3 Consolidated net income of P700000 should be reported for 20X4 computed as

# 3 consolidated net income of p700000 should be

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3. Consolidated net income of P70,0000 should be reported for 20X4, computed as follows: Reported net income of AA P59,000 Less: Dividend income from KR (9,000 ) Operating income of AA P50,000 Net income of KR 20,000 Consolidated net income P70,000

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4. Income of P79,000 would be attained by adding the income reported by AA (P59,000) to the income reported by KR (P20,000). However, the dividend income from KR recorded by AA must be excluded from consolidated net income. Problem XI 1. Net income for 20x4: QQ NN Operating income P 90,000 P35,000 Income from subsidiary 24,500 Net income P114,500 P35,000 2. Consolidated net income is P125,000 (P90,000 + P35,000). 3. Retained earnings reported at December 31, 20x4: QQ NN Retained earnings, January 1, 20x4 P290,000 P40,000 Net income for 20x4 114,500 35,000 Dividends paid in 20x4 (30,000 ) (10,000 ) Retained earnings, December 31, 20x4 P374,500 P65,000 4. Consolidated retained earnings at December 31, 20x4, is equal to the P374,500 retained earnings balance reported by QQ. 5. When the cost method is used, the parent's proportionate share of the increase in retained earnings of the subsidiary subsequent to acquisition is not included in the parent's retained earnings. Thus, this amount must be added to the total retained earnings reported by the parent in arriving at consolidated retained earnings. Problem XII (Consolidated balances three years after purchase. Parent has applied the equity method.) 1. Schedule 1—Acquisition-Date Fair Value Allocation and Amortization JJ’s acquisition-date fair value P206,000 Book value of JJ ......................... (140 ,000 ) Fair value in excess of book value 66,000 Excess fair value assigned to specific accounts based on individual fair values Annual Excess
Life Amortization Equipment ............................. 54,400 8 yrs. P6,800 Buildings (overvalued) ......... (10 ,000 ) 20 yrs. (500) Goodwill ............................... P21 ,600 indefinite -0- Total ...................................... P6 ,300 Investment in JJ Company—12/31/x6 JJ’s acquisition-date fair value ................................ P206,000 20x4 Increase in book value of subsidiary 40,000 20x4 Excess amortizations (Schedule 1) ................ (6,300) 20x5 Increase in book value of subsidiary ............. 20,000 20x5 Excess amortizations (Schedule 1) ................ (6,300) 20x6 Increase in book value of subsidiary ............. 10,000 20x6 Excess amortizations (Schedule 1) ................ (6 ,300 ) Investment in J Company .................................. P257 ,100 2. Equity in Subsidiary Earnings Income accrual ........................................................ P30,000 Excess amortizations (Schedule 1) ......................... (6 ,300 ) Equity in subsidiary earnings ............................ P23 ,700 3.Consolidated Net Income Consolidated revenues (add book values) .............. P414,000 Consolidated expenses (add book values) .............. (272,000) Excess amortization expenses (Schedule 1) ........... (6 ,300 ) Consolidated net income ........................................ P135 ,700 4. Consolidated Equipment Book values added together ................................... P370,000 Allocation of purchase price .................................. 54,400 Excess depreciation (P6,800 × 3) ........................... (20 ,400 ) Consolidated equipment .................................... P404 ,000 5.Consolidated Buildings ...................................................... Book values added together ................................... P288,000 Allocation of purchase price .................................. (10,000) Excess depreciation (P500 × 3) .............................. 1 ,500 Consolidated buildings ....................................... P279 ,500 6. Consolidated goodwill Allocation of excess fair value to goodwill ............. P21 ,600

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7. Consolidated Common Stock ........................................... P290 ,000 As a purchase, the parent's balance of P290,000 is used (the acquired company's common stock will be eliminated each year on the consolidation worksheet).
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