1. On January 1, 20X1, P Company (PC) purchased 80% of the outstanding shares of S Company (SC) at the

cost of P700,000. On that date, SC had P300,000 and P500,000 capital stock and retained earnings,

respectively. The non-controlling interest (NCI) is measured on a fair-value basis.

For 20X1, PC had a comprehensive income (CI) of P300,000 and paid dividends of P100,000. On the other

hand, SC reported a CI of P150,000 and paid dividends of P50,000. All of the assets and liabilities of S

Company had book values that approximately equal to their respective market values.

On December 31, 20X1, PC sold a piece of equipment with a book value of P30,000 to SC for P25,000.

The gain on the sale is included in the CI of PC indicated above. The equipment has a 10-year useful life.

It has been used for the past five (5) years before the date of acquisition.

Required:

a. Prepare the journal entries that both companies should make for the year 20X1.

b. Allocate the consolidated comprehensive income at the end of the year.

2. On January 2, 20X1, Padre Corporation (PC) purchases 80% of the common stock of Son Company (SC)

for P300,000. SC's has P200,000 and P50,000 book value of common stock and retained earnings. The

book values of SC identifiable net assets approximate their related fair values. On May 20X1, PC sold

merchandise costing P19,600 to SC for P24,500. Out of which, only P5,000 remains unsold by SC at the

end of 20X1. PC and Saul use the same mark-up based on cost.

In 20X2, PC sold another merchandise to SC for P30,000. Of the said merchandise, P8,000 remains in the

ending inventory of 20X2.

PC has P50,000 and P80,000 comprehensive income from its operations on 20X1 and 20X2, respectively.

On the other hand, SC has P20,000 and P50,000 comprehensive income from its operations for 20X1 and

20X2.

Required:

Prepare the necessary entries to be made by both companies for 20X1 and 20X2.

Allocate the consolidated comprehensive income to the controlling and non-controlling interest for

20X1 and 20X2.