COMPUTE FOR: 1. Consolidated Gross Profit2. Consollidated Operating expenses On January 2, 20x6, TOTAL Company acquired 90% of the outstanding shares of POWERCompany at book value. During 20x6 and 20x7, intercompany sales amounted to P2,000,000and P4,000,000, respectively. POWER Company consistently recognized 25% mark-up basedon sales while TOTAL Company had a 25%, gross profit on cost. The inventories of the buyingaffiliate, which all came from Inter-company transactions show:TОTALPOWER12/31/x6240,000100,00012/31/x7160,00040,000On October 1,20x6, TOTAL Company purchased a piece of land costing P1,000,000 fromPOWER Company for P1,500,000. On December 31, 20x7, TOTAL sold this land to anunrelated party for P1,500,000. On the other hand, on July 1, 20x7, TOTAL Company sold aused machine with a carrying value of P60,000 and remaining life of 3 years to POWERCompany for P42,000.Separate Statement of Comprehensive Income for the two companies for 20x7 follow:POWER COMPANYTOTAL COMPANY14,040,0008,400,0005,640,0003,800,0001,840,000Sales25,000,00015,000,00010,000,0006,000,0004,000,000Cost of salesGross profitOperating ExpensesOperating ProfitLoss on sale of Machine(18,000)1,822,000Net Income4,000,000Compute the following amounts for/as of December 31, 20x7

Consolidated Gross Profit on 02.01.16 Power company acquired outstanding shares of Solar Inc. = 90%…

Answered: On January 2, 20x6, T

Business

Accounting

On January 2, 20x6, T

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

COMPUTE FOR:

1. Consolidated Gross Profit

2. Consollidated Operating expenses

On January 2, 20x6, TOTAL Company acquired 90% of the outstanding shares of POWER
Company at book value. During 20x6 and 20x7, intercompany sales amounted to P2,000,000
and P4,000,000, respectively. POWER Company consistently recognized 25% mark-up based
on sales while TOTAL Company had a 25%, gross profit on cost. The inventories of the buying
affiliate, which all came from Inter-company transactions show:
TОTAL
POWER
12/31/x6
240,000
100,000
12/31/x7
160,000
40,000
On October 1,20x6, TOTAL Company purchased a piece of land costing P1,000,000 from
POWER Company for P1,500,000. On December 31, 20x7, TOTAL sold this land to an
unrelated party for P1,500,000. On the other hand, on July 1, 20x7, TOTAL Company sold a
used machine with a carrying value of P60,000 and remaining life of 3 years to POWER
Company for P42,000.
Separate Statement of Comprehensive Income for the two companies for 20x7 follow:
POWER COMPANY
TOTAL COMPANY
14,040,000
8,400,000
5,640,000
3,800,000
1,840,000
Sales
25,000,000
15,000,000
10,000,000
6,000,000
4,000,000
Cost of sales
Gross profit
Operating Expenses
Operating Profit
Loss on sale of Machine
(18,000)
1,822,000
Net Income
4,000,000
Compute the following amounts for/as of December 31, 20x7

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