Chapter 11 17

Problem 12-1
Home Office Books Branch Books
1. Investment in branch 30,000 Cash 30,000

Cash 30,000 Home office 30,000
2. Investment in branch 75,000 Shipment from home office 75,000

Shipment to branch 75,000 Home office 75,000
3. No entry Purchases 10,000

Accounts payable 10,000
4. No entry Accounts receivable 125,000

Sales 125,000
5. Shipment to branch 2,000 Home office 2,000

Investment in branch 2,000 Shipment from home office 2,000
6. No entry Cash 105,000

Accounts receivable 105,000
7. No entry Accounts payable 7,000

Cash 7,000
8. No entry Salaries 10,000

Rent 5,000
Utilities 2,000
Other operating expenses 12,000
Cash 29,500
9. Investment in branch 7,500 Depreciation 1,500

Accumulated dep’n 7,500 Rent 5,000
Insurance 1,000
Home office 7,500
10. Cash 65,000 Home office 65,000

Investment in branch 65,000 Cash 65,000
11. Cash 3,000 Home office 3,000

Investment in branch 3,000 Accounts receivable 3,000
12. Investment in branch 10,000 Sales 125,000

Branch income 10,000 Inventory, end 5,000
Shipment from HO 73,000
Purchases 10,000
Salaries 10,000
Rent 10,000
Utilities 2,000
Other operating expenses 12,500
Home office 10,000
Problem 12-2
a. Books of the Branch

1. Cash 200,000
Merchandise inventory 350,000
Home office 550,000
1
2. Merchandise inventory 400,000
3. Accounts receivable 650,000

Sales 650,000
Cost of goods sold 425,000

Cash 600,000
4. Advertising expense 40,000

Sales commission 65,000
Other expense 45,000
Cash 150,000
5. Accounts payable 370,000

Home office 120,000
Cash 490,000
b. Manila Sales – Naga Branch

Income Statement
Year Ended December 31, 2008
Sales P650,000
Gross profit 225,000
Expenses:
Advertising expense P40,000
Sales commissions 65,000
Other expenses 45,000 150,000
Net income P 75,000
c. Manila Sales – Naga Branch

Balance Sheet
December 31, 2008
Cash P160,000 Accounts payable P 30,000

Accounts receivable 50,000 Home office 505,000
Total assets P535,000 Total liabilities and capital P535,000
Problem 12-3

(1) Adjusting Entries
a. Investment in branch 63,750 Cash 63,750

b. Investment in branch 75,300 Shipment from HO 75,300

c. Accounts receivable 157,500 Accounts receivable 99,000

Sales 157,500 Sales 99,000
d. Purchases 183,750 Purchases 33,750

Accounts payable 183,750 Accounts payable 33,750
2
e. Cash 170,400 Cash 80,100
Accounts receivable 170,400 Accounts receivable 80,100
Home office 80,100

Cash 80,100
f. Accounts payable 186,000 Accounts payable 18,375

Cash 186,000 Cash 18,375
g. Expenses 39,900 -
Cash 39,900
Furniture & fixtures – branch 12,000 Home office 12,000

h. Cash 80,100 -
Investment in branch 80,100
Expenses 27,000
Cash 27,000
i. Retained earnings 15,000

Cash 15.000
j. Expenses 1,750
Acc. Depreciation 1,750
k. Investment in branch 975 Expenses 975

Acc. Dep’n – Br. F & F 975 Home office 975
l. Prepaid expenses 375 Prepaid expenses 1,125

Expenses 375 Expenses 1,125
m. Expenses 150 Expenses 450

Accrued expenses 150 Accrued expenses 450
Closing Entries
n. Sales 157,500 Sales 99,000

Shipments to branch 75,300 Merchandise inv., 12/31 35,250
Merchandise inv., 12/31 72,750 Income summary 2,100
Merchandise inv. 1/1 60,180 Purchases 33,750
Purchases 183,750 Shipment from HO 75,300
Expenses 41,445 Expenses 27,300
Income summary 20,175
o. Branch loss 2,100 Home office 2,100

Investment in branch 2,100 Income summary 2,100
p. Income summary 2,100

Branch loss 2,100
q. Income summary 18,075

Retained earnings 18,075
3. Individual Financial Statements
3
Cebu Company – Home Office
Income Statement
Sales P157,500
Cost of sales
Merchandise inventory, 1/1 P 60,180
Purchases 183,750
Goods available for sale P243,930
Shipment to branch ( 75,300)
Goods available for own sale P168,630
Merchandise inventory, 12/31 ( 72,750) 95,880
Gross profit P 61,620
Expenses 41,445
Net operating income P 20,175
Branch income (loss) ( 2,100)
Net income P 18,075
Cebu Company – Branch

Income Statement
Sales P 99,000
Cost of sales
Purchases P 33,750
Shipments from home office 75,300
Merchandise inventory, 12/31 35,250 73,800
Expenses 27,300
Net income (loss) P( 2,100)
Cebu Company – Home Office

Balance Sheet
December 31, 2008
Assets
Cash P 34,800
Merchandise inventory, 12/31 72,750
Prepaid expenses 3,075
Furniture and fixtures P30,000
Less: Accumulated depreciation 8,370 21,630
Branch furniture and fixtures P12,000
Less: Accumulated depreciation 975 11,025
Total assets P217,680
Liabilities and Stockholders’ Equity

Liabilities
Accrued expenses P 2,025
Total liabilities P 33,975
Stockholders’ Equity
Capital stock P 75,000
Retained earnings 108,705 183,705
Total liabilities and stockholders’ equity P217,680
Cebu Company – Branch

Balance Sheet
4
December 31, 2008
Assets
Cash P 6,375
Merchandise inventory, 12/31 35,250
Liabilities and Capital

Accounts payable P 450
Home office 15,375
Total liabilities and capital P61,650
4. Combined Financial Statements

Cebu Company
Combined Income Statement
Sales P256,500
Cost of sales
Merchandise inventory, 1/1 P 60,180
Purchases 217,500
Merchandise inventory, 12/31 108,000 169,680
Expenses 68,745
Combined net income P 18,075
Cebu Company
Balance Sheet
December 31, 2008
Assets
Cash P 41,175
Furniture and fixtures P42,000
Less: accumulated depreciation 9,345 32,655

Accrued expenses P 2,475
Capital stock 75,000
Problem 12-4
Branch Books Home Office Books

(a) and (b) Closing Entries
Sales 145,000 Sales 560,000

Inventory, 12/31 60,000 Inventory, 12/31 90,000
Inventory, 1/1 18,000 Shipments to branch 145,000
Shipments from HO 145,000 Inventory, 1/1 45,000
Expenses 20,000 Purchases 540,000
Income summary 23,000 Expenses 90,000
5
Income summary 22,000 Investment in branch 22,000
Home office 22,000 Branch income 22,000
Branch income 22,000


© CG Corporation
Combined Statement Working Paper
Eliminations
Income
Home Statement Balance
Office Branch Debit Credit Dr (Cr) Sheet
Debits
Cash 36,000 7,000 43,000
Accounts receivable 54,000 29,000 83,000
Inventory, 1/1 45,000 18,000 63,000
Investment in branch 70,000 (2) 70,000
Equipment (net) 95,000 95,000
Purchases 540,000 540,000
Shipments from HO 145,000 (1)145,000
Expenses 90,000 20,000 110,000
Total debits 930,000 219,000
Inventory 12/31 (BS) 150,000

Total assets 371,000
Credits
Accounts payable 27,000 4,000 31,000
Home Office 70,000 (2) 70,000
Capital stock 54,000 54,000
Retained earnings, 1/1 144,000 144,000
Sales 560,000 145,000 (705,000)
Shipments to branch 145,000 (1)145,000
Total credits 930,000 219,000
Inventory, 12/31 (IS) 90,000 60,000 (150,000)

215,000 215,000
Net income 142,000 142,000
Total liabilities & equity 371,000
1. To eliminate shipments to branch and shipments from HO

2. To eliminate reciprocal accounts.
Problem 12-5
(1) Oro Company

Working Paper for Combined Statements
6
Income
Home Eliminations Statements Balance
Office Branch Debit Credit Dr (CR) Sheet
Debits
Cash 63,000 21,900 84,900
Notes receivable 10,500 10,500
Accounts receivable (net) 120,600 55,950 176,550
Inventories 143,700 36,300 (2)135,000 45,000
Furniture & fixtures (net) 72,150 72,150
Investment in Branch 124,050 (1)124,050
Cost of goods sold 300,750 128,700 (2)135,000 564,050
Operating expenses 104,250 32,850 137,100
Totals 939,000 275,700 389,100
Credits
Accounts payable 61,500 61,500
Common stock 300,000 300,000
Home Office 124,050 (1)124,050
Sales 540,000 151,650 (691,650)
Totals 939,000 275,700 289,050 289,050
Net Income 9,900 (9,900)

389,100
(1) To eliminate shipments
(2) To eliminate reciprocal accounts.
Closing Entries
2. Branch Books 3. Home Office Books
Sales 151,650
Income Summary 9,900
Operating expenses 32,850
Home Office 9,900 Branch loss 9,900

Income summary 9,900 Investment in Branch 9,900

Branch loss 9,900
Problem 12-6
a. Investment in Branch account (Home Office Books)

Unadjusted balance P138,200
Error in recording cash transfer, April 8 ( 45,000)
Cash transfer recorded in subsequent year, Dec. 31 ( 15,000)
Error in recording allocated depreciation, Dec. 31 6,000
Adjusted balance P 84,200
Home Office account (Branch Books)

Unadjusted balance P(93,000)
Error in recording salary allocation, April 5 ( 200)
Error in recording inventory transfer, July 6 12,000
Unrecorded allocated depreciation, Dec. 31 ( 3,000)
Adjusted balance P(84,200)
7
b. Adjusting Entries

Other income 45,000 Salary expense 200
Investment in branch – Home office 200
Rizal 45,000

Investment in branch- Shipments from HO 12,000
Rizal 15,000
Investment in branch 6,000 Depreciation expense 3,000

Accumulated dep’n 6,000 Home office 3,000
Problem 12-7
a. Investment in Branch account (Home Office Books)

Unadjusted balance, Dec. 31 P166,400
Cash remittance in transit (30,000)
Merchandise returns in transit (12,000)
Adjusted balance, Dec. 31 P124,400
Home Office account (Branch Books)

Unadjusted balance, Dec. 31 P103,200
Error in recording expense 7,200
Shipment in transit 24,000
Supplies charged to branch 8,000
Collection of branch receivable ( 18,000)
Adjusted balance, Dec. 31 P124,400
b. Adjusting Entries
Cash 30,000 Shipment from HO 24,000
Shipment to branch 12,000 Supplies 8,000
Investment in branch 42,000 Expenses 7,200
Home office 21,200
Problem 12-8
(1) Reconciliation Statement

(Home Office Books) (Branch Books)
Investment in Branch Home Office
Unadjusted balances, 1/31 P59,720 P 43,268

Advertising charged to branch 480
Home office AR collected by branch 600
Shipment in transit ( 180)
Error in recording receipt of merchandise ( 432)
Understatement of depreciation (12,800)
Remittance in transit, 1/31 P47,088 P 47,088

Retained earnings 432 Advertising 480
Cash 12,800 Shipments from HO 3,520
Accounts receivable 600 Shipment from HO 180
Investment in branch 12,632 Home office 3,820
8
Problem 12-9
(1) Branch Books
Adjusting Entries
Shipment from home office 57,600

Operating expenses (P4,200 + P3,900) 8,100
Home office 65,700
Closing Entries
Sales 778,200
Inventory, 12/31 (P64,580 + P57,600) 122,180
Inventory, 1/1 47,800
Shipment from HO (P623,200 + P57,600) 680,800

Home office 116,900
(2) Home Office Books
Accounts receivable 470

Investment in branch 330
Cash (P20,000 + P19,200) 800

Branch income 116,900
(3) Reconciliation Statement

(Investment in Branch) (Home Office)
Unadjusted balances, 12/31 P 206,344 P 140,974
Error in recording remittance to branch 20,000
Shipment in transit 57,600
Expenses charged to branch 8,100
Branch net income 116,990 116,990
Freight erroneously charged to branch ( 470)
Cash remittance in transit to HO ( 19,200)
Adjusted balances, 12/31 P 323,664 P 323,664
Problem 12-1111
a. P 2,000
Sales (P 27,000 + P 33,000 + P 26,000) …………………. P 86,000

