The Nathan Company acquired all of the outstanding stock of Caleb Company on January 1, 2014...

The Nathan Company acquired all of the outstanding stock of Caleb Company on January 1, 2014 for P267,800 cash. Caleb had a book value of only P182,000 on that date. However, equipment (having an eight-year life) is undervalued by P52,000 on Caleb’s financial records. A building with a 20-year life was overvalued by P13,000. Subsequent to the acquisition, Caleb reported the following:

	Net Income	Dividends Paid
2014	P 65,000	P 13,000
2015	78,000	52,000
2016	39,000	26,000

In accounting for this investment, Nathan has used the cost method. Selected accounts taken from the financial records of these two companies as of December 31, 2016, are as follows:

	Nathan Company	Caleb Company
Revenues – Operating	P403,000	P135,200
Expenses	257,400	96,200
Equipment (net)	416,000	65,000
Building (net)	286,000	88,400
Ordinary share	377,000	65,000
Accumulated profits	533,000	208,000

Required:

Determine the following account balances as of December 31, 2016.

Net Income Attributable to Equity Holders of the Parent
Non-controlling Interest in Net Income of Subsidiary
Consolidated Net Income
Consolidated Equipment (net)
Consolidated Buildings (net)
Consolidated Goodwill (net)
Consolidated Ordinary Shares
Consolidated Accumulated Profits

Solutions

Expert Solution

1. Net income attributable to equity shareholders of parenf are:

Revenues - Operating expenses

P4,03,000 - P2,57,400= P1,45,600

Net Income attributable to equity shareholdera is P1,45,600

2. Non- Controlling interest would be 0 since Nathan has acquired all the outstanding shares of Caleb Company.

3. Considated net income = Net income of Caleb company + Net income of Nathan company

Consolidate net income= P39,000 i.e. ( P1,35,200 - P96,200) + P1,45,600 i.e. (P4,03,000 - P2,57,400)

=P1,84,600

4. Consildated equipment (net) = P4,16,000 + P65,000

= P4,81,000

5. Consolidated Buildings (net) = P2,86,000 + P88,400

= P3,74,400

6. Consolidated Goodwill (net)= Consideration paid by parent + Non controlling interest - fair value of subsidiary net identifiable assets

=P2,67,800 + 0 - P1,53,400

=P1,14,400

7. Consildated ordinary shares = P4,42,000

8. Consolidated accumulated profits= P5,33000 + P2,08000

= P7,41,000

ekkarill92 answered 1 year ago

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