P Company sells to S Company a parcel of land that originally costs P60,000, for P100,000 selling price.

The seller records a P40,000 gain and the buyer record the acquisition of land at a transfer price of P100,000.
Seller
Year of sale Cash 100,000.00
Gain on sale of land 40,000.00 Land
Land 40,000.00 Gain on sale
To eliminate intercompany sale of land (Applicable to all situations)

Year following the sale

Retained Earnings , beg - seller 40,000.00
Land 40,000.00
To adjust beg RE for gains recorded in prior year (Applicable to all situations except partially-owned upstre

II. Depreciable Assets

On January 1, 20x4, P Company sells to S Company, a 90% owned-subsidiary, equipment with a book value of P375,000
(original cost of P675,000 and accumulated depreciation of P300,000) for P450,000.

On the date of sale, the equipment has an estimated remaining useful life of three years, has
no residual value, and depreciated using straight line method.

Entries in P Co (Seller) Entries in S Co (Buyer)

Cash 450,000.00 Equipment
Accumulated depreciation 300,000.00 Cash
Equipment 675,000.00
Gain on sale of equipment 75,000.00

Working paper entries

Year of sale (Applicable to all situations)
Equipment 225,000.00
Gain on sale of equipment 75,000.00
Accumulated depreciation 300,000.00
To eliminate intercomapny gain and to restore the balances
to its original cost

Accumulated depreciation 25,000.00

Depreciation expense 25,000.00
To adjust excess depreciation recorded in the books

Year following the sale (Year 2) (Except Partially owned upstrea Year 3
Equipment 225,000.00 Equipment
Retained earnings, P Co beg 75,000.00 Retained earnings, P Co beg
Accumulated depreciation 300,000.00 Accumulated depreciation
To remove unrealized gain recorded in the prior period To remove unrealized gain recorded in the prior period

Accumulated depreciation 50,000.00 Accumulated depreciation

Depreciation expense 25,000.00 Depreciation expense
Retained earnings, P Co beg 25,000.00 Retained earnings, P Co beg
To adjust excess depreciation recorded in the books To adjust excess depreciation recorded in the books
Upstream - Partially-owned
Year following the sale
Equipment 225,000.00
Non-controlling interest (NCI) 7,500.00 10%
Retained earnings, P Co beg 67,500.00 90%
Accumulated depreciation 300,000.00
To remove unrealized gain recorded in the prior period

Accumulated depreciation 50,000.00

Depreciation expense 25,000.00
Retained earnings, P Co beg 22,500.00 90%
Non-controlling interest (NCI) 2,500.00 10%
To adjust excess depreciation recorded in the books
selling price. Computation of Consolidated Net Income
r price of P100,000.
Buyer Net income fr own operations
Land 100,000.00 Adjustments:
60,000.00 Cash 100,000.00 Amortization of excess
40,000.00 Realized gain (via excess dep'n)
Unrealized gain on sale
Adjusted NI

ons except partially-owned upstream sales)

with a book value of P375,000

450,000.00
450,000.00

225,000.00
75,000.00
depreciation 300,000.00
in recorded in the prior period

75,000.00
25,000.00
nings, P Co beg 50,000.00
ation recorded in the books
olidated Net Income
P S Conso
xx xx

(xx)
xx -down xx-up
(xx)-down (xx)-up
xx xx xx
x 20%

xx share of NCI
Prob 1
Downstream sale
2014: Year of Sale Padre Salve Consolidated *Price paid (90%)
Net income fr its own oper 160,000.00 70,000.00 100% FV of S
Adj: Amortization* (3,500.00) BV of SHE
Realized gain (excess depn) 2,000.00 Excess
Unrealized gain (12,000.00) Div by
Adjusted net income 150,000.00 66,500.00 216,500.00 Amort

x90% x10% Cash

Share of parent 59,850.00 6,650.00 Share of NCI Accum D

NI - Parent 150,000.00
Share of parent 59,850.00 Rem Life: 6 yrs
Attributable to P 209,850.00
Depreciation expense
Year 2014
2015: Year After Sale Palma Small Consolidated Year 2015
Net income fr its own oper 120,000.00 40,000.00
Adj: Amortization (3,500.00)
Realized gain (excess depn) 2,000.00
Unrealized gain -
Adjusted net income 122,000.00 36,500.00 158,500.00

x90% x10%
Share of parent 32,850.00 3,650.00 Share of NCI

NI - Parent 122,000.00
Share of parent 32,850.00
Attributable to P 154,850.00

Prob 2
Entry on sale
4/1/2015 Upstream
Cash 60,000.00
Equipment 30,000.00
Gain on sale 30,000.00
Remaining life: 5 yrs
Excess dep'n (annual) 6,000.00
For 2015: 6,000 x 9/12 = 4,500

9/30/2015 Downstream
Cash 75,000.00
Equipment 40,000.00
Gain on sale 35,000.00
Remaining life: 10 yrs
Excess dep'n (annual) 3,500.00
For 2015: 3,500 x 3/12 = 875
#5, #6, #7 P Co S Co Consolidated
Net income fr its own oper 300,000.00 150,000.00
Adj: Amortization (3,000.00)
Realized gain (excess depn) 875.00 4,500.00
Unrealized gain (35,000.00) (30,000.00)
Adjusted net income 265,875.00 121,500.00 387,375.00

