NAME ____________________________________ SCORE ___________

On January 2, 2013, Polo Corporation purchased 80% of the Common Share of Solo Company for
P604,000. On this date, Polos shareholders equity showed Common Share P800,000, Share Premium
P200,000 and Retained Earnings P600,000 and Solos had Common Share P400,000 and Retained
Earnings of P200,000.

All assets and liabilities of Solo had fair market values equal to their book values except Inventories
and Plant Assets which had fair values of P10,000 and P120,000 above their respective book values.

During the year, Polo sold P25,000 merchandise to Solo at a gross margin of 25% of which P8,000
remained unsold at year-end. Polo reported net income from its own operations of P280,000 and paid
dividends of P120,000 while Solo had net earnings of P100,000 and paid dividends of P60,000. All of
the inventories of Solo at January 2 to which the difference relates were sold during 2013. The Plant
Assets had an expected remaining life of 10 years from the date of acquisition.

For 2014, Polo again sold merchandise of P50,000 to Solo at the same margin and P12,000 remained
unsold at year-end. At December 31, Polo reported at net income from its own operations of P320,000
and paid dividends of P120,000 while Solo had net earnings of P150,000 and paid dividends of
P80,000.

1. D & A Schedule
2. Amortization of Allocated Excess Schedule
3. Journal and elimination entries for CY 2013 and 2014
4. Compute the NCI, CCI and CRE for CY 2013 and 2014
Determination and Allocation of Excess Schedule
Total Parent 20% NCI
Fair value of subsidiary 755,000 604,000 151,000 Fair value 20% NCI = (P600,000+P130,000) x
20% = P146,000
Less: Book value of net assets acquired Implied value 20% NCI = (P604,000/80%) x 20%
= P151,000
Common Share SOLO Co 400,000
Retained earnings SOLO Co 200,000
(600,000 X 80%)
Total 600,000 480,000 120,000 (600,000 X 20%)
Excess 155,000 124,000 31,000
Add(Less): Allocations
Increase in Inventories - 10,000
Increase Plant Assets, net -
120,000
Total -
130,000
Goodwill 25,000

Amortization of Allocated Excess Allocate Amortization

d
Excess Year 1 Year 2-10
Inventories 10,000 10,000 -
Plant Assets, net 120,000 12,000 12,000
Goodwill 25,000 - -
155,000 22,000 12,000

CY 2013

Cost method - journal entries Equity method - journal entries

Investment in Solo Co 604,000 Investment in Solo Co 604,00
Cash 604,000 Cash 0 604,000
# #
Cash 25,000 Cash
Sales 25,000 Sales 25,000 25,000
# #
Cost of Goods Sold 18,750 Cost of Goods Sold
Inventories 18,750 Inventories 18,750 18,750
# (P25,000x75%) # (P25,000x75%)
Cash 48,000 Cash
Dividend Income 48,000 Investment in Solo Co 48,000 48,000
# (P60,000x80%) # (P60,000x80%)
Investment in Solo Co
Investment Income 80,000 80,000
# (P100,000x80%)
Investment Income
Investment in Solo Co 19,600 19,600
#
Amortization 17,600
(P22,000x80%)
Add: Inty end 2,000
(P8,000x25%x100%)
Adjusted undistributed 19,600
earnings

