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CHAPTER 16
MULTIPLE CHOICE
16-1: d,because no impairment of goodwill is recognized.
16-2: d, consolidated net income will decrease due to amortization of the allocated difference
which is not the goodwill (P60,000 / 10 years).
16-3: d, computed as follows
!ubsidiary"s net income P1#0,000
$mortization of the allocated difference ( %0,000)
Minority interest in net income of subsidiary P130,000
16-4: c
$c&uisition cost (P#00,000 ' P0,000) P#0,000
ess *oo+ alue of interest ac&uired -0,000
ifference P 60,000
Cost Method Equity Method
$c&uisition cost P#0,000 P#0,000
Parent"s share of subsidiary"s net income 1%0,000
iidends receied from subsidiary ( -,000)
$mortization of allocated difference (P60,000/%0) ( ,000)
Investment account balance, Dec. 31, 2008 P540,000 P0!,000
16-5: a
et assets of !ol, 2anuary %, %00- P00,000
3ncrease in earningset income P160,000
iidends paid (P60,000 / 4#5) -0,000 -0,000
et assets of !ol, ec. 1, %00- P-0,000
Minority interest in net assets of subsidiary "P380,000 # 25$% P !5,000
16-6: a
Puno"s net income P1#,000iidend income (P0,000 705) (6,000)
!alas" net income 1%0,000
&onsolidated net income P22!,000
P$89 4-
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16-7: d
Peter"s net income from own operation P1,000,000
Peter"s share of !eller"s net income %00,000
:33! (P%00,000 %#5) ( #0,000)
&onsolidated net income attributable to 'arent P1,150,000
16-8: a
2006 2007 2008
3nestment in !on, 2an. 1 P10,000 P76,%00 P#1%,00
Pop"s share of !on"s net income (1005) 1#0,000 1-0,000 %00,000
iidends receied (1005) ( 60,000) (60,000) ( 60,000)
$mortization of allocated difference to
9&uipment (P-,000 / 10) ( ,-00) ( ,-00) ( ,-00)
Investment in (on, Dec. 31 P3!,200 P512,400
P48,00
16-9: a
!y"s net income P00,000
$mortization of allocated difference ( 60,000)$d;usted net income of !y P%0,000
Minority interest in net income of subsidiary "P240,000 # 10$% P 24,000
16-10: a. Puzon P#00,000
?onsolidated net income attributable to parent
et income > Puzon P%00,000
et income > !uarez 0,000
iidend income (P%0,000 -05) (16,000):33! (P0,000 %05) ( -,000) %16,000
iidends paid > Puzon ( #0,000)
&onsolidated retained earnin)s, Dec. 31, 2008 P,000
16-12: c
$c&uisition cost P1,400,000
ess *oo+ alue of interest ac&uired 1,%60,000
ifference P 0,000
$llocation due to underaluation of net assets ( 0,000)
*ood+ill " not im'aired% P 400,000
P$89 4-
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16-13: d
et assets of !uazon, 2an. %, %00- P1,000,000
3ncrease in earnings (P170,000 > P1%#,000) 6#,000et assets of !uazon, ec. 1, %00- P1,06#,000
P10,000) 70,000
$d;usted net assets of !uazon, ec. 1, %00- P1,14#,000
Minority interest in net assets of subsidiary "1,15,000 # 20$% P 231,000
16-14: b
Presto"s net income from own operations P10,000
Presto"s share of !tor+"s net income (P-0,000 > P%,000) #4,000
:33! (P#4,000 105) ( #,400)
&onsolidated net income attributable to 'arent P1!1,300
16-15: b
Investment in (iso stoc- "at acuisition cost% P00,000
Dividend income "P30,000 # 5$% P 1,500
16-16 d
Co!o"#da$%d %$ #co&%:
Pepe"s net income from own operations P%10,000
!ison"s ad;usted net incomeet income %00- P64,000
$mortization of allocated difference
to e&uipment (P%0,000 / #) ,000 6,000
&onsolidated net income P23,000
Co!o"#da$%d '%$a#%d %a'#(!Pepe"s retained earnings, 2an.%, %004 P401,000
?onsolidated net income attributable to parent> %004
Pepe"s 3 from own operations P1-#,000
!ison"s ad;usted 3@et income > %004 P0,000
$mortization %004 ,000 6,000 :33! (P6,000 05) (10,-00) %10,%00
iidends paid ,%004 Pepe ( #0,000)
Pepe"s retained earnings, 2an. %, %00- P-61,%00
?onsolidated net income attributable to parent> %00-
?onsolidated net income (see aboe) P%4,000
:33! (P6,000 05) ( 1-,700) %#,100
iidends paid, %00- > Pepe ( 60,000)
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&onsolidated retained earnin)s, Dec. 31, 2008 P1,055,300
16-17: b
$c&uisition cost P400,000
ess *oo+ alue of interest ac&uired 60,000
$llocated to building P 40,000
Co!o"#da$%d '%$a#%d %a'#(!
