On January 1, 2018, Parent Company purchased 80% of the outstanding shares of Subsidiary Company for P800,000. On the date of acquisition,Subsidiary Company reported Ordinary Shares of P800,000 and Retained Earnings of P200,000. Subsidiary's Inventory was understated by P20,000;Equipment with a 5-year life was understated by P20,000, Building with an 8-year life was understated by P80,000 and land was understated byP40,000. The non-controlling interest is to be stated at fair value and the fair value of the non-controlling interest on January 1, 2018 is P210,000.The following are taken from the books of Parent and Subsidiary for 2018.ParentSubsidiarySales2,000,0001,500,000Gross Profit350,000550,000200,000Net Income150,000Dividend Declared (to be paid on Jan 15, 2019)100,00050,000Total Assets5,000,0004,000,000From the data above, determine: Assuming the retained earnings of Subsidiary on December 31, 2021 is P350,000, determine the non-controllinginterest to be reported in the consolidated financial statements on December 31, 2021 assuming no changes to Subsidiary company's ordinaryshares.

NCI stands Non- Controlling interest which is defined as the situation which happen when the firm…

Answered: On January 1, 2018, Parent Company…

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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On January 1, 2019, Parent Company acquires 75% (750,000 ordinary shares) of Subsidiary Company for P7,500,000. During this time, the shares of the subsidiary are trading at P8 per share. Moreover, at the date of acquisition, the Subsidiary reports outstanding shares of P4,000,000 and the retained earnings is valued at P2,000,000 and the Subsidiary's inventories is understated by P100,000, equipment with a remaining 5-year life is understated by P600,000 and land is understated by P1,300,000. The Non-controlling interest is valued at P2,375,000 at this date. Parent and Subsidiary furthermore reports net income of P700,000 and P180,000 each respectively and declared dividends of P400,000 and P300,000 each respectively for 2019. What is the Non-controlling interest in net assets arising from the consolidation to be reported at the end of 2019 if the Non-controlling interest is stated at fair value? What is the net income of the Equity Holder's of the Parent to be reported in the…
On 1 July 2022, Birds Ltd acquired all the issued shares of Tokyo Ltd for $174 800. At this date the equity of Tokyo Ltd consisted of share capital of $80 000 and retained earnings of $68 800. All the identifiable assets and liabilities of Tokyo Ltd were recorded at amounts equal to fair value except for the following. Carrying amount Fair value Patent $60 000 $72 000 Plant (cost $80 000) 40 000 48 000 Inventories 21 600 28 000 The patent was considered to have an indefinite life. It was estimated that the plant had a further life of 10 years, and was depreciated on a straight-line basis. All the inventories were sold by 30 June 2023. In May 2023, Tokyo Ltd transferred $20 000 from the retained earnings on hand at 1 July 2022 to a general reserve. In June 2023, Tokyo Ltd conducted an impairment test on the patent and on the goodwill acquired. As a result, the goodwill was considered to be impaired by $1200. The tax rate is 30%. 1.Required Prepare the acquisition analysis at 1 July…
On January 1, 2016, Parent Company purchased for P6,500,000 65% of the outstanding shares of Subsidiary Company. On this date, the assets of Subsidiary Company have a book value P10,000,000 while their liabilities have book values of P2,000,000. All of Subsidiary Company’s assets approximated their fair values except for Machinery and Land which were understated by P25,000 and P75,000 each respectively and a Liability which was overstated by P10,000. Parent and Subsidiary each have 100,000 shares outstanding and their shares are currently trading in the stock market at P250 and P125 per share to Parent and Subsidiary each, respectively. The non-controlling interest is valued at fair value. What is the the increase in the total assets of Parent because of the acquisition?

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