Entity X and Entity Y incorporated Entity Z to manufacture a microchip to incorporate entities as components for their final products for cellular phones and tablets. The contractual agreement of the incorporating entities provided that the decisions on relevant activities of Entity C will require the unanimous consent of both entities. Entity X and Entity Y have rights to the assets, and obligations for the liabilities, relating to the agreement. Entity X and Entity Y will own the ordinary shares of Entity Z in the ratio of 60:40. The contractual agreement of Entity X and Entity Y also provided the following about the assets and liabilities of Entity Z: • Entity X owns the land and incurs the loan payable of Entity Z. • Entity Y owns the building and incurs the note payable of Entity Z. • The other assets and liabilities are owned by Entity X and Entity Y based on their capital interest in Entity Z. • The sales revenue of Entity Z includes sales to Entity X and Entity Y in the amount of P1,000,000 and P2,000,000, respectively. As of the end of the first year, Entity X and Entity Y were able to resell 30% and 60% of the inventory coming from Entity Z to third persons. At the end of the first operation, Entity Z provided the following data of its financial statements: Inventory P1,000,000 Accounts Payable P2,000,000 Land 3,000,000 Notes Payable 1,000,000 Building 5,000,000 Loan Payable 4,000,000 Share Capital 1,000,000 Retained Earnings 1,000,000 Sales Revenue 5,000,000 Required: Determine the following: a. Amount of total assets to be reported by Entity X concerning its interest in Entity Z. b. Amount of total liabilities to be reported by Entity Y concerning its interest in Entity Z. c. Amount of sales revenue to be reported by Entity X concerning its interest in Entity Z.
. Entity X and Entity Y incorporated Entity Z to manufacture a microchip to incorporate entities as components
for their final products for cellular phones and tablets.
The contractual agreement of the incorporating entities provided that the decisions on relevant activities of
Entity C will require the unanimous consent of both entities.
Entity X and Entity Y have rights to the assets, and obligations for the liabilities, relating to the agreement.
Entity X and Entity Y will own the ordinary shares of Entity Z in the ratio of 60:40.
The contractual agreement of Entity X and Entity Y also provided the following about the assets and
liabilities of Entity Z:
• Entity X owns the land and incurs the loan payable of Entity Z.
• Entity Y owns the building and incurs the note payable of Entity Z.
• The other assets and liabilities are owned by Entity X and Entity Y based on their capital interest in
Entity Z.
• The sales revenue of Entity Z includes sales to Entity X and Entity Y in the amount of P1,000,000
and P2,000,000, respectively. As of the end of the first year, Entity X and Entity Y were able to
resell 30% and 60% of the inventory coming from Entity Z to third persons.
At the end of the first operation, Entity Z provided the following data of its financial statements:
Inventory P1,000,000 Accounts Payable P2,000,000
Land 3,000,000 Notes Payable 1,000,000
Building 5,000,000 Loan Payable 4,000,000
Share Capital 1,000,000
Retained Earnings 1,000,000
Sales Revenue 5,000,000
Required: Determine the following:
a. Amount of total assets to be reported by Entity X concerning its interest in Entity Z.
b. Amount of total liabilities to be reported by Entity Y concerning its interest in Entity Z.
c. Amount of sales revenue to be reported by Entity X concerning its interest in Entity Z.
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 3 images
