University of Nueva Caceres

College of Business and Accountancy

J. Hernandez Avenue, Naga City
Advanced Financial Accounting and Reporting II

Consolidation-Comprehensive Exercises

Multiple Choice Problems

A. Consolidated Financial Statements (Part 1)
Consolidation – Date of Acquisition
On January 1, 20x1, ABC Co. acquired 80% interest in XYZ, Inc. by issuing 5,000 shares with fair value of P60 per share
and par value of P40 per share. The financial statements of ABC Co. and XYZ, Inc. immediately before the acquisition are
shown below:
ABC Co. XYZ, Inc.
Cash 40,000 20,000
Accounts Receivable 120,000 48,000
Inventory 160,000 92,000
Equipment 800,000 200,000
Accumulated depreciation (80,000) (40,000)
Total Assets 1,040,000 320,000

Accounts payable 80,000 24,000

Bonds payable 120,000 -
Share capital 480,000 200,000
Share premium 160,000 -
Retained earnings 200,000 96,000
Total liabilities and owner’s equity 1,040,000 320,000

On January 1, 20x1, the fair value of the assets and liabilities of XYZ, Inc. were determined by appraisal, as follows:

XYZ, Inc. Carrying amounts Fair values Fair Value Increment

Cash 20,000 20,000 -
Accounts Receivable 48,000 48,000 -
Inventory 92,000 124,000 32,000
Equipment 200,000 240,000 40,000
Accumulated Depreciation (40,000) (48,000) (8,000)
Accounts Payable (24,000) (24,000) -
Net Assets 296,000 360,000 64,000

The equipment has a remaining useful life of 4 years from January 1, 20x1.

Case #1: NCI measured at proportionate share of parent

ABC co. elects to measure non-controlling interest as its proportionate share in XYZ’s net identifiable assets
1.) How much is the consolidated total assets as of January 1, 20x1?
a. 1,436,000 b. 1,439,000 c. 1,736,000 d. 1,376,000

2.) How much is the consolidated total equity as of January 1, 20x1?

a. 1,200,000 b. 1,215,000 c. 1,212,000 d. 1,364,000

Case #2: NCI measured at fair value

3.) How much is the consolidated total assets as of January 1, 20x1?
a. 1,436,000 b. 1,439,000 c. 1,736,000 d. 1,376,000

4.) How much is the consolidated total equity as of January 1, 20x1?

a. 1,200,000 b. 1,215,000 c. 1,212,000 d. 1,364,000

Consolidation subsequent to date of acquisition (proportionate share)

On January 1, 20x1, ABC Co. acquired 80% interest in XYZ, Inc. by issuing 5,000 shares with fair value of P60 per share
and par value of P40 per share. On acquisition date, ABC co. elected to measure non-controlling interest as its
proportionate share in XYZ, Inc.’s net identifiable assets.

XYZ’s shareholder’s equity as of January 1, 20x1 comprises the following:

Carrying Amount
Share capital 200,000
Retained Earnings 96,000
Total equity 296,000

On January 1, 20x1, the fair value of the assets and liabilities of XYZ, Inc. were determined by appraisal, as follows:
 University of Nueva Caceres
College of Business and Accountancy
J. Hernandez Avenue, Naga City
Advanced Financial Accounting and Reporting II

XYZ, Inc. Carrying amounts Fair values Fair Value Increment

Cash 20,000 20,000 -
Accounts Receivable 48,000 48,000 -
Inventory 92,000 124,000 32,000
Equipment 200,000 240,000 40,000
Accumulated Depreciation (40,000) (48,000) (8,000)
Accounts Payable (24,000) (24,000) -
Net Assets 296,000 360,000 64,000

The remaining useful life of the equipment is 4 years.

During 20x1, no dividends were declared by either ABC or XYZ. There were also no inter-company transactions. The
group determined that there is no goodwill impairment.

