PROFELEC 1 (Review of Advanced Financial Accounting & Reporting)

PRELIM PERIOD - A.Y. 2024-2025

Instr. Mike Glenard F. Cascante

Consolidated Financial Statements - Subsequent to Date of Acquisition

IFRS 10 provides that a parent shall prepare consolidated financial statements using uniform accounting policies
for like transactions and events. If a member of the group uses accounting policies other than those adopted
in the consolidated financial statements for like transactions and events, appropriate adjustments are made to
that group's FS to ensure conformity with the group's accounting policies.

Consolidation of FS subsequent to Date of acquisition is quite similar with the consolidation process on the
date of acquisition, however, not only Statement of Financial Position is consolidated, but also includes
Statement of Comprehensive Income and Retained Earnings statement.

CONSOLIDATION PROCEDURES
a. Combine like items of assets, liabilities, equity, income, expenses and cash flows of the parent with those of
its subsidiaries.
b. Eliminate the carrying amount of the parent's investment in each subsidiary and the parent's portion of equity of
each subsidiary.
c. Eliminate all intercompany assets and liabilities, equity, income, expenses and cashflows.

CONSOLIDATED COMPREHENSIVE INCOME

Consolidated comprehensive income is allocated to non-controlling interests (NCI) and controlling interests
(equity holders of the parent company).

2 Approaches

1. Parent Company Approach - consolidating total enterprise's income that is assigned to the parent
company's stockholders.
For wholly-owned subsidiaries, all income of parent & its subsidiaries accrue to the parent company.

For partially-owned subsidiaries, a portion of its income is allocated to non-controlling shareholders and
is excluded from consolidated net income.
ILLUSTRATION:
Assume that P Company owns 80% of the stock of S company which was purchased at book value. In 2020,
S Company reported comprehensive income of P50,000.00 while P company reported comprehensive income
of P120,000.00 including dividend income from S company of P20,000.00. Consolidated comprehensive income
for 2020 is computed as follows:

S Company Income from own operations 50,000.00

Multiply by Controlling Interest 80%
Share in Subsidiary net income from own operations 40,000.00

P Company comprehensive income 120,000.00

Dividend Income - 20,000.00
Comprehensive income from own operations 100,000.00
Add: Share in Subsidiary net income from own operations* 40,000.00
Consolidated comprehensive income 140,000.00

2. Entity Approach - Consolidated CI of wholly-owned subsidiary is the same with the first approach. If a
subsidiary is partially-owned by the parent, the portion of its income accruing to NCI is included in the
consolidated comprehensive income.

Consolidated CI equals total earnings of all companies consolidated, less any income recorded by the parent from the
consolidating companies.

Using the same data above:

P Company comprehensive income 120,000.00

Dividend Income - 20,000.00
Comprehensive income from own operations 100,000.00
S company comprehensive income from own operation 50,000.00
Total 150,000.00
Less: NCI comprehensive income (P50,000.00*20%) 10,000.00
Consolidated comprehensive income 140,000.00

ACCOUNTING FOR INVESTMENT IN A SUBSIDIARY

IAS 27 provides provides that in the separate financial statements of an entity who have investment in
subsidiaries, it may elect to account for its investments either:

1. Cost method - used when the acquirer/parent owns directly or indirectly more than half of the voting power
of the acquiree/subsidiary, thereby exercising control.
This method is the most commonly used in practice where Income on the investment is limited to dividends from the
subsidiary.

2. Fair Value method - this method requires a parent that is an investment entity to measure its investments
in particular subsidiaries at fair value through profit or loss in accordance with IFRS 9/IAS 39 without consolidating
those subsidiaries in its consolidated and separate financial statements.
Investment entity is defined as an entity that:
 -obtains funds from one or more investors for the purpose of providing those investors with
investment management services.
-commits to investors that its business purpose is purely to invest funds only (returns from capital appreciation
and investment income)
-measures and evaluates the performance of sbustantially all of its investments on a fair value basis.