Cost of Goods Sold (P 36,000 + P 18,000) ………………. (54,000)
Gross Profit ……………………………………………… P 32,000
Rent Expense …………………………………………….. P 4,000
Property Tax Expense …………………………………… 5,000 Depreciation
Expense …………………………………… 4,000
Miscellaneous Expense …………………………………. 11,000
General Corporate Expense ……………………………… 6,000 (30,000)
Net Income ……………………………………………… P 2,000
b. P 180,000
9
Initial Transfers …………………………………………. P 188,000
June Inventory Shipment ……………………………….. 18,000
Property Tax Payment ………………………………….. 5,000
September Inventory Shipment ………………………… 26,000
Expense Allocation …………………………………….. 6,000
Cash Transfer …………………………………………... (63,000)
Balance in Home Office/Branch Accounts (correct) ….. P 180,000
c. Journal Entries – Tarlac Branch
1/10/08 Cash …………………………………. 30,000

Inventory ……………………………. 36,000
Equipment …………………………… 122,000
Home Office …………………… 188,000
1/20/08 Rent Expense ………………………… 4,000
Cash ……………………………. 4,000
2/1/08 Cash ………………………………….. 27,000
Sales …………………………… 27,000
Cost of Goods Sold ………………….. 18,000
Inventory ………………………. 18,000
4/1/08 Cash …………………………………. 33,000
Sales …………………………... 33,000
Cost of Goods Sold …………………. 18,000
Inventory ……………………… 18,000
5/1/08 Miscellaneous Expenses ……………. 7,000
Cash …………………………... 7,000
6/5/08 Inventory ……………………………. 18,000
Home office …………………... 18,000
7/6/08 Property Tax Expense ………………. 5,000
Home Office ………………….. 5,000
9/9/08 Inventory …………………………… 26,000
Home Office …………………. 26,000
10/1/08 Cash ………………………………… 26,000
Sales …………………………. 26,000
Cost of Goods Sold ……………….. 18,000
Inventory …………………….. 18,000
11/1/08 Miscellaneous Expenses …………... 4,000
Cash …………………………. 4,000
12/22/08 Home Office ……………………… 63,000
Cash …………………………. 63,000
12/31/08 Depreciation Expense ……………. 4,000
Accumulated depreciation ….. 4,000
12/31/08 General Corporate Expenses ……… 6,000
Home Office ………………….. 6,000
d. TARLAC BRANCH
Balance Sheet
December 31, 2008
Assets
Cash ……………………………………………. P 38,000
Inventory ………………………………………. 26,000
Equipment ……………………………………... P 122,000
Accumulated Depreciation ……………………. (4,000) 118,000
Total Assets …………………………… P 182,000
Equity
Home Office* ………………………………….. P 182,000
*Home office balance is P 180,000 as computed in Part b plus the P 2,000 net income for the period.
10
Problem 13-1
(a) Journal Entries
(1) Investment in branch 18,000 Equipment 18,000

(2) Investment in branch 3,000 Rent expense 3,000

(3) Investment in branch 100,000 Shipment from HO 100,000

Allowance for over-
Valuation 20,000
(4) No entry Operating expenses 11,000

Cash 11,000
Cash 105,000
Sales 105,000
(5) Cash 60,000 Home office 60,000

(b) Working Paper Elimination Entries
(1) Home office 61,000

To eliminate reciprocal accounts computed
as follows:
Equipment purchased P 18,000
Rent paid 3,000
Inventory shipped 100,000
Cash transfer ( 60,000)
Balance P 61,000
(2) Shipment to branch 80,000

Allowance for overvaluation of branch inventory 20,000
To eliminate inter-company shipments
(3) Inventory, 12/31 (Income statement) 5,000

Inventory, 12/31 (Balance Sheet) 5,000
To reduce inventory, 12/31 to cost.
(c) Closing Entries – Branch Books
Sales 105,000
Inventory, 12/31 25,000
Rent expense 3,000

Home office 16,000
11
Problem 13-2
a. Branch Books
- Equipment 50,000
Cash 10,000
Home office 120,000
- Purchases 30,000
Cash or accounts payable 30,000
- Prepaid rent 10,000

Home office 10,000
- Cash 40,000
Sales 90,000
- Advertising expense 8,000

Salary expense 5,000
Cash 13,000
- Home office 10,000

Cash 10,000
- Home office 3,000

- Rent expense 5,000

Prepaid rent 5,000
Home Office Books
- Investment in branch 120,000

Equipment 50,000
Shipment to branch 40,000
Allowance for overvaluation of branch inventory 20,000
Cash 10,000
To record assets sent to branch
- Investment in branch 10,000

Cash 10,000
To record rent expense of the branch
- Cash 10,000
To record cash remittance from branch
- Cash 3,000
To record collection of branch receivable.
b. Income Statement
Sales P90,000
Cost of goods sold
Shipment from home office – at cost P40,000
Purchases 30,000
Goods available for sale 70,000
Ending inventory:
12
From home office (1/3) P13,333
From outsiders (1/4) 7,500 (20,833) 49,167
Gross profit P40,833
Expenses:
Advertising expense P 8,000
Salary expense 5,000
Rent expense 5,000 18,000
Net income P22,833
Problem 13-3
a. Investment in Branch account – beginning balance P 86,000

Inventory transfer 34,500
Rent allocated 1,000
Expenses allocated 3,000
Transportation allocated 3,000
Unadjusted balance – Investment in Branch account P141,500
b. Home Office account – beginning balance P 54,000

Rent allocated 1,000
Expenses allocated 3,000
Inventory transfer (error made) 64,000
Home Office account – unadjusted balance P 82,500
c. Reconciliation Statement
Investment in Branch Home Office
Unadjusted balances, 1/31 P141,500 P 82,500
Unrecorded cash transfer ( 74,000)
Error in recording transfer (overstated) 18,000
Expense allocation not recorded ( 3,000)
Adjusted balances, 1/31 P 67,500 P 67,500
Problem 13-4
a. Books of Branch X

Freight-in 300
Home office 5,300
Home office 5,800

Shipment from office 5,800
b. Books of Branch Y

Freight-in 600
Home office 5,600
c. Books of the Home Office
Investment in branch – X 5,300

Shipment to branch – X 5,000
Cash 300
Investment in branch – Y 5,000

Inter-branch freight expense 600
Investment in branch – X 5,600
13
Shipment to branch – X 5,000
Shipment to branch – Y 5,000
Malakas Company
Combination Worksheet
Adjustments and Income Retained

Eliminations Statement Earnings Balance
Malakas Davao Debit Credit Dr (Cr) Dr (Cr) Sheet
Debits
Cash 25,000 18,000 43,000
Inventory, 12/31 209,000 42,000 (4) 14,000 (5) 16,000 249,000
Investment in branch 207,000 - (7)207,000
Land, bldg, and 340,000 112,000 452,000
equipment
Shipment from office - 96,000 (3) 14,000 (6)110,000
Purchases 348,000 - 348,000
Depreciation expense 25,000 8,000 33,000
Advertising expense 36,000 15,000 (1) 9,000 60,000
Rent expense 12,000 5,000 (1) 6,000 23,000
Miscellaneous expense 40,000 20,000 (1) 2,000 62,000
Inventory, 1/1 175,000 35,000 (2) 10,000 200,000
Total debits 1,525,000 376,000 877,000
Credits
Accumulated 80,000 16,000 96,000
depreciation
Notes payable 220,000 - 220,000
Home office - 176,000 (7)207,000 (1) 17,000 -
(3) 14,000
Common stock 100,000 - 100,000
Retained earnings, 1/1 240,000 - (2) 10,000 (230,000)
Sales 529,000 127,000 (655,000)
Shipment to branch 110,000 - (6)110,000
Inventory, 12/31 209,000 42,000 (5) 16,000 (4) 14,000 (249,000)
Combined net income (179,000) (179,000)
Combined retained (409,000) (409,000)

earnings
Totals 1,525,000 376,000 388,000 877,000

388,000
Adjustments and Elimination Entries
(1) Advertising expense 9,000

Rent expense 6,000
Miscellaneous expenses 2,000
Home office 17,000
Unrecorded expenses allocated to the branch
(2) Retained earnings, 1/1 10,000

Inventory, 1-1 10,000
To eliminate unrealized inventory profit of preceding year
14
(3) Shipment from home office 14,000
Home office 14,000
Unrecorded shipments
(4) Inventory, 12/31 (debits) 14,000

Inventory (credits) 14,000
Shipment not yet received by the branch
(5) Inventory, 12/31 (debits) 16,000

Inventory (credits) 16,000
To reduce ending inventory to cost
(6) Shipment to branch 110,000

To eliminate inter-company shipments

To eliminate reciprocal accounts
Problem 13-6
a. Eliminating Entries

Investment in branch – Silver 395,000

Investment in branch – Opal 260,000
(3) Unrealized intra-company profit – Silver 20,000

Unrealized intra-company profit – Opal 16,000
Inventory – from home office 36,000
(4) Inventory 90,000

Inventory – from home office 90,000
(5) Unrealized intra-company profit – Silver 40,000

Equipment 40,000
Ginto Company
Balance Sheet Working Paper
December 31, 2008
Home Silver Opal Eliminations

Office Branch Branch Debit Credit Combined
Cash 81,000 20,000 15,000 116,000
Accounts receivable 100,000 40,000 25,000 165,000
Inventory 260,000 50,000 44,000 (4) 90,000 444,000
Inventory – from home office 70,000 56,000 ( 3)
36,000
(4) 90,000
Land 70,000 30,000 20,000 120,000
Buildings and equipment 700,000 350,000 200,000 (5) 40,000 1,210,000
Investment in branch – Silver 395,000 (1)395,000
Investment in branch – Opal 260,000 (2)260,000
Total debits 1,866,000 560,000 360,000 2,055,000
Accumulated depreciation 280,000 120,000 80,000 480,000

15
Accounts payable 110,000 45,000 20,000 175,000
Bonds payable 400,000 400,000
Common stock 300,000 300,000
Home office - 395,000 260,000 (1)395,000
(2)260,000
Unrealized intra-company profit
Silver 60,000 (3) 20,000
(5) 40,000
Opal 16,000 (3) 16,000
Total credits 1,866,000 560,000 360,000 821,000 2,055,000
821,000
b. Ginto Company
Combined Balance Sheet
December 31, 2008
Assets
Cash P 116,000
Inventory 444,000
Land 120,000
Buildings and equipment P1,210,000
Total assets P1,575,000

Liabilities
Accounts payable P 175,000
Bonds payable 400,000
Total liabilities P 575,000
Common stock P 300,000
Retained earnings 700,000 1,000,000
Total liabilities and stockholders’ equity P1,575,000
Problem 13-7
a. Books of Branch P

Freight-in 50
Home office 8,050
Home office 8,120

Freight-in 50
Cash 70
b. Books of Branch Q

Freight-in 80
Home office 8,080
c. Books of Home Office
Investment in branch – P 8,050

Shipment to branch – P 8,000
Cash 50
16
Investment in branch – Q 8,080
Inter-branch freight expense 40
Investment in branch – P 8,120
Shipment to branch - P 8,000

Shipment to branch – Q 8,000
Problem 13-8
Debits:
Cash = P36,000 (add the book values and include the P9,000 transfer in transit)
Accounts receivable = P118,000
Inventory, 12/31 = P151,000 (branch balance would be P81,000 when the shipment in transit is
included. This balance must be adjusted to cost of P54,000
(P81,000 ÷ 150%) and then add to home office balance of P97,000.
Investment in branch = 0 (eliminated)
Land, buildings and equipment = P460,000
Shipment from home office = 0 (eliminated)
Purchases = P429,000
Depreciation expense = P28,000 (add the two book values and the year-end allocation)
Advertising expense = P58,000 (add the two book values and the year-end allocation)
Rent expense = P30,000 (add the two book values and the year-end allocation)
Miscellaneous expense = P100,000 (add the two book values and the year-end allocation)
Inventory, 1/1 = P145,000 (branch balance is adjusted to cost of P24,000 (P36,000 / 150%),
and then added to home office balance.
Total debits = P1,555,000 (add the above totals)
Credits
Accumulated depreciation = P108,000
Accounts payable = P104,000
Notes payable = P180,000
Home office = 0 (eliminated)
Common stock = P60,000 (home office balance)
Retained earnings, 1/1 = P248,000 (home office balance after reduction of P12,000 unrealized
profit in beginning inventory of branch. Cost is P24,000
(P36,000 / 150%) which indicates the P12,000 unrealized.
Sales = P704,000
Shipment to branch = 0 (eliminated)
Inventory, 12/31 = P151,000
Total credits = P1,555,000 (add the above totals)
Reconciliation Statement
Investment in Branch account balance (Home office books) P177,000
Unrecorded cash transfer ( 9,000)
Adjusted balance P168,000
Home Office account balance (Branch books) P123,000

