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  Chap 15 EXERCISES 1.Paradise Corporation acquired on January 1, 80% Seaside shares and paid P26,000,000 when Seaside's shareholders'equity consisted of P20,000,000 share capital and P10,000,000 retained earnings.Seaside reported net income of P1,000,000 for the year 2010 and paid dividends of P600,000 on December 1.Required: a) Prepare journal entries, in parallel column, to record the above transactions using two methods: equityand cost. Determine the balance of the investment account as at the end of 2010. b) In parallel column, prepare the necessary working paper adjustment and elimination entries for consolidation purposes.2. Refer to no. 1. To continue, assume that for 2011 Seaside reported net income of P500,000 and paid dividends onDecember 1 in the amount of P600,000.Required:a) In parallel column, using the equity and cost methods, prepare journal entries to update the investmentaccount. Determine its balance as at the end of the year.  b) In parallel column, prepare the adjustment and elimination entries for consolidation purposes.3.On January 1, 2013, Davao Corporation purchased 60% of the share capital of Cebu Corporation for P480,000. OnDecember 31, 2013, their trial balances are as follows:DavaoCebuCashP 70,000P 50,000Accounts Receivable140,000160,000Dividends Receivable30,000Advances to Cebu40,000Inventory-January 1150,00080,000Investment in Cebu Company480,000Other Assets570,000480,000Dividends100,00050,000Purchases900,000200,000Expenses 100,000 80,000 P2,580,000 P1,100,000Accounts Payable50,00010,000Dividends Payable50,000Advances from Davao40,000Other Liabilities50,000Share Capital (par, P100)1,000,000500,000Retained Earnings400,000100,000Sales1,050,000400,000Dividend Income 30,000________ P 2,580,000P1,100,000Inventory-December 31P 200,000P 100,000  Davao uses the cost method of accounting for its investment in Cebu.Required: Prepare a working paper for consolidated financial statements on December 31, 2013. Support with a tablefor determination and allocation of excess. 4. On January 1, 2013 Davao Corporation purchased 60% of the capital stock of Cebu Corporation for P480,000. OnDecember 31, 2013 their trial balances are as follows:DavaoCebuCash P 70,000P 50,000Accounts Receivable140,000160,000Dividends Receivable 30,000Advances to Cebu40,000Inventory-Jan. 1 150,00080,000Investment In Stocks 534,000Other Assets 570,000480,000Dividends100,00050,000Purchases900,000200,000Expenses 100,000 80,000P2,634,000P1,100,000Accounts PayableP 50,000P 10,000Dividends Payable50,000Other Liabilities50,000Advances from Davao40,000Share Capital (Par P100)1,000,000500,000Retained Earnings400,000100,000Sales1,050,000400,000Income from Subsidiary 84,000______ P2,634,000P1,100,000Inventory, December 31P 200,000P 100,000Required: a) Prove the Investment balance of P534,000. b) Prepare a working paper for consolidation on December 31, 2013.5. On January 1, 2014 Pan Corporation purchased 70% interest in Set Corporation for P1,150,000, when its share capitaland retained earnings were P600,000 and P400,000, respectively. The assets and liabilities of Set Company are fairlyvalued except for the plant and equipment which has a book value of P1,000,000 and a market value of P1,500,000(with a remaining life of 10 years) and the inventories which has a book value of P250,000 and a market value of P220,000.Pan reported net income of P800,000 and dividends on November 30 in the amount of P400,000. Set reported netincome for 2014 of P500,000 and dividends paid on December 1 of P250,000.Required:a)Entries in the books of Pan Corporation to record the above transactions using the cost method.  b)Working paper adjusting and eliminating entries on December 31, 2014. Support with a table for determination and allocation of excess.c)Compute for the non-controlling interest as at December 31.d)Compute for consolidated net income. b)Prepare a schedule of consolidated retained earnings for 2014. Pan Corporation's retained earnings as of January 1, 2014 was P1,500,000.  6.Refer to exercise 5. Assume that they reported the following on December 31, 2015: Pan Set  Net Income P900,000P600,000Dividends500,000300,000Required: Same requirements as in exercise 5 except a. For b) prepare a table for adjustments only. 7.Repeat Exercises 5 and 6 using the equity method. Same requirements . One presenter each year.8.On January 1, 2014, Palo Towers purchased 24,000 shares of Swiss Corporation by issuing 9,450 of its commonshares with a market value of P80. Registration of stocks and stock certificates paid amounted to P25,000. BusinessCombination expenses paid amounted to P75,000. On that date, the assets and liabilities of Sister have market valuesdifferent from the book values as follows:Book ValueMarket ValueInventories P 40,000P 30,000Building 250,000230,000Patents40,00090,000Land 150,000 200,000 The building has a remaining life of 5 years, the useful life of the patents is 10 years and the company is using theFIFO method for the inventory. Trial balances at the end of 2014 are as follows:PaloSwissCashP 200,000P 50,000Accounts Receivable150,00050,000Inventories100,00060,000Land150,000Building360,000Equipment700,000490,000Patents40,000Investment in Stocks of Swiss843,200Cost of Sales400,000150,000Expenses (including business combination exp) 360,000200,000Dividends 100,000 50,000Total DebtsP2,853,200P1,600,000LiabilitiesP 124,000P 250,000Accumulated Depreciation - Building.90,000Accumulated Depreciation - Equipment402,00060,000Share Capital, par 50 and 10200,000 300,000Share Premium400,000Retained Earnings600,000400,000Sales1,000,000500,000Income from Subsidiary 127,200_______ Total CreditsP2,853,200P1,600,000Required: a. Prove the investment balance and the income from subsidiary balance. b.Prepare the adjustment and elimination entries. Support with a table.c.Prepare the working paper for consolidation.   9. Refer to Exercise 8. Assume that on December 31, 2015 the trial balances for the two entities showed: Palo Swiss CashP 233,000P 48,000Accounts Receivable240,00025,000Inventories150,00080,000Land150,000Building260,000Equipment800,000633,000Patent45,000Investment in Stocks of Swiss.952,800Cost of Sales500,000250,000Expenses400,000252,000Dividends 150,000 60,000Total DebitsP3,425,800P1,803,000LiabilitiesP 150,000P 140,000Accumulated Depreciation-Building73,000Accumulated Depreciation-Equipment451,00090,000Common Stock, par P50200,000 par P10300,000Additional Paid In Capital400,000Retained Earnings867,200500,000Sales1,200,000700,000Income from Subsidiary 157,600_______ Total CreditsP3,425,800P1,803,000Required: same requirements as in Exercise 8.10. Peer International paid P180,000 for a 90% interest in Seer Co on January 2, 2015 when Seer's share capital wasP150,000 and its retained earnings was P80,000. Equipment, net included in other assets was revalued for P20,000 to be depreciated using 5 years. Their trial balances at the end of the year appears below:PeterSimonCashP 22,000P 60,000Receivables33,00050,000Other Assets218,000200,000Investment in Simon180,000Cost of Goods Sold100,00060,000Expenses50,00080,000Dividends40,00020,000Liabilities(160,000)( 60,000)Capital Stock(200,000)(150,000)APIC( 20,000)-Retained Earnings( 45,000)( 80,000)Sales(200,000)(180,000)Dividend Income( 18,000) - 0 0 Required: a) Prepare a table for determination and allocation of excess. b)Prepare the working paper entries.c)Prepare a consolidated income statement for the year 2015. Prove theconsolidated net income by computing for income from subsidiary.d)Compute for consolidated retained earnings.e)Compute for non-controlling interest.
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