NEGROS ORIENTAL STATE UNIVERSITY M.

NAPAROTA, CPA
College of Business Administration ACCY 304 (Chapter Exam)
Accountancy Department

Name: ___________________________________ Section: ____________ Score: ___________

Instruction: Encircle the corresponding letter of the correct answer.

For items 1 and 2:

On January 1, 20298, Entity A acquired 90% of outstanding ordinary shares of Entity B. On July 1, 2029,
Entity A purchased 80% of outstanding ordinary shares of Entity C. Entity A, Entity B and Entity C reported
the following sales and cost of goods sold for the years ended December 31, 2029, and December 31,
2030:
Entity A Entity B Entity C
2029 Sales P5,000,000 P3,000,000 P2,000,000
2029 Cost of Sales 3,000,000 2,100,000 1,600,000
2030 Sales P6,000,000 P4,000,000 P3,000,000
2030 Cost of Sales 4,200,000 3,200,000 1,800,000

The following intercompany sales of goods involving different set of inventories occurred during
2029 and 2030:

• During 2029, Entity C sold inventory to Entity A at a price of P200,000. ¼ of those inventories were
resold by Entity A to third persons during 2029 while the remainders were resold to third persons
during 2030.
• During 2029, Entity B sold inventory to Entity C at a price of P300,000. 1/3 of those inventories
were resold by Entity C to third persons during 2029 while the remainders were resold to third
persons during 2030.
• During 2030, Entity C sold inventory to Entity B at a price of P400,000. 1/5 of those inventories
remained in the ending inventory of Entity B at the end of December 31, 2030.
• During 2030, Entity A sold inventory to entity B at a price of P500,000. 2/5 of those inventories
were resold by Entity B to third persons during 2030.

1. What is the consolidated sales to be reported by Entity A in its Consolidated Statement of

Comprehensive Income for the year ended December 31, 2030?

a. P12,500,000
b. P12,600,000
c. P12,100,000
d. P11,600,000

2. What is the consolidated cost of sales to be reported by Entity A in its Consolidated Statement of
Comprehensive Income for the year ended December 31, 2030?

a. P8,332,000
b. P8,912,000
c. P8,532,000
d. P8,652,00

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 NEGROS ORIENTAL STATE UNIVERSITY M. NAPAROTA, CPA
College of Business Administration ACCY 304 (Chapter Exam)
Accountancy Department

For items 3 and 4:

On January 1, 2030, Entity A acquired 80% of the outstanding common stocks of Entity B at a gain on
bargain purchase of P100,000. At the date of acquisition, all the assets of Entity B are property valued
except for a building that is overvalued of P50,000 and an inventory that is undervalued by P30,000.
The said overvalued building has a remaining useful life of 5 years on January 1, 2030 while 1/3 of the
said undervalued inventory remained unsold as of December 31, 2030. The following intercompany
transactions occurred during the year:

• On July 1, 2030, Entity B leased a machinery to Entity A at an annual rental of P120,000.

• On October 1, 2030, Entity A rendered management services to Entity B at a consideration of
P40,000.

Entity A accounted its Investment in Entity B using cost method in its separate financial statements. For
the year ended December 31, 2030, Entity A reported net income of P1,000,000 and declared
dividends of P200,000 in its separate financial statements while Entity B reported P500,000 and declared
dividends of P100,000 in its separate financial statements.

3. What is the consolidated net income attributable to Entity A's shareholders to be reported by Entity
A in its Consolidated Income Statement for the year ended December 31, 2030?

a. P1,354,000
b. P1,452,000
c. P1,416,000
d. P1,282,000

4. Using the same data from preceding number, what is the net income attributable to non-controlling
interest to be reported by Entity A in its Consolidated Income Statement for the year ended December
31, 2030?

a. P94,000
b. P106,000
c. P86,000
d. P96,000

5. TUV Co. acquired 80% of the shares of JKL Co. for 1,680,000 on January 1, 2022. JKL Co. net assets of
1,760,000 included a patent with a 10-year life. The book value of the patent is 800,000 while the fair
value is 660,000. On December 31, 2022, the total expenses were at 1,242,000 and 1,428,000 for TUV
Co. and JKL Co. respectively.

Compute the Consolidated total expenses on December 31, 2022

a. 2,656,000
b. 2,670,000
c. 2,684,000
d. 2,750,000

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 NEGROS ORIENTAL STATE UNIVERSITY M. NAPAROTA, CPA
College of Business Administration ACCY 304 (Chapter Exam)
Accountancy Department

For items 6 to 8:

Popoy Company purchased 60 percent of Sasha Company’s voting stocks for P252,000 on January 1,
2019. Sasha reported total stockholders’ equity of P400,000 at the time of acquisition. The excess is
allocated to equipment with an expected life of 10 years from the date of acquisition.

During 2022, Popoy purchased inventory for P20,000 and sold the full amount to Sasha Company for
P30,000. On December 31, 2022, Sasha’s ending inventory included P6,000 of items purchased from
Popoy. Also in 2022, Sasha purchased inventory for P50,000 and sold the units to Popoy for P80,000.
Popoy included P20,000 of its purchase from Sasha in its ending inventory on December 31, 2022.

