CHAPTER 13

SUGGESTED ANSWERS

EXERCISES
Exercise 13 - 1
1. 2006 Sales
Cost of Sales

2007
2008
2.
3.

2006
2006

2007

20,000

Retained Earnings, Parent

Inventory

20,000

Retained Earnings, Parent

Cost of Sales

20,000

Sales
Cost of Sales

60,000

Sales
Cost of Sales

60,000

20,000
20,000
20,000
60,000
60,000

Cost of Sales
Inventory
P20,000 x 25%

5,000

Retained Earnings, Parent

Cost of Sales

5,000

Equity in Subsidiary Income

Investment in Surigao Co.
P42,000 x 40%/140% = P12,000

2008

60,000

Cost of Sales
Inventory

Exercise 13 - 2
1. 2006 Investment in Surigao Co.
Equity in Subsidiary Income
P200,000 x 75% = P150,000

2007

60,000

5,000

5,000

150,000
150,000
12,000
12,000

Investment in Surigao Co.

Equity in Subsidiary Income
P350,000 x 75% = P262,500

262,500

Investment in Surigao Co.

Equity in Subsidiary Income.
P400,000 x 75% = P300,000

300,000

Investment in Surigao Co.

Equity in Subsidiary Income

262,500

300,000

12,000
12,000

Chapter 13 - Suggested Answers

2.

Consolidation elimination entries

2006 Equity in Subsidiary Income
Investment in Surigao Co.
Cost of Sales
Inventory
2007

Equity in Subsidiary Income

Investment in Surigao Co.
Retained Earnings, Parent
Inventory

2008

Equity in Subsidiary Income

Investment in Surigao Co.
Investment in Surigao Co.
Cost of Sales

Exercise 13 3
a.
Sales
Cost of Sales
b.

Cost of Sales
Inventory
P80,000 x 20% = P16,000

Exercise 13 4
a.
Equity in Subsidiary Income
Investment in Selecta Co.
b.
c.

d.

Sales
Cost of Sales

page 2

138,000
138,000
12,000
12,000
262,500
262,500
12,000
12,000
312,000
312,000
12,000
12,000
200,000
200,000
16,000
16,000

212,000
212,000
1,000,000
1,000,000

Cost of Sales
Inventory
from Presto = P40,000 x 60% = P24,000
from Selecta = P80,000 x 50% = P40,000

64,000

Investment in Selecta Co.

Retained Earnings, Selecta Co. (P50,000 x 20%)
Cost of Sales
from Presto = P 60,000 x 60% = P36,000
from Selecta = P100,000 x 50% = P50,000

76,000
10,000

Exercise 13 -5
Share in net income of Santolan Co. (P360,000 x 80%)
Impairment loss on goodwill
Unrealized profit on ending inventory
(P32,000 x 33 1/3%/133 1/3%) x 80%

64,000

86,000

P288,000
( 4,000)
(

6,400)

Chapter 13 - Suggested Answers

page 3

Realized profit on beginning inventory

(P242,000 x 40%/104%)
Equity in subsidiary income

69,143
P346,743

Exercise 13 - 6
1. Original cost of the equipment to Paredes Co.
Accumulated depreciation as of December 31, 2008 (P2,000,000 x 6/20)
Book value of equipment as of December 31, 2008
2.

Elimination entries
a.
Gain on Sale of Equipment
Equipment
Accumulated Depreciation Equipment
b.

300,000
200,000
500,000

Accumulated Depreciation Equipment

Operating Expenses

20,000
20,000

Exercise 13 - 7
a. Sales
Cost of Sales

100,000
100,000

Cost of Sales
Inventory
P40,000 x 25% = P10,000
b.
c.

P2,000,000
600,000
P1,400,000

10,000
10,000

Gain on Sale of Machinery

Machinery

600,000
600,000

Cost of Sales
Inventory

12,000
12,000

Exercise 13 - 8
(2)
Consolidated
net income
Net income from own operations:
Princess Inc.
Stella Co.
Unrealized gain on sale of machine
Realized gain on sale of machine
Total
3.