ABC’s and XYZ’s individual financial statements at year-end are shown below:
Statement of financial position
At December 31, 20x1
ABC Co. XYZ, Inc.
ASSETS
Cash 92,000 228,000
Accounts Receivable 300,000 88,000
Inventory 420,000 60,000
Investment in subsidiary 300,000
Equipment 800,000 200,000
Accumulated depreciation (240,000) (80,000)
TOTAL ASSETS 1,672,000 496,000

LIABILITIES AND EQUITY

Accounts payable 172,000 120,000
Bonds payable 120,000 -
Total liabilities 292,000 120,000
Share capital 680,000 200,000
Share premium 260,000 -
Retained Earnings 440,000 176,000
Total equity 1,380,000 376,000
TOTAL LIABILITIES AND EQUITY 1,672,000 496,000

Statement of profit or loss

At December 31, 20x1
ABC Co. XYZ, Inc.
Sales 1,200,000 480,000
Cost of goods sold (660,000) (288,000)
Gross profit 540,000 192,000
Depreciation expense (160,000) (40,000)
Distribution costs (128,000) (72,000)
Interest expense (12,000) -
Profit for the year 240,000 80,000

5.) How much is the consolidated profit for 20x1?

a. 208,000 b. 280,000 c. 240,000 d. 296,000

6.) How much is the consolidated total assets as of December 31, 20x1?
a. 1,867,000 b. 1,907,000 c. 1,894,000 d. 1,904,000

7.) How much is the consolidated total equity as of December 31, 20x1?
a. 1,492,000 b. 1,415,000 c. 1,412,000 d. 1,421,000
 University of Nueva Caceres
College of Business and Accountancy
J. Hernandez Avenue, Naga City
Advanced Financial Accounting and Reporting II

Consolidation subsequent to date of acquisition (NCI at fair value)

On January 1, 20x1, ABC Co. acquired 80% interest in XYZ, Inc. by issuing 5,000 shares with fair value of P60 per share
and par value of P40 per share. On acquisition date, ABC co. elected to measure non-controlling interest at the non-
controlling interest’s fair value. A value of P75,000 is assigned to the 20% non-controlling interest.

XYZ’s shareholder’s equity as of January 1, 20x1 comprises the following:

Carrying Amount
Share capital 200,000
Retained Earnings 96,000
Total equity 296,000

On January 1, 20x1, the fair value of the assets and liabilities of XYZ, Inc. were determined by appraisal, as follows:

XYZ, Inc. Carrying amounts Fair values Fair Value Increment

Cash 20,000 20,000 -
Accounts Receivable 48,000 48,000 -
Inventory 92,000 124,000 32,000
Equipment 200,000 240,000 40,000
Accumulated Depreciation (40,000) (48,000) (8,000)
Accounts Payable (24,000) (24,000) -
Net Assets 296,000 360,000 64,000

The remaining useful life of the equipment is 4 years.

During 20x1, no dividends were declared by either ABC or XYZ. There were also no inter-company transactions. The
group determined that there is no goodwill impairment.

ABC’s and XYZ’s individual financial statements at year-end are shown below:
Statement of financial position
At December 31, 20x1
ABC Co. XYZ, Inc.
ASSETS
Cash 92,000 228,000
Accounts Receivable 300,000 88,000
Inventory 420,000 60,000
Investment in subsidiary 300,000
Equipment 800,000 200,000
Accumulated depreciation (240,000) (80,000)
TOTAL ASSETS 1,672,000 496,000

LIABILITIES AND EQUITY

Accounts payable 172,000 120,000
Bonds payable 120,000 -
Total liabilities 292,000 120,000
Share capital 680,000 200,000
Share premium 260,000 -
Retained Earnings 440,000 176,000
Total equity 1,380,000 376,000
TOTAL LIABILITIES AND EQUITY 1,672,000 496,000

Statement of profit or loss

At December 31, 20x1
ABC Co. XYZ, Inc.
Sales 1,200,000 480,000
Cost of goods sold (660,000) (288,000)
Gross profit 540,000 192,000
Depreciation expense (160,000) (40,000)
Distribution costs (128,000) (72,000)
Interest expense (12,000) -
Profit for the year 240,000 80,000

