Since 1977
PRACTICAL ACCOUNTING II
P2.708-Consolidated Statements
LECTURE NOTES
Consolidated financial statements- are the financial
statements of a group presented as those of a single
economic entity.
Group is a parent and all of its subsidiaries.
Separate financial statements – are those presented by a
parent, an investor in an associate, or a venturer in a
jointly controlled entity, in which the investments are
accounted for on the basis of the direct equity interest
rather than on the basis of the reported credits, and the
net assets of the investee.
PRESENTATION OF CONSOLIDATED FINANCIAL
STATEMENTS
A parent shall present consolidated financial statements,
except when
• The partner is itself a wholly-owned subsidiary, or is
a partially-owned subsidiary of another entity
• The parent’s debt or equity instruments are not
traded in a public market
• The parent did not file, nor is in the process of filing,
its financial statements with a securities commission
for the purpose of issuing any class of instruments in
a public market
• The ultimate parent produces consolidated financial
statements available for public use
CONSOLIDATION PROCEDURES
• The carrying amount of the parent’s investment in
each subsidiary and the parent’s portion of equity of
each subsidiary are eliminated
• Minority interests in the profit or loss of consolidated
subsidiaries for the reporting period are identified
• Minority interests in the net assets of consolidated
subsidiaries are identified separately from the parent
shareholders’ equity in them. Minority interests in
the net assets consist of:
1. The amount of those minority interests at the
date of the original combination
2. The minority’s share of changes in equity since
the date of the combination
ACCOUNTING FOR INVESTMENTS IN SUBSIDIARIES,
JOINTLY CONTROLLED ENTITIES AND ASSOCIATES IN
SEPARATE FINANCIAL STATEMENTS
For separate financial statements investment in
subsidiaries, jointly controlled entities and associates,
that are not classified as held for sales, shall be
accounted for either:
• at cost, or
• in accordance with IAS 39
Summary of Critical Points:
1. Consolidated statements are prepared from the
separate statements of the acquiring company and
acquired company(ies) from the standpoint of a single
economic entity.
2. Consolidation procedures are necessary whenever a
parent and a subsidiary relationship existed, except if
the parent is exempted under PAS 27 to present
consolidated financial statements.
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DE LEON / DE LEON
OCTOBER 2009
3. The acquiring company, generally, is a parent if it
owns, directly and indirectly, more than 50% of the
outstanding voting shares of the acquired company. If
the controlling interest is not 100%, the difference
would represent the minority interest.
4. The following steps summarize the consolidation
worksheet procedures.
a. Prepare a schedule of excess to determine if there
is either goodwill, or, income from acquisition.
This will also be the basis in formulating the
working paper elimination entries.
b. If the working paper is to prepare post acquisition
consolidated statements, computations must
show the amortization of increase/decrease in
value of net assets of the acquired company.
5. Increase/decrease to fair value of net asset items and
GOODWILL are recognized in full regardless of the
extent of the minority interest. Such remeasurement
and resulting amortization/impairment loss accrue to
both the controlling interest and the non-controlling
interests.
Please note that goodwill, which is part of the excess
is no longer amortized but subjected to annual tests
for impairment losses.
6. Working paper elimination entries orchestrate the
items and balances that must comprise the
consolidated statements. Their two basic objectives
are (1) to eliminate intercompany balances and (2) to
make adjustments to or set-up some items in order
to conform with purchase principles.
7. In purchase combination, for example, working paper
elimination entries aim to accomplish the following:
a. Eliminate inter-company balances
b. Make adjustments for acquired assets and
assumed liabilities to comply with fair value
considerations.
c. Set up goodwill or income from acquisition into
the consolidated statements.
d. Amortize increase/decrease in value of net assets
and measure their effects in the consolidated
financial statements,
e. Make adjustments to consolidated amounts as a
result of inter-company transactions.
f. And for a variety of other consolidation
requirements.
8. Basically, in the working papers, similar items from
the parent’s records and from the subsidiary’s records
are simply combined, plus/minus any working paper
adjustments affecting such items.
9. The fair value method is usually applied to small
stockholdings. Generally it is the method used by the
investor if the interest acquired is less than 20% of
outstanding voting shares. An investor that can
exercise significant influence must use the equity
method as required by PAS 28. Control by the
investor over the investee may use either the cost
method or the equity method and must consolidate
unless exempted. The cost method is however
preferred.
P2.708
EXCEL PROFESSIONAL SERVICES, INC.
- done –
MULTIPLE CHOICE THEORETICAL
Select the best answer for each of the following multiple-choice questions:
1. X has control over the composition of Y's board of
directors. X owns 49% of Y and is the largest
shareholder. X has an agreement with Z, which owns
10% of Y, whereby Z will always vote in the same way
as X. Can X exercise control over Y?
a. X cannot exercise control because it owns only
49% of the voting rights
b. X cannot exercise control because it can control
only the makeup of the board and not necessarily
the way the directors vote
c. X can exercise control solely because it has an
agreement with Z for the voting rights to be used
in whatever manner X wishes
d. X can exercise control because it controls more
than 50% of the voting power, and it can govern
the financial and operating policies of Y through is
control of the board of directors
2. X owns 50% of Y's voting shares. The board of
directors consists of six members; X appoints three of
them and Y appoints the other three. The casting vote
at meetings always lies with the directors appointed by
X. Does X have control over Y?
a. No, control is equally split between X and Z
b. Yes, X holds 50% of the voting power and has the
casting vote at board meetings in the event that
there is not a majority decision
c. No, x owns only 50% of the entity's shares and
therefore does not have control
d. No, control can be exercised only through voting
power, not through a casting vote
3. Z has sold all of its shares to the public. The company
was formerly a state-owned entity. The national
regulator has retained the power to appoint the board
of directors. An overseas entity acquires 55% of the
voting shares, but the regulator still retains its power
to appoint the board of directors. Who has control of
the entity?
a. The national regulator
b. The overseas entity
c. Neither the national regulator nor the overseas
entity
d. The board of directors
4. A has acquired an investment in a subsidiary, B, with
the view to dispose of this investment within six
months. The investment in the subsidiary has been
classified as held for sale and is to be accounted for in
accordance with IFRS 5. The subsidiary has never been
consolidated. How should the investment in the
subsidiary be treated in the financial statements?
a. Purchase accounting should be used
b. Equity accounting should be used
c. The subsidiary should not be consolidated but IFRS
5 should be used
d. The subsidiary should remain off balance sheet
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5. 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 activities
b. The entity should not be consolidated using the
purchase method but should be consolidated using
equity accounting
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
6. In the separate financial statements of a parent entity,
investments in subsidiaries that are not classified as
held for sale should be accounted for
a. At cost
b. In accordance with IAS 39
c. At cost or in accordance with IAS 39
d. Using the equity method
7. Which of the following is not a valid conditions that will
exempt an entity from preparing consolidated financial
statements?
a. The parent entity is a wholly owned subsidiary of
another entity
b. The parent entity's debt or equity capital is not
traded on the stock exchange
c. The ultimate parent entity produces consolidated
financial statements available for public use that
comply with IFRS
d. The parent entity is in the process of filing its
financial statements with a securities commission
8. Entity X controls an overseas entity Y. Because of
exchange controls, it is difficult to transfer funds out of
the country to the parent entity. X owns 100% of the
voting power of Y. How should Y be accounted for?
a. It should be excluded from consolidation and the
equity method should be used
b. It should be excluded from consolidation and
stated at cost
c. It should be excluded from consolidation and
accounted for in accordance with IAS 39
d. It is not permitted to be excluded from
consolidation because control is not lost
9. Where should minority interests be presented in the
consolidated balance sheet?
a. Within long-term liabilities
b. In between long-term liabilities and current
liabilities
c. Within the parent shareholders' equity
d. Within equity but separate from the parent
shareholders' equity
P2.708
EXCEL PROFESSIONAL SERVICES, INC.

