ACCOUNTING FOR BUSINESS COMBINATION:

Problem 1

On December 31, 2015, P Company purchased 70 percent of the outstanding shares of S Company at a cost of P423, 250.On that date, S Company had P145, 000 worth of share capital and P362, 500 worth of accumulated profits.

For 2016, P Company had income of P290, 000 from its own operations and paid dividends of P145, 000.S Company, on the other hand reported income of P43, 500 and paid dividends of P29, 000.All assets and liabilities of S Company have book values approximately equal to their market values.

The beginning inventory of P Company includes P8, 000 of merchandise purchased from S Company on December 31, 2015 at 150 percent of cost.The ending inventory of P Company includes P13, 050 worth of merchandise purchased from S Company at the same mark-up. P Company uses the FIFO inventory costing. P Company uses the cost method to account for its investment is S Company.

Required:

Compute the consolidated net income for 2016.

Compute the Non-controlling Interest in Net Income of Subsidiary for 2016.