Acctg 10

16-11: Several years ago Pig, Inc. acquired 90% of Sir Company at book value.
Below are the year 2017 statements of comprehensive income for the two
companies. Pig’s statement of CI was prepared without regard to its investment in
Sir.
Pig Inc. Sir Co.
Sales P 1,200,000 P 400,000
Cost of Sales 600,000 280,000
Gross Profit P 600,000 P 120,000
Operating Expenses 400,000 40,000
CI P 200,000 P 80,000
Other relevant data:
Intercompany sales during 2017 P 200,000
Intercompany merchandise inventories:
January 1, 2017 70,000
December 31, 2017 60,000
Both Pig and Sir have experienced very stable gross profit rates.
Assuming that the intercompany sales were made by Sir to pig, the amount of
cost of sales and consolidated CI attributable to parent to be shown in the
consolidated statement of CI in 2017 are:
Cost of Sales Consolidated CI
a. P677,000 P 280,000
b. P677,000 P274,700
c. P880,000 P274,700
d. P880,000 P280,000
Solution:
Gross Profit Rate (120,000/400,000) 30%

Cost of Sales-Pig P600,000
Cost of Sales-Sir 280,000
Eliminations:
Realized Profit (70,000*30%) (21,000)
Unrealized Profit (60,000*30%) 18,000
Intercompany Sales 200,000
Consolidated Cost of Sales P677,000
CI from own operation-Pig P200,000

Adjusted CI-Sir
CI P80,000
Realized Profit (70,000*30%) 21,000
Unrealized Profit (60,000*30%) (18,000) 83,000

Consolidated CI P283,000
Attributable to NCI (83,000*10%) (8,300)
Attributable to parent P274,700
16-12: Sea Company sells all its output at 25 percent above cost. Pal Corporation
purchases its entire inventory from Sea. Selected information on the operations
of the companies over the past three years are as follows:
Sea Company Pal Corporation

Sales to Pal Inventory, Operating
Year Corp. CI Dec. 31 Income
2015 P200,000 P100,000 P70,000 P150,000
2016 175,000 90,00 105,000 240,00
2017 225,000 160,000 120,000 300,000
Pal purchased 60 percent of the ownership of Sea on January 1, 2014, at

underlying book value.
What is the consolidated CI attributable to parent for 2015, 2016, and 2017?
2015 2016 2017

a. P201,600 P289,800 P394,200
b. P236,000 P323,000 P457,000
c. P235,500 P345,900 P475,200
d. P196,000 P287,000 P393,000
Solution:
Gross Profit Rate:
*2015 (200,000*125%=250,000-200,000=50,000/250,00) 20%

*2016 (175,000*125%=218,750-175,000=43,750/218,750) 20%
*2017 (225,000*125%=281,250-225,000=62,250/281,250) 20%
2015 2016 2017

Pal Corporation CI P150,000 P240,000 P300,000
Intercompany profit:
*2015 (70,000*20%) (14,000) 14,000
*2016 (105,000*20%) (21,000) 21,000
*2017 (120,000*20%) (24,000)
Pal own CI P136,000 P233,000 P297,000
Sea own CI 100,000 90,000 160,000
Consolidated CI P236,000 P323,000 P427,000
Attributable to NCI
2015 (100,000-14,000*40%) (34,400)
2016 (90,000+14,000-21,000*40%) (33,200)
2017 (160,000+21,000-
24,000*40%) (62,800)
Attributable to parent P201,600 P289,800 P394,200
Items 16-13 to 16-15 are based on the following data
Polo Company Purchased 60 percent of Star Company’s voting stocks for

P252,000 on January 1, 2014. Star reported total stockholder’s equity of P400,000
at the time of acquisition. The excess is allocated to equipment with an expected
life of 10 years from the date of acquisition.
During 2017, Polo purchased inventory for P20,000 and sold the full amount to
Star Company for P30,000. On December 31,2017, Star’s ending inventory
included P6,000 of items purchased from Polo. Also in 2017, Star purchased
inventory for P50,000 and sold the units to Polo for P80,000. Polo included
P20,000 of its purchase from star in its ending inventory on December 31,2017.
Summary statement of CI data for the two companies revealed the following:
Polo
Corporation Star Company
Sales P400,000 P200,000
Dividend Income 25,000 -
P425,000 P200,000
Cost of goods sold P250,000 P120,000
Other expenses 70,000 35,000
Total P(320,000) P(155,000)
Comprehensive income P105,000 P45,000
16-13: What is the amount to be reported as sales in the 2017 consolidated

statement of CI?
a. P490,000
b. P450,000
c. P600,000
d. P550,000
Solution:
Total Sales (200,000+400,000) P600,000

Intercompany Sales (30,000+80,000) (110,000)
Consolidated Sales P490,000
16-14: What is the amount to be reported as cost of goods sold in the 2017
consolidated statement CI?
a. P100,500
b. P105,000
c. P269,500
d. P159,000
Solution:
Total cost of goods sold (250,000+120,000) P370,000

Adjustments:
COGS intercompany sales (20,000+50,000) P70,000
COGS by Star (30,000-6,000) 24,000
COGS by Polo (80,000-20,000) 60,000
Total P154,000
Cost of goods sold for consolidated:
20,000*(24,000/30,000) (16,000)
50,000*(60,000/80,000) (37,500) (105,500)
Consolidated Cost of Goods Sold P269,500
16-15: What amount of consolidated CI will be assigned to parent company in the

2017 consolidated statement of CI?
a. P 98,500
b. P113,500
c. P 99,300
d. P 95,800
Solution:
Polo CI from own (105,000-25,000) P80,000

Unrealized Profit [6,000*(10,000/30,000)] (2,000)
Adjusted CI Polo P78,000
Star CI from own:
CI P45,000
Unrealized Profit [20,000*(30,000/80,000)] (7,500)
Amortization (20,000/10) (2,000) 35,500
Consolidated CI P113,500
Attributable to NCI (35,500*40%) (14,200)
Attributable to parent P99,300

Acctg 10

Uploaded by

Copyright:

Available Formats

Acctg 10

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Acctg 10

Uploaded by

Copyright:

Available Formats

16-11: Several years ago Pig, Inc. acquired 90% of Sir Company at book value.

Pig Inc. Sir Co.

Sales P 1,200,000 P 400,000

Cost of Sales 600,000 280,000

Gross Profit P 600,000 P 120,000

Operating Expenses 400,000 40,000

Other relevant data:

Intercompany sales during 2017 P 200,000

Intercompany merchandise inventories:

January 1, 2017 70,000

December 31, 2017 60,000

Cost of Sales Consolidated CI

Gross Profit Rate (120,000/400,000) 30%

CI from own operation-Pig P200,000

Unrealized Profit (60,000*30%) (18,000) 83,000

Sea Company Pal Corporation

Pal purchased 60 percent of the ownership of Sea on January 1, 2014, at

2015 2016 2017

Gross Profit Rate:

*2015 (200,000*125%=250,000-200,000=50,000/250,00) 20%

2015 2016 2017

Polo Company Purchased 60 percent of Star Company’s voting stocks for

16-13: What is the amount to be reported as sales in the 2017 consolidated

Total Sales (200,000+400,000) P600,000

Total cost of goods sold (250,000+120,000) P370,000

16-15: What amount of consolidated CI will be assigned to parent company in the

Polo CI from own (105,000-25,000) P80,000

You might also like

2015 (200,000125%=250,000-200,000=50,000/250,00) 20%