=etained earnings, 2an. 1, %00- > Pepe P##0,000
?onsolidated net income attributable to parent
et income > Precy P%4#,000
$d;usted net income of !usy
et income of !usy P100,000
$mortization (P40,000 / 10) A % ( ,#00) 76,#00
:33! (P76,#00 05) (%-,7#0) %,##0iidends paid > Precy ( 40,000)
&onsolidated retained earnin)s, Dec. 31, 2008 P822,550
M#o'#$) #$%'%!$ # %$ a!!%$! o* !+b!#d#a')
!toc+holders" e&uity of !usy, 2une 0, %00- P 700,000
3ncrease in earnings net income (4/1 to 1%/1) 100,000
!toc+holders" e&uity, ec. 1, %00- P1,000,000
P,#00) 66,#00
$d;usted net assets of !usy, ec. 1, %00- P1,066,#00
Minority interest in net assets of subsidiary "P1,0,500 # 30$% P 31!,!50
16-18: a
Goodwill
$c&uisition cost P1,%00,000
ess *oo+ alue of interest ac&uired (P1,%0,000 > P%0,000) 1,000,000
*ood+ill "not im'aired% P 200,000
&onsolidated retained earnin)s under t/e euity met/od is eual to t/e retained earnin)s of
t/e 'arent com'any, P1,240,000.
16-19: b
et income > Pablo P10,000
iidend income (P0,000 405) (%-,000)
!ito"s net income 40,000
:33! (P40,000 05) (%1,000)
&onsolidated net income attributable to 'arent P151,000
P$89 4-
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16-20: c
Co!o"#da$%d %$ #co&% 2008
et income > Ponce P 70,000iidend income (P1#,000 605) (7,000)
!olis" net income 0,000
:33! (P0,000 05) (16,000)
&onsolidated net income attributable to 'arent 2008 P105,000
Co!o"#da$%d '%$a#%d %a'#(! 2008
=etained earnings, 2an. %, %004 Ponce P 00,000
?onsolidated net income attributable to parent> %004
et income > Ponce P40,000
iidend income (P0,000 605) (1-,000)
!olis" net income #,000
:33! (P#,000 05) ( 1,000) 4#,000iidends paid, %004> Ponce (%#,000)
?onsolidated retained earnings, ec. 1, %004 P#0,000
?onsolidated net income attributable to parent> %00- 10#,000
iidends paid. %00- > Ponce(0,000)
&onsolidated retained earnin)s, Dec. 31, 2008 P525,000
16-21 a
$c&uisition cost P%16,000
ess *oo+ alue of interest ac&uired (%%0,000 -05) 146,000
ifference 0,000
$llocated toepreciable assets (0,000 A -05) (4,#00)
:inority interest ( 4,#00 %05) 4,#00 (0,000) B
-05
8oodwill 10,000
Polo net income from own corporation P 7#,000!eed net income from own operation
et income #,000
$mortization (4,#00 A 105) (,4#0) 1,%#0
Cotal 1%6,%#08oodwill impairment lost (-,000)
&onsolidated net income 118,250
16-22: a
=etained earnings 1/1/0- > Polo P#%0,000
?onsolidated net income attributed to parent
?onsolidated net income 11-,%#0
:33 (#,000 > ,4#0) %05 6,%#0 11%,000
Cotal 6%,000
iidends paid Polo (6,000)
P$89 4-
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&onsolidated retained earnin)s 123108 58,000
16-23: a (#,000 > 4#0) %05
16-24: a
!eed stoc+holders e&uity, 2anuary %, %00- (-0,000 ' 10,000) %%0,000 %00- (#,000 > 1#,000) %0,000
#,000) 05 (6,000) 1%4,000
iidend paid Pepe company (#0,000)
&onsolidated retained earnin)s 123108 4,000
P$89 4-
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PROLEM
P'ob"%& 16-1
a. !ince Pasig paid more than the P%0,000 fair alue of !ibol"s net assets, all allocations
are based on fair alue with the ecess of P10,000 assigned to goodwill. Che amortizations of the
allocated difference are as follows
Annual
Allocated to Allocation Life Amortization
*uilding P #0,000 10 years P #,0009&uipment (%0,000) # years (,000)
