UNIVERSITY OF THE EAST

PAS 27- Separate Financial Statements and PFRS 10- Consolidated Financial Statements

1. Consolidated Financial Statements- 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 entity.

2. Separate Financial Statements- financial statements presented by a parent (i.e. an investor with
control of a subsidiary, an investor with joint control of, or significant influence over, on investee., in
which the investments are accounted for at cost or in accordance with PAS/PFRS 39-Financial Instruments.

3. Control of an investee- an investor controls an investee when the investor is exposed, or has rights, to
variable returns from its investment with the investee and has the ability to affect those returns through its
power over the investee.

4. Consolidation Procedures- The concept that drives all consolidation procedures is that the consolidated
financial statements should show only the results of the transactions with outsiders. The effects on the
transactions between the parent company and its subsidiaries or between subsidiaries should always be
eliminated in full.

Problem 1: On January 1, 2025, PIXIE Company purchased O 90% of the outstanding shares of SIXER
Corporation from the market for P2,700,000. Additional direct acquisition cost of P250,000 was paid to a
-

consultant who facilitated the transaction. On this date, the Share Capital and Retained Earnings of SIXER
Corporation totaled to P1,500,000 and P(50,000), respectively

The statements of financial positions of the two companies as of December 31, 2025, before closing
entries, show the following:

PIXIE Company SIXER Corporation

Cash P2,537,500 P450,000
Accounts Receivable 437,500 620,000
Inventories 735,000 950,000
Plant Assets, net 1,400,000 1,100,000
Patents 250,000 150,000
TOTAL ASSETS P5,360,000 P3,270,000

Current Liabilities P 250,000 P 170,000

Bonds Payable 750,000 750,000
Share Capital, no par 3,500,000 1,500,000
Retained Earnings 860,000 850,000
TOTAL EQUITIES P5,360,000 P 3,270,000

For the year ending December 31, 2025, the statements of comprehensive income of the two companies
follow:

PIXIE Company SIXER Corporation

Sales P 5,000,000 P 2,750,000
Dividend Revenue 500,000 100,000
Total 5,500,000 2,850,000
Cost of Goods Sold 3,900,000 1,325,000
Operating Expenses* 550,000* 225,000*

Total 4,450,000 1,550,000

Net Profit P 1,050,000 P1,300,000

* Includes depreciation and amortization

Other Information:
 On January 1, 2025, SIXER Corporation had machinery with carrying value less than its fair value by
P150,000. (remaining life- 3 years); Patent whose fair value was less than its carrying value by
J P30,000 (remaining life- 3 years)
 Also on January 1, 2024, its merchandise inventory’s fair value was more than its book value by
P125,000; 75% of this was sold in 2025 and the remaining amount was sold in 2026.
 During 2025, PIXIE and SIXER paid dividends of P500,000 and P400,000, respectively.
 Impairment loss in 2024 is P125,000.
  The parent accounts for its investment in subsidiary using the cost method.

REQUIRED:
1. Working paper elimination entries in 2024.
2. Compute the following for the year 2024

405000 1. Goodwill (Bargain Price) arising from the above acquisition:

A. P1,555,000 B. P1,305,000 C. 1,005,000 D. P1,605,000
173/250 2. Consolidated Net Income
A. P1,610,250 B. P1,937,500 C. P2,350,000 D. P1,712,500
1627125
3. Consolidated Net Income Attributable to Controlling Interest
A. P1,610,250 B. P1,937,500 C. P2,350,000 D. P1,712,500
104125 4. Consolidated Net Income Attributable to Non-Controlling Interest
A. P113,500 B. P130,000 c. P102,250 D. P108,500
1987125
5. Consolidated retained earnings as of December 31:
A. P2,470,250 B. P2,407,250 c. P2,102,250 D. P1,970,250
364125 6. Non-controlling interest as of December 31:
A. P313,500 B. P362,250 c. P302,250 D. P308,500
240 , 000 7. Consolidated dividend revenue
A. P240,000 B. P230,000 c. P600,000 D. P208,500

Problem 2: On January 1, 2025, P Co. acquired 75% of the outstanding ordinary shares of S Co. at a
price of P5,000,000 including control premium of P400,000. The non-controlling interest has a fair
value of P1,500,000.
S Co’s net assets were reported at P5,000,000 on the same date. On January 1, 2025, P Co reported
retained earnings of P5,500,000, while S Co reported retained earnings of P2,500,000 on their separate
books.

