Suggested Solutions:

Home Office Book Branch Book

Unadjusted Balance 150,000.00 39,155.00 number 2
a 48,000.00
b 34,300.00
c (9,000.00)
d 21,700.00 21,700.00
e (83,000.00)
f 425.00
f (100.00) (100.00)
g (10,120.00)
h (5,400.00)
h 5,400.00 5,400.00
number 1 109,180.00 109,180.00 109,180.00

Sales 600,000.00
Sales Discount (9,000.00)
Net Sales 591,000.00
Cost of Sales (450,000.00)
Gross Profit 141,000.00
Selling Expenses (5,000.00)
Administrative Expenses (30,000.00)
Samples-Depreciation (60,000.00)
Net income 46,000.00 number 3

Ending Inventory at Billed Price 60,000.00

Ending Inventory at Branch Book 80,000.00
Purchase from Outside Suppliers 20,000.00 number 4

Unadjusted Allowance 200,000.00

Allowance for Shipment this year (180,000.00)
Allowance Relatedto Beginning Inventory 20,000.00
GP Rate Previous Year 20% based on cost
Beg Inventory Came from Home Office at Billed Price 120,000.00
Beg Inventory of branch per book 150,000.00
Beg. Inventory from Outside Supplier 30,000.00 number 5

Ending Inventory 180,000.00

From Outside Supplier 90,000.00
GP Rate Current Year Based on Sales 0.30
From Home Office
Shiiped during the year 37,800.00
Shipped in the previous year 30,000.00
Ending Inventory at Cost 157,800.00 number 6

Home Office Branch

Net Sales 800,000.00 700,000.00
Cost of Sales
Beg Inventory at Cost 200,000.00 130,000.00
Net Purchases 700,000.00 250,000.00
 Shipment to Branch (420,000.00) 420,000.00
Ending Inventory (100,000.00) (157,800.00)
380,000.00 642,200.00
Gross Profit 420,000.00 57,800.00
Operating Expnses (100,000.00) (500,000.00)
Net Income 320,000.00 (442,200.00)
Combined Net Loss (122,200.00) number 7

Sales Net of Returns 322,900.00

Increase in Accounts Receivable (3,600.00)
Accounts Written Of (2,000.00)
Collections 317,300.00

Operating Expenses 35,000.00

Accounts Written Of (2,000.00)
Replenishment of Petty Cash Fund 9,700.00
Depreciation Expense (5,000.00)
Accrued Expenses (7,500.00)
Prepaid Expenses 5,000.00
Payment for Expenses 35,200.00

Remittance to Home Office 282,100.00 number 8

Sales 322,900.00
Shipment from Home Office (220,600.00)
Decrease in Inventories (5,500.00)
Operating Expenses (35,000.00)
Petty Cash Expenses (9,700.00)
Net Income 52,100.00 number 9

Home Office Account Balance

Beg. Balance 175,700.00
Shipment from Home Office 220,600.00
Payment made by the Home Office for the Furniture and
Fixtures 100,000.00
Remittance (282,100.00)
Another Approach for Branch Nt Income
Net Sales
Cost of Sales
Beg Inventory at Billed Price
Net Purchases
 Shipment from Home Office
Ending Inventory
Gross Profit
Operating Expnses
Net Income
Adjustment Allowance
True Branch Net Income
 ABC Co. and XYZ Co. formed a business combination on January 1, 2016, when ABC Co. acquired
common stock of XYZ Co. by paying P3,000,000 cash and contingent consideration of P1,000,000 which h
occurrence as of that date. Such investment was accounted using cost method in ABC Co.'s separate books.
interest has a fair value of P800,000 at the date of acquisition. At that date, all assets and liabilities of XYZ C
respective fair values except the following:

Book Values Fair Values Net Effect in FVNA

Inventories 200,000 250,000 50,000
Building-net 1,500,000 1,420,000 (80,000)
Equipment-net 600,000 650,000 50,000
Machinery A 300,000 330,000 30,000
Land 1,000,000 1,200,000 200,000
Bonds Payable 200,000 180,000 20,000
4,030,000 270,000.00

60% of the inventories were sold in 2016, the remainder were sold on the early part of 2017. The building has
years while the equipment has a remaining life of 5 years. The only machinery of XYZ Co,. Machinery A, h
5 years and was bought on January 1, 2014. The bonds payable has a maturity of 4 years from the date of a
was sold on October 31, 2017 for P1,500,000.