P 800,000
800,000
( 240,000)
40,000
P1,400,000

Book value of the machine to Princess Inc. at the time of sale

Less Depreciation for 2008 based on original book value
Book value of equipment as of December 31, 2008
Exercise 13 - 9
1. Share in net income of Sultan Co. (P4,000,000 x 80%)
Impairment loss on goodwill
Unrealized gain on sale of machine (P400,000 x 80%)
Realized gain on sale of machine [(P400,000 / 5 yrs x 1/2) x 80%]
Equity in subsidiary income

(1)
Minority interest
net income
P200,000
______
P200,000
P960,000
160,000
P800,000
P3,200,000
( 20,000)
( 320,000)
32,000
P2,892,000

Chapter 13 - Suggested Answers

2.

Net income from own operations of Porter Co.

Equity in subsidiary income (see # 1)
Consolidated net income

3.

Minority interest, January 1 (P2,000,000 x 20%)

Minority interest net income:
Share in adj. of assets (P400,000 /80% x 20%)
Share in net income of Sultan Co.(P4,000,000 x 20%)
Unrealized gain on sale of machine (P400,000 x 20%)
Realized gain on sale of machine (P40,000 x 20%)
Minority interest dividends (P1,000,000 x 20%)
Minority interest, December 31

4.

page 4

P 8,000,000
2,892,000
P10,892,000
P400,000
P100,000
800,000
( 80,000)
8,000

Original cost of investment

Equity in subsidiary income
Dividends received (P1,000,000 x 80%)
Balance of investment, December 31, 2008

Exercise 13 - 10
a. Equity in Subsidiary Income
Investment in Success Co.
b.
c.

d.
e.
f.

728,000
( 200,000)
P1,028.000

Sales
Cost of Sales
Investment in Success Co.
Retained Earnings, Success Co.
Cost of Sales
P40,000 x 33 1/3% /133 1/3% = P10,000

P2,000,000
2,892,000
( 800,000)
P4,092,000
61,250
61,250
400,000
400,000
7,500
2,500
10,000

Cost of Sales
Inventory

15,000

Gain of Sale of Equipment

Equipment

80,000

Equipment
Operating Expenses
P80,000 / 8 yrs.

10,000

Exercise 13 -11
Net income from own operations:
Pomelo Corp.
Santol Co. (P140,000 x 90%)
Singkamas Corp. (P160,000 x 60%)
Unrealized gross profit on ending inventory of
Pomelo Corp. - seller Singkamas Corp. (P50,000 x 25% x 60%)
Santol Co. - seller Pomelo Corp. (P100,000 x 30%)
Unrealized gain on sale of machinery to Singkamas Corp. by Santol Co.
(P80,000 x 90%)

15,000
80,000
10,000

P240,000
126,000
96,000
( 7,500)
( 30,000)
( 72,000)

Chapter 13 - Suggested Answers

page 5

Consolidated net income

P352,500

PROBLEMS
Problem 13 - 1
Platinum Corp. and Subsidiary Silver Co.
Consolidated Statement of Recognized Income and Expenses
For the Year Ended December 31, 2008
Sales (P3,000,000 - P400,000)
P2,600,000
Cost of Sales*
905,000
Gross Margin
P1,695,000
Expenses
1,040,000
Operating Income
P 655,000
Less Minority Interest net income**
43,750
Consolidated Net Income
P 611,250
*

**

Combined cost of sales

Realized gross profit on beginning inventory
(P40,000 x 33 1/3%/133 1/3%)
Unrealized gross profit on ending inventory
(P60,000 x 33 1/3%/133 1/3%)
Intercompany sales
Consolidated cost of sales
Minority interest net income
(P180,000 + P10,000 - P15,000) x 25%

P1,300,000
(

10,000)

15,000
( 400,000)
P 905,000
P 43,750

Problem 13 - 2
1.
Minority interest net income
Unrealized gross profit on ending inventory of Pedrito Co.
purchased from Salome Co. (P22,000 x 25%/125% x 20%)
Unadjusted share in net income of Salome Co.
Minority interest percentage
Net income of Salome Co.
Unadjusted share in net income of Salome Co.
Unrealized gross profit on ending inventory of
Pedrito Co., seller - Salome Co. (P22,000 x 25%/125% x 80%)
Salome Co., seller - Pedrito Co. P15,000 x 20%/120%)
Equity in subsidiary income
2.

3.

