Finals Take-Home Assignment Accounting 302

Topics Covered: Chapters 1 to 6

1. Below is the statement of income of c) Upon adjustment by the Home

Palawan Branch submitted to the Home Office, how much is the true net
Office for the year ended December 31, income of the Cebu Branch during
2017: the year?

Sales P1,200,000 P502,400

Less: Cost of sales:
Inventory, 1/1/17 P150,000 2. On December 1, 2017, Vision
Shipments fr HO 475,000 Companys Home Office recorded a
Local purchases 50,000 shipment of merchandise to its Batanes
Total goods Branch as follows:
available for sale 675,000 Dr. Cr.
Less: Invty, 12/31/17 125,000 550,000 Batanes Branch P117,000
Gross profit P650,000 Shipments to Branch P97,500
Less: Operating Unrealized profit in
expenses 247,000 branch inventory 15,600
Net income for the Cash (for freight) 3,900
year P403,000
The Batanes Branch sold 45% of the
As of January 1, 2017 and December 31, merchandise to outside entities during the
2017, the composition of the Branchs month ended December 31, 2017. The
inventories follows (Note: Home office Company has a calendar year close.
shipments were billed to Palawan Branch
at 25% above cost by the Home Office): On January 15, 2018, the Batanes Branch
transferred 25% of the original shipment to
1/1/2017: the Pagudpud Branch, and the Batanes
Home office shipments P100,000 branch paid P2,275 as additional shipment
Local purchases 50,000 charges.
Total P150,000
Question:
12/31/2017: In the Home Offices books of Vision,
Home office shipments P78,000 how should the transfer to Pagudpud
Local purchases 47,000 from Batanes be accounted for if the
Total P125,000 transfer cost of the merchandise to
Pagudpud would have been 50% lesser
Questions: than the actual freight charges
a) How much is the true Cost of Sales of incurred?
the Branch during the year?
(Try to do the journal entry)
P450,600

b) How much is the balance of

Allowance for Overvaluation in the
Branch Inventory account as at
December 31, 2017?

P15,600

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3. The Romblon Branch of Persistent 4. Below is the statement of income of
Company is billed for merchandise by Integrity and its 70% owned subsidiary,
the Home Office at 35% above cost. The Purity, for the year 2017:
Branch in turn, prices merchandise for
sales purposes at 25% above billed Integrity Purity
prices. All of its merchandise come from Sales P1,200,000 P475,000
the Home Office. Gain on sale of
building 25,000
Unfortunately, on September 2, 2017, all Dividend income 80,000
of the Branch merchandise was (50% came from Purity)
destroyed by flood. As partial Cost of Sales (840,000) (332,500)
compensation, Persistent has Depreciation (120,000) (80,000)
appropriately maintained an insurance Other expenses (150,000) (27,500)
cover against flood with 75% coverage. Net income P195,000 P35,000

Immediately before the disaster, Branch The gain on sale relates to a building with
accounts were as follows: book value of P75,000 and a 8-year
remaining useful life that was sold to Purity
Merchandise invty, 1/1/17 on July 1, 2017.
(at billed price) P114,750
Shipments from HO Questions:
(1/1/17 to 9/1/17) 124,200
Sales 194,062.50 a) How much is the adjusted net income
Sales discounts 7,500 of Purity for consolidation purposes?
Sales returns 13,500
Sales allowances 3,575 P35,000

Questions: b) How much is the consolidated

depreciation expense in 2017?
a) How much was Persistents cost of
inventories that were ruined by the P198,437.50
flood?
c) How much is the profit attributable
P70,000 to the equity holders of parent for
2017?
b) How much was the loss
compensation provided by the P156,062.50
insurance cover?
d) How much is the non-controlling
P52,500 interests share in net income of
Purity in 2017?
c) How much was the net loss suffered
by Persistent as a result of the flood? P10,500

P17,500

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5. Brave Company owns 90% of Valor 8. Strong-willed Company owns 90% of the
Company. On December 31, 2017, Valor outstanding shares of Confident
sold to Brave a heavy equipment for Company. For the current year,
P550,000. The asset originally costs Confident reports net income of
P750,000 but has a carrying amount of P295,000, and declares 45% of its net
P375,000 as of the date of sale. The profits during the year as dividends.
consolidated statement of financial During the date of the purchase of
position has been prepared without Confidents net assets, Confidents
taking into consideration any equipment was understated resulting to a
adjustments relating to this sale. depreciation of the current fair value
excess of P55,000.
Question:
By how much should the Noncurrent Question:
assets and Accumulated profits The parent companys share in net
accounts be adjusted for consolidation income of subsidiary is?
purposes?
Noncurrent assets = (P175,000) P216,000
Accumulated profits = (P157,500)