STRAIGHT PROBLEMS
Problem 1 The plant and equipment had an expected remaining
On January 1, 2010, P Company purchased interest in life of 5 years, and the inventory should be sold in
S Company. On this date the book values and the fair 20x9. P Company’s income was P250,000 in 20x9 and
values of S Company were as follows: P290,000 in 20x0. S Company’s income was P120,000
Fair Market in 20x9 and P 180,000 in 20x0. S Company paid cash
Book Values Values dividends of P50,000 in 20x9 and P60,000 in 20x0.
Cash P 300,000
Accounts receivable 180,000 P Company uses the cost method in accounting for its
Merchandise investment in stocks of S Company.
inventory 720,000 900,000 Requirements:
Building (net) 1,860,000 1,920,000 1. Calculate the investment income of P Company
Equipment 600,000 480,000 from S Company in 20x9 and in 20x0.
Long term inv. in 2. Elimination entries for consolidated statement
MS 1,200,000 1,740,000 working papers on January 1, 20x9, December 31,
P 4,860,000 20x9 and December 31, 20x0.
Current liabilities P 600,000 3. Calculation of minority interest in net income of
Bonds payable 1,260,000 1,560,000 subsidiary for 20x9 and 20x0
Common stock 1,200,000 4. Calculation of consolidated net income for 20x9 and
Retained earnings 1,800,000 20x0.
P 4,860,000 5. Calculation of minority interest in net assets as of
January 1, 20x9, December 31, 20x9 and
Requirements: Prepare the following assuming that P December 31, 20x0.
Company paid Problem 4
(a) P 3,420,000 for a 100% interest Pet Company acquired a 60% interest in Show
(b) P 2,208,000 for an 80% interest Enterprises on 2 January 20x1 when Show’s share
1. Determination and distribution of excess capital and retained earnings were P80,000 and
schedule P30,000 respectively. The net assets of Show were
2. Working paper elimination entries fairly valued on that date. The fair value of non-
controlling interest as at the date of acquisition is
Problem 2 P78,000.
Pluto Company acquired a 60% interest in Saturn Co
on 2 January, 2010. Book and fair values at the date of The following financial statements pertain to the two
acquisition were close to each other. The fair value of companies for the year ended December 31, 20x8
non-controlling interests as at the date of acquisition is
P75,000. A control premium was paid by Pluto to Income Statement for the year ended December 31,
acquire Saturn. 20x8