Cost method - elimination Equity method - elimination entries

entries 48,000 Investment Income (P80,000-P19,600) 60,400
Dividend Income (P60,000x80%) 12,000 NCI (P60,000x20%) 12,000
NCI (P60,000x20%) 60,000 Dividends Solo Co 60,000
Dividends Solo Co Investment in Solo Co 12,400
# #
400,000 Common Share Solo Co 400,00
Common Share Solo Co 200,000 Retained earnings Solo Co 0
Retained earnings Solo Co 480,000 Investment in Solo Co 200,00 480,000
Investment in Solo Co 120,000 NCI 0 120,000
NCI #
# 10,000 Inventories
Inventories 120,000 Plant Assets, net
Plant Assets, net 25,000 Goodwill 10,000
Goodwill 124,000 Investment in Solo Co 120,00 124,000
Investment in Solo Co 31,000 NCI 0 31,000
NCI # 25,000
# 10,000 Cost of Goods Sold
Cost of Goods Sold 12,000 Expenses
Expenses 10,000 Inventories 10,000
Inventories 12,000 Plant Assets, net 10,000 12,000
Plant Assets, net # 12,000
# 25,000 Sales
Sales 25,000 Cost of Goods Sold 25,000
Cost of Goods Sold #
# 2,000 Cost of Goods Sold 25,000
Cost of Goods Sold 2,000 Inventories 2,000
Inventories # (P8,000X25%)
# (P8,000X25%) 15,600 NCI in CI of Subsidiary 2,000
NCI in CI of Subsidiary 15,600 NCI 15,600
NCI #
# 15,600
Comprehensive income 100,00
Solo Co 0
Amortization 22,000
Adjusted comprehensive 78,000
income
NCI share (P78,000x20%) 15,600

Computation of non-controlling
interest
Net assets Solo Co (Jan 1) 600,000 (P400,000+P200
Add: Undistributed earnings ,000)
Comprehensive income 100,00
Less: Dividends 0 40,000
60,000
Net assets Solo Co (Dec 31) 640,000
Add: Unamortized excess
Excess 155,00
Less: Total amortization 0 133,000
22,000
Net assets Solo Co (Dec 31) at fair 773,000
value
NCI (773,000 x 20%) 154,600

Computation of consolidated CI
Polo Corp comprehensive income 280,000
Less: Unrealized profit, inventory end - 2,000 (P8,000X25%)
Polo adjusted income 278,000
Add: Solo Co adjusted comprehensive
income 100,00
Solo Co comprehensive income 0 78,000
Less: Amortization 22,000
Consolidated comprehensive income 356,000
Less: Attributable to NCI (P78,000x20%) 15,600
Attributable to parent shareholders 340,400

Computation of consolidated
retained earnings
Retained earnings Polo Corp (Jan 1) 600,000
Add: Consolidated CI attributable to 340,400
parent
Total 940,400
Add: Dividends Polo Corp 120,000
Consolidated retained earnings (Dec 31) 820,400

CY 2014

Cost method - journal entries Equity method - journal entries

Cash Cash 50,000
Sales Sales 50,000
# #
Cost of Goods Sold 50,000 Cost of Goods Sold 37,500
Inventories 50,000 Inventories 37,500
# (P50,000x75%) # (P50,000x75%)
Cash 37,500 Cash 64,000
Dividend Income 37,500 Investment in Solo Co 64,000
# (P80,000x80%) # (P80,000x80%)
64,000 Investment in Solo Co 120,00
64,000 Investment Income 0 120,000
# (P150,000x80%)
Investment Income
Investment in Solo Co 10,600 10,600
# [(P12,000x80%)+(P12,000X25%)]-
(P8,000x25%)
Amortization (P12,000x80%) 9,60
0
Add: Inty end 3,00
(P12,000x25%x100%) 0
Total 12,6
Less Inty beg 00
(P8,000x25%x100%) 2,00
0
Adjusted undistributed 10,6
earnings 00

