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Train Company bought 69.56% of the outstanding common shares of Track Company for cash worth P79,882.95 and Train Company common shares. On this date, Train

Train Company bought 69.56% of the outstanding common shares of Track Company for cash worth P79,882.95 and Train Company common shares. On this date, Train Company common shares have a market value of P64.30 a share respectively. Track Company common shares drop to P52.80 per share right after the acquisition. On this date (January 1 2009), Track Company's stockholders' equity consisted of the following: Share Capital (par 25) 973,523.00 Share Premium 720,546.84 Retained Earnings 527,374.47 The book values of , Track Company's assets and liabilities approximate fair value except for the following: Book Value Fair Value Notes Current Assets 1,521,643.38 1,798,034.73 The excess was due to inventory with book value of P100,000. Half was sold in 2010, the rest were deemed obsolete by 2011 and was written off Plant Assets 7,265,317.43 9,246,091.39 The excess was due to two assets: Equiipment with excess of P200,000. It was depreciated using the straightline method for 8 years. Depreciation was always charged to Operating Expenses. Land had an excess of P250,000. The land was subsequently sold to a 3rd party company during 2011. You noted the following details: 1. On January 31 2009, Track Company sold inventory to Train Company. The cost of inventory is P250,000 on a gross margin on cost of 25%. 10% remains in ending inventory. All remaining inventory were sold to 3rd parties by 2010. 2. On June 30 2009, Track Company bought 2,000, P1,000 face value bonds of Peach from the open market at a yield of 10%. The bonds were initially issued at 12% on January 1, 2009. It pays semiannual coupons pegged at 11%. for the next four years every June 30 and December 31. Track Company intends to hold the investment to maturity 3. On December 31, 2010, Train Company sold two pieces of equipment to Track Company with a combined purchase cost of P750,000 for P300,000. It was originally depreciated over 8 years when it was bought on June 30, 2005. Track Company estimates useful life of 5 years from December 31, 2009. 4. During 2010, Train Company sold inventory to Track Company. The intercompany sales were P400,000 on a gross margin of 40%. Only 40% were sold. Three-fourhts of the remaining inventory was sold in 2011. The rest were sold in 2012. 5. During 2010, Track Company sold inventory to Train Company. The intercompany sales were P200,000 on a gross margin on cost of 25%. Only 75% were sold. The rest were sold in 2011. The following shos the financial statements of Train Company and Track Company as of/for the period ending December 31, 2011. What is the Consolidated Financial Statements (except for cash flows) as of/for the period ending December 31, 2011. Train Company Track Company Sales (2,417,249.63) (1,527,215.72) CGS 1,150,274.64 996,957.16 Opex 222,515.75 170,243.83 Int Exp, net 56,404.53 38,419.88 Other exp, net 364,391.10 255,000.00 Net Income (623,663.61) (66,594.86) STATEMENT OF RETAINED EARNINGS Beg RE (1,131,217.59) (855,123.37) Net Income (623,663.61) (66,594.86) Dividends 92,843.19 32,530.56 End RE (1,662,038.02) (889,187.67) Beg NCI Net Income Dividends End NCI BALANCE SHEET Current Assets 2,189,895.72 1,292,648.79 PPE 7,176,379.98 5,625,036.63 Inv in Sub 1,475,864.01 - Other Assets 1,012,029.10 2,970,155.70 GW Total 11,854,168.82 9,887,841.12 Current Liab (878,952.00) (1,492,744.13) Bonds Payable (4,579,489.82) (1,796,994.05) Other NCL (466,868.91) (2,147,452.45) Share Capital (1,302,658.77) (973,523.00) Share Premium (2,132,992.38) (720,546.84) UGL (250,079.34) (100,000.00) RE (2,243,127.60) (2,656,580.65) NCI Total (11,854,168.82) (9,887,841.12)

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