ACCOUNTING FOR BUSINESS COMBINATION

INTERCOMPANY TRANSACTIONS

ANSWER THE FOLLOWING AND PROVIDE STEP BY STEP EXPLANATION:

ProbIEm 2 On December 31. 2015. Nathan Company purchased 80 percent of the outstanding shares of Nate Company at a cost of P435000. On that date, Nate Company had P211500 worth of ordinary shares and P290900 worth of accumulated prots. All assets and liabilities of Nate Company have book values approximately equal their market values at this time. For 2016, Nathan Company had income of P100000 from its own operations and paid dividends of P30,000. Nate Company also reported net income of P300000 and paid dividends of P20,000. The beginning inventory of Nate Company includes P15,225 worth of merchandise purchased from Nathan Company on December 31, 2015. Nathan Company shipped this merchandise at 40 percent above its cost. The ending inventory of Nathan Company includes P11,600 worth of merchandise purchased from Nate Company, which shipped this merchandise at 33 1f3 percent above its cost. Both companies use FIFD inventory costing. P uses the cost method to account for its investment in 5 Company. Required: 16. Compute the consolidated net income for year 2016. 1?. Compute the Non-controlling Interest in Net Income of Subsidiary for year 2016. 13. Compute the total non-controlling interest as of December 31, 2016. Problem 3 On January 1, 2016, Jenny Company purchased 80 percent of the outstanding shares of Mark Company at a price that included P40.000 excess attributable entirely to an undervalued equipment with a remaining life of 5 years on the date of acquisition. For 2016. Jenny Company reported consolidated net income of P461,443. Non-controlling interest in net income was P44,312. The non-controlling interest reported in the consolidated statement of nancial position as of December 31, 201-15 is P229312. On December 31. 2016. Jenny Company had inventories that included P52.200 worth of merchandise purchased from Mark Company at 125 percent of its cost. On the same date, Mark Company had inventories that included P34,800 worth of merchandise purchased from Jenny Company at 120 percent of its cost. Neither company paid any dividends in 2016. Required: 1. Compute net income of Jenny Company from their own operations. 2. Compute the price paid by Jenny Company for its investment in Mark Company