Common stock Subsidiary Company y2 P 1200000 Retained earnings

Common stock subsidiary company y2 p 1200000 retained

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Common stock – Subsidiary Company, December 31, 20y2…… P 1,200,000 Retained earnings – Subsidiary Company, December 31, 20y2 Retained earnings – Subsidiary Company, January 1, 20y2 P1,040,0 00 Add: Net income of subsidiary for 20y2 135,00 0 Total P1,175,0 00 Less: Dividends paid – 20y2 100,00 0 1,075,00 0 Stockholders’ equity – Subsidiary Company, December 31, 20x5 P 2,275,200 Adjustments to reflect fair value - (over) undervaluation of assets and liabilities, date of acquisition (January 1, 20x4) 0 Amortization of allocated excess (refer to amortization above) : 0 Fair value of stockholders’ equity of subsidiary, December 31, 20x5…… P2,275,200 Less: Upstream - net unrealized gain on sale of equipment – prior to 12/31/20y2 _____)0 Realized stockholders’ equity of subsidiary, December 31, 20x5………. P 2,275,00 Multiplied by: Non-controlling Interest percentage…………... _ 20 Non-controlling interest (partial goodwill) ………………………………….. P 455,000 85. c Prout Sexton Consolidated
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Selling price P 360,000 P300,000 P 300,000 Less: Book value : Cost P 400,000 P360,000 P 240,000 Accumulat ed *160,000 __240,00 0 **48,000 312,00 0 ***32,000 _208,000 Unrealized gain on sale of Equipment, 1/1/20y1 P 120,000 Realized Gain – depreciation (P120,000/15 x 2 yrs) __16,000 Net unrealized gain, 1/1/20y3 P 104,000 _______ ___ _________ Gain on sale P 104,000 P( 12,000 ) P 92,000 *P400,000/25 x 10 years = P160,000 **P360,000/15 x 2 years = P48,000 ***P240,000/15 x 2years = P400,000 86. b – refer to No. 85 87. a – refer to No. 85 Analysis: Workpaper entries (not required) Intercompany Sale of Equipment Accumulated Remaining Cost Depreciation Carrying Value Life Depreciation Original Cost P400,000 P160,000 P240,000 15 yr P 16,000 Intercompany Selling Price 360,000 _______ 360,000 15 yr 24,000 Difference P 40,000 P160,000 P120,000 P 8,000 (1) Investment in Sexton Company 192,000 Retained Earnings - Prout 192,000 To establish reciprocity/convert to equity (.80 x (P1,040,000 - P800,000)) (2) Equipment 40,000 Beginning Retained Earnings - Prout 120,000 Accumulated Depreciation 160,000 To reduce beginning consolidated retained earnings by amount of unrealized profit at the beginning of the year, to restate property and equipment to its book value to Prout Company on the date of the intercompany sale. (3) Accumulated Depreciation 16,000 Depreciation Expense 8,000 Beginning Retained Earnings - Prout 8,000 To reverse amount of excess depreciation recorded during current year and recognize an equivalent amount of intercompany profit as realized (4) Dividend Income 80,000 Dividends Declared 80,000 To eliminate intercompany dividends (5) Beginning Retained Earnings – Sexton 1,040,000 Common Stock – Sexton 1,200,000 Investment in Sexton Company (P1,600,000 + P192,000) 1,792,000 Noncontrolling Interest [P400,000 + (P1,040,000 - P800,000) x .20] 448,000 To eliminate investment account and create noncontrolling interest account
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Entry analysis: Journal Entry on the books of Sexton to record the sale Cash 300,000 Accumulated Depreciation - Fixed Assets (P360,000/15) x 2 years) 48,000 Loss on Sale of Equipment 12,000 Plant and Equipment 360,000 Workpaper eliminating entry on December 31, 20y3 consolidated statement necessary to prepare consolidated statements: Beginning Retained Earnings – Prout(P120,000 - P16,000) 104,000 Loss on Sale of Equipment 12,000 Gain on Sale of Equipment 92,000 Cost to the Affiliated Companies P400,000 Accumulated Depreciation Based on Original Cost ((12/25)x P400,000) 192 ,000 Book Value, 1/1/y3 P 208,000 Proceeds from Sale to Non-affiliate (300 ,000 ) Gain from consolidated point of view P 92 ,000 Note : As of Dec. 31, 20y3, the amount of profit recorded by the affiliates on their books
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