3. Equity method - used when the investor/acquirer owns 20% or more but not more than 50% of the voting power
of the investee/acquiree, thereby exercising significant influence over the operations of the investee.

CONSOLIDATION: WHOLLY OWNED SUBSIDIARY - Acquisition at Book Value

FIRST YEAR AFTER ACQUISITION

Assume that on January 2, 2020, Peter Corporation acquires all the stockholders' equity of Saber Company for
P300,000.00 At that time, Saber company has P200,000.00 of common stock outstanding and retained earnings
of P100,000.00. Analysis of the acquisition is as follows:

Price paid 300,000.00

Less: book value of interest acquired (100%)
Common stock 200,000.00
Retained earnings 100,000.00 300,000.00
Excess -

On December 31, 2020, Saber Company reported the following results of its operations:

Net Income 50,000.00

Dividends paid 30,000.00

Parent Company Entries

Using the cost method, Pete Corporation would make the following entries:

Jan. 2 Investment in Saber 300,000.00

Company Cash 300,000.00
To record the purchase of Saber Company stock.

Dec. 31 Cash 30,000.00

Dividend income 30,000.00
 To record the purchase of Saber Company stock.
Account balances related to Investment in Saber Company

Investment in Saber Company 300,000.00

Dividend income 30,000.00

Working Paper Elimination Entries:

1. Eliminate Dividend income account of Peter Corporation against Dividend declared account
of Saber Company.
2. Eliminate parent's Investment account in the subsidiary's stockholders equity at date of acquisition
against Investment account.

Working Paper Elimination Entries

E1 Dividend income 30,000.00

Dividend declared 30,000.00
To eliminate intercompany dividends

E2 Common stock 200,000.00

Retained earnings 100,000.00
Investment in Saber Company 300,000.00
To eliminate investment and equity accounts at the date
of acquisition

CONSOLIDATION WORKING PAPER - FIRST YEAR

Peter Corporation and Subsidiary

Working Paper for Consolidated Financial Statements
Year Ended December 31, 2020 - First Year

Peter Saber Eliminations Consolidated

Corporation Company Debit Credit FS
Statement of CI
Sales 400,000.00 200,000.00 600,000.00
Dividend income 30,000.00 30,000.00 -
Total revenue 430,000.00 200,000.00 600,000.00

Cost of goods sold 170,000.00 115,000.00 285,000.00

Operating expenses 50,000.00 20,000.00 70,000.00
Other expenses 40,000.00 15,000.00 55,000.00
Total costs and expenses 260,000.00 150,000.00 410,000.00
CI, carried forward 170,000.00 50,000.00 190,000.00

Statement of Retained Earnings

Retained earnings, January 1
Peter Corporation 300,000.00 300,000.00
Saber Company 100,000.00 100,000.00 -
CI from above 170,000.00 50,000.00 190,000.00
Total 470,000.00 150,000.00 490,000.00

Dividends declared
Peter Corporation - 60,000.00 - 60,000.00
Saber Company - 30,000.00 30,000.00 -
Retained earnings, December 31
Carried forward 410,000.00 120,000.00 430,000.00

Statement of FP
Cash 210,000.00 75,000.00 285,000.00
Accounts Receivable 75,000.00 50,000.00 125,000.00
Inventory 100,000.00 75,000.00 175,000.00
Property and Equipment 525,000.00 320,000.00 845,000.00
Investment in Saber Company 300,000.00 - 300,000.00 -
Total Assets 1,210,000.00 520,000.00 1,430,000.00

Accounts payable 100,000.00 100,000.00 200,000.00

Bonds payable 200,000.00 100,000.00 300,000.00
Common stock:
Peter Corporation 500,000.00 500,000.00
Saber Company 200,000.00 200,000.00 -
Retained earnings, from above 410,000.00 120,000.00 430,000.00
Total liabilities and equity 1,210,000.00 520,000.00 330,000.00 330,000.00 1,430,000.00

