Consolidated FS & Intercompany Transactions [PDF]

Zitiervorschau

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PRACTICAL ACCOUNTING PROBLEMS II CONSOLIDATED FS AND INTERCOMPANY TRANSACTIONS DATE SUBSEQUENT TO ACQUISITION I On January 2, 2011, Party Corporation purchased 80% of Summer Company’s common stock for P810,000. P37,500 of excess is attributable to goodwill and the balance to a depreciable asset with an economic life of ten years. Non-controlling interest is measured at its fair value on date of acquisition. On the date of acquisition, stockholders' equity of the two companies are as follows:

Common Stock Retained Earnings

Party Corporation P1,312,500 1,950,000

Summer Corporation P 300,000 525,000

On December 31, 2011, Summer Company reported net income of P131,250 and paid dividends of P45,000 to Party. Party reported earnings from its separate operations of P356,250 and paid dividends of P172,500. Goodwill had been impaired and should be reported at P7,500 on December 31, 2011. 1. What is the consolidated net income on December 31, 2011? A. P447,187.50 C. P473,437.50 B. P450,000 D. P442,500 2. What is the consolidated retained earnings attributable to parent’s shareholders equity on December 31, 2011? A. P2,202,750 C. P2,197,500 B. P2,196,750 D. P2,599,687.50 3. What is the NCI in net income of Son Company on December 31, 2011? A. P23,437.50 C. P23,250 B. P26,250 D. P17,250 4. What amount of NCI is to be presented in the consolidated statement of financial position on December 31, 2011? A. P205,312.50 C. P208,500 B. P193,125 D. P181,875 5. What is the consolidated net income attributable to parent shareholders on December 31, 2011? A. P420,000 C. P445,500 B. P425,250 D. P450,000 II PP Company purchased 75% of the capital stock of SS Company on December 31, 2006 at P525,000 more than the book value of its net assets. The excess was allocated to equipment in the amount of P234,375 and to goodwill for the balance. The equipment has an estimated useful life of 10 years and goodwill was not impaired. For four years SS Company reported cumulative earnings of P2,362,500 and paid P682,500 in dividends. On January 2, 2011, non-controlling interest in net assets of SS Company amounts to P984,375. Assuming NCI is measured at estimated fair value, what is the price paid by PP Company on the date of acquisition? A. P2,218,125 C. P1,752,187.50 B. P1,763,437.50 D. P2,100,000 III Please Corporation purchased 70% of Sorry Company’s outstanding stock on January 2, 2010 for P866,250 cash. At that date, Sorry Company reported book value of its net assets as P1,050,000. The

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excess is allocated to a depreciable asset with a remaining life of 10 years. The companies reported the following data for 2011: Retained earnings January 1 Net income Dividends Please Corporation P1,950,000 P450,000 P187,500 Sorry Company 862,500 93,750 37,500 Non-controlling interest is measured at its estimated fair value. The following entry was included in the eliminating entries to prepare the consolidated financial statements at December 31, 2011: Retained earnings, 1/1 – Sorry 78,750 Non-controlling interest 78,750 1. What is the amount of retained earnings of Sorry Company on January 2, 2010/ A. P600,000 C. P581,250 B. P618,750 D. P637,500 2. What is the consolidated retained earnings attributable to parent’s shareholders equity to be reported on January 1, 2011? A. P2,133,750 C. P2,152,500 B. P2,212,500 D. P2,812,500 3. What is the consolidated net income attributable to parent shareholders on December 31, 2011? A. P498,750 C. P543,750 B. P525,000 D. P476,250 4. What is the consolidated retained earnings attributable to parent’s shareholders equity at December 31, 2011/ A. P2,238,750 C. P2,445,000 B. P2,422,500 D. P2,587,500 IV On January 2, 2011, P Company acquired 80% interest in S company for P2,062,500 cash. On this date, the outstanding capital stock and retained earnings of P Company and S Company are as follows: P Company S Company Common stock P1,125,000 P 656,000 APIC 750,000 Retained earnings 2,625,000 1,593,750 There was no issuance of capital stock during the year. Non-controlling interest is measured at its fair value. Fair values of the following assets exceeded their book values as follows: Inventories, P105,000 ; Property and equipment (useful life, 10 years), P63,750. All other assets and liabilities are fairly valued. Goodwill, if any, is not impaired. On December 31, 2011, the two companies reported the following operating results: P Company S Company Net income P 892,500 P 487,500 Dividends paid 262,500 131,250 1. What is the consolidated net income attributable to parent on December 31, 2011? A. P1,275,000 C. P1,163,625 B. P1,088,400 D. P1,177,500 2. What is the consolidated stockholder’s equity to be reported in the consolidated statement of financial position on December 31, 2011? A. P5,325,900 C. P3,517,500 B. P6,750,000 D. P5,980,500