Inventory transfer in transit 21,000
Expense allocated not yet recorded 24,000
Adjusted balance P168,000
Problem 13-9
Home Office Books

Case A Case B Case C
(1) Investment in branch 60,000 75,000 90,000
Shipment to branch 60,000 60,000 60,000
Unrealized inventory profit - 15,000 30,000
(2) Cash 61,200 61,200 61,200

Investment in branch 61,200 61,200 61,200
17
Closing entries:
(3) Sales 130,000 130,000 130,000
Inventory, 12/31 8,000 8,000 8,000
Shipment to branch 60,000 60,000 60,000
Purchases 150,000 150,000 150,000
Expenses 17,200 17,200 17,200
Income summary 30,800 30,800 30,800
(4) Investment in branch 13,000
Branch income summary 13,000
Branch income summary 500 14,000
Investment in branch 500 14,000
Unrealized inventory profit 13,500 27,000

Branch income summary 500 14,000
Income summary 13,000 13,000
Income summary 43,800 43,800 43,800

Retained earnings 43,800 43,800 43,800
Ilocos Branch Books
Case A Case B Case C
(1) Shipment from home office 60,000 75,000 90,000

Home office 60,000 75,000 90,000
(2) Accounts receivable 81,000 81,000 81,000

Sales 81,000 81,000 81,000
(3) Cash 64,000 64,000 64,000

(4) Expenses 14,000 14,000 14,000

Cash 14,000 14,000 14,000
(5) Home office 61,200 61,200 61,200

Cash 61,200 61,200 61,200
Closing entries
(6) Sales 81,000 81,000 81,000

Inventory 12/31 6,000 7,500 9,000
Shipment from HO 60,000 75,000 90,000
Expenses 14,000 14,000 14,000
Income summary 13,000 500 14,000
(7) Income summary 13,000

Home office 13,000
Home office 500 14,000

Income summary 500 14,000
18
Working Paper for Combined Financial Statements
December 31, 2008
Eliminations
Home Office Branch Debit Credit Combined
Income Statement
Sales 130,000 81,000 211,000
Merchandise inventory, 12/31 8,000 9,000 (3) 3,000 14,000
Shipment to branch 60,000 (2) 60,000 -
Total credits 198,000 90,000 225,000
Shipment from home office 90,000 (2) 90,000 -

Purchases 150,000 150,000
Expenses 17,200 14,000 31,200
Total debits 167,200 104,000 181,200
Net income(loss) carried forward 30,800 (14,000) 43,800
Retained Earnings Statement

Net income (loss) from above 30,800 (14,000) 43,800
Retained earnings, 12/31 -
Carried forward 30,800 (14,000) 43,800
Balance Sheet
Cash (overdraft) 39,000 (11,200) 27,800
Merchandise inventory, 12/31 8,000 9,000 (3) 3,000 14,000
Investment in branch 28,800 (1) 28,800 -
Total debits 120,800 14,800 103,800
Accounts payable 20,000 20,000

Unrealized inventory profit 30,000 (2) 30,000 -
Retained earnings, from above 30,800 (14,000) 43,800
Home office 28,800 (1) 28,800 -
Total credits 120,800 14,800 121,800 121,800 103,800
Problem 13-10
(1) Consolidated Working Paper
Home Adj. & Income Balance

Elim.
Office Branch A Branch B (dr) Cr Statement Sheet
Debits
Cash 33,000 22,000 13,000 68,000
Inventories 70,000 21,000 15,000 A (12,000)
B 8,000 110,000
Other current assets 50,000 25,000 23,000 98,000
Investment in Branch A 45,000 D 45,000
Investment in Branch B 42,000 D 42,000
Cost of sales * 80,000 57,000 45,000 B (8,000) (165,000)
C 25,000
Expenses 90,000 25,000 20,000 (135,000)
410,000 150,000 116,000 276,000
Credits
Current liabilities 40,000 15,000 11,000 66,000
Retained earnings, Jan. 1 50,000 50,000
19
Home Office 45,000 30,000 A 12,000
D (87,000)
Allow. for overvaluation of
Branch inv. – Branch A 13,000 C (13,000)
Allow. for overvaluation of
Branch inv. – Branch B 12,000 C (12,000)
Sales 195,000 90,000 75,000 360,000
410,000 150,000 116,000
Net income 60,000 60,000
276,000
 Book value of cost of sales from home office and branches
Investment in Investment in
Home Office Branch A Branch B
Inventory, January 1, P 80,000 P 18,000 P24,000

Purchases 160,000
Shipment to branch ( 90,000)
Shipment from home office 60,000 36,000
Goods available for sale P150,000 P 78,000 P 60,000
Inventory, Dec. 31 ( 70,000) ( 21,000) (15,000)
Cost of sales P 80,000 P 57,000 P 45,000
(2) Reconciliation of Home Office and Investment in Branch accounts.
Books of Home Office Books of Books of

Investment Investment Branch A Branch B
In Branch A In Branch B Home Office Home Office
Unadjusted balances, Dec.31 P 45,000 P 42,000 P 45,000 P 30,000
Shipments in transit to Branch B 12,000
Branch Profit (Schedule 1) 8,000 10,000 8,000 10,000
Adjusted balances, December 31 P 53,000 P 52,000 P 53,000 P 52,000
Schedule 1:
Branch A Branch B
Sales P90,000 P75,000
Cost of sales:
Beginning inventory P18,000 P24,000
Shipment from home office 60,000 48,000
Goods available for sale 78,000 72,000
Ending inventory 21,000 27,000
Cost of sales 57,000 45,000
Gross profit 33,000 30,000
Expenses 25,000 20,000
Net profit P 8,000 P10,000
20
Problem 14-1
1. Books of Big Corporation

(a) To record acquisition of net assets of Small:
Inventories 140,000
Property, plant and equipment 300,000
Current liabilities 50,000
Income from acquisition 10,000
Cash 500,000
(b) To record acquisition-related costs:

Acquisition expense 5,000
Cash 5,000
Computation of Income from Acquisition:

Price paid P500,000
Less: Fair value of net identifiable assets acquired:
Accounts receivable P120,000
Inventories 140,000
Current liabilities ( 50,000) 510,000
Income from acquisition P( 10,000)
2. Books of Small Corporation

(a) To record the sale of net assets to Big:
Cash 500,000
Inventories 100,000
(b) To record liquidation of the corporation:

Common stock 200,000
Cash 500,000
Problem 14-2
(1) To record the acquisition of net assets:

Cash 50,000
Inventory 150,000
Building and equipment – net 300,000
Patent 200,000
Cash 565,000
Income from acquisition 105,000
Computation of Income from Acquisition

Price paid P565,000
Less: Fair value of net identifiable assets acquired
Accounts payable ( 30,000) 670,000
Income from acquisition P(105,000)
21
(2) To record acquisition-related costs:
Acquisition expenses 5,000
Cash 5,000
Problem 14-3
(1) To record acquisition of net assets:

Cash and receivables 50,000
Inventory 200,000
Building and equipment 300,000
Goodwill 40,000
Common stock, P10 par value 60,000
Additional paid-in capital 480,000
Computation of Goodwill
Price paid (6,000 shares x P90) P540,000
Less: fair value of net identifiable assets acquired
Accounts payable ( 50,000) 500,000
Goodwill P 40,000

Cash 40,000
Problem 14-4
Cash 60,000
Inventory 115,000
Land 70,000
Building and equipment 350,000
Bond discount 20,000
Goodwill 95,000
Bonds payable 200,000
Common stock, P10 par value 120,000
Purchase price (12,000 shares x P50) P600,000
Total liabilities ( 190,000) 505,000
Goodwill P 95,000
Additional paid in capital 18,000

Acquisition expense 10,000
Cash 28,000
22
Problem 14-5
1. Common stock:: P200,000 + (8,000 shares x P10) P280,000

2. Cash and receivables: P150,000 + P40,000 190,000
3. Land: P100,000 + P85,000 185,000
4. Building and equipment – net: P300,000 + P230,000 530,000
5. Goodwill: (8,000 shares x P50) - P355,000 45,000
6. APIC: P20,000 + (8,000 shares x P40) 340,000
7. Retained earnings 330,000
Problem 14-6
Combined Statement of Financial Position

After acquisition
Based on P40/share Based on P20/share

Cash and receivables P 350,000 P 350,000
Inventory 645,000 645,000
Building and equipment 1,050,000 1,050,000
Accumulated depreciation (200,000) (200,000)
Goodwill 180,000 -
Total assets P2,025,000 P1,845,000
Accounts payable P 140,000 P 140,000

Bonds payable 485,000 485,000
Common stock P10 Par value 450,000 450,000
Additional paid-in capital 550,000 250,000
Retained earnings(including income from acquisition) 400,000 520,000
Total liabilities and stockholders’ equity P2,025,000 P1,845,000
Computation of Goodwill – Based on P40 per share:

Less: Fair value of net identifiable assets (P545,000 – P125,000) 420,000
Goodwill P180,000
Computation of Income from Acquisition – Based on P20 per share:

Less: Fair value of net identifiable assets 420,000
Income from acquisition (added to retained earnings of Red) P(120,000)
Problem 14-7
(a) Combined Statement of Financial Position

January 1, 2011
ASSETS
Cash and receivables P 110,000
Inventory 142,000
Land 115,000
Plant and equipment P540,000
Goodwill 13,000
Total assets P 770,000
23
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities P 100,000
Capital stock, P20 par value 214,000
Capital in excess of par 216,000
Total liabilities and stockholders’ equity P 770,000
Problem 14-7, continued:

Price paid (700 shares x P300) P210,000
(P217,000 – P20,000) 197,000
Goodwill P 13,000
(b) Stockholders’ Equity section
(1) With 1,100 shares issued
Capital stock: P200,000 + (1,100 shares x P20) P222,000

Capital in excess of par: P20,000 + (1,100 x P280) 328,000
Total P790,000
Capital stock: P200,000 + (1,800 shares x P20) P 236,000

Total P1,000,000
Capital stock: P200,000 + (3,000 shares x P20) P260,000

Total P1,360,000
Problem 14-8
2010 (a) 2011 2012

Revenue P1,400,000 P1,800,000 (b) P2,100,000
Net income 500,000 545,000 © 700,000
Earnings per share P 5.00 P 4.84 (d) P 5.60 (e)
(a) Separate figures for Dollar Transport only.

(b) P2,000,000 – P200,000
(c) P620,000 - P55,000
(d) P545,000 / 112,000 shares (100,000 + 125,000) ÷ 2
(e) P700,000 / 125 shares
Problem 14-9
a. Books of Peter Industries:
24
Cash 28,000
Inventory 395,000
Long-term investments 175,000
Land 100,000
Rolling stock 63,000
Plant and equipment 2,500,000
Patents 500,000
Special licenses 100,000
Discount on equipment trust notes 5,000
Discount on debentures 50,000
Goodwill 109,700
Allowance for bad debts 6,500
Current payables 137,200
Mortgage payables 500,000
Premium on mortgage payable 20,000
Equipment trust notes 100,000
Debenture payable 1,000,000
APIC – common 2,340,000
Price paid (180,000 shares x P14) P2,520,000
Less: fair value of net identifiable assets acquired
Total assets P4,112,500
Total liabilities (1,702,200) 2,410,300
Goodwill P 109,700

Additional paid in capital 42,000
Cash 42,000
b. Books of HCC:
Common stock 7,500

APIC – Common 4,500
Treasury stock 12,000
To record retirement of treasury stock.
P7,500 = P5 x 1,500 shares
P4,500 = P12,000 – P7,500
Investment in stock - Peter 2,520,000

Allowance for bad debts 6,500
Accumulated depreciation 614,000
Current payable 137,200
Mortgage payable 500,000
Equipment trust notes 100,000
Debentures payable 1,000,000
Discount on bonds payable 40,000
Cash 28,000
Inventory 381,000
Long-term investments 150,000
25
Land 55,000
Rolling stock 130,000
Plant and equipment 2,425,000
Patents 125,000
Special licenses 95,800
Gain on sale of assets and liabilities 1,189,900
To record sale of assets and liabilities to Peter.

