advanced accounting part ii quiz 13 intercompany profits long quiz

8/19/2019 Advanced Accounting Part II Quiz 13 Intercompany Profits Long Quiz

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QUIZ 2 ON INTERCOMPANY PROFITS-SBC

Parent Company purchased majority of the outstanding shares of Subsidiary Company for P750,000 on

March 31, 2013 !ny e"cess shou#d be treated as an adjustment to a $arehouse $hich has a remaining #ife

of 5 years as of March 31 Se#ected accounts for 2013 and succeeding periods fo##o$ %a## in thousands&'

1(1 to 7(1(13 1(1 to 12(31(13 12(31(1) 12(31(15

P Co S Co P Co S Co P Co S Co P Co S Co*iabi#ities P250 P110 P300 P++5 P330 P5+0

Share Capta#ParP100 1,000 500 1,000 500 P1,000 P500 P1,000 P500

Share Premium 200 200 200 200

-etained .arnings,1(1 700 300 1700 300 1,+375 5/0

Sa#es 2,500 1,200 3,500 2,200 ),000 2,500 ),200 2,+00

Cost of Sa#es 1,500 /00 2,)50 1,)50 2,00 1,750 2,/)0 2,100

."penses 750 200 +50 )50 1,200 500 +0 500

ainsa#e of machine )0 %10&

i4idends, +(1 100 50 150 100 200 100

i4idend ncome 375 75 75

Cash 105 0 120 70 130 5 100 35

!ccounts -ecei4ab#es 1)5 50 1+0 20 150 55 50 )5

n4entories 3+0 250 ))0 2)0 500 1+0 )+0 220

*and 2,000 1,000 2,000 1,000 2,000 1,000 2,130 /00

Machines 1,500 750 1,500 750 1,50 700 1,500 700

!ccumu#ated epn 550 275 5+2 300 00 325

6arehouse 1,000 200 1,000 200 1,000 200 1,000 200

!ccum epreciation 30 3525 30 3755 +0 3/+5 130

!dditiona# information'

• he machine $as so#d by Subsidiary Co to Parent on 8u#y 1, 2013 $ith a cost of P50 for P0 t

has a remaining #ife of ) years

•Parent Co so#d goods to Subsidiary Co costing P120 for P150 on 9ct 1, 201), out of $hich P50$as reported unso#d by Subsidiary Co on ec 31, 201)

• he machine $as so#d by Parent Company on 8une 30, 2015

-e:uirements'

1 Prepare a tab#e for determination and a##ocation of e"cess sho$ing both contro##ing interest and

noncontro##ing interest

2013'

2 ;pdate the in4estment account assuming the parent uses the e:uity method ;se !ccount

proper#y #abe##ed

3 Prepare adjusting and e#iminating entries

) Prepare a conso#idated income statement and conso#idated retained earnings

5 Prepare the conso#idated stoc


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3 Prepare a $or


3/14

2015 Adjustment nd

E!"m"nt"#n Ent$"es

In%#me Sttement P C# S C# &e'"t C$ed"t NCI C#ns#!"dted

Sa#es

Cost of Sa#es

."penses

>et 9perating ncomei4idend ncome

ain on sa#e of machine

*oss on sa#e of machine

Share of >C

>et ncome

Ret"ned E$n"n(s

8an 1

>et ncome

i4idends

ec 31

F"nn%"! P#s"t"#n

!ssets

Cash

-ecei4ab#es

n4entories

*and

Machines

!ccumu#ated epreciation

6arehouse!ccumu#ated epreciation

n4estment in StocC

ota# *iabi#ities and S?.


4/14

S9*;9> @9- >.-C9MP!>A P-9@S

1 ab#e for determination and a##ocation of e"cess'

Contro##ing nterest >onCont nt

100B 75B 25B

@air a#ue of in4estment P1,000,000 P 750,000 P250)000

@air a#ue of Subsidiary Co'Capita# Stoc< %500,000& %)00,000& %100,000&

-etained .arnings % 300,000& %200,000& % 0,000&Pre!c:n .arnings' %50,000& %37,500& %20,000&

-e4a#uation of P#ant !ssets P150)000 P112)500 P *+)500

2 n4estment in S

8u#y 1 P 750,000

Share n net income %3)0 P!.50& 2/0

!djustment for depn of 6?

