DMC College Foundation

Practical Accounting 2
Consolidated F/S

1. Papa Corporation owns 75% of the outstanding stock of San Company, acquired at book
value during 2015. Selected information from the accounts of Papa and San for 2017 are as
follows:
Papa San
Sales ₱900,000 ₱500,000
Cost of goods sold 490,000 190,000

During 2017, Papa sold merchandise to San for ₱50,000 at a gross profit of ₱20,000.
Half of this merchandise remained in San’s inventory at December 31, 2017. San’s December
31, 2016 inventory included unrealized profit of ₱4,000 on goods acquired from Papa.
In the consolidated income statement for Papa Corporation and subsidiary for the year
2017, consolidated sales and cost of goods sold should be:
a. ₱1,450,000 and ₱636,000 c. ₱1,350,000 and ₱634,000
b. 1,350,000 and 636,000 d. 1,400,000 and 624,000

2. Pidro Corporation owns an 80% interest in Sisa Company, and at December 31, 2016,
Pidro’s investment in Sisa under the cost method was equal to 80% of Sisa’s stockholder’s
equity. During 2017, Sisa sells merchandise to Pidro for ₱100,000, at a gross profit to
Sisa of ₱20,000. At December 31, 2017, half of this merchandise is included in Pidro’s
inventory. Separate incomes for Pidro and Sisa for 2017 are summarized as follows:
Pidro Sisa
Sales ₱500,000 ₱300,000
Cost of sales (250,000) (200,000)
Operating expenses (125,000) (40,000)
Net income from own operations ₱125,000 ₱60,000

In the consolidated income statement for 2017, NCI in net income of subsidiary is:
a. ₱12,000 b. ₱11,000 c. ₱10,000 d. ₱14,000

3. Pat Corporation owns 70% of Susan Company’s outstanding stock, acquired on January
1, 2016. Susan regularly sells merchandise to Pat at 150% of Susan’s cost. Pat’s December
31, 2016 and 2017 inventories include goods purchased intercompany of ₱112,500 and
₱33,000, respectively. The separate incomes (excluding investment income) of Pat and
Susan for 2017 are summarized below:
Pat Susan
Sales ₱1,200,000 ₱800,000
Cost of goods sold (600,000) (500,000)
Operating expenses (400,000) (100,000)
Net income from own operations 200,000 200,000

Consolidated net income should be allocated to parent and NCI in the amount of:
a. ₱338,550 and ₱67,950, respectively
b. 346,500 and 67,950, respectively
c. 346,500 and 60,000, respectively
d. 358,550 and 67,950, respectively

4. Patton Corporation acquired a 60% interest in Solis Company on January 1,2016 for
₱360,000, when Solis’ net assets had a book value and fair value of ₱600,000. During
2016, Patton sold inventory items that cost ₱600,000 to Solis for ₱800,000, and Solis’
inventory at December 31, 2016 included one-fourth of this merchandise. Patton reported
separate income from its own operations (excluding investment income) of ₱300,000, and
Solis reported a net loss of ₱150,000 for 2016. Consolidated net income for Patton
Corporation and Subsidiary for 2016 is:
a. ₱180,000 b. ₱100,000 c. ₱160,000 d. ₱260,000

5. Santos Company, a 75%-owned subsidiary of Pardo Corporation, sells inventory items

to its parent at 125% of cost. Inventories of the two affiliated companies for 2017 are
as follows:
Pardo Santos
Beginning inventory ₱400,000 ₱250,000
Ending inventory 500,000 200,000

Pardo’s beginning and ending inventories include merchandise acquired from Santos of
₱150,000 and ₱200,000, respectively. If Santos reports net income of ₱300,000 for 2017,
Pardo’s investment income under the equity method will be:
a. ₱195,000 b. ₱255,000 c. ₱215,000 d. ₱217,500

6. On January 1, 2016, Puzon Company purchased 75% of the outstanding stock of Suazon
Company at book value. During 2016, Suazon sold inventory items costing ₱50,000 to Puzon
for ₱75,000. Puzon resold 60% of this inventory to outsiders during the year for
₱100,000. For the year 2016, Puzon had net income from its own operations of ₱200,000 and
paid dividends of ₱120,000. Suazon’s net income for the year was ₱110,000; it paid
₱40,000 in dividends. What is the consolidated net income attributable to parent for
2016?
a. ₱273,000 b. ₱276,000 c. ₱300,000 d. ₱275,000

7. On January 1, 2016, Pat Corporation acquired 80% of Sun Company at book value. The
following information is available for years 2016 and 2017:
2016 2017
Net income from its own operations
Pat ₱500,000 ₱550,000
Sun 200,000 225,000
Intercompany sales by Pat to Sun 100,000 120,000
Intercompany cost of sales 60,000 60,000
Invty. @ billed prices, Dec. 31 20,000 30,000

The consolidated net income in 2016 and 2017 are:

a. ₱652,000 and ₱723,000, respectively
b. 692,000 and 768,000, respectively
c. 652,000 and 715,000, respectively
d. 653,600 and 724,400, respectively

8. Several years ago, Pip Company acquired 70% of Sol Company at book value. Relevant
data for 2016 are as follows:
Pip Sol
Net income from its own operations ₱400,000 ₱250,000
Dividends declared and paid in 2016 270,000 110,000
Merchandise from intercompany sales in
Pips inventory:
January 1, 2016 40,000
December 31, 2016 70,000
Gross profit rate on sales:
2015 70% 40%
2016 75% 30%

Consolidation net income for 2016 is:

 a. ₱645,000 b. ₱625,000 c. ₱517,000 d. ₱571,500

9. Popo Corporation purchased 95% of the stock of Sotto Company on January 2016. On
that date, the book value of Sotto’s net assets approximated fair value. As a result of
the purchase, Popo recognized ₱60,000 of goodwill.