+#"d#(:$llocation, 2an. 1, %00 P #0,000$mortization during past years %00 to %00# (P#,000 %) (10,000)
$mortization for the current year > %006 ( #,000)
$llocation, ec. 1, %006 P #,000
E+#&%$
$llocation, 2an. 1, %00 P(%0,000)
$mortization during past years > %00 to %00# (P,000 %) -,000
$mortization for the current year > %006 ,000
$llocation, ec. 1, %006 P( -,000)
b. !ince Pasig paid P%0,000 less than the P%0,000 fair alue of !ibol"s net assets, a
negatie difference arises.
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iscount on notes payable (#0,000)
Cotal P(170,000)
:inority interest (105) 17,000 141,000
8oodwill (not impaired) P 67,000
Amortization of differential"3nentory sold P #,000
and sold 4#,0009&uipment (P60,000/1# years) ,000
iscount on notes payable 4,#00
Cotal P71,#00
b. o'#( a%' %"#a$#o %$'#%!
1/ ?ommon stoc+ > !tate #00,000
Premium on common stoc+ > !tate 100,000
=etained earnings > !tate 1%0,000
3nestment in !tate stoc+ 6-,000
:inority interest in net assets of subsidiary 4%,000
#o eliminate equity accounts of $tate on the dateof acquisition%
2/ 3nentory #,000
and 4#,0009&uipment 60,000
iscount on notes payable #0,000
8oodwill 67,000
3nestment in !tate stoc+ %0,000
:inority interest in net assets of subsidiary 17,000
#o allocate difference%
3/ ?ost of goods sold #,0008ain on sale of land 4#,000
Fperating epenses (depreciation) ,000
3nterest epense 4,#00
3nentory #,000
and 4#,000
9&uipment ,000iscount on notes payable 4,#00
#o amortize allocated difference%
4/ :inority interest in net asset of subsidiary %,#0
:inority interest in net income of subsidiary %,#0#o reco&nize minority share in the net income 'loss(
of $tate.?omputed as follows
et income P 6-,000
$d;ustments for total amortization 71,#00
$d;usted net income (loss) P(%,#00)
:inority interest share (P%,#00 105) P %,#0
P$89 4-
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P'ob"%& 16-3
a. Co!o"#da$%d +#"d#(!Profit ?ompany (at boo+ alue) P 700,000
!imon ?orporation (at fair alue) #60,000
$mortization of differential (P1%0,000 / 6 years) ( %0,000)
Cotal P1,0,000
b. Co!o"#da$%d R%$a#%d Ea'#(!, %c. 31, 2008
=etained earnings, 2an. 1 > Profit ?ompany P 600,000
?onsolidated net income (per c below) -0,000
iidends paid > Profit ?ompany (-0,000)
Cotal P 700,000
c. Co!o"#da$%d %$ #co&%, %c. 31, 2008Cotal reenues (P400,000 ' P00,000) P1,100,000
Cotal epenses (P00,000 ' P00,000) (400,000)
$mortization ( %0,000)
Cotal P -0,000
d. Co!o"#da$%d ood#""G(P6-0,000 > P-0,000) P1%0,000H P -0,000
P'ob"%& 16-4
A""oca$#o c%d+"%
$c&uisition cost P%06,000ess *oo+ alue of interest ac&uired 10,000
ifference P 66,000
$llocation
9&uipment P(0,000)
*uildings 10,000 (0,000)
8oodwill (not impaired) P 6,000
a. 3nestment in !tag ?ompany > 1%/1/06 (at ac&uisition cost) P %06,000
b. :inority 3nterest in et $ssets of !ubsidiary (:3$!) P 0
c. Co!o"#da$%d %$ Ico&%
et income from own operations > Pony (P10,000 > P17-,000) P 11%,000
et income from own operations > !tag (P10,000 > P4,000) 0,000
$mortization ( ,#00)
Cotal P 14,#00
d. Co!o"#da$%d E+#&%$
P$89 4-
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Cotal boo+ alue (P%0,000 ' P#0,000) P 40,000
$llocation 0,000
$mortization (P#,000 years (1#,000)
Cotal P 7#,000
%. Co!o"#da$%d +#"d#(!