Minority interest, December 31, 2008

Add Unrealized gross profit on ending inventory of Pedrito Co.
purchased from Salome Co.
Total
Minority interest percentage

P 26,180
880
P 27,060
20%
P135,300
x 80%
P108,240
( 3,520)
( 2,500)
P102,220
P82,420

Net assets of Salome Co., December 31, 2008

880
P83,300
20%
P416,500

Net assets of Salome Co., December 31, 2008

Less: Net income for 2008
Net assets of Salome Co., January 1, 2008
Book value (80%)
Excess due to undervaluation of land

P416,500
135,300
P281,200
P224,960
25,000

Chapter 13 - Suggested Answers

page 6

Cost of investment
Problem 13 -3
a.
Sales
Cost of Sales
b.

c.

P249,960

700,000
700,000

Retained Earnings, Pamela Co.

Cost of Sales
(P24,000 x 25/125 = P4,800)

4,800

Retained Earnings, Pamela Co.

Retained Earnings, Salve Co.
Cost of Sales
P15,000 x 33 1/3%/133 1/3% = P3,750

3,375
375

Cost of Sales
Inventory
P30,000 x 25%/125%
= P6,000
P20,000 x 33 1/3%/133 1/3% = P5,000
P6,000 + P5,000
P11,000

11,000

4,800

3,750

11,000

Problem 13 - 4
Pentagon Co. and Subsidiary Sexagon Co.
Consolidated Statement of Recognized Income and Expenses
For the Year Ended December 31, 2008
Sales (P4,600,000 - P1,000,000)
Cost of Sales*
Gross Margin
Expenses (P1,664,000 - P6,000)
Operating Income
Less Minority net income**
Net Income

**

Combined cost of sales

Unrealized gross profit on ending inventory of
Pentagon (P40,000 x 50%)
Sexagon (P100,000 x 60%)
Realized gross profit on beginning inventory of
Pentagon (P60,000 x 50%)
Sexagon (P80,000 x 60%)
Intercompany sales
Consolidated cost of sales
Share in net income of Sexagon (P276,000 x 20%)
Realized gross profit on beginning inventory of
Pentagon (P30,000 x 20%)
Unrealized gross profit on ending inventory of
Pentagon (P20,000 x 20%)
Unrealized gain of sale of equipment by Sexagon
(P60,000 x 20%)

P3,600,000
1,002,000
P2,598,000
1,658,000
P 940,000
46,400
P 893,600

P2,000,000
20,000
60,000
( 30,000)
( 48,000)
( 1,000,000)
P1,002,000
P55,200
6,000
( 4,000)
( 12,000)

Chapter 13 - Suggested Answers

page 7

Realized gain on sale of equipment by Sexagon

(P6,000 x 20%)
Minority interest net income
Problem 13 - 5
Cost of investment
Book value of interest acquired:
Ordinary Share Capital
(P600,000 x 80%)
APIC
(P400,000 x 80%)
Retained Earnings (P400,000 x 80%)
Excess

1,200
P46,400
P1,200,000
P480,000
320,000
320,000
P

Grossed-up excess goodwill (P80,000 / 80%)

Impairment of goodwill (P4,000 x 2 years, 2006 and 2007

1,120,000
80,000
P100,000
P 8,000

Balance of goodwill, Jan. 1, 2008

P92,000
Poland Co. and Subsidiary Sweden Co.
Consolidated Working Paper
For the Year Ended December 31, 2008

Poland Co.
Income Statement
Sales
Cost of Sales

Sweden
Co.

1,600,000
800,000

400,000
300,000

Gross Margin
Expenses
Operating Income
(loss)

800,000
440,000
360,000

100,000
160,000
( 60,000)

Equity in sub. income

1,600
361,600

( 60,000)

Net income (loss)

MINI
NI (loss)- carried forward

Retained Earnings
Statement
Bal, Jan. 1, 2008:
Poland Co.
Sweden Co.
NI (loss) - brought forward

Total
Less Div. declared:
Poland Co.
Bal, Dec. 31, 2008 Balance Sheet
Cash
Accounts Receivable
Inventories
Equipment (net)
Inv. in Sweden Co.

Adj. & Eliminations

Debit
Credit
e. 360,000
g. 11,000
d.

4,000

b.

