ACCOUNTING FOR BUSINESS COMBINATION

INTERCOMPANY TRANSACTIONS

ANSWER THE FOLLOWING:

Problem 4 On January 1, 2006, Peter Company purchased 30 percent of the outstanding shares of Pedro Company at a cost of Pi,0El0,0-00. On that date, Pedro Company had P600000 worth of ordinary shares and P250000 worth of accumulated prots. For 2006, Pedro Company reported income of P220000 and paid diyidends of P9031300. All of the assets and liabilities of Pedro Company are at fair market value. On December 31, 2006, Peter Company sold equipment to Pedro Company for P112,500 that had a cost of P672500. The equipment is expected to have a useful life of 10 years from this date. For the year 2006, Peter Company reported income from its own operations in the amount of P300,000, which included the gain of P45,000 on equipment sold to Pedro Company. Required: 1. Compute the amount to be shown as consolidated net income. 2. Compute the Non-controlling Interest in Net Income of Subsidiary for 2006. 3. Compute the amount to be shown as Non-controlling Interest in Net Assets of Subsidiary on the consolidated statement of nancial position as of December 31, 2006. Problem 5 On January 5, 2008, Grace Co. purchased ?0% of the outstanding shares of Leo Co. at a cost of P500000. On that date, the outstanding ordinary shares of Lee had a P200000 balance, while accumulated prots had a P100000 balance. All the book values of assets and liabilities of Leo approximated their fair values except for an equipment which was understated by P50,000 For the year 2008, Grace sold an equipment to Leo reporting a gain on sale of P25,000 on July 1, 2000 and Leo on the other hand sold a machine to Grace reporting a loss of P10,000 on October 1, 2008. Grace reported net income of P250000 and declared dividends of P40,000 and reported an accumulated prots balance as of December 31, 2003 of P350000. Leo reported net income for the year of P150000 and declared dividends of P20,000. The remaining useful lives of the plant assets as of January 1. 2008 for both companies are 4 years for machinery and 5 years for equipment. Required: From the above data, determine: 03. The net income attributable to equity holders of the parent for 2003. 09. The non'controlling interest net income in Leo Co. for 2003. 10. The consolidated net income of Grace Co. for 2008. 11. The consolidated accumulated prots as of December 31, 2003. Problem 6 On January 1, 2003, 3acil Company purchased 30 percent of the outstanding shares of Lou Company at a cost of P910000. On that date. Lou Company had P390000 worth of outstanding shares and PCS-50,000 worth of accumulated prots. For 2003, 3acil Company had income of P390000 from its own operations and paid dividends of P130000. For 2003, Lou Company reported a net income of P195000 and paid dividends of Pei-5,000. All of the assets and liabilities of Lou Company had book values approximately equal to their respective market values. On April 1, 2003, Lou Company sold equipment with a book value of P39,0~00 to 3acil Company for P?3,000. The gain on the sale is included in the income of Lou Company indicated above. The equipment is expected to have a useful life of ve years from the date of sale. Real-med: 03. Compute the consolidated net income for 2003. 09. Compute the net income attributable to equity holders of the parent. 10. Compute the Non-controlling interest in Net Income of Subsidiary for 2003. 11. Compute the Non-controlling interest in Net Assets of Subsidiary on December 31, 2003