CPA REVIEW SCHOOL OF THE PHILIPPINES
MANILA
PRACTICA.L ACCOUNTING PROBLEMS aJERRERO GERMAN stY I DE. JESUS uM TERRER
/
II
BI,SINESS COMBINATION SUESEQUENT TO ACQUTSTTToN & INTE RCOMPAN Y TRANSACTIONS
I
I
FIRST PROBTEM
for On January 2,20L3, phillips Coi"p,:ration purchase 80% af Signage Company's outstanding shares p64g,000, p30.000 of the excess is attriSutable tc goociwill and the balance to an equipment with an economic life of ten years. Non-controlling interest is measured at its fair value on date of acquisition' On the date of acouisitii.rrt, stocl.lhoiders' equity of the two companies were as follows: PhillipsCorporcrion SignageCompany Ordinary shares Retained 'oarnii'tgs
P1,050,c00
P
240,000 470,OAA
1,560,000
of On DecemOer 31,203,3, Signage Conrpany reported net income of P105,000 and paid dividends p36,000 to phillips. phillips repoi-ted earnings from its separate operations of P285,000 and paid on December 31, dividencls of p138,000. Goodwill had been impaire.d anci should be reported at P6,000 2013
t.
Z.
3.
What is the non-controlling interest in profit of Signage Company on December 31,201'3? A
P21,000
B.
P13,800
{
P18,750
D.
P18,60C
\Uhat is the consoliciut"6 p;ofit atiributable tc paren. shareholders on Decernber 31, 2013? A.
P34A 200
B.
P360,000
C.
P336,0rJ0
D
P356,400
What is the consolidated retained earnings attilbutable December
4.
31,2013?
A.
P1-,757,404
B,
P2,479,754
c.
?1,762,2A0
D.
P1,758,000
to parent's shareholders equity
on
/
What aniount of non-controliing interest is to be presented in the consolidated statement of financial position on December 31, 2013? P1_64,25C B.
Pl45,5t)0
C.
P166,830
D.
Pr.54,500
FA
2-74c7
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Page
2
On January 2,2A!2, D Corporation purchasea 80% of the outstanding shares of C Company for P4,750,000. At that date, C had P4,000,000 o1'ordinary shares outstanding and retained earnings of P1,600,000,
= l,'' r
C's equipment with a rernaining life of 5 years had a book vaiue of P2,250,000 and a fair value of P2,630,000. C's remalning assets had book values equal to their fair values, All intangibles except goodwill are expected to have remaining lives of 8 years.
, .-' o o ' .
:..:
The income and dividend figures for both D and C are as follows: Net income of D in 2012 P900,000-; 2013 is P1,100,000. Net income of C in 2012 is P340,000 ;2a13 is P510,000. Dividends of D in 20L2 is P220,000 ; 2013 is P390,000. Dividends of C in 2012 is P70,000 ; 2013
-1.
is
P130,000.
o
D's retained earnings balance at the date cf acquisition was P3,450,000.
1. .;, _1: ),,
is
How much is the consolidated retain€clearnings attributable to controlling interest in 2013?
A. B . -C
?5,272,400 P5,333,200 P5,238,400
2. i$f"*ql? Corporation A. P21.1.,204 B. P155,200
in the adjusteo ancl unCistribr.rted earnings of C Company in 2012
'a-
3. How much
is
r\ P1,343,200 B. p1,.439,000 e,' P1,430,000 D P1,,464,A00
4.
'i:.-
-1,,... | .' .' the consolidated piofif in ?A13?
1i.a,r
,r Ir,Jr i., ,,..,*-i
..r:-,
-: -! :.
;,.,;. i'ri -
,*,r,i.
How much is the non-controlling interest in net assets in 2013? P1,295,600 P1,250,000 PL,302,400 P1,299,500
A. B. c. D.
TI.JIRD PROBLEM
Positive Corporation acquireci 80% af the outstancling conrrnon stock of Synergy Company on June 1, 201"3
for P586,250.
o
Synergy Company's stockholder's equity components at the end of this year are as follows: Ordinary shares, P100 par, P250,000, APIC P112,500, Retained Earnings pZ22,5OO.
o
Non-controlling interest is measured ai fair value.
o
All the assets of Synergy were fairl,,, 'talued except for inventories, which are overstated by P11,,000, and equipment, which was understated by P15,000. Remaining useful life of equipment is 4 years.
c
Both companies use the straight-line method for depreciation and amortization, Stockholder's equity of Positive on January t,2011is co,nposed of Ordinary shares P750,000, Share premium P175,000, Retained Earnings P525,000.
FA2- 74cV
,-E
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Page 3
o
Fair value of non-controliing interest on the date of acquisition is P117,500.
o
Goodwill, if any, should be written down by PL4,225 at year-end.
o
l.let lncome for the first lrear of parent and subsidiary are P75,000 and P42,500 ( from date of acquisition) respe.tively.
o
Dividends declared at the end o'i'the year amcunted to P20,000 and P15,000' During the year, there was no issuance of new o:dinary shares.
L,
What is the balance of the non-controllinB i,'itere;t in net assets of sub::idiary on Decernber 3L, 20L3?
A. B. c D. 2.
P145,167.50 Pr2V,242.50 P124,242.5{)
P12i,917.50
What is the amcunt of consolidatr:d shareholder's equity?