Shortcut Computation of Consolidated CI and Retained Earnings

Consolidated CI
Peter Corporation CI 170,000.00
Saber Company CI 50,000.00
Dividend Income - 30,000.00
Consolidated CI 190,000.00

Consolidated Retained earnings

Retained Earnings, Peter Corporation, Dec 31 410,000.00
Share in Net increase of Saber's RE)
[P50,000-30,000)*100%] 20,000.00
Consolidated Retained earnings 430,000.00

Consolidated Retained earnings

Retained Earnings, Peter Corporation, Jan 1 300,000.00
Net Income 170,000.00
Dividend Income - 30,000.00
Dividend declared - 60,000.00
Share in Net Income of Saber Company
(P50,000*100%) 50,000.00
Consolidated Retained earnings 430,000.00

Peter Corporation and Subsidiary

Consolidated Statement of Comprehensive Income and Retained Earnings
Year Ended December 31, 2020

Sales 600,000.00
Cost and expenses:
Cost of goods sold 285,000.00
Operating expenses 70,000.00
Other expenses 55,000.00 410,000.00
Consolidated CI 190,000.00
Retained Earnings, January 1 - Peter Corporation 300,000.00
Total 490,000.00
Dividends paid - Peter Corporation 60,000.00
Consolidated Retained Earnings, December 31 430,000.00
Peter Corporation and Subsidiary
Consolidated Statement of Financial
Position Year Ended December 31, 2020
Assets
Current Assets
Cash 285,000.00
Accounts receivable 125,000.00
Inventory 175,000.00
Total current assets 585,000.00
Property and equipment 845,000.00
Total Assets 1,430,000.00

Liabilities and Stockholders' Equity

Liabilities
Accounts payable 200,000.00
Bonds payable 300,000.00
Total liabilities 500,000.00
Stockholders' Equity
Common stock 500,000.00
Retained earnings 430,000.00 930,000.00
Total liabilities and stockholders' equity 1,430,000.00

SECOND AND SUBSEQUENT YEARS AFTER ACQUISITION

Consolidation procedures at the end of the second year and in periods thereafter are basically the same
as those used in the first year. Each year's consolidation procedures begin as if there had never been a previous
consolidation.

Assuming the same data above and two years after combination, on December 31, 2021, Saber Company
reported net income of P75,000 and paid dividends of P40,000.

Parent Company Entries - dividend received by Peter from Saber

Cash 40,000.00
Dividend income 40,000.00
To record dividends received from Saber

Account balances related to Investment in Saber Company on December 31, 2021

Investment in Saber Company (at original cost) 300,000.00
Dividend income 40,000.00

Working Paper Elimination Entries

E1 Dividend income 40,000.00

Dividend declared 40,000.00
To eliminate intercompany dividends

E2 Common stock 200,000.00

Retained earnings 100,000.00
Investment in Saber Company 300,000.00
To eliminate investment and equity accounts at the date
of acquisition

CONSOLIDATION WORKING PAPER - SECOND YEAR

Peter Corporation and Subsidiary

Working Paper for Consolidated Financial Statements
Year Ended December 31, 2021 - Second Year

Peter Saber Eliminations Consolidated

Corporation Company Debit Credit FS
Statement of CI
Sales 450,000.00 300,000.00 750,000.00
Dividend income 40,000.00 40,000.00 -
Total revenue 490,000.00 300,000.00 750,000.00
Cost of goods sold 180,000.00 160,000.00 340,000.00
Operating expenses 50,000.00 20,000.00 70,000.00
Other expenses 60,000.00 45,000.00 105,000.00
Total costs and expenses 290,000.00 225,000.00 515,000.00
CI, carried forward 200,000.00 75,000.00 235,000.00
Statement of Retained Earnings
Retained earnings, January
1 Peter Corporation 430,000.00 430,000.00
Saber Company 120,000.00 100,000.00 20,000.00
CI from above 200,000.00 75,000.00 235,000.00
Total 630,000.00 195,000.00 685,000.00

