ABC Corp purchased 95% of the stock of DEF Company on January 2021. On that date, the book value of DEF's net assets approximated fair value. As a result of the purchase, ABC recognized P75,000 worth of goodwill. During 2021, DEF sold inventory to ABC. On December 31, 2021, DEF had unrealized profits on its books of P12,500. By December 31, 2022, the entire inventory left on ABC's books had been sold to outside parties. During 2022, ABC sold inventory to DEF and had P18,750 unrealized profits left on its books at then end of 2022. For 2022, ABC reported operating income of P590,000 and DEF reported net income of P450,000. What is the consolidated net income?

ABC Corp purchased 95% of the stock of DEF Company on January 2021. On that date, the book value of DEF's net assets approximated fair value. As a result of the purchase, ABC recognized P75,000 worth of goodwill. During 2021, DEF sold inventory to ABC. On December 31, 2021, DEF had unrealized profits on its books of P12,500. By December 31, 2022, the entire inventory left on ABC's books had been sold to outside parties. During 2022, ABC sold inventory to DEF and had P18,750 unrealized profits left on its books at then end of 2022. For 2022, ABC reported operating income of P590,000 and DEF reported net income of P450,000. What is the consolidated net income?

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

100%

ABC Corp purchased 95% of the stock of DEF Company on January 2021. On that date, the book value of DEF's
net assets approximated fair value. As a result of the purchase, ABC recognized P75,000 worth of goodwill.
During 2021, DEF sold inventory to ABC. On December 31, 2021, DEF had unrealized profits on its books of
P12,500. By December 31, 2022, the entire inventory left on ABC's books had been sold to outside parties.
During 2022, ABC sold inventory to DEF and had P18,750 unrealized profits left on its books at then end of
2022. For 2022, ABC reported operating income of P590,000 and DEF reported net income of P450,000. What
is the consolidated net income?

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