Question 1

On January 1, 2020, Ruler of Seven Kingdoms acquired 70% of outstanding ordinary shares of Breaker of
Chains at a price of P210,000. On the same date, the net assets of Breaker of Chains were reported at P260,000.
On January 1, 2020 before the combination, Ruler of Seven Kingdoms reported retained earnings of P2,000,000
while Breaker of Chains reported retained earnings of P200,000.
All the assets and liabilities of Breaker of Chains are fairly valued except machinery which is undervalued by
P80,000 and inventory which is overvalued by P10,000. The said machinery has remaining useful life of four
years while 40% of the said inventory remained unsold at the end of 2020.
For the year ended December 31, 2020, Ruler of Seven Kingdoms reported net income of P1,000,000 and
declared dividends of P150,000 in the separate financial statements while Breaker of Chains reported net
income of P150,000 and declared dividends of P20,000 in the separate financial statements.
What is the noncontrolling interest in net assets on December 31, 2020?
133,800

Question 2
Valenzuela Company acquired 55% of the outstanding common stock of Mandaluyong Company on August 1,
2018 at a total cost of P5,00,000. At acquisition date, Mandaluyong’s common stock and retained earnings
amounted to P200,000 and P4,800,000, respectively. All of Mandaluyong’s asset and liabilities had a fair value
equal to book values as of the acquisition date except for patents which had a fair value of P1,800,000 and a
book value of P400,000. The patents have a remaining life of five years. For 2018, Mandaluyong had the
following earnings and dividends:

Jan-Jul Aug-Dec
Net income P500,000 P1,1,00,000
Dividends paid P300,000 P1,200,000

What amount of noncontrolling interest is to be presented in the consolidated statement of financial position on
December 31, 2018?
3,997,500

Question 3
On July 1, 2015, Baliwag Company purchased 80% of the outstanding shares of Bicol Company at a cost of
P4,000,000. On that date, Bicol had P2,500,000 of capital stock and P3,500,000 of retained earnings. For 2015,
Baliwag had income of P1,400,000 from its separate operations and paid dividends of P750,000. For 2015,
Bicol reported income of P325,000 and paid dividends of P150,000. All the assets and liabilities of Bicol have
book values equal to their respective fair market values. Assume income was earned evenly throughout the year.
In December 31, 2015, how much is the consolidated net income attributable to controlling interest?
1,530,000

Question 4
Which of the following statements concerning the requirement of IAS 27 for preparation of Separate Financial
Statements is incorrect?
IAS 27 as amended mandates the entities which shall present separate financial statements

Question 5
For each business combination, the acquirer shall measure at the acquisition date components of noncontrolling
interest (NCI) in the acquiree that are present ownership interest and entitle their holders to a proportionate
share of the entity’s net assets in the event of liquidation at?
Fair Value

Question 6
DV Company purchased 70% ownership of RV Company on January 1, 2010, at underlying book value. While
each company has its own sale forces and independent product lines, there are substantial inter-corporate sales
of inventory each period. The following inter-corporate sales occurred during 2011 and 2012:

Cost of Unsold at Year Sold

Sales
Year Seller Product Buyer End of to
Price
Sold Year Outsiders
2011 DV Co. P448,000 RV Co. P640,000 P140,000 2012
2012 RV Co. 312,000 DV Co. 480,000 77,000 2013
2012 DV Co. 437,500 RV Co. 437,500 63,000 2013

The following data summarized the results of their financial operations for the year ended, December 31, 2012:
DV RV
Company Company
Sales P3,850,000 P1,680,000
Gross Profit 1,904,000 504,000
Operating Expenses 770,000 280,000
Ending Inventories 336,000 280,000
Dividend Received from
126,000 -
affiliate
Dividend Received from non-
- 70,000
affiliate
Compute for the consolidated sales for the year ended 2012
4,612,500

Question 7
A parent is not required to present consolidated financial statements
When the parent is wholly owned subsidiary

