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UNIVERSITY OF MINDANAO - MAIN

COLLEGE OF ACCOUNTING EDUCATION

Advanced Financial Accounting and Reporting

Accounting for Special Transactions
Consolidated Financial Statements
Discussion Problems:
Problem 1
On January 1, 2025, Entity A acquired 70% of the outstanding ordinary shares of Entity B at a price of
P210,000. Entity B's net assets were reported at P260,000 on the same date. On January 1, 2025, Entity
A reported retained earnings of P2,000,000, while Entity B reported retained earnings of P200,000 on
their separate books.
All the assets and liabilities of Entity B are fairly valued except machinery, which is undervalued by
P80,000, and inventory, which is overvalued by P10,000. The machinery has a remaining useful life
of four years, while 40% of the said inventory remained unsold at the end of 2025.
For the year ended December 31, 2025, Entity A reported net income of P1,000,000 and declared
dividends of P150,000 in the separate financial statements, while Entity B reported net income of
P150,000 and declared dividends of P20,000 in the separate financial statements.

1. What is the non-controlling interest in net assets on December 31, 2025?

A. 124,800
B. 130,200
C. 126,000
D. 133,800
2. What is the consolidated net income attributable to parent shareholders for the year
ended December 31, 2025?
A. 1,102,200
B. 1,162,200
C. 1,141,200
D. 1,095,200
3. What is the amount of consolidated retained earnings on December 31, 2025?
A. 3,012,200
B. 2,991,200
C. 2,952,200
D. 2,945,200
Problem 2
Parent Company owns an 80% interest in Subsidiary Corporation. The parent’s investment in the
Subsidiary Corporation is carried on a cost basis equal to the book value of the Subsidiary
stockholder’s equity. During 2025, Subsidiary Corp. sold merchandise to Parent Co. for P500,000 at a
gross profit of P100,000. On December 31, 2025, half of this merchandise is included in the Parent’s
inventory. Also, in 2025, the Subsidiary’s ending inventory included P200,000 merchandise from inter-
company sales, which was made at 20% profit, and the Parent Company sold it for P600,000. Parent
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and Subsidiary declared dividends of P300,000 and P250,000, respectively, paying 90% of the declared
amount in 2025.
Separate income statements for Parent and Subsidiary for the year ended 2025 are summarized as
follows:

Parent Co. Subsidiary Corp.

Sales 1,500,000 2,000,000
Cost of goods sold (800,000) (1,200,000)
Gross profit 700,000 800,000
Opex (300,000) (420,000)
Dividend revenue 280,000 140,000
Net income 680,000 520,000

1. What is the consolidated sales for the year December 31, 2025?
A. 3,500,000
B. 2,400,000
C. 2,900,000
D. 3,000,000

2. What is the consolidated cost of goods sold for the year ended December 31, 2025?
A. 990,000
B. 2,000,000
C. 1,910,000
D. 1,410,000

3. What is the net income attributable to the controlling interest for the year ended
December 31, 2025?
A. 916,000
B. 810,000
C. 910,000
D. 816,000

Problem 3
On January 1, 2025, Entity A acquired 80% of outstanding ordinary shares of Entity B at a gain on
bargain purchase of P180,000. The following intercompany transactions occurred between the two
entities:
• On January 1, 2025, Entity B sold land to Entity A, costing P1,000,000 at a selling price of
P1,100,000. The land was eventually sold by Entity A to an outsider in 2026.
• On January 1, 2025, Entity A sold white machinery to Entity B at a cost of P200,000 and
accumulated depreciation of P40,000 at a selling price of P180,000. The remaining life of the
machinery is 16 years. The residual value of white machinery is immaterial.
• On July 1, 2025, Entity B sold black machinery to Entity A at a cost of P270,000 and
accumulated depreciation of P180,000 at a selling price of P60,000. The remaining life of the
machinery is 3 years. The residual value of black machinery is immaterial.
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For the year ended December 31, 2025, Entity A reported a net income of P1,037,500, while Entity B
reported a net income of P500,000 and distributed dividends of P150,000.

1. What is the consolidated net income attributable to controlling interest for the year
ended December 31, 2025?
A. 1,418,750
B. 1,238,750
C. 1,576,250
D. 1,403,750

2. What is the non-controlling interest in net income for the year ended December 31,
2025?
A. 115,000
B. 100,000
C. 85,000
D. 84,000

3. What is the net adjustment for the depreciation expense in the consolidated statements
for the year ended December 31, 2025?
A. 8,750 net increase
B. 8,750 net decrease
C. 3,750 net increase
D. 3,750 net decrease
Problem 4
Parent Corporation acquired a 60% interest in Subsidiary Company on January 2, 2025 for
P10,080,000. On the acquisition date, the non-controlling interest's fair value was P5,100,000. On this
date also, the share capital and retained earnings of the two companies follow:

Parent Corp. Subsidiary Co.

Share capital 24,000,000 9,000,000
Retained earnings 12,000,000 1,800,000

On January 2, 2025, the assets and liabilities of Subsidiary Co. were stated at their fair values except
for machinery, which is undervalued by P900,000 (remaining life is 3 years). On December 31, 2025,
the reported amount of goodwill was P3,300,000, and as of December 31, 2026, goodwill was
determined to be impaired by P240,000.

On September 30, 2025, Subsidiary sold merchandise to Parent at an inter-company profit of P600,000;
1/4 was still unsold at year-end. Likewise, on October 1, 2026, the Subsidiary purchased merchandise
from its Parent for P14,400,000. The selling affiliate included a 20% mark-up on the cost of this sale.
Only 3/4 of these purchases had been sold to unrelated parties as of December 31, 2026.
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On September 2, 2025, Subsidiary Co. sold land costing P1,500,000 to Parent Corp. for P3,000,000.
Parent Corp. sold the land to Entity X on January 25, 2026. On June 1, 2025, Parent Corp. sold
equipment (remaining life of 4 years) with a carrying amount of P250,000 to Subsidiary Co. for
P200,000. On November 1, 2026, the Subsidiary sold a machine (remaining life of 5 years) with a
carrying amount of P160,000 to Parent Corp. for P300,000.

The following is the summary of the transactions of the affiliated companies:

Parent Corp. Subsidiary Co.

2025 2026 2025 2026
Net income 5,000,000 6,000,000 2,100,000 2,400,000
Dividends declared but not yet paid 2,000,000 2,400,000 650,000 720,000

1. What is the non-controlling interest in net assets in the December 31, 2026 Consolidated
Statements?
A. 4,878,276
B. 6,555,177
C. 6,007,177
D. 5,587,177

2. What is consolidated shareholders' equity in the December 31, 2026 Consolidated

Statements?
A. 25,104,875
B. 49,104,875
C. 53,509,479
D. 49.794,521

Theory of Accounts:
1. IFRS 10 defines them as the financial statements of a group in which the assets, liabilities, equity,
income, expenses, and cash flows of the parent and its subsidiaries are presented as those of a
single economic unit.
A. Consolidated financial statements
B. Separate financial statements
C. Group financial statements
D. Combined financial statements

2. Under IFRS 10, a parent corporation is the entity that controls one or more entities. How does IFRS
10 define control?
A. An investor controls an investee when it is exposed or has the right to variable return from
the investment with the investee and has the ability to affect those returns through the power
over the investee.
B. An investor controls an investee when it has the power to govern an entity's financial and
operating policies to obtain benefits from its activities.
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C. An investor controls an investee when it can influence an entity's financial and operating
policies to obtain benefits from its activities.
D. An investor controls an investee when it owns more than 50% of all the outstanding capital
stocks, whether common or preferred.