APIC – Common 495,500
APIC – Retirement of preferred 22,000
Retained earnings 1,410,000
Investment in stock – Peter 2,520,000
To record retirement of HCC stock and distribution of
Peter Industries stock:
P592,500 = P600,000 - P7,500
P495,500 = P500,000 – P4,500
P1,410,000 = P220,000 + P1,189,900
Problem 14-10
a. Increase in capital stock (P240,00 – P200,000) P 40,000

Increase in APIC (P420,000 – P60,000) 360,000
Value of shares issued P 400,000
b. Total assets after combination P1,130,000

Total assets of Subic before combination 650,000
Total fair value of assets of Clark before combination P 480,000
Total liabilities after combination P220,000

Total liabilities of Subic before combination (140,000) ( 80,000)
Fair value of Clark’s net assets (including goodwill) P 400,000
Less: Goodwill 55,000
Fair value of Clark’s net assets before combination P 345,000
c. Par value of common stock after combination P 240,000

Par value of common stock before combination 200,000
Increase in par value P 40,000
Divided by par value per share ÷ P5
Number of shares issued 8,000 shares
d. Value of shares computed in (a) P 400,000

Number of shares issued computed in © ÷ 8,000
Market price per share P 50
Problem 14-11
a. Inventory reported by Son at date of combination was P70,000

(325,000 – P20,000 – P55,000 – P140,000 – P40,000)
b. Fair value of total assets reported by Son:
Fair value of cash P 20,000

Fair value of accounts receivable 55,000
Fair value of inventory 110,000
26
Buildings and equipment reported following purchase P570,000
Buildings and equipment reported by Papa (350,000) 220,000
Fair value of Son’s total assets P405,000
c. Market value of Son’s bond:
Book value reported by Son P100,000

Bond premium reported following purchase 5,000
Market value of bond P105,000
d. Shares issued by Papa Corporation:
Par value of stock following acquisition P190,000

Par value of stock before acquisition (120,000)
Increase in par value of shares outstanding P 70,000
Divide by par value per share ÷ P5
Number of shares issued 14,000
e. Market price per share of stock issued by Papa Corporation
Par value of stock following acquisition P190,000

Additional paid-in capital following acquisition 262,000 P452,000
Par value of stock before acquisition P120,000

Additional paid-in capital before acquisition 10,000 (130,000)
Market value of shares issued in acquisition P322,000
Divide by number of shares issued ÷ 14,000
Market price per share P 23.00
f. Goodwill reported following the business combination:
Market value of shares issued by Papa P322,000

Fair value of Son’s assets P405,000
Fair value of Son’s liabilities:
Bond payable 105,000
Fair value of liabilities (135,000)
Fair value of Son’s net assets (270,000)
Goodwill recorded in business combination P 52,000
Goodwill previously on the books of Papa 30,000
Goodwill reported P 82,000
g. Retained earnings reported by Son at date of combination was P90,000

(P325,000 – P30,000 – P100,000 – P50,000 – P55,000)
h. Papa’s retained earnings of P120,000 will be reported.
i. 1. Acquisition expense 8,500

Cash 14,800
2. Goodwill previously computed (no changes) P82,000
3. Additional paid-in capital reported following combination P262,000

Stock issue costs (6,300)
27
Total additional paid-in capital reported P255,700
Problem 14-12
(1) Liability from contingent consideration 80,000

Loss on contingent payment 40,000
Cash 120,000
2 x (average income of P110,000 – P50,000) = P120,000
(2) Additional paid in capital 12,000

Common stock, P1 par 12,000
2 x (average income of P110,000 – P50,000) ÷ P10
(3) Additional paid in capital 100,000

Common stock, P1 par 100,000
Deficiency (P12 – P8) x 200,000 shares P800,000
Divided by fair value per share ÷ 8
Additional shares to be issued 100,000 shares
Problem 14-13
(1) To record the acquisition of net assets of Baby Company:
Current assets 256,000

Non-current assets 660,000
Goodwill 761,000
Non-current liabilities 440,000
Estimated liability for contingent consideration 75,000
Cash 400,000
Common stock, (15,000 shares x P4) 60,000
Additional paid in capital (15,000 shares x P36) 540,000
Goodwill computation:
Price paid:
Cash P 400,000
Common stock (15,000 shares x P40) 600,000
Contingent consideration (P100,000 x 75%) 75,000
Total price paid 1,075,000
Less: Fair value of net assets acquired
Current assets P 256,000
Non-current assets 660,000
Current liabilities ( 162,000)
Non-current liabilities ( 440,000) 314,000
Goodwill P 716,000
(2) Goodwill 15,000

Estimated liability for contingent consideration 15,000
(P100,000 x 90%) - P75,000
28
Problem 14-14
(1) Price paid P500,000

Less: Fair value of net assets acquired 400,000
Goodwill recorded P100,000
(2 – a) No, because the carrying amount of the net assets of the business is less
than the recoverable of the unit.
(2 – b) Yes.
Estimated recoverable amount of the unit P400,000

Carrying value of the unit, excluding goodwill 340,000
Implied fair value of the goodwill 60,000
Existing recorded goodwill (No. 1) 100,000
Estimated impairment loss P(40,000)
Entry:
Impairment loss 40,000
Goodwill 40,000
Problem 15-1
a. Investment in Solo Company stock 1,080,000

Cash 1,080,000
To record acquisition of 90%
of the outstanding shares of Solo.
Retained earnings – Polo Company 50,000

Cash 50,000
To record acquisition-related costs direct to
Retained earnings of Polo Company.
b. Working paper elimination entries:
(1) Common stock – Solo 400,000

Retained earnings – Solo 500,000
Investment in Solo company stock 810,000
Non-controlling interest 90,000
To eliminate Solo’s equity accounts at date of acquisition.
(2) Inventories 30,000

Plant assets 60,000
Goodwill 210,000
Investment in Solo company stock 270,000
To allocate excess
Determination and Allocation of Excess Schedule:
Total Parent (80%) NCI (10%)

Company fair value P1,200,000 P1,080,000 P120,000*
Less BV of interest acquired:
Total equity 900,000 P 900,000 P900,000
29
Interest aquired 90% 10%
Book value P 810,000 P 90,000
Excess P 300,000 P 270,000 P 30,000
Adjustments:
Inventory (30,000)
Plant assets (60,000
Goodwill P 210,000
* (P1,080,000/90%) x 10% = P120,000
Problem 15-2
a. Investment in Straw Company 600,000

Cash 600,000
To record acquisition of 100% of Straw stock.
b. Price paid P600,000

Less: Book value of interest acquired (100%) 420,000
Difference 180,000
Allocation (100%:
Inventories P( 40,000)
Land ( 80,000)
Building 150,000
Equipment ( 20,000)
Patents ( 20,000) ( 10,000)
Goodwill P170,000
c. Working paper elimination entries:
(1) Common stock – Straw 100,000

Retained earnings – Straw 320,000
Investment in Straw Company 420,000
To eliminate equity accounts of Straw at
date of acquisition.

Land 80,000
Equipment 20,000
Patents 20,000
Goodwill 170,000
Buildings 150,000
Investment in Straw Company 180,000
To allocate excess.
Problem 15-3
a. Investment in Soto Company 950,000

Cash 950,000
To record acquisition of 80% stock of Sotto.
Retained earnings – Pedro Company 80,000

Cash 80,000
To record acquisition costs.
b. Price paid by the Parent Company P950,000

Non-controlling interest (NCI) 230,000
30
Total 1,180,000
Less: Book value of net assets 900,000
Excess 280,000
Allocation:
Current assets P 50,000
Property and equipment (100,000)
Long-term debt ( 40,000) ( 90,000)
Goodwill P190,000
c. Working paper elimination entries:
(1) Common stock – Sotto 100,000

APIC – Sotto 200,000
Retained earnings – Sotto 600,000
Investment in Sotto stock 720,000
To eliminate equity accounts of Sotto at date of
acquisition.
(2) Property, plant and equipment 100,000

Goodwill 190,000
Long-term debt 40,000
Current assets 50,000
Investment in Sotto stock 230,000
To allocate excess
Problem 15-4
Paco Company and Subsidiary

Consolidated Statement of Financial Position
January 2, 2011
Current assets P475,000

Other assets 70,000
Current liabilities P280,000

Mortgage payable 85,000
Retained earnings (including gain on acquisition of P20,000) 200,000
Computation of income from acquisition:

Consideration given (20,000 shares x P6) P120,000
Less fair value of net assets:
Property and equipment 85,000
Other assets 40,000
Current liabilities (60,000)
Mortgage payable (25,000) 140,000
Gain on acquisition P(20,000)
31
Problem 15-5
The entry to record the acquisition of stock is as follows:
(a) Investment in Solo stock 250,000

Common stock, at par 100,000
To record acquisition of stock.
(b) Retained earnings – Polo 10,000

Cash 30,000
To record acquisition-related costs.
Palo Company and Subsidiary

December 31, 2011
Cash P 70,000
Receivables 120,000
Inventory 170,000
Property and equipment – net 340,000
Goodwill 20,000

Long-term liabilities 120,000
Additional paid-in capital (P20,000 + P150,000 – P20,000) 150,000
Retained earnings, 12/31 (P220,000 – P10,000) 210,000
Computation of goodwill:
Consideration given P250,000
Less fair value of net assets (P290,000 – 60,000) 230,000
Goodwill P 20,000
Problem 15-6
a. Investment in Seed Company 350,000
Cash 350,000
To record acquisition of 100% of Seed company stock.
Determination and Allocation of Excess schedule:

Price paid P350,000
Less: Book value of interest acquired 320,000
Excess 30,000
Allocation:
Inventory P(20,000)
Plant assets (80,000)
Long-term liabilities 40,000 (60,000)
Income from acquisition P(30,000)
b. Working paper elimination entries

(1) Common stock – Seed 100,000
Additional paid-in capital – Seed 40,000
Retained earnings – Seed 180,000
Investment in Seed stock 320,000
To eliminate equity accounts of Seed Company
32
(2) Inventory 20,000
Plant assets 80,000
Investment in Seed stock 30,000
Retained earnings – Pill (income from acquisition) 30,000
To allocate excess
Pill Corporation and Subsidiary

Consolidated Working Paper
May 31, 2011 – Date of Acquisition
Pill Seed Eliminations & adjustment Conso-

Corporation Company Debit Credit lidated
Assets
Cash 200,000 10,000 210,000
Inventories 1,400,000 120,000 (2) 20,000 1,540,000
Investment in Seed company 350,000 (1)320,000 -
(2) 30,000
Plant assets 2,850,000 610,000 (2) 80,000 3,540,000
Total 5,500,000 800,000 6,050,000
Liabilities & Stockholders’

Equity
Current liabilities 500,000 80,000 580,000
Long-term debt 1,000,000 400,000 (2) 40,000 1,440,000
Common stock:
Pill 1,500,000 1,500,000
Seed 100,000 (1)100,000
Additional paid-in capital
Pill 1,200,000 1,200,000
Seed 40,000 (1) 40,000
Retained earnings
Pill 1,300,000 (2) 30,000 1,330,000
Seed 180,000 (1)180,000
Total 5,500,000 800,000 420,000 420,000 6,050,000
Problem 15-7
a. Accounts Receivable 70,000

Cash 70,000
b. Investment in Sea Company stock 600,000

Common stock ((30,000 shares x P20) 600,000
Retained earnings – Pop Corporation 40,000

Common stock 30,000
Pop Corporation and Subsidiary

Working Paper for Consolidated Balance Sheet
April 30, 2011 – Date of acquisition
Pop Sea Adjustments & Eliminatio Consoli-

Corporation Company Debit Credit dated
Assets
Cash 50,000 80,000 130,000
Accounts receivable – net 230,000 270,000 (3) 70,000 430,000
33
Inventories 400,000 350,000 (2) 90,000 840,000
Investment in Sea Company 600,000 (1)328,000 -
(2)272,000
Plant assets 1,300,000 560,000 (2)220,000 2,080,000
Goodwill (2) 50,000 50,000
Total 2,580,000 1,260,000 3,530,000

Equity
Current liabilities 380,000 250,000 (3) 70,000 560,000
Long-term debt 800,000 600,000 (2) 20,000 1,420,000
Common stock
Pop 1,070,000 1,070,000
Sea 100,000 (1)100,000
Additional paid-in capital 360,000 (1)360,000
Retained earnings
Pop 330,000 330,000
Sea (50,000) (1) 50,000
NCI (1) 82,000 150,000

(2) 68,000
Total 2,580,000 1,260,000 890,000 890,000 3,530,000
(1) To eliminate equity accounts of Sea Company on the date of acquisition .