%150(5 " /(12& %225&

;nrea#iDed gain on machine

)0 E 5 %)0() " 1(2& %35 & 17),375 Fncome o4er S CoShare in di4idends %50 & %37,500&

P,,),+5

3 i4idend ncome 37,500

i4idends, Subsidiary Co 37,500

Common StocC 50,000

n4estment in Subsidiary Co 750,000

Common StocC 50,000

>C 250,000

eprreciation 22,500

!ccumu#ated epn$arehouse 22,500

ain on sa#e )0,000

Machine 10,000

!ccum epn %30G25 against 75& 25,000

epreciation %25 against 75& or )0() "5 5,000

) Sa#es %3,500,H G 2,200& P 5,700,000Cost of Sa#es %2,)50 G 1,)50& %3,/00,000&

."penses %+50 G)50 G3,750 G2255&& %1,317,500&

Pre !c:uisition .arnings %50,000&

Conso#idated >et ncome )32,500

Share of noncontro##ing interest %2325& " 25 % 5+,125&

Share of Parent Company P *+.)*+5

o Pro4e' >et operating income of Parent Company P200,000


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.:uity o4er Subsidiary Company 17),375

P*+.)*+5

-etained .arnings, 8an 1 P1,700,000

Share in C> 37),375i4idends % 100,000&

-etained .arinings, Subsidiary ec 31 P1)/+.)*+5

5 >onContro##ing nterest, 8an 1

P250,000

Share in >et ncome 5+,125

Share in i4idends % 12,500& >C ec 31 P2/5)25

Share Capita# 1,000,000

Share Premium 200,000

-etained .arnings 1/7),375

Conso#idated S?. *).+0)000

7

Conso#idated n4entory

PP.