The following balance sheets relate to Pluto and Saturn Pet Co Show Ent
right after the combination: Operating profit P160,000 P 60,000
Pluto Co Saturn Co Dividend income from
Investment in Saturn Co, cost P117,000 P 0 Show 18,900 -
Other assets 578,000 294,700 Net profit before tax 178,900 60,000
Total assets P695,000 P294,700 Tax expense (48,900) (18,000)
Share capital P300,000 P 80,000 Net profit after tax 130,000 42,000
Retained earnings 140,000 30,000 Retained earnings,
Long-term liabilities 200,000 150,400 January 1 110,000 38,200
Current liabilities 55,000 34,300 Dividends declared (100,000) (31,500)
Total equities P695,000 P294,700 Retained earnings,
December 31 P140,000 P 48,700
Required:
1. Determination and distribution of excess schedule Balance as at December 31, 20x8
at the date of acquisition. Pet Co Show Ent
2. Consolidation working paper entries at the date of Investment in Saturn Co,
acquisition. cost P117,000 P -
3. Consolidated balance sheet at the date of Other assets 520,200 265,230
acquisition. Total assets P637,200 P265,230
Share capital P270,000 P 80,000
Problem 3 Retained earnings 126,000 48,700
On January 1, 20x9, P Company purchased an 80% Long-term liabilities 180,000 120,000
interest in S Company for P340,000. On this date, S Current liabilities 61,200 16,530
Company had Capital Stock of P150,000 and Retained Total equities P637,200 P265,230
Earnings of P100,000. An examination of S Company’s
assets and liabilities revealed that book values were Required:
equal to market values for all except the following: 1. Show the consolidation working paper entries for
Book value Market value the year ended December 31, 20x8.
Plant and equipment (net) 300,000 400,000 2. Perform an analytical check on the non-controlling
Merchandise inventory 80,000 100,000 interests as at December 31, 20x8.

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EXCEL PROFESSIONAL SERVICES, INC.