(2) To allocate difference, computed as follows:
Price paid P600,000
NCI (P600,000/80%) x 20% 150,000
Total 750,000
Less: Book value of net assets of Sea 410,000
Excess 340,000
Allocation:
Inventories P( 90,000)
Plant assets (220,000)
Long-term debt 20,000 (290,000)
Goodwill P 50,000
(3) To eliminate intercompany receivables and payables.
Problem 15-8
1. Price paid P500,000

Less book value of interest acquired
Common stock P100,000
APIC 200,000
Excess ( 30,000)
Allocation:
Inventory P( 20,000)
Land ( 10,000)
Building 50,000
Equipment 60,000
Bonds payable ( 50,000) 30,000
34
2. P Company and Subsidiary
January 2, 2011 – Date of acquisition
P S Adjustments & Eliminations Consoli-

Company Company Debit Credit dated
Debits
Cash 300,000 50,000 350,000
Inventory 200,000 80,000 (2) 20,000 300,000
Land 100,000 50,000 (2) 10,000 160,000
Building 600,000 400,000 (2) 50,000 950,000
Equipment 800,000 200,000 (2) 60,000 940,000
Investment in S Company 500,000 (2) 30,000 (1)530,000 -
Total 2,700,000 880,000 3,000,000
Credits
Bonds payable 290,000 (2) 50,000 240,000
Common stock – P Company 1,500,000 1,500,000
Common stock – S Company 100,000 (1)100,000
APIC – S Company 200,000 (1)200,000
Retained earnings – P Co. 1,050,000
Retained earnings – S Co. 230,000 (1)230,000 1,050,000
Total 2,700,000 880,000 640,000 640,000 3,000,000
(1) To eliminate equity accounts of S Company.

(2) To allocate excess
Problem 15-9

NCI (20% of FV of S Co’s net assets excluding GW (P500,000 x 20%) 100,000*
Total 600,000
Less book of net assets 530,000
Excess 70,000
Allocation
Inventory P (20,000)
Land (10,000)
Building 50,000
Equipment 60,000
Bonds payable (50,000) 30,000
Goodwill P100,000
* NCI is measured at its proportionate interest in S Company’s net assets because the assessed fair value of
P80,000 is smaller.


Debits
Cash 300,000 50,000 350,000
Inventory 200,000 80,000 (2) 20,000 300,000
Land 100,000 50,000 (2) 10,000 160,000
Building 600,000 400,000 (2) 50,000 950,000
Equipment 800,000 200,000 (2) 60,000 940,000
35
Investment in S Company 500,000 (1)424,000 -
(2) 76,000
Goodwill (2)100,000 100,000
Total 2,700,000 880,000 3,100,000
Credits
Bonds payable 290,000 (2) 50,000 240,000
Common stock – P Co. 1,500,000 1,500,000
Common stock – S Co. 100,000 (1)100,000
APIC – S Co. 200,000 (1)200,000
Retained earnings – P Co. 1,050,000 1,050,000
Retained earnings – S Co. 230,000 (1)230,000
NCI (2) 6,000 (1)106,000 100,000

Total 2,700,000 880,000 716,000 716,000 3,100,000
(1) To eliminate equity accounts of S Company
Problem 15-10

Less book value of interest acquired (100%): 670,000
Excess (128,000)
Allocation
Inventory P (10,000)
Land (40,000)
Equipment 20,000
Long-term investment in MS (15,000) ( 45,000)
Gain on acquisition P(173,000)

Assets
Cash 100,000 100,000 200,000
Inventory 150,000 130,000 (2) 10,000 290,000
Land 50,000 80,000 (2) 40,000 170,000
Equipment 300,000 200,000 (2) 20,000 480,000
Investment in S Company 542,000 (2)128,000 (1)670,000 -
Long-term investment in MS 100,000 125,000 (2) 15,000 240,000
Total 1,442,000 785,000 1,730,000

Equity
Common Stock – P Co. 400,000 400,000
Common Stock – S Co. 200,000 (1)200,000
APIC – P Co. 200,000 200,000
Retained earnings – P Co. 667,000 (2)173,000 840,000
Retained earnings – S Co. 470,000 (1)470,000
Total 1,442,000 785,000 863,000 863,000 1,730,000
(1) To eliminate equity accounts of S Company.

36
Problem 15-11
1. Investment in Sun Company 1,900,000

Cash 1,900,000
2. Price paid P1,900,000

Less book value of interest acquired:
Common stock P 600,000
Retained earnings 840,000 1,440,000
Excess 460,000
Allocation:
Land (100,000)
Building (200,000)
Bond payable (bond discount) ( 40,000)
Deferred taxes ( 20,000) (360,000)
Goodwill P 100,000
3. Land 100,000
Building 200,000
Bond discount 40,000
Goodwill 100,000
Deferred taxes 20,000
Additional paid in capital 1,300,000
4. Common stock 600,000

Additional paid in capital 1,300,000
Investment in Sun Company 1,900,000
Problem 15-12
Supporting computations:
Fair value of existing X Company equity (200 shares P50) P10,000

P Company interest in X Company [300/(300 + 200)] 60%
Acquisition price P 6,000
Entry to record the issuance of 300 shares – Books of X Company (legal parent)
Investment in P Company 6,000

Common stock (300 shares x P2) 600
APIC 5,400
Fair value analysis: Implied FV Parent (60%) NCI (40%)
Company fair value P10,000 P6,000 P4,000

Fair value of net assets excluding goodwill 6,000 3,600 2,400
Goodwill P 4,000 P2,400 P1,600
1. Distribution and allocation of excess schedule:
Implied FV Parent (60%) NCI (40%)
Fair value of subsidiary P10,000 P6,000 P4,000

37
Common stock P2 par 4,000
APIC 1,600
Total 4,000 P4,000 P4,000
Interest acquired 60% 40%
Book value P2,500 P1,600
Excess 6,000 P3,600 P2,400
Allocated to Non-current assets ( 2,000)
Goodwill P 4,000
2. X Company and Subsidiary P Company

December 31, 2011
Assets Liabilities and Equity
Current assets P 4,000 Non-current liabilities P 6,000

Non-current assets 16,000 Common stock (300 shares x P2) 600
Goodwill 4,000 APIC 1,400*
Retained earnings 6,000**
NCI 10,000***
Total assets P24,000 Total liabilities and equity P24,000
* Total paid in capital of P Company (P200 + P1800) P2,000

New shares issued (300 shares x P2) 600
APIC P1,400
** Retained earnings of the legal subsidiary – P Company
*** The remaining shares of the original C Company equity.
Problem 16-1
1. Determination and Allocation of Excess Schedule:
Implied Parent Price NCI Value

Fair Value (80%) (20%)
Fair value of subsidiary P 312,500 P 250,000 P 62,500

Less book value of interest acquired
Capital stock P 100,000
Total equity P 250,000 P 250,000 P 250,000
Book value P200,000 P 50,000
Excess P 62,500 P 50,000 P 12,500
Allocation to:
Fixed assets 62,500
2. Working Paper Elimination Entries:
a. Eliminate dividends declared by the subsidiary against dividend income and NCI:
Dividend income 4,000

NCI 1,000
Dividends declared – Sulu 5,000
38
b. Eliminate equity accounts of the subsidiary against the investment account and the NCI
account.
Common stock – Sulu 100,000

Retained earnings – Sulu 150,000
Investment in Sulu Company 200,000
NCI 50,000
c Allocate excess to fixed assets:
Fixed assets 62,500

Investment in Sulu Company 50,000
NCI 12,500
d. Amortized fixed assets (P62,500 / 10)

Expenses 6,250
Fixed assets 6,250
e. Recognize NCI in subsidiary net income:

NCI in subsidiary net income 3,750
NCI 3,750
3. Pedro Company
Consolidated Income Statement
Sales P250,000
Expenses 191,250
Consolidated net income P 58,750
Attributable to NCI 3,750
Attributable to controlling interest P 55,000
4. Pedro Company
Statement of Retained Earnings
Retained earnings, January 1 – Pedro Company P200,000

Consolidated net income attributable to controlling interest 55,000
Retained earnings, December 31, 2011 P255,000
5. Pedro Company
December 31, 2011
Assets
Non-current assets
Fixed assets (P662,500 – P132,250) 530,250

Current liabilities P100,000
Stockholders’ Equity:
Controlling interest:
39
Total P555,000
Non-controlling interest (P62,500 – P1,000 + P3,750) 65,250 620,250
Total liabilities and equity P720,250
Problem 16-2
1. Eliminations and adjustments:
a to c are the same as in Problem 16-1:
d. Depreciate the fixed asset for the current year and one prior year:
Retained earnings, Jan. 1 – Sulu (prior year) 6,250

Expenses (current year) 6,250
Fixed assets 12,500
e. Recognize NCI in subsidiary net income:
NCI in subsidiary net income 1,750

NCI 1,750
e. Assign to the NCI their share of the increase in the subsidiary’s

Adjusted undistributed earnings of prior year:
Retained earnings, January 1- Sulu 2,750

NCI 2,750
Retained earnings, January 1, 2009 P170,000
Retained earnings, January 2, 2008 150,000
Increase in undistributed earnings P 20,000
Amortization in prior years 6,250
Adjusted undistributed earnings P 13,750
NCI % 20%
NCI P 2,750
2. Pedro Company
Sales P300,000
Expenses (P245,000 + P6,250) 251,250
Problem 16-3
Amortization Schedule
Annual
Accounts Adjustments Life Amount 2008 2009 2010 2119
Inventory 1 P 6,250 P 6,250
Amortization:
Investments 3 5,000 5,000 5,000 5,000 5,000
Buildings 20 12,500 12,500 12,500 12,500 12,500
Equipment 5 34,500 34,500 34,500 34,500 34,500
40
Patent 10 2,250 2,250 2,250 2,250 2,250
Trademark 10 2,000 2,000 2,000 2,000 2,000
Discount on bonds payable 5 2,500 2,500 2,500 2,500 2,500
Total P 65,000 P 65,000 P 58,750 P 58,750 P58,750
Problem 16-4
Allocation Schedule
Price paid P206,000
Less: Book value of interest acquired 140,000
Excess P 66,000
Allocation:
Equipment P(40,000)
Buildings 10,000 (30,000)
Goodwill (not impaired) P 36,000
a. Investment in Stag Company – 12/31/09 (at acquisition cost) P 206,000
b. Non-controlling interest P -0-
c. Consolidated Net Income

Net income from own operations – Pony (P310,000 – P198,000) P 112,000
Net income from own operations – Stag (P104,000 – P74,000) 30,000
Amortization: Equipment (P40,000/8) P5,000
Buildings (P10,000/20) (500) ( 4,500)
d. Consolidated Equipment
Total book value (P320,000 + P50,000) P 370,000
Allocation 40,000
Amortization (P5,000 x 3 years) (15,000)
Total P 395,000
e. Consolidated Buildings
Total book value P 288,000
Allocation ( 10,000)
Amortization (P500 x 3 years) 1,500
Total P 279,500
f. Consolidated Goodwill (not impaired) P 36,000
g. Consolidated Common Stock (Pony) P 290,000
h. Consolidated Retained Earnings

Retained earning, Dec. 31, 2011 – Pony P 410,000
Add: Pony’s share of Stag’s adjusted increase in earnings
Net earnings – 2011 (P30,000 – P20,000) P10,000
Amortization ( 4,500) 5,500
Retained earnings, December 31, 2011 P 415,500
41
Problem 16-5
a. Working Paper Elimination Entries, Dec. 31, 2011
(1) Dividend income 10,000

Dividends declared – Short 10,000
To eliminate intercompany dividends.
(2) Common stock – Short 100,000

Retained earnings – Short 50,000
Investment in Short Company 150,000
To eliminate equity accounts of Short at
date of acquisition
(3) Depreciable asset 30,000

Investment in Short Company 30,000
To allocate excess
(4) Depreciation expense 5,000

Depreciable asset 5,000
To amortize allocatedexcess
b. Pony Corporation and Subsidiary

Consolidation Working Paper
December 31, 2011
Pony Short Adjustments & Eliminations Consoli-

Income Statement
Sales 200,000 120,000 320,000
Dividend income 10,000 (1) 10,000 -
Total 210,000 120,000 320,000
Depreciation 25,000 15,000 (3) 5,000 45,000
Other expenses 105,000 75,000 180,000
Total 130,000 90,000 225,000
Net income carried forward 80,000 30,000 95,000
Retained Earnings
Retained earnings, Jan. 1 230,000 50,000 (2) 50,000 230,000
Net income from above 80,000 30,000 95,000
Total 310,000 80,000 325,000
Dividends declared 40,000 10,000 (1) 10,000 40,000
Retained earnings, Dec. 31
Carried forward 270,000 70,000 285,000
Statement of FP
Cash 15,000 5,000 20,000
Inventory 70,000 60,000 130,000
Depreciable asset (net) 325,000 225,000 (3) 30,000 (4) 5,000 575,000
Investment in Short company 180,000 (2)150,000 -
(3) 30,000
Total 620,000 330,000 795,000