INTERCOMPANY PROFIT – INVENTORIES

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I A Co. acquired 60% of the outstanding ordinary shares of B Co. on January 2, 2010. A Co. acquired it at book value which is the same as its fair value at the date of acquisition. Income statements of A Co. and B Co. for 2011 are as follows: A B Net Sales P 218,750 P 87,500 Cost of Sales 131,250 52,500 Gross Profit P 87,500 P 35,000 Operating Expenses 26,250 13,125 Operating Income P 61,250 P 21,875 Dividend Income 14,000 _ Net Income P 75,250 P 21,875 B Co. made sales to A Co. of P28,000 in 2010 and P42,000 in 2011. A Co. reported inventory on December 31,2010 amounting to P17,500 of which 20% comes from B Co. and inventory on December 31, 2011 amounting to P21,000 of which 30% comes from B Co. A Co. uses 30% mark up on cost and B Co. uses 25% mark up on cost for their selling prices. A Co. and B Co. declared and paid dividends in 2011 amounting to P21,000 and P17,500 respectively. On January 1, 2011, B Co. has common stock of P80,000; additional paid-in capital of P30,000 and retained earnings of P40,000. How much is the consolidated net income attributable to parent shareholders’ equity and noncontrolling interest in net assets? A. P74,039 ; P61,246 C. P77,539 ; P61,526 B. P77,539 ; P61,246 D. P74,039 ; P61,526 II GV Company purchased 70% ownership of DL Company on January 1, 2009, at underlying book value. While each company has its own sales forces and independent product lines, there are substantial intercorporate sales of inventory each period. The following inter-corporate sales occurred during 2010 and 2011:

Year 2010 2011 2011

Seller GV Co. DL Co. GV Co.

Cost of Product Sold P448,000 P312,000 P350,000

Buyer DL Co. GV Co. DL Co.

Sales Price P640,000 P480,000 P437,500

Unsold at Year Sold End of Year to Outsiders P140,000 2011 P77,000 2012 P63,000 2012

The following data summarized the results of their financial operations for the year ended, December 31, 2011: GV Company DL Company Sales P3,850,000 P1,680,000 Gross profit 1,904,000 504,000 Operating Expenses 770,000 280,000 Ending Inventories 336,000 280,000 Dividend Received from affiliate 126,000 Dividend Received from non-affiliate 70,000 For the year ended 2011, compute: 1. Consolidated sales and Consolidated cost of goods sold A. P4,612,500 ; P2,457,550 B. P4,612,500 ; P2,202,050

C. P4,612,500 ; P2,206,950 D. P5,530,000 ; P2,202,050

2. Consolidated net income attributable to parent’s shareholders equity and non-controlling interest in net income A. P1,301,335 ; P59,115 C. P1,476,335 ; P59,115 B. P1,476,335 ; P80,115 D. P1,350,335 ; P80,115

