Name:__________________________ Date:_________________ Score________________

ACTIVITY No. 2
Answer the following questions and show your solutions. Use yellow paper for your solution. Your
answer must be supported by your solution.

A) Ivan and Kir reported in December 31, 2015 as follows:

Statement of Comprehensive Income Ivan Kir
Sales 561,321 255,986
Dividend Income -
Total Revenue 561,321 255,986

Cost of Good Sold 132,654 123,652

Operating Expenses 145,654 75,632
Other Expenses 15,026 5,632
Total Cost and Expenses 293,334 204,916

Net Income 267,987 51,070

Statement of Retained Earnings

Retained Earnings,beg. 852,366 47,525
Net Income 267,987 51,070
Total 1,120,353 98,595
Less: Dividends Paid 50,326 25,635
Retained Earnings, end 1,070,027 72,960

Statement of Financial Position

Cash 899,157 81,653
Receivables 326,515 165,325
Inventory 665,458 265,985
Land 321,456 122,326
Buildings (net) 1,256,345 226,531
Equipment (net) 365,946 103,265
Total Assets 3,834,877 965,085

Accounts Payable 475,987 65,324

Long-term Liabilities 1,025,321 345,236
Common Stocks 1,263,542 481,565
Retained Earnings 1,070,027 72,960
Total Equity and Liabilities 3,834,877 965,085
Ivan acquires assets and liabilities of Kir Company on December 31, 2015. To obtain the 80%
interest, Ivan pays P415,632 and issues 6,253 shares of P3 par value common stock on this
date. Ivan’s stock had a fair value of P5 per share on that date. Ivan also pays P15, 625 to a
local investment firm for arranging the transaction. An additional P10, 195 was paid by Ivan
in stock issuance costs.

The book values and fair values for both Ivan and Kir as of December 31, 2015, as follows:
Name:__________________________ Date:_________________ Score________________

ACTIVITY No. 2
Ivan Kir
Book Value Fair Value Book Value Fair Value
Cash 899,157 899,157 81,653 81,653
Receivables 326,515 345,632 165,325 165,325
Inventory 665,458 680,952 265,985 290,362
Land 321,456 465,123 122,326 205,625
Buildings (net) 1,256,345 1,326,542 226,531 325,566
Equipment (net) 365,946 485,365 103,265 103,265
Trademark - - - 55,625

Accounts Payable 475,987 475,987 65,324 65,324

Long-term Liabilities 1,025,321 1,103,265 345,236 355,362
Common Stocks 1,263,542 481,565
Retained Earnings 1,070,027 72,960

Assuming the combination is accounted for as an acquisition, immediately after the

acquisition, in the statement of financial position of Ivan and Kir:

1) Prepare a consolidated statement of financial position.

2) Prepare a consolidated statement of comprehensive income.
3) Prepare a consolidated statement of retained earnings.
Name:__________________________ Date:_________________ Score________________

ACTIVITY No. 2

B) Continuation of problem A: For the year 2016, Ivan and Kir reported the following:
Statement of Comprehensive Income Ivan Kir
Sales 1,326,532 456,365
Dividend Income 28,500 -
Total Revenue 1,355,032 456,365

Cost of Good Sold 632,653 221,565

Operating Expenses 452,362 100,253
Other Expenses 95,632 10,236
Total Cost and Expenses 1,180,647 332,054

Net Income 174,385 124,311

Statement of Retained Earnings

Retained Earnings,beg. 1,054,402 72,960
Net Income 174,385 124,311
Total 1,228,787 197,271
Less: Dividends Paid 50,489 35,625
Retained Earnings, end 1,178,298 161,646

Statement of Financial Position

Cash 849,700 133,768
Receivables 456,326 75,869
Inventory 335,623 125,362
Investment in Kir 446,897 -
Investment in Ivan 21,070
Land 321,456 122,326
Buildings (net) 125,635 203,878
Equipment (net) 329,350 92,939
Total Assets 2,864,987 775,212

Accounts Payable 94,978 32,565

Long-term Liabilities 325,858 99,436
Common Stocks 1,263,542 481,565
Additional Paid-in Capital 2,311 -
Retained Earnings 1,178,298 161,646
Total Equity and Liabilities 2,864,987 775,212

The remaining useful life of Building is 10 years and trademark can be used for 5 years. Likewise, the
Long-term Liabilities is due 2 years after.