3. How shall the parent corporation present the Non-controlling Interest (NCI) in the Consolidated
Statement of Financial Position?
A. It shall be presented within Consolidated Stockholders’ Equity, separately from the equity
of the owners of the parent.
B. It shall be presented as a non-current liability.
C. It shall be presented as a non-current asset.
D. It shall be presented as a contract-equity account, such as treasury shares and subscriptions
receivable.

4. The sale of inventory items by a parent company to an affiliated company

A. Enters the consolidated revenue computation only if the transfer was the result of arm’s
length bargaining
B. Affects consolidated net income under a periodic inventory system but not under a
perpetual inventory system
C. Does not result in consolidated income until the merchandise is sold to outside parties
D. Does not require a working paper adjustment if the merchandise was transferred at cost

5. Downstream sales that remained unsold by the subsidiary as of the year-end

A. Will increase both consolidated net income attributable to the parent and consolidated net
income attributable to non-controlling interest for the current year.
B. Will decrease both consolidated net income attributable to the parent and consolidated net
income attributable to non-controlling interest for the current year.
C. The consolidated net income attributable to the parent will be increased for the current year.
D. The consolidated net income attributable to the parent will decrease for the current year.

6. The following increases the consolidated net income attributable to controlling interest, except
A. Downstream unrealized loss from the sale of land
B. Downstream realized gains from the sale of land
C. Upstream realized loss from the sale of equipment
D. Upstream unrealized loss from the sale of equipment

7. The gain on the sale of land from a downstream intercompany sale will be realized in the
consolidated financial statements when
A. The parent sells the land to outsiders
B. The subsidiary sells the land to outsiders
C. The subsidiary sells the land back to the parent
D. The subsidiary did not sell the land to outsiders
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8. Statement 1: Unrealized gains and losses from intercompany sale of depreciable assets are realized
over the remaining asset life as the buying affiliate uses it.
Statement 2: The parent owns 80% of the shares of stock of Subsidiary Co. and purchases
equipment from Subsidiary Co. Subsidiary Co. recognizes a gain from the sale in its books, the
gain recognized by Subsidiary Co. must be eliminated from his separate books.
A. Statement 1 is TRUE, and Statement 2 is FALSE
B. Statement 1 is FALSE, and Statement 2 is TRUE
C. Both statements are TRUE
D. D. Both statements are FALSE

9. Which of the following items will affect both consolidated net income attributable to parent’s
shareholders and noncontrolling interest in net income?
A. Dividend income from subsidiary
B. Realized gain on the downstream transaction
C. Realized loss on the upstream transaction
D. Gain on bargain purchase

10. Which of the following statements regarding the consolidation working paper is true?
A. It is used in eliminating both the pre-existing goodwill of the parent and the subsidiary.
B. It is used in amortizing the excess of the fair value differentials of the group.
C. It is used in allocating the share of the non-controlling interest in the net income of the
subsidiary
D. It is used in recognizing the intercompany dividend revenue of the acquired company from
the acquirer company.

11. Which of the following statements regarding group reporting is true?

A. The consolidated retained earnings is increased by the consolidated net income.
B. The non-controlling interest in the net assets of the subsidiary is a component of the
consolidated stockholders’ equity.
C. The consolidated cost of goods sold is affected by the excess of fair value over the book
value or book value over the fair value in the merchandise of the subsidiary.
D. The consolidated gross profit is increased upon recognizing an intercompany gain on sale
of land through sale to outsiders.

12. A parent company that uses the equity method in accounting for its investment in subsidiary has
neglected to adjust the investment balance for its share in the subsidiary’s net income or net loss.
The parent’s share in the net income of the subsidiary was P60,000 last year and P40,000 this year.
If the subsidiary did not declare any dividends during the year, which of the following statements
is true?
A. The net income of the parent this year should be increased by P100,000.
B. The retained earnings of the parent should be increased by P100,000.
C. The net income of the parent this year should be increased by P40,000 and retained
earnings should be increased by P60,000.
D. Any of the choices is true, depending on the company’s accounting policy.
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13. On January 1, 2024, Pint Company has acquired 100% controlling interest in Sterest Company.
The net assets of Sterest Company were all fairly value except for a note payable. The face value
of the note is P1,000,000 with a stated rate of 10%, but the effective rate in the market for a similar
type of note is only 8%. The principal of the note is payable in lumpsum after 2 years and interest
is payable annually. Which of the following is true?
A. The book value of the net assets of the subsidiary on date of acquisition is less than its fair
value.
B. Amortization of the excess will ultimately increase the consolidated retained earnings.
C. The difference in nominal and effective rate will not affect the measurement of the net
assets acquired by the acquirer.
D. All of the choices are true

14. Statement 1: On the consolidated working papers, the net income of the parent is allocated between
the controlling and non-controlling interests.
Statement 2: On the consolidated working papers, the net income of the subsidiary is allocated
between the controlling and non-controlling interests.
A. Both statements are true
B. Both statements are false
C. Statement 1 is true; statement 2 is false
D. Statement 2 is true; statement 1 is false

15. Investment in subsidiaries should be accounted for by the parent in its separate financial
statements using
A. Cost method
B. Cost method or fair value model
C. Equity method
D. Cost method, fair value model or equity method

16. Which of the following is not a valid condition that will exempt an entity from preparing
consolidated financial statements?
A. The parent entity is a wholly owned subsidiary of another entity or partially owned and the
other owners do not object to the nonconsolidation.
B. The parent entity’s debt or equity capital is not traded in the stock exchange.
C. The ultimate parent entity produces consolidated financial statements available for public
use that comply with IFRS.
D. The parent entity is in the process of filing financial statements with a securities commission
for the purpose of issuing any class of instruments in a public market.

17. A subsidiary shall be excluded from consolidation when

A. The investor is a venture capital organization, mutual fund, unit trust or similar entity.
B. The business activities of the subsidiary are dissimilar from those of the other entities
within the group.
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C. The subsidiary is acquired with the intention to dispose of it within twelve months from
date of acquisition.
D. The subsidiary is operating under severe long-term restrictions that significantly impair its
ability to transfer funds to the parent.

18. Consolidated financial statements are typically prepared when one entity has a controlling
financial interest in another unless
A. The subsidiary is a finance entity.
B. The fiscal year-ends of two entities are more than three months apart.
C. Such control is likely to be temporary.
D. The two entities are in unrelated industries, such as manufacturing and real estate.

19. A parent is exempted from preparing consolidated financial statements if all of the following
conditions exist, except
A. The parent is wholly or partially owned and the owners do not object to the
nonconsolidation.
B. The parent does not have any debt or equity instruments publicly traded.
C. The parent reports one class of share capital in the statement of financial position
D. The ultimate parent prepares consolidated financial statements that comply with IFRS.

20. Which of the following conditions is required to exclude a subsidiary from consolidation?
A. The other owners object to the nonconsolidation.
B. The parent makes an election not to consolidate.
C. The other owners do not object to the nonconsolidation and the subsidiary does not have
any publicly traded debt or equity instruments.
D. The parent must own 100% of the subsidiary.

21. The noncontrolling interest should be recorded at what amount?

A. The fair value of the shares held by the acquirer
B. The fair value of the shares not held by the acquirer or the proportionate share of the fair
value of net identifiable assets of the acquiree
C. The proportionate share of the carrying amount of net identifiable assets of the acquiree
D. The fair value of the shares held by the noncontrolling interest plus goodwill

22. For the purpose of consolidating financial interests, a majority voting interest is deemed to be
A. 50% of the directly or indirectly owned outstanding voting shares of another entity.
B. 50% of the directly or indirectly owned outstanding voting shares and at least 50% of the
directly owned outstanding nonvoting shares of another entity.
C. Greater than 50% of the directly or indirectly owned outstanding voting shares of another.
D. Greater than 50% of the directly or indirectly owned outstanding voting shares and at least
50% of the directly or indirectly owned outstanding nonvoting shares of another entity.

