Questions:a. How much is the Consolidated Net Income?b. Using the same problem, how much is the Goodwill to be presented in the consolidated financial statements at December 31, 2022?c. Using the same problem, how much is the Consolidated Shareholders’ Equity at December 31, 2022?------- Parent Company issued 75,000 new shares of its P5 par value ordinary shares valued at P12 per share in exchange for 90% outstandingshares of Subsidiary Company on January 1, 2022. The fair value and book value of Subsidiary's identifiable assets and liabilities werethe same except inventory, which was understated by P30,000 and equipment which was overstated by P90,000 (remaining useful lifeof 10 years). The stockholders' equity of Parent and Subsidiary at the date of acquisition were as follows:ParentSubsidiaryShare CapitalShare PremiumRetained Earnings600,000450,000260,000Net IncomeDividend declared and paidThe parent opted to measure NCI using fair value method. During the year, Parent sold merchandise to Subsidiary for 600,000 while theSubsidiary also sold merchandise to Parent for P250,000. 20% of the intercompany sales are still in the ending inventory of the purchasingcompany. Parent and Subsidiary used the same mark-up on cost: 25% for intercompany sales and 40% for other sales. At the end ofDecember 31, 2022, the goodwill was determined to be impaired by P22,500 (partial). Below is the result of operations in 2022:ParentSubsidiary250,00050,000600,000550,000100,000300,00050,000

Answer: To compute the consolidated net income, we need to first eliminate the intercompany…

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Business

Accounting

How much is the Consolidated Net Income?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Questions:

a. How much is the Consolidated Net Income?

b. Using the same problem, how much is the Goodwill to be presented in the consolidated financial statements at December 31, 2022?

c. Using the same problem, how much is the Consolidated Shareholders’ Equity at December 31, 2022?

-------

Parent Company issued 75,000 new shares of its P5 par value ordinary shares valued at P12 per share in exchange for 90% outstanding
shares of Subsidiary Company on January 1, 2022. The fair value and book value of Subsidiary's identifiable assets and liabilities were
the same except inventory, which was understated by P30,000 and equipment which was overstated by P90,000 (remaining useful life
of 10 years). The stockholders' equity of Parent and Subsidiary at the date of acquisition were as follows:
Parent
Subsidiary
Share Capital
Share Premium
Retained Earnings
600,000
450,000
260,000
Net Income
Dividend declared and paid
The parent opted to measure NCI using fair value method. During the year, Parent sold merchandise to Subsidiary for 600,000 while the
Subsidiary also sold merchandise to Parent for P250,000. 20% of the intercompany sales are still in the ending inventory of the purchasing
company. Parent and Subsidiary used the same mark-up on cost: 25% for intercompany sales and 40% for other sales. At the end of
December 31, 2022, the goodwill was determined to be impaired by P22,500 (partial). Below is the result of operations in 2022:
Parent
Subsidiary
250,000
50,000
600,000
550,000
100,000
300,000
50,000

Definition Definition Intangible asset that includes proprietary or intellectual property and brand value of a firm. Goodwill is recorded in the books when a firm purchases another firm and the purchase price is more than the fair value of net identifiable assets of the acquired business. The amount of goodwill is recorded on the asset side of the balance sheet (statement of financial position).

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