Notes payable 100,000 120,000 220,000
Common stock
Pony 200,000 200,000
Short 100,000 (2)100,000
42
From above 270,000 70,000 285,000
Total 620,000 330,000 195,000 195,000 795,000
Problem 16-6
a. Working Paper Elimination Entries

NCI 2,000
Dividends declared – Sisa 10,000
(2) Common stock – Sisa 100,000

Retained earnings – Sisa 50,000
Investment in Sisa stock 120,000
NCI 30,000
(3) NCI in net income of subsidiary 6,000

NCI 6,000
b. Popo Corporation and Subsidiary

December 31, 2011
Popo Sisa Adjustments & Eliminations Consoli-
Income Statement
Sales 200,000 120,000 320,000
Total revenue 208,000 120,000 320,000
Other expenses 105,000 75,000 180,000
Total expenses 130,000 90,000 220,000
Net income 78,000 30,000 100,000
NCI in net income of Sub. (3) 6,000 ( 6,000)
Retained Earnings
Retained earnings, 1/1 230,000 50,000 (2) 50,000 230,000
Total 308,000 80,000 324,000
Retained earnings, 12/31
Carried forward 268,000 70,000 284,000
Statement of FP
Current assets 173,000 105,000 278,000
Depreciable assets 500,000 300,000 800,000
Investment in Sisa Company 120,000 (2)120,000 -
Total 793,000 405,000 1,078,000
Accumulated depreciation 175,000 75,000 250,000

Long-term debt 100,000 120,000 220,000
Common stock 200,000 100,000 (2)100,000 200,000
Retained earnings , 12/31
From above 268,000 70,000 284,000
NCI (1) 2,000 (2) 30,000 34,000
(3) 6,000
Total 793,000 405,000 166,000 166,000 1,078,000
43
c. Consolidated Financial Statements
Popo Corporation and Subsidiary

December 31, 2011
Assets
Depreciable assets P800,000

Total liabilities P310,000
Retained earnings, 12/31 284,000
Minority interest in net assets of subsidiary 34,000 518,000

Sales P320,000
Expenses:
Depreciation expense P 40,000
Consolidated net income P100,000
NCI in net income of subsidiary 6,000
Attributable to parent P 94,000

Consolidated Retained Earnings
Retained earnings, Jan. 1 – Popo P230,000

Consolidated net income attributable to parent 94,000
Total P324,000
Dividends paid – Popo 40,000
Consolidated retained earnings, Dec. 31 P284,000
Problem 16-7
a. Palo Corporation and Subsidiary

December 31, 2011
Palo Sebo Adjustments & Eliminations Consoli-

Income Statement
Sales 300,000 150,000 450,000
Investment Income 19,000 (1) 19,000 -
Total revenues 319,000 150,000 450,000
44
Cost of goods sold 210,000 85,000 295,000
Other expenses 23,000 25,000 48,000
Total cost and expenses 258,000 130,000 388,000
Retained Earnings
Retained earnings, Jan. 1 230,000 50,000 (2) 50,000 230,000
Total 291,000 70,000 292,000
carried forward 271,000 60,000 272,000
Statement of FP
Cash 37,000 20,000 57,000
Inventory 70,000 60,000 130,000
Buildings and equipment 300,000 240,000 540,000
Investment in Sebo Company 229,000 (1) 9,000 -
(2)200,000
(3) 20,000
Goodwill (3) 20,000 20,000
Total 686,000 350,000 827,000
Accumulated depreciation 105,000 65,000 170,000

Taxes payable 70,000 55,000 125,000
Common stock 200,000 150,000 (2)150,000 200,000
from above 271,000 60,000 272,000
Total 686,000 350,000 239,000 239,000 827,000
b. Consolidated Financial Statements
Palo Corporation and Subsidiary

Sales P450,000
Expenses:
Depreciation expenses P45,000

Consolidated Retained Earnings
Retained earnings, January 1 – Palo P230,000

Consolidated net income 62,000
Total 292,000
Dividends paid – Palo 20,000
Retained earnings, December 31 P272,000
45
December 31, 2011
Assets
Cash P 57,000
Inventory 130,000
Buildings and equipment P540,000
Goodwill 20,000
Total P657,000

Taxes payable 125,000
Retained earnings, Dec. 31 272,000
Total P657,000
Problem 16-8
1. Determination and Allocation of Excess Schedule:

Company Parent Price NCI Value
Estimated FV (80%) (20%)
Fair value of subsidiary P945,000 P756,000 P189,000
Common stock – S Company 300,000
Retained earnings – S Company 400,000
Total equity 700,000 700,000 700,000
Book value 560,000 140,000
Excess of fair value over book value 245,000 196,000 49,000
Allocations:
Inventory (30,000)
Land (50,000)
Building (100,000)
Equipment 75,000
Patent (40,000)
Total 145,000
Goodwill P 100,000
Working Paper Elimination Entries - December 31, 2011(not required)
(1) Investment income 94,800

NCI 10,000
Dividends declared – S Company 50,000
Investment in S Company 54,800
(2) Common stock – S 300,000

Retained earnings, Jan. 1 – S 400,000
NCI 140,000

Land 50,000
Building 100,000
Patents 40,000
46
Goodwill 100,000
Equipment 75,000
NCI 49,000
(4) Cost of goods sold 30,000
Inventory 30,000
Equipment (P75,000 / 10) 7,500

Expenses (amortization) 1,500
Buildings (P100,000 / 20) 5,000
Patents (P40,000 / 10) 4,000

NCI 23,700
To recognize NCI in subsidiary net income (P150,000 – 31,500)x 20%

Income Statement
Sales 1,000,000 500,000 1,500,000
Cost of sales 400,000 150,000 (4) 30,000 580,000
Gross profit 600,000 350,000 920,000
Expenses 360,000 200,000 (4) 1,500 561,500
Operating income 240,000 150,000 358,500
Investment income 94,800 - (1) 94,800 -
Net /consolidated income 334,800 150,000 358,500
NCI in net income of
Subsidiary (5) 23,700 (23,700)
Retained earnings
Retained earnings, 1/1 600,000 400,000 (2)400,000 600,000
Total 934,800 550,000 934,800
Carried forward 834,800 500,000 834,800
Statement of FP
Cash 200,000 100,000 300,000
Inventories 100,000 40,000 (3) 30,000 (4) 30,000 140,000
Land 150,000 (3) 50,000 200,000
Buildings (net) 200,000 (3)100,000 (4) 5,000 295,000
Equipment (net) 298,000 450,000 (4) 7,500 (3) 75,000 680,500
Patent - - (3) 40,000 (4) 4,000 36,000
Investment in S Company 810,800 (1) 54,800 -
(2)560,000
(3)196,000
Goodwill (3) 100,000 100,000
Total 1,558,800 1,090,000 1,951,500

Common stock 200,000 300,000 (2)300,000 200,000
Additional paid-in capital 400,000 - 400,000
from above 834,800 500,000 834,800
NCI (1) 10,000 (2)140,000 2022,700
47
(3) 49,000
(5) 23,700
Total 1,558,800 1,090,000 486,200 486,200 1,951,500
Problem 16-9
a. Investment in Sally Products Co. 160,000

Cash 160,000
To record acquisition of 80% stock of Sally.
Cash 8,000
Dividend income 8,000
To record dividends received from Sally (P10,000 x 80%)
b. Working Paper Eliminating Entries – Dec. 31, 2011

NCI 2,000
Dividends declared – Sally 10,000
(2) Common stock – Sally 100,000

Retained earnings, 1/1/08 –Sally 50,000
Investment in Sally Products 120,000
NCI 30,000
(3) Building and equipment 50,000

Investment in Sally Products 40,000
NCI 10,000
(4) Retained earnings, 1/1 – Sally (prior year) 5,000

Depreciation expense (current year) 5,000
Accumulated depreciation – Bldg 10,000
(5) Accounts payables 10,000

Cash and receivables 10,000

NCI 5,000
(P30,000 – P5,000) x 20%
(7) Retained earnings, 1/1 – Sally 7,000

NCI 7,000
To recognize NCI in subsidiary’s prior year earnings
[(P50,000 – P90,000) – P5,000] x 20%
c. Pilar Corporation and Subsidiary

December 31, 2011
Pilar Sally Wood Adjustments & Eliminations Consoli-

Corporation Products Debit Credit dated
Income Statement
Sales 200,000 100,000 300,000
Total revenue 208,000 100,000 300,000
Cost of goods sold 120,000 50,000 170,000

Depreciation expense 25,000 15,000 (4) 5,000 45,000
Inventory losses 15,000 5,000 20,000
48
Total cost and expenses 160,000 70,000 235,000
Net /consolidated income 48,000 30,000 65,000
NCI in net income of

subsidiary (6) 5,000 (5,000)
Retained earnings statement

Retained earnings, 1/1 298,000 90,000 (2) 50,000 326,000
(4) 5,000
(7) 7,000
Total 346,000 120,000 386,000
carried forward 316,000 110,000 356,000
Statement of FP
Cash and receivables 81,000 65,000 (5) 10,000 136,000
Inventory 260,000 90,000 350,000
Land 80,000 80,000 160,000
Buildings and equipment 500,000 150,000 (3) 50,000 700,000
Investment in Sally 160,000 (2)120,000 -
(3) 40,000
Total 1,081,000 385,000 1,346,000
Accumulated depreciation 205,000 105,000 (4) 10,000 300,000

Accounts payable 60,000 20,000 (5) 10,000 70,000
Notes payable 200,000 50,000 250,000
Common stock 300,000 100,000 (2)100,000 300,000
Retained earnings from above 316,000 110,000 356,000
NCI (1) 2,000 (2) 30,000 50,000
(3) 10,000
(6) 5,000
(7) 7,000
Total 1,081,000 385,000 242,000 242,000 1,346,000
Problem 17-1
The computation of the selected consolidation balances are affected by the inter-company profit in
downstream intercompany sales as computed below:
Unrealized profit in ending inventory, Dec. 31, 2010 – Downstream

Intercompany profit (P120,000 – P72,000) P 48,000
Inventory left at year end x 30%
Unrealized profit, Dec. 31, 2010 P 14,400
Unrealized profit in ending inventory, Dec. 31, 2011 – Downstream

Intercompany profit (P250,000 – P200,000) P 50,000
Inventory left at year end x 20%
Unrealized profit, Dec. 31, 2011 P 10,000
a. Consolidated Sales
Apo P800,000
Bicol 600,000
Intercompany sales – 2011 (250,000)
Total P1,150,000
49
b. Cost of goods sold
Apo’s book value P 535,000
Bicol’s book value 400,000
Intercompany sales-2011 (250,000)
Realized profit in beginning inventory – 2011 ( 14,400)
Unrealized profit in ending inventory – 2011 10,000
Consolidated cost of goods sold P 680,600
c. Operating expenses
Apo P 100,000
Bicol 100,000
Total P 200,000
d. Dividend Income – 0 (eliminated)
e. NCI in Net Income of Subsidiary (P100,000 x 20%) P 20,000
f. Inventory
Apo P 298,000
Bicol 700,000
Unrealized profit in ending inventory, Dec. 31, 2011 (10,000)
Consolidated inventory P 988,000
g. NCI
NCI, December 31, 2010 [ (P902,000/80%) x 20%] P225,500
NCI in dividends paid by Bicol (P50,000 x 20%) (10,000)
NCI in net income of subsidiary (P100,000 x 20%) 20,000
Total NCI, 12/31/11 P235,500
Problem 17-2
P Company and Subsidiary

Sales (P2,000,000 + P1,000,000 – P600,000) P2,400,000

Cost of goods sold (Schedule 1) 704,000
Gross profit 1,696,000
Expenses 600,000
Income before income tax 1,096,000
Provision for income tax 440,000
Consolidated net income after income tax 656,000
Attributable to NCI (Schedule 2) 44,000
Schedule 1:
Cost of sales – P Company P 800,000
Purchases from S Company (600,000)
Intercompany profit in beginning inventory (P60,000 x 25%) ( 15,000)
Intercompany profit in ending inventory (P76,000 x 25%) 19,000
Total P 204,000
Cost of sales – S Company 500,000
Consolidated cost of sales P 704,000
50
Schedule 2:
Net income – S Company P 180,000
Realized profit in beginning inventory – Upstream 15,000
Unrealized profit in ending inventory – Upstream (19,000)
Adjusted net income P 176,000
NCI proportionate share x 25%
NCI in net income of subsidiary P 44,000
Problem 17-4
a. Consolidated Sales
Reported total sales (P600,000 + P510,000) P1,170,000
Intercompany sales (P140,000 + P240,000) (380,000)
Consolidated sales P 790,000
b. Consolidated Cost of Goods Sold