23. Following a business combination accomplished through a legal acquisition, transactions

between affiliated entities can originate with:
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A. Parent Company
B. Subsidiary Company
C. Both Parent Company and Subsidiary Company
D. Neither parent Company nor Subsidiary Company

24. A subsidiary, acquired for cash in a business combination, owned inventories with a market
value different from the book value as of the date of combination. A consolidated statement of
financial position prepared immediately after the acquisition would include this difference as part
of
A. Deferred Credits
B. Goodwill
C. Inventories
D. Retained Earnings

25. Which one of the following would be of concern in preparing consolidated financial statements
at the end of the operating period following a business combination that would not be a concern
in preparing financial statements immediately following a combination?
A. Whether or not there are intercompany accounts receivable and accounts payable.
B. Whether or not goodwill resulted from the business combination.
C. Whether the parent carries its investment in the subsidiary using the cost method or the
equity method.
D. Whether or not there is a noncontrolling interest in the subsidiary.

26. Under which of the following methods of carrying a subsidiary on its books, if any, will the
carrying amount of the investment normally change following a combination?
A. Both cost method and equity method
B. Cost method
C. Equity method
D. Neither cost method nor equity method

27. When a parent company uses the cost method on its books to carry its investment in a subsidiary,
which one of the following will be recorded by the parent on its books?
A. Parent's share of subsidiary's net income or net loss.
B. Parent's amortization of goodwill resulting from excess investment cost over fair value of
subsidiary's net assets.
C. Parent's share of subsidiary's cash dividends declared.
D. Parent's depreciation of excess investment cost over book values of subsidiary's net assets.

28. A 70%-owned subsidiary company declares and pays a cash dividend. What effect does the
dividend have on the retained earnings and noncontrolling interest equity reported on the
consolidated statement of financial position?
A. No effect on either retained earnings or noncontrolling interest.
B. No effect on retained earnings and a decrease in noncontrolling interest.
C. Decrease in both retained earnings and noncontrolling interest.
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D. A decrease in retained earnings and no effect on noncontrolling interest.

29. Which one of the following will occur on consolidated financial statements if an intercompany
transaction is not eliminated.
A. An understatement eliminated.
B. An overstatement of sales
C. An understatement of purchases
D. An overstatement of accounts receivable

30. A parent sells goods to its subsidiary, which in turn sells the goods to an unaffiliated firm. Which
of these transactions, if any, should be eliminated in the consolidating process?
A. Parent to subsidiary and subsidiary to an unaffiliated firm
B. Parent to subsidiary
C. Subsidiary to unaffiliated firm
D. Neither transactions

31. An intercompany depreciable fixed asset transaction resulted in an intercompany gain. Which
one of the following is least likely to be reflected in the consolidated financial statements
prepared at the end of the period in which the intercompany transaction occurred?
A. Consolidated income will be less than the sum of the incomes of the separate companies
being combined.
B. Consolidated assets will be less than the sum of the assets of the separate companies being
combined.
C. Consolidated depreciation expense will be more than the sum depreciation expense of the
separate companies being combined.
D. Consolidated accumulated depreciation will be more than the sum of accumulated
depreciation of the separate companies being combined.

32. Which of the following is not a characteristic of intercompany bonds?

A. Intercompany bonds may occur on the date a business combination or subsequent to a
business combination.
B. When bonds become intercompany, it is as though the bonds have been retired for
consolidated purposes.
C. Intercompany bonds can result in the recognition of gain or a loss for consolidating
purposes.
D. When bonds become intercompany, they are written off of the books of the issuing affiliate
and the investing affiliate.

33. The following affects the consolidated net income except

A. intercompany dividends
B. amortization of excess of fair value over book value of equipment
C. amortization of excess book value over the fair value of an inventory
D. pre-existing goodwill
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34. The following affects the non-controlling interest in net income, except
A. impairment loss under partial goodwill
B. amortization of excess book value over the fair value of an inventory
C. amortization of excess of fair value over the book value of a machine
D. net income per book of subsidiary

35. Unrealized profit ending inventory in 2025 will be realized in

A. 2026, when the buying affiliate sells the inventory to outsiders
B. 2026, when the buying affiliate uses the inventory
C. 2025 at year-end
D. none of the choices

36. The following affects the consolidated net income attributable to the parent, except
A. downstream UPEI
B. upstream RPBI
C. downstream RPBI
D. none of the choices

37. The following increases the non-controlling interest in net income except
A. upstream realized gain from intercompany sale of land
B. upstream realized gain from intercompany sale of equipment
C. downstream unrealized loss from the sale of land
D. upstream unrealized loss from the sale of the machine

38. The loss on sale from an intercompany sale of land is recorded in the separate books of the Parent
A. is true and correct
B. will be realized in the consolidated financial statements when the Subsidiary sells the land
to outsiders
C. Both A and B are true
D. Both A and B are false

39. Working paper eliminations are entered in

A. Both the parent company’s and the subsidiary’s accounting records
B. The parent company’s accounting records only
C. Neither the parent company’s nor the subsidiary’s accounting records
D. The subsidiary’s accounting records only

40. How is the non-controlling interest in the subsidiary’s net assets presented in the consolidated
statement of financial position?
A. As a mezzanine item between liabilities and equity
B. Within equity but separately from the equity of the owners of the parent.
C. Within equity as part of retained earnings
D. Any of these as a matter of accounting policy choice
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41. How should negative goodwill be shown on the consolidated financial statements of the acquirer?
A. As a gain on the statement of comprehensive income
B. As a loss on the statement of comprehensive income
C. As a liability on the statement of financial position
D. As a separate amount under shareholders' equity on the statement of financial position

42. When there is on intercompany transaction, how much of any profit or loss created as a result of
the transaction is eliminated during the consolidation process
A. None of the profit or loss is eliminated
B. All of the profit or loss is eliminated
C. The parent's ownership interest in the profit or loss is eliminated
D. If is not possible to determine how much of the profit or loss is eliminated without knowing
whether the transaction is upstream or downstream

43. In the period of an intercompany asset transaction, the consolidated balance sheet will present
what amount in the asset account?
A. The purchase price by the new owner
B. The purchase price by the original owner
C. The purchase price by the original owner plus the parent's ownership percentage of the gain
or loss on the sale recognized at the time of the intercompany transaction
D. The purchase price by the original owner plus the noncontrolling interests percentage of the
gain or loss on the sale recognized at the time of the intercompany transaction

44. Parent company has an investment in a subsidiary which it accounts for using the cost method.
Accordingly, the original cost of P250,000 is its carrying value. On December 1, 2024, the parent
declared its subsidiary as property dividends to its shareholders, to be distributed on January 30,
2025. The fair value of the subsidiary shares amounted to P280,000 on December 1, 2024, and
P270,000 on December 31, 2024. In the books of the parent, which of the following is true?
A. The entry on December 1, 2024 will include a debit to asset held for distribution at
P280,000.
B. The entry on December 1, 2024 will include a credit to property dividends payable for
P280,000.
C. The entry on December 31, 2024 will include a debit to property dividends payable for
P270,000
D. The entry on December 31, 2024 will include a debit to equity for P10,000.

