Problem # 1

On January 2, 2017, PANDA Company acquired 90% of SUNSET Company in exchange for 112,500 shares of its P100 par
ordinary shares from the market for P2,250,000. The separate financial statements of the two companies on this date
show:

PANDA Company SUNSET Company

Cash P 1,250,000 P 520,000
Accounts Receivable 780,000 800,000
Merchandise Inventories 1,800,000 1,200,000
Equipment, net 2,240,000 1,750,000
Patents 570,000 250,000
Total Assets P 6,640,000 P 4,520,000

Current Liabilities P1,500,000 P 900,000

Bonds Payable 1,000,000 1,500,000
Share Capital 2,000,000 2,000,000
Share Premium 1,000,000
Retained Earnings 1,140,000 120,000
Total Liabilities P 6,640,000 P 4,520,000

On the date of acquisition, assets and liabilities of Sunset Company have book values approximately equal to their
respective market values except for the following:

Merchandising Inventories P 1,250,000

Equipment 2,000,000
Patents 100,000

a. The company is using first-in-first out method. Equipment and patents have remaining useful life of 4 and 10
years, respectively.
b. The fair value of non-controlling interests on January 2, 2017 is P300,000.
c. For the year ended December 31, 2017, Panda Company generated net income of P750,000 and paid dividends
of P250,000; Sunset Company had net income of P360,000 and paid dividends of P80,000.

4. Compute the resulting goodwill allocated to the controlling and non-controlling interest on the date of acquisition:
A. P252,000 and P28,000 C. P207,000 and P73,000
B. 207,000 and 23,000 D. 157,000 and 73,000

5. Compute the CNI attributable to Controlling interest on December 31, 2017

A. P914,250 B. P326,250 C. P245,250 D. P253,250

6. What is the amount Non-controlling interest on December 31, 2017?

A. P318,250 B. P326,250 C. P245,250 D. P253,250

Problem # 2

PAL Chemicals routinely receives/sells goods from/to its 90% -owned subsidiary, SNG Corporation. In 2016, PAL sold
merchandise costing P500,000 to SNG for P750,000. Seventy percent of this merchandise had been sold during 2016.
During 2017, SNG sold merchandise to PAL that cost P750,000 for P937,500 of this merchandise remained in PAL’s
inventory at year-end.

Summary of the 2017 results of financial operations follow:

PAL Chemicals SNG Corporation
Sales P3,100,000 P2,450,000
Cost of Goods Sold 2,325,000 1,592,000
Operating Expenses 342,000 275,000

7. What is the amount of consolidated (1) sales and (2) consolidated CGS in 2017?
A. (1) P3,862,500 (2) P2,452,300 C. (1) P4,612,500 (2) P2,592,300
B. (1) P3,862,500 (2) P2,357,700 D. (1) P4,612,500 (2) P2,952,300

8. What is the amount of the CNI-attributable to controlling interest in 2017?

 A. P989,680 B. P1,043,200 C. P984,950 D. P924,820

Problem # 3

PERFECTO Corporation owns 90% of SAMANTHA Inc. On November 30, 2017, finished goods totaling P90,000 were
disposed by PERFECTO as follows:
a. It sold 60% of the above inventory to SAMANTHA for P72,000.
b. Sold P27,000 worth of the same inventories to an unaffiliated company for P36,000.

SAMANTHA resold 80% of the inventory it purchased from PERFECTO to an outsider for P72,000 on December 31, 2017.
The companies had no other transactions during 2017.

9. What amount of sales will be reported on the 2017 consolidated income statement?
A. P180,000 B. P108,000 C. P90,000 D. P72,000

10. What amount of cost of goods sold will be reported on the 2017 consolidated income statement?
A. P81,000 B. P138,600 C. P57,600 D. P70,200

11. What amount of consolidated net income would be assigned to the controlling interest?
A. P41,400 B. P36,720 C. P37,800 D. P36,360

12. What inventory balance will be reported by the consolidated entity on December 31, 2017?
A. P10,800 B. P19,800 C. P14,400 D. P23,400

Problem # 4

On January 2, 2015, PIXEL Industries acquired 80% interest in SAB Company to insure a steady supply of PIXEL’s raw
materials inventory that uses in its own manufacturing process. SAB sold 100% of its output to PIXEL during 2016 and
2017 at a mark-up of 120% of its manufacturing cost. PIXEL had P330,00 of these items in its January 2017 inventories
and P288,750 on December 31, 2017.

13. How much is the unrealized profits on ending inventory that would be included in the computation of CNI-
attributable to controlling interest in 2016 and 2017?

A. P144,000; P126,000 B. P - ; P126,000 C. P44,000; P38,500 D. P55,000; P48,125