During 2016, Sotto sold inventory to Popo. On December 31, 2016, Sotto had
unrealized profits on its books of ₱10,000. By December 31, 2017, all of the inventory
left on Popo’s books had been sold to outside parties. During 2017, Popo sold inventory
to Sotto and had ₱15,000 of unrealized profits left on its books at the end of 2017.

For 2017, Popo reported operating income of ₱500,000, and Sotto reported net income
of ₱360,000. What is the consolidated income attributable to parent for 2017?
a. ₱836,500 b. ₱833,000 c. 833,500 d. ₱855,000

10. On January 1, 2016, Post Corporation acquired 60% of the outstanding common stock
of Sand Company at an excess of cost over book value of ₱1,000,000. This excess was
allocated to plant assets with a remaining useful life of five years. For the year ended
December 31, 2016, Sand Company prepared the following condensed financial statements:

Condensed Statement of Financial Position @ Dec. 31, 2016

Current assets ₱900,000
Plant assets – net 5,000,000
Total assets 5,900,000

Liabilities 400,000
Capital stock 3,400,000
Retained earnings 2,100,000
Total liabilities and stockholder’s equity 5,900,000

Condensed Statements of Comprehensive Income and R/E

Sales 1,000,000
Cost of goods sold (500,000)
Operating expenses (300,000)
Net income 200,000
Retained earnings, Jan. 1 2,000,000
Dividends (100,000)
Retained earnings, Dec. 31 2,100,000

Sand regularly sells merchandise to Post at a gross profit of 25% above cost. In 2015
and 2016 sales from Sand to Post are:
2015 2016
Sales ₱840,000 ₱960,000
Inventory unsold by Post @ Dec. 31 120,000 360,000

On December 31,2016 consolidated statements, NCI in net income(loss) of subsidiary

should be reported at:
a. (₱60,800) b. ₱50,000 c. ₱56,000 d. (₱19,200)

11-12. Parco Corporation acquired an 80% interest in Slack Company on January 2, 2016
for ₱10,080,000. On this date, the share capital and retained earnings of the two
companies follow:
Parco Corp. Slack Co.
Share Capital ₱24,000,000 ₱9,000,000
Retained Earnings 12,000,000 1,800,000
 On January 2, 2016, the assets and liabilities of Slack Co. were stated at their fair
values except for machinery which is undervalued by ₱900,000 (remaining life is 3 year).
On September 30, 2016, Slack sold merchandise to Parco at an inter-company profit of
₱600,000; 1/4 was still unsold at year-end. Likewise, on October 1, 2017, Slack purchased
merchandise from Parco for ₱14,400,000. The selling affiliate included a 20% mark-up on
cost on this sale. Only 3/4 of these purchases had been sold to unrelated parties as of
December 31, 2017. As of December 31, 2017, goodwill was determined to be impaired by
₱240,000.

The following is the summary of the 2017 transactions of the affiliated companies:
Parco Corp. Slack Co.
Net income ₱6,000,000 ₱2,400,000
Dividends declared and paid 2,400,000 720,000

11. What is the net income attributable to parent shareholder’s equity in the 2017
consolidated financial statements?
a. ₱6,432,000 b. ₱6,744,000 c. ₱6,552,000 d. ₱6,834,000
12. What is the non-controlling interest in net income in the 2017 consolidated
financial statements?
a. ₱330,000 b. ₱342,000 c. ₱282,000 d. ₱402,000

13-14. On January 1, 2016, Rapids Company purchased 80% of the outstanding shares of
Mock Corporation at book value. The stockholder’s equity of Mock Corporation on this date
showed: Ordinary shares - ₱4,560,000 and Retained earnings - ₱3,920,000. On April 30,
2016, Rapids Company acquired used machinery for ₱672,000 from Mock Corp. that was being
carried in the latter’s books at ₱840,000. The asset still has a remaining useful life of
5 years. On the other hand, on August 31, 2016, Mock Corp. purchased an equipment that
was already 20% depreciated from Rapids Co. for ₱2,760,000. The original cost of this
equipment was ₱3,000,000 and had a remaining life of 8 years. Net income of Rapids Co.
and Mock Corp. for 2016 amounted to ₱2,880,000 and ₱1,240,000. Dividends paid totaled to
₱920,000 and ₱420,000 for Rapids Co. and Mock Corp., respectively.

13. What is the net income in the consolidated financial statements in 2016?
a. ₱3,920,600 b. ₱3,775,000 c. ₱3,584,600 d. ₱3,307,480
14. What is the net income attributable to parent’s shareholder’s equity in the
consolidated financial statements I 2016?
a. ₱3,336,600 b. ₱3,307,480 c. ₱3,643,480 d. ₱3,584,600
15. What is the non-controlling interest in net assets in the consolidated financial
statement in 2016?
a. ₱1,696,000 b. ₱1,860,000 c. ₱1,820,000 d. ₱1,889,120