Cotal boo+ alue P %--,000$llocation ( 10,000)
$mortization (P#00 years) 1,#00
Cotal P %47,#00
*. ?onsolidated 8oodwill (not impaired) P 6,000
(. ?onsolidated ?ommon !toc+ (Pony) P %70,000
. Co!o"#da$%d R%$a#%d Ea'#(!
=etained earning, ec. 1, %00- > Pony P 10,000
$dd Pony"s share of !tag"s ad;usted increase in earnings
et earnings > %00- (P0,000 > P%0,000) P10,000$mortization ( ,#00) #,#00
Cotal P 1#,#00
P'ob"%& 16-5
a. R%$a#%d Ea'#(!, %c. 31, 2008 #!o
!toc+holders" e&uity, ec. 1, %00- > !ison (P%%,000/05) P #-0,000
!toc+holders" e&uity, 2an. 1, %00# > !ison (#00,000)
3ncrease in earnings P -0,000
=etained earnings, 2an. 1, %00# > !ison %00,000
=etained earnings, ec. 1, %00- > !ison P %-0,000
b. Co!o"#da$%d R%$a#%d Ea'#(! %c. 31, 2008
=etained earnings, 2an. 1, %00# Perez P 600,000
et income > %00# to %00- 100,000
iidends paid > %00# to %00- ( #,000)
=etained earnings, ec. 1, %00- P 6##,000$dd Perez share of ad;usted net increase in !ison"s
=etained earnings P-0,000
$mortization (P-, ) (,%)
$d;usted P6,66- Perez interest 605 %-,000
Cotal P 6-,000
A""oca$#o c%d+"%
$c&uisition cost P#0,000
ess *oo+ alue of interest ac&uired (P#00,000 605) 00,000
ifference P #0,000
$llocation
epreciable assets (P#0,000 / 605) P(-,)
:inority interest (05) , (#0,000
P$89 4-
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$mortization per year (P-,/10 years) P -,
P'ob"%& 16-6
a. o'#( Pa%' E"#a$#o E$'#%!, %c. 31, 2008
(1) iidend income 10,000
iidends declared > !hort 10,000
#o eliminate intercom)any di*idends.
