Cost Model Full goodwill 80 Owned Subsidiary x4 First Year after

Cost model full goodwill 80 owned subsidiary x4 first

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Cost Model (Full-goodwill) 80%-Owned Subsidiary
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December 31, 20x4 (First Year after Acquisition) Income Statement P Co S Co. Dr. Cr. Consolidate d Sales P480,000 P240,00 0 P 720,000 Gain on sale of equipment 15,000 31,200 (5) 15,000 (6) 31,200 Dividend income 28,800 - (4) 28,800 _________ Total Revenue P523,800 P271,20 0 P 720,000 Cost of goods sold P204,000 P138,00 0 (3) 6,000 P 348,000 Depreciation expense 60,000 24,000 (3) 6,000 (7) 2,250 (8) 3,900 83,850 Interest expense - - (3) 1,200 1,200 Other expenses 48,000 18,000 66,000 Goodwill impairment loss - - (3) 3,750 3,750 Total Cost and Expenses P312,000 P180,00 0 P 502,800 Net Income P211,800 P 91,200 P 217,200 NCI in Net Income - Subsidiary - - (9) 9,390 ( 9,390) Net Income to Retained Earnings P211,800 P 91,200 P 207,810 Statement of Retained Earnings Retained earnings, 1/1 P Company P360,000 P 360,000 S Company P120,00 0 (1) 120,000 Net income, from above 211,800 91,20 0 207,810 Total P571,800 P211,20 0 P 567,810 Dividends paid P Company 72,000 72,000 S Company - 36,00 0 (4) 36,000 _ ________ Retained earnings, 12/31 to Balance Sheet P499,800 P175,20 0 P 495,810 Balance Sheet Cash………………………. P 232,800 P 90,000 P 322,800 Accounts receivable…….. 90,000 60,000 150,000 Inventory…………………. 120,000 90,000 (2) 6,000 3) 6,000 210,000 Land……………………………. 210,000 48,000 (2) 7,200 265,200 Equipment 240,000 180,000 (5) 30,000 (6) 12,000 462,000
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Buildings 720,000 540,000 (2) 216,000 1,044,000 Discount on bonds payable (2) 4,800 (3) 1,200 3,600 Goodwill…………………… (2) 15,000 (3) 3,750 11,250 Investment in S Co……… 372,000 (1) 288,000 (2) 84,000 - Total P1,984,800 P1,008,0 00 P2,468,850 Accumulated depreciation - equipment P 135,000 P 96,000 (2) 80,000 (7) 2,250 (8) 3,900 (3) 10,000 (5) 45,000 (6) 43,200 P229,050 Accumulated depreciation - buildings 405,000 288,000 (2) 192,000 (3) 6,000 495,000 Accounts payable…………… 105,000 88,800 193,800 Bonds payable………………… 240,000 120,000 360,000 Common stock, P10 par……… 600,000 600,000 Common stock, P10 par……… 240,000 (1) 240,000 Retained earnings, from above 499,800 175,20 0 495,810 Non-controlling interest………… _________ ____ _____ (3) 7,200 _________ _ (1 ) 72,000 (2) 21,000 (9) 9,390 ____95,190 Total P1,984,800 P1,008,0 00 P 843,690 P 843,690 P2,468,850 20x5: Second Year after Acquisition P Co. S Co. Sales P 540,000 P 360,000 Less: Cost of goods sold 216000 192,000 Gross profit P 324,000 P 168,000 Less: Depreciation expense 60,000 24,000 Other expense 72,000 54,000 Net income from its own separate operations P 192,000 P 90,000 Add: Dividend income 38,400 - Net income P 230,400 P 90,000 Dividends paid P 72,000 P 48,000 No goodwill impairment loss for 20x5. Parent Company Cost Model Entry January 1, 20x5 – December 31, 20x5: Cash……………………… 38,400 Dividend income (P48,000 x 80%)……………. 38,400 Record dividends from S Company. On the books of S Company, the P48,000 dividend paid was recorded as follows:
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Dividends paid………… 48,000 Cash 48,000 Dividends paid by S Co.. Consolidation Workpaper – Second Year after Acquisition (E1) Investment in S Company………………………… 44,160 Retained earnings – P Company……………………… 44,160 To provide entry to convert from the cost method to the equity method or the entry to establish reciprocity at the beginning of the year, 1/1/20x5, computed as follows: Retained earnings – S Company, 1/1/20x5 P175,200 Retained earnings – S Company, 1/1/20x4 120,000 Increase in retained earnings…….. P 55,200 Multiplied by: Controlling interest % 80% Retroactive adjustment P 44,160 (E2) Common stock S Co………………………………………… 240,000 Retained earnings – S Co., 1/1/20x5 175,200 Investment in S Co (P415,200 x 80%) ………………………… 332,160 Non-controlling interest (P415,200 x 20%) ………………………..
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