ACC113 Accounting for Business Combination
Third Periodical Activity #2
Problem 1
Parent Company purchased 70% ownership of Subsidiary Company on January 1, 2023 at underlying book value. While
each company had its own sales forces and independent product lines, there were substantial inter-corporate sales of
inventory each period. The following intercorporate sales occurred during 2023 and 2024:
Year Seller Cost of product sold Buyer Sales price Unsold at year-end Year sold to outsiders
2023 Parent 448,000 Subsidiary 640,000 140,000 2024
2024 Subsidiary 312,000 Parent 480,000 77,000 2025
2024 Parent 350,000 Subsidiary 437,500 63,000 2025
The following data summarized the results of their financial operations for the year ended December 31, 2024:
Parent Company Subsidiary Company
Sales 3,850,000 1,680,000
Gross profit 1,904,000 504,000
Operating expenses 770,000 280,000
Ending inventories 336,000 280,000
Dividend from affiliate 126,000 -
Dividend from non-affiliate - 70,000
1. What are the Consolidated sales and Consolidated cost of goods sold at the end of 2024?
a. 4,612,500 and 2,457,550
b. 4,612,500 and 2,206,950
c. 4,612,500 and 2,202,050
d. 5,530,000 and 2,202,050
2. What are the Consolidated net income attributable to parent shareholders’ equity and non-controlling interest
in net income at the end of 2024?
a. 1,301,335 and 59,115
b. 1,476,335 and 59,115
c. 1,476,335 and 80,115
d. 1,350,335 and 80,115
Problem 2
On January 1, 2024, Parent Company purchased 80% of the shares of Subsidiary Corporation at book value. The
shareholders’ equity of Subsidiary Corporation on this date showed: Ordinary shares – P570,000 and Retained earnings –
P490,000. On April 30, 2024, Parent Company acquired a used machinery for P84,000 from Subsidiary Corp. that was
being carried in the latter’s books at P105,000. The asset still has a remaining useful life of 5 years. On the other hand,
on August 31, 2024, Subsidiary Corp. purchased an equipment that was already 20% depreciated from Parent Co. for
P345,000. The original cost of this equipment was P375,000 and had a remaining life of 8 years. Net income of Parent
ACC113 Accounting for Business Combination
Third Periodical Activity #2
Co. and Subsidiary Corp. for 2024 amounted to P360,000 and P155,000. Dividends paid totalled to P115,000 and
P52,500 for Parent Co. and Subsidiary Corp., respectively.
3. In the consolidated financial statements in 2024, what is the non-controlling interest in net assets?
a. 236,140
b. 232,500
c. 232,500
d. 236,140
Problem 3
A summary of the separate income statement of Parent Corporation and its 75% owned subsidiary, Subsidiary Company,
for 2024 were as follows:
Parent Subsidiary
Sales 9,000,000 5,400,000
Gain on sale of equipment 180,000 -
Cost of goods sold 3,600,000 2,340,000
Depreciation expense 900,000 540,000
Other expenses 1,440,000 720,000
Income from operations 3,240,000 1,800,000
There was an upstream sale of equipment with a book value of P720,000 for P1,170,000 on January 1, 2022. At the time
of the intercompany sale, the equipment had a remaining useful life of five years. Parent uses straight-line depreciation.
The buying affiliate used the equipment until December 31, 2024, at which time it was sold to B Corp. for P648,000.
4. What is the amount of net profit attributable to non-controlling interests for 2024?
a. 517,500
b. 472,500
c. 450,000
d. 562,500
Problem 4
The following transactions occurred regarding Entity A and its two subsidiaries, Entity B and Entity C:
On January 1, 2023, Entity A acquired 90% of the outstanding common stocks of Entity B at a gain on bargain
purchase of P100,000
On April 1, 2024, Entity A acquired 80% of the outstanding common stocks of Entity C at goodwill of P50,000
On December 1, 2024, Entity B sold inventory to Entity A at a selling price of P120,000 with mark-up on cost of
20%. Entity A was able to sell 70% of the said inventory to third person during 2024 while the remainder was
eventually sold to third person during 2025
On October 1, 2024, Entity C sold an equipment to A at a loss of P200,000 and the remaining life of the said
equipment was 4 years
ACC113 Accounting for Business Combination
Third Periodical Activity #2
On August 1, 2024, Entity A leased a building to Entity B at annual rental of P360,000
On September 1, 2024, Entity C rendered advertising services to Entity B in the amount of P200,000
It is the policy of Entity A to account its Investments in Subsidiary using cost method in its separate financial
statements
The following relevant data are provided from the separate financial statements of Entity A, Entity B and Entity C for the
year ended December 31, 2024:
Entity A Entity B Entity C
2024 Net income for the year 5,000,000 3,000,000 2,000,000
2024 idends declared 1,000,000 500,000 400,000
5. What is the consolidated net income attributable to parent's stockholders to be reported in the consolidated
income statement for the year ended December 31, 2024?
a. 8,679,600
b. 9,449,600
c. 8,339,600
d. 8,239,600
6. What is the non-controlling interest in net income to be reported in the consolidated income statement for the
year ended December 31, 2024?
a. 886,900
b. 621,900
c. 811,900
d. 731,900
