Problem 1

1 Ordinary share capital - S Co. 300,000

Retained earnings - S Co. 250,000
Investment in S Co. 440,000
Non-controlling interest 110,000

Equipment 50,000
Investment in S Co. 40,000
Non-controlling interest 10,000

Goodwill 150,000
Investment in S Co. 120,000
Non-controlling interest 30,000

Dividend income 60,000

Non-controlling interest 15,000
Dividend (Retained earnings) 75,000

Depreciation expense 10,000

Accumulated depreciation 10,000

P Co. S. Co
2 Reported net income 380,000 110,000
Dividend income -60,000
Additional depreciation -10,000
Adjusted net income 320,000 100,000
Share of parent 80,000 -80,000
Consolidated net income 400,000 20,000

3 NCI, beg 150,000

NCINIS 20,000
dividend received by NCI -15,000
NCI, end (NCINAS) 155,000

Problem 2
1 Investment in Subsidiary 287,400
Cash 287,400

Cash 7,500
Dividend income 7,500

2 Ordinary share capital - S Co. 131,250

Ordinary share premium - S Co. 52,500
Retained earnings - S Co. 105,000
Investment in S Co. 216,562
Non-controlling interest 72,188

Inventories 18,000
Plant assets 30,000
Patents 12,000
 Investment in S Co. 27,000
Non-controlling interest 9,000

Goodwill 58,450
Investment in S Co. 43,838
Non-controlling interest 14,612

Dividend income 7,500

Non-controlling interest 2,500
Dividend (Retained earnings) 10,000

Cost of sales 18,000

Inventory 18,000

Depreciation expense 3,000

Accumulated depreciation 3,000

Accumulated amortization 2,400

Amortization expense 2,400

P Co. S. Co
3 Reported net income 180,000 100,000
Dividend income -7,500
Undervalued inventory -18,000
Undervalue plant assets -3,000
Overvalued patents 2,400
Adjusted net income 172,500 81,400
Share of parent 61,050 -61,050
Impairment loss -3,000 -1,000
Consolidated net income 230,550 19,350

RE, parent 150,000

Net income attributable to parent 230,550
Dividends paid by the parent -20,000
Consolidated RE 360,550

NCI, beg 95,800

Net income attributable to NCI 19,350
Dividends received by the NCI -2,500
NCI, end 112,650

Problem 3
S Co.
Reported net income 290,000
Undervalue plant assets -20,000
Adjusted net income 270,000
NCI rate 20%
Share of NCI 54,000
Impairment loss 0
 Net income attributable to NCI 54,000
***NCI is at proportionate; no impairment for NCI

NCI, beg (1,120,000 x 20%) 224,000

Net income attributable to NCI 54,000
Dividends received by the NCI (112,000/80% X 20%) -28,000
NCI, end 250,000

Problem 4
1 P Co. S. Co
Reported net income 356,250 131,250
Dividend income 0 0
Undervalue plant assets 0 -15,000
Adjusted net income 356,250 116,250
Share of parent 93,000 -93,000
Impairment loss -24,000 -6,000
Consolidated net income 425,250 17,250

2 Net income attributable to parent 425,250

Net income attributable to NCI 17,250
Consolidated net income 442,500

3 RE, parent 1,950,000

Net income attributable to parent 425,250
Dividends paid by the parent -172,500
Consolidated RE 2,202,750

4 NCI, beg 202,500

Net income attributable to NCI 17,250
Dividends received by the NCI -11,250
NCI, end 208,500

5 Share capital - parent 1,312,500

Consolidated RE 2,202,750
NCI, end 208,500
Consolidated SHE 3,723,750

Problem 5
Delete requirement number 1 2022 2023
S Co. S Co.
2 Reported net income 750,000 150,000
Overvalued building 12,500 12,500
Undervalued Equipment -20,000 -20,000
Adjusted net income 742,500 142,500
NCI rate 40% 40%
Share of NCI 297,000 57,000
Impairment loss 0 0
Net income attributable to NCI 297,000 57,000
 NCI @ Proportionate 2022 2023
NCI, beg 2,500,000 2,757,000
Net income attributable to NCI 297,000 57,000
Dividends received by the NCI -40,000 -20,000
NCI, end 2,757,000 2,794,000

NCI @ Fair value 2022 2023

3 NCI, beg 2,620,000 2,877,000
Net income attributable to NCI 297,000 57,000
Dividends received by the NCI -40,000 -20,000
NCI, end 2,877,000 2,914,000

Problem 6
1 Paul Micah
Reported net income 1,825,000 975,000
Dividend income -210,000 0
Undervalued Inventory 0 -210,000
Undervalued PPE 0 -12,750
Adjusted net income 1,615,000 752,250
Share of parent 601,800 -601,800
Impairment loss 0 0
Consolidated net income 2,216,800 150,450