Also on this date, all the assets and liabilities of S Co are fairly valued except machinery, which is
undervalued by P480,000, inventory, which is overvalued by P500,000 and liabilities overstated by
P300,000. 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, P Co reported net income of P3,000,000 and declared dividends
of P1,000,000 in its separate financial statements, while S Co reported net income of P2,000,000 and
declared dividends of P1,000,000 in its separate financial statements.

Assume that the impairment loss of goodwill for the year amounted to P500,000.
1. What is the consolidated net income attributable to parent shareholders for the year ended
December 31, 2025?
A. P3,930,000 B. P3,060,000 C. P3,510 ,000 D. P3,780,000

2. What is the amount of consolidated retained earnings on December 31, 2025?

A. P8,010,000 B. P8,700,000 C. P8,080,000 D. P8,500,000

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

A. P1,920,000 B. P620,000 C. P1,670,000 D. P2,320,000

4. What is the non-controlling interest in consolidated net income on December 31, 2025?
A. P270,000 B. P420,000 C. P780,000 D. P620,000

Problem 3: PANDA Corporation acquired 60% of the voting common stock of SATO Company at a time when
SATO Company’s book values and fair values were equal. Separate incomes of PANDA Corporation and SATO
Company for 2025 are as follows:

PANDA CORP STAG CO.

Sales P20,000,000 P12,500,000
Cost of Goods Sold 15,000,000 9,000,000
Operating Expenses 2,500,000 1,500,000
Separate Income from own Operations 2,500,000 2,000,000

 The beginning inventory of PANDA and SATO include P225,000 and P350,000 from intercompany
purchases; likewise, the December 31, 2025 inventories of PANDA and SATO include P341,250 and
P420,000.
 Journal Entries : P Co
.
3 1 .

Problem 1
Investment stock of Sco 2700, 000
entry
on
Jan 1 2025 no
cash 2700, 000

D 90 %1 2700 , 000
no RF , 000
2700 X 500
7400
Lash
800
NU 10 1-

-.
10 =
300, 000 300000
Can
3000000
Less :
FUNA 2595000
LUPFF
Good will 405 00
D Dec 31 2025 -

FV OF NA Of S CO 5 70 %00
Oper Expense
.

Sco . 1500 000

-

1 Share
.
capital
3290000
-

920000 2350000 500

=

RE-JU- 850, 000 plant Assets

+ 150, 000 Investment instock (90 % ) 2115000 (150000/3)

NUT (10-1) 235000 6 10000
20008 Patent
·

↑ 2. Operating Expense 10 , 000

125000 machinery 150 000
(20000 /3)
2595000 Inventory 125008
7
Los >9375
.

10) Patent 20000

220500
Inv in Sco (90 % )
259508 (125000 X75 1)
.
-

24506
NU (10- 1)

3 .
Good will 405
, 000

Inv in > Co
. 364588
NU 40508

4 Dividend revenue
360000
Div Declared 360000

Enr ins 10
. NUI

I I
& 2700 , 235000
T
000

Und
Sco -
yo5o
Het Income CH-2) (M -
NU 000
300 008
2700,
2700, 000
NP .

Co 1050 000 1050, 000

N) J A .
1300 , 000 1170000 130 , 000
⑤ runs RE 12 31 25 . .

Interest Dividend (400000X90- 1) (360000) (360000)

RE-p C by .
860, 000
Amortization of under (over
Plant Assets 15000013
(50 000) (45000) 150000) CHIC 1627
1500 000]
125

Rel Div

10000 1000 1987 125

Patent 20000/3 9000 Cons RE

125000 X75 1 .
.

(93750) (84 375)

,
(9315)
& NUaJoF 12 31 25
: -

Impairment loss (125000) (11250r) (12500) Recognized NY 300 000

10412T
(N) -NU
Shr in Ru pil (40000)

& 104125
10)
② 1731250 ③
(400000 X10

1627125
-

364125

& const Div New

total 600, 000

Ente Cobiv
.
(360000)
240000

& Long SHE 12 31 25 . .

