On January 2, 20x6, T
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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdd954b5b-c