3. Prepare the consolidation worksheet for the year

ended December 31, 20x8.
Problem 5 (Upstream Merchandise Transfer)
S Company, a 75% owned subsidiary of P Company,
sold merchandise during 2009 to its parent company
for P 150,000. The merchandise cost S Company P
110,000, 25% of the transferred merchandise
remained in P Company’s ending inventory. For the
year 2009, S Company reported a net income of P
150,000 and P Company reported net income
(including dividend income of P 60,000) of P 275,000.
Requirements:
1. Calculate P Company’s investment income from S
Company in 2009.
2. Elimination entries for 2009
3. Determine non-controlling interests in the net
income of the subsidiary for 2009.
4. Show consolidated net income for 2009, and
allocate to Controlling interests and Non-controlling
interests.
Requirements
1. Calculate P Company’s investment income from S
Company in 2009 and in 2010.
2. Elimination entries for 2009 and for 2010.
3. Determine non-controlling interest in the net
income of the subsidiary for 2009 and for 2010.
4. Show the consolidated net income for 2009 and
2010. Allocate each to Controlling and MNon-
controlling interests.
Problem 8 (Intercompany Transactions)
On January 1, 2009, P Company acquired 75% of the
outstanding shares of S Company at book value.
During 2010, P Company purchased merchandise from
S Company in the amount of P 400,000 at billed
prices. S Company shipped the merchandise at 40%
above its cost, and this pricing policy was also used for
shipments made in 2009 to P Company. The
inventories of P Company included merchandise at
billed prices from S Company as follows:

Problem 6 (Downstream Land Transfer) January 1, 2010 112,000

During 2008 P Company sold land with a cost of December 31, 2010 84,000
P150,000 to its 80% owned subsidiary, S Company,
for P 200,000. The subsidiary sold the land in 2010 to Also, in 2009 P Co sold land to S Co for P200, 000. The
an outsider for P280,000. The subsidiary and the cost of the land to P Co was P150, 000. S Co sold the
parent reported net income as follows: land to an outsider for P230, 000 in 2010.
Parent Subsidiary
2008 351,000 154,000 Furthermore, on January 1, 2010 S Co sold equipment
2009 335,000 149,000 to P Co for P75, 000 cash at the date of the transfer,
2010 315,000 165,000 the equipment is carried at a cost of P106, 000 less
The reported income of the parent company includes P accumulated depreciation of P45, 000. The equipment
51,000 of dividend income each year. has an estimated remaining life of 7 years.
Requirements:
1. Calculate P Company’s investment income from S Income statements for the two companies for the year
Company in 2008, 2009, and 2010. 2010 are as follows:
2. Elimination entries for 2008, 2009, and 2010 P Company S Company
3. Determine non-controlling interest in the net Sales P2,000,000 P1,000,000
income of the subsidiary in 2008, 2009 and 2010 Cost of sales 800,000 500,000
4. Show the consolidated net income for 2008, 2009 Gross profit 1,200,000 500,000
& 2010. Allocate each to Controlling and non- Operating expenses 720,000 320,000
controlling interests. Operating income 480,000 180,000
Gain on sale of land 30,000
Problem 7 (Upstream depreciable asset transfer) Gain on sale of equipment _________ 14,000
On January 1, 2009, S Company a 90% owned Net income P 480,000 P 224,000
subsidiary of P Company transferred equipment to its Requirements:
parent in exchange for P75,000 cash. At the date of 1. Calculate the non-controlling interests in the
transfer, the subsidiary’s record carried the equipment consolidated net income in 2010.
at a cost of P106,000 less accumulated depreciation of 2. Calculate the controlling interest in the
P45,000. The equipment has an estimated remaining consolidated net income in 2010.
life of 7 years. The subsidiary reported net income for 3. Prepare working paper elimination entries for the
2009 and 2010 of P 132,000 and P197,000, above information at December 31, 2010.
respectively. The parent company reported income of 4. Prepare a consolidated income statement for the
P 220,000 (including dividend income of P 45,000) and year ended December 31, 2010.
P295,000 (including dividend income of P45,000) for
2009 and 2010, respectively.

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EXCEL PROFESSIONAL SERVICES, INC.