Dividends declared
Peter Corporation - 60,000.00 - 60,000.00
Saber Company - 40,000.00 40,000.00 -
Retained earnings, December 31
Carried forward 570,000.00 155,000.00 625,000.00

Statement of FP
Cash 265,000.00 85,000.00 350,000.00
Accounts Receivable 150,000.00 80,000.00 230,000.00
Inventory 180,000.00 90,000.00 270,000.00
Property and Equipment 475,000.00 300,000.00 775,000.00
Investment in Saber Company 300,000.00 - 300,000.00 -
Total Assets 1,370,000.00 555,000.00 1,625,000.00

Accounts payable 100,000.00 100,000.00 200,000.00

Bonds payable 200,000.00 100,000.00 300,000.00
Common stock:
Peter Corporation 500,000.00 500,000.00
Saber Company 200,000.00 200,000.00 -
Retained earnings, from above 570,000.00 155,000.00 625,000.00
Total liabilities and equity 1,370,000.00 555,000.00 340,000.00 340,000.00 1,625,000.00

Retained earnings of P100,000.00 is closed because this was he original balance on the date of acquisition. The remaining 20,000
shall be part of the consolidated retained earnings as Peter's share in the net increase of Saber's RE in the year ended
December 2020.

CONSOLIDATION: PARTIALLY OWNED SUBSIDIARY - Acquisition at Book Value

FIRST YEAR AFTER ACQUISITION

Assume that on January 2, 2020, Peter Corporation purchases 80% of the common stock of Saber Company
for P240,000.00. All other data are the same as those used in the previous example. The following D&A schedule
was prepared on the date of acquisition:

Parent NCI at FV/Implied value

Total Price (80%) (20%)
Fair value of subsidiary 300,000.00 240,000.00 60,000.00
Less book value of interest acquired
 Common stock - S Company 200,000.00
Retained earnings - S Company 100,000.00
Total 300,000.00 300,000.00 300,000.00
Interest acquired 80% 20%
Book Value 240,000.00 60,000.00
Excess - - -

Peter Corporation would record its investment in Saber Company stock, and the receipt of dividends
from Saber Company as follows:

2020
Jan. 2 Investment in Saber Company 240,000.00
Cash 240,000.00
To record the purchase of Saber Company stock.

Dec. 31 Cash 24,000.00

Dividend income 24,000.00
To record the purchase of Saber Company stock.

Account balances related to Investment in Saber Company

Investment in Saber Company 240,000.00

Dividend income 24,000.00

Working Paper Elimination Entries

E1 Dividend income (80%) 24,000.00

NCI (20%) 6,000.00
Dividend declared 30,000.00
To eliminate intercompany dividends

E2 Common stock 200,000.00

Retained earnings 100,000.00
Investment in Saber Company 240,000.00
NCI 60,000.00
To eliminate investment and equity accounts at the date
of acquisition and establish minority interest in net assets of
subsidiary.

E3 NCI in CI of 10,000.00
subsidiary NCI 10,000.00
 To recognize NCI in subsidiary's net income
for the year 2020. (P50,000*20%)

Peter Corporation and Subsidiary

Working Paper for Consolidated Financial Statements
Year Ended December 31, 2020 - First Year

Peter Saber Eliminations Consolidated

Corporation Company Debit Credit FS
Statement of CI
Sales 400,000.00 200,000.00 600,000.00
Dividend income 24,000.00 24,000.00 -
Total revenue 424,000.00 200,000.00 600,000.00
Cost of goods sold 170,000.00 115,000.00 285,000.00
Operating expenses 50,000.00 20,000.00 70,000.00
Other expenses 40,000.00 15,000.00 55,000.00
Total costs and expenses 260,000.00 150,000.00 410,000.00
Net/consolidated income 164,000.00 50,000.00 190,000.00
NCI in CI of subsidiary 10,000.00 - 10,000.00
CI to RE 164,000.00 50,000.00 180,000.00