Cost of goods sold:
Pato (P660,000 / 140%) P 471,429
Sales (P510,000 / 120% 425,000
Amount to be eliminated (P128,000 + P232,000) see entry below ( 360,000)
Total P 536,429
Elimination of intercompany sales and intercompany profit in inventory:
Downstream Sales
Sales 140,000
Inventory (P42,000 x 40/140) 12,000
Upstream Sales
Sales 240,000
Inventory (P48,000 x 20/120) 8,000
c. Consolidated Net Income

Net income from own operations – Pato P 70,000
Unrealized profit in ending inventory – Downstream (12,000)
Adjusted net income – Pato P 58,000
Adjusted net income of Sales Co.
Net income P20,000
Unrealized profit in ending inventory – Upstream (8,000) 12,000
d. Consolidated Inventory, Dec. 31, 2011

Inventory reported – Pato P 48,000
Inventory reported – Sales 42,000
Unrealized profit in ending inventory (P8,000 + P12,000) (20,000)
Problem 17-5
P Company and Subsidiary S Company

51
Eliminations Adjustments Consoli-
P Company S Company Debit Credit dated
Income Statement
Sales 12,000,000 1,300,000 (5) 400,000 12,900,000
Dividend income 210,000 (1) 210,000 -
Total revenue 12,210,000 1,300,000 12,900,000
Cost of goods sold 7,000,000 750,000 (7) 30,000 (5) 400,000 7,380,000
Operating expenses 4,210,000 50,000 (4) 40,000 4,300,000
Total cost and expenses 11,210,000 800,000 11,680,000
Net income to retained earnings 1,000,000 500,000 1,220,000
Statement of Retained
Earnings
Retained earnings, January 1 5,500,000 2,200,000 (2)2,200,000 5,500,000
Net income from above 1,000,000 500,000 1,220,000
Total 6,500,000 2,700,000 6,720,000
Dividends declared - 210,000 (1) 210,000 -
Retained earnings,12/31 to BS 6,500,000 2,490,000 6,720,000
Statement of FP
Cash 810,000 170,000 980,000
Accounts receivable 425,000 445,000 (6) 25,000 845,000
Inventory 600,000 275,000 (7) 30,000 845,000
Property, plant and equipment 4,000,000 2,300,000 (3) 400,000 (4) 40,000 6,660,000
Investment in S Company 3,200,000 (2)2,800,000 -
(3) 400,000
Total assets 9,035,000 3,1900,000 9,330,000

Common stock 1,000,000 400,000 (2) 400,000 1,000,000
Additional paid in capital 1,500,000 200,000 (2) 200,000 1,500,000
Retained earnings from above 6,500,000 2,490,000 6,720,000
9,035,000 3,190,000 3,905,000 3,905,000 9,330,000
Eliminations and Adjustments

(1) Eliminate intercompany dividends
(2) Eliminate subsidiary’s equity balances
(3) Allocate excess to equipment
(4) Amortize allocated excess to equipment
(5) Eliminate intercompany sale of P400,000
(6) Eliminate intercompany trade balances of P25,000
(7) Eliminate intercompany profit (30%) applicable to P100,000 (P400,000 – P300,000)
of intercompany goods in P Company.
Determination and Allocation of Excess Schedule
Price paid by the parent P3,200,000

Less book value of interest acquired (100%)
Common stock – S Company P 400,000
Additional paid in capital – S Company 200,000
Retained earnings, Jan. 1 – S Company 2.200,000 2,800,000
Excess allocated to equipment P 400,000
Amortization (P400,000/10) P 40,000
Note: There is no NCI since this is a wholly-owned subsidiary.
52
Problem 17-6
Determination and Allocation of Excess Schedule:
Price paid by the parent (80%) P425,000

Non-controlling interest [(P425,000/80%) x 20%] 106,250
Total 531,250
Common stock – So P200,000
APIC – So 100,000
Total equity P400,000
Interest acquired 80% 320,000
Excess allocated to goodwill P131,250
Fair Value Analysis:

Company Parent NCI
Implied Price Value

Fair value of net assets excluding goodwill 400,000 320,000 80,000
Goodwill P131,250 P105,000 P 26,250
Po Company and Subsidiary So Company

Eliminations Adjustments Consoli-
Po Company So Company Debit Credit dated
Income Statement
Sales 880,000 630,000 (6) 32,000
(8) 30,000 1,448,000
Total revenue 904,000 630,000 1,448,000
Cost of goods sold 704,000 504,000 (7) 1,320 (5) 1,350
(10) 750 (6) 32,000
(8) 700
(9) 30,000 1,146,020
Other expenses 130,000 81,000 211,000
Total cost and expenses 834,000 585,000 1,357,020
Net income 70,000 45,000 90,980
NCI in net income of Subsidiary (12) 8,990 (8,990)
Net income to retained earnings 70,000 45,000 81,990
Statement of Retained
Earnings
Retained earnings, January 1 1,105,000 140,000 (1) 8,000
(3)100,000
(5) 1,350
(8) 560 1,135,090
Total 1,175,000 185,000 1,217,080
Retained earnings,12/31 to BS 1,150,000 155,000 1,192,080
Statement of FP
Cash 216,200 44,300 260,500
Accounts receivable 290,000 97,000 (11) 15,000 372,000
Inventory 310,000 80,000 (7) 1,320
(10) 750 387,930
53
Pant assets (net) 1,991,000 340,000 2,331,000
Investment in S Company 425,000 (3)320,000
(4)105,000 -
Goodwill 60,000 (4)131,250 191,250
Total assets 3,292,200 561,300 3,542,680

Common stock 250,000 200,000 (3)200,000 250,000
Additional paid in capital 1,250,000 100,000 (3)100,000 1,250,000
Retained earnings from above 1,150,000 155,000 1,192,080
Non-controlling interest (NCI) (2) 6,000 (1) 8,000
(8) 140 (3) 80,000
(4) 26,250
(12) 8,990 117,100
3,292,200 561,300 659,360 659,360 3,542,680
Eliminations and Adjustments

(1) Recognize NCI in subsidiary’s increase in undistributed earnings (P40,000 x 20%)
(2) Eliminate intercompany dividends.
(3) Eliminate subsidiary’s equity at date of acquisition
(4) Allocate excess to goodwill.
(5) Eliminate realized profit in beginning inventory (P9,000 x 15%) = P1,350 (Downstream)
(6) Eliminate intercompany downstream sales from April 1, 2008 to March 31, 2009, P32,000.
(7) Eliminated unrealized profit in ending inventory (downstream), P6,000 x 22% = P1,320.
(8) Eliminate realized profit in beginning inventory (upstream) P3,500 x 20% = P700.
(9) Eliminate intecompany upstream sales on March 31, 2009, P30,000.
(10) Eliminate unrealized profit in ending inventory (upstream), P3,000 x 25% = P750.
(11) Eliminate intercompany payables and receivables ,P10,000 + P5,000 = P15,000.
(12) Recognized non-controlling interest (NCI) in net income of subsidiary computed as follows:
Net income of So Company P45,000

Realized profit in beginning inventory (upstream) 700
Unrealized profit in ending inventory (upstream) (750)
Adjusted income P44,950
NCI share 20%
NCI in net income of subsidiary P 8,990
(2)
Po Company and Subsidiary So Company
Fiscal Year Ended March 31, 2011
Sales P1,448,000
Cost of goods sold 1,146,020
Expenses 211,000
Problem 17-7
a. Unrealized Profit in Beginning Inventory

Beginning inventory - Downstream P 100,000
Gross profit rate (P240,000/ P400,000) x 60%
Unrealized profit in beginning inventory P 60,000
54
Unrealized Profit in Ending Inventory
Ending inventory – Downstream (P200,000 x 80%) P 160,000
Gross profit rate x 60%
Unrealized profit in ending inventory P 96,000
b. Intercompany Sales
Sales – P Company P2,000,000
Sales – S Company 1,000,000
Intercompany sales – 2011 (400,000)
Consolidated sales P2,600,000
Intercompany Cost of Sales

Cost of sales – P Company P 800,000
Cost of sales – S Company 600,000
Intercompany purchases (400,000)
Intercompany profit in beginning inventory ( 60,000)
Intercompany profit in ending inventory 96,000
Consolidated cost of sales P1,036,000
c. Parent’s interest (40,000 shares / 50,000 shares) 80%
P Company Entries – 2011:

(1) Investment in S Company stock 96,000
Income from subsidiary 96,000
To record P’s share of S Co. income
(P120,000 x 80%)
(2) Cash 48,000

Investment in S Company stock 48,000
To record dividends received from S
(P60,000 x 80%)
(2) Income from subsidiary 36,000

To adjust income from subsidiary for intercompany
profit in :
Ending inventory (96,000)
Beginning inventory 60,000
Net adjustment ( 36,000)
d. Working Paper Eliminating Entries:
(1) Income from subsidiary 60,000

NCI (P60,000 x 20%) 12,000
Dividends declared – S 60,000
To eliminate intercompany dividends.
(2) Common stock – S Co. 500,000

Retained earnings – S Co. 860,000
Investment in S Company stock 1,088,000
NCI 272,000
To eliminate equity accounts of S Company as of
beginning of year.
55
(3) Goodwill 60,000
To allocate excess to goodwill.
(4) Retained earnings – Jan. 1 60,000

Cost of sales 60,000
To eliminate realized profit in beginning inventory-
Downstream.
(5) Cost of sales 96,000

Inventories 96,000
To eliminate unrealized profit in ending inventory-
Downstream.
(6) Sales 400,000

Cost of sales 400,000
To eliminate intercompany sales.
(7) Accounts payable 50,000

To eliminate intercompany payables and receivables.

NCI 24,000
To recognize NCI share in S Company net income
(P120,000 x 20%)
e. Consolidated Net Income

Net Income from own operations – P Company (P480,000 – P60,000) P420,000
Realized profit in beginning inventory 60,000
Unrealized profit in ending inventory ( 96,000)
Adjusted net income – P Compay P384,000
S Company net income 120,000
Problem 18-1
Computation of the missing amounts in the working paper eliminations for P Corporation and S Company:
(1) P640 (P3,200 x 20%)
(2) P2,560 (P3,200 x 80%)
(3) P1,600 (P800 x 2)
(4) P320 (P1,600 x 20%)
(5) P1,280 (P1,600 x 80%)
(6) P3,200 (P800 x 4)
Problem 18-2
a. Consolidated Net Income

Net income from own operations – P Company P200,000
Unrealized gain on sale of equipment, Dec. 31 – Downstream (30,000)
Adjusted net income – P Co, P170,000
S Company net income 180,000
b. NCI in net income of subsidiary (P180,000 x 20%) P 36,000
56
c. Non-controlling interest (NCI):
NCI, January 1, 2011 [(P720,000/80%) x 20%] P180,000
NCI in dividends paid by subsidiary (P60,000 x 20%) (12,000)
NCI in net income of subsidiary (P180,000 x 20%) 36,000
NCI, December 31, 2011 P204,000
Problem 18-3
Pony Corporation and Subsidiary

Sales (P500,000 + P300,000) P800,000

Gain on sale of machinery (schedule 1) 20,000
Total revenue 820,000
Cost of sales P200,000 + P130,000) 330,000
Expenses:
Depreciation (P50,000 +P30,000 – P5,000) P 75,000
Other expenses (P80,000 + P140,000) 220,000 295,000
Attributable to NCI [(P190,000 + P5,000) +10,000) x 25%] (28,750)
Attributable to parent P266,250
Schedule 1:
Selling price – Dec. 28, 2011 P36,000
Book value (P65,000 ÷ 5) x3 26,000
Gain on sale 10,000
Unrealized gain (P25,000 – P15,000) 10,000
Total gain P20,000
Problem 18-4
a. Consolidated Net Income

Net income from own operations – P Company P300,000
Adjusted net income of S Company:
Net income – S P150,000
Unrealized gain, 4/1/11 - Upstream ( 30,000)
Realized gain, 12/31/11 (P30,000/5) x 9/12 4,500 124,500
Attributable to NCI (P124,500 x 20%) (24,900)
Attributable to parent P399,600
b. Non-controlling interest (NCI)

NCI, January 1, 2011 [(P800,000/80% x 20%] P200,000
NCI share in dividends paid by subsidiary (P50,000 x 20%) ( 10,000)
NCI in adjusted net income of subsidiary 24,900
NCI, December 31, 2011 P214,900
Problem 18-5
Texas Company and Subsidiary
57
Sales P1,500,000
Expenses (P200,000 + P100,000 – P8,000 ) 292,000
Attributable to NCI (P150,000 x 25%) 37,500
Adjustment for expenses (depreciation) = P40,000 / 5 years.
Problem 18-7