Sh Corp po -

3500000

cons RE 1987125

SHEPCO-5487125 -

14700 , 000

Do
NU 364125-

LON JHF 585258

  PANDA Corp. billed SATO Co. at 40% and 30% in 2024 and 2025, respectively; on the other hand,
SATO Co. charged the parent company at 25% and 30% above cost for the same years.
 Intercompany sales and purchases in 2024 and 2025 amounted to P5,000,000 and P7,500,000,
respectively

On the 2025 consolidated statement of profit and loss, what would be the amounts of:

1. Sales
A. P27,500,000 B. P32,500,000 C. P25,000,000 D. P24,750,00o

2. Cost of Goods Sold

A. P16,480,250 B. P16,500,000 C. P23,992,500 D. P23,972,759

3. Net income
A. P4,519,750 C. P3,693,750 C. P 4,963,250 D.P4,480,250

Problem 4: On January 2, 2025, the statements of financial position of Parent Co. and Subsidiary Co. prior
to combination are:

PARENT CO. SUBSIDIARY CO.

Cash P 9,500,000 P 1,500,000
Inventories 1,500,000 2,000,000
Property and Equipment, net 4,800,000* 3,500,000**
TOTAL P15,800,000 P 7,000,000

Current Liabilities P 2,600,000 P 1,000,000

Share Capital 10,000,000 3,500,000
Share Premium 3,400,000 1,000,000
(200,000) 1,500,000
TOTAL P15,800,000 P7,000,000

*- Fair value is P7,000,000;remaining life- 8 years

** Fair value is P4,500,000; remaining life-10 years

1. Assuming Parent Co. acquired all of the outstanding stocks of Subsidiary Co. resulting to a goodwill of
P625,000, what was the price paid to Subsidiary Company’ s stock?
A. P10,125,000 B. P8,125,000 C. P8,625,000 D. P7,625,000

2. Assuming that Parent acquired 70% of the outstanding ordinary shares of Subsidiary for P4,400,000 and
Non-Controlling Interest is measured at fair value. If the fair value of the NCI is P2,000,000,what was the
gain from bargain price on acquisition?
A. P500,000 B. P400,000 C. P(500,000) C. P(400,000)

8
3. Assuming that Parent acquired 80% of the outstanding ordinary shares of Subsidiary for P4,100,000 and
NCI is measured at NCI’s proportionate share of Subsidiary’s FVNA, what was the consolidated shareholder’s
equity immediately after acquisition?
A. P13,700,000 B. P14,700,000 C. P15,100,000 D. P16,100,000

4. Assuming Parent acquired 90% of the outstanding ordinary shares of Subsidiary for P8,100,000 and Non-
Controlling Interest is measured at fair value, what was the total consolidated assets immediately after
acquisition
A. P18,900,000 B. P17,500,000 C. P16.700,000 D. P17,700,000

5. What is the amount of the Property and Equipment, net to be shown on the consolidated statement of
financial position as of December 31, 2019?
A. P8,020,000 B. P8,250,000 C. P10,175,000 D. P7,350,000

Problem 5: On April 1, 2025, the MARRIOT Company paid P6,000,000 to the former stockholders of RITZ
Inc. to acquire 75% ownership interest (representing 135,000 shares outstanding of RITZ Inc.) in a
transaction properly accounted for as acquisition. On this date, the assets and liabilities of RITZ Inc. were
as follows: Cash, P240,000 ; Inventories, P1,500,000 ; Plant assets, P6,200,000 ; Liabilities, P2,700,000.
Furthermore, it was determined that the merchandise inventory of RITZ Inc. had a fair market value of
P1,650,000 and the plant assets of P5,130,000. The non-controlling interest is initially measured at fair
value. Quoted price on the date of acquisition of MARRIOT Inc. shares is at P175.00 per share.