During 2016 and 2017, some intercompany sales of inventories were made by XYZ Co. and ABC Co. Both
consistent gross profit rate for all its sales, including intercompany sales of inventories, except for th
transaction for 2017 which was made at cost. All transactions are credit transactions and are being paid the yea
Information regarding the intercompany sales of inventories are as follows:

Seller Cost Invoice amount

XYZ Co. 20,000 28,000

2016
ABC Co. 22,500 30,000
ABC Co. 26,250 35,000
2017 XYZ Co. 15,000 21,000
ABC Co. 10,000 10,000

On December 31, 2016, ABC Co. sold an equipment with a carrying amount of P200,000 and remaining li
Co. for P250,000. On July 1, 2017, XYZ Co. sold Machinery A to ABC Co. for a price of P140,000.

Goodwill impairment loss amounted to P30,000 and P20,000 for XYZ Co. at the end of 2016 and 2017, respe

Other information with regard to the two companies are as follows:

2016 2017
ABC Co. XYZ Co. ABC Co.
Sales 9,000,000 3,850,000 9,500,000
Cost of Goods Sold (6,750,000) (2,750,000) (7,125,000)
Gross Profit 2,250,000 1,100,000 2,375,000
Expenses (1,000,000) (500,000) (1,100,000)
Dividend Income 150,000 - 225,000
Gain (Loss) on Sale 50,000 - -
Net Income 1,450,000 600,000 1,500,000

Dividends Paid 400,000 200,000 500,000

As of 12/31/2016 As of 12/31/2017
ABC Co. XYZ Co. ABC Co.
Cash 1,050,000 757,500 1,725,000
Accounts Receivable 1,500,000 1,000,000 1,800,000
Inventories 550,000 300,000 650,000
Land 2,000,000 1,000,000 2,000,000
Building 2,000,000 1,312,500 1,800,000
Equipment-net 500,000 730,000 400,000
Machinery-net 200,000 200,000 600,000
Investment in Subsidiary 3,500,000 - 3,500,000
TOTAL ASSETS 11,300,000 5,300,000 12,475,000

Accounts Payable 1,200,000 1,150,000 1,350,000

Bonds Payable 500,000 200,000 500,000
Deferred Income 100,000 50,000 125,000
Contingent Consideration 500,000 - 500,000
TOTAL LIABILITIES 2,300,000 1,400,000 2,475,000

Ordinary Share Capital 4,000,000 1,500,000 4,000,000

Ordinary Share Premium 2,000,000 500,000 2,000,000
Retained Earnings 3,000,000 1,900,000 4,000,000
TOTAL SHE 9,000,000 3,900,000 10,000,000

Determine the following for the Consolidated Financial Statements:

1. Goodwill or gain on acquisition
2. 2016 Consolidated Net Income
3. 2016 NCI's share in goodwill impairment loss
4. Gain/Loss on Sale of Equipment on December 31, 2016 sale
5. 2016 Share of Parent in the Consolidated Net Income
6. 2016 Share of NCI in the Consolidated Net Income
7. 2016 Sales
8. 2016 Cost of Goods Sold
9. 2016 Expenses
10. Inventories as of December 31, 2016
11. Carrying Amount of Equipment as of December 31, 2016
12. Carrying Amount of Machinery as of December 31, 2016
13. Carrying Amount of Building as of December 31, 2016
14. Accounts Receivable as of December 31, 2016
15. Accounts Payable as of December 31, 2016
16. 2016 Total Assets
17. 2016 Total Liabilities
18. 2016 Retained Earnings
19 2016 Non-controlling interest
10. Inventories as of December 31, 2016
11. Carrying Amount of Equipment as of December 31, 2016
12. Carrying Amount of Machinery as of December 31, 2016
13. Carrying Amount of Building as of December 31, 2016
14. Accounts Receivable as of December 31, 2016
15. Accounts Payable as of December 31, 2016
16. 2016 Total Assets
17. 2016 Total Liabilities
18. 2016 Retained Earnings
19 2016 Non-controlling interest
20. 2016 Total Shareholders' Equity
21. 2017 Consolidated Net Income
22. ABC Co.'s share in 2017 Net Income of XYZ Co.
23. Gain/Loss on Sale of Machinery A
24. 2017 Share of Parent in the Consolidated Net Income
25. 2017 Share of NCI in the Consolidated Net Income
26. 2017 Sales
27. 2017 Cost of Goods Sold
28. 2017 Expenses
29. Inventories as of December 31, 2017
30. Carrying Amount of Equipment as of December 31, 2017
31. Carrying Amount of Machinery as of December 31, 2017
32. Carrying Amount of Building as of December 31, 2017
33. Accounts Receivable as of December 31, 2017
34. Accounts Payable as of December 31, 2017
35. 2017 Total Assets
36. 2017 Total Liabilities
37. 2017 Retained Earnings
38. 2017 Non-controlling interest
39. 2017 Total Shareholders' Equity
40. Gain on Sale of Land
 SOLUTIONS:
016, when ABC Co. acquired 75% interest in the
ideration of P1,000,000 which has a 50% chance of
d in ABC Co.'s separate books. The non-controlling
ll assets and liabilities of XYZ Co. are equal to their

