jerax P 320,000
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Saksa P 450,000
Ceb P 500,000

Determine the total accounts receivable, including accounts receivable from investees if any to be shown in the
consolidated balance sheet
A. 1,965,000
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B. 1,620,000
C. 2,545,000
D. 2,070,000

18 Pedro Corporation an 90 % interest in Simon Company. In the consolidated financial statements on December 2012
the carrying amount of Simon’s net assets is P 5,000,000 and the carrying amount of the non-controlling interest (NCI)
in Simon Company (including the non- controlling interest’s share of accumulated other comprehensive income is P
5,000,000. On January 1, 2021 Pedro Corporation decided to sell a 50 % interest in Simon Company to outsiders for
cash proceeds of P 3,000,000. As a result of this transaction, Pedro loses control of Simon but retains a 40 % interest
in the former subsidiary, valued at 1,750,000.
What is the gain (loss) on disposal?
A. 250,000
B. 750,000
C. (250,000)
D. 750,000

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THEORIES
1. Which of the following statement is correct? An investor does not have power over the investee even if the investor
holds more than half of the voting rights of the investee.
I. The investor’s voting rights are not substantive
II. A third party has existing rights that provide it with the right to direct the relevant activities of the investee and
the third party is not an agent of the investor
A. I only C. Both I and II
B. II only D. Neither I and II

2. A manufacturing group has just acquired a controlling interest in a football club that is listed on a stock exchange. The
management of the manufacturing group wishes to exclude the football club from the consolidated financial statements
on the grounds that its activities are dissimilar. How should the football club be accounted for
A. The entity should be consolidated as there is no exemption from consolidation on the grounds of dissimilar activiites
B. The entity should not be consolidated using the acquisition method but should be consolidated using equity method
C. The entity should not be consolidated and should appear as an investment in the group accounts
D. The entity should not be consolidated, details should be disclosed in the financial statements

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3. Consolidating the financial statements of A company, B Company, and C Company is needed if:
A. A owns 30 % of the outstanding ordinary share of B and 80 % of the outstanding ordinary share of C; and unrelated

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X company owns 40% of the outstanding ordinary share of B
B. A owns all of the outstanding ordinary share of B and C; B company is being liquidated in bankruptcy proceedings
C. A owns 25 % of the outstanding ordinary share of B and 80% of the outstanding ordinary share of C and C owns
40% of the outstanding ordinary shares of B

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D. A owns 100 % of the outstanding ordinary share of B and 90 % of the outstanding ordinary share of C; A acquired
the ordinary share of C one month before the balance sheet date and old it 8 months later

4. Which of the following statements is correct?

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Statement 1: In eliminating the intercompany profit on sale of inventory, the eliminating journal entry for unrealized profit
of the remaining inventory under eliminating journal entry for unrealized profit of the remaining inventory under
eliminating journal entry for unrealized profit of the remaining under upstream sale is to credit inventory account and to
debit cost of goods sold
PA

Statement 2: Gain on bargain purchase results from the excess of the purchase price over the fair value of net
identifiable assets
A. Statement 1 is correct C. Both statements are correct
B. Statement 2 is correct D. Neither statements are correct

5. Which of following statements is correct when consolidating financial statements?

C

I. All intercompany balances should be eliminated

II. Inter-company profit should be eliminated unless it is realized by sale to an outsider
III. The group share of the whole subsidiary’s profit is included within the group profit
A. Both I and II only C. Both I and II only
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B. Both II and III only D. I, II and III

6. When a subsidiary’s assets are valued up to fair value on consolidation the following tax effects occurs:
A. Deferred tax asset increases
B. Deferred tax liability increases
C. A temporary taxable difference reverse
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D. A temporary deductible difference arises

7. When the parent corporation accounts its investment in subsidiary using fair value model in its separate financial
statements, which income accounts may be recognized?
A. Dividend income and gain/loss on changes in fair value
B. Share in net income of subsidiary
C. Impairment loss
D. All of the above

8. Under IAS 27, which entities are required to present and prepare separate financial statements?
A. Small and medium enterprises (SMEs)
B. Barangay Micro-business Enterprises (BMBEs)
C. Publicly listed entities
D. IAS 27 does not mandate which entities produce separate financial statements available for public use.

REO CPA REVIEW PHILIPPINES Effectiveness. Efficiency. Convenience

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 Page 9 of 9 | TAX Handouts No. 05

Separate and Consolidated FS

Robert Carl Angelo B. Arrojo, CPA

9. When a parent purchases land from a 70 % owned subsidiary resulting to a gain. How will be the Consolidated NCI and
Retained Earnings be adjusted accordingly?
NCI Retained Earnings
A. Decrease 100 % of the gain Decrease 100 % of the gain
B. Decrease 25 % of the gain Decrease 75 % of the gain
C. No Effect Decrease 75 % of the gain
D. No effect No effect

10. Statement 1: When there is impairment in goodwill, the impairment loss recognized by NCI would be equal to the percent
of their ownership.
Statement 2: Fair value is not permitted as one of the models to be used for recognizing the Investment in Subsidiary
in the Separate Financial statements of the parent company.
Statement 3: When there is no loss of control, there would also be no gain or loss recognized.
A. Statement 1,2 and 3 are correct C. Statement 3 is correct
B. Statement 1 and 2 are correct D. Statement 1 and 3 are correct

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REO CPA REVIEW PHILIPPINES Effectiveness. Efficiency. Convenience

www.reocpareview.ph REAL EXCELLENCE ONLINE CPA REVIEW
(074) 665 6774 0916 840 0661 support@reocpareview.ph OCTOBER 2021 CPA REVIEW SEASON