Chap 15 EXERCISES

1. Paradise Corporation acquired on January 1, 80% Seaside shares and paid P26,000,000 when Seaside's shareholders'
equity consisted of P20,000,000 share capital and P10,000,000 retained earnings.
Seaside reported net income of P1,000,000 for the year 2010 and paid dividends of P600,000 on December 1.
Required: a) Prepare journal entries, in parallel column, to record the above transactions using two methods: equity
and cost. Determine the balance of the investment account as at the end of 2010.
b) In parallel column, prepare the necessary working paper adjustment and elimination entries for
consolidation purposes.

2. Refer to no. 1. To continue, assume that for 2011 Seaside reported net income of P500,000 and paid dividends on
December 1 in the amount of P600,000.
Required: a) In parallel column, using the equity and cost methods, prepare journal entries to update the investment
account. Determine its balance as at the end of the year.
b) In parallel column, prepare the adjustment and elimination entries for consolidation purposes.

3. On January 1, 2013, Davao Corporation purchased 60% of the share capital of Cebu Corporation for P480,000. On
December 31, 2013, their trial balances are as follows:
Davao Cebu
Cash P 70,000 P 50,000
Accounts Receivable 140,000 160,000
Dividends Receivable 30,000
Advances to Cebu 40,000
Inventory-January 1 150,000 80,000
Investment in Cebu Company 480,000
Other Assets 570,000 480,000
Dividends 100,000 50,000
Purchases 900,000 200,000
Expenses 100,000 80,000
P2,580,000 P1,100,000
Accounts Payable 50,000 10,000
Dividends Payable 50,000
Advances from Davao 40,000
Other Liabilities 50,000
Share Capital (par, P100) 1,000,000 500,000
Retained Earnings 400,000 100,000
Sales 1,050,000 400,000
Dividend Income 30,000 ________
P 2,580,000 P1,100,000
Inventory-December 31 P 200,000 P 100,000
 Davao uses the cost method of accounting for its investment in Cebu.
Required: Prepare a working paper for consolidated financial statements on December 31, 2013. Support with a table
for determination and allocation of excess.

4. On January 1, 2013 Davao Corporation purchased 60% of the capital stock of Cebu Corporation for P480,000. On
December 31, 2013 their trial balances are as follows:
Davao Cebu
Cash P 70,000 P 50,000
Accounts Receivable 140,000 160,000
Dividends Receivable 30,000
Advances to Cebu 40,000
Inventory-Jan. 1 150,000 80,000
Investment In Stocks 534,000
Other Assets 570,000 480,000
Dividends 100,000 50,000
Purchases 900,000 200,000
Expenses 100,000 80,000
P2,634,000 P1,100,000
Accounts Payable P 50,000 P 10,000
Dividends Payable 50,000
Other Liabilities 50,000
Advances from Davao 40,000
Share Capital (Par P100) 1,000,000 500,000
Retained Earnings 400,000 100,000
Sales 1,050,000 400,000
Income from Subsidiary 84,000 ______
P2,634,000 P1,100,000
Inventory, December 31 P 200,000 P 100,000
Required: a) Prove the Investment balance of P534,000.
b) Prepare a working paper for consolidation on December 31, 2013.
5. On January 1, 2014 Pan Corporation purchased 70% interest in Set Corporation for P1,150,000, when its share capital
and retained earnings were P600,000 and P400,000, respectively. The assets and liabilities of Set Company are fairly
valued except for the plant and equipment which has a book value of P1,000,000 and a market value of P1,500,000
(with a remaining life of 10 years) and the inventories which has a book value of P250,000 and a market value of
P220,000.
Pan reported net income of P800,000 and dividends on November 30 in the amount of P400,000. Set reported net
income for 2014 of P500,000 and dividends paid on December 1 of P250,000.
Required: a) Entries in the books of Pan Corporation to record the above transactions using the cost method.
b) Working paper adjusting and eliminating entries on December 31, 2014. Support with a table for
determination and allocation of excess.
c) Compute for the non-controlling interest as at December 31.
d) Compute for consolidated net income.
b) Prepare a schedule of consolidated retained earnings for 2014. Pan Corporation's retained earnings as of
January 1, 2014 was P1,500,000.
6. Refer to exercise 5. Assume that they reported the following on December 31, 2015:
Pan Set
Net Income P900,000 P600,000
Dividends 500,000 300,000
Required: Same requirements as in exercise 5 except a. For b) prepare a table for adjustments only.