(%) ?ommon stoc+ > !hort 100,000
=etained earnings > !hort #0,000
3nestment in !hort ?ompany 1#0,000
#o eliminate equity accounts of $hort at
date of acquisition
() epreciable asset 0,0003nestment in !hort ?ompany 0,000
#o allocate difference%
() epreciation epense #,000epreciable asset #,000
#o amortize allocated difference
P$89 4-
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b. Po) Co'o'a$#o ad +b!#d#a')
Co!o"#da$#o o'#( Pa%'
%c%&b%' 31, 2008
Pony(/ortdustments9 :liminations&onsoli6&or'oration&om'anyDebit&reditdatedIco&%
$a$%&%$!ales%00,000 1%0,000%0,000iidend income 10,000(1) 10,000
Cotal%10,0001%0,000%0,000epreciation %#,000 1#,000() #,000 #,000Fther epenses10#,000
4#,0001-0,000Cotal10,000 70,000%%#,000+et income carried forward -0,000 0,000 7#,000R%$a#%d
Ea'#(!=etained earnings, 2an. 1%0,000 #0,000(%) #0,000%0,000et income from aboe -0,000
0,000 7#,000Cotal10,000 -0,000%#,000iidends declared 0,000 10,000(1) 10,000
0,000,etained earnin&s- !ec% ./ Carried forward%40,000 40,000%-#,000a"ac% %%$?ash 1#,000
#,000 %0,000$ccounts receiable 0,000 0,000 40,0003nentory 40,000 60,00010,000epreciableasset (net)%#,000%%#,000() 0,000() #,000#4#,0003nestment in !hort stoc+1-0,000(%)1#0,000()
0,000Cotal6%0,0000,00047#,000$ccounts payable #0,000 0,000 70,000otes
payable100,0001%0,000%%0,000?ommon stoc+ Pony%00,000%00,000
!hort100,000(%)100,000=etained earnings, ec. 1Drom aboe
%40,000
40,000%-#,000Cotal6%0,0000,000 17#,000 17#,00047#,000
P'ob"%& 16-7
a. o'#( Pa%' E"#a$#o E$'#%!(1) iidend income -,000
:inority interest in net assets of subsidiary %,000
iidends declared > !isa 10,000
(%) ?ommon stoc+ > !isa 100,000
=etained earnings > !isa #0,0003nestment in !isa stoc+ 1%0,000:inority interest in net assets of subsidiary 0,000
() :inority interest in net income of subsidiary 6,000
:inority interest in net assets of subsidiary 6,000
b. Poo Co'o'a$#o ad +b!#d#a')Co!o"#da$%d o'#( Pa%'
%c%&b%' 31, 2008
Po'o(isadustments9 :liminations&onsoli6&or'oration&om'anyDebit&reditdatedIco&%
$a$%&%$!ales%00,0001%0,000%0,000iidend income -,000(1) -,000Cotal
reenue%0-,0001%0,000%0,000epreciation epense %#,0001#,000 0,000Ftherepenses10#,0004#,0001-0,000Cotal epenses10,00070,000%%0,000et income 4-,0000,000100,000Min net income of $u1%() 6,000( 6,000)et incomecarried forward 4-,0000,0007,000R%$a#%dEa'#(!=etained earnings, 1/1%0,000#0,000 (%) #0,000%0,000et incomefrom a1o*e 4-,0000,000
7,000Cotal0-,000-0,000%,000iidends declared 0,00010,000(1) 10,000 0,000=etained earnings,
1%/1Carried forward
%6-,000
40,000
P$89 4-
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%-,000a"ac% %%$?urrent assets14,00010#,000%4-,000epreciable
assets#00,00000,000-00,0003nestment in !isa stoc+1%0,000(%)1%0,000
Cotal47,0000#,0001,04-,000$ccumulated depreciation14#,0004#,000%#0,000?urrent liabilities
#0,0000,00070,000ongterm debt100,0001%0,000%%0,000?ommonstoc+%00,000100,000(%)100,000%00,000=etained earnings , 1%/1
rom a1o*e
%6-,000
40,000%-,000M in net assets of $u1sidiary(1) %,000(%) 0,000
() 6,000 ,000Cotal47,0000#,000 166,000 166,0001,04-,000
c. Co!o"#da$%d ;#ac#a" $a$%&%$!
Poo Co'o'a$#o ad +b!#d#a')
Co!o"#da$%d a"ac% %%$
%c%&b%' 31, 2008
ssets?urrent assets P%4-,000
epreciable assets P-00,000
ess $ccumulated depreciation %#0,000 ##0,000
Cotal assets P-%-,000
L#ab#"#$#%! ad $oco"d%'!< E+#$)
?urrent liabilities P 70,000
ongterm debt %%0,000
Cotal liabilities P10,000
!toc+holders" 9&uity?ommon stoc+ P%00,000
=etained earnings, 1%/1 %-,000:inority interest in net assets of subsidiary ,000 #1-,000
Cotal liabilities and stoc+holders" e&uity P-%-,000
Poo Co'o'a$#o ad +b!#d#a')
Co!o"#da$%d Ico&% $a$%&%$
=%a' Ed%d %c%&b%' 31, 2008
!ales P%0,000
P$89 4-
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9penses
epreciation epense P 0,000
Fther epenses 1-0,000 %%0,000
?onsolidated net income P100,000
:inority interest in net income of subsidiary 6,000?onsolidated net income attributable to parent P 7,000
Poo Co'o'a$#o ad +b!#d#a')
Co!o"#da$%d R%$a#%d Ea'#(!