1. What should be the amount reflected as goodwill (gain) by MARRIOT Company in its legal entity financial
statements as a result of the business combination?
A. P0 B. P2,760,000 C. P3,255,000 D. P3,680,00
 Prob 4

① price paid 7625000

Less :
ENNA of 11 . 7000000
(1500 +2000 + 4500
-

1000
425000
Good will -

& (1 10.1 4400000

N130% 2000 , 000
2100000
30 % X700 2100000
6500, 000

Bp To
③ 80 % 4100 , 000

20 1 x7000000
.
.
1400000
Tgoo

FUNA Of Sc -

-
7000000

BP 1500 000

SHE PL .

10m + 3 4M .
= 200k 13200000

BP 14700, 000

4 90 1. ·

8108 00
10
%

18000000 =

1000
10 %x7000
.
=
700, 000 900 , 000
9000 000

FUNA
Goodwill
10000
TAPlo By .

T700 000
(15800000 8100000 -

T A of 50 Fv -

(1500 + 2000+ 4500) 8000 000

17700 , 000

D PPE as
Of 12 31 .

PCo -4800000 x 718 =

4200000
610 -

4500000 X 1110 =
4050, 000

8 250 000
Problem 6: The following are some of the transactions between POPOY Co. and its 75%- owned subsidiary SONY
Co. in 2024:

SONY Inc., sold equipment with a carrying value of P100,000 to POPOY Inc., for P75,000 on January 2, 2024
at which time, the asset had a remaining useful life of 3 years. POPOY used the equipment until December
31, 2026 until it was sold to outsiders for P36,000.

On the other hand, SONY bought an old office furniture from POPOY for P80,000 last July 31, 2024. The
asset was bought last June 30,2023 at a cost of P120,000 with an estimated useful life five years.

Furthermore, before the year ends, SONY Inc., sold land to POPOY Inc., for P2,000,000. The land was
acquired in the year 2000 at P1,500,000.

POPOY Co. and SONY Inc., generates net income from operations of P1,200,000 and P2,000,000 and paid
dividends of P450,000 and P500,000, respectively for the year 2024:

1. Compute the consolidated net income:

A. P2,324,989 B. P2,704,156 C. P2,702,667 D. P2,712,489

2. Compute the consolidated attributable to the controlling interest:

P2,324,989 B. P2,704,156 C. P2,702,667 D. P2,712,489

Problem 7: On January 1, 2025, P Company acquired 80% of outstanding ordinary shares of S Co. at a
bargain purchase of P300,000. The following intercompany transactions occurred between the two
companies:
 On January 1, 2025, S Co. sold furniture to P Company for P250,000. The asset has a carrying value
of P275,000 and could still be used to 5 more years.
 On January 9, 2025, P Company purchased land from S Co. for P2,000,000. The land was originally
purchased by S Co. from ALVEO at P1,000,000 last 2020. By December 31, 2025, P Company sold the
land to ALVEO for P3,000,000.
 On July 01, 2025, P Company sold machinery to S Co. with an original cost of P750,000 and
accumulated depreciation of P250,000 at a selling price of P520,000. The remaining life of the
machinery is 4 years. The residual value of the machinery is immaterial.
For the year ended December 31, 2025, P Company and S Co., reported a net income of P750,000 and
P500,000, respectively.

1. What is the consolidated net income attributable to controlling interest for the year ended
December 31, 2025?
A.P1,148,500 B. P1,238,750 C. P1,576,250 D. P1,403,750

2. What is the non-controlling interest in net income for the year ended December 31, 2025?
A.P115,000 B. P100,000 C. P85,000 D.P104,000

3. What is the net adjustment for the depreciation expense in the consolidated statements for the
year ended December 31, 2025?
A. P5,750 net increase C. P5,000 net increase
B. P5,750 net decrease D. P5,000 net decrease

Problem 8: POP Company acquired 55% of SET Company on January 2, 2025 for P1,750,000 cash. SET’s
shareholders’ equity on this date is consisted of ordinary share- P2,000,000 and retained earnings-
P1,050,000. An analysis of SET’s net assets revealed the following:
Carrying Value Fair Value
Office Equipment (4 year life) P 50,000 P 75,000
Patent (2year life) 20,000 10,000
Land 100,000 250,000
Bonds Payable 75,000 100,000