Question 8
Valenzuela Company acquired 55% of the outstanding common stock of Mandaluyong Company on August 1,
2018 at a total cost of P5,00,000. At acquisition date, Mandaluyong’s common stock and retained earnings
amounted to P200,000 and P4,800,000, respectively. All of Mandaluyong’s asset and liabilities had a fair value
equal to book values as of the acquisition date except for patents which had a fair value of P1,800,000 and a
book value of P400,000. The patents have a remaining life of five years. For 2018, Mandaluyong had the
following earnings and dividends:

Jan-Jul Aug-Dec
Net income P500,000 P1,1,00,000
Dividends paid P300,000 P1,200,000
How much is the net income attributable to the noncontrolling interest?
442,500

Question 9
DV Company purchased 70% ownership of RV Company on January 1, 2010, at underlying book value. While
each company has its own sale forces and independent product lines, there are substantial inter-corporate sales
of inventory each period. The following inter-corporate sales occurred during 2011 and 2012:

Cost of Unsold at Year Sold

Sales
Year Seller Product Buyer End of to
Price
Sold Year Outsiders
2011 DV Co. P448,000 RV Co. P640,000 P140,000 2012
2012 RV Co. 312,000 DV Co. 480,000 77,000 2013
2012 DV Co. 437,500 RV Co. 437,500 63,000 2013

The following data summarized the results of their financial operations for the year ended, December 31, 2012:
DV RV
Company Company
Sales P3,850,000 P1,680,000
Gross Profit 1,904,000 504,000
Operating Expenses 770,000 280,000
Ending Inventories 336,000 280,000
Dividend Received from
126,000 -
affiliate
Dividend Received from non-
- 70,000
affiliate
Compute for the noncontrolling interest in net income for the year ended 2012
80,115

Question 10
On January 1, 2020, Ruler of Seven Kingdoms acquired 70% of outstanding ordinary shares of Breaker of
Chains at a price of P210,000. On the same date, the net assets of Breaker of Chains were reported at P260,000.
On January 1, 2020 before the combination, Ruler of Seven Kingdoms reported retained earnings of P2,000,000
while Breaker of Chains reported retained earnings of P200,000.
All the assets and liabilities of Breaker of Chains are fairly valued except machinery which is undervalued by
P80,000 and inventory which is overvalued by P10,000. The said machinery has remaining useful life of four
years while 40% of the said inventory remained unsold at the end of 2020.
For the year ended December 31, 2020, Ruler of Seven Kingdoms reported net income of P1,000,000 and
declared dividends of P150,000 in the separate financial statements while Breaker of Chains reported net
income of P150,000 and declared dividends of P20,000 in the separate financial statements.
What is the consolidated net income attributable to controlling interest for the year ended December 31, 2020?
1,102,200
Question 11
DV Company purchased 70% ownership of RV Company on January 1, 2010, at underlying book value. While
each company has its own sale forces and independent product lines, there are substantial inter-corporate sales
of inventory each period. The following inter-corporate sales occurred during 2011 and 2012:

Cost of Unsold at Year Sold

Sales
Year Seller Product Buyer End of to
Price
Sold Year Outsiders
2011 DV Co. P448,000 RV Co. P640,000 P140,000 2012
2012 RV Co. 312,000 DV Co. 480,000 77,000 2013
2012 DV Co. 437,500 RV Co. 437,500 63,000 2013

The following data summarized the results of their financial operations for the year ended, December 31, 2012:
DV RV
Company Company
Sales P3,850,000 P1,680,000
Gross Profit 1,904,000 504,000
Operating Expenses 770,000 280,000
Ending Inventories 336,000 280,000
Dividend Received from
126,000 -
affiliate
Dividend Received from non-
- 70,000
affiliate

Compute for the consolidated net income attributable to parent’s shareholders equity for the year ended 2012
1,350,335