Statement of Retained Earnings

Retained earnings, January 1
Peter Corporation 300,000.00 300,000.00
Saber Company 100,000.00 100,000.00 -
CI from above 164,000.00 50,000.00 180,000.00
Total 464,000.00 150,000.00 480,000.00

Dividends declared
Peter Corporation - 60,000.00 - 60,000.00
Saber Company - 30,000.00 30,000.00 -
Retained earnings, December 31
Carried forward 404,000.00 120,000.00 420,000.00

Statement of FP
Cash 264,000.00 75,000.00 339,000.00
Accounts Receivable 75,000.00 50,000.00 125,000.00
Inventory 100,000.00 75,000.00 175,000.00
Property and Equipment 525,000.00 320,000.00 845,000.00
Investment in Saber Company 240,000.00 - 240,000.00 -
Total Assets 1,204,000.00 520,000.00 1,484,000.00

Accounts payable 100,000.00 100,000.00 200,000.00

Bonds payable 200,000.00 100,000.00 300,000.00
Common stock:
Peter Corporation 500,000.00 500,000.00
Saber Company 200,000.00 200,000.00 -
Retained earnings, from above 404,000.00 120,000.00 420,000.00

NCI 60,000.00
6,000.00 10,000.00 64,000.00
Total liabilities and equity 1,204,000.00 520,000.00 340,000.00 340,000.00 1,484,000.00

SHORT-CUT COMPUTATIONS

NCI

Net assets at book value, 1/2/2020 - S Company 300,000.00

Increase in earnings, 2020
Net income 50,000.00
Dividends paid - 30,000.00 20,000.00
Net assets at fair value, 12/31/2020 - S Company 320,000.00

NCI share (P320,000.00*20%) 64,000.00

Consolidated CI

Peter Corporation CI 164,000.00

Saber Company CI 50,000.00
Dividend Income - 24,000.00
Consolidated CI 190,000.00

The CI carried forward to the consolidated retained earnings is the CI attributable to parent(P190,000-10,000)

NET INCOME ATTRIBUTABLE TO PARENT

Peter Corporation CI 164,000.00

Dividend Income - 24,000.00
Peter's share in CI of Subsidiary 40,000.00
Net Income Attributable to Parent 180,000.00

Consolidated RE

Peter Corporations retained earnings, Dec 31 404,000.00

Peter's share in net increase in Saber's retained earnings
[(P50,000-30,000)*80%] 16,000.00
Consolidated RE 420,000.00

Consolidated RE (Alternate)
Peter Corporations retained earnings, Jan 1 300,000.00
Net Income attributable to Parent (NIAP) 180,000.00
Dividends declared - Parent/Peter - 60,000.00
Consolidated RE 420,000.00

CONSOLIDATION: PARTIALLY-OWNED SUBSIDIARY- Acquisition at other than book value

Consolidation procedures
1. Eliminate intercompany dividiends and recognize NCI share of subisidiary's dividends declared
2. Eliminate equity accounts of subsidiary at date of acquistion against Investment account and NCI
3. Allocate excess to the specific assets and liabilities of the subsidiary.
4. Amortize the allocated excess except goodwill
5. Assign income of subsidiary to NCI.