Summary statement of CI data for the two companies revealed the following:

Popoy Corporation Sasha Company

Sales P400,000 P200,000
Dividend income from S 25,000 0
Cost of goods sold P250,000 P120,000
Other expenses 70,000 35,000
Comprehensive income P105,000 P45,000

6. What is the amount to be reported as sales in the 2022 consolidated statement of CI?

a. 490,000
b. 450,000
c. 600,000
d. 550,000

7. What is the amount to be reported as cost of goods sold in the 2022 consolidated statement of CI?

a. 100,500
b. 105,000
c. 269,500
d. 159,000

8. What amount of consolidated CI will be assigned to parent company in the 2022 consolidated
statement of CI?

a. 98,500
b. 113,500
c. 99,300
d. 95,800

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 NEGROS ORIENTAL STATE UNIVERSITY M. NAPAROTA, CPA
College of Business Administration ACCY 304 (Chapter Exam)
Accountancy Department

For items 9 and 10:

Pietro Corporation owns 75% of the outstanding stock of Scarlet Company, acquired at book value in
2020. Selected information from the accounts of Pietro Corporation and Scarlet Company for 2022
are as follows:
Pietro Scarlet
Sales P900,000 P500,000
Cost of goods sold 490,000 190,000

During 2022, Pietro sold merchandise to Scarlet for P50,000 at a gross profit of P20,000. Half of this
merchandise remained in Scarlet’s inventory at December 31, 2022. Scarlet’s December 31, 2021
inventory included unrealized profit of P4,000 on goods acquired from Pietro. In the consolidated CI for
Pietro Corporation and subsidiary for the year 2022, compute for the following amounts:

9. Consolidated sales

a. 1,450,000 c. 1,400,000
b. 1,350,000 d. 900,000

10. Consolidated Cost of Sales

a. 636,000 c. 624,000
b. 634,000 d. 490,000

For items 11 to 13:

Parent Corp. acquired 90% of the outstanding shares of stock of Subsidiary Co. on January 1, 2023 at
book value. On the same date, Subsidiary Co. sold to Parent Corp. a building with a carrying amount
ofP240,000 for P300,000. The building had a remaining useful life of 10 years.

The following were the balances on December 31, 2023 in the separate financial statements of Parent
Corp. and Subsidiary Co. respectively: Building (historical cost) P1,000,000 and P460,000 respectively;
Accumulated Depreciation P360,000 and P158,000 respectively.

11. What is the amount of consolidated building, net on December 31, 2023?

a. 942,000 c. 1,406,000
b. 882,000 d. 888,000

12. What is the amount of consolidated accumulated depreciation on December 31, 2023?

a. 518,000 c. 524,000
b. 512,000 d. 464,000

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 NEGROS ORIENTAL STATE UNIVERSITY M. NAPAROTA, CPA
College of Business Administration ACCY 304 (Chapter Exam)
Accountancy Department

13. What is the amount of adjustment for the consolidated depreciation expense on December 31,
2023?
a. 6,000 decrease c. 24,000 decrease
b. 30,000 decrease d. 6,000 increase

For items 14 and 15:

Parent Corp. acquired 70% of the outstanding shares of stock of Subsidiary Co. on January 1, 2023 at
book value. On September 2, 2023 Parent sold the land to Subsidiary Co. for P2,200,000 and on that
date, the cost of the land was P2,500,000. Subsidiary sold the land to outsiders on March 21, 2024 for
P1,800,000

14. What is the amount of adjustment for the consolidated loss on sale on December 31, 2023?
a. 300,000 increase c. 400,000 increase
b. 300,000 decrease d. 400,000 decrease

15. What is the amount of consolidated loss on sale to be reported on December 31, 2024?

a. 400,000 c. 700,000
b. 300,000 d. 100,000

16. 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

17. What date should be used as the acquisition date for a business combination?
a. The date when the acquirer signs the contract to purchase the business
b. The date when the acquirer obtains control of the acquiree
c. The date when all the contingencies related to the transaction are resolved
d. The date when the acquirer purchased more than 20% of the stock of the acquiree

For items 18 to 20:

On January 1, 2021, 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
P 700,000

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 NEGROS ORIENTAL STATE UNIVERSITY M. NAPAROTA, CPA
College of Business Administration ACCY 304 (Chapter Exam)
Accountancy Department

The net assets of BAGAL SULONG on January 1, 2021 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:

Date Transaction Sales Amount GPR Purchaser’s Remaining Ending
Inventory
In 2021 Downstream P 61,250 30% P 15,750
Upstream 35,000 25% 6,125
In 2022 Downstream 56,000 30% 10,500
Upstream 52,500 25% 5,250

• Condensed trial balances of the two (2) companies on December 31, 2018 follow:
GININTUANG PUSO CORP. BAGAL SULONG COMPANY
Current assets P 1,428,000 P 387,275
Investment in BAGAL SULONG 743,750 ---
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, 2022 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

18. Compute the consolidated net income for 2022.

a. P 195,125 c. P215,915
b. P 251,195 d. P161,043

19. Compute the amount of the consolidated net income for 2018 attributable to the parent’s
shareholders.
a. P 175,500.50 c. P195,030
b. P 145,249 d. P143,482.50

20. Compute the amount of consolidated net income attributable to the non-controlling interest
a. P 19,624.50 c. P 20,885
b. P 15,794 d. P 15,732.50

- END OF EXAMINATION -

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