On January 2, 2022, S Company acquired 80% of the stocks of L Company for P2,000,000. On this date, L Company had P1,000.000 of Share Capital and P800,000 of Retained Earnings. The carrying values of the identifiable assets and liabilities of L are equal to their fair values. During the year. L ships merchandise to S costing P800.000 at 25% above cost. At the end of the year, records show the following: S Company L Company Inv. beg 350,000 120,000 Inv. end 200,000 5,500,000 2,500,000 3,250,000 1,680,000 400,000 Sales Purchases Operating Exp. Dividends paid 650,000 300,000 500,000 350,000
On January 2, 2022, S Company acquired 80% of the stocks of L Company for P2,000,000. On this date, L Company had P1,000.000 of Share Capital and P800,000 of Retained Earnings. The carrying values of the identifiable assets and liabilities of L are equal to their fair values. During the year. L ships merchandise to S costing P800.000 at 25% above cost. At the end of the year, records show the following: S Company L Company Inv. beg 350,000 120,000 Inv. end 200,000 5,500,000 2,500,000 3,250,000 1,680,000 400,000 Sales Purchases Operating Exp. Dividends paid 650,000 300,000 500,000 350,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:On January 2, 2022, S Company acquired 80% of the stocks of L
Company for P2,000,000. On this date, L Company had P1,000.000 of
Share Capital and P800,000 of Retained Earnings. The carrying values of
the identifiable assets and liabilities of L are equal to their fair values.
During the year. L ships merchandise to S costing P800.000 at 25%
above cost.
At the end of the year, records show the following:
S Company L Company
Inv. beg
350,000
120,000
Inv. end
400,000
5,500,000 2,500,000
3,250,000 1,680,000
200,000
Sales
Purchases
Operating Exp.
Dividends paid
650,000
300,000
500,000
350,000
The ending inventory of S includes merchandise from L amounting to
P50,000. The reported impairment of goodwill in 2022 is P20,000. The
parent opted to measure NCI at fair value.
In 2021, S Company sold inventory costing P50,000 to $ Company (90%-
owned) for P100,000. By the end of the year, L sold 80% of the inventory.
The elimination entries in 2022 would include:
a. Credit to Cost of Sales, P100,000
b. Credit to Inventory, P10,000.
c. Debit to Cost of Sales, P10,000
d. Debit to Retained Earnings, P10,000.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education