FIRST YEAR AFTER COMBINATION

Assume that on January 2, 2020, Peter Corporation purchases 80% of the common stock of Saber Company
for P300,000.00. Assume further that on the date of combination, all assets and liabilities of Sake Company have
fair market values equal to their book values, except for the following:
Book Fair (Under) Over-
Value Value valuation
Inventory 60,000.00 65,000.00 - 5,000.00
Property and equipment 300,000.00 360,000.00 - 60,000.00
 360,000.00 425,000.00 - 65,000.00

D&A SCHEDULE
Parent NCI at FV
Total Price (80%) (20%)
Fair value of subsidiary 375,000.00 300,000.00 75,000.00
Less book value of interest acquired
Common stock - S Company 200,000.00
Retained earnings - S Company 100,000.00
Total 300,000.00 300,000.00 300,000.00
Interest acquired 80% 20%
Book Value 240,000.00 60,000.00
Excess 75,000.00 60,000.00 15,000.00
Allocations (adjustments)
Inventory - 5,000.00
Property and equipment - 60,000.00
Total - 65,000.00
Goodwill 10,000.00

For the first year immediately after the acqusition, Saber Company reported the following:

Comprehensive income 50,000.00

Dividends Paid 30,000.00

Peter Corporation would record its investment in Saber Company stock, and the receipt of dividends
from Saber Company as follows:

2020
Jan. 2 Investment in Saber Company 300,000.00
Cash 300,000.00
To record the purchase of Saber Company stock.

Dec. 31 Cash 24,000.00

Dividend income 24,000.00
To record the purchase of Saber Company stock.
(P30,000.00*80%)
Amortization of Allocated Excess
Allocated Amortization
Excess 2020 2021 onwards
Inventory 5,000.00 5,000.00 -
Property and equipment 60,000.00 6,000.00 6,000.00
Goodwill 10,000.00 - -
Total 75,000.00 11,000.00 6,000.00

Working Paper Elimination Entries - First Year

E1 Dividend income (80%) 24,000.00

NCI (20%) 6,000.00
Dividend declared 30,000.00
To eliminate intercompany dividends

E2 Common stock 200,000.00

Retained earnings 100,000.00
Investment in Saber Company 240,000.00
NCI 60,000.00
To eliminate investment and equity accounts at the date
of acquisition and establish minority interest in net assets of
subsidiary.

E3 Inventory 5,000.00
Property and equipment 60,000.00
Goodwill 10,000.00
Investment in Saber Company 60,000.00
NCI 15,000.00
To allocate excess between investment cost
and book value of identifiable assets acquired
with remainder to goodwill

E4 Cost of goods sold 5,000.00

Operating expenses 6,000.00
Inventory 5,000.00
Property and equipment 6,000.00
To amortize allocated excess to identiable assets

E5 NCI in CI of subsidiary 7,800.00

NCI 7,800.00
To recognize NCI in subsidiary's net income
for the year 2020
 CI from subsidiary 50,000.00
Amortization per E4 11,000.00
Adjusted CI of subsidiary 39,000.00

NCI share (P39,000*20%) 7,800.00

Peter Corporation and Subsidiary

Working Paper for Consolidated Financial Statements
Year Ended December 31, 2020 - First Year

Peter Saber Eliminations Consolidated

Corporation Company Debit Credit FS
Statement of CI
Sales 400,000.00 200,000.00 600,000.00
Dividend income 24,000.00 24,000.00 -
Total revenue 424,000.00 200,000.00 600,000.00
Cost of goods sold 170,000.00 115,000.00 5,000.00 290,000.00
Operating expenses 50,000.00 20,000.00 6,000.00 76,000.00
Other expenses 40,000.00 15,000.00 55,000.00
Total costs and expenses 260,000.00 150,000.00 421,000.00
Net/consolidated income 164,000.00 50,000.00 179,000.00
NCI in CI of subsidiary 7,800.00 - 7,800.00
CI to RE 164,000.00 50,000.00 171,200.00

Statement of Retained Earnings

Retained earnings, January 1
Peter Corporation 300,000.00 300,000.00
Saber Company 100,000.00 100,000.00 -
CI from above 164,000.00 50,000.00 171,200.00
Total 464,000.00 150,000.00 471,200.00

Dividends declared
Peter Corporation - 60,000.00 - 60,000.00
Saber Company - 30,000.00 30,000.00 -
Retained earnings, December 31
Carried forward 404,000.00 120,000.00 411,200.00

