Problem A. PCo acquires 75% of the outstanding shares of SCo for P675,000, on January 1, 2020.

At that time,
common shares, APIC, and RE of SCo amounted to P200,000, P80,000, and P548,500 respectively. Also on that date,
an examination on SCo’s assets and liabilities revealed that all assets and liabilities are recorded at fair value except:
inventory with book value P60,000 but fair value of P68,000; land with fair value P80,000 more than its book value;
equipment whose book value exceeds its fair value in the amount of P50,000. The equipment has a remaining
economic life of 5 years. The non-controlling interest is measured at fair value in the amount of P220,000. The
following are the separate financial statements of PCo and SCo for the years ended December 31, 2020 and 2021
respectively.
PCO 2020 PCO 2021 SCO 2020 SCO 2021
Cash 580,000 630,000 180,000 200,000
Accounts receivables 90,000 320,000 50,000 30,000
Inventories 85,500 90,000 95,000 110,000
Equipment, net 326,000 118,000 250,000 320,000
Land 898,000 898,000 530,000 530,000
Investment in SCO 675,000 675,000 0 0
total 2,645,500 2,731,000 1,105,000 1,190,000

Accounts payable 180,000 150,000 95,000 105,000

Notes payable 367,500 368,000 110,000 120,000
Common shares 800,000 800,000 200,000 200,000
APIC 500,000 500,000 80,000 80,000
Retained earnings 807,000 913,000 620,000 685,000
total 2,645,500 2,731,000 1,105,000 1,190,000

Additional information:
 For the year ended 2020, the net income of PCo and SCo amounted to P135,000 and P86,500 respectively,
while dividends declared amounted to P23,000 and P15,000 respectively.
 For the year ended 2021, the net income of PCo and SCo amounted to P156,000 and P93,000 respectively,
while dividends declared amounted to P50,000 and P28,000 respectively.
 In 2020, goodwill was impaired in the amount of P12,000, while in 2020 it was impaired in the amount of
P9,000.

1. How much is non-controlling interest, goodwill or bargain purchase, and consolidated assets on January 1,
2020?
2. How much is the consolidated net income 2020 and 2021?
3. How much is the consolidated net income attributable to controlling interest 2020 and 2021?
4. How much is the non-controlling interest share in the net income of subsidiary 2020 and 2021?
5. How much is the consolidated retained earnings on December 31, 2020 and 2021?
6. How much is the non-controlling interest share in the net assets of the subsidiary on December 31, 2020 and
2021?

Problem B. PCO acquired 80% of outstanding common shares of SCO on January 2, 2019 for P3,712,500. On this date,
the balances of SCO’s stockholders’ equity accounts were P2,075,000 common shares, P895,000 retained earnings.
An examination of SCO’s net assets on the date of acquisition revealed that book values were equal to fair values for
all items except inventory which had a book value of P594,000 and a fair value of P858,000; land which was
undervalued by P470,000; equipment which was overvalued by P375,000; and copyright which was undervalued by
P120,000; any remaining excess was attributable to goodwill.

Non-controlling interest is measured at fair value of P900,000

The remaining one-fourth of inventories on the date of acquisition were sold in 2020. The equipment had a remaining
life of 8 years while the copyright had a remaining life of 6 years from the date of acquisition. Goodwill was impaired
in the amount of P45,000 and P36,000 in 2019 and 2020 respectively.

Dividends declared by SCO in 2019 amount to P500,000. Retained Earnings of PCO on January 1, 2019 amount to
P2,400,000. PCO declared dividends during 2019 in the amount of P800,000.

The Unconsolidated Trial Balance as of December 31, 2020 show:

PCO SCO
Cash P2,550,000 P1,485,000
Accounts Receivable 628,000 1,600,000
Investment in LCO held at FVPL 100,000
Inventory 1,980,000 1,380,000
Equipment, net 570,000 870,000
Building, net 6,000,000 2,000,000
Land 3,800,000 900,000
Copyright, net 370,000 220,000
 Investment in SCO 3,712,500
Cost of Goods Sold 6,600,000 3,200,000
Loss on sale of furniture 140,000
Operating expenses 3,465,000 1,290,000
Dividends declared 1,650,000 1,500,000
TOTAL P31,425,500 P14,585,000

Liabilities P2,450,000 1,935,000

Common shares 9,250,000 2,075,000
Retained Earnings, 01/01/2020 3,975,000 1,650,000
Sales 13,550,500 7,800,000
Gain on sale of land 800,000
Gain on sale of building 825,000
Dividend income 1,400,000 300,000
TOTAL P31,425,500 P14,585,000

Problem C. On January 1, 2019 PCO acquired 80% of the 100,000 outstanding common shares of SCO for cash
amounting to P31.25 per share. The fair value of SCO’s common shares are P30 per share. The latest available FS was
as of the year ended December 31, 2018:

SCO
Current assets 80,000 Liabilities 180,000
Building 1,250,000 Notes payable 1,500,000
Trademark 700,000 Common shares 50,000
Patent 940,000 APIC 500,000
RE 740,000

SCO’s building was over valued by P150,000. The building had a useful life of 6 years when it was purchased for
P1,500,000. Trademark was undervalued by P200,000 and still has a remaining useful life of 10 years. Patent was
undervalued since it had a fair value of P2,000,000. In addition, PCO assigned P600,000 to value certain unpatented
technology which SCO has recently developed.

During 2019, SCO declared P30,000 dividends to its shareholders. The net income of PCO and SCO for the year
ended December 31, 2019 amounted to P1,250,000 and P800,000 respectively.

Problem D. PCO acquired 80% of the outstanding common shares of SCO on July 1, 2019 for P1,360,000 cash. The
latest available FS was as of the year ended December 31, 2018 which showed that SCO had net assets amounting
to P1,440,000. On the date of acquisition, SCO’s net assets had book values equal their fair values except for
equipment which was undervalued by P150,000 (and have a remaining useful life of 5years). SCO declared dividends
on May 23, 2019 for the amount of P20,000. Operations for the year ended December 31, 2019 resulted to a net
income of P200,000 for PCO, and P120,000 for SCO.

Problem E.