8.) How much is the consolidated profit for 20x1?

a. 208,000 b. 280,000 c. 240,000 d. 296,000
 University of Nueva Caceres
College of Business and Accountancy
J. Hernandez Avenue, Naga City
Advanced Financial Accounting and Reporting II

9.) How much is the consolidated total assets as of December 31, 20x1?
a. 1,867,000 b. 1,907,000 c. 1,894,000 d. 1,904,000

10.) How much is the consolidated total equity as of December 31, 20x1?
a. 1,492,000 b. 1,415,000 c. 1,412,000 d. 1,495,000

B. Consolidated Financial Statements (Part 2)

Fair value decrement

Use the following information for the next two questions:

Popo Co. acquired 80% of Momo Co. on January 1, 20x1 for P800,000. The following information was determined at
acquisition date:
Popo Co. Momo Co. Momo Co.
Carrying Amount Carrying Amount Fair value
Equipment 4,000,000 2,000,000 1,600,000
Accumulated Depreciation (800,000) (400,000) (320,000)
Net 3,200,000 1,600,000 1,280,000
Remaining Useful life-1/1/20x1 10 years 5 years 5 years

1.) How much is the consolidated “equipment-net” in the December 20x2 financial statements?
a. 3,968,000 b. 3,628,000 c. 3,428,000 d. 3,328,000

2.) The consolidation journal entry for the depreciation of the fair value adjustment on December 31, 20x2 includes
a. Debit to accumulated depreciation for P128,000
b. Credit to accumulated depreciation for P128,000
c. Debit to depreciation expense for P64,000
d. Debit to retained earnings of Popo Co. for P51,200

Fair value increment

3.) On January 1, 20x1, Donkey Co. acquired 75% of Monkey Co. At that time, Monkey’s equipment has a carrying
amount of P400,000 and a fair value of P480,000. The equipment has a remaining useful life of 10 years. On
December 31, 20x2, Donkey and Monkey reported equipment with carrying amount of P2,000,000 and P1,200,000,
respectively. How much is the consolidated “equipment-net” in the December 31, 20x2 financial statements?
a. 3,200,000 b. 3,384,000 c. 3,264,000 d. 3,124,000

NCI in net assets

Use the following information for the next six questions:
Owl Co. paid P600,000 for its 75% interest in Owlet Co. Owl elected to value NCI at fair value. Owlet’s net identifiable
assets approximated their fair values at acquisition date. The acquisition resulted in a goodwill attributable to NCI of
P40,000.
Since the acquisition date, Owlet has made accumulated profits of P800,000. There have been no changes in Owlet’s
share capital since acquisition date. The group determined that goodwill has been impaired by P32,000.
A summary of the individual statements of financial positions of the entities as at the end of reporting period is shown
below:
Owl Co. Owlet Co.
Total assets 4,000,000 2,000,000

Total liabilities 800,000 480,000

Share Capital 1,200,000 400,000
Retained Earnings 2,000,000 1,120,000
Total liabilities and equity 4,000,000 2,000,000

4.) How much is the fair value assigned to NCI at date of acquisition?
a. 220,000 b. 250,000 c. 268,000 d. 224,000

5.) How much is the goodwill to be presented in the current-year consolidated financial statements?
a. 72,000 b. 64,000 c. 56,000 d. 68,000

6.) How much is the NCI in net assets?

a. 304,000 b. 380,000 c. 412,000 d. 426,000

7.) How much is the consolidated retained earnings?

a. 2,600,000 b. 2,480,000 c. 2,576,000 d. 2,276,000
 University of Nueva Caceres
College of Business and Accountancy
J. Hernandez Avenue, Naga City
Advanced Financial Accounting and Reporting II

8.) How much is the consolidated net assets?

a. 5,468,000 b. 6,068,000 c. 5,400,000 d. 5,620,000

9.) How much is the consolidated total equity?