1,600

Minority
Interest

1,640,000
681,000

e. 360,000
f. 70,000

959,000
604,000
355,000

(6,600)
361,600

( 60,000)

1,142,400

355,000
( 6,600)
361,600

1,142,400
600,000

a. 480,000
f. 6,000

114,000

361,600
1,504,000

( 60,000)
540,000

(6,600)

160,000
1,344,000

540,000

107,400

300,000
180,000
120,000
654,400
1,289,600

Consolidated

100,000
60,000
80,000
1,500,000

h. 40,000
g. 11,000
f. 64,000

a.1,280,000
b.
1,600

361,600
1,504,000
160,000
1,344,000

400,000
200,000
189,000
2,154,400

Chapter 13 - Suggested Answers

Goodwill
Total
AP and accrued exp
OS Poland Co.
OS - Sweden Co.
APIC -Sweden Co.
RE-brought forward
Minority interest

page 8

c. 92,000
2,544,000
400,000
800,000
1,344,000

1,740,000
200,000

c.
d.

88,000
3,031,400
560,000
800,000

h. 40,000

600,000
400,000
540,000

a. 480,000
a. 320,000
c.

2,544,000

72,000
4,000

1,740,000

1,858,600

120,000
80,000
107,400
20,000

20,000
1,858,600

1,344,000
327,400
3,011,400

Explanation of adjusting and elimination entries:

a.
b.
c.
d.
e.
f.
g.
h.

To eliminate 80% of stockholders' equity of subsidiary.

To eliminate equity in subsidiary income
To recognize balance of goodwill as of Jan. 1, 2008.
To recognize impairment of goodwill for 2008.
To eliminate intercompany sales.
To recognize realized gross profit on beginning inventories of
Poland, seller - Sweden(P120,000 x 33 1/3%/133 1/3%)
Sweden, seller - Poland(P80,000 x 100%/200%)
To eliminate unrealized gross profit on ending inventories of
Poland, seller - Sweden (P12,000 x 33 1/3%/133 1/3%)
Sweden, seller - Poland (P16,000 x 100%/200%)
To eliminate intercompany receivable and payable.

P30,000
P40,000
P3,000
P8,000

Computation of minority net income:

Unadjusted share in net income (loss) of Sweden Co. (P60,000 x 20%)
Realized gross profit on beginning inventory of Poland Co. (P30,000 x 20%)
Unrealized gross profit on ending inventory of Poland Co. (P3,000 x 20%)
Minority interest net income (loss)
Problem 13 -6
Palladium Co. and Subsidiary Stadium Co.
Consolidated Working Paper
For the Year Ended December 31, 2008
Palladium
Company

Stadium
Company

1,000,000
400,000
600,000
400,000
200,000
25,000
28,000
253,000

500,000
300,000
200,000
140,000
60,000

Adj. & Eliminations

Debit
Credit

Minority
Interest

P(12,000)`
6,000
( 600)
P( 6,600)

Consolidated

Income Statement

Sales
Cost of sales
Gross margin
Expenses
Operating income
Gain on sale of equit.
Equity in sub. income

Net income
MINI
NI (loss)- carried forward
Retained Earnings
Statement

1,500,000
700,000
800,000
535,000
265,000

e. 5,000
d. 25,000
b. 28,000

60,000
12,000

253,000

60,000

265,000
12,000
253.000

Chapter 13 - Suggested Answers

Balance, Jan. 1,
2008:
Palladium Co.
Stadium Co.
NI - brought forward

Total
Less
Dividends
declared:
Palladium Co.
Stadium Co.
Balance, Dec. 31, 2008 -

Balance Sheet
Cash
Accounts
receivable
Inventories
Land
Building
Equipment
Inv. in Stadium Co.

Total

Accounts payable
Acc. depr. - bldg.
Acc. depr. - equipt.
OS - Palladium Co.
OS - Stadium Co.
APIC - Palladium Co.
RE-brought forward
Total

page 9

1,526,500
253,000
1,779,500

1,526,500
430,000
60,000
490,000

a. 344,000

86,000
12,000
98,000

253,000
1,779,500

200,000

200,000

1,579,500

30,000
460,000

150,000

100,000

250,000

130,000
200,000
300,000
200,000
651,500
548,000

100,000
100,000

230,000
300,000
300,000
200,000
1,176,500

2,179,500

800,000

2,456,500

151,000
20,000
29,000
250,000

10,000

161,000
20,000
154,000
250,000

500,000

80,000
250,000

150,000
1,579,500
2,179,500

460,000
800,000

c. 24,000

d. 25,000
c. 24,000

e.