Statement of FP
Cash 204,000.00 75,000.00 279,000.00
Accounts Receivable 75,000.00 50,000.00 125,000.00

Inventory 100,000.00 75,000.00 5,000.00 5,000.00 175,000.00

Property and Equipment 525,000.00 320,000.00 60,000.00 6,000.00 899,000.00
Investment in Saber Company 300,000.00 - 240,000.00 -
60,000.00
Goodwill 10,000.00 10,000.00
Total Assets 1,204,000.00 520,000.00 1,488,000.00

Accounts payable 100,000.00 100,000.00 200,000.00

Bonds payable 200,000.00 100,000.00 300,000.00
Common stock:
Peter Corporation 500,000.00 500,000.00
Saber Company 200,000.00 200,000.00 -
Retained earnings, from above 404,000.00 120,000.00 411,200.00

NCI 6,000.00 60,000.00

15,000.00
7,800.00 76,800.00
Total liabilities and equity 1,204,000.00 520,000.00 423,800.00 423,800.00 1,488,000.00

SHORT-CUT COMPUTATIONS

Total Asset-P 1,204,000.00

Total Asset-S 520,000.00
Investment - 300,000.00
Allocation of excess 65,000.00
Amortization - 11,000.00
Goodwill 10,000.00
Conso TA 1,488,000.00

NCI

Net assets at book value, 1/2/2020 - S Company 300,000.00

Increase in earnings, 2020
Net income 50,000.00
Dividends paid - 30,000.00 20,000.00
Net assets at book value, 12/31/2020 - S Company 320,000.00
Add unamortized excess (75,000-11,000) 64,000.00
Net assets at fair value, 12/31/2020 - S Company 384,000.00

NCI share (P384,000.00*20%) 76,800.00

Consolidated CI

Peter Corporation CI 164,000.00

Saber Company CI 50,000.00
Dividend Income - 24,000.00
Amortization of excess - 11,000.00
Consolidated CI 179,000.00

The CI carried forward to the consolidated retained earnings is the CI attributable to parent(P179,000-7,800)

NET INCOME ATTRIBUTABLE TO PARENT

Peter Corporation CI 164,000.00

Dividend Income - 24,000.00
Peter's share in CI of Subsidiary 40,000.00
Peter's share in Unamortized excess - 8,800.00 (P11,000*80%)
Net Income Attributable to Parent 171,200.00

Consolidated RE

Peter Corporations retained earnings, Dec 31 404,000.00

Peter's share in net increase in Saber's retained earnings
[(P50,000-30,000)*80%] 16,000.00
Peter's share in Unamortized excess (P11,000*80%) - 8,800.00
Consolidated RE 411,200.00

Consolidated RE (Alternative computation)

Peter Corporations retained earnings, Jan 1 300,000.00
Net Income attributable to Parent (NIAP) 171,200.00
Dividends declared - Parent/Peter - 60,000.00
Consolidated RE 411,200.00

SECOND AND SUBSEQUENT YEARS AFTER ACQUISITION

Consolidation procedures at the end of the second year and in periods thereafter are basically the same
as those used in the first year. Each year's consolidation procedures begin as if there had never been a previous
consolidation.

Assuming the same data above and two years after combination, on December 31, 2021, Saber Company
reported net income of P75,000 and paid dividends of P40,000.

Parent Company Entries - dividend received by Peter from Saber

Cash 32,000.00
Dividend income 32,000.00
To record dividends received from Saber
(P40,000.00*80%)

Account balances related to Investment in Saber Company on December 31,

2021
Investment in Saber Company (at original cost) 300,000.00
Dividend income 32,000.00

Working Paper Elimination Entries - First Year

E1 Dividend income (80%) 32,000.00

NCI (20%) 8,000.00
Dividend declared 40,000.00
To eliminate intercompany dividends

E2 Common stock 200,000.00

Retained earnings 100,000.00
Investment in Saber Company 240,000.00
NCI 60,000.00
To eliminate investment and equity accounts at the date
of acquisition and establish minority interest in net assets of
subsidiary.