Question 12
On January 1, 2020, Ruler of Seven Kingdoms acquired 70% of outstanding ordinary shares of Breaker of
Chains at a price of P210,000. On the same date, the net assets of Breaker of Chains were reported at P260,000.
On January 1, 2020 before the combination, Ruler of Seven Kingdoms reported retained earnings of P2,000,000
while Breaker of Chains reported retained earnings of P200,000.
All the assets and liabilities of Breaker of Chains are fairly valued except machinery which is undervalued by
P80,000 and inventory which is overvalued by P10,000. The said machinery has remaining useful life of four
years while 40% of the said inventory remained unsold at the end of 2020.
For the year ended December 31, 2020, Ruler of Seven Kingdoms reported net income of P1,000,000 and
declared dividends of P150,000 in the separate financial statements while Breaker of Chains reported net
income of P150,000 and declared dividends of P20,000 in the separate financial statements.
What is the amount of consolidated retained earnings on December 31, 2020?
2,952,200

Question 13
How shall the parent corporation present the Noncontrolling Interest (NCI) in the Consolidated Statement of
Financial Position?
It shall be presented within Consolidated Stockholders’ Equity, separately from the equity of the owners of the
parent

Question 14
What percentage of the intercompany gain on sale of fixed assets should be eliminated in the consolidation
working paper?
100% on both downstream and upstream sales

Question 15
Statement 1: The depreciation on buildings is presented under investing activities on the consolidated cash flow
statement.
Statement 2: Gain on the sale of land between affiliates should not appear in the consolidated income statement.
Only statement 2 is correct

Question 16
Johnson paid P1.2 million for a 30% investment in Treems equity shares on 1 August 2019. Treems profit after
tax for the year ended 31 March 2020 was P750,000. On 31 March 2020, Treem had P300,000 goods in its
inventory which it had bought from Johnson in March 2020. These had been sold by Johnson at a mark-up on
cost of 20%. Treem has not paid any dividends. On the assumption that Treem is an associate of Johnson, what
would be the carrying amount of the investment in Treem in the consolidated statement of financial position of
Johnson as at 31 March 2020?
1,335,000

Question 17
A Parent and its 80 percent owned subsidiary have made several intercompany sales of noncurrent assets during
the past two years. The amount of income assigned to the noncontrolling interest for the second year should
include the noncontrolling interest's share of gains
realized in the second year from upstream sales made in both years

Question 18
Statement 1: The consolidated financial statements are primarily for the benefit of managers of the parent
company.
Statement 2: When a parent/investor sells an ownership interest, a gain or loss is recorded where the interest
sold leads to the deconsolidation of a former subsidiary.
Statement 3: When a parent acquires 100% of a subsidiary at book value, the consolidated balance sheet
eliminates reciprocal accounts and combines nonreciprocal accounts.
Only 1 statement is false

Question 19
Statement 1: The transfer of non-depreciable plant assets between affiliates at a price other than book value
gives rise to unrealized profit or loss to the consolidated entity.
Statement 2: An entry is necessary to eliminate the full amount of the gain on the sale of land and to reduce the
land to its cost basis to the consolidated entity whether the intercompany sale is upstream or downstream.
Both statements are correct

Question 20
Victor Corporation owns 80 percent of the stock of Vicky Company. At the end of 2017, Victor Corporation and
Vicky Company reported the following partial operating results and inventory balances:
Victor Vicky
Corporati Corporati
on on
Total sales 660,000 510,000
Sales to
Vicky 140,000

Sales to Victor 240,000

Net income 20,000
Operating income (excluding income from Vicky
70,000
Company)
Inventory on hand, December 31, 2017
Purchased from Vicky 48,000
Purchased from Victor 42,000
Victor Corporation regularly prices its products at cost plus a 40 percent markup for profit. Vicky Company
prices its sales at cost plus a 20 percent markup. The total sales reported by Victor and Vicky include both
intercompany sales and sales to nonaffiliates. The controlling interest net income for 2017 must be
67,600