5,000

6,000
92,000

a. 544,000
b. 28,000

d. 50,000

a. 200,000

50,000
92,000

651,000

1,579,500

150,000
1,579,500

651,000
142,000

Minority interest

142,000
2,456,500

Explanation of adjusting and elimination entries

a. To eliminate 80% of shareholders' equity accounts of Stadium Co.
b. To eliminate equity in subsidiary income.
c. To eliminate dividends from subsidiary.
d. To eliminate unrealized gain on sale of equipment
e. To recognize gain on sale of equipment.
Problem 13 - 7
Cost of investment
Book value of acquired investment:
Ordinary Share Capital (P300,000 x 80%)
Retained earnings (P90,000 x 80%)
Excess

P360,000
P240,000
72,000

312,000
P 48,000

Chapter 13 - Suggested Answers

Grossed-up excess goodwill (P$8,000 / 80%)

Impairment of goodwill
Adjusting and elimination entries
a. Investment
Retained Earnings, Pluto Co.
To record share in the net increase in retained
earnings of Saturn Inc.
P225,000 + (9% of P300,000) - P80,000 = P172,000
P172,000 - P90,000 = P82,000 x 80% = P65,600
b.

c.

d.

e.

f.

g.

h.

page 10

P 60,000
P 2,400
65,600
65,600

Ordinary Share Capital, Saturn Co. (P300,000 x 80%)

Retained Earnings, Saturn Co. (P172,000 x 80%)
Investment
To eliminated 80% of stockholders' equity of
Saturn Inc.

240,000
137,600

Goodwill
Investment
Minority Interest
To record the excess of cost over book value of
investment attributed to goodwill.

60,000

Retained Earnings, Pluto (P2,400 x 3 years)

Expenses
Goodwill
To record amortization of goodwill of prior years
and current year.
Sales
Cost of Goods Sold
To eliminate intercompany sale of merchandise.

377,600

48,000
12,000

7,200
2,400
9,600

300,000
300,000

Retained Earnings, Pluto Corp.

Cost of Goods Sold
To record realized gross profit on beginning
inventory of Saturn Inc.
P90,000 - P30,000 = P60,000 x 25% = P15,000

15,000

Cost of Goods Sold

Inventories
To eliminate unrealized gross profit on ending
inventories of Saturn, Inc.
P90,000 x 25% = P22,500

22,500

Accounts Payable
Accounts Receivable
To eliminate intercompany receivable and payable.
P63,000 + P45,000 = P108,000

15,000

22,500

108,000
108,000

Chapter 13 - Suggested Answers

i.

j.

k.

l.

m.

page 11

Retained Earnings, Pluto

Plant and Equipment
To eliminate unrealized gain on sale of building.

36,000

Accumulated Depreciation Building

Expenses
Retained Earnings, Pluto (P1,800 x 2.5 yrs.)
To record amortization of unrealized gain on sale
of building of prior years and current year.
P36,000 / 20 yrs. = P1,800 per year

6,300

36,000

1,800
4,500

Notes Payable
Notes Receivable
To eliminate intercompany note receivable and
payable.

24,000
24,000

Other Current Liabilities

Other Current Assets
To eliminate intercompany interest receivable and
payable.
P24,000 x 12% x 6/12 = P1,440

1,440
1,440

Dividends Payable
Retained Earnings, Saturn Inc.
P300,000 x 9% x 80% = P21,600

21,600
21,600

Problem 13 - 8
Net income from own operations:
Paloma
Selma (100% x P120,000)
Solita (90% x P96,000)
Sandara (80% x P80,000)
Realized gross profit on beginning inventory of Paloma, seller- Sandara
(P6,400 x 80%)
Unrealized gross profit on ending inventory of
Paloma, seller - Sandara (P4,000 x 80%)
Sandara, seller - Selma (P640,000 x 20% x 25% x 100%))
seller - Solita (P40,000 x 20% x 20% x 90%)
Consolidated net income

P240,000
120,000
86,400
64,000
5,120
( 3,200)
( 32,000)
( 1,440)
P478,880

Problem 13 - 9
Polaroid Co. and Subsidiary Solar Co.
Consolidated Working Paper
For the Year Ended December 31, 2008
Polaroid
Solar
Adj. & Eliminations
Company
Company
Debit
Credit
Income Statement
Sales
Cost of sales
Gross margin