*and P3,000,000

Machine 2,2)0,00

!ccum epn % +30,000&6arehouse 1,350,000

!ccum epn %)05,000&

P,0)000

P5)*55)000

201) n4estment in S

8an 1 P ++,+75

Share n net income 250

!djustment for depn of 6? % 30&

-ea#iDed gain on machine 10 230 " 75 172,500

;nrea#iDed ain on Mdse %10,000& 12,500 ncome 94er S

Share in di4idends %75,000&

P/+.)*+5

3 i4idend ncome 75,000

i4idends, Subsidiary Co 75,000

n4estment in StoconContro##ing nterest 31,+75

n4estment in Subsidiary Co /13,125


6/14

Common StocC 31,+75

>C 30),375

n4estment in Stoc


7/14

*and P3,000,000

Machine #ess 10,000 2,250,000

!ccum epn add 15,000 %+/7,000&

6arehouse add 127,500 1,327,500

!ccum epn add 30,000 %)+5,500& P5)1/5)500

20152 n4estment in S Co

8anuary 1

P1,/7),375

Share n net income 200,000

!djustment for depn of 6? %30,000&Piecemea# rea#iDation 5,000

ain on sa#e 20,000 1/5 " 75 1),250

-ea#iDed gain on in4ty 10,000 P15,250 is ncome o4er S

Share in di4idends %100,000 " 75& %75,000&

P1)055)25

3 i4idend ncome 75,000 i4idends, Subsidiary Co 75,000

n4estment in StocC 33),375

n4estment in Stoc


8/14

accum depn shoud be P32,500 7,500& recorded under by P25,000

in 2015' depreciation recorded as P7,500 shou#d be P2,500 o4er by P5,000

no need to ana#yDe accumu#ated2015 Adjustment nd

E!"m"nt"#n Ent$"es


Sa#es ),200 2,+00 7,000

Cost of Sa#es %2,/)0& %2,100& g& 10 %5,030&

."penses %+0& %500& f& 30 e& 5 %1,3+5&

>et 9perating ncome )00 200

i4idend ncome 75 a& 75

ain on sa#e of machine e& 20 20

*oss on sa#e of machine %10& %10&

C> 5/5

Share of >C )+75 %)+75&

>et ncome )5 200 5)25

Ret"ned E$n"n(s

8an 1 1,/25 b&22)375 2,1++75

7)0 c& 555

e& 25 17+75

>et ncome )5 200 )+75 5)25

i4idends %200& %100& a&75 %25& %200&

ec 31 2,2275 +)0 2025 2,53325

F"nn%"! P#s"t"#n

!ssets

Cash 100 35 135-ecei4ab#es 50 )5 /5

n4entories )+0 220 700

*and 2,130 /00 3,030

Machines 1,500 700 2,200

!ccumu#ated epreciation %00& %325& %/25&

6arehouse 1,000 200 c& /75 1,2/75

!ccumu#ated epreciation %3/+5& %130& f& 30 %55+5&

n4estment in StocC c& 2)375 2)375

>C 351+75 351+75


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ota# *iabi#ities and S?. 5,0115 1,)5 5,/7)

QUIZ ON INTERCOMPANY PROFITS

Parent Company purchased ),000 of the outstanding shares of Subsidiary Company for P700 on 8an 1,

2013#y !ssets are at fair 4a#ue e"cept for the machine $hich shou#d be on#y P730 based on a remaining

#ife of ) years !ny e"cess shou#d be treated as an adjustment to a nonidentifiab#e asset Se#ectedaccounts for three succeeding periods fo##o$ %thousands omitted inc#uding in4estment described in the

first statement&'

12(31(13 12(31(1) 12(31(15

P Co S Co P Co S Co P Co S Co

Share Capita#, Par100 P1,000 P500 P1,000 P500 P1,000 P500

-etained .arnings, 1(1 /00 300

Sa#es 3,500 2,200 ),000 2,500 ),200 2,+00

Cost of Sa#es 2,)50 1,)50 2,00 1,750 2,/)0 2,100

."penses +50 )50 1,200 500 +0 500

ain on sa#e of *and 30 20

i4idends,+(1 100 50 150 100 200 100

n4entory ))0 2)0 500 1+0 )+0 220

*and 2,000 +00 1,/30 /00 1,/30 +00

Machines 1,500 750 1,500 750 1,)50 750

!ccumu#ated epreciation 550 275 575 300 00 350

!dditiona# information'

• Subsidiary Co so#d goods to Parent costing P10) for P130 on 9ct 1, 2013, out of $hich P)+ $as

reported unso#d by Parent Co on ec 31, 2013

• he #and $as so#d by Parent Co to Subsidiary for P100 on May 30, 201)

• he #and $as so#d by Subsidiary Co to Cybe## Co on 9ct 1, 2015

-e:uirements'

1 Prepare a tab#e for determination and a##ocation of e"cess sho$ing both contro##ing

interest and noncontro##ing interest

2013'

2 ;pdate the in4estment account assuming the parent uses the e:uity method ;se !ccount

3 etermine the ncome from Subsidiary ;se !ccount

) Prepare adjusting and e#iminating entries

5 Prepare a conso#idated income statement, conso#idated retained earnings, conso#idated ba#ance

Sheet sho$ing in4entories, #and, machines, good$i## %if any&, stoc


10/14

1 ab#e for determination and a##ocation of e"cess'

100B +0B 20B

@air a#ue of subsidiary P+75,000 P 700,000 P1+5)000

@air a#ue of Subsidiary Co'

Capita# Stoc< %500,000& %)00,000& %100,000&-etained .arnings % 300,000& %2)0,000& % 0,000&

