Statement of financial position for Puro Corporation and Sato Company on
December 31, 2017, is given below:
Puro Sato
Corporation Company
Cash and cash equivalents ₱ 70,000 ₱ 90,000
Inventory 100,000 60,000
Property and equipment (net) 500,000 250,000
Investment in Sato Company 260,000
Total assets ₱930,000 ₱400,000
Current liabilities ₱180,000 ₱ 60,000
Long-term liabilities 200,000 90,000
Common stock 300,000 100,000
Retained earnings 250,000 150,000
Total liabilities and stockholders' equity ₱930,000 ₱400,000
Puro Corporation purchased 80 percent ownership of Sato Company on December
31, 2017, for ₱260,000. On that date, Sato Company's property and equipment had
a fair value of ₱50,000 more than the book value shown, while its long-term
liabilities has a market value of ₱150,000. All other book values approximated fair
value. In the consolidated statement of financial position on December 31, 2017:
14-14: What amount of total property and equipment will be reported?
a. ₱500,000
b. ₱750,000
c. ₱790,000
d. ₱800,000
Solution:
₱500,000 + ₱300,000 = ₱800,000
14-15: What amount of goodwill will be reported?
a. ₱ 0
b. ₱ 85,000
c. ₱25,000
d. ₱60,000
Solution:
Price paid ₱260,000
NCI [(₱ 260,000/80%) x 20%] 65,000
Total ₱325,000
Less fair value of net acquired (₱450,000 – ₱210,000) 240,000
Goodwill ₱ 85,000
14-16: What amount of consolidated retained earnings will be reported?
a. ₱250,000
b. ₱280,000
c. ₱370,000
d. ₱400,000
14-17: What amount of total stockholders’ equity will be reported?
a. ₱550,000
b. ₱615,000
c. ₱750,000
d. ₱800,000
Solution:
Controlling interest (Stockholders’ equity of the parent) ₱550,000
Non-controlling interest 65,000
Stockholders’ equity ₱615,000
14-18: What amount of non-controlling interest will be reported?
a. ₱ 65,000
b. ₱ 60,000
c. ₱110,000
d. ₱160,000
14-19: What amount of total liabilities will be reported?
a. ₱240,000
b. ₱290,000
c. ₱590,000
d. ₱530,000
Solution:
Total Liabilities (₱380,000 + ₱210,000) ₱ 590,000
15-20: What amount of the total assets will be reported?
a. ₱1,205,000
b. ₱1,070,000
c. ₱1,145,000
d. ₱1,140,000
Solution:
Cash and cash equivalent (₱70,000 + ₱90,000) ₱ 160,000
Inventory (₱100,000 + ₱60,000) 160,000
Property and equipment (₱500,000 + ₱300,000) 800,000
Goodwill 85,000
Total assets ₱1,205,000
Chapter 15
15-1: Puzon, Inc., purchased 80% of Santos Company’s outstanding common stock
for ₱ 260,000, ₱ 60,000 above the underlying book value on January 2, 2017. The
fair value of Santos’ net assets approximated book value. On the December 31,
2017 consolidated statement of financial position, non-controlling interest (NCI)
should be reported at:
a. ₱ 75,000
b. ₱ 42,000
c. ₱ 65,000
d. ₱ 60,000
Solution:
NCI [₱ 260,000 / 80%] x 20% ₱ 65,000
15-2: Person, Inc., purchased 90 percent of Sison Company’s voting common
stock for ₱ 260,000, ₱60,000 above the underlying book value on January 2, 2015.
Any excess is amortized over 10 years. What is the effect of the excess on the 2017
consolidated CI?
a. A decrease of ₱ 18,000
b. An increase of ₱ 12,000
c. An increase of ₱ 6,000
d. A decrease of ₱ 6,000
Solution:
Amortization of Excess (₱ 60,000 / 10 yrs) (₱ 6,000)
15-3: If a wholly owned subsidiary’s CI was ₱ 150,000 and the subsidiary declared
dividends of ₱ 80,000, and the depreciation and amortization of current fair value
excess was ₱ 20,000, the NCI in CI of subsidiary under the cost method of
accounting is:
a. ₱ 0
b. ₱ 70,000
c. ₱ 100,000
d. ₱ 130,000
15-4: On January 2, 2017, Paz Corporation acquired 60% of the outstanding shares
of Sin Company for ₱ 500,000. In addition, Paz paid acquisition-related costs of ₱
40,000. The book and fair value of these shares was ₱ 480,000. Any excess of the
investment cost over the book value of interest acquired has a maximum life of 20
years. For 2017, Sin Company reported CI of ₱ 200,000 and paid dividends of
₱80,000. Under the Cost and Equity Methods the balance of the investments in Sin
Company stock account on Paz Corporation’s books at December 31, 2017 is:
Cost Method Equity Method
a. ₱611,000 ₱ 611,000
b. ₱ 571,000 ₱ 660,000
c. ₱ 500,000 ₱ 569,000
d. ₱ 612,000 ₱ 602,000
Solution:
Investment cost ₱ 540,000
Less: Book Value of interest acquired 480,000
Excess ₱ 60,000
Cost Method Equity Method
Investment Cost ₱ 500,000 ₱ 500,000
Parent’s share of subsidiary CI - 120,000
Dividends received from subsidiary - (48,000)
Amortization of allocated excess
(₱60,000 / 20 years) - (3,000)
Investment account balance, Dec. 31, 2017 ₱ 500,000 ₱ 569,000
15-5: On January 2, 2017, Pat Corporation acquired 75% of the outstanding
commonstock of Sol Company for ₱270,000 cash. The investment was accounted
for bythe cost method. On January 2, 2017, Sol’s identifiable net assets (book
valueand fair value) were ₱300,000. Sol’s CI for the year ended December 31,
2017,was ₱160,000. During year 2013, Pat received ₱60,000 cash dividends from
Sol. There were no other inter-company transactions. The balance of the non-
controlling interest (NCI) account on December 31, 2017 is:
a. ₱ 114,000
b. ₱ 106,000
c. ₱ 55,000
d. ₱ 20,000
Solution:
NCI, January 2, 2017 [(₱270,000/75%) x 25% ₱ 90,000
NCI in S Company dividends [(₱60,000/75%) x 25%] (16,000)
NCI in S Company CI (₱160,000x 25%) 40,000
NCI balance, December 31, 2017 ₱ 114,000