1. What was the resulting goodwill (bargain price) on the above acquisition?
A. P(8,182) B. P(4,500) C. P8,182 D. P4,500

2. What adjustment would be necessary for SET’s office equipment account in preparing the consolidated
FS at January 2, 2025, December 31, 2025 and December 31, 2026. Assume the equipment would be sold in
2026.
A. P(25,000); P(6,250); P(18,750) C. P(25,000); P(6,250); P(6,250)
 B. P25,000; P6,250; P18,750 D. P25,000 ; P6,250; P6,250

3. What adjustment was necessary for SET’s Land account in preparing the consolidated FS at January 2,
2025, December 31, 2025 and December 31, 2026?
A. P(150,000; P(150,000); P0 C. P(150,000); P(150,000); P(150,000)
B. P150,000;P150,000; P0 D. P150,000; P150,000; P150,000

Problem 9: PIT Corporation owns 70% of the outstanding common shares of SAP Company. On March 31,
2024, factory machineries that had a carrying value to SAP Company P 3,200,000 and has a remaining life of
4 years was sold to PIT Corporation for P3,000,000. On the other hand, last August 31, 2025, PIT
Corporation sold a second -hand delivery van to SAP Company at a gain of P75,000 (remaining life- 5 years).

Included in the January 1, 2024 inventory of PIT Company was merchandise inventory worth P90,000 while
SAP Company had P120,000 on its December 31, 2024 likewise the December 31, 2025 inventories of PIT
Company and SAP Company amounted to P100,000 and P150,000, respectively. These inventories came
from inter-company sales and purchases. PIT Corporation included a mark-up of 25% on cost while SAP
Company charged a 30% mark-upon sales.

At the time of acquisition, SAP Company’s office equipment was understated by P50,000 (remaining life- 5
years while its patent with a remaining useful life of 3 years, is overstated by P15,000.

Each of the two companies has net incomes in 2024 and 2025 as follows:
2024 2025
PIT Corporation P 3,000,000 P 2,000,000
SAP Company 1,200,000 1,000,000

What is the amount of the consolidated net income attributable to parent’s equity in (1) 2024 and (2) 2025?

Problem 10: POTTER Corp. owns 80% of SOXY Corp.’s ordinary shares. On June 1, 2024, POTTER sold to
SOXY for P 450,000 machinery with a carrying amount of P 300,000. SOXY is to depreciate the acquired
machinery over a five- year life by the straight-line method. On the other hand, last September 30, 2025,
SOXY sold a piece of land to POTTER Corp for P2,000,000 which he purchased 2 years ago to Mr. GO at
P1,750,000.

In June 30,2025, POTTER purchased slightly used computers from SOXY for P80,000 (with carrying value of
P100,000; remaining life 4 years).

On December 31, 2026, SOXY was able to sell the machinery to a non-affiliated company for P350,000. Also
on this date, SOXY was able to sell the above-mentioned land to Mr. GO who at this point urgently needs a
space for his business expansion at P2,200,000

What is net adjustments to compute 2024, 2025 and 2026 consolidated income before income tax?
increase or (decrease) of?
Page 2
 Page 2

CNI CNI-CI CNI-NCI

NI- P 162,500 162,500
NI- S 115,000 92,000 23,000
GAIN ON SALE- S (15,000) (12,000) (3,000)
REALIZED GAIN (15,000/5) 3,000 2,400 600
LOSS ON SALE- P CO. 7,500 7,500
REALIZED LOSS (7,500/3 X 3/12 ( 625) ( 625)
TOTAL 272,375 251,775 20,600

Problem 6: PEPE Inc. owns 90% of the outstanding shares of SUE Co. On September 30, 2024, SUE
purchased office furniture from PEPE at an intercompany gain of P50,000 (remaining life- 4 years).
Income information for 2024 taken from the separate company’s financial statements of PEPE Inc. and SUE
Co. is presented as follows:

PEPE INC. SUE CO.