y part of 2017. The building has a remaining life of 8

y of XYZ Co,. Machinery A, has an original life of
ty of 4 years from the date of acquisition. The land

y XYZ Co. and ABC Co. Both companies maintain

of inventories, except for the last intercompany
ctions and are being paid the year following the sale.

Percentage sold
Gross Profit
during the year

8,000 40%

7,500 75%
8,750 60% 35,000
6,000 85% 15,000
- 45%

t of P200,000 and remaining life of 5 years to XYZ

or a price of P140,000.

the end of 2016 and 2017, respectively.

2017
XYZ Co.
4,375,000 GP rates: -0.3333333333
(3,125,000) Parent 25% based on sale
 1,250,000 Subsidiary 40% based on cost
(575,000) 0.2857142857
-
490,000
1,165,000

300,000 Consolidated Retained Earnings, Dec

As of 12/31/2017
XYZ Co.
3,105,000
1,200,000
320,000
-
1,125,000
560,000
-
-
6,310,000

1,270,000
200,000
75,000
-
1,545,000

1,500,000 Consolidated Retained Earnings, Dec

500,000
2,765,000
4,765,000
1

6
 7

10

11

12
13

14

15

16

17

18

19

20
SOLUTIONS:

75% 25%
Fair Value of the Whole Subsidiary 3,500,000 942,500
FVNA-Subsidiary 2,827,500 942,500
Goodwill 672,500 -

Amortization Schedule
FV-BV 2016
Inventories 50,000 30,000
Building-net (80,000) (10,000)
Equipment-net 50,000 10,000
Machinery A 30,000 10,000
Land 200,000 -

BV-FV
Bonds Payable 20,000 5,000
Total Amortization 45,000

Intercompany Sale of Inventories

Unrealized Profit
Upstream Sale 8,000
2016
Downstream Sale 7,500
Downstream Sale 8,750
2017
Upstream Sale 6,000

Intercompany Sale of Depreciable Assets

Unrealized Profit
(Loss)
2016 Downstream Sale 50,000
Upstream Sale (10,000)
2017
Downstream Sale -

2016
Subsidiary's Net Income 600,000
2016 amortization (45,000)
Unrealized Profit from upstream trans. (8,000)
Realized Profit from upstream trans. 3,200
550,200

Parent's Share 412,650

Goodwill Impairment Loss (30,000)
Share in Subsidiary's Net Income 382,650
Parent's Net Income 1,450,000
 Dividend Income Received From Subsidiary (150,000)
Unrealized Profit from downstream trans. (57,500)
Realized Profit from downstream trans. 5,625
CI- Consolidated Net Income 1,630,775 +
Retained Earnings of Parent, January 1, 2016 1,950,000
Dividend Paid by Parent (400,000)
Consolidated Retained Earnings, December 31, 2016 3,180,775

2017
Subsidiary's Net Income 1,165,000
2017 amortization (235,000)
Unrealized Profit/Loss from upstream trans. 4,000
Realized Profti/Loss from upstream trans. 6,567
940,567

Parent's Share 705,425

Goodwill Impairment Loss (20,000)
Share in Subsidiary's Net Income 685,425
Parent's Net Income 1,500,000
Dividend Income Received From Subsidiary (225,000)
Unrealized Profit from downstream trans. (8,750)
Realized Profit from downstream trans. 17,125
Consolidated Net Income 1,968,800 +
Consolidated Retained Earnings, January 1, 2017 3,180,775
Dividend Paid by Parent (500,000)
Consolidated Retained Earnings, December 31, 2017 4,649,575

ANSWERS:
Goodwill 672,500 21

22
2016 Consolidated Net Income 1,768,325

NCI's share in goodwill impairment loss - 23

24
Gain/Loss on Sale of Equipment 0

2016 Share of Parent in the Consolidated Net

25
Income 1,630,775

2016 Share of NCI in the Consolidated Net

Income 137,550 26
2016 Sales-P 9,000,000
2016 Sales-S 3,850,000
Intercompany sales @billed price (58,000)
2016 Consolidated Sales 12,792,000 27