MULTIPLE CHOICE
Daito Corporation owns 100% of Prince Enterprises. Separate balance sheet data for the companies at the
On January 1, 2010, Daito sold Prince delivery combination date are given below:
equipment at a gain. Daito had owned the equipment
for two years and used a five-year straight-line Sabina Argo
depreciation rate with no residual value. Prince is Cash 12,000 103,000
using a three-year straight-line depreciation rate with Accounts Receivables 72,000 13,000
no residual value for the equipment. Inventory 66,000 19,000
1. In the consolidated income statement, Prince Land 39,000 16,000
recorded depreciation expense on the equipment Plant Assets 350,000 150,000
for 2010 will be decreased by: Accum. Depreciation (120,000) (30,000)
a. 20% of the gain on sale Invesment in Argo 196,000 _______-
b. 33.33% of the gain on sale Total Assets 615,000 271,000
c. 50% of the gain on sale Accounts Payable 103,000 71,000
d. 100% of the gain on sale Capital Stock 400,000 150,000
Retained Earnings 112,000 50,000
Parker Corporation sells equipment with a book value Total Equities. 615,000 271,000
of P80,000 to Sheaffer Enterprises, its 75%-owned
subsidiary, for P100,000 on January 1, 2010. Sheaffer At the date of combination the book values of ARGO’s
determines that the remaining useful life of the net assets was equal to the fair value of the net assets
equipment is four years and that straight-line except for ARGO’s inventory which has a fair value of
depreciation is appropriate. The December 31, 2010 P30,000.
separate company financial statements of Parker and
Sheaffer show equipment-net of P500,000 and 5. What amount of goodwill will be reported?
P300,000, respectively. a. P15,667 c. P21,000
2. The consolidated equipment-net will be: b. P37,750 d. P50,333
a. P800,000 c. P780,000
b. P785,000 d P650,000 6. What amount of total liability will be reported?
a. P174,000 c. P213,000
Balance sheet data for P Corporation and S Company b. P284,333 d. P 90,667
on December 31, 2010, are given below:
P Corporation S Company 7. What is the amount of total assets?
Cash P 70,000 P 90,000 a. P590,667 c. P751,333
Merchandise b. P686,000 d. P738,750
Inventory 100,000 60,000
Property and On January 1, 2009, Paul Company purchased 90% of
equipment (net) 500,000 250,000 the common stock of Bryan Company for P81,000 over
Investment in S the book value of the shares acquired. All of the
Company 260,000 ________ differential was related to land held by Bryan. On May
Total assets P930,000 1, 2010, Bryan sold the land at a gain of P145,000.
P400,000 For the year 2010, Bryan reported net income of
P331,000 and paid dividends of P80,000. Paul
Current liabilities P180,000 P 60,000 reported income from its own separate operations of
Long term liabilities 200,000 90,000 P659,000 and paid no dividends.
Common stock 300,000 100,000 9. Consolidated net income for 2010 was
Retained earnings 250,000 150,000 a. P 824,000 c. P 1,005,400
Total liabilities & SE P930,000 P400,000 b. P 875,900 d. P 900,000
On January 1, 2009 the Blumentritt Corporation sold
P Corporation purchased 80% interest in S Company
equipment to its wholly-owned subsidiary, Morayta
on December 31, 2010 for P260,000. S Company’s
Enterprises, for P1,800,000. The equipment cost
property and equipment had a fair value of P50,000
Blumentritt P2,000,000; accumulated depreciation at
more than the book value shown above. All other
the time of the sale of P500,000. Blumentritt was
book values approximated fair value. In the
depreciating the equipment on the straight-line-
consolidated balance sheet on December 31, 2010.
method over twenty years with no salvage value, a
procedure that Morayta continued.
3. The amount of total stockholders’ equity to be
reported will be 10. On the consolidated balance sheet at December
a. P 550,000 c. P 750,000 31, 2009 the cost and accumulated depreciation,
b. P 610,000 d. P 615,000 respectively, should be:
a. P1,500,000 and P600,000
4. The amount of non-controlling interest will be b. P1,800,000 and P100,000
a. P 50,000 c. P 110,000 c. P1,800,000 and P500,000
b. P 60,000 d. P 65,000 d. P2,000,000 and P600,000

On January 1, 2010. SABINA Corporation purchased

75% of the common stock of ARGO Company. - now do the DIY drill -

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EXCEL PROFESSIONAL SERVICES, INC.

