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Consolidated Financial Statements Guide

This document contains problems and solutions for the consolidated financial statements of several companies. Problem 1 involves consolidating the financial statements of Dream Co. and Theater Co., including their consolidated sales, cost of sales, ending inventory, and calculation of unrealized profit in inventory. Problem 2 involves Bright Co. and Dull Co., calculating the carrying amount of equipment sold between them, their consolidated equipment balance, and consolidated depreciation expense. Problem 3 involves Pare Co. and Kidd Co., calculating the non-controlling interest in net assets, the amount of common stock, and dividends paid in the consolidated financial statements.

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1K views4 pages

Consolidated Financial Statements Guide

This document contains problems and solutions for the consolidated financial statements of several companies. Problem 1 involves consolidating the financial statements of Dream Co. and Theater Co., including their consolidated sales, cost of sales, ending inventory, and calculation of unrealized profit in inventory. Problem 2 involves Bright Co. and Dull Co., calculating the carrying amount of equipment sold between them, their consolidated equipment balance, and consolidated depreciation expense. Problem 3 involves Pare Co. and Kidd Co., calculating the non-controlling interest in net assets, the amount of common stock, and dividends paid in the consolidated financial statements.

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  • Problem 1: Dream Co. and Theater Co.
  • Problem 2: Bright Co. and Dull Co.
  • Problem 3: Pare Co. and Kid Co.

ASSESSMENT TASK 7

PROBLEM 1 DREAM CO. AND THEATER CO.

A. Consolidated Sales

ANSWER: P 1,622,000

SOLUTION:

Sales by Dream Co. P 1,000,000


Sales by Theater Co. 700,000
LESS: Intercompany sales
during the year ( P 38,000 +
40,000) 78,000
CONSOLIDATED SALES P 1,622,000

B. CONSOLIDATED COST OF SALES

ANSWER: P 682,500

SOLUTION:

Cost of sales of Dream Co. P 400,000


Cost of sales of Theater Co. 350,000
LESS: Intercompany sales during the year 78,000
ADD: Unrealized profit in ending inventory
( P 4,500 + 6,000) 10,500
LESS: Realized profit in beginning inventory -
ADD: Depreciation of FVA on inventory -
CONSOLIDATED COST OF SALES P 682,500

DOWNSTREAM UPSTREAM TOTAL


Sale price P 38,000 P 40,000 100%
Cost of sales (20,000)   (32,000) 80%
Gross profit P 18,000 P 8,000 20%
Multiply by: unsold
portion 9,500/38,000 3/4
Unrealized profit in          
ending inventory P 4,500   P 6,000   P 10,500
C. CONSOLIDATED ENDING INVENTORY

ANSWER: P 369,500

SOLUTION:

Ending inventory of Theater Co. P 300,000


Ending inventory of Dream Co. 80,000
LESS: Unrealized profit in ending inventory
( P 4,500 + 6,000) 10,500
ADD: FVA, net 12/31 -
CONSOLIDATED ENDING INVENTORY P 369,500

PROBLEM 2 BRIGHT CO. AND DULL CO.

A. What is the carrying amount of the equipment sold by Bright Co. to Dull Co. in the

consolidated financial statements?

ANSWER: P 36,000

SOLUTION:

Cost of the equipment P 120,000


LESS: Accumulated depreciation P 72,000
(P 120,000/10 years) 12,000 84,000
CARRYING AMOUNT OF THE EQUIPMENT P 36,000

B. How much is the consolidated Equipment – net?

ANSWER: P 581,000

SOLUTION:

Parent's equipment, net P 400,000


Subsidiary equipment,net 190,000
FVA- net 12/31 -
Deferred gain
Gain on sale of equipment P 12,000
Multiply by: 3/4 (9,000)
CONSOLIDATED EQUIPMENT P 581,000
C. How much is the consolidated Depreciation expense?

ANSWER: P 49,000

SOLUTION:

Depreciation expense
Bright Co. P 40,000
Dull Co. 12,000 P 52,000
Overstatement in depreciation
( P 120,000- 72,000/4 remaining years) P 12,000
Dull Co. Depreciation ( P 60,000/4) (15,000) (3,000)
Depreciation before FVA P 49,000
FVA- depreciation -
CONSOLIDATED DEPRECIATION EXPENSE   P 49,000

PROBLEM 3 PARE CO. AND KIDD CO.

3.1 In the December 31, 2020 consolidated balance sheet, what amount should be reported as

non-controlling interest in net assets?

ANSWER: B. P 30,000

SOLUTION:

1-Jan 31-Dec Net change


Net assets at carrying amount
Total assets P 180,000
Liabilities 60,000  
NET ASSETS AT FAIR VALUE P 120,000 P 120,000

Kidd's net asset in December 31, 2020 P 120,000


Multiply by: NCI percentage ( 100% -75%) 25%
Non- controlling interest in net assets P 30,000
3.2 In the December 31, 2020 consolidated balance sheet, what amount should be reported as common
stock?

ANSWER: B P 100,000

SOLUTION: Same as the parent’s common stock.

3.3 In the December 31, 2020 consolidated statement of retained earnings, what amount should be
reported as dividends paid?

ANSWER: B P 25,000

SOLUTION: The amount dividend paid by the parent (PARE CO.) is recorded in the consolidated
statement of retained earnings.

ASSESSMENT TASK 7 PROBLEM 1 DREAM CO. AND THEATER CO. A. Consolidated Sales ANSWER: P 1,622,000 SOLUTION: Sales by Dream Co.
C. CONSOLIDATED ENDING INVENTORY ANSWER: P 369,500 SOLUTION: Ending inventory of Theater Co. P 300,000 Ending inventory of D
C. How much is the consolidated Depreciation expense? ANSWER: P 49,000 SOLUTION: Depreciation expense Bright Co. P 40,000
3.2 In the December 31, 2020 consolidated balance sheet, what amount should be reported as common stock? ANSWER: B P 100,000

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