Sales P 1,000,000 P 460,000
Gain on Sale of Furniture 50,000
Dividend Revenue 45,000
Total 1,095,000

Cost of Goods Sold P 500,000 260,000

Operating Expenses 200,000 40,000
Depreciation Expense 100,000, 60,000
Total 800,000 360,000

Net Profit P 295,000 P 100,000

At what amount will the (1) gain on sale of furniture, (2) consolidated depreciation and (3) consolidated
net income appear on the consolidated statement of comprehensive income of PEPE and SUE for the year
2024:
A. (1) Zero; (2) P156,875; (3) P303,125 C. (1) P0 ; (2) P160,000; (3) P303,125
B. (1) P 12,500; (2) P158,000; (3) P295,000 D.(1) P12,500; (2)P160,000; (3)P280,000

Consolidated Depreciation : 160,000 – 3,125 =156,875

CNI : 1,460,000 -50,000- 45,000 +3,125 = 303,125

Problem 7: On January 1, 2024, P Company purchased 75 percent of the outstanding shares of SALLY
Company at a cost of P3,200,000. On that date, SALLY Company had P 2,500 of ordinary shares and P
450,000 of retained earnings. P Company had P3,000,000 ordinary shares and retained earnings of
P1,000,000. P Co. normally sells merchandise to SALLY Co. at 120% of cost while SALLY Co., regularly sells
merchandise to P Co. at 30% mark-up. P Co’s December 31,2024 and 2025 inventories include goods
purchased intercompany of P52,000 and P40,300, respectively; SALLY’s December 31, 2024 and 2025
inventories include inter-company purchases of P72,000 and P54,000, respectively.

On July 1,2024, SALLY Co., purchased a machine for P1,000,000 (with carrying value of P850,000) to P
Corp. This machine still had remaining useful life of 5 years.

For 2024, P Company had net income of P 1,200,000 and paid dividends of P 420,000. On the other hand,
SALLY Company reported a net income of P750,000 and paid dividends of P 350,000. Annual impairment
loss on goodwill of P250,000 had been computed.

On the 2024 consolidated financial statement what is the (1) attributable to parent and (2) to non-
controlling interest?

Problem 8: PITT Corporation owns 90% of the outstanding common shares of SAP Company. On March 31,
2024, office equipment that had a carrying value to SAPP Company P 3,200,000 and has a remaining life of
 Page 3
6 years was sold to PITT Corporation for P3,500,000. On the other hand, last August 31, 2024, PITT
Corporation sold a second hand delivery van to SAPP Company at a loss of P50,000 (remaining life- 4 years).

Included in the January 1, 2024 inventory of PITT Company was merchandise inventory worth P65,000 while
SAPP Company had P80,000 on its December 31, 2024. These inventories came from inter-company sales
and purchases. PITT Corporation included a mark-up of 25% on cost while SAPP Company charged a 30%
mark-upon sales.

Each of the two companies has net incomes in 2024 and 2025 as follows:
2022 2023
PITT Corporation P 1,200,000 P 1,500,000
SAPP Company 900,000 1,000,000

What is the amount of the consolidated net income attributable to parent’s equity in (1) 2022 and (2) 2023?

Problem 9: PANTER Corp. owns 80% of SOS Corp.’s ordinary shares. On June 1, 2024, PANTER sold to SOS
for P 450,000 machinery with a carrying amount of P 300,000. SOS is to depreciate the acquired machinery
over a five- year life by the straight-line method. On the other hand, last September 30, 2025, PANTER
purchased slightly used computers from SOS for P85,000 (with carrying value of P100,000; remaining life 3
years). On December 31, 2026, SOS was able to sell the machinery to a non-affiliated company for
P350,000,

The net adjustments to compute 2024, 2025 and 2026 consolidated income before income tax would be an
increase (decrease) of:
2024 2025 2026
A. P(118,750) P43,750 P30,000
B. P(132,500) 43,750 97,500
C. P118,750 25,000 30,000
D. P(132,500) 43,750 30,000

END OF HANDOUT

On January 1, 2025, Parent Company acquired 70% of the outstanding ordinary shares of SUB Inc., at a
price of P210,000. SUB’s net assets were reported at P260,000 on the same date. On January 1, 2025,
Parent Company reported retained earnings of P2,000,000, while SUB reported retained earnings of
P200,000 on their separate books.

All the assets and liabilities of SUB 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, Parent reported net income of P1,000,000 and declared
dividends of P150,000 in the separate financial statements, while SUB reported net income of P150,000
and declared dividends of P20,000 in the separate financial statements.

5. 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
 Page 4

6. 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

7. 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 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
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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.
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
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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.

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

END
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