Cost method - elimination Equity method - elimination entries

entries 64,000 Investment Income (P120,000-P10,600) 109,40
Dividend income (P80,000x80%) 16,000 NCI (P80,000x20%) 0
NCI (P80,000x20%) 80,000 Dividends Solo Co 16,000 80,000
Dividends Solo Co Investment in Solo Co 45,400
# #
400,000 Common Share Solo Co
Common Share Solo Co 200,000 Retained earnings, Jan 1 Solo Co 400,00
Retained earnings Solo Co 480,000 Investment in Solo Co 0 512,000
Investment in Solo Co 120,000 (P640,000x80%) 240,00 128,000
NCI NCI (P640,000x20%) 0
# 10,000 #
Inventories 120,000 Plant Assets, net (P1200,000-P12,000)
Plant Assets, net 25,000 Goodwill 106,400
Goodwill 124,000 Investment in Solo Co 108,00 26,600
(P133,000x80%)
Investment in Solo Co 31,000 0
NCI (P133,000x20%)
NCI 25,000
#
# 3,600
Retained Earnings S Co 3,600
NCI
#
Retained earnings, 1/1/14 240,00
0
Retained earnings, 1/1/13 200,00
0
Increase 40,000
Less: Amortization, prior 22,000
years
Adjusted undistributed 18,000 22,000
earnings 12,000 12,000
Expenses
NCI share 3,600 10,000
(P18,000x20%) Plant Assets, net
24,000
#
Retained Earnings, Solo Co 12,000
Expenses 50,000
Inventories 50,000 Sales 50,000
Plant Assets, net (P12,000x2yrs) Cost of Goods Sold
# 3,000 #
Sales 3,000 Cost of Goods Sold 50,000 3,000
Cost of Goods Sold Inventory
# 2,000 # (P12,000X25%)
Cost of Goods Sold 2,000 Retained Earnings, Polo Corp 3,000 2,000
Inventory Cost of Goods Sold
# (P12,000X25%) 27,600 # (P8,000X25%)
Retained Earnings, Polo Corp 27,600 NCI in CI of Subsidiary 2,000 27,600
Cost of Goods Sold NCI
# (P8,000X25%) #
NCI in CI of Subsidiary 27,600
NCI
#
Comprehensive income 150,00
Solo Co 0
Amortization 12,000
Adjusted comprehensive 138,00
income 0
NCI share (P138,000x20%) 27,600

Computation of non-controlling
interest
Net assets Solo Co (Jan 1) 640,000 (P400,000+P240
Add: Undistributed earnings ,000)
Comprehensive income 150,00
Less: Dividends 0 70,000
80,000
Net assets Solo Co (Dec 31) 710,000
Add: Unamortized excess
Excess 155,00
Less: Total amortization 0 121,000
(P22,000+P12,000) 34,000
Net assets Solo Co (Dec 31) at fair 831,000
value
NCI (831,000 x 20%) 166,200

Computation of consolidated CI
Polo Corp income from own operations 320,000
Add: Realized profit, inventory 2,000 (P8,000X25%)
beginning - 3,000 (P12,000X25%)
Less: Unrealized profit, inventory end
Polo adjusted income from own 319,000
operations
Add: Solo Co adjusted comprehensive 150,00
income 0 138,000
Solo Co comprehensive income 12,000
Less: Amortization
Consolidated comprehensive income 457,000
Less: Attributable to NCI (P138,000x20%) 27,600
Attributable to parent shareholders 429,400

Computation of consolidated retained earnings (cost

method)
Retained earnings Polo Corp (Jan 1) 808,000 Retained Earnings, Jan 1, 600,000
Add: Consolidated CI attributable to 429,400 2013 280,000
parent Add: Net income 2013
Total 1,237,40 Dividend income 48,000
Add: Dividends Polo Corp 0 2013 -120,000
120,000 Less: Dividends paid
2013
Consolidated retained earnings (Dec 31) 1,117,40 Retained Earnings, Jan 1, 808,000
0 2014

Computation of consolidated retained earnings (equity

method)
Retained earnings Polo Corp (Jan 1) 820,400 Retained Earnings, Jan 1, 600,000
Add: Consolidated CI attributable to 429,400 2013 280,000
parent Add: Net income 2013
Total 1,249,80 Investment 60,400
Add: Dividends Polo Corp 0 Income 2013 -120,000
120,000 Less: Dividends paid
2013
Consolidated retained earnings (Dec 31) 1,129,40 Retained Earnings, Jan 1, 820,400
0 2014