=%a' Ed%d %c%&b%' 31, 2008
=etained earnings, 2an. 1 > Popo P%0,000
?onsolidated net income attributable to parent 7,000
Cotal P%,000
iidends paid > Popo 0,000
?onsolidated retained earnings, ec. 1 P%-,000
P'ob"%& 16-8
a. Pa"o Co'o'a$#o ad +b!#d#a')Co!o"#da$#o o'#( Pa%'
%c%&b%' 31, 2008
Palo(ebodustments9 :liminations&onsoli6&or'oration&om'anyDebit&reditdatedIco&%
$a$%&%$!ales00,0001#0,000#0,0003nestment 3ncome 17,000(1) 17,000Cotal
reenues17,0001#0,000#0,000?ost of goods sold%10,000 -#,000%7#,000epreciation epense %#,000
%0,000 #,000Fther epenses %,000 %#,000 -,000Cotal cost and epenses%#-,00010,000--,000etincome carried forward 61,000 %0,000 6%,000R%$a#%d Ea'#(!=etained earnings, 2an. 1%0,000
#0,000(%) #0,000%0,000et incomefrom a1o*e 61,000 %0,000 6%,000Cotal%71,000
40,000%7%,000iidends declared %0,000 10,000(1) 10,000 %0,000=etained earnings, ec. 1
carried forward%41,000
60,000
%4%,000a"ac% %%$?ash 4,000 %0,000 #4,000$ccounts receiable #0,000 0,000 -0,0003nentory
*uildings and e&uipment 40,00000,000 60,000
%0,00010,000
#0,0003nestment in !ebo stoc+%%7,000(1) 7,000(%)%00,000
() %0,0008oodwill() %0,000 %0,000Cotal6-6,000#0,000-%4,000$ccumulated depreciation10#,0006#,000140,000$ccounts payable 0,000 %0,000 60,000Caes payable 40,000 ##,0001%#,000?ommon
stoc+%00,0001#0,000(%)1#0,000%00,000=etained earnings, ec. 1
from a1o*e
Cotal
%41,000
6-6,000
60,000
P$89 4-
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#0,000
%7,000
%7,000
%4%,000
-%4,000
b. &onsolidated ;inancial (tatements
Pa"o Co'o'a$#o ad +b!#d#a')
Co!o"#da$%d Ico&% $a$%&%$=%a' Ed%d %c%&b%' 31, 2008
!ales P#0,000
?ost of goods sold %7#,000
8ross profit 1##,000
9penses
epreciation epenses P#,000
Fther epenses -,000 7,000
?onsolidated net income P 6%,000
Pa"o Co'o'a$#o ad +b!#d#a')
Co!o"#da$%d R%$a#%d Ea'#(!
=%a' Ed%d %c%&b%' 31, 2008
=etained earnings, 2anuary 1 > Palo P%0,000?onsolidated net income 6%,000
Cotal %7%,000
iidends paid > Palo %0,000
=etained earnings, ecember 1 P%4%,000
Pa"o Co'o'a$#o ad +b!#d#a')
Co!o"#da$%d a"ac% %%$
%c%&b%' 31, 2008
ssets
?ash P #4,000
$ccounts receiable -0,000
3nentory 10,000
*uildings and e&uipment P#0,000
ess $ccumulated depreciation 140,000 40,000
8oodwill %0,000
Cotal P6#4,000
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3nentory 0,000
9&uipment (P4#,000 / 10) 4,#00
9penses (amortization) 1,#00*uildings (P100,000 / %0) #,000
Patents (P0,000 / 10) ,000
(#) :inority interest in net income of subsidiary %,400:inority interest in net assets of subsidiary %,400
Co established minority share in subsidiary net income.