1) Prepare a consolidated statement of financial position for the year 2015 and
2016. (Kir and Ivan)
Name:__________________________ Date:_________________ Score________________

ACTIVITY No. 2
2) Prepare a consolidated statement of comprehensive income for the year 2015
and 2016.(Kir and Ivan)
3) Prepare a consolidated statement of retained earnings for the year 2015 and
2016. (Kir and Ivan)

C) Continuation of Problem A and B: Ivan acquires assets and liabilities of Gerald Company
on December, 2016. To obtain the 75% interest, Ivan pays P561, 326 and issues 7,361
shares of P3 par value common stock on this date. Ivan’s stock had a fair value of P6 per
share on that date. Ivan also pays P16, 325 to a local investment firm for arranging the
transaction. An additional P5, 246 was paid by Ivan in stock issuance costs.

The book values and fair values for both Ivan and Gerald as of December, 2016, as
follows:
Ivan Gerald
Book Value Fair Value Book Value Fair Value
Cash 849,700 849,700.00 125,625.00 125,625.00
Receivables 456,326 426,365.00 13,653.00 13,653.00
Inventory 335,623 400,562.00 65,432.00 80,456.00
Investment in Kir 446,897 446,897.00 - -
Land 321,456 425,656.00 456,326.00 625,316.00
Buildings (net) 125,635 165,326.00 325,652.00 465,365.00
Equipment (net) 329,350 450,625.00 52,632.00 526,321.00

Accounts Payable 94,978 94,978.00 89,654.00 89,654.00

Long-term Liabilities 325,858 315,266.00 236,456.00 236,456.00
Common Stocks 1,263,542 654,320.00
Additional Paid-in Capital 2,311
Retained Earnings 1,178,298 58,890.00
Name:__________________________ Date:_________________ Score________________

ACTIVITY No. 2
Likewise, Ivan and Gerald reported in December 31, 2016 as follows:
Statement of Comprehensive Income Ivan Gerald
Sales 1,326,532 103,262
Dividend Income 28,500 -
Total Revenue 1,355,032 103,262

Cost of Good Sold 632,653 56,326

Operating Expenses 452,362 25,632
Other Expenses 95,632 11,236
Total Cost and Expenses 1,180,647 93,194

Net Income 174,385 10,068

Statement of Retained Earnings

Retained Earnings,beg. 1,054,402 48,822
Net Income 174,385 10,068
Total 1,228,787 58,890
Less: Dividends Paid 50,489 -
Retained Earnings, end 1,178,298 58,890

Statement of Financial Position

Cash 849,700 125,625
Receivables 456,326 13,653
Inventory 335,623 65,432
Investment in Kir 446,897 -
Land 321,456 456,326
Buildings (net) 125,635 325,652
Equipment (net) 329,350 52,632
Total Assets 2,864,987 1,039,320

Accounts Payable 94,978 89,654

Long-term Liabilities 325,858 236,456
Common Stocks 1,263,542 654,320
Additional Paid-in Capital 2,311 -
Retained Earnings 1,178,298 58,890
Total Equity and Liabilities 2,864,987 1,039,320

Assuming the combination is accounted for as an acquisition, immediately after the

acquisition, in the statement of financial position of Ivan and Gerald:
1) Prepare consolidated statements of financial position for the year 2015 and
2016. (Kir, Ivan and Gerald)
2) Prepare consolidated statements of comprehensive income for the year 2015
and 2016. (Kir,Ivan and Gerald)
3) Prepare consolidated statements of retained earnings for the year 2015 and
2016. (Kir, Ivan and Gerald)