DO-IT-YOURSELF (DIY) DRILL

P Company acquired a 65% interest in S company in 2008. PARKER’s loss o sale of equipment relates to an equipment
For years ended December 31, 2009 and 2010, S reported with a book value of P75,000 and a 6-year remaining
net income of P325,000 and P390,000, respectively. useful life that was sold to SPENCER for P45,000 on
During 2009, S sold merchandise to P for P70,000 at a October 1, 2009.
cost of P54,000. Two-fifths of the merchandise was later
resold by P to outsiders for P38,000 during 2010. In 2010, 6. Consolidated Depreciation expense in 2009 is
P sold merchandise to S for P98,000 at a profit of P24,000. P___________.
One-fourth of the merchandise was resold by S to On December 31, 2008, PANDOY Inc. purchased 75% of
outsiders for P30,000 during 2010. the outstanding shares of SAHARA Company at cost of
1. Minority interest net income in 2009 is P__________ . P1,750,000. On that date, SAHARA Company had
2. Minority interest net income in 2010 is P__________ . P500,000 of capital stock and P1,250,000 of retained
earnings. For 2009, the results of operations are:
CORN Corporation sells equipment with a book value of PANDOY SAHARA
P200,000 to BEANS Company, its 75% owned subsidiary Inc. Company
for P160,000 on April 1, 2009. BEANS determines that the Net income (loss) from own
remaining useful life of the equipment is four years and operations P900,00 P(110,000)
that the straight-line depreciation is appropriate. The 0
December 31, 2009 separate financial statements of CORN Dividends paid 350,000 60,000
and BEANS show equipment-net of P1,000,000 and
P600,000, respectively. All assets and liabilities of SAHARA Company have book
3. Consolidated equipment-net will be P___________. values approximately equal to their respective market
values. The beginning inventory of PANDOY Inc. includes
RICH Corporation paid P1,125,000 for an 80% interest in P20,000 of merchandise purchased from SAHARA
HARD Corporation on January 1, 2009 at a price P37,500 Company on December 31, 2008 at 25% above its cost.
in excess of underlying book value. The excess was The ending inventory of SAHARA Company includes
allocated P15,000 to undervalued equipment with a ten- P22,500 of merchandise purchased from PANDOY Inc. in
year remaining useful life and P22,500 to goodwill which 2009 at 20% above its cost. Goodwill is not impaired.
was not impaired during the year. During 2009, HARD
Corporation paid dividend of P60,000 to RICH Corporation. 7. Consolidated net income in 2009 is P___________ .
The income statements of RICH and HARD for 2009 are 8. Non-controlling interest net income (loss) for 2009 is
given below: P___________ .
RICH HARD
9. Total non-controlling interest at December 31, 2009 is
Sales P2,500,000 P1,000,000
Cost of sales (1,250,000) (500,000) P_____________ .
Depreciation
expense (250,000) (150,000) On January 1, 2009, PAN Co. purchased 85% of the
Other expense (500,000) (225,000) outstanding shares of SAN Company for P640,000 when
Net income P500,000 P125,000 the latter’s stockholders’ equity is P640,000. On October 1,
2009. SAN Company sold equipment with a book value of
4. Consolidated net income for 2009 is P____________. P32,000 to PAN Company for P64,000. The equipment is
5. Non-controlling interest in net assets at December 31, expected to have a remaining life of five years. The gain
2009 is P____________ . on sale is included in the 2009 net income of SAN
Company. Goodwill if any is not impaired. SAN Company
Income information for 2009 taken from the separate paid dividends of P60,000 in 2009 and P100,000 in 2010.
company financial statements of PARKER Corporation The individual income of PAN Company and SAN Company
remaining useful life that was sold to SPENCER for P45,000 from their own operations are:
on October 1, 2009.
PARKER SPENCER 2009 2010
Sales P1,250,000 P575,000 PAN Company P220,000 P360,000
Cost of goods sold (625,000) (325,000)
SAN Company 140,000 240,000
Depreciation expense (125,000) (75,000)
Loss on sale of equipment (30,000)
Other expense (250,000) (50,000) 10. Minority interest in a assets for 2009 is P__________ .
Net income P220,000 P125,000 11. Consolidated net income in 2010 is P____________

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EXCEL PROFESSIONAL SERVICES, INC.