1,000,000
400,000
600,000

500,000
f. 250,000
300,000 h. 60,000
200,000

f. 250,000
g. 30,000

Minority
Interest

Consolidated
1,250,000
480,000
770,000

Chapter 13 - Suggested Answers

page 12

Expenses
Operating income
Dividend
incomesubsidiary
Net income
MINI

390,000
210,000
24,000

140,000
60,000

234,000

60,000

NI (loss)- carried forward

234,000

Retained Earnings
Statement
Bal., Jan. 1, 2008:
Polaroid Co.
Solar Co.
NI

brought
forward
Total
Less Div. declared:
Polaroid Co.
Solar Co.
Bal, Dec. 31, 2008carried forward
Balance Sheet
Cash
Accounts receivable
Inventories
Land
Building (net)
Equipment (net)
Inv. in Solar Co.

AP and accrued exp

Bonds payable (FVP100,000)
OS Polaroid Co.
OS Solar Co.
APIC Polaroid Co.
RE-brought forward
Minority interest
Total

2,500

532,500
237,500

c. 24,000
12,000
60,000

1,367,500
234,000

430,000
60,000

1,601,500

490,000

e. 7,500
g. 30,000
b. 344,000

a. 224,000

237,500
12,000
225,500

1,554,000
86,000
12,000

225,500

98,000

1,779,500

200,000

200,000
30,000

1,401,500

460,000

150,000
130,000
200,000
300,000
200,000
651,500
370,000

100,000
100,000
100,000

c.

24,000

6,000
92,000

i.
h.

a. 224,000
d. 62,500

2,001,500

800,000

151,000
49,000

90,000

1,579,500

250,000
195,000
240,000
300,000
200,000
1,151,500

35,000
60,000

500,000

Goodwill
Total

e.

b. 544,000
d. 50,000
e.
10,000

52,500
2,389,000

i.

35,000

206,000
49,000

250,000

250,000
250,000

150,000
1,401,500

460,000

2,001,500

800,000

Explanation of adjusting and elimination entries:

b. 200,000

50,000
92,000

1,239,500

d. 12,500
1,239,500

12,500

150,000
1,579,500
154,500
2,389,000

Chapter 13 - Suggested Answers

page 13

a.

To recognize share of Polaroid Co. in the net increase in the retained earnings account
balance of Solar Co.
RE, Jan. 1, 2008
P430,000
RE, Jan. 1, 2006 (P400,000 P250,000)
150,000
Net increase in retained earnings
P280,000
Share of Polaroid Co. (P280,000 x 80%)
P224,000

b.
c.
d.
e.
f.
g.
h.
i.

To eliminate 80% of stockholders' equity account of Solar Co.

To eliminate dividend income of Polaroid Co.
To record goodwill arising from the acquisition on January 1, 2006.
To record amortization of goodwill for the period 2006 to 2007 and for 2008.
To eliminate intercompany sales.
To record realized gross profit on beginning inventory of Solar Co.
To eliminate unrealized gross profit on ending inventory of Solar Co.
To eliminate intercompany receivable and payable.

Computation of goodwill
Cost of acquired investment
Book value of acquired investment (P400,000 x 80%)
Excess
Grossed-up excess goodwill (P50,000/80%)

P370,000
320,000
P 50,000
P 62,500

Computation of consolidated net income and minority net income

Consolidated
net income
Net income from own operations:
Polaroid Co.
P234,000
Solar Co.
48,000
Impairment of goodwill
( 2,500)
Realized gross profit on beginning inventory
30,000
Unrealized gross profit on ending inventory
( 60,000)
Dividend income from Solar
( 24,000)
Total
P225,500

Minority int.
net income
P12,000

______
P12,000

MULTIPLE CHOICE
13-A

1.
2.
3.
4.

A
D
C
A

13-B

1.

13-C

1.
2.
3.

B
A
C

1.

13-D

5.
6.
7.
8.

A
C
A
C

(P100,000 P80,000) + [(P150,000 P100,000) x 80%]

Net income from own operations:
Palacio

P152,000

Chapter 13 - Suggested Answers

page 14

Silahis (P92,000 x 100%)

Sultan (P64,000 x 90%)
Unrealized gross profit on ending inventory of Palacio
on purchases from Silahis (P1,200 x 100%)
from Sultan (P2,600 x 90%)
Realized gross profit on beginning inventory of Palacio
on purchases from Silahis (P2,400 x 100%)
from Sultan (P2,000 x 90%)
Consolidated net income
13-E

13-F

1.

