I .

Pony Corporation purchased all the common shares of Short Company on January 1, 20x1 for
P180,000. On that date, the book value of the net assets reported by Short Company was P150,000. The
entire excess was assigned to a depreciable asset with a 6 year remaining economic life from January 1,
20x1.
The adjusted trial balances for the two companies on December 31, 20x1 are as follows :
Pony Corp Short Company
Debit Credit Debit Credit
Cash P 15,000 P 5,000
Accounts receivable 30,000 40,000
Inventory 70,000 60,000
Depreciable assets( net) 325,000 225,000
Investment in Short Company 180,000
Depreciation expense 25,000 15,000
Other expenses 105,000 75,000
Dividends declared 40,000 10,000
Accounts payable 50,000 40,000
Notes payable 100,000 120,000
Common stock 200,000 100,000
Retained earnings 230,000 50,000
Sales 200,000 120,000
Dividend income 10,000 -_________________
Total P790,000 P 790,000 P 430,000 P430,000

Pony Corporation uses the cost method of accounting for its investment in Short Company. Short
Company dividends were paid on December 31. 20x1.
Required :
a. Prepare the working paper elimination entries.
b. Prepare a three part consolidated working paper as of December 31, 20x1.

a. Working Paper Elimination Entries, Dec. 31, 20x1

(1) Dividend income 10,000

Dividends declared – Short 10,000
To eliminate intercompany dividends.

(2) Common stock – Short 100,000

Retained earnings – Short 50,000
Depreciable asset 30,000
Investment in Short Company 180,000
To allocate excess

(3) Depreciation expense 5,000

Depreciable asset 5,000
To amortize allocated excess
(30,000/6 years)
b. Pony Corporation and Subsidiary
Consolidation Working Paper
December 31, 20x1

Pony Short Adjustments & Eliminations Consoli-

Corporation Company Debit Credit dated
Statement of CI
Sales 200,000 120,000 320,000
Dividend income 10,000 (1) 10,000 -
Total 210,000 120,000 320,000
Depreciation 25,000 15,000 (3) 5,000 45,000
Other expenses 105,000 75,000 180,000
Total 130,000 90,000 225,000
CI carried forward 80,000 30,000 95,000

Retained Earnings
Retained earnings, Jan. 1 230,000 50,000 (2) 50,000 230,000
CI from above 80,000 30,000 95,000
Total 310,000 80,000 325,000
Dividends declared 40,000 10,000 (1) 10,000 40,000
Retained earnings, Dec. 31
Carried forward 270,000 70,000 285,000

Statement of FP
Cash 15,000 5,000 20,000
Accounts receivable 30,000 40,000 70,000
Inventory 70,000 60,000 130,000
Depreciable asset (net) 325,000 225,000 (3) 30,000 (4) 5,000 575,000
Investment in Short company 180,000 (2)150,000 -
(3) 30,000
Total 620,000 330,000 795,000

Accounts payable 50,000 40,000 90,000

Notes payable 100,000 120,000 220,000
Common stock
Pony 200,000 200,000
Short 100,000 (2)100,000
Retained earnings, Dec. 31
From above 270,000 70,000 285,000
Total 620,000 330,000 195,000 195,000 795,000

II. Popo Corporation purchased 80% of the voting stock of Sisa Company on January 1, 20x1, at
underlying book value. Popo Corp uses the cost method in accounting for its ownership of Sisa
Company. On December 31, 20x1, the trial balances of the two companies are as follows :

Popo Corporation Sisa Company

Debit Credit Debit Credit
Current assets P173,000 P 105,000
Depreciable assets 500,000 300,000
Investment in Sisa 120,000
Depreciation expense 25,000 15,000
Other expenses 105,000 75,000
Dividends declared 40,000 10,000
Accumulated depreciation P175,000 P 75,000
Current liabilities 50,000 40,000
Long term debt 100,000 120,000
Common stock 200,000 100,000
Retained earnings 230,000 50,000
Sales 200,000 120,000
Dividend income 8,000________________________
Total P963,000 P963,000 P505,000 P505,000
Required :
a. Give all the eliminating entries required as of December 31, 20x1, to prepare consolidated
financial statements.
b. Prepare a three part consolidation working paper.
c. Prepare a consolidated statement of financial position , statement of CI and retained earnings
statement for 20x1.

a. Working Paper Elimination Entries

(1) Dividend income 8,000
NCI 2,000
Dividends declared – Sisa 10,000

(2) Common stock – Sisa 100,000

Retained earnings – Sisa 50,000
Investment in Sisa stock 120,000
NCI 30,000

(3) NCI in CI of subsidiary 6,000

NCI 6,000

b. Popo Corporation and Subsidiary

Consolidated Working Paper
December 31, 20x1
Popo Sisa Adjustments & Eliminations Consoli-
Corporation Company Debit Credit dated
Statement of CI
Sales 200,000 120,000 320,000
Dividend income 8,000 (1) 8,000 -
Total revenue 208,000 120,000 320,000
Depreciation expense 25,000 15,000 40,000
Other expenses 105,000 75,000 180,000
Total expenses 130,000 90,000 220,000
CI 78,000 30,000 100,000
NCI in CI of Sub. (3) 6,000 ( 6,000)
CI carried forward 78,000 30,000 94,000

Retained Earnings
Retained earnings, 1/1 230,000 50,000 (2) 50,000 230,000
CI from above 78,000 30,000 94,000
Total 308,000 80,000 324,000
Dividends declared 40,000 10,000 (1) 10,000 40,000
Retained earnings, 12/31
Carried forward 268,000 70,000 284,000

Statement of FP
Current assets 173,000 105,000 278,000
Depreciable assets 500,000 300,000 800,000
Investment in Sisa Company 120,000 (2)120,000 -
Total 793,000 405,000 1,078,000

Accumulated depreciation 175,000 75,000 250,000

Current liabilities 50,000 40,000 90,000
Long-term debt 100,000 120,000 220,000
Common stock 200,000 100,000 (2)100,000 200,000
Retained earnings , 12/31
From above 268,000 70,000 284,000
NCI (1) 2,000 (2) 30,000 34,000
(3) 6,000
Total 793,000 405,000 166,000 166,000 1,078,000

c. Consolidated Financial Statements

Popo Corporation and Subsidiary

Consolidated Statement of Financial Position
December 31, 20x1

Assets
Current assets P278,000
Depreciable assets P800,000
Less: Accumulated depreciation 250,000 550,000
Total assets P828,000
Liabilities and Stockholders’ Equity
Current liabilities P 90,000
Long-term debt 220,000
Total liabilities P310,000
Stockholders’ Equity
Common stock P200,000
Retained earnings, 12/31 284,000
Minority interest in net assets of subsidiary 34,000 518,000
Total liabilities and stockholders’ equity P828,000

Popo Corporation and Subsidiary

Consolidated Statement of CI
Year Ended December 31, 20x1

Sales P320,000
Expenses:
Depreciation expense P 40,000
Other expenses 180,000 220,000
Consolidated CI P100,000
NCI in CI of subsidiary 6,000
Attributable to parent P 94,000

Popo Corporation and Subsidiary

Consolidated Retained Earnings
Year Ended December 31, 20x1

Retained earnings, Jan. 1 – Popo P230,000

Consolidated CI attributable to parent 94,000
Total P324,000
Dividends paid – Popo 40,000
Consolidated retained earnings, Dec. 31 P284,000