?omputed as follows
et income > ! ?o. P1#0,000$mortization 1,#00
$d;usted net income P11-,#00
:33! (P11-,#00 %05) P %,400
2. P Co&a) ad +b!#d#a')
Co!o"#da$%d o'#( Pa%'
=%a' Ed%d %c%&b%' 31, 2008
P(dustments9 :liminations&onsoli6&om'any&om'anyDebit&reditdatedIco&%
$a$%&%$!ales1,000,000#00,0001,#00,000?ost of sales 00,0001#0,000() 0,000#-0,0008ross profit
600,000#0,0007%0,0009penses 60,000%00,000() 1,#00#61,#00Fperating income%0,0001#0,000#-,#003nestment income 7,-00(1) 7,-00et /consolidated income
,-001#0,000#-,#00:3 interest in net income of
!ubsidiary
(#) %,400(%,400)et income carried forward,-001#0,000,-00R%$a#%d %a'#(!=etained earnings,
1/1600,00000,000(%)00,000600,000et incomefrom
a1o*e,-001#0,000,-00Cotal7,-00##0,0007,-00iidends declared100,000 #0,000(1)
#0,000100,000=etained earnings, 1%/1 Carried forward
-,-00#00,000
-,-00a"ac% %%$?ash%00,000100,00000,000$ccounts receiable1#0,000#0,000%00,0003nentories100,000 0,000() 0,000() 0,00010,000and1#0,000()
#0,000%00,000*uildings (net)%00,000()100,000() #,000%7#,0009&uipment (net)%7-,000#0,000()
4,#00() 4#,0006-0,#00Patent() 0,000() ,000 6,0003nestment in ! ?o. stoc+-10,-00(1)#,-00(%)#60,000()176,0008oodwill
Cotal
1,##-,-00
1,070,000() -0,000 -0,0001,71,#00$ccounts payable1%,000 170,0001,000?ommon stoc+%00,000
00,000(%)00,000%00,000$dditional paidin capital00,00000,000=etained earnings, 1%/1
from a1o*e
-,-00#00,000
-,-00:3 in net assets of subsidiary(1) 10,000(%)10,0001-%,400() %7,000
(#) %,400Cotal 1,##-,-00 1,070,000 66,%00 66,%001,71,#00
P'ob"%& 16-10
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a. 3nestment in !ally Products ?o. 160,000
?ash 160,000
#o record acquisition of 803 stoc4 of $ally%
?ash -,000
iidend income -,000#o record di*idends recei*ed from $ally '5/0-000 803(
b. o'#( Pa%' E"#a$#( E$'#%! %c. 31, 2008
llocation sc/edule"
$c&uisition cost P160,000
ess *oo+ alue of interest ac&uired (P1#0,000 -05) 1%0,000
ifference 0,000
$llocated to building and e&uipment P (#0,000)
:inority interest (%05) 10,000 (0,000)
(1) iidend income -,000
:inority interest in net assets of subsidiary %,000
iidends declared > !ally 10,000
(%) ?ommon stoc+ > !ally 100,000
=etained earnings, 1/1 >!ally #0,000
3nestment in !ally Products 1%0,000
:inority interest in net assets of subsidiary 0,000
() *uilding and e&uipment #0,000
3nestment in !ally Products 0,000:inority interest in net assets of subsidiary 10,000
() epreciation epense #,000
$ccumulated depreciation > *ldg #,000
(#) $ccounts payables 10,000?ash and receiables 10,000
:inority interest in net income of subsidiary #,000
:inority interest in net assets of subsidiary #,000Com)uted as follows
et income > !ally P0,000$mortization (#,000)
$d;usted net income P%#,000
:33! (P%#,000 %05) P #,000
c. P#"a' Co'o'a$#o ad +b!#d#a')
P$89 4-
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19/21
Co!o"#da$#o o'#( Pa%'
%c%&b%' 31, 2008
Pilar(ally >ooddustments9 :liminations&onsoli6&or'orationProductsDebit&reditdatedIco&%
$a$%&%$!ales%00,000100,00000,000iidend income -,000(1) -,000Cotal
reenue%0-,000100,00000,000?ost of goods sold1%0,000 #0,000140,000epreciation epense %#,000
1#,000() #,000 #,0003nentory losses 1#,000 #,000 %0,000Cotal cost and epenses160,000
40,000%#,000et /consolidated income -,000 0,000 6#,000:3 interest in net income of subsidiary (:33!
