Reference no: EM133095795
Problem 1 - LALA Inc. owns 80% of outstanding stocks of LILI Company purchased at book value. During the year 2016, the following transactions
On July 1, 2016, LALA sold equipment, carried in its books at P108,000, to LILI for P126,000 cash. This equipment was acquired by LALA last July 1, 2015 for P120,000.
On August 30, 2016, LALA Inc. acquired the furniture of LILI Company for P250,000 in cash. This was carried in the books of LILI at P265,000. Useful life of this furniture at the time of sale was five years.
On November 8, 2016, LILI sold land to LALA which earned it P235,000 gain. The land was reported in the books of LILI at P835,000.
Net income presented in the books of LALA and LILI amounted to P820,000 and P350,250, respectively.
Required -
A. For intercompany sale in July, how much will be the adjustment on equipment net account balance in the December 31, 2016 consolidated financial statements? Indicate whether Increase or Decrease.
B. How much is the adjustment on the furniture net account balance in the December 31, 2016 consolidated financial statements? Indicate whether Increase or Decrease.
Problem 2 - P company owns 80% interest in S Company. During 20x8, S sells merchandise to P for P180,000 at a profit of P30,000. On December 31, 20x8, 40% of this merchandise is included in P's inventory. Also during 20x8, P sells merchandise to S for P250,000 at a profit of P50,000 of which 20% of this merchandise is included in S's inventory on December 31, 20x8. Income statement information for P and S are summarized below:
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P Co.
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S Co.
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Sales
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P900,000
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P450,000
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Cost of sales
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450,000
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300,000
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Operating expenses
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225,000
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60,000
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Required - What is the cost of goods sold on the consolidated income statement for 20x8?
Problem 3 - Basahin Company acquires 75% of Mabuti Company for P480,000 on January 1, 20x8. Mabuti reported capital stock of P325,000 and retained earnings of P275,000 on that day. An equipment with 5-year remaining life was undervalued by P50,000 and buildings with 10-year remaining life were overvalued by P20,000. Any excess consideration transferred over fair value was attributable to goodwill. Based on annual review, goodwill was impaired by P1,000. In 20x8, Mabuti net income is P120,000 and paid dividends of P50,000.
Required - How much is the non-controlling interest under PARTIAL GOODWILL method in December 31, 20x8 consolidated financial statements?