Question 21
On July 1, 2015, Baliwag Company purchased 80% of the outstanding shares of Bicol Company at a cost of
P4,000,000. On that date, Bicol had P2,500,000 of capital stock and P3,500,000 of retained earnings. For 2015,
Baliwag had income of P1,400,000 from its separate operations and paid dividends of P750,000. For 2015,
Bicol reported income of P325,000 and paid dividends of P150,000. All the assets and liabilities of Bicol have
book values equal to their respective fair market values. Assume income was earned evenly throughout the year.
On the date of acquisition, how much is the goodwill/gain on acquisition to be
P800,000 gain on acquisition

Question 22
DV Company purchased 70% ownership of RV Company on January 1, 2010, at underlying book value. While
each company has its own sale forces and independent product lines, there are substantial inter-corporate sales
of inventory each period. The following inter-corporate sales occurred during 2011 and 2012:

Cost of Unsold at Year Sold

Sales
Year Seller Product Buyer End of to
Price
Sold Year Outsiders
2011 DV Co. P448,000 RV Co. P640,000 P140,000 2012
2012 RV Co. 312,000 DV Co. 480,000 77,000 2013
2012 DV Co. 437,500 RV Co. 437,500 63,000 2013
 The following data summarized the results of their financial operations for the year ended, December 31, 2012:
DV RV
Company Company
Sales P3,850,000 P1,680,000
Gross Profit 1,904,000 504,000
Operating Expenses 770,000 280,000
Ending Inventories 336,000 280,000
Dividend Received from
126,000 -
affiliate
Dividend Received from non-
- 70,000
affiliate
Compute for the consolidated cost of goods sold for the year ended 2012
2,202,050

Question 23
On July 1, 2015, Baliwag Company purchased 80% of the outstanding shares of Bicol Company at a cost of
P4,000,000. On that date, Bicol had P2,500,000 of capital stock and P3,500,000 of retained earnings. For 2015,
Baliwag had income of P1,400,000 from its separate operations and paid dividends of P750,000. For 2015,
Bicol reported income of P325,000 and paid dividends of P150,000. All the assets and liabilities of Bicol have
book values equal to their respective fair market values. Assume income was earned evenly throughout the year.
In December 31, 2015, how much is the consolidated net income attributable to noncontrolling interest?
32,500

Question 24
What percentage of the intercompany gain on sale of fixed assets should be used to reduce consolidated net
income using parent company approach?
100% on downstream and parent’s percentage of ownership in subsidiary on upstream sales

Question 25
Baste Company owns an 80% controlling interest in the Bastion Company. Bastion regularly sells merchandise
to Baste, which then sold to outside parties. The gross profit on all such sales is 40%. On January 1, 2016, Baste
sold land and a building to Bastion. The value of the parcel is 20% to land and 80% to structures. The data are
the following:
Baste Bastion
Internally generated net income,
1,560,000 750,000
2016
Internally generated net income,
10,320,000 705,000
2017
Intercompany merchandise sales,
300,000
2016
Intercompany merchandise sales,
360,000
2017
Intercompany inventory, December
45,000
31, 2016
Intercompany inventory, December
60,000
31, 2017
Cost of real estate sold on January 1,
1,800,000
2016
Sales price of real estate on January
2,400,000
1, 2016
Depreciable life of building 20 years
For 2016, what is the consolidated comprehensive income attributable to controlling interest?
1,569,600

Question 26
Assume an upstream sale of machinery occurs on January 1, 2014. The parent owns 70% of the subsidiary.
There is a gain on the intercompany transfer and the machine has five remaining years of useful life and no
salvage value. Straight-line depreciation is used. Which of the following statements is correct?
Noncontrolling interest share for 2014 is equal to: (subsidiary income for 2014 minus the gain on sale plus the
excess depreciation expense) multiplied by 30%.

Question 27
In determining controlling interest in consolidated income in the consolidated financial statements, unrealized
intercompany profit on inventory acquired by a parent from its subsidiary should:
be eliminated in full.

