Sales P 540000 P 380000 Less Cost of goods sold 21600 1920 00 Gross profit P

Sales p 540000 p 380000 less cost of goods sold 21600

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Sales P 540,000 P 380,000 Less: Cost of goods sold 216,00 0 192,0 00 Gross profit P 324,000 P 168,000 Less: Depreciation expense 60,000 24,000 Other expense 72,00 0 54,0 00 Net income from its own separate operations P 192,000 P 90,000 Add: Investment income 66,24 0 - Net income P 258,240 P 90,000 Dividends paid P 72,000 P 48,000 No goodwill impairment loss for 20x5. Parent Company Equity Method Entry The following are entries recorded by the parent in 20x5 in relation to its subsidiary investment: January 1, 20x5 – December 31, 20x5: (2) Cash……………………… 38,400 Investment in S Company (P48,000 x 80%)……………. 38,400 Record dividends from S Company. December 31, 20x5: (3) Investment in S Company 72,000 Investment income (P90,000 x 80%) 72,000 Record share in net income of subsidiary.
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December 31, 20x5: (4) Investment income (P7,200 x 80%) 5,760 Investment in S Company 5,760 Record amortization of allocated excess of inventory, equipment, buildings and bonds payable P Company’s P12,000 portion of the differential related to goodwill related to goodwill is not adjusted on the parent’s books following Option 2 as referred to above for goodwill impairment loss. Even though the goodwill of the consolidated entity is impaired, Thus, the investment balance and investment income in the books of P Company is as follows: Consolidation Workpaper – Second Year after Acquisition The schedule of determination and allocation of excess presented above provides complete guidance for the worksheet eliminating entries. (E1) Common stock S Co………………………………………… 240,000 Retained earnings – S Co, 1/1/x5…………………………. 144.000 Investment in S Cost, 1/1/x5 377,640 38,400 Dividends – S (48,000x 80%) NI of S Amortization (90,000 x 80%) 72,000 5,760 (P7,200 x 80%) Balance, 12/31/x5 405,480 Investment Income Amortization NI of S (7,200 x 80%) 5,760 72,000 (90,000 x 80%) 66,240 Balance, 12/31/x4
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Investment in S Co (P384,000 x 80%) 307,200 Non-controlling interest (P384,000 x 20%)……………………….. 76,800 To eliminate investment on January 1, 20x5 and equity accounts of subsidiary on date of acquisition; and to establish non- controlling interest (in net assets of subsidiary) on 1/1/20x5. (E2) Accumulated depreciation – equipment (P96,000 – P12,000) 84,000 Accumulated depreciation – buildings (P192,000 + P6,000) 198,000 Land……………………………………… ………………………………. 7,200 Discount on bonds payable (P4,800 – P1,200)…. 3,600 Goodwill (P15,000 – P3,750) …………………………….. 11,250 Buildings……………………………… ……….. 216,000 Non-controlling interest [(P90,000 – P13,200) x 20%] + [P3,000, full goodwill - [(P3,750, full-goodwill impairment – P3,000, partial- goodwill impairment)* or (P3,750 x 20%)] 17,610 Investment in S Co……………………………………………… . 70,440 (E3) Depreciation expense……………………….. 6,000 Accumulated depreciation – buildings………………….. 6,000
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Interest expense………………………………… 1,200 Accumulated depreciation – equipment………………..
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