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On January 2, 20x6, T

On January 2, 20x6, T

FINANCIAL ACCOUNTING
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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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
Transcribed Image Text: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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