Question

On January 1, 2006, Peter Company purchased 80 percent of the outstanding shares of Pedro Company at a cost of P1,080,000. On that date, Pedro Company had P600,000 worth of ordinary shares and P750,000 worth of accumulated profits. For 2006, Pedro Company reported income of P270,000 and paid dividends of P90,000. All of the assets and liabilities of Pedro Company are at fair market value.

On December 31, 2006, Peter Company sold equipment to Pedro Company for P112,500 that had a cost of P67,500. The equipment is expected to have a useful life of 10 years from this date. For the year 2006, Peter Company reported income from its own operations in the amount of P300,000, which included the gain of P45,000 on equipment sold to Pedro Company.

Required:

1. Compute the amount to be shown as consolidated net income.
2. Compute the Non-controlling Interest in Net Income of Subsidiary for 2006.
3. Compute the amount to be shown as Non-controlling Interest in Net Assets of Subsidiary on the consolidated statement of financial position as of December 31, 2006.

Answer 1

Answer 1]

Particulars	Peter Co.	Pedro Co.	Elimination	Consolidation
Operating Income	300000	270000	45000[profit on sale of equipment	525000
Add Dividend Recd.	72000	0	72000	0
Dividend paid	0	90000	72000	18000
Retained Earnings	372000	180000		507000

Answer 2

Particulars	Pedro Co.
Operating Income	270000
Add Dividend Recd.	0
Dividend paid	90000
Retained Earnings	180000
Non Contriolling Interest Peter Co.20%	36000

Answer 3

Liabilities	Amount $	Assets	Amount $
Capital	600000	All Assets	1530000
Retained Earnings 750000
Add Current Year 180000[270000-Dividend90000]	930000
Total	1530000		1530000
Non Contriolling Interest Peter Co.20%			306000