Eliminations/ Adjustments Conso-

P Company S Company Debit Credit lidated
Income Statement
Sales 600,000 315,000 (7) 40,000 875,000
Total revenue 616,000 315,000 875,000
Cost of goods sold 350,000 150,000 (9) 5,000 (7) 40,000
(8) 10,000 455,000
Operating expenses 150,000 60,000 (6) 6,250 (11) 3,000 213,250
Total costs and expenses 500,000 210,000 668,250
Net income 116,000 105,000 206,750
NCI in net income of S (2) 20,750 (20,750)

Retained earnings, January 1 280,000 150,000 (1) 6,250 285,000
(4)100,000
(6) 18,750
(8) 8,000
(10) 12,000
Dividends declared (60,000) (20,000) (3) 20,000 (60,000)
RE, 12/31 carried forward 336,000 235,000 411,000
Statement of FP
Inventory 130,000 50,000 (5) 12,500 (6) 12,500 175,000
(9) 5,000
Other current assets 241,000 235,000 476,000
(5) 40,000
Goodwill (5) 12,500 12,500
Other long-term investments 20,000 20,000
Land 140,000 80,000 220,000
Buildings and equipment 375,000 200,000 (5) 25,000 (10) 15,000 585,000
Intangible assets 20,000 20,000
Totals 1,106,000 585,000 1,508,500
Accumulated depreciation 120,000 30,000 (10) 3,000 (6) 12,500 156,500

(11) 3,000
Non-current liabilities 200,000 150,000 350,000
Common stock 200,000 50,000 (4) 50,000 200,000
APIC 100,000 50,000 (4) 50,000 100,000
RE, 12/31 from above 336,000 235,000 411,000
NCI (3) 4,000 (1) 6,250 71,000

(8) 2,000 (2) 20,750
58
(4) 40,000
(5) 10,000
Totals 1,106,000 585,000 395,000 395,000 1,508,000
Company Parent NCI

Implied Price Value
Price paid for investment P250,000 P200,000 P 50,000*
Total equity 200,000 P200,000 P200,000
Book value of interest acquired P160,000 P 40,000
Excess P 50,000 P 40,000 P 10,000
Allocations
Inventory (12,500)
Equipment (25,000)
Total (37,500)
Goodwill P12,500
* (P200,000/80%) x 20% = P50,000
Amortization
Inventory P12,500
Equipment (P25,000/4) 6,250
Explanations of Eliminations and Adjustments:
(1) To recognize NCI share in subsidiary’s adjusted prior year’s undistributed earnings (P50,000 –
P18,750) 20% = P6,250.
(2) To recognized NCI in net of subsidiary for the current year
(P105,000 + P10,000 – P5,000 – 6,250) x 20% = P20,750
(3) To eliminated intercompany dividends paid the subsidiary.
(4) To eliminate equity of the subsidiary at date of acquisition.
(5) To allocate excess.
(6) To amortize allocated excess.
(7) To eliminate intercompany sales.
(8) To eliminate beginning inventory profit.
(9) To eliminate ending inventory profit.
(10) To eliminate fixed asset gain at beginning of year.
(11) To eliminate realized gain on fixed assets.
Problem 18-8
Supporting computations
(1) Determination and allocation of excess schedule;
Total Price paid (60%) NCI (40%)
Less book value of interest acquiree:
Small’s equity 350,000 350,000 350,000
Book value of interest acquired 210,000 140,000
Excess 270,000 162,000 108,000
Allocated to patents ( 120,000)
Goodwill P150,000
59
Amortization of patents (P120,000 / 12) P 10,000
(2) Unrealized gain on intercompany sale of building – Upstream, Jan. 1, 2011:

Unrealized gain at date of sale (P80,000 – P30,000) P 50,000
Realized gain (P50,000 / 5) x 2 years (20,000)
Unrealized gain as of Jan. 1, 2011 P 30,000
(3) Realized profit from intercompany sale of inventory – Downstream, 1/1/11:

Remaining inventory as of Dec. 31, 2010 P 50,000
Gross profit rate on sales – 2010 (P30,000 / P150,000) x 20%
Realized profit as of Jan. 1, 2011 P 10,000
(4) Unrealized profit from intercompany sale of inventory – Downstream, 12/31/11

Remaining inventory as of Dec. 31, 2011 P 40,000
Gross profit rate on sales – 2011 (P48,000 / P160,000) x 30%
Unrealized profit as of Dec. 31, 2011 P 12,000
Consolidated balances – 2011
a. Cost of goods Sold

Cost of goods sold – Apex P 460,000
Cost of goods sold – Small 205,000
Intercompany sale of inventory – 2011 (160,000)
Realized profit on beginning inventory ( 10,000)
Unrealized profit on ending inventory 12,000)
Consolidated P 507,000
b. Operating Expenses
Operating expenses – Apex P 170,000
Operating expenses – Small 70,000
Amortization (No. 1 above) 10,000
Excess depreciation (P50,000 / 5 years) (10,000)
Consolidated P 240,000
c. Consolidated Net Income Attributable to Parent

Sales (after elimination of intercompany sales) P 840,000
Cost of goods sold (a) (507,000)
Operating expenses (b) (240,000)
NCI in net income of subsidiary:
Net income – Small P25,000
Realized gain on sale of building – Upstream 10,000
Adjusted net income P35,000
NCI x 40% ( 14,000)
d. Consolidated Retained Earnings, Jan. 1, 2011

Retained earnings, Jan. 1, 2010 – Apes P 690,000
Amortization of patents – 2005 to 2010(P10,000 x 6) (60,000)
Unrealized profit on inventory, 2010– Downstream (10,000)
Unrealized gain on sale of building, 1/1/11 - Upstream (P30,000 x 60%) (18,000)
Consolidated retained earnings, Jan. 1, 2011 P 602,000
60
e. Consolidated Inventory
Inventory – Apex P 233,000
Inventory – Small 229,000
Unrealized profit in inventory – Dec. 31, 2011 ( 12,000)
f. Consolidated Building
Buildings – Apex P 308,000
Buildings – Small 202,000
Unrealized gain, Jan. 1, 2011 (50,000)
Realized gain, 2009– 2009 (P10,000 x 3 ) 30,000
Consolidated buildings P 490,000
g. Consolidated Patents
Patents – Small P 20,000
Allocation 120,000
Amortization, 2009 – 2011 (P10,000 x 7) ( 70,000)
Consolidated patents (net) P 70,000
h. Consolidated Common Stock = P300,000 (Apex common stock)

Problem 18-9
Consolidated Worksheet
Eliminations Adjustments Conso-
P Company S Company Debit Credit lidated
Income Statement
Sales 1,900,000 1,500,000 (7)180,000 3,220,000
Total revenue 1,940,000 1,500,000 3,220,000
Cost of goods sold 1,180,000 870,000 (8) 18,000 (7)180,000 1,888,000
Operating expenses 550,000 440,000 (4) 9,000 (6) 4,000 995,000
Total costs and expenses 1,730,000 1,310,000 2,883,000

Retained earnings, Jan. 1 250,000 206,000 (2)156,000 258,000
(4) 18,000
(5) 24,000
Dividends paid (40,000) (1) 40,000 -
RE, 12/31, carried forward 460,000 356,000 595,000
Statement of FP
Cash 285,000 150,000 435,000
Accounts receivables (net) 430,000 350,000 (9) 75,000 705,000
Inventories 530,000 410,000 (8) 18,000 922,000
Land, buildings, and equipment 660,000 680,000 (3) 54,000 (5) 30,000 1,364,000
(3)114,000
Goodwill (3) 60,000 60,000
Totals 2,655,000 1,590,000 3,486,000
Accumulated depreciation 185,000 210,000 (5) 6,000 (4) 27,000 412,000

(6) 4,000
Accounts payable 670,000 544,000 (9) 75,000 1,139,000
Common stock, P10 par 1,200,000 400,000 (2)400,000 1,200,000
APIC 140,000 80,000 (2) 80,000 140,000
Retained earnings from above 460,000 356,000 595,000
Totals 2,655,000 1,590,000 1.124,000 1,124,000 3,486,000
61
Price paid by the parent P750,000

Less book value of interest acquired (100%)
Common stock – S Company P400,000
Additional paid in capital – S Company 80,000
Retained earnings – S Compay 156,000 636,000
Excess P114,000
Allocated to machinery (54,000)
Goodwill P 60,000
Problem 18 – 10
Pluto Corporation and Subsidiary Star Corporation

Comparative Consolidated Income Statement
Years Ended December 31, 2010 and 2011
. December 31 .
. 2011 2010 .
Sales P800,000 P660,000
Cost of goods sold 442,000 368,000 .
Gross profit 358,000 292,000
Operation expenses 178,000 138,000 .
Consolidated net income 180,000 154,000
NCI in net income of subsidiary 10,000 10,000 .
Attributable to equity holders of Pluto P170,000 P144,000 .
Supporting computations:
. .
. 2011 2010 .
Consolidated sales:
Combined sales P850,000 P700,000
Less: intercompany sales (50,000) (40,000) .
Consolidated sales P800,000 P660,000 .
Consolidated cost of goods sold:

Combined costs of good sold P490,000 P400,000
Intercompany sales (50,000) (40,000)
Unrealized profit in ending inventory 10,000 8,000
Unrealized profit in beginning inventory (8,000) .
Consolidated cost of goods sold P442,000 P368,000 .
Consolidated operating expenses

Combined operating expenses P180,000 P140,000
Realized gain on sale of equipment (P10,000/.2) (2,000) (2,000) .
Consolidated operating expenses P178,000 P138,000 .
NCI in net income of subsidiary

Star Company’s reported net income P65,000 P50,000
Gain on upstream sale of land (5,000)
Unrealized gain in upstream, inventory sales (10,000) .
Realized net income P50,000 P50,000
NCI 20% 20% .
NCI in net income of subsidiary P10,000 P10,000 .
62

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Problem 12-1

Home Office Books Branch Books

1. Investment in branch 30,000 Cash 30,000

2. Investment in branch 75,000 Shipment from home office 75,000

3. No entry Purchases 10,000

4. No entry Accounts receivable 125,000

5. Shipment to branch 2,000 Home office 2,000

6. No entry Cash 105,000

7. No entry Accounts payable 7,000

8. No entry Salaries 10,000

9. Investment in branch 7,500 Depreciation 1,500

10. Cash 65,000 Home office 65,000

11. Cash 3,000 Home office 3,000

12. Investment in branch 10,000 Sales 125,000

a. Books of the Branch

3. Accounts receivable 650,000

Cost of goods sold 425,000

4. Advertising expense 40,000

5. Accounts payable 370,000

b. Manila Sales – Naga Branch

c. Manila Sales – Naga Branch

Cash P160,000 Accounts payable P 30,000

Home Office Books Branch Books

a. Investment in branch 63,750 Cash 63,750

b. Investment in branch 75,300 Shipment from HO 75,300

c. Accounts receivable 157,500 Accounts receivable 99,000

d. Purchases 183,750 Purchases 33,750

Home office 80,100

f. Accounts payable 186,000 Accounts payable 18,375

Furniture & fixtures – branch 12,000 Home office 12,000

i. Retained earnings 15,000

(2) Adjusting Entries

k. Investment in branch 975 Expenses 975

l. Prepaid expenses 375 Prepaid expenses 1,125

m. Expenses 150 Expenses 450

n. Sales 157,500 Sales 99,000

o. Branch loss 2,100 Home office 2,100

p. Income summary 2,100

q. Income summary 18,075

3. Individual Financial Statements

Cebu Company – Branch

Cebu Company – Home Office

Liabilities and Stockholders’ Equity

Cebu Company – Branch

Liabilities and Capital

4. Combined Financial Statements

Liabilities and Stockholders’ Equity

Branch Books Home Office Books

Sales 145,000 Sales 560,000

Branch income 22,000

Income summary 142,000

Inventory 12/31 (BS) 150,000

Inventory, 12/31 (IS) 90,000 60,000 (150,000)

Total liabilities & equity 371,000

1. To eliminate shipments to branch and shipments from HO

(1) Oro Company

Totals 939,000 275,700 389,100

Totals 939,000 275,700 289,050 289,050

Net Income 9,900 (9,900)

2. Branch Books 3. Home Office Books

Home Office 9,900 Branch loss 9,900

Income summary 9,900

a. Investment in Branch account (Home Office Books)