E3 Inventory 5,000.00
Property and equipment 60,000.00
Goodwill 10,000.00
Investment in Saber Company 60,000.00
NCI 15,000.00
To allocate excess between investment cost
and book value of identifiable assets acquired
with remainder to goodiwll
E4 Retained Earnings - Saber, Jan 1 1,800.00
 NCI 1,800.00
To assign the NCI their share of the increase in
the subsidiary's adjusted undistributed earnings that occurred
between the acquisition date and the beginning of the current
period, computed as follows:

Retained earnings-S Company, Jan 1, 2021 120,000.00

Retained earnings-S Company, Jan 1, 2020 - 100,000.00
Increase in arnings - prior year 20,000.00
Amortization of allocated excess in prior years - 11,000.00
Adjusted undistributed earnings 9,000.00

Assignable to NCI (P9,000*20%) 1,800.00

E5 Retained earnings-S Company 11,000.00

Operating expenses 6,000.00
Inventory 5,000.00
Property and equipment 12,000.00
To amortize allocated excess to iidentiable assets

E6 NCI in CI of subsidiary 13,800.00

NCI 13,800.00
To recognize NCI in subsidiary's net income
for the year 2021
(P75,000-6,000)*20%

CONSOLIDATION WORKING PAPER - SECOND YEAR

Peter Corporation and Subsidiary

Working Paper for Consolidated Financial Statements
Year Ended December 31, 2021 - Second Year

Peter Saber Eliminations Consolidated

Corporation Company Debit Credit FS
Statement of CI
Sales 450,000.00 300,000.00 750,000.00
Dividend income 32,000.00 32,000.00 -
Total revenue 482,000.00 300,000.00 750,000.00
Cost of goods sold 180,000.00 160,000.00 340,000.00
Operating expenses 50,000.00 20,000.00 6,000.00 76,000.00
Other expenses 60,000.00 45,000.00 105,000.00
Total costs and expenses 290,000.00 225,000.00 229,000.00
Net/consolidated income 192,000.00 75,000.00
NCI in CI of subsidiary 13,800.00 - 13,800.00
CI to RE 192,000.00 75,000.00 215,200.00

Statement of Retained Earnings

Retained earnings, January 1
Peter Corporation 404,000.00 404,000.00
Saber Company 120,000.00 100,000.00 7,200.00
1,800.00
11,000.00
CI from above 192,000.00 75,000.00 215,200.00
Total 596,000.00 195,000.00 626,400.00

Dividends declared
Peter Corporation - 60,000.00 - 60,000.00
Saber Company - 40,000.00 40,000.00 -
Retained earnings, December 31
Carried forward 536,000.00 155,000.00 566,400.00

Statement of FP
Cash 231,000.00 85,000.00 316,000.00
Accounts Receivable 150,000.00 80,000.00 230,000.00
Inventory 180,000.00 90,000.00 5,000.00 5,000.00 270,000.00
Property and Equipment 475,000.00 300,000.00 60,000.00 12,000.00 823,000.00
Investment in Saber Company 300,000.00 - 240,000.00 -
60,000.00
Goodwill 10,000.00 10,000.00
Total Assets 1,336,000.00 555,000.00 1,649,000.00

Accounts payable 100,000.00 100,000.00 200,000.00

Bonds payable 200,000.00 100,000.00 300,000.00
Common stock:
Peter Corporation 500,000.00 500,000.00
Saber Company 200,000.00 200,000.00 -
Retained earnings, from above 536,000.00 155,000.00 566,400.00

NCI 8,000.00 60,000.00

15,000.00
1,800.00
 13,800.00 82,600.00
Total liabilities and equity 1,336,000.00 555,000.00 447,600.00 447,600.00 1,649,000.00