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Advanced Accounting - 2015 (Chapter 17) Multiple Choice Solution (Part M)

This document contains multiple choice problems and solutions related to consolidation accounting. Problem 73 involves calculating consolidated cost of sales by taking the cost of sales of two companies, subtracting intercompany sales, and adding back unrealized profit in ending inventory from intercompany transactions. Problem 74 involves calculating non-controlling interest using both the partial goodwill and full goodwill methods. It provides the calculation for determining non-controlling interest value under each method. Problem 75 involves calculating consolidated equipment balance by taking the balances for each company, adding any undervalued equipment from an acquisition, and subtracting depreciation on the undervalued amount.

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John Carlos Doringo
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208 views

Advanced Accounting - 2015 (Chapter 17) Multiple Choice Solution (Part M)

This document contains multiple choice problems and solutions related to consolidation accounting. Problem 73 involves calculating consolidated cost of sales by taking the cost of sales of two companies, subtracting intercompany sales, and adding back unrealized profit in ending inventory from intercompany transactions. Problem 74 involves calculating non-controlling interest using both the partial goodwill and full goodwill methods. It provides the calculation for determining non-controlling interest value under each method. Problem 75 involves calculating consolidated equipment balance by taking the balances for each company, adding any undervalued equipment from an acquisition, and subtracting depreciation on the undervalued amount.

Uploaded by

John Carlos Doringo
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Chapter 17

Multiple Choice Problems


73. c
Cost of Sales
P Company 196,000
S Company _112,000
Total 308,000
Less: Intercompany sales 140,000
Add: Unrealized profit in EI of S Co.
[P140,000 x 60% = P84,000 x (140 - 112)/140] _16,800
Consolidated 184,800

74. a or e - if full goodwill method.


Non-controlling interest (partial-goodwill), December 31, 20x4
Common stock – S Company, December 31, 20x4…… P 140,000
Retained earnings – S Company, December 31, 20x4
Retained earnings – S Company, January 1, 20x4 P210,000
Add: Net income of S for 20x4 154,000
Total P364,000
Less: Dividends paid – 20x4 0 364,000
Stockholders’ equity – S Company, December 31, 20x4 P 504,000
Adjustments to reflect fair value - (over) undervaluation of assets and
liabilities, date of acquisition (January 1, 20x4) 35,000
Amortization of allocated excess (refer to amortization above) :
20x5 (P35,000/7 years) ( 5,000)
Fair value of stockholders’ equity of S, December 31, 20x5…… P 534,000
Multiplied by: Non-controlling Interest percentage…………... 20
Non-controlling interest (partial goodwill)………………………………….. P 106,800
Add: NCI on full-goodwill (P70,000 – P56,000) 14,000
Non-controlling interest (full- goodwill)………………………………….. P 120,800

Partial-goodwill
Fair value of Subsidiary (80%)
Consideration transferred……………………………….. P 364,000
Less: Book value of stockholders’ equity of S:
Common stock (P140,000 x 80%)……………………. P112,000
Retained earnings (P210,000 x 80%)………………... 168,000 280,000
Allocated excess (excess of cost over book value)….. P 84,000
Less: Over/under valuation of assets and liabilities:
Increase in equipment (P35,000 x 80%) ___28,000
Positive excess: Partial-goodwill (excess of cost over
fair value)………………………………………………... P 56,000
Full-goodwill
Fair value of Subsidiary (100%)
Consideration transferred: Cash (P364,000/80%) P 455,000
Less: Book value of stockholders’ equity of S (P350,000 x 100%) __350,000
Allocated excess (excess of cost over book value)….. P 105,000
Add (deduct): (Over) under valuation of assets and liabilities
Increase in equipment P35,000 x 100% 35,000
Positive excess: Full-goodwill (excess of cost over
fair value)………………………………………………... P 70,000
75. d
Equipment
P Company 616,000
S Company 420,000
Total 1,036,000
Add: Undervalued equipment 35,000
Less: Depreciation on undervalued equipment (P35,000/7 years) 7,000
Consolidated 1,064,000

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