1.

These are those presented in addition to consolidated financial statements or the financial
statements of an entity with an investment in associate or joint venture that is accounted for
using equity method in accordance with PAS 28.
a. Individual financial statements
b. Separate financial statements
c. Consolidate financial statements
d. Equity financial statements

2. Entity A acquired an investment in associate for ₱1M many years ago. At the end of the current
reporting period, the investment has a fair value of ₱2.9M. If the equity method is used, the
investment would have a current carrying amount of ₱2.6M. In Entity A’s separate financial
statements, the investment should be valued at
a. 1,000,000.
b. 2,600,000.
c. 2,900,000.
d. any of these, as a matter of an accounting policy choice

Use the following information for the next five questions:

On January 1, 20x1, Bass Co. issued equity instruments in exchange for 75% interest in Guitar Co.
On acquisition date, Bass Co. elected to measure non-controlling interest at fair value. Bass Co.’s
management believes that the fair value of the consideration transferred correlates to the fair value
of the controlling interest acquired and that the fair value of the controlling interest is proportionate
to the fair value of the remaining interest.

Guitar Co.’s net identifiable assets have carrying amount and fair value of ₱300,000 and ₱360,000,
respectively. The difference is attributable to a building with a remaining useful life of 6 years.

The December 31, 20x1 statements of financial position of Bass Co. and Guitar Co. are summarized
below:

Bass Co. Guitar Co.

ASSETS
Investment in subsidiary (at cost) 300,000 -
Other assets 1,372,000 496,000
TOTAL ASSETS 1,672,000 496,000

LIABILITIES AND EQUITY

Trade and other payables 292,000 120,000
Share capital 940,000 200,000
Retained earnings 440,000 176,000
Total equity 1,380,000 376,000
TOTAL LIABILITIES AND EQUITY 1,672,000 496,000

No dividends were declared by either entity during year. There were also no inter-company
transactions and impairment in goodwill.
3. What amount of goodwill is presented in the consolidated statement of financial position on
December 31, 20x1?
a. 40,000
b. 35,000
c. 20,000
d. 15,000

4. How much is the consolidated total assets as of December 31, 20x1?

a. 1,867,000
b. 1,907,000
c. 1,958,000
d. 1,974,000

5. How much is the non-controlling interest in the net assets of the subsidiary on December 31,
20x1?
a. 106,500 c. 136,500
b. 116,500 d. 146,500

6. How much is the consolidated retained earnings on December 31, 20x1?

a. 489,500 c. 534,500
b. 498,500 d. 543,500

7. How much is the consolidated total equity on December 31, 20x1?

a. 1,546,000 c. 1,642,000
b. 1,564,000 d. 1,624,000

Use the following information for the next three questions:

On January 1, 20x1, Laughter Co. issued equity instruments in exchange for 75% interest in Tears
Co. Tears Co.’s net identifiable assets have carrying amount and fair value of ₱300,000 and ₱360,000,
respectively. The difference is attributable to a building with a remaining useful life of 6 years.

The December 31, 20x1 statements of profit or loss of Laughter Co. and Tears Co. are summarized
below:

Statements of profit or loss

For the year ended December 31, 20x1

Laughter Co. Tears Co.

Revenues 1,200,000 480,000
Operating expenses (960,000) (400,000)
Profit for the year 240,000 80,000

8. How much is the consolidated profit in 20x1?

a. 301,000 c. 320,000
b. 310,000 d. 336,000
9. How much is the consolidated profit attributable to owners of the parent in 20x1?
a. 292,500 c. 320,000
b. 310,000 d. 232,500

10. How much is the consolidated profit attributable to non-controlling interest in 20x1?
a. 6,500 c. 57,500
b. 17,500 d. 77,500

Use the following information for the next three questions:

Rainy Afternoon Co. owns 80% interest in Sunny Morning Co. During 20x1, Rainy sold inventories
costing ₱200,000 to Sunny for ₱300,000. One-fourth of the inventories were unsold as of December
31, 20x1 and were included in Sunny’s year-end statement of financial position at the purchase price
from Rainy. The individual financial statements of Rainy and Sunny on December 31, 20x1 show the
following information:

  Rainy Sunny
Inventory 1,260,000 380,000

Sales 6,700,000 2,700,000

Cost of
(3,015,000) (1,755,000)
sales
Gross profit 3,685,000 945,000

There are no fair value adjustments arising from the business combination date.

11. How much is the consolidated inventory on December 31, 20x1?

a. 1,615,000
b. 1,590,000
c. 1,665,000
d. 1,585,000

12. How much is the consolidated sales?

a. 9,400,000
b. 9,100,000
c. 9,375,000
d. 9,700,000

13. How much is the consolidated cost of sales?

a. 4,695,000
b. 4,495,000
c. 4,565,000
d. 4,545,000

Use the following information for the next two questions:

On January 1, 20x1, Horse Co. acquired 80% interest in Colt Co. by issuing bonds with fair value of
₱250,000. NCI is measured at proportionate share. The following information was determined
immediately before the acquisition:

  Horse Co. Colt Co. Colt Co.

