Acctg-10-Chap15-Probs-3-4

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School

Garcia College of Technology, Kalibo, Aklan**We aren't endorsed by this school

Course

AC AUDITING

Subject

Accounting

Date

Dec 17, 2024

Pages

Uploaded by DeanCapybaraPerson263

ACCOUNTING 10 CHAPTER 15 CONSOLIDATED FINANCIAL STATEMENTS- SUBSEQUENT TO DATE OF ACQUISITION15-3.If a wholly owned subsidiary's CI was ₱150,000 and the subsidiary declared dividends of ₱80,000,and the depreciation and amortization of current fair value excess was ₱20,000, the NCI in CI of subsidiary under the cost method of accounting is:a. ₱ -0- b. ₱ 70,000 c. ₱ 100,000 d. ₱ 130,000 Answer: a. There is no NCI in a wholly owned subsidiary.15-4.On January 2, 2017, Paz Corporation acquired 60% of the outstanding shares of Sin Company for₱500,000. In addition, Paz paid acquisition-related costs of ₱40,000. The book and fair value of these shares was ₱480,000. Any excess of the investment cost over the book value of interest acquired has a maximum life of 20 years. For 2017, Sin Company reported CI of ₱200,000 andpaid dividends of ₱80,000. Under the Cost and Equity Methods, the balance of the Investment in Sin Company stock account on Paz Corporation's books at December 31, 2017 is:Cost MethodEquity Methoda. ₱ 611,000 ₱ 611,000 b. ₱ 571,000 ₱ 660,000 c. ₱ 500,000 ₱ 569,000 d. ₱ 612,000 ₱ 602,000 Solution: Cost MethodEquity MethodOriginal Cost of Acquisition₱ 500,000 ₱ 500,000 * Parent's Share of Subsidiary's Net Income120000** Dividends received from Subsidiary-48,000*** Amortization of Allocated Excess-1,800Investment in Sin Company Stock₱ 500,000 ₱ 570,200 *200,000 x 60%= 120,000**80,000 x 60%= 48,000***Consideration Given (500T + 40T)₱ 540,000 Less: Book Value of Interest Acquired 480,000Excess ₱ 60,000 Excess ₱ 60,000

Multiply: Parent's Share60%Amortization in Allocated Excess₱ 36,000

200,000 - 3000 = 197,000 x 60% = 118,200500,000 + 118,200 - 48,000 = P570,200

Cost MethodThe cost method is a simpler accounting method used when a parent company holds a minorityUnder this method, the investment in the subsidiary is recorded at its original cost on the parent compaEquity MethodThe equity method is used when a parent company has significant influence over a subsidiary (This method reflects the parent company's share of the subsidiary's net income or loss in the padividends, and any other changes in the subsidiary's equity.No adjustments:The investment account is not adjusted for the subsidiary's subsequenDividend income:Dividends received from the subsidiary are recognized as dividend incNo consolidation:The subsidiary's financial statements are not consolidated with the paInvestment adjustment: The investment account is adjusted for the parent company's pEquity income:The parent company recognizes its share of the subsidiary's net incomeConsolidation:The subsidiary's financial statements are consolidated with the parent's,

y interest in a subsidiary (typically less than 20% ownership). any's balance sheet.(typically 20% or more ownership).parent's financial statements.nt earnings, dividends, or changes in fair value.come on the parent company's income statement.arent's.proportionate share of the subsidiary's net income or loss,e as equity income on its income statement.but only the parent's portion of the subsidiary's assets and liabilities are included.