2016 COGS-P 6,750,000

2016 COGS-S 2,750,000
Intercompany sales @billed price (58,000)
2016 Unrealized profits-inventories 15,500
2016 Realized profits-inventories (8,825)
2016 Amortization-inventories 30,000
2016 Consolidated COGS 9,478,675 28

2016 Expenses-P 1,000,000

2016 Expenses-S 500,000
2016 Amortization-Building (10,000)
2016 Amortization-Equipment 10,000

2016 Amortization-Machinery A 10,000

2016 Amortization-Bonds Payable 5,000
2016 Realized Profit-intercompany sale of -
equipment
Goodwill Impairment loss 30,000
2016 Consolidated Expenses 1,545,000 29

Inventories-P 550,000
Inventories-S 300,000
Adjustment (FV-BV) 50,000
Accumulated Amortization (30,000)
Cumulative Unrealized profit-inventories (15,500)
Cumulative Realized profit-inventories 8,825
Consolidated Inventories-net 863,325 30

Equipment-P 500,000
Equipment-S 730,000
Adjustment (FV-BV) 50,000
Accumulated Amortization (10,000)
Cumulative Unrealized Gain-Equipment (50,000)
Cumulative Realized Gain-Equipment -
Consolidated Equipment-net 1,220,000 31

Machinery-P 200,000
Machinery-S 200,000
Adjustment (FV-BV) 30,000
Accumulated Amortization (10,000)
Consolidated Machinery-net 420,000

Building-P 2,000,000 32
Building-S 1,312,500
Adjustment (FV-BV) (80,000)
Accumulated Amortization 10,000
Consolidated Building-net 3,242,500

Accounts Receivable-P 1,500,000 33

Accounts Receivable-S 1,000,000
Intercompany Receivables (58,000)
Consolidated Accounts Receivable 2,442,000

Accounts Payable-P 1,200,000 34

Accounts Payable-S 1,150,000
Intercompany Payables (58,000)
Consolidated Accounts Payable 2,292,000

Parent's Assets at 12/31/16 11,300,000 35

Investment in Subsidiary (3,500,000)
Subsidiary's Assets at 12/31/16 5,300,000
FV-BV adjustments 250,000
Accumulated Amortization-2016 (40,000)
Goodwill 672,500
Accumulated Goodwill Impairment Loss-2016 (30,000)
2016 Cumulative Unrealized profits (65,500)
2016 Cumulative Realized profits 8,825
Intercompany Receivables (58,000)
Consolidated Total Assets, 12/31/16 13,837,825

Parent's Liabilities at 12/31/16 2,300,000 36

Subsidiary's Liabilities at 12/31/16 1,400,000
FV-BV adjustments (20,000)
Accumulated Amortization-2016 5,000
Intercompany Payables (58,000)
Consolidated Total Liabilities, 12/31/16 3,627,000

2016 Consolidated Retained Earnings 3,180,775 37

2016 Non-Controlling Interest 1,030,050 38

OSC-P 4,000,000 39
OSP-P 2,000,000
2016 Consolidated Retained Earnings 3,180,775
2016 Non-Controlling Interest 1,030,050
2016 Consolidated SHE 10,210,825
40
 Checking
Intercompany Sales of Inventory
Total 2016
4,442,500 942,500 XYZ ABC
3,770,000 Sales 28,000 30,000
672,500 COGS 20,000 22,500
GP 8,000 7,500
GP% 40% 25%
2017
20,000 Intercompany Sales of PPE
(10,000) Equipment-Downstream
10,000
10,000 2016
200,000 ABC Co. 's Book
Cash 250,000
Equipment-net 200,000
5,000 Gain on Sale 50,000
235,000
XYZ Co.'s Book
Equipment 250,000
Realized Profit Cash 250,000
3,200 4,800
5,625 1,875 Conso's Book no entry
7,125 1,625 2017
9,900 - 3,900 XYZ Co.'s Books

Depreciation Expe 50,000

Acc. Depreciation 50,000
Realized Profit
(Loss)
- Conso's Book
(3,333) Depreciation Expe 40,000
10,000 Acc. Depreciation 40,000

137,550 NCI's Share

-
137,550
 137,550 = 1,768,325 Total CNI
942,500 NCI, January 1, 2016
(50,000) Dividend Received from Subsidiary
1,030,050 NCI, December 31, 2016