  Carrying amount Carrying amount Fair value
Total assets 1,000,000 400,000 430,000
Total liabilities (600,000) (200,000) (200,000)
Net assets 400,000 200,000 230,000

Included in Colt’s liabilities is an account payable to Horse amounting to ₱20,000.

14. How much is the total assets in Horse’s separate financial statements immediately after the
combination?
a. 1,000,000
b. 1,400,000
c. 1,250,000
d. 1,430,000

15. How much is the total assets in the consolidated financial statements?
a. 1,476,000
b. 1,580,000
c. 1,465,000
d. 1,528,000

Use the following information for the next two questions:

Lion Co. acquired 80% of Cub Co. on January 1, 20x1 for ₱100,000. The following information was
determined at acquisition date:

  Lion Co. Cub Co. Cub Co.

  Carrying amt. Carrying amt. Fair value
Equipment 1,000,000 500,000 400,000
Accumulated depreciation (200,000) (100,000) (80,000)
Net 800,000 400,000 320,000

Remaining useful life, 1/1/ x1 10 yrs. 5 yrs. 5 yrs.

16. How much is the consolidated “Equipment – net” in the December 31, 20x2 financial statements?
a. 880,000
b. 846,000
c. 852,000
d. 832,000

17. The consolidation journal entry for the depreciation of the fair value adjustment on December
31, 20x2 includes which of the following?
 a. 16,000 debit to depreciation expense
b. 12,800 credit to retained earnings of Lion
c. 32,000 credit to accumulated depreciation
d. 16,000 credit to depreciation expense

18. On January 1, 20x1, Kangaroo Co. acquired 75% of Joey Co. At that time, Joey’s equipment has a
carrying amount of ₱100,000 and a fair value of ₱120,000. The equipment has a remaining useful
life of 10 years. On December 31, 20x2, Kangaroo and Joey reported equipment with carrying
amounts of ₱500,000 and ₱300,000, respectively. How much is the consolidated “equipment –
net” in the December 31, 20x2 financial statements?
a. 800,000
b. 816,000
c. 784,000
d. 826,000

19. On January 1, 20x1, ABC Co. acquired 80% interest in XYZ, Inc. by issuing 5,000 shares with fair
value of ₱15 per share. On this date, XYZ’s equity comprised of ₱50,000 share capital and ₱24,000
retained earnings. NCI was measured at its proportionate share in XYZ’s net identifiable assets.

XYZ’s assets and liabilities on January 1, 20x1 approximate their fair values except for the following:
Fair value
XYZ, Inc. Carrying Fair adjustments
amounts values (FVA)
Inventory 23,000 31,000 8,000
Equipment (4 yrs. remaining life) 50,000 60,000 10,000
Accumulated depreciation (10,000) (12,000) (2,000)
Totals 63,000 79,000 16,000

XYZ, Inc. declared and paid dividends of ₱6,000 during 20x1. There was no impairment in goodwill.
The year-end individual statements of profit or loss are shown below:

Statements of profit or loss

For the year ended December 31, 20x1
ABC Co. XYZ, Inc.
Sales 300,000 120,000
Cost of goods sold (165,000) (72,000)
Gross profit 135,000 48,000
Depreciation expense (40,000) (10,000)
Distribution costs (32,000) (18,000)
Interest expense (3,000) -
Dividend income 4,800 -
Profit for the year 64,800 20,000

How much is the profit attributable to

Owners of the parent NCI
 a. 68,000 2,000
b. 64,800 5,200
c. 52,000 18,000
d. 57,200 12,800

20. ABC Co. owns 80% interest in XYZ, Inc. The individual statements of financial position of the
entities as of December 31, 20x1 are shown below:

Statements of financial position

As at December 31, 20x1
ABC Co. XYZ, Inc.
ASSETS
Cash 23,000 44,000
Accounts receivable 75,000 22,000
Inventory 105,000 15,000
Investment in subsidiary (at cost) 75,000 -
Investment in bonds - 13,000
Equipment 200,000 50,000
Accumulated depreciation (60,000) (20,000)
TOTAL ASSETS 418,000 124,000

LIABILITIES AND EQUITY

Accounts payable 43,000 30,000
Bonds payable (at face amount) 30,000 -
Total liabilities 73,000 30,000
Share capital 170,000 50,000
Share premium 65,000 -
Retained earnings 110,000 44,000
Total equity 345,000 94,000
TOTAL LIABILITIES AND
EQUITY 418,000 124,000

On December 31, 20x1, XYZ, Inc. purchased 50% of the outstanding bonds of ABC Co. from the open
market for ₱13,000. There were no other intercompany transactions during the year.

The consolidation journal entry to eliminate the intercompany bond transaction includes which of
the following?
a. debit to bonds payable for ₱30,000
b. credit to gain on extinguishment of debt for ₱4,000
c. credit to investment in bonds for ₱15,000
d. credit to gain on extinguishment of debt for ₱2,000