ood$i## P +5)000 P 0)000 P 15)000

2 n4estment in S Co ncome o4er Subsidiary

8anuary 1 P 700,000

Share n net income %300,000 " +& 2)0,000 P 2)0,000

;nrea#iDed profit on intercompany

sa#es %)+,000 " 2& % /,00& % /,00&

Share in di4idends %50,000 " +& %)0,000&

P ,/0).00 P2*0).00

3 1& Subsidiary ncome 230,)00

i4idends, Subsidiary Co )0,000

n4estment in Subsidiary Co 1/0,)002& Share Capita#, Subsidiary Co )00,000

-etained .arnings, Subsidiary Co 2)0,000

ood$i## 75,000

Share of >C in ood$i## 15,000

n4estment in Subsidiary Co 700,000

Share Capita#, Subsidiary Co 100,000

-etained .arnings, Subsidiary Co 0,000


>C 175,000

3& Sa#es 130,000

Cost of Sa#es 120,)00

Merchandise n4entory /,00

201)2 n4estment in S Co ncome o4er Subsidiary

8anuary 1 P +/0,)00

Share n net income %2+0,000 " +& 22),000 P 22),000

;nrea#iDed gain on #and %30,000 " +&

-ea#iDed gain on sa#e of mdse

% 2),000&

/,00

%2),000&

/,00

Share in di4idends %100,000 " +& %+0,000&

P1)020)000 P20/)00

3 1& Subsidiary ncome 20/,00

i4idends, Subsidiary Co +0,000 n4estment in Subsidiary Co 12/,00

2& Share Capita#, Subsidiary Co )00,000

-etained .arnings, Subsidiary Co ))0,000

ood$i## 75,000


n4estment in Subsidiary Co /00,000


11/14


-etained .arnings, Subsidiary Co 110,000


>C 225,000

3& n4estment in StocC in ood$i## 15,000 n4estment in Subsidiary Co 1,0)),000


-etained .arnings, Subsidiary Co 1)0,000

Share of >C in ood$i## 15,000 >C 255,000

3& n4estment in StocC& ,000

*and 30,000

)& ain on sa#e 20,000

!ccumu#ated epreciation +,750

epreciation ."pense 1250

Machine 10,000

!na#ysis of sa#e of machine in 2015'

effectsmachine cost of P50,000 so#d and recorded for P0,000 o4er by P10,000

depreciation recorded as P3,750 shou#d be P2,500 o4er by P1,250

accum depn shoud be P12,500 %2,500 G 10,000& recorded

as P3,750 under by P+,750


12/14

2013 !djustment and

.#imination .ntriesIn%#me Sttement P Co S Co ebit Credit >C Conso#idated

Sa#es 3,500 2,200 130 5,570

Cost of Sa#es %2,)50& %1,)50& 120) %3,37/&

."penses %+50& %)50& %1,300&

>et 9perating ncome 200 300ncome from Subsidiary 230) KKKK 1&230)

C> )/0)

Share of >C 0 %0&

>et ncome )30) 300 0 )30)Ret"ned E$n"n(s

8an 1 /00 300 2& 2)0 0 /00

>et ncome )30) 300 0 )30)

i4idends %100& %50& 1& )0 %10& %100&

ec 31 1,230) 550 110 1,230)F"nn%"! P#s"t"#n

n4entories ))0 2)0 3& / 70)

*and 2,000 1,000 3,000

Machines 1,500 750 2,250

!ccumu#ated epreciation %550& %275& %+25&

n4estment in Stoc


13/14

ec 31 1,)/0 730 1)0 1,)/0F"nn%"! P#s"t"#n

n4entories 500 1+0 +0

*and 2,130 /00 )& 30 3,000

Machines 1,500 750 2,250

!ccumu#ated epreciation 575 300 %+75&

n4estment in StocC in 6 2& 15 15

>C 255 255

2015 Adjustment nd

E!"m"nt"#n Ent$"es


Sa#es ),200 2,+00 7,000

Cost of Sa#es %2,/)0& %2,100& %5,0)0&

."penses %+& %500& )&1,25

0

%5+)75&

>et 9perating ncome )00 200 0125

ncome from Subsidiary 1)125 1&1)12

5

ain 20 )& 20

C> 0125

Share of >C )0 %)0&

>et ncome 5125 200 )0 5125

Ret"ned E$n"n(s

8an 1 1,)/0 730 2& 5+) 1,)0

3&

>et ncome 5125 200 5125

i4idends %200& %100& 1& +0 %200&

ec 31 1,+512

5

+30 1+5125

F"nn%"! P#s"t"#n

!ssets

n4entories )+0 220 700*and 2,130 /00 3& 30 3,000

Machines 1,)50 +10 )& 10 2,250

!ccumu#ated epreciation %00& %350& )& +75 %/5+75&

n4estment in Stoc


14/14

ood$i## 2& 75 75

.:uity

Share Capita# 1,000 500 2& )00 100 1,000

-etained .arnings 1,+512

5

+30 10 1+5125

Share of >C in 6 2& 15 15 275

>C

advanced accounting part ii quiz 13 intercompany profits long quiz

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