PROBLEM 1. On January 2, 2015, Polo Corp. purchased 70% of the ordinary shares of Solo Co.

for
P550,000. At that date, Solo had P575,000 of ordinary shares outstanding and retained earnings of
P185,000. Equipment with the remaining life of 5 years had a book value of P280,000 and a fair value of
P300.000. Solo’s remaining assets had book values equal to their fair values. The income and dividend
figures for both Polo and Solo are as follows: Polo Corp. Solo Co. 2015 2016 2015 2016
Net income P185,000 P210,000 P40,000 P67,000 Dividends 50,00 60,000 10,000 15,000

Polo’s retained earnings balance at the date of acquisition was P701,000.

1. How much is the consolidated net income in 2016?

2. How much is the consolidated retained earnings attributable to parent in 2016?

PROBLEM 2. Panther Company acquired 75% of outstanding ordinary shares of Science Company for
P900,000. Book value of Science Company’s net assets is P1,000,000. Upon re-measurement of
acquiree’s net assets, it shows that inventory has a fair value lower by P40,000 than its book value and
equipment held for 3 years has a fair value and book value of P450,000 and P360,000, respectively. The
original cost of Science Company’s equipment is P576,000 with no residual value. Panther opt to
measure NCI at fair value of P275,000. During the year Panther reported net income from own
operation of P300,000 and received P30,000 dividend from Science. Science Company’s net income
amounts to P120,000. Goodwill is impaired by P15,000.

1. Compute the consolidated net income. 2. The non-controlling interest in net assets of subsidiary
(NCINAS) at the end is:

PROBLEM 3. On January 1, 2015, Prime Corp. acquired 80% of the outstanding shares of Share Company
at P600, 000. Plant assets at the time of acquisition were understated by P100, 000, remaining life of 5
years. During 2016, Prime Corp. purchased merchandise from Share Company who also purchased
merchandised from Prime Corp. Data regarding intercompany sales, inventories and profit percentages
are presented below: Prime Corp. Share Company Intercompany sales P600, 000 P400, 000
Intercompany inventories January 1, 2016 100, 000 60, 000 December 31, 2016 80, 000
40, 000 Gross profit percentage 50% 40%
Income statements for the two companies for the year 2016 are as follows: Prime Corp. Share
Company Sales P3, 000, 000 P1, 600, 000 Cost of sales 1, 200, 000 800, 000 Gross margin
P1, 800, 000 P 800, 000 Expenses 1, 080, 000 560, 000 Operating income P 720, 000 P
240, 000 Dividend income 80, 000 Net income P 800, 000 P 240, 000

The stockholders’ equity of Share Company at the time of acquisition consists of the following: Ordinary
Shares, P300, 000; Share Premium, 100, 000; Retained Earnings, P200, 000. Dividends declared by Share
Company during the year amounted to P100, 000. The retained earnings of Share Company on January
1, 2016 amounted to P300, 000. Prime is using the fair value approach in measuring the noncontrolling
interest. Loss on impairment of Goodwill in 2015 and 2016 amounted to P15, 000 and P20, 000,
respectively.

1. Determine the consolidated net income attribute to parent in 2016. 2. Determine the non-
controlling interest in net assets on December 31, 2016.

PROBLEM 4. Phantom Corp. has an 80% interest in the outstanding shares of Shalom Co. On January 1,
2015, Shalom Co. sold for P300, 000 to Phantom a machinery with a cost of P500, 000 five years ago.
The machinery was originally estimated to have a service life of ten years to Shalom Co. but Phantom
decided that the machinery would still have an estimated remaining life of eight years. In 2015,
Phantom and Shalom reported net income of P120, 000 and P84, 000, respectively. Dividends declared
and paid by Shalom in 2015 amounted to P30, 000.

1. Determine the consolidated net income attributable to parent in 2015. 2. Determine the non-
controlling interest in net income of Shalom in 2015?

PROBLEM 5. P Company acquired a 90% interest in S Company at a time when S Company’s book values
of net assets were equal to fair market values. On January 1, 2015 S Company sold a machine with a
P30, 000 book value to P Company for P60, 000. P Company depreciates the machine over 10 years
using the straight line method. Income statement information for P Company and S Company are as
follows: P Company S Company Sales P1, 200, 000 P 700, 000 Gain on machinery 30, 000
Cost of Goods Sold 500, 000 190, 000 Depreciation expense 300, 000 90, 000 Other
expenses 120, 000 300, 000
1. Determine the consolidated net income for 2015. 2. Determine the book value of the machine on
the December 31, 2015.