x80% x20%
Share of parent 97,200.00 24,300.00 Share of NCI

NI - Parent 265,875.00
Share of parent 97,200.00
Attributable to P 363,075.00

1.00 80% 20%

Price paid 875,000.00 700,000.00 175,000.00
Less: BV of SHE - S
Common stock 300,000.00 240,000.00 60,000.00
Retained Earnings 500,000.00 400,000.00 100,000.00
Total 800,000.00 640,000.00 160,000.00
Excess of cost over BV 75,000.00 60,000.00 15,000.00
Less: Adj to bulding (inc) (75,000.00) (60,000.00) (15,000.00)
Goodwill - - -
Amortization 3,000.00
#8
NCI, beg (implied fair value) 175,000.00 Undistributed income*
Add: Undistributed income* 19,400.00 Retained earnings - S (
Share of NCI 24,300.00 Retained earnings - S (
Less: Share in Div - S (10,000.00) 50,000 x 20% Increase in Retained e
NCI, end (Full GW) 208,700.00 Less:
Less: Share of NCI in GW -
NCI, end (Partial GW) 208,700.00
#11
Retained Earnings, beg - P 800,000.00 Adjusted increase
Add: Undistributed income* 77,600.00
Attributable to P 363,075.00 Parent's share 80% (to
Less: Div paid - P (100,000.00) NCI share 20% (to NCI

Retained Earnings, end (conso) 1,140,675.00

#12
Commons stock - P 1,000,000.00
Retained earnings - P 1,140,675.00
NCI (full) 208,700.00
Total stockholders' equity 2,349,375.00

#9
NCI, beg 2016 208,700.00
Add: Share of NCI 40,600.00 *(200,000-3000+6000) x 20%
Less: Share in Div - S (14,000.00) 70,000 x 20%
NCI, ending 2016 235,300.00
#4
Equity method
Net income - S 150,000.00
Adj: Amortization (3,000.00)
Realized gain - up 4,500.00 6,000 x 9/12
Unrealized gain - up (30,000.00)
Adjusted NI 121,500.00
x 80%
Parent s share 97,200.00
Adj: Realized gain - down 875.00 3,500 x 3/12
Unrealized gain - down (35,000.00)
Investment income 63,075.00
#3
Inv in S, beg 1/1/15 777,600.00
Add: Investment income 63,075.00
Less: Div paid - S 80% (40,000.00)
Inv in S. end 12/31/15 800,675.00

#10
2015 2016
Common Stock - S 300,000.00 300,000.00
RE - S, beg bal 600,000.00 700,000.00
Net income 150,000.00 200,000.00
Div paid (50,000.00) (70,000.00)
RE - S, end bal 700,000.00 830,000.00
Total SHE 1,000,000.00 1,130,000.00
 Upstream sale
*Price paid (90%) 693,000.00 2014: Year of Sale Padre
100% FV of S 770,000.00 Net income fr its own oper 160,000.00
BV of SHE (700,000.00) Adj: Amortization
70,000.00 Realized gain (excess depn)
20 yrs Unrealized gain
3,500.00 Adjusted net income 160,000.00

42,000.00 x90%
40,000.00 Share of parent 50,850.00
Equipment 70,000.00
Gain 12,000.00 NI - Parent 160,000.00
Rem Life: 6 yrs Share of parent 50,850.00
Attributable to P 210,850.00
Depreciation expense
Year 2014 5,000.00 30,000 / 6 yrs
Year 2015 5,000.00 2015: Year After Sale Palma
Net income fr its own oper 120,000.00
Adj: Amortization
Realized gain (excess depn)
Unrealized gain
Adjusted net income 120,000.00

x90%
Share of parent 34,650.00

NI - Parent 120,000.00
Share of parent 34,650.00
Attributable to P 154,650.00
Undistributed income*
Retained earnings - S (1/1/14) 500,000.00
Retained earnings - S (1/1/15) 600,000.00
Increase in Retained earnings 100,000.00
Accumulated amort
P3,000 x 1 yr (3,000.00)

Adjusted increase 97,000.00

Parent's share 80% (to RE, beg - P) 77,600.00

NCI share 20% (to NCI) 19,400.00

*Net income - S 200,000.00

Less: Amortization (3,000.00)
Add: Realized gain (up) 6,000.00
Adj NI - S 203,000.00
x 20%
40,600.00
 Equity method
Salve Consolidated Downstream Year 2014 Year 2015
70,000.00 Net income - S 70,000.00 40,000.00
(3,500.00) Adj: Amortization (3,500.00) (3,500.00)
2,000.00
(12,000.00)
56,500.00 216,500.00 Adjusted net income 66,500.00 36,500.00
Multiply x 90% 90% 90%
x10% Share of Parent 59,850.00 32,850.00
5,650.00 Share of NCI Add: Realized gain - down 2,000.00 2,000.00
Less: Unrealized gain -down (12,000.00) -
Investment income 49,850.00 34,850.00

Investment in S 810,000.00 849,050.00

Add: Invest income 49,850.00 34,850.00
Less: Div paid - S (10,800.00) (7,200.00)
Small Consolidated Investment in S, end 849,050.00 876,700.00
40,000.00
(3,500.00)
2,000.00
-
38,500.00 158,500.00

x10%
3,850.00 Share of NCI
Upstream Year 2014 Year 2015
Net income - S 70,000.00 40,000.00
Adj: Amortization (3,500.00) (3,500.00)
Add: Realized gain - up 2,000.00 2,000.00
Less: Unrealized gain - up (12,000.00) -
Adjusted net income 56,500.00 38,500.00
Multiply x 90% 90% 90%
Share of Parent 50,850.00 34,650.00

Investment income 50,850.00 34,650.00

Investment in S 810,000.00 850,050.00

Add: Invest income 50,850.00 34,650.00
Less: Div paid - S (10,800.00) (7,200.00)
Investment in S, end 850,050.00 877,500.00