consolidated
On January 1, 20x0, P Company purchased 80 percent of the outstanding shares of S Company by paying P650,000.
On that date, S Company P300,000 capital stock and P500,000
to building amounting to P75,000 with a remaining life of 25 years. All other assets and liabilities of S Company
had book value approximated their fair market value.
On January 1, 20x1 P’s common stock and retained earnings amounted to P1,000,000 and P800,000, respectively,
while S Company’s retained earnings is P600,000.
The 20x1 net income and dividends using cost (or initial value) method that was as follows;
Net Income Dividends
P Company P340,000 P100,000
S Company P150,000 P50,000
On April 1, 20x1, S Company sold equipment with book value of P30,000 to P Company for 60,000. The gain on
the sale is included in the net income of S Company indicated above. The equipment is expected to have to have a
remaining useful life of five years from the date of sale.
On September 30, 20x1, P Company sold machinery with a book value of P40,000 to S Company for P75,000. The
gain on the sale is also included in the net income of P company indicated above. The machinery is expected to last
for ten (10) years from the date of sale.
8. The controlling (parent’s) interest – retained earnings or the consolidated retained earnings on December
31, 20x1:
A. 1,040,000 C. 1,190,675
B. 1,063,075 D. 1,140,675
9. The consolidated
A. 2,040,000 C. 2,399,375
B. 2,349,375 D. 2,375,975
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