235,142 NCI's Share

-
235,142

235,142 = 2,203,942 Total CNI

1,030,050 NCI, January 1, 2017
(75,000) Dividend Received from Subsidiary
1,190,192 NCI, December 31, 2017

2017 Consolidated Net Income 2,203,942

C Co.'s share in 2017 Net Income of

XYZ Co. 685,425

Gain/Loss on Sale of Machinery A 0

2017 Share of Parent in the Consolidated

Net Income 1,968,800

2017 Share of NCI in the Consolidated Net

Income 235,142

2017 Sales-P 9,500,000

2017 Sales-S 4,375,000
Intercompany sales @billed price (66,000)
2016 Consolidated Sales 13,809,000

2017 COGS-P 7,125,000

2017 COGS-S 3,125,000
Intercompany sales @billed price (66,000)
2017 Unrealized profits-inventories 14,750
2017 Realized profits-inventories (17,025)
2017 Amortization-inventories 20,000
2017 Consolidated COGS 10,201,725

2017 Expenses-P 1,100,000

2017 Expenses-S 575,000
2017 Amortization-Building (10,000)
2017 Amortization-Equipment 10,000
2017 Amortization-Machinery A 10,000
2017 Amortization-Bonds Payable 5,000
2017 Realized Profit-intercompany sale of
equipment (6,667)
Goodwill Impairment loss 20,000
2017 Consolidated Expenses
1,703,333

Inventories-P 650,000
Inventories-S 320,000
Adjustment (FV-BV) 50,000
Accumulated Amortization (50,000)
Cumulative Unrealized profit-inventories (30,250)
Cumulative Realized profit-inventories 25,850
Consolidated Inventories-net 965,600

Equipment-P 400,000
Equipment-S 560,000
Adjustment (FV-BV) 50,000
Accumulated Amortization (20,000)
Cumulative Unrealized Profit-Equipment (50,000)
Cumulative Realized Profit-Equipment 10,000
Consolidated Equipment-net 950,000

Machinery-P 600,000
Machinery-S -
Adjustment (FV-BV) 30,000
Accumulated Amortization (20,000)
Cumulative Unrealized Profit-Equipment 10,000
Cumulative Realized Profit-Equipment (3,333)
Consolidated Machinery-net 616,667

Building-P 1,800,000
Building-S 1,125,000
Adjustment (FV-BV) (80,000)
Accumulated Amortization 20,000
Consolidated Building-net 2,865,000

Accounts Receivable-P 1,800,000

Accounts Receivable-S 1,200,000
Intercompany Receivables (66,000)
Consolidated Accounts Receivable 2,934,000

Accounts Payable-P 1,350,000

Accounts Payable-S 1,270,000
Intercompany Payables (66,000)
Consolidated Accounts Payable 2,554,000

Parent's Assets at 12/31/17 12,475,000

Investment in Subsidiary (3,500,000)
Subsidiary's Assets at 12/31/17 6,310,000
FV-BV adjustments 250,000
Accumulated Amortization-2017 (270,000)
Goodwill 672,500
Accumulated Goodwill Impairment Loss-20 (50,000)
2017 Cumulative Unrealized profits (70,250)
2017 Cumulative Realized profits 32,517
Intercompany Receivables (66,000)
Consolidated Total Assets, 12/31/17 15,783,767

Parent's Liabilities at 12/31/17 2,475,000

Subsidiary's Liabilities at 12/31/17 1,545,000
FV-BV adjustments (20,000)
Accumulated Amortization-2017 10,000
Intercompany Payables (66,000)
Consolidated Total Liabilities, 12/31/17 3,944,000

2017 Consolidated Retained Earnings 4,649,575

2017 Non-Controlling Interest 1,190,192

OSC-P 4,000,000
OSP-P 2,000,000
2017 Consolidated Retained Earnings 4,649,575
2017 Non-Controlling Interest 1,190,192
2017 Consolidated SHE 11,839,767
Selling Price 1,500,000
Land at Fair Value 1,200,000
Gain on Sale 300,000
 2017
ABC XYZ ABC
35,000 21,000 10,000
26,250 15,000 10,000
8,750 6,000 -
25% 40% 0%

Upstream-Machinery A

2017
XYZ Co.'s Book
Dep Exp 50,000
Acc. Dep. 50,000

Cash 140,000
Loss on Sale 10,000
Machinery-net 150,000

ABC Co. 's Book

Machinery-net 140,000
Cash 140,000

Depreciation Expense 46,666.67

Acc. Dep 46,666.67

Conso's Book
Dep Exp 110,000
Acc. Dep. 110,000