45. In accordance with IFRS 10, Consolidated Financial Statements, and IFS 12, Disclosure of
interests in Other Entities, a consolidated statement of financial position (or notes thereto) would
not present information relating to
A. Investment in Subsidiaries.
B. Goodwill acquired by the group.
C. Loans to entities not related to the group.
D. Non-controlling interests' share of consolidated net assets.
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Problem Solving:
Number 1
KLM Corporation paid P18,000,000 for a 90% interest in CDE Corporation on January 1, 2024. The
excess of the aggregate amount over the book value of the identifiable net assets of the acquired
company amount to P960,000. The excess was allocated as follows: P640,000 to an undervalued
equipment with a five-year remaining useful life and the balance to goodwill. Non-controlling interest
is measured at fair market value. Net income of KLM in 2024 is P8,000,000; Net income of CDE in
2024 is P2,000,000. Dividends declared by CDE to KLM amount to P192,000.
Compute the consolidated net income in 2024.
A. 9,872,000
B. 9,360,000
C. 9,680,000
D. 9,532,800

Number 2
MNO owns 70% of DEF Company’s outstanding ordinary shares. DEF Company, in turn, owns 20%
investment in RST Corporation. During 2024, MNO earned a net income of P32,060,000 while DEF
suffered a loss of P6,000,000 excluding its share in the earnings of associates, if any. RST reported a
net income of P4,350,000. DEF declared dividends of P2,500,000 from its accumulated profits in
previous years.
Compute the consolidated net income attributable to controlling interest for the year 2024.
A. 28,469,000
B. 26,930,000
C. 26,719,000
D. 26,110,000

Number 3
DEF Corp. owns 70% of PQR Corp’s ordinary shares. On August 1, 2024, DEF Corp. acquired a
building from PQR Corp. for P40,600,000. The carrying amount of the building is P23,800,000 and
has a remaining life of 8 years.
Due to this intercompany transaction, compute the net adjustment (increase/decrease) in the
consolidated net income attributable to controlling interest for 2024
A. 15,925,000 decrease
B. 14,700,000 increase
C. 11,147,500 decrease
D. 10,290,000 increase

Number 4
UVW Corp. owns 80% of FGH Corp’s ordinary shares. On June 1, 2024, FGH Corp. sold machinery
to UVW Corp. for P21,000,000. The carrying amount of the machinery is P22,800,000 and has a
remaining life of 5 years.
Due to this intercompany transaction, compute the net adjustment (increase/decrease) in the
non- controlling interest in net income 2024
A. 1,590,000 decrease
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B. 318,000 increase
C. 288,000 decrease
D. 1,272,000 increase

Number 5
RST Company acquired a 75% interest in JKL Company in 2022. For years ended December 31,
2023, and 2024, JKL reported net income of P22,960,000 and P26,000,000, respectively. During
2023, JKL sold merchandise to RST for P6,080,000 at a cost of P4,160,000. Two-fifths of the
merchandise was later resold by RST to outsiders for P2,800,000 during 2024. In 2024, RST
purchased merchandise from JKL for P7,040,000 at a profit of P2,560,000. One-fourth of the
merchandise was resold by RST to outsiders for P2,160,000 during 2024.
Compute the non-controlling interest in net income in 2024
A. 6,692,000
B. 6,628,000
C. 6,308,000
D. 6,212,000

Number 6
Condensed statements of the financial position of HIJ Corp. and LMN Corp. as of December 31, 2023,
were as follows:
HIJ LMN
Current assets P 175,000 P 65,000
Noncurrent assets 725,000 425,000

Liabilities P 85,000 P 35,000

Ordinary shares, P20 par 550,000 300,000
Share premium 5,000 25,000
Retained earnings 260,000 130,000

On January 1, 2024, HIJ Corp. issued 29,000 shares with a market value of P22/share for the
identifiable assets and liabilities of LMN Corp. The book value reflects the fair value of the assets and
liabilities, except that the noncurrent assets of LMN have a fair value of P630,000, and P30,000
overstates the noncurrent assets of HIJ. Contingent consideration to the extent probable on the date of
acquisition amounts to P15,000. HIJ also paid for the share issue costs worth P84,000 and other
acquisition costs of P59,000.
Compute the retained earnings in the books of the surviving company immediately after the
merger
A. 251,000
B. 201,000
C. 192,000
D. 187,000
 Page 15 of 38
Number 7
ABC Co. had the following transactions with two subsidiaries, S1 and S2, during 2024: Sales of
P23,520,000 to S1, Inc., resulting in a P7,056,000 gross profit. S1 had P5,880,000 of this inventory on
hand at year-end. Purchases of raw materials totaling P94,080,000 from S2 Corp., a wholly owned
subsidiary. S2’s gross profit on the sale was P18,816,000. ABC had P21,952,000 of this inventory
remaining on December 31, 2024. Before working paper entries, ABC had combined current assets of
P117,600,000.
Compute the amount ABC should report in its December 31, 2024, consolidated financial
position for current assets
A. 89,768,000
B. 111,445,600
C. 117,600,000
D. 123,754,400
Number 8
The Statement of Financial Position of ABC Company as of December 31, 2023, were as follows:
Book Value

Cash P 6,000,000
Accounts Receivable 7,500,000
Inventories 12,600,000
Plant & Equipment, net 15,000,000
Goodwill 1,500,000
Liabilities 21,000,000
Share Capital, P200 par 15,600,000
Retained Earnings 6,000,000
On January 2, 2024, LMN Company acquired all the identifiable net assets of ABC Company for
P27,000,000 cash. A contingent consideration of P1,500,000 is to be paid to the stockholders of the
dissolved company, depending on the outcome of the specific target. Only 60% of the consideration to
be transferred is probable on the date of acquisition. The fair value of the inventories of ABC is
undervalued by 900,000, and P1,500,000 undervalues its plant & equipment. Out-of-pocket costs of
the business combination were paid in the amount of P600,000.
On the date of acquisition, the goodwill in the acquirer's books amounted to P1,200,000. On August 1,
2024, the amount of contingent consideration was increased by P450,000 due to an improved
information regarding relevant facts and circumstances on January 2, 2024. On October 31, 2024, the
amount of contingent consideration was decreased by P240,000 due to the massive destruction brought
about by the calamities that recently hit the country.
Compute the amount of goodwill shown on the statement of financial position of LMN Company
as of December 31, 2024.
A. 7,050,000
B. 5,850,000
C. 6,810,000
D. 4,350,000
 Page 16 of 38
Numbers 9 and 10
On January 1, 2024, Pei Company acquired 75% of the outstanding shares of Dari Company that
resulted at a gain on acquisition in the amount of P75,000. On this date the Ordinary shares and
Retained earnings of Dari Company were P1,200,000 and P300,000 respectively.
All of the book values of the assets and liabilities of Dari Company equal their fair values except for
the equipment which was understated by P156,000. The equipment had a remaining life of 10 years.
For the year ended, December 31, 2024, Pei Company reported a net income of P600,000, while Dari
Company reported a net income of P360,000 and declared dividends of P240,000

9. What amount should Pei Company report as consolidated net income attributable to
parent for the year ended December 31, 2024?
a. 600,000
b. 776,700
c. 678,300
d. 753,300
10. What amount should Pei Company report as noncontrolling interest net income for the
year ended December 31, 2024?
a. 360,000
b. 90,000
c. 93,900
d. 86,100
Number 11
A parent company provided a P10,000 non-interest bearing loan to its wholly owned subsidiary. With
a market rate of 9%, the fair value of the loan is determined to be P7,722. Which of the following is
false?
A. In the books of the parent, the journal entry at the end of the first year will include a debit to
intercompany loan receivable for P695
B. In the books of the subsidiary, the journal entry at the end of the second year will include a
debit to interest expense for P758
C. The working paper entries at the end of the second year will include a debit to intercompany
loan payable for P758
D. The working paper entries at the end of the first year will include a credit to interest income
for P695.
Number 12
Statement of Financial Position for Puro Corporation and Sato Company on December 31, 2024 are
given below:
Puro Sato
Cash and cash equivalents P70,000 P90,000
Inventory 100,000 60,000
Property and equipment 500,000 250,000
Investment in Sato Company 260,000 -
Total assets 930,000 400,000
 Page 17 of 38