a. 6,188,000 b. 4,188,000 c. 4,156,000 d. 5,622,000

NCI in profit and comprehensive income

Use the following information for the next six questions:
On January 1, 20x1, Rooster Co. acquired 75% interest in Cockerel Co. for P600,000. At this time, Cockerel’s net
identifiable assets have a carrying amount of P720,000 which approximates fair value, NCI was assigned a fair value. Nci
was assigned a fair value of P220,000.
During 20x1, Rooster sold goods to Cockerel for P600,000, having bought them for P480,000. A quarter of these goods
remain unsold at year-end. Goodwill on acquisition of Cockerel has been tested for impairment and found to be impaired
(in total) by P32,000 for the current year.
The individual statements of profit or loss and other comprehensive income of the entities for the year ended December
31, 20x1 are shown below:
Rooster Co. Cockerel Co.
Revenue 4,000,000 2,800,000
Cost of Sales (1,600,000) (1,200,000)
Gross profit 2,400,000 1,600,000
Dividend income from Cockerel Co. 40,000
Distribution costs (800,000) (400,000)
Administrative costs (320,000) (200,000)
Profit before tax 1,320,000 1,000,000
Income tax expense (384,000) (300,000)
Profit after Tax 936,000 700,000
Other Comprehensive Income 296,000 100,000
Comprehensive Income 1,232,000 800,000

10.) How much is the consolidated sales?

a. 6,200,000 b. 6,350,000 c. 6,650,000 d. 6,180,000

11.) How much is the consolidated cost of sales?

a. 2,170,000 b. 2,230,000 c. 2,770,000 d. 2,320,000

12.) How much is the consolidated profit?

a. 1,574,000 b. 1,566,000 c. 1,564,000 d. 1,534,000

13.) How much is the consolidated comprehensive income?

a. 1,970,000 b. 1,930,000 c. 1,962,000 d. 1,960,000

14.) How much is the profit attributable to owners of the parent and NCI, respectively?
Owners of Parent NCI
a. 1,391,000 175,000
b. 1,367,000 167,000
c. 1,391,000 173,000
d. 1,384,000 190,000

15.) How much is the comprehensive income attributable to owners of the parent and NCI, respectively?
Owners of Parent NCI
a. 1,663,000 267,000
b. 1,778,000 192,000
c. 1,756,000 206,000
d. 1,738,000 192,000

Acquisition during the year

Use the following information for the next four questions:
On September 1, 20x1, Pig Co. acquired 75% interest in Piglet Co. At this time, Piglet’s net identifiable assets have a
carrying amount of P720,000 which approximates fair value.
During the last month of the year, Piglet sold goods to Pig for P324,000. Piglet had marked up these goods by 50% on
cost. One-third of these goods remain unsold at year-end. The group assessed that there is no impairment loss on
goodwill for the current year.
 University of Nueva Caceres
College of Business and Accountancy
J. Hernandez Avenue, Naga City
Advanced Financial Accounting and Reporting II

The individual statements of profit or loss of the entities for the year ended December 31, 20x1 are shown below:
Pig Co. Piglet Co.
Revenue 4,000,000 2,880,000
Cost of Sales (1,600,000) (1,200,000)
Gross profit 2,400,000 1,680,000
Distribution costs (800,000) (400,000)
Administrative costs (320,000) (180,000)
Profit before tax 1,280,000 1,100,000
Income tax expense (384,000) (300,000)
Profit after Tax 896,000 720,000

16.) How much is the consolidated sales?

a. 6,556,000 b. 4,852,000 c. 4,786,000 d. 4,636,000

17.) How much is the consolidated cost of sales?

a. 1,712,000 b. 2,530,000 c. 1,730,000 d. 1,876,000

18.) How much is the consolidated profit?

a. 1,100,000 b. 1,580,000 c. 1,360,000 d. 1,420,000

19.) How much is the profit attributable to owners of the parent and NCI, respectively?
Owners of Parent NCI
a. 1,040,000 60,000
b. 1,049,000 51,000
c. 1,036,000 54,000
d. 1,049,000 31,000

