PRAC 2 - prac 2 PDF

Preview

Summary

PQ1 Company purchased an 80% interest in Subsidiary Company for P230,000 on January 1, 2004, when Subsidiary Company had the following balance sheet:Assets Current assets .................... P 100, Property, plant, and ........... equipment (net) ........... 200, Total assets .........................

Description

PQ2 1.Parent Company purchased an 80% interest in Subsidiary Company for P230,000 on January 1, 2004, when Subsidiary Company had the following balance sheet: Assets Current assets .................... Property, plant, and ........... equipment (net) ........... 200,000 Total assets ........................

P 100,000

P300,000

Liabilities and Equity Current liabilities ............... P 50,000 Common stock (P10 par) ... 100,000 Retained earnings ............... 150,000 Total liabilities and equity .. P300,000

Any excess of the price paid over book value is attributable only to the plant assets, which have a 10year remaining life. Parent uses the cost method to record the investment in Subsidiary Company. The following trial balances of the two companies were prepared on December 31, 2004:

Current Assets ................................................ Property, Plant and Equipment ....................... Accumulated Depreciation ............................ Investment in subsidiary Company ............... Current Liabilities .......................................... Common Stock (P10 par) .............................. Retained Earnings, January 1, 2004 ............... Sales ............................................................... Expenses ........................................................ Dividend Income ........................................... Dividends Declared ....................................... Total .........................................................

Parent 80,000 400,000 (106,000) 230,000 ( 60,000) (300,000) (200,000) (150,000) 110,000 ( 4,000) 0

Subsidiary 130,000 200,000 ( 20,000) ( 40,000) (100,000) (150,000) (100,000) 75,000 5,000 0

The consolidated net income for 2004: 2. On January 1, 2003, P Co. acquired 70 percent of S Co. for P300,000. On that day, S Co.'s common stock and retained earnings accounts had credit balances of P100,000 and P300,000, respectively. It was agreed that goodwill, if any, would have an annual impairment loss of P2,000. P Co. decided to use the cost method to account for the investment on its books. On December 31, 2005, the retained earnings accounts of P and S were P800,000 and P400,000, respectively. Consolidated Retained Earnings on that day are: 3. Madonna Corp. has a 75% interest in Jemo Co. which is recorded on a cost basis. For the fiscal year ended June 30, 2005, the following data were taken from their respective books: Net income of Madonna Corp. was P125,000, while the net income of Jemo Co. was was intercompany interest on bonds of P5,700. Jemo Co. paid dividend of P9,000.

P45,000. There

How much was the consolidated net income for the fiscal year? 4. Com Corporation and Bo Corporation are sister companies. Com Corporation owns 140,000 shares of stock out of the 200,000 shares of stock outstanding of Bo Corporation. On the other hand, Bo Corporation owns 120,000 shares out of the 600,000 shares outstanding of Com Corporation. Com Corporation announced a net income of P84,080 for the year 2005 while Bo Corporation sustained a loss of P12,000 for the same year. The net income and loss of both corporation were arrived at without consideration of the earnings of the affiliate. On a consolidated basis for year 2005, and the net income or (loss) for: 5. AA Company owns 80% of the outstanding common stock of BB Company and 90% of the outstanding common stock of CC Company. Each company's net income from its own separate operations, exclusive of dividend income and amortization of cost over book value of net assets, is as follows: AA Company ............................................................................. P1,000,000 BB Company .............................................................................. 100,000 CC Company .............................................................................. 10,000 Amortization of cost over book value of net assets (at 100%) on a full-year basis is P4,000 P2,000 for AA and BB respective.

and

P2,000 for AA and BB respective....