1.
2.

Net income from own operations:

Pearl
Sapphire (P200,000 x 70%)
Unrealized gross profit on ending inventory of Sapphire
(P180,000 x 40% x 20%/120%)
Consolidated net income

D
D

Consolidated
net income
Net income from own operations:
Pancho
Sanchez
Realized gross profit on beginning invty.
of Pancho
Unrealized gross profit on ending invty. of
Pancho (P40,000 x 20% x 25%/125%)
Sanchez (P100,000 x 20% x 25%/125%)
Total

13-G

13-H

1.

1.

2.

3.

(
(

(
(

1,200)
2,340)

2,400
1,800
P302,260
P200,000
140,000
( 12,000)
P328,000
Minority
net income

P120,000
56,000

P14,000

640

160

1,280)
4,000)
P171,360

Net income from own operations:

Panay
Sta. Ana (P75,000 x 80%)
Unreallized gross profit on ending inventory of Sta. Ana
(P60,000 x 20%)
Unrealized gain on construction of warehouse by Sta. Ana
(P30,000 x 80%)
Realized gain on warehouse (P30,000 / 5 yrs. x 80%)
Consolidated net income
Consolidated
net income
Net income from own operations:
Pureza
Sta. Mesa
Impairment of goodwill
Realized gross profit on beginning inventory
of Sta. Mesa (P4,800 x 25%/125%)
Unrealized gross profit on ending inventory
of Sta. Mesa (P9,000 x 25%/125%)
Total

92,000
57,600

P200,000
80,000
( 4,000)

( 320)
______
P13,840
P 90,000
60,000
( 12,000)
( 24,000)
4,800
P118,800
Minority int.

net income
P20,000

960
( 1,800)
P275,160

Equity in subsidiary income (P275,160 - P200,000)

______
P20,000
P 75,160

Chapter 13 - Suggested Answers

13-I

13-J

page 15

4.

Minority interest, January 1, 2008 (P400,000 x 20%)

Adjustment of assets (P80,000/80% x 20%)
Minority interest net income
Minority interest dividends (P20,000 x 20%)
Minority interest, December 31, 2008

P 80,000
20,000
20,000
( 4,000)
P116,000

5.

Original cost of investment

Equity in subsidiary income
Dividends received from Sta. Mesa (P20,000 x 80%)
Balance of investment, December 31, 2008

P400,000
75,160
( 16,000)
P459,160

1.

Unadjusted share in the NI of San Simon

(P200,000 x 80%)
Impairment of goodwill
Unrealized profit on ending inventory of San Simon
(P18,000 x 25%/125%)
Realized profit on beginning inventory of San Simon
(P9,600 x 25%/125%)
Equity in San Simon Co.'s net income for 2008

1.

P160,000
( 8,000)
(

3,600)

1,920
P150,320

Minority interest net income

Add Unrealized GP on Ending Inventory of Panasonic Co.
(36,000 x 25%/125% = P7,200 x 20%)
Unadjusted share in Net Income of Panasonic Co.
Minority interest percentage
Net income of Supersonic Co.
Controlling interest
Unadjusted share of Panasonic in net income of Supersonic
Unrealized GP on ending inventory of Panasonic Co. (P7,200
x 80%)
Unrealized GP on ending inventory of Supersonic Co.
(P24,000 x 20%/120%)
Equity in subsidiary net income

P 30,560
1,440
P 32,000
20%
P 160,000
x 80%
P 128,000
( 5,760)
( 4,000)
P 118,240

2.

Minority interest, Dec. 31, 2008

Less Minority interest net income
Minority interest, January 1, 2008
Percentage of minority interest
Net assets of Supersonic Co., Jan. 1, 2008
Add Net income of Supersonic Co. for 2008
Net assets of Supersonic Co., Dec. 31, 2009

P158,560
30,560
P120,000
20%
P640,000
160,000
P800,000

3.

Net assets of Supersonic Co., Jan. 1, 2008

Percentage of interest acquired
Book value of investment acquired
Excess of cost over book value of investment
Price paid for investment

P640,000
x 80%
P512,000
20,000
P532,000

4.