Subsidiary’s outstanding cumulative preference shares

20.) Bear Co. owns 75% of Cub Co.’s ordinary shares. Cub Co. has 12% 400,000 outstanding cumulative preference
shares, none of which are held by Bear Co. The carrying amount of Cub’s net identifiable assets at acquisition
date approximates fair value.
Bear and Cub reported individual profits of P936,000 and P700,000, respectively, for the year ended December
31, 20x1. Neither company declared dividends. There are 3-year dividends in arrears on the outstanding
cumulative preference shares of Cub Co. It was assessed that goodwill is not impaired.
How much is the profit attributable to owners of the parent and NCI, respectively?
Owners of Parent NCI
a. 1,425,000 163,000
b. 1,377,000 163,000
c. 1,377,000 211,000
d. 1,425,000 211,000

C. Consolidated Financial Statements (Part 3)

Impairment of goodwill
On January 1, 20x1, ABC Co. acquired 80% interest in XYZ, Inc. by issuing 5,000 shares with fair value of P60 per share
and par value of P40 per share.
XYZ’s shareholders’ equity as of January 1, 20x1 comprises the following:
Carrying Amount
Share capital 200,000
Retained Earnings 96,000
Total equity 296,000

On January 1, 20x1, the fair value of the assets and liabilities of XYZ, Inc. were determined by appraisal, as follows:

XYZ, Inc. Carrying amounts Fair values Fair Value Increment

Cash 20,000 20,000 -
Accounts Receivable 48,000 48,000 -
Inventory 92,000 124,000 32,000
Equipment 200,000 240,000 40,000
Accumulated Depreciation (40,000) (48,000) (8,000)
Accounts Payable (24,000) (24,000) -
Net Assets 296,000 360,000 64,000
 University of Nueva Caceres
College of Business and Accountancy
J. Hernandez Avenue, Naga City
Advanced Financial Accounting and Reporting II

The remaining useful life of the equipment is 4 years.

During 20x1, no dividends were declared by either ABC or XYZ. There were also no inter-company transactions. The
group determined that goodwill is impaired by P4,000.

ABC’s and XYZ’s individual financial statements at year-end are shown below:
Statement of financial position
At December 31, 20x1
ABC Co. XYZ, Inc.
ASSETS
Cash 92,000 228,000
Accounts Receivable 300,000 88,000
Inventory 420,000 60,000
Investment in subsidiary 300,000
Equipment 800,000 200,000
Accumulated depreciation (240,000) (80,000)
TOTAL ASSETS 1,672,000 496,000

LIABILITIES AND EQUITY

Accounts payable 172,000 120,000
Bonds payable 120,000 -
Total liabilities 292,000 120,000
Share capital 680,000 200,000
Share premium 260,000 -
Retained Earnings 440,000 176,000
Total equity 1,380,000 376,000
TOTAL LIABILITIES AND EQUITY 1,672,000 496,000

Statement of profit or loss

At December 31, 20x1
ABC Co. XYZ, Inc.
Sales 1,200,000 480,000
Cost of goods sold (660,000) (288,000)
Gross profit 540,000 192,000
Depreciation expense (160,000) (40,000)
Distribution costs (128,000) (72,000)
Interest expense (12,000) -
Profit for the year 240,000 80,000

Case #1: On acquisition date, ABC Co. elected to measure non-controlling interest as its proportionate share in XYZ,
Inc.’s net identifiable assets.
1.) How much is the consolidated profit for 20x1?
a. 296,000 b. 280,000 c. 208,000 d. 276,000

2.) How much is the consolidated total assets as of December 31, 20x1?
a. 1,900,000 b. 1,907,000 c. 1,903,000 d. 1,904,000

3.) How much is the consolidated total equity as of December 31, 20x1?
a. 1,492,000 b. 1,415,000 c. 1,488,000 d. 1,491,000