7. Repeat Exercises 5 and 6 using the equity method. Same requirements . One presenter each year.

8. On January 1, 2014, Palo Towers purchased 24,000 shares of Swiss Corporation by issuing 9,450 of its common
shares with a market value of P80. Registration of stocks and stock certificates paid amounted to P25,000. Business
Combination expenses paid amounted to P75,000. On that date, the assets and liabilities of Sister have market values
different from the book values as follows:
Book Value Market Value
Inventories P 40,000 P 30,000
Building 250,000 230,000
Patents 40,000 90,000
Land 150,000 200,000
The building has a remaining life of 5 years, the useful life of the patents is 10 years and the company is using the
FIFO method for the inventory. Trial balances at the end of 2014 are as follows:
Palo Swiss
Cash P 200,000 P 50,000
Accounts Receivable 150,000 50,000
Inventories 100,000 60,000
Land 150,000
Building 360,000
Equipment 700,000 490,000
Patents 40,000
Investment in Stocks of Swiss 843,200
Cost of Sales 400,000 150,000
Expenses (including business combination exp) 360,000 200,000
Dividends 100,000 50,000
Total Debts P2,853,200 P1,600,000
Liabilities P 124,000 P 250,000
Accumulated Depreciation - Building. 90,000
Accumulated Depreciation - Equipment 402,000 60,000
Share Capital, par 50 and 10 200,000 300,000
Share Premium 400,000
Retained Earnings 600,000 400,000
Sales 1,000,000 500,000
Income from Subsidiary 127,200 _______
Total Credits P2,853,200 P1,600,000
Required: a. Prove the investment balance and the income from subsidiary balance.
b. Prepare the adjustment and elimination entries. Support with a table.
c. Prepare the working paper for consolidation.
9. Refer to Exercise 8. Assume that on December 31, 2015 the trial balances for the two entities showed:
Palo Swiss
Cash P 233,000 P 48,000
Accounts Receivable 240,000 25,000
Inventories 150,000 80,000
Land 150,000
Building 260,000
Equipment 800,000 633,000
Patent 45,000
Investment in Stocks of Swiss. 952,800
Cost of Sales 500,000 250,000
Expenses 400,000 252,000
Dividends 150,000 60,000
Total Debits P3,425,800 P1,803,000
Liabilities P 150,000 P 140,000
Accumulated Depreciation-Building 73,000
Accumulated Depreciation-Equipment 451,000 90,000
Common Stock, par P50 200,000
par P10 300,000
Additional Paid In Capital 400,000
Retained Earnings 867,200 500,000
Sales 1,200,000 700,000
Income from Subsidiary 157,600 _______
Total Credits P3,425,800 P1,803,000
Required: same requirements as in Exercise 8.

10. Peer International paid P180,000 for a 90% interest in Seer Co on January 2, 2015 when Seer's share capital was
P150,000 and its retained earnings was P80,000. Equipment, net included in other assets was revalued for P20,000 to
be depreciated using 5 years. Their trial balances at the end of the year appears below:
Peter Simon
Cash P 22,000 P 60,000
Receivables 33,000 50,000
Other Assets 218,000 200,000
Investment in Simon 180,000
Cost of Goods Sold 100,000 60,000
Expenses 50,000 80,000
Dividends 40,000 20,000
Liabilities (160,000) ( 60,000)
Capital Stock (200,000) (150,000)
APIC ( 20,000) -
Retained Earnings ( 45,000) ( 80,000)
Sales (200,000) (180,000)
Dividend Income ( 18,000) -
0 0
Required: a) Prepare a table for determination and allocation of excess.
b) Prepare the working paper entries.
c) Prepare a consolidated income statement for the year 2015. Prove the
consolidated net income by computing for income from subsidiary.
d) Compute for consolidated retained earnings.
e) Compute for non-controlling interest.
11. Refer to Exercise 10. To continue, the net income and dividends for 2016 showed:
Peer Seer
Net Income P90,000 P60,000
Dividends 50,000 30,000
Required: answer the same requirements (b) to (e) as in Exercise 10.