6. On January 1, 2018, Consistent 9. On January 2, 2018, Solitude Company

Company sold an equipment for acquired 80% of the outstanding ordinary
P1,575,000 to Reliable Company, its shares of Bliss Company for P675,000
fully owned subsidiary. Consistent paid cash, excluding direct acquisition costs.
P1,850,000 for this equipment upon The investment was accounted for by the
acquisition, which had accumulated cost method. On January 2, 2018, Bliss
depreciation of P333,000 at the time of identifiable net assets (book value and
sale. Consistent estimated a 10% salvage fair value) were P650,000. Bliss net
value and depreciated the equipment income for the year ended December 31,
over 10 years. This practice was also 2018 was P375,000. During 2018,
adopted by Reliable. Solitude received P75,000 cash dividends
from Bliss. There were no other
Question: intercompany transactions.
In Consistents December 31, 2018
consolidated statement of financial Question:
position, this equipment should be The balance of the Non-controlling
included in the amounts of: interest in Net Assets of Subsidiary
a) Cost? P1,850, 000 account on December 31, 2018 is?
b) Accumulated depreciation?
P499,500 P186,250

7. Humility Company acquired 75% of 10. Firm Company owned 95% in an

Poor Spirits outstanding ordinary shares acquired subsidiary, Stern Company,
for P1,250,000, 125% of the underlying
book value on January 2, 2018. The fair
value of Poor Spirits net assets
approximated book value.
Question:
On December 31, 2018 consolidated
statement of financial position, partial
goodwill should be reported at?
P250,000
which was accounted for by the cost
method. During 2018, Firm had income
(exclusive of dividend income from
subsidiary) of P395,000, and Stern had a
net income of P182,000. Stern declared
and paid a P54,600 dividend during
2018.

There were no differences between the 12. Royal Company acquired a 75% interest

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 current fair values and book values of in Chosen Company in 2018. During
Sterns identifiable net assets on the date 2019, Chosen sold merchandise to Royal
of the business combination, and there for P25,000 at a gross profit of P5,000.
was no goodwill in the business The merchandise was resold during 2019
combination. by Royal to outsiders at 20% above cost.
The following are the net income of
Question: Chosen Company for the years ended
How much is the consolidated net December 31, 2018 and 2019:
income of Firm and its subsidiary for
the year 2018? 2018 P170,000
2019 180,000
P577,000
Question:
How much is the non-controlling
11. Excellent Company owns 77% of interest in Chosens net income for
Brilliant Companys common stock. On 2019?
September 20, 2018, Brilliant sold
merchandise to Excellent for P235,000. P45,000
As at December 31, 2018, 40% of the
merchandise remained in Excellents
inventory. For 2018, gross profit %s 13. Generous Company is a wholly owned
were 25% for Excellent and 35% for subsidiary of Golden Heart Corporation.
Brilliant. The following are excerpts from the 2018
condensed income statement of two
Question: companies.
How much is the unrealized
intercompany profit in ending In Thousands
inventory at December 31, 2018 that Generous Golden Heart
should be eliminated for consolidation Sales to GH P1,000
purposes? Sales to others 2,500 P2,000
Total P3,500 P2,000
P32,900 Cost of Goods
Sold:
From Generous P750
From others 2,275 800
Total 2,275 1,550
Gross profit P1,225 P450

The sales of Generous to Golden Heart

are made on the same terms as those
made to others.

Question:
For consolidation purposes, on
December 31, 2018, the intercompany
profit that should be eliminated from
Golden Hearts inventory is?

P87,500

14. On June 30, 2019, Special Company

issued 200,000 shares of its P25 par

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 common stock for which it received all
of One-of-a-Kinds common stock. The
fair value of the common stock issued is
equal to the book value of One-of-a-
Kinds net assets. Both companies
continued to operate as separate
businesses, maintaining accounting
record with years ending December 31.
Net income from own operations and
dividends paid were:

In Thousands
Special One-of-a-Kind
Net income:
6-month ended
6/30/19 P850 P335
6-month ended
12/31/19 975 425

Dividends paid:
4/25/19 P775
10/31/19 225

On December 31, 2019, One-of-a-Kind

held in its inventory merchandise
acquired from Special on December 29,
2019 for P185,000, which included a
20% mark up.

Question:
How much is the consolidated net income
in 2019?

P2,213,000

While everyone else has thrown in the towel,

successful people continue to grind until they breakthrough.
MJ Mallari