Case #2: On acquisition date, ABC Co. elected to measure non-controlling interest at fair value. A value of P75,000 is
assigned to the non-controlling interest.
4.) How much is the consolidated profit for 20x1?
a. 296,000 b. 280,000 c. 208,000 d. 276,000

5.) How much is the consolidated total assets as of December 31, 20x1?
b. 1,900,000 b. 1,907,000 c. 1,903,000 d. 1,904,000

6.) How much is the consolidated total equity as of December 31, 20x1?
c. 1,492,000 b. 1,415,000 c. 1,488,000 d. 1,491,000
 University of Nueva Caceres
College of Business and Accountancy
J. Hernandez Avenue, Naga City
Advanced Financial Accounting and Reporting II

Inter-company receivables and payables

Use the following information for the next two questions:
On January 1, 20x1, Dad Co. acquired 80% interest in Son Co. by issuing bonds with fair value of P1,000,000. The
following info. Was determined immediately before the acquisition:
Dad Co. Carrying Amount Son Co. Carrying Amount Son Co. Fair Value
Total assets 4,000,000 1,600,000 1,720,000
Total liabilities (2,400,000) (800,000) (800,000)
Net assets 1,600,000 800,000 920,000

Included in Son’s liabilities is an account payable to Dad amounting to P80,000. Dad elected to measure NCI as its
proportionate share in Son’s net identifiable assets.
7.) How much is the total assets in Dad’s separate financial statements immediately after the combination?
a. 6,304,000 b. 4,000,000 c. 5,000,000 d. 4,920,000

8.) How much is th total assets in the consolidated financial statements?

a. 6,304,000 b. 5,904,000 c. 6,054,000 d. 5,984,000

Group accounting policy

Use the following information for the next five questions:
On June 30, 20x1, Cockroach Co. acquired 75,000 of Nymph Co.’s 100,000 outstanding equity shares with par value per
share of P4 for P16 per share. At the time of acquisition, the retained earnings of Nymph were P320,000. The quoted
price of Nymph’s shares was P14 per share at acquisition date.

Additional Information: Included in the total assets of Nymph is land classified as investment property with a cost of
P720,000. Its fair value at acquisition date was P800,000 and by June 30, 20x3 this had risen to P1,280,000. Nymph uses
the cost model for its investment properties. However, the group’s policy for investment properties is the fair value model.
 Also at acquisition date, Nymph’s building classified as property, plant and equipment had a fair value of
P120,000 in excess of its carrying amount. The building’s remaining life is 5 years at that date. The group’s
depreciation method is straight-line basis.
 The inter-company current accounts included receivables and payables of P40,000 on June 30, 20x3.
 An impairment test at June 30, 20x3 concluded that consolidated goodwill was impaired by P80,000.
 Cockroach elected to measure NCI at the NCI’s fair value. There have been no changes in Nymph’s number of
outstanding shares subsequent to date of acquisition.
A summary of the individual statements of financial positions of the entities as at June 30, 20x3 is shown below:
Cockroach Co. Nymph Co.
Total Assets 4,000,000 2,000,000

Total liabilities 800,000 480,000

Share capital 1,200,000 400,000
Retained earnings 2,000,000 1,120,000
Total liabilities and equity 4,000,000 2,000,000

9.) How much is the goodwill to be presented in the June 30, 20x3 consolidated financial statements?
a. 550,000 b. 620,000 c. 485,000 d. 530,000

10.) How much is the NCI in net assets?

a. 538,000 b. 584,000 c. 624,000 d. 638,000

11.) How much is the consolidated retained earnings?

a. 2,864,000 b. 2,924,000 c. 2,874,000 d. 2,984,000

12.) How much is the consolidated total assets?

a. 5,310,000 b. 5,942,000 c. 5,982,000 d. 5,350,000

13.) How much is the consolidated total equity?

a. 4,064,000 b. 4,684,000 c. 4,702,000 d. 4,724,000

Business combination achieved in stages (Step acquisition)