2 Net income attributable to parent 2,216,800

Net income attributable to NCI 150,450
Consolidated net income 2,367,250

3 RE, parent 5,520,000

Net income attributable to parent 2,216,800
Dividends paid by the parent -525,000
Consolidated RE 7,211,800

4 NCI, beg 1,031,250

Net income attributable to NCI 150,450
Dividends received by the NCI -52,500
NCI, end 1,129,200

5 Share capital - parent 2,250,000

Share premium - parent 1,750,000
Consolidated RE 7,211,800
NCI, end 1,129,200
Consolidated SHE 12,341,000

Problem 7
S Co.
Reported net income 290,000
Undervalue plant assets -24,000
Adjusted net income 266,000
 NCI rate 20%
Share of NCI 53,200
Impairment loss 0
Net income attributable to NCI 53,200
***NCI is at proportionate; no impairment for NCI

NCI, beg (1,120,000 x 20%) 224,000

Net income attributable to NCI 53,200
Dividends received by the NCI (125,000 X 20%) -25,000
NCI, end 252,200

Problem 8
NCI @ FV NCI @ Prop
Consideration (80%) 3,517,500 3,517,500
NCI (20%) 705,000 673,800
Total 4,222,500 4,191,300
FMV of net assets acquired * 3,369,000 3,369,000
Goodwill 853,500 822,300

United's equity as of end of the year 3,510,000

Net income from June 1 - Dec 31 -255,000
Dividend declared 90,000
United's equity as of date of acquisition (BV) 3,345,000
Overstatement of inventories -66,000
Understatement of equipment 90,000
United's equity as of date of acquisition (FV) 3,369,000

Galaxy United
Reported net income 450,000 255,000
Dividend income -72,000 0
Overvalued Inventory 0 66,000
Undervalued PPE 0 -13,125
Adjusted net income 378,000 307,875
Share of parent 246,300 -246,300
Impairment loss ** -82,230 -3,120
Consolidated net income 542,070 58,455

Allocation of Impairment Loss

Parent: 85,350 x (822,300/853,500) 82,230
NCI: 85,350 x (31,200/853,500) 3,120

NCI, beg 705,000

Net income attributable to NCI 58,455
Dividends received by the NCI -18,000
NCI, end 745,455

Problem 9
Consideration (80%) 19,000,000
NCI (20%) 4,625,000
 Total 23,625,000
FMV of net assets acquired * 23,920,000
Gain on bargain purhcase -295,000

For the year 2022 Honesty Character For the yea

Reported net income 3,600,000 1,360,000 Reported ne
Dividend income -224,000 0 Dividend in
Gain on bargain purchase 295,000 0 Gain on bar
Overstated equipment 0 -304,000 Overstated
Adjusted net income 3,671,000 1,056,000 Adjusted ne
Share of parent 844,800 -844,800 Share of par
Impairment loss ** 0 0 Impairment
Consolidated net income 4,515,800 211,200 Consolidate

NCI, beg 4,625,000 NCI, beg

Net income attributable to NCI 211,200 Net income attributable to
Dividends received by the NCI -56,000 Dividends received by th
NCI, end 4,780,200 NCI, end

Problem 10
Sabah
Reported net income 1,100,000
Undervalued patents (1.4M/5) x 5/12 -116,667
Adjusted net income 983,333
NCI rate 45%
Share of NCI 442,500
Impairment loss 0
Net income attributable to NCI 442,500

Problem 11
For the year 2022 Growth Expanded
Reported net income 120,000 45,000
Dividend income -20,000 0
Adjusted net income 100,000 45,000
Share of parent 36,000 -36,000
Impairment loss -2,400 0
Consolidated net income 133,600 9,000

RE, parent 280,000

Net income attributable to parent 133,600
Dividends declared by the parent -75,000
Consolidated RE 338,600

NCI, beg 42,000

Net income attributable to NCI 9,000
Dividends received by the NCI -5,000
NCI, end 46,000

Share capital - parent 630,000

Consolidated RE 338,600
NCI, end 46,000
Consolidated SHE 1,014,600
 Honesty Character
4,400,000 2,040,000
-416,000 0
0 0
0 -304,000
3,984,000 1,736,000
1,388,800 -1,388,800
0 0
5,372,800 347,200

4,780,200
Net income attributable to 347,200
Dividends received by the -104,000
5,023,400
 Chapter 3
Multiple Choice - Theory
1 B 11 B
2 C 12 A
3 A 13 D
4 B 14 B
5 D 15 D
6 B 16 D
7 B 17 A
8 B 18 B
9 D 19 D
10 D 20 A

Chapter 3
Multiple Choice - Problems
1 A 11 D 21 A
2 A 12 B 22 C
3 A 13 D 23 B
4 C 14 A 24 B
5 D 15 B 25 D
6 B 16 C 26 C
7 A 17 D 27 A
8 C 18 D 28
9 C 19 A 29
10 A 20 B 30