Question 28
Failure to eliminate intercompany sales would result in an overstatement of consolidated
cost of sales

Question 29
How shall the acquirer account for its previously held equity interest in the acquiree upon obtaining control of
the acquiree or how shall an acquirer account for a business combination achieved in stages a.ka. step
acquisition?Corr
The acquirer shall remeasure its previously held equity interest in the acquiree at its acquisition-date fair value
and recognize the resulting gain or loss in profit/loss.
.

Question 30
Sales from one subsidiary to another are called
Horizontal sales

Question 31
The noncontrolling interest in consolidated income when the selling affiliate is an 80% owned subsidiary is
calculated by multiplying the noncontrolling minority ownership percentage by the subsidiary’s reported net
income
less unrealized profit in ending inventory plus realized profit in beginning inventory.

Question 32
On July 1, 2015, GRC purchased 80% of JPIA’s outstanding stock for P 1,600,000. On that date JPIA had P
1,000,000 capital stock and retained earnings of P 1,400,000. For 2015 GRC had net income of P 560,000 from
its own operation and paid dividends of P 300,000. JPIA reported net income of P 130,000 and paid dividend of
P 60,000 for 2015. All of JPIA’s net assets BV=FV. Assume all pf the net income was evenly earned except for
the intercompany transaction on October 1, 2015 where GRC purchased equipment from JPIA for P 200,000.
The BV of equipment was P 240,000 on the date of sale and remaining useful life of 5 years.
On December 31, 2015, how much is the consolidated net income attributable to parent?
642,400

Question 33
On January 1, 2015 PE CO. purchased 80% of the total outstanding stock of SE CO for P 620,000. On that date
BV=FV of SE CO. and no goodwill is included on the purchase price. The following was available at 2015, net
income from own operation PE CO, P 150,000; operating loss of SE CO P 20,000; dividends paid by PE, P
75,000, by SE CO to PE CO, P 12,000.

On July 1, 2015 there was a downstream sale of equipment at a gain of P 25,000. At this date equipment has a
remaining useful life of 10 years. Also, on January 1, 2015, there was an upstream sale of furniture with
remaining life of 5 years on the date of sale at a loss of P 7,500. NCI is measured at FV.
115,050

Question 34
Which of the following is correct? The direct sale of additional shares to the parent company from a subsidiary
increases the parent’s interest and decreases the noncontrolling shareholders’ interest.

Question 35
Assume an upstream sale of machinery occurs on January 1, 2014. The parent owns 70% of the subsidiary.
There is a gain on the intercompany transfer and the machine has five remaining years of useful life and no
salvage value. Straight-line depreciation is used. Which of the following statements is correct?
Noncontrolling interest share for 2014 is equal to: (subsidiary income for 2014 minus the gain on sale plus the
excess depreciation expense) multiplied by 30%.

Question 36
Parental Company and Sub Company were combined in an acquisition transaction. Parental
was able to acquire Sub at a bargain price. The sum of the fair values of identifiable assets acquired less the fair
value of liabilities assumed exceeded the cost to Parental. After eliminating previously recorded goodwill, there
was still some "negative goodwill." Proper accounting treatment by Parental is to report the amount asu An
an ordinary gain

Next 4 questions:
On December 31, 2013, SCO net income was Php 105,000 and declared dividend of P36,000 for PCO but paid
only P30,000. PCO reported separate inome of P285,000, DIVIDEND paid P138,000. Good will have been
impaired and should be reported only P6,000 on December 31, 2013.
Compute the following:

Question 37
Consolidated Net Income attribute to Parent
P 340,200

Question 38
Consolidated Net Income attribute to NCI
13,800

Question 39
Retained Earnings at the end of the year.
1,762,200

Question 40
NCI at consolidated financial position at year end.
166,800

Next 4 questions:
On January 2, 2013 DCO purchased 80% of CCO”s outstanding stock for P 4,750,000. NCI is measured using
fair value. On that date the following information is available; CCO had ordinary share capital P4,000,000
retained earnings, P1,600,000
C’s equipment with remaining useful life of 5 years had a book value of P 2,250,000, fair value P 2,630,000. All
other remaining assets have BV equal to FV.
ALL INTANGIBLE ASSETS except goodwill are having estimated life of 8 years.
DCO net income for 2013 and 2014 ARE P 900,000 & P 1,100,000 RESPETIVELY
SCO net income for 2013 and 2014 ARE P 340,000 & P 510,000 RESPECTIVELY
DCO DIVIDENDS for 2013 and 2014 ARE P 220,000 & P 390,000 RESPECTIVELY
SCO DIVIDENDS for 2013 and 2014 ARE P 70,000 and P 130,000 RESPECTIVELY
DCO’s retained earnings on the date of acquisition was P 3,450,000
Compute the following:

Question 41
Consolidated Profit in 2014
1,430,000

Question 42
NCI in net asset 2014.
1,295,600

Question 43
Consolidated Retained earnings attributable to parent 2014.
5,272,400

Question 44
Parent’s share in the adjusted undistributed earnings of CCO in 2013.
155,200

Next 2 questions:
POCO acquired 80% of the outstanding share of SOCO for P 586,250 on June 1, 2013. NCI is measured at fair
value in the amount of P 117,500.

SOCO’S SHAREHOLDER’S EQUITY (at the end of this year) – ORDINARY SHARE (P 100 PAR), P
250,000; APIC, P 112,500; RETAINED EARNINGS, P 222,500. All of the BV of assets of SSOCO were equal
to FV ecept inventories which is overstated by P 11,000 and equipment which understated by P 15,000 with a
remaining useful life of 4 years,

Both companies use straight line method of depreciation and amortization. The shareholder’s equity of POCO
on January 1, 2013 is composed of Ordinary Share P 750,00, Share premium P 175,000, Retained Earnings P
525,000.

Any goodwill is to be written off by P 14,225 at year end.

Net income of the parent and subsidiary for the first year (from the date of acquisition) are P 75,000 and P
42,500 respectively. Dividends declared of the parent and subsidiary at the end of the year are P 20,000 and P
15,000 respectively. There was no additional issuance of share during the year.

Compute the following:

Question 45
NCI in Net Asset at the end of 2013.
P 124,242.50

Question 46
Consolidated shareholder’s equity for 2013.
P 1,644,587.50

Next 4 questions:
On January 2, 2012, POO Inc. purchased 90% of the outstanding shares of WITY CO. at book value. During the
2012 and 2013, the intercompany sales amounted to P 2,000,000 and P 4,000,000 respectively. POO
consistently recognized 25% mark up based on cost while WITY recognized 25% profit based on sales. The
inventories of the buying affiliate which all came from intercompany sales transaction show:

December 2012 December 2013

POO INC. P 240,000 P 160,000
WITY CO. 100,000 40,000

On October 1, 2012 WITY CO. purchased land from POO costing P 1,000,000 for P 1,500,000. WITY sold this
land to outside party by P 1,500,000 on December 1, 2013. On July 1, 2013, the other hand, WITY sold used
photocopy equipment with a carrying value of P 60,000 with a remaining life of 3 years to POO for P 42,000.

Separate comprehensive income for the two companies for 2013 shown below:

POO INC. WITY CO.

SALES P 25,000,000 P 14,000,000
COST OF SALES (15,000,000) (8,400,000)
GROSS PROFIT P 10,000,000 P 5,600,000
OPERATING EXPENSES (6,000,000) (3,800,000)
OPERATING PROFIT P 4,000,000 P 1,800,000
LOSS ON SALE OF OFFICE EQUIPMENT (18,000)
DIVIDEND REVENUE 40,000
NET INCOME P 4,000,000 P 1,822,000

Compute the following amounts for/as of December 31, 2013

Question 47
Consolidated income attributable to parent
6,813,300

Question 48
Consolidated operating expense.
9.788M

Question 49
NCI net income.
185,700

Question 50
Compute for consolidated gross profit.
15.632M