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On January 1, 2010, P Company acquired 90% of the outstanding common shares of S Company for a price of P140,000. On that date, the stockholders’ equity of S Company was P100,000. All of the assets and liabilities of S Company had book values approximately equalled to their fair market values except land that was overvalued by P4,000, plant assets (with remaining life of 9 years) were undervalued by P54,000. The net excess was due to Goodwill. For 2011, there were intercompany sales. Information relating to sales, inventories and profit percentages are as follows:

Intercompany Sales Intercompany Inventories December 31, 2010 December 31, 2011 Gross profit percentage based on cost Net Income

P Company P90,000

S Company P42,000

30,000 7,200

18,000 6,000

100% P50,000

33 1/3% P36,000

Consolidated net income attributable to parent’s shareholders equity ; non-controlling interest on net income A. P90,260 ; P4,140 C. P88,130 ; P4,140 B. P90,260 ; P3,570 D. P88,130 ; P3,570 INTERCOMPANY PROFIT – PLANT ASSETS I On January 1, 2011, RDJ Company purchased 80% of the stocks of MCD Corporation at book value. The stockholders’ equity of MCD Corporation on this date showed: Common stock – P1,140,000 and Retained earnings – P980,000. On April 30, 2011, RDJ Company acquired a used machinery for P168,000 from MCD Corp. that was being carried in the latter’s books at P210,000. The asset still has a remaining useful life of 5 years. On the other hand, on August 31, 2011, MCD Corp. purchased an equipment that was already 20% depreciated from RDJ Co. for P690,000. The original cost of this equipment was P750,000 and had a remaining life of 8 years. Net income of RDJ Co. and MCD Corp. for 2011 amounted to P720,000 and P310,000. Dividends paid totalled to P230,000 and P105,000 for RDJ Co. and MCD Corp., respectively. On the consolidated financial statements in 2011, how much would be the: 1. Net income attributable to parent’s shareholders equity and non-controlling interest net income A. P826,870 ; P69,280 C. P826,870 ; P62,000 B. P834,150 ; P62,000 D. P834,150 ; P69,280 2. Non-controlling interest in net assets and Carrying value of the Property and equipment A. P472,280 ; P810,000 C. P465,000 ; P810,000 B. P465,000 ; P757,000 D. P472,280 ; P757,000 II On January 2, 2010, PP Company purchased 70% of the stocks of SS Company at book value. On May 1, 2010, PP Company acquired a used machinery for P337,500 from SS Company that was carried in the latter’s books at P270,000. The machinery has a remaining life of 6 years. On October 1, 2011, SS Company purchased an equipment that was already 30% depreciated from PP Company for P570,000. The original cost of this equipment was P900,000 and had a remaining life of 5 years. Results of operation for the year 2011 are: PP Company SS Company Net Income P945,000 P165,000 Dividends Paid 345,000 On the consolidated income statement in 2011, what is the consolidated net income attributable to parent’s shareholders equity? A. P1,125,375 C. P1,178,250 B. P1,131,375 D. P1,128,375

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III On January 1, 2011, P Corporation purchased 80% of S Company’s Outstanding stock for P775,000. At that date, all of S Co.’s assets and liabilities had market values approximately equal to their book values and no goodwill was included in the purchase price. The following information was available for 2011: Income from own operations of P Corp., P187,500 ; Operating loss of S Co., P25,000 ; Dividends paid in 2011 by P Corp., P93,750 ; by S Co., P18,750. On July 1, 2011, P Corp. sold an equipment to S Company at a gain of P31,250. The machine is expected to have a remaining useful life of 10 years from date of sale. Also, on January 1, 2011, S Co. sold a furniture to P Corp. at a loss of P9,375. The furniture is expected to have a remaining useful life of five years from the date of sale. Non-controlling interest is measured at fair market value. How much is the consolidated net income attributable to parent shareholders’ equity and noncontrolling interest in net assets? A. P143,812.50 ; P186,500 C. P143,812.50 ; P183,500 B. P143,437.50 ; P185,000 D. P143,437.50 ; P183,500