(6) #,000
(#,000)et income carried forward-,000 0,000 60,000R%$a#%d %a'#(! !$a$%&%$=etained earnings,
1/1%7-,000 70,000(%) #0,000-,000et incomefrom a1o*e -,000 0,000 60,000Cotal6,0001%0,0007-,000iidends declared 0,000 10,000(1) 10,000 0,000=etained earnings, 1%/1
carried forward
16,000
110,0006-,000a"ac% %%$?ash and receiables -1,000 6#,000(#) 10,00016,0003nentory%60,000
70,000#0,000and -0,000 -0,000160,000*uildings and e&uipment#00,0001#0,000()
#0,000400,0003nestment in !ally160,000(%)1%0,000()
0,000Cotal1,0-1,000-#,0001,6,000$ccumulated depreciation%0#,00010#,000() #,000
1#,000$ccounts payableotes payable 60,000
%00,000 %0,000
#0,000(#) 10,000 40,000%#0,000?ommon stoc+00,000100,000(%)100,00000,000=etained earningsfrom
a1o*e16,000110,0006-,000:3 in net assets if subsidiary
(1) %,000(%) 0,000
() 10,000(6) #,000 ,000Cotal1,0-1,000-#,000%0,000%0,0001,6,000
P'ob"%& 16-11
a. 9liminating entries
9(1) iidend 3ncome %0,000
iidends eclared %0,000
9liminate diidend income from subsidiary.
9(%) ?ommon !toc+ > !tar ?ompany 1#0,000=etained 9arnings, 2anuary 1 #0,000
ifferential %0,0003nestment in !tar ?ompany !toc+ %%0,000
9liminate inestment balance at date
of ac&uisition.
9() 8oodwill -,000
=etained 9arnings, 2anuary 1 1%,000
ifferential %0,000
$ssign differential at beginning of year
P$89 4-
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Po'o Co'o'a$#o ad $a' Co&a)
Co!o"#da$%d o'#(a%'
%c%&b%' 31, 2008
Li&ht $tar Eliminationstem Cor)oration Com)any !e1it Credit ConsolidatedIncome (tatement
!ales #0,000 %00,000 ##0,000
iidend income %0,000 (1) %0,000 IIIIIII ?redits 40,000 %00,000 ##0,000
?ost of goods sold %40,000 1#,000 0#,000
epreciation epense %#,000 %0,000 #,000
Fther epenses %1,000 10,000 1,000ebits (16,000) (16#,000) II IIII (-1,000)
et income, carry forward #,000 #,000 %0,000 67,000
etained :arnin)s (tatement
=etained earnings, 2an. 1 %6%,000 60,000 (%) #0,000 () 1%,000 %60,000
et income, from aboe #,000 #,000 %0,000 67,000
16,000 7#,000 %7,000iidends declared (%0,000) (%0,000) III (1) %0,000 (%0,000)
=etained earnings, ec. 1,
carry forward %76,000 4#,000 -%,000 %0,000 07,000
?alance (/eet
?ash 6,000 0,000 46,000
$ccounts receiable ##,000 0,000 7#,0003nentory 4#,000 6#,000 10,000
*uildings and e&uipment 00,000 %0,000 #0,000
3nestment in !tar ?ompany
stoc+ %%0,000 (%)%%0,000ifferential (%) %0,000 () %0,000
8oodwill () -,000 -,000
ebits 676,000 4#,000 -#7,000
$ccumulated depreciation 10,000 -#,000 %1#,000
$ccounts payableJ %0,000 0,000 #0,000
Caes payable #0,000 #,000 -#,000
?ommon stoc+ight ?orporation %00,000 %00,000
!tar ?ompany 1#0,000 (%)1#0,000
=etained earnings, from aboe %76,000 4#,000 -%,000 %0,000 07,000
?redits 676,000 4#,000 %60,000 %60,000 -#7,000
P$89 4-
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P$89 4-