Use the following information for the next five questions:
On January 1, 20x1, Rabbit Co. acquired 40% of Bunny Co. for P160,000. At this time, Bunny’ net identifiable assets has
a carrying amount of P400,000 which approximates fair value. The investment was classified as “Investment in
 University of Nueva Caceres
College of Business and Accountancy
J. Hernandez Avenue, Naga City
Advanced Financial Accounting and Reporting II

Associate”. On January 1, 20x3, Rabbit Co. acquired additional 35% interest in Bunny Co. for P800,000. On this date, the
fair value of the existing holdings of Rabbit in Bunny was P400,000. Bunny’s net identifiable assets on January 1, 20x3,
has a carrying amount of P720,000 which approximates fair value. Bunny’s net assets comprised of share capital
amounting to P400,000 and retained earnings amounting to P320,000. Rabbit assigned a fair value of P220,000 to the
NCI. The group determined on Dec. 31, 20x3 that there is no impairment in goodwill. A summary of the individual
statements of financial positions of the entities at December 31, 20x3 is shown below:
Rabbit Co. Bunny Co.
Total Assets 4,000,000 2,000,000

Total liabilities 800,000 480,000

Share capital 1,200,000 400,000
Retained Earnings 2,000,000 1,120,000
Total liabilities and equity 4,000,000 2,000,000

14.) How much is the goodwill to be presented in the December 31, 20x3 consolidated financial statements?
a. 480,000 b. 700,000 c. 300,000 d. 80,000

15.) How much is the NCI in net assets?

a. 380,000 b. 340,000 c. 480,000 d. 420,000

16.) How much is the consolidated Retained Earnings?

a. 2,600,000 b. 2,680,000 c. 2,740,000 d. 2,860,000

17.) How much is the consolidated total assets?

a. 5,460,000 b. 5,500,000 c. 4,880,000 d. 5,280,000

18.) How much is the consolidated total equity?

a. 4,180,000 b. 4,280,000 c. 4,420,000 d. 4,220,000

Reconstruction of financial information

Use the following information for the next three questions:
On January 1, 20x1, Sheep Co. acquired 75% interest in Lamb Co. for P600,000. At this time, Lamb’s net identifiable
assets have a carrying amount of P720,000 which approximates fair value. NCI was assigned a fair value of P220,000.
There were no inter-company transactions during the year, Goodwill on acquisition of Lamb has been tested and found to
be impaired (in total) by P32,000 for the current year.
Sheep’s separate financial statements reported profit of P866,000 for the year ended December 31, 20x1. Profit
attributable to NCI was approporiately determined at P167,000.
19.) How much is the profit of Lamb for the year ended December 31, 20x1?
a. 175,000 b. 625,000 c.700,000 d.225,000

20.) How much is the consolidated profit?

a. 1,558,000 b. 1,534,000 c. 1,834,000 d. 1,526,000

21.) How much is the profit attributable to owners of the parent and to NCI, respectively?
Owners of Parent NCI
a. 1,367,000 167,000
b. 1,391,000 167,000
c. 1,359,000 167,000
d. 1,436,000 398,000

Comprehensive Problem
Use the following information for the next ten questions:
On January 1, 20x1, Peter Co. acquired 90% ownership interest in Simon Co. for P488,000. Peter Co. elected to measure
NCI at fair value. NCI was assigned a fair value of P60,000.
On January 1, 20x1, the fair values of the assets and liabilities of XYZ, Inc. were determined by appraisal, as follows:
Simon Co. Carrying Amounts Fair Values Fair Value Increment
Cash 40,000 40,000 -
Accounts Receivable 60,000 60,000 -
Inventory 100,000 124,000 24,000
Equipment 240,000 360,000 120,000
Accumulated Depreciation (80,000) (120,000) (40,000)
Patent 80,000 80,000
Accounts Payable (24,000) (24,000) -
Net Assets 336,000 520,000 184,000
 University of Nueva Caceres
College of Business and Accountancy
J. Hernandez Avenue, Naga City
Advanced Financial Accounting and Reporting II