Original cost of investment

Equity in subsidiary income

P532,000
118,240

Chapter 13 - Suggested Answers

page 16

Balance of investment, Dec. 31, 2008

13-K

1.

13-L

2007

1. C

Unadjusted share in net income of Soriaga Co.

2007 - P320,000 x 30%
2008 - P360,000 x 30%
Gross profit on merchandise sold by Soriaga
Co. to Pasadena Corp. in 2007 and sold by
Pasadena in 2008 (P8,000 x 30%)
Minority net income
Subsidiary net income in 2006
Eliminate profit in transfer of land

P 96,000
P108,000
( 2,400)
P 93,600

Percentage of ownership
Parents income from subsidiary
2. A
3.
4.
5.
6.
7.
8.
9.
10.
11.
1. C

13-N

1. D
2. D

3.

1.

2.

2,400
P110,400
P60,000
( 10,000)
P50,000
x 80%
P40,000

P80,000 x 80% = P64,000

B
A
C
A
D
C
B
D
D

13-M

13-O

P650,240
2008

Original cost of P750,000

Consolidated
Net Income
Net income from own operations:
Pateros Co.
Santiago Co.
Unrealized gain on sale of machinery to
Pateros by Santiago (P300,000 - P250,000)
Realized gain on sale of machinery
(P50,000/8 years = P6,250)
Total

P120,000
67,200

P16,800

( 40,000)

( 10,000)

5,000
P152,200

1,250
P 8,050

Book value of machinery, Jan. 1, 2008

Less Depreciation expense for 2008 (P250,000/8 years)
Book value of machinery, Dec. 31, 2008

Net income from own operations:

Portero
Sotero
Unrealized gain on sale of machine
Realized gain on sale of machine
(P30,000/6 years)

Minority
Net Income

P250,000
31,250
P218,750

Consolidated
Net Income

Minority
Net Income

80,000
80,000
( 30,000)

P 20,000

5,000

_______

Chapter 13 - Suggested Answers

Total
3.

13-P

1.

3.

4.

13-Q

1.

13-R

1.

1.

P 20,000
P 90,000
( 15,000)
P 75,000

Consolidated
Net Income

Minority
Net Income

Net income from own operations:

Pedro Co.
P 800,000
Sixto Co.
320,000
Impairment of goodwill
(
16,000)
Unrealized gain on sale of equipment
(
80,000)
Realized gain on sale of equipment
(P80,000/5 x 9/12)
12,000
Total
P 1,036,000
Equity in subsidiary income (P1,036,000 - P800,000)

______
P 80,000
P 236,000

Minority interest, Jan. 1, 2008 (P1,600,000 x 20%)

Share in assets adjustments (P320,000 / 80% x 20%)
Minority interest net income
Minority interest dividends (P80,000 x 20%)
Minority interest, Dec. 31, 2008

P 320,000
80,000
80,000
( 16,000)
P 464,000

Unrealized gain on sale of machinery

Realized gain (P20,000/5 years)
Net adjustments
13-S

P 135,000

Book value of machine, Jan. 1, 2008

Less Depreciation for 2008 (P90,000/6 years)
Book value of machine, Dec. 31, 2008

2.

page 17

2007
(P20,000)
4,000
(P16,000)

Reported subsidiary net income

Eliminate intercompany profit on transfer of equipment
Realized gain on sale of equipment

P 80,000

2008
P -----4,000
P4,000

Minority interest percentage

Minority net income

P400,000
( 100,000)
20,000
P320,000
x 40%
P128,000

2.

P300,000 (P30,000 x 3)

P210,000

3.

P3,000,000 + (P2,000,000 P100,000 + P20,000)

P4,920,000

4.

(P1,200,000 P200,000) + P800,000

P1,800,000
Minority
Net Income

5.

Consolidated
Net Income

A
Net income from own operations:
Parch
Starch
Unrealized profit on transfer of equipt.
Realized profit on transfer of equipt.
Impairment of goodwill

P750,000
240,000
( 60,000)
12,000
( 30,000)
P912,000

P160,000
( 40,000)
8,000
P128,000

Chapter 13 - Suggested Answers

6.
7.

B
A

The retained earnings of Parch of P4,210,000

(P900,000 + P100,000 + P200,000 + P210,000) x 40%

page 18

P564,000