Current liabilities 180,000 60,000

Long-term liabilities 200,000 90,000
Common stock 300,000 100,000
Retained earnings 250,000 150,000
Total liabilities and SHE 930,000 400,000

Puro Corporation purchased 80% ownership of Sato Company on December 31, 2024, for P260,000.
On that date, Sato Company’s property and equipment had a fair value of P50,000 more than the
book value shown, while its long-term liabilities had a market value of P150,000. All other book
values approximated fair values. In the consolidated statement of financial position on December 31,
2024:
What amount of goodwill will be reported?
A. 0
B. 85,000
C. 25,000
D. 60,000

Number 13
On January 2, 2024, Peter Co. acquired 80% of Sato’s outstanding common stock for P500,000.
Sato’s book value on that date was P500,000. There were no significant differences between the
market value and book value of Sato’s net assets. Goodwill, if any, is not impaired. During 2024,
Peter and Sato reported the following:
Peter Sato
Comprehensive income, excluding dividends from Subsidiary 1,000,000 200,000
Dividends declared and paid 300,000 120,000

How much is the CNI attributable to parent?

A. 1,143,750
B. 1,160,000
C. 1,146,875
D. 1,150,000

Numbers 14, 15 and 16

Papa Corporation owns 75% of the outstanding stock of San Company, acquired at book value in
2021. Selected information from the accounts of Papa Corporation and San Company for 2024 are as
follows:
Papa San
Sales 900,000 500,000
Cost of goods sold 490,000 190,000
During 2024, Papa sold merchandise to San for P50,000 at a gross profit of P20,000. Half of this
merchandise remained in San’s inventory at December 31, 2024. San’s December 31, 2023 (beginning
inventory of 2024) included unrealized profit of P4,000 on goods acquired from Papa.
 Page 18 of 38
In the consolidated CI for Papa Corporation and subsidiary for 2024, compute for the following:

14. Consolidated Sales

A. 1,450,000
B. 1,350,000
C. 1,250,000
D. 1,400,000

15. Consolidated Cost of Goods Sold

A. 640,000
B. 636,000
C. 634,000
D. 625,000

16. The realized gross profit of P4,000 would be:

A. Deducted from Consolidated Cost of Goods Sold
B. Added to Consolidated Cost of Goods Sold
C. Ignored in the determination of Consolidated Net Income
D. Added to Consolidated Sales

Numbers 17 and 18
On January 1, 2024, Pete Company sold equipment to Sison Company, its wholly-owned subsidiary,
for P400,000. The equipment had a cost of P500,000; the accumulated depreciation at the time of sale
was P250,000. Pete used a 10-year life, no salvage value, and straight-line depreciation. Sison will
continue this practice. In the consolidated statement of financial position at December 31, 2024,
compute for the following balances:

17. Cost of equipment

A. 500,000
B. 400,000
C. 300,000
D. 150,000

18. Gain (Loss) on sale of equipment

A. (100,000)
B. 150,000
C. (150,000)
D. 0
Numbers 19 and 20
On January 1, 2024, Entity A acquired 90% of outstanding ordinary shares of Entity B at a price of
P1,800,000. Entity A paid P40,000 costs related to acquisition of shares. At the acquisition date, the
net assets of Entity B were reported at P1,900,000. All the assets of Entity B are properly valued except
for a machinery which is undervalued by P300,000. The machinery has a remaining useful life of 5
years.
 Page 19 of 38
For the year ended December 31, 2024, Entity B reported net income of P400,000 and declared
dividends of P60,000. The fair value of Investment in Entity B on December 31, 2024 is P2,000,000
while the cost of disposal is 5% of fair value. Entity A voluntarily prepared its separate financial
statements.
19. What amount should be reported as investment income for 2024 if Entity A elected the cost
method to account its Investment in Entity B in its separate financial statements?
A. 14,000
B. 54,000
C. 360,000
D. 214,000
20. What amount should be reported as investment income for 2024 if Entity A elected the fair
value model to account its Investment in Entity B in its separate financial statements?
A. 14,000
B. 54,000
C. 360,000
D. 214,000
Numbers 21 and 22
On January 1, 2024, Entity A acquired 80% of outstanding ordinary shares of Entity B at a price of
P1,100,000. On the same date, the net assets of Entity B were reported at P1,250,000. On January 1,
2024, Entity A reported retained earnings of P1,000,000 while Entity B reported retained earnings of
P100,000.
All the assets and liabilities of Entity B are fairly valued except machinery which was undervalued by
P375,000 and inventory which was overvalued by P125,000. The said machinery had remaining useful
life of five years while 60% of the said inventory remained unsold at the end of 2024.
For the year ended December 31, 2024, Entity A reported net income of P2,000,000 and declared
dividends of P500,000 in the separate financial statements while Entity B reported net income of
P750,000 and declared dividends of P250,000 in the separate financial statements. Entity A accounted
the investment in Entity B using cost method in the separate financial statements.
21. What amount should be reported as noncontrolling interest in net assets on December 31,
2024?
A. 445,000
B. 300,000
C. 495,000
D. 395,000
22. What amount should be reported as consolidated net income attributable to parent
shareholders for the year ended December 31, 2024?
A. 2,480,000
B. 2,100,000
C. 1,800,000
D. 2,380,000
 Page 20 of 38
Numbers 23 and 24
On January 1, 2024, Entity A acquired 60% of outstanding ordinary shares of Entity B at a gain on
bargain purchase of P20,000. For the year ended December 31, 2025, Entity A and Entity B reported
sales revenue of P1,000,000 and P500,000 in their respective separate income statements. Entity A and
Entity B reported cost of goods sold of P600,000 and P350,000 in their respective separate income
statements for 2025.
During 2024, Entity A sold inventory to Entity B at a selling price of P140,000 with gross profit rate
of 40% based on cost. On the other hand, Entity B sold inventory to Entity A at a selling price of
P200,000 with gross profit rate of 30% based on sales during 2025.
On December 31, 2024, 25% of the goods coming from Entity A remained in Entity B’s inventory but
all were eventually sold to third persons during 2025. As of December 31, 2025, 40% of the goods
coming from Entity B were eventually sold to third persons.
For the year ended December 31, 2025, Entity A reported net income of P250,000 while Entity B
reported net income of P100,000 and distributed dividends of P25,000. Entity A accounted for its
investment in Entity B using the cost method in its separate financial statements.
23. What amount should be reported as consolidated sales revenue for the year ended
December 31, 2025?
A. 1,300,000
B. 1,160,000
C. 1,500,000
D. 1,360,000
24. What amount should be reported as consolidated net income attributable to parent
shareholders for the year ended December 31, 2025?
A. 383,400
B. 298,400
C. 303,400
D. 283,400
Number 25
Subsidiary, Inc. is a wholly owned subsidiary of Parent Inc. On June 1, 2024, Parent declared and paid
a P1 per share cash dividend to stockholders record on May 15, 2024. On May 1, 2024, Subsidiary
bought 10,000 shares of Parent's common, stock for P700,000 on the open market when the book value
per share was P30.
What amount of gain should Parent report from this transaction in its consolidated income
statement for the year ended December 31, 2024?
A. 0
B. 390,000
C. 400,000
D. 410,000
 Page 21 of 38
Number 26
Entity A owns all of the common stock of Entity B Company and 80% of the common stock of Entity
C Company. Entity B owns the remaining 20% interest in Entity C’s common stock, for which it paid
P8,000, and which it carries at cost, because there is no ready market for Entity C’s stock. The
condensed statements of financial position. for Entity B and Entity C as of December 31, 2024, were:
Entity B Entity C
Assets 300,000 120,000
Liabilities 100,000 60,000
Common stock 50,000 40,000
Retained Earnings 150,000 20,000
Total 300,000 120,000