PROBLEM 6. Solid Company purchased a piece of land in 2015 for P250, 000 and immediately sold it to
its parent company, Prince Company, for P350, 000. Prince had purchased its 70 percent interest in Solid
several years before at book value. During 2015, Prince reported net income of P800, 000 and Solid
reported net income of P600, 000, including the gain on the transfer of the land.

1. Determine the consolidated net income attributable to parent in 2015.

PROBLEM 7. Galaxy Corporation acquired 80% of the outstanding shares of United Company on June 1,
2016 for P3,517,500. United Company’s stockholder’s equity components at the end of this year are as
follows: Ordinary Shares, P100 par, P1,500,000. Share Premium P675,000 and Retained Earnings,
P1,335,000. Non – controlling interest is measured at fair value and the fair value is P705,000. The assets
of United Company were fairly valued, except for inventories, which are overstated by P66,000 and
equipment, which was understated by P90,000. Remaining useful life of equipment is 4 years.
Stockholders’ equity of Galaxy on January 1, 2016 is composed of Ordinary Shares, P4,500,000, Share
Premium, P1,050,000 and Retained Earnings, P3,150,000. Goodwill, if any, should be written down by
P85,350 at year – end. Net income for the first year of parent is P450,000 and the net income of
subsidiary from the date of acquisition is P255,000. Dividends declared at the end of the year by Galaxy
and United amounted to P120,000 and P90,000, respectively. During the year, there was no issuance of
new ordinary shares.

1. How much is the non – controlling interest in the net assets on December 31, 2016? 2. What is the
amount of consolidated shareholders’ equity on December 31, 2016?

PROBLEM 8. On January 2, 2016, Fever Company acquired 60% of the outstanding shares of Benz Inc.
resulting to an income from acquisition in the amount of P330,000. During 2016 and 2017,
intercompany sales amounted to P6,800,000 and P9,400,000, respectively. Fever Company consistently
recognized a 30% gross profit on sales while Benz Inc. had a 40% gross profit on sales. The inventories of
the buying affiliate were as follows: ¾ of the beginning inventory came from intercompany transactions
and 1/3 of the ending inventory came from outsiders. The December 31, 2016 inventory of Fever and
Benz amount to P840,000 and P350,000, respectively. The December 31, 2017 inventory of Fever and
Benz amount to P570,000 and P150,000, respectively.
On September 1, 2016, Benz Inc. purchased a land costing P3,500,000 from Fever Company for
P5,250,000. On November 2, 2017, the buying affiliate sold this land to Jam Co. for P7,500,000. On the
other hand, on May 1, 2017, Benz Inc., sold a machinery with a carrying value of P430,000 and
remaining useful life of 4 years to Fever Company for P190,000. Benz Inc. declared dividends in 2017 in
the amount of P600,000. Separate Statement of Comprehensive Income for the two companies for the
year 2017 follow: Fever Co. Benz Inc. Sales P 21,500,000 P 10,000,000 Cost of Sales
(13,500,000) (6,200,000) Gross Profit P 8,000,000 P 3,800,000 Operating Expenses (3,240,000)
(1,100,000) Operating Profit P 4,760,000 P 2,700,000 Gain on Sale of Land 2,250,000 Loss on
Sale of Machinery (240,000) Dividend Revenue 450,000 110,000 Net Income P 5,210,000
P 4,820,000

Compute the following amounts for / as of December 31, 2017. 1. Consolidated Gross Profit 2.
Consolidated Net Income attributable to parent 3. Consolidated Operating Expenses

PROBLEM 9. On July 1, 2016, Density Company purchased 80% of the outstanding shares of Evolve
Company at a cost of P4,000,000. On that date, Evolve had P2,500,000 of ordinary shares and
P3,500,000 of retained earnings. For 2016, Density had income of P1,400,000 from its separate
operations and paid dividends of P750,000. For 2016, Evolve reported income of P325,000 and paid
dividends of P150,000. All the assets and liabilities of Evolve have book values equal to their respective
fair market values. On October 1, 2016, there was an upstream sale of machinery for P500,000. The
book value of the machinery on that date was P600,000. The machinery is expected to have a useful life
of 5 years from the date of sale.

In the December 31, 2016 consolidated statement of financial position, how much is the consolidated
net income attributable to controlling interest? “That in all things, GOD maybe glorified”