SOLUTION TO PROBLEM 4
Determination and Distribution of Excess Schedule:
Cost (P117,000 + P78,000) P195,000
Less Book value acquired:
Share capital P80,000
Retained earnings 30,000 110,000
Goodwill (Excess of Cost over Fair Value) P 85,000
Consolidation working paper entries:
CWPE#1: Share capital (Show) P80,000
Retained earnings (Show) 30,000
Goodwill 85,000
Investment in Show P117,000
Non-controlling interests 78,000
Elimination of investment in Show, share capital, and pre-acquisition retained
earnings and recognition of goodwill and non-controlling interests as at date
of acquisition.
CWPE#2: Retained earnings (Show) 3,280
Non-controlling interests 3,280
Allocation of share of change in retained earnings of Show to non-controlling
interests from the date of acquisition to beginning of current period.
(P38,200 – P30,000) x 40% = P3,280; (P38,200 – P30,000) x 60% = P4,920
CWPE#3: Dividend income (Pet) (60% x P31,500) 18,900
Non-controlling interests (40% x P31,500) 12,600
Dividends declared by Show 31,500
Elimination of dividends declared by Show against (a) Dividend income of
Pet, and (b) non-controlling interests - balance sheet
CPWE#4: Income to non-controlling interests (I/S) 16,800
Non-controlling interests (B/S) 16,800
Allocation of share of current profit after tax of Show to non-controlling
Interests. (Show’s net income, P42,000 x 40%)
2. Analytical check on the non-controlling interests as at December 31, 20x8.
NCI, 12/31/x8: ( P78,000 + P3,280 + P16,800 – P12,600 P85,480
Show’s book value of net assets as at December 31, 20x8 P128,700
Goodwill 85,000
Total at fair value P213,700
X NCI% 40%
NCI, 12/31/x8 P 85,480
4. Consolidation Worksheets for the year ended December 31, 20x8.
INCOME STATEMENTS for the year ended December 31, 20x8:
Cons. Adjustment Consolidted
Pet Co Show Ent Debit Credit Balance Sheet
Operating profit P160,000 P 60,000 P 220,000
Dividend income 18,900 0 18,900 0
Net profit b4 tax P178,900 P 60,000 220,000
Tax expense (48,900) (18,000) 66,900
Net prft after tax P130,000 P 42,000 153,100
Profit to NCI 16,800 ( 16,800)
Profit to Parent P130,000 P 42,000 P136,300

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EXCEL PROFESSIONAL SERVICES, INC.

RE, Jan. 1 110,000 38,200 30,000 114,920

3,280
Dividends dclrd (100,000) (31,500) 31,500 (100,000)
RE, Dec. 31 P140,000 P 48,700 P68,980 P31,500 P 151,220
BALANCE SHEETS as at December 31, 20x8
Inv in Show P117,000 P 0 117,000 P 0
Other assets 520,200 265,230 785,430
Goodwill 85,000 85,000
Total assets P637,200 P265,230 85,000 117,000 P 870,430

Share capital P270,000 P80,000 80,000 P 270,000

RE, 12/31 126,000 48,700 68,980 31,500 137,220
NCI, 12/31 12,600 78,000 85,480
3,280
16,800
LT liabilities 180,000 120,000 300,000
C / liabilities 61,200 16,530 77,730
Total equities P637,200 P265,230 246,580 246,580 P870,430

CONSOLIDATED INCOME SSTATEMENT FOR YEAR ENDED DEC. 31, 20X8

Net profit before tax P220,000
Tax expense ( 66,900)
Net profit after tax P153,100

Attributable to NCI P 16,800

Attributable to parent’s shareholders 136,300
Total P153,100
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR 20X8
Retained earnings, January 1 P114,920
Net profit after tax attributable to parent’s shareholders 136,300
Dividends declared by Pet (100,000)
Retained earnings, December 31, 20x8 P151,220

CONSOLIDATED BALANCE SHEET AS AT December 31, 20x8

Other assets P785,430
Goodwill 85,000
Total assets P870,430
Share capital P270,000
Retained earnings 137,220
Parent’s shareholders’ equity P407,220
Non-controlling interests 85,480
Total shareholders’ equity P492,700
Long-term liabilities P300,000
Current liabilities 77,730 377,730
Total equity and liabilities P 870,430

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