The remaining useful life of the equipment is 5 years while the patent has a remaining legal and useful life of 8 years.
Simon’s share capital has a balance of P200,000.
Among the transactions of Peter and Simon during 20x1 were the following:
 Peter’s accounts receivable include a receivable from Simon amounting to P12,000 while Simon’s accounts
payable include a payable to Peter amounting to P8,000. The difference was due to a check amounting to P4,000
deposited by Simon directly to Peter’s bank account which was not yet recorded by Peter in its books. The check
has already cleared in Simon’s bank account.
 Peter sold goods costing P80,000 to Simon for P128,000. One-third of the inventory remains as of Dec. 31, 20x1.
 Simon sold goods costing P40,000 to Peter for P60,000. One-half of the goods remain in inventory as of Dec. 31,
20x1.
 On January 1, 20x1, Simon sold to Peter equipment for P20,000. The equipment has a historical cost of P40,000
and accumulated depreciation of P16,000 and a remaining useful life of 5 years on the date of sale.
 On July 1, 20x1, Simon Co. purchased 50% of the outstanding 10-year bonds of Peter Co. from the open market
for P240,000. The interest income accruing on the bonds for the year was received by Simon from Peter.
 Peter declared dividends of P160,000.
 Simon declared dividends of P80,000.
 Goodwill is impaired by P8,000.
 There have been no changes in Simon’s share capital.
The individual financial statements of the entities at December 31, 20x1 are shown below:

Statement of financial position

At December 31, 20x1
Peter Co. Simon Co.
ASSETS
Cash 1,448,000 85,200
Accounts Receivable 712,000 20,000
Inventory 440,000 268,000
Investment in Bonds 238,000
Investment in subsidiary 488,000
Equipment 4,020,000 200,000
Accumulated depreciation (1,444,000) (91,200)
TOTAL ASSETS 5,664,000 720,000

LIABILITIES AND EQUITY

Accounts payable 284,000 83,200
Bonds payable 400,000 -
Total liabilities 684,000 83,200
Share capital 3,200,000 200,000
Share premium 1,780,000 436,800
Retained Earnings 440,000 176,000
Total equity 4,980,000 636,800
TOTAL LIABILITIES AND EQUITY 5,664,000 720,000

Statement of profit or loss

At December 31, 20x1
Peter Co. Simon Co.
Sales 3,728,000 1,020,000
Cost of goods sold (1,700,000) (472,000)
Gross profit 2,028,000 548,000
Interest income - 8,000
Depreciation expense (644,000) (27,200)
Distribution costs (256,000) (144,000)
Interest expense (40,000) -
Loss on sale of equipment - (4,000)
Dividend Income 72,000 -
Profit for the year 1,160,000 380,800

22.) How much is the consolidated sales?

a. 4,364,000 b. 4,560,000 c. 4,540,000 d. 4,650,000

23.) How much is the consolidated cost of sales?

a. 1,862,000 b. 2,034,000 c. 2,128,000 d. 1,934,000
 University of Nueva Caceres
College of Business and Accountancy
J. Hernandez Avenue, Naga City
Advanced Financial Accounting and Reporting II

24.) How much is the consolidated ending inventory?

a. 708,000 b. 634,000 c. 674,000 d. 682,000
25.) How much is the goodwill in the December 31, 20x1 consolidated financial statements?
a. 20,000 b. 18,800 c. 22,000 d. 19,800

26.) How much is the NCI in net assets as of December 31, 20x1?
a. 82,080 b. 82,720 c. 82,800 d. 82,880

27.) How much is the consolidated retained earnings as of December 31, 20x1?
a. 1,939,200 b. 1,979,200 c. 1,946,000 d. 1,929,200

28.) How much is the consolidated profit or loss in 20x1?

a. 1,390,000 b. 1,263,100 c. 1,470,000 d. 1,350,000