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CONSOLIDATION WORKING PAPER (Cost Method) On January 1, 2012, Polariod Company purchased 20,000 shares of Solar Company in the open market for P370,000. On
CONSOLIDATION WORKING PAPER (Cost Method) On January 1, 2012, Polariod Company purchased 20,000 shares of Solar Company in the open market for P370,000. On that date, the net assets of Solar Company amounted to P400,000 and had book values that approximated their respective fair market values. Goodwill, if any, is to be tested for impairment. Polariod Company uses cost method in recording investment and measures non-controlling interest at its proportionate share on the identifiable net assets (partial goodwill). On December 31, 2015, Solar Company owed Polariod Company P35,000 on open account for purchases made during 2015. The amount of sales to Solar Company during 2015 is P250,000. Polariod Company shipped this merchandise to Solar Company at 250% of its cost. The entire closing inventory of Solar Company was purchased from Polariod Company. The opening inventory of Solar Company included P50,000 of inventory acquired from Polariod Company at the same profit rate. Annual impairment loss on goodwill was consistent at P2,500 from the date of acquisition. Financial statements for the two corporation are presented below. Polariod Co. Solar Co. Income Statement Sales 1,000,000 500,000 Cost of Sales 400,000 300,000 Gross Margin 600,000 200,000 Expenses 390,000 140,000 Operating Income 210,000 60,000 Dividend Income - Subsidiary 24,000 Net Income - Carried Forward 234,000 60,000 Retained Earnings Statement Balance, January 1, 2015 1,367,500 430,000 Net Income Carried Forward 234,000 60,000 Total 1,601,500 490,000 Less Dividends Declared 200,000 30,000 Balance, December 31, 2015 1,401,500 460,000 Statement of Financial Position Cash 150,000 100,000 Accounts Receivable 130,000 100,000 Inventories 200,000 100,000 Land 300,000 Building (net) 200,000 Equipment (net) 651,500 500,000 Investment in Solar Company 370,000 Totals 2,001,500 800,000 Accounts Payable and Accrued Expenses 151,000 90,000 Bonds Payable (face amount P100,000) 49,000 Ordinary Share Capital, P50 par 250,000 Ordinary Share Capital, P10 par 250,000 Additional Paid-in Capital 150,000 Retained Earnings 1,401,500 460,000 Totals 2,001,500 800,000 Requirement: Prepare consolidation working paper for Dec. 31, 2015
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