What amount should be reported as total owners’ equity in a combined statement of financial
position for Entity B and Entity C of December 31, 2024?
A. 260,000
B. 252,000
C. 212,000
D. 200,000
Number 27
On January 1, 2024, Parent Corp. and Subsidiary Corp. had the following condensed statements of
financial position:
Parent Subsidiary
Current assets 140,000 40,000
Noncurrent assets 180,000 80,000
Total assets 320,000 120,000
Current liabilities 60,000 20,000
Long-term debt 100,000 -
Stockholders’ equity 160,000 100,000
Total liabilities and stockholders’ equity 320,000 120,000

On January 2, 2024, Parent borrowed P120,000 and used the proceeds to purchase 90% of the
outstanding common shares of Subsidiary. This debt is payable in ten equal annual principal payments,
plus interest, beginning December 30, 2024. The excess cost of the investment over Subsidiary’ book
value of acquired net assets should be allocated 60% to inventory and 40% to goodwill. On January 1,
2024, the fair value of Subsidiary shares held by noncontrolling parties was P20,000.
On January 2, 2024, stockholders’ equity including noncontrolling interests should be
A. 160,000
B. 170,000
C. 180,000
D. 260,000
 Page 22 of 38
Number 28
On January 1, 2024, Parent, Inc. purchased 80% of the stock of Subsidiary Corp. for P8,000,000 Cash.
Prior to the acquisition, Subsidiary had 100,000 shares of stock outstanding. On the date of acquisition,
Subsidiary's stock had a fair value of P104 per share. During the year Subsidiary reported P560,000 in
net income and paid dividends of P100,000.
What is the balance in the noncontrolling interest account on Parent's statement of financial
position on December 31, 2024?
A. 2,000,000
B. 2,080,000
C. 2,172,000
D. 2,192,000
Number 29
On January 2, 2024, Parent Co. purchased 75% of Subsidiary Co.'s outstanding common stock. On
that date, the fair value of the 25% noncontrolling interest was P70,000. During 2024, Subsidiary had
net income of P40,000. Selected data at December 31, 2024, are:
Parent Subsidiary
Total assets 840,000 360,000
Liabilities 240,000 120,000
Common stock 200,000 100,000
Retained earnings 400,000 140,000

During 2024 Parent and Subsidiary paid cash dividends of P50,000 and P10,000, respectively, to their
shareholders. There were no other intercompany transactions.
In its December 31, 2024 consolidated statement of retained earnings, what amount should
Parent report as dividends paid?
A. 10,000
B. 50,000
C. 52,500
D. 60,000
Number 30
Parent Company acquired goods for resale from its manufacturing subsidiary at Subsidiary's cost to
manufacture of P24,000. Parent subsequently resold the goods to a nonaffiliate for P36,000.
Which one of the following is the amount of the elimination that will be needed as a result of the
intercompany inventory transaction?
A. 0
B. 12,000
C. 24,000
D. 36,000

Number 31
Parent Co. owns 100% of Subsidiary Co.'s outstanding common stock. Parent's cost of goods sold for
the year totals P300,000, and Subsidiary's cost of goods sold totals P200,000. During the year, Parent
 Page 23 of 38
sold inventory costing P30,000 to Subsidiary for P50,000. By the end of the year, all transferred
inventory was sold to third parties.
What amount should be reported as cost of goods sold in the consolidated statement of income?
A. 450,000
B. 470,000
C. 480,000
D. 500,000
Number 32
Parent Co. owns 100% of Subsidiary, Inc. On January 2, 2024, Parent sold equipment with an original
cost of P160,000 and a carrying amount of P96,000 to Subsidiary for P144,000. Parent had been
depreciating the equipment over a five-year period using straight-line depreciation with no residual
value. Subsidiary is using straight-line depreciation over three years with no residual value.
In Parent's December 31, 2024, consolidating worksheet, by what amount should depreciation
expense be decreased?
A. 0
B. 16,000
C. 32,000
D. 48,000
Number 33
Parent corp. has several subsidiaries that are included in its consolidated financial statements. In its
December 31, 2024 trial balance, Parent had the following Intercompany balances before eliminations.
Debit Credit
Current receivable due from M Co. 64,000
Noncurrent receivable from M Co. 228,000
Cash advance to C Corp 12,000
Cash advance from K Co. 30,000
Intercompany payable to K Co. 202,000

In its December 31, 2024 consolidated statement of financial position, what amount should
Parent report as intercompany receivables?
A. 304,000
B. 292,000
C. 72,000
D. 0

Number 34 and 35
On January 1, 2024, PQR Co. acquired 70% of the outstanding shares of MNO Co. at a price of
P1,350,000. On the date of acquisition, MNO Co. had a total equity of P1,200,000 (Ordinary shares,
P500,000 and Retained Earnings, P700,000). All the assets and liabilities of MNO Co. have book value
equal to its fair value except for machinery which is undervalued by P50,000. The remaining useful
life of the machinery is 2.5 years.

In 2025, the companies resulted to the following:

 Page 24 of 38
PQR Co. MNO Co.
Net income 750,000 500,000
Dividends paid 200,000 150,000

During 2025, PQR Co. sold merchandise to MNO Co. at 150% of its cost, the same percentage that
was used last year. The composition of MNO Co. inventory were as follows:
Acquired from PQR Co. Acquired from XYZ Co.
Beginning balance 19,200 100,000
Ending Balance 36,000 135,000

The retained earnings of MNO Co. per books at the beginning of 2025 was P900,000. Non-controlling
interest is measured using the proportionate share. Impairment of goodwill, if any amount to P40,000
and P50,000 in 2024 and 2025, respectively.
34. Compute the consolidated net income attributable to parent in 2025.
A. 939,400
B. 925,400
C. 1,059,400
D. 935,400
35. Compute the non-controlling interest in net assets in 2025.
A. 591,500
B. 545,000
C. 528,000
D. 540,000
Number 36
The QRS Corp. acquired 60% of the outstanding shares of JKL Corp. At the beginning of the year,
JKL Corp sold machinery to QRS Corp. for P490,000. The machinery was acquired 3 years ago with
a carrying value of 700,000 and a total estimated useful life of 10 years. QRS Corp. and JKL Corp
reported net income of P600,000 and P550,000, respectively. Dividends declared and paid by JKL
Corp for the year amounted to P100,000.
Compute the non-controlling interest in net income
A. 292,000
B. 208,000
C. 304,000
D. 220,000

Numbers 37 and 38
On January 1, 2024, ABC Co. acquired 70% of the outstanding shares of LMN Co. at underlying book
value. On January 2, 2024, ABC sold an equipment to LMN for P500,000 cash. The equipment had an
original cost of P1,000,000 and is now 60% depreciated after 3 years from original purchase date. Net
income of ABC and LMN for 2024 amounted to P1,000,000 and P500,000 respectively. Net income
of ABC and LMN for 2025 amounted to P1,500,000 and P900,000 respectively.
 Page 25 of 38
37. Assuming the equipment was still being used by LMN at the end of 2024, compute the
consolidated net income attributable to controlling interest 2024.
A. 1,450,000
B. 1,300,000
C. 1,315,000
D. 1,400,000