A. B. c. D.
PL,520,345 F1,642,262.54 P1,162,262.50 P1,644,587.50
FOURTLIPROBLEM
Pure Corporation acquirecj an 80% interest in Sincere Cornpany on January 2,ZOLZ tor P2,520,O00. On this date, the sha:e capital arrd ret::ineC i'.:arnings o'the iivr; companies foll(-'w:
Corp. P6,C00,000 Share Capital Retained Earnings 3,000,000 Pure
Sincere Co' P2,250,C00
450,000
On January ?, )-O1.2, the assets and iiabilities of Sincere Co. were statecl at their fair values except for
machinery which is undervalued by P225,000 (remainrng iife is 3 years). On September 3A, 20!2, Sincere sold merchandise to Pure at an inter-company profit of P150,000;25%was still unsold at yearend. Likewise, on October 1, 20L3, Sincere purchased mercltanclise from Pure for P3,600,000. The
sellingaffriiaieiocludeC a2O%marli-uponcostonthr;sale. OrrlyT5%ofihesepurchaseshadbeensold to unrelated parties as of December -lL, 201-3. As :f Dece mber 31, 2013, goodwill was determined to be impaired by P60,000. The following is the summary cf the 2013 transactions of tne aifiiiateC companies:
Corp. Net lncome P3.,500,000 Dividends declared and paid 60C,0C0 Pure
Sincere Co. P600,000 180,0C0
On the 2013 consrrlidaied financiai ,rtaiements rlo!./ ff;rJ(ih-'Aould be
1.
tiie:
Net incorne attributable to Parent
A. B. c.
P1,638,00C
D.
P1,686,000
P1,708,500 P1.,508,000
YAf,*7407
2.
Page 4 Non-controlling interest in net income
A. B.
c.
P70,500 P100,500 P92,500
D.
P95,500
FIFTH PROBLEM
On January 2, 2At2, Power Company acquired
gOYo
of the outstanding shares of Solar lnc. at book value. During 2012 and 2013, intercompany sales amounted to P2,000,000 and p4,000,000, respectively. Power Company consistently recognized a25% mark-up based on cost while Solar lnc. had a 25% gross profit on sales, The inventories of the buying affiliate, which al! came from inter-company transactions show:
31.,20t2 p240,00O 100,000
December
Power Solar On October
December 3i., 20i_3 p160,000 40,000
a piece of land costing p1,000,000 from power Company for Pl',500,000. On December 1., 2013, Solar lnc., sold this land to unrelated party for Pl,,5OO,0O0. On the other hand, on July i,2Ot3, Solar lnc., sold a used photc-copier with a carrying value of P60,000 and remaining life of 3 years to Power Company for P42,OOA. 1-,
201-2, Solar lnc., purchased
Separate Statement of Comprehensivr lncorre for the two contpanies for the year 2013 follow: Power Sales
Cost of Sales Gross Profit
Company
Solar lnc.
P25,000,000 P14,000,000 (1s.000,0c0) ( 8,400,000) P10,000,000 P 5,600,000
Loss on Sale of Office Equipment
(5.000.000) (3,80Q,900) P 4,C00,000 P 1,800,000 ( 18,000)
Dividend Revenue Net lncome
P4,C00,0000
Operating Expenses Operating Profit
40,000 P 1,922,000
Compute the following amounts for/asof December 31, 20i3
1.
Consolidated Gross profit
A. P19,532,000 B. P1.5,712,000 c. P15,632,000 D.
2.
P15,594,000
Consoliclated Net lncome attributai:le to parent
A. P6,193-300 B. P6,369,000
c.
P6,1,69,g00
D.
P6,191,300
PAfr- 7407
Page
3.
Non-controlling interest in Net lncome
A, B.
4.
5
P199,700 P185,700
c,
P189,200
D.
P1.94,200
Consolidated Operating Expense
A. B.
P9,900,000 P9,799,000
c.
P9,903,000
D.
P9,799,500
SIXTH PROBLEM
On January 1, 2012, P Corporation purchased 809/o of S Company's outstanding stock for P620,000' At that date, alt of S Company's assets and liabilities had market values approximately equal to their book values and no goodwill was included in the purchase price. The following intbrmation was available for 201.2: lncome from own operations
of
P Corporation, P150,000 ; Operating ioss
Dividends paid in 2012 by P Corporation, P75,000; by
S
of
S Company, P20,000'
Company to P Corporation, P1.2,000.
july !,20L2, there was a downstream sale'of equipment at a gain of P25,000. -lhe equipment is expected to have a remaining useful life of 10 years frorn the date cf sale. Aiso, or: January L,201'2, there was an upstream sale of furniture at a loss of P7,500. The furniture is expected to have a useful On
life of five years from the clate of sale. Non-controlling interest is measured at fair market value.
1.
How much is the consolidated net income attributable to parerrt shareholders' equity?
A. P97,250 B. P],15,050
c.
P112,250
D. P103,050 -i,
SEVENTH PROBLEM
On July L, 201i, lssue Company purchased 80% of the outstanding shales of lntrigue Company at a cost
of
Pl',600,000. On
that date, tntrigue had pi.,000,000 of capital stock and P1,400,000 of retained
earnings. For 2013, lssue hacl income of p550,000 from its separ3te opei'ations and paid dividends of P300,000. For 2013, lntrigue reported income of P130,000 anct pa;d rjividends of P60,000, Allthe assets and liabitities of lntrigue have book velues equal to 16sir pElpJ.ctive fair market ,r,alues. Assume income was earned evenly throughout the year except for the intercompany transacticrr on October 1. On October l-, 2013, lssue purchased an equipment from tntrigue for ?2AA,000. The book value of the equipment on that date was P240,000. The loss of p40,000 is reflected in the income of lntrigue indicated above. The equipment is expected to have useful.!ife of 5 years from the clate of sale. a
1' ln the December 31' 20'13 consolidated
statement
of financial pr:sition' how much is the
consolidated rret income attributable to the parent company? A. P642,400 B. P930,400
c.
P946,400
D. P962,400
PAfl-ruCI7