38. Assuming the equipment was sold by LMN to outsiders on July 1, 2024, which resulted to a
gain of P120,000. Compute the increase or decrease to gain on sale of equipment for consolidation
purposes.
A. 75,000 decrease
B. 75,000 increase
C. 50,000 increase
D. 0

Numbers 39 and 40
On January 1, 2024, HIJ Corp. acquired 90% of STU Company’s outstanding shares for P1,350,000.
The book value of STU’s net assets is P1,000,000, which is P300,000 lower than its fair value. The
excess of fair value over the book value is attributable to a fixed asset with 2 years remaining life. Net
income for the year 2024 amounted to P2,000,000 for HIJ and P1,780,000 for STU. During 2025, STU
sold merchandise to HIJ, one-fifth were sold to outsiders by the end of 2025. The profit for this
intercompany sale amounted to P10,000. Also during 2025, HIJ sold merchandise to STU, one-third
of which were unsold to outsiders at the end of the same year. The profit for this sale amounted to
P15,000. Net income for the year 2025 amounted to P2,500,000 for HIJ and P2,000,000 for STU.

39. Compute the consolidated net income for 2024.

A. 3,780,000
B. 3,467,000
C. 3,630,000
D. 3,645,000

40. Compute the consolidated net income attributable to non-controlling interest for the year
2025.
A. 185,000
B. 184,200
C. 184,000
D. 184,800

Numbers 41, 42, 43, 44 and 45

The following balance sheets at December 31, 2024 are for PHILRABBIT Company and
SUPERLINES Enterprises, respectively just before the business combination. On this date,
PHILRABBIT acquires the net assets of SUPERLINES and issues 9,600 new shares in consideration
thereof. The issued shares have a market value of P35 each.
 Page 26 of 38
PHILRABBIT SUPERLINES
Cash P 112,000 P 40,000
Accounts receivable 96,000 28,000
Land 176,000 40,000
Buildings, net 280,000 168,000
Equipment, net 328,000 100,000
Total assets P 992,000 P 376,000
Accounts payable P 128,000 P 44,000
Bonds payable 160,000 80,000
Share capital, P10 par 320,000 144,000
Share premium - 20,000
Retained profit 384,000 88,000
Total liabilities and P 992,000 P 376,000
equity

The following market values have been agreed upon by the parties over some of SUPERLINES’s net
asset items:
Accounts receivable, P24,000; Land, P48,000; Buildings, P200,000; Equipment, P120,000; and Bonds
payable, P88,000.
PHILRABBIT Company also paid out-of-pocket costs: P6,400 for direct acquisition costs; P12,000
for stock issuance and registration; and P1,600 for indirect acquisition expenses.

41. How much goodwill is recorded upon the merger combination?

A. P45,000
B. P0
C. P36,000
D. P56,250

42. How much share premium will be shown in the balance sheet right after the date of
acquisition?
A. P240,000
B. P228,000
C. P0
D. P248,000

43. How much Stockholders Equity will be shown in the balance sheet right after the date of
acquisition?
A. P1,020,000
B. P 656,000
C. P980,000
D. P890,000

44. How much is the balance of cash shown in the balance sheet at date of acquisition?
A. P 112,000
 Page 27 of 38
B. P 40,000
C. P152,000
D. P132,000

45. How much total assets will be shown in the balance sheet at date of acquisition?
A. P 1,520,000
B. P 1,250,000
C. P1,020,000
D. P1,440,000

Numbers 46, 47, 48 and 49

Separate balance sheets for P Company and S Company on December 31, 2024, are as follows:
P COMPANY S COMPANY
Cash P 150,000 20,000
Other current assets 150,000 80,000
Land 300,000 50,000
Buildings 400,000 150,000
Current liabilities 200,000 50,000
Common stock, P 10 par 600,000 100,000
Additional paid-in 60,000 75,000
capital
Retained earnings 140,000 75,000

P Company issued 20,000 shares of its own common stock with a market value of P250,000 on January
1, 2025, in exchange for 80% of S Company’s outstanding stock. All of the excess is attributable 25%
to land and the balance to the buildings.

The following out of pocket costs were paid by P Company

Finder’s fees 25,000
Fees paid to company accountants 5,000
Cost to register and issue stocks 30,000
Cost of printing the stock certificates 25,000
Legal fees paid 5,000
Direct acquisition cost 20,000
Indirect cost 10,000

46. Total amount of land on the consolidated balance sheet

a. P 300,000
b. P 350,000
c. P 375,000
d. P 365,625
 Page 28 of 38
47. Total amount of buildings on the consolidated balance sheet
a. P 550,000
b. P 400,000
c. P 596,875
d. P 592, 350
48. Total APIC on the consolidated balance sheet
a. P 55,000
b. P 110,000
c. P 135,000
d. P 80,000
49. Total retained earnings on the consolidated balance sheet
a. P 75,000
b. P 70,000
c. P 20,000
d. P 140,000

Numbers 50 and 51
PAPSY CORPORATION purchases all the outstanding shares of MAMSHIE COMPANY on January
2, 2024 for P385,000 cash. On this date the stockholder’s equity of MAMSHIE is as follows:
Share capital, P10 par P175,000
Paid-in capital in excess of par 87,500
Retained earnings 175,000
Any excess of the fair value of net assets over the fair value of the investment is attributable to
MAMSHIE’s building which is currently overstated in its books. All other net asset items of the
acquired company are fairly valued at the acquisition date. The building has an estimated life of 10
years from January 2, 2024 without salvage value.
The condensed trial balances of the affiliated companies on December 31, 2024 appear as follows:
PAPSY MAMSHIE
Current assets P 420,000 P 302,750
Land 210,000 210,000
Building (net) 1,050,000 283,500
Investment in MAMSHIE 385,000 -
Current liabilities (708,750) (367,500)
Ordinary shares, P3 par (525,000) -
Share capital, P10 par - (175,000)
Paid-in capital in excess
of par (315,000) ( 87,500)
Retained earnings,
Jan. 2, 2024 (446,250) (175,000)
Sales (367,500) ( 70,000)
Cost of goods sold 210,000 61,250
 Page 29 of 38
Operating expenses 78,750 17,500
Dividends declared 8,750 -
Totals -- --

50. Compute the consolidated net income for 2024.

A. P75,520
B. P70,525
C. P72,550
D. P75,250
51. Compute the consolidated Retained Earnings at December 31, 2024.
A. P517,250
B. P525,170
C. P515,270
D. P512,750

Numbers 52, 53 and 54

On January 1, 2023, GININTUANG PUSO CORPORATION acquired 80% of the outstanding shares
of BAGAL SULONG COMPANY for P743,750. At this date, the stockholders’ equity of BAGAL
SULONG follows:

Ordinary shares, P5 par P 350,000

APIC 175,000
Retained earnings 175,000
Total SHE P 700,000

The net assets of BAGAL SULONG on January 1, 2023 were fairly valued. GININTUANG PUSO
assigned the full fair value to the non-controlling interest at the date of acquisition in analyzing the fair
value of its investment.
Selected information over the first two (2) years of affiliated operations follows:
• Intercompany merchandise sales are summarized as follows:
Purchaser’s Remaining Ending
Date Transaction Sales Amount GPR Inventory
In 2023 Downstream P61,250 30% P 15,750
Upstream 35,000 25% 6,125
In 2024 Downstream 56,000 30% 10,500
Upstream 52,500 25% 5,250

• Condensed trial balances of the two (2) companies on December 31, 2024 follow:

GININTUANG PUSO BAGAL SULONG

CORP. COMPANY
Current assets P 1,428,000 P 387,275
Investment in BAGAL SULONG 743,750 ---
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Equipment, net 1,891,750 262,500
Buildings, net 1,592,500 332,500
Goodwill 105,000 ---
Liabilities (1,123,500) (186,025)
Common Stocks, P1 par (437,500) ---
Ordinary shares, P5 par (350,000)
APIC (2,187,500) (175,000)
Retained earnings, January 1, 2024 (1,933,750) (245,000)
Sales (1,540,000) (1,102,500)
Dividend income (42,000) ---
Cost of goods sold 1,232,000 882,000
Other expenses 227,500 141,750
Dividends declared 43,750 52,500
Totals P 0 P 0

52. Compute the consolidated net income for 2024.

A. P195,125
B. P251,195
C. P215,915
D. P161,043
53. Compute the amount of the consolidated net income for 2024 attributable to the parent’s
shareholders.
A. P175,500.50
B. P145,249
C. P195,030
D. P143,482.50
54. Compute the amount of consolidated net income attributable to the non-controlling interest
A. P19,624.50
B. P15,794
C. P20,885
D. P15,732.50

Number 55
On January 1, 2019, GLOBALPORT CORPORATION purchased a delivery truck with an expected
useful life of five years. On January 1, 2021, GLOBALPORT sold the truck to TERRAIN COMPANY
and recorded the following journal entry:
Cash 37,440
Accumulated depreciation 16,960
Truck 42,400
Gain on Sale of Truck 12,000
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TERRAIN holds 60% of GLOBALPORT’s outstanding common shares. GLOBALPORT reported net
income of P44,000 in 2021 and TERRAIN's separate net income (excludes interest in GLOBALPORT)
for 2021 was P78,400.
Consolidated net income for 2021 was
A. P 96,800
B. P100,000
C. P104,800
D. P114,400
Numbers 56 and 57
PARENT CORPORATION regularly sells merchandise to its 80%-owned subsidiary, DIANCIN
ENTERPRISES. In 2019, Parent sold merchandise that cost P64,000 to DIANCIN for P80,000. Half
of this merchandise remained in Diancin’s December 31, 2019 inventory. During 2020, Parent sold
merchandise that cost P100,000 to Diancin for P125,000. Forty percent of this merchandise inventory
remained in Diancin’s December 31, 2020 inventory. Selected income statement information for the
two affiliates for the year 2020 is as follows:

56. Consolidated sales revenue and cost of goods sold for 2020 are:
A. P775,000, P607,000
B. P855,000, P603,000
C. P800,000, P607,000
D. P900,000, P603,000
57. Consolidated Net Income attributable to the Parent and the NCI for 2020 are:
A. P102,400, P5,600
B. P102,000, P6,000
C. P104,000, P6,000
D. P102,000, P5,600
Number 58
ENERGETIC COMPANY owns 100% of POWER ENTERPRISES. On September 1, 2024,
ENERGETIC sold POWER delivery equipment at a gain. ENERGETIC had owned the equipment for
two years and used a five-year straight-line depreciation rate with no residual value. POWER is using
a three-year straight-line depreciation rate with no residual value for the equipment.
In the consolidated income statement, POWER’s recorded depreciation expense on the
equipment for 2024 will be decreased by:
A. 16.67% of the gain on sale
B. 33.33% of the gain on sale
C. 50% of the gain on sale
D. 11.11% of the gain on sale
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Number 59
PARKER COMPANY sells equipment with a book value of P38,400 to SHEAFFER, INC. its 75%-
owned subsidiary, for P48,000 on January 1, 2024. SHEAFFER determines that the remaining useful
life of the equipment is four years and that straight-line depreciation is appropriate. The December 31,
2024 separate company financial statements of PARKER and SHEAFFER show equipment-net of
P240,000 and P144,000, respectively.
The consolidated equipment-net will be
A. P 384,000
B. P 376,800
C. P374,400
D. P312,000

Numbers 60 and 61
Balance sheet data for PRIMARY COMPANY and SECONDARY CORP. on December 31, 2024, are
given below:

PRIMARY purchased 80% interest in SECONDARY on December 31, 2024 for P124,800.
SECONDARY’s’ property and equipment had a fair value of P24,000 more than the book value shown
above. All other book values approximated fair value. In the consolidated balance sheet on December
31, 2024.
60. The amount of total stockholders’ equity to be reported will be
A. P 264,000
B. P 292,800
C. P 360,000
D. P 295,200

61. The amount of non-controlling interest will be

A. P 24,000
B. P 28,800
C. P 52,800
D. P 31,200
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Numbers 62, 63 and 64
On January 1, 2024. SHELLFISH CORPORATION purchased 75% of the common stock of
SQUIDBALL COMPANY. Separate balance sheet data for the companies at the combination date are
given below:

At the date of combination, the book values of Squidball’s net assets was equal to the fair value of the
net assets except for Squidball’s inventory which has a fair value of P14,400.
62. What amount of goodwill will be reported?
A. P 7,520
B. P 18,120
C. P29,280
D. P24,160
63. What amount of total liability will be reported?
A. P 83,520
B. P 136,480
C. P102,240
D. P 43,520
64. What is the amount of total assets?
A. P 300,800
B. P 329,280
C. P 360,640
D. P 354,600

Number 65
On January 1, 2024, PYRAMID COMPANY purchased 90% of the common stock of BRITISH, INC
for P31,104 over the book value of the shares acquired. All of the differential was related to land held
by BRITISH. On May 1, 2024, BRITISH sold the land at a gain of P55,680. For the year 2024,
BRITISH reported net income of P127,104 and paid dividends of P30,720. PYRAMID reported
income from its own separate operations of P253,056 and paid no dividends.
Consolidated net income for 2024 was
A. P 316,416
B. P 336,346
C. P 386,074
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D. P 345,600

Number 66
On January 1, 2024 the Parent Corporation sold equipment to its wholly-owned subsidiary, Subsidiary
Enterprises, for P691,200. The equipment cost Parent Company P768,000; accumulated depreciation
at the time of the sale of P192,000. The parent was depreciating the equipment on the straight-line-
method over twenty years with no salvage value, a procedure that the subsidiary continued.
On the consolidated balance sheet at December 31, 2024 the cost and accumulated depreciation,
respectively, should be
A. P 576,000 and P230,400
B. P 691,200 and P 38,400
C. P 691,200 and P192,000
D. P 768,000 and P230,400

Numbers 67 and 68
P Company acquired a 65% interest in S company in 2021. For years ended December 31, 2023 and
2024, S reported net income of P124,800 and P149,760, respectively. During 2023, S sold merchandise
to P for P26,880 at a cost of P20,736. Two-fifths of the merchandise was later resold by P to outsiders
for P14,592 during 2024. In 2024, P sold merchandise to S for P37,632 at a profit of P9,216. One-
fourth of the merchandise was resold by S to outsiders for P11,520 during 2024.
67. Non-controlling- interest net income in 2023 is
A. P 44,198
B. P 58,026
C. P 42,820
D. P 42,436
68. Non-controlling- interest net income in 2024 is
A. P 53,276
B. 55,246
C. P 51,755
D. P 52,931

Number 69
CORNELL Corporation sells equipment with a book value of P76,800 to BEANS Company, its 75%
owned subsidiary for P61,440 on April 1, 2024. BEANS determines that the remaining useful life of
the equipment is four years and that the straight-line depreciation is appropriate. The December 31,
2024 separate financial statements of CORNELL and BEANS show equipment-net of P 384,000 and
P230,400, respectively.
Consolidated equipment-net will be
A. P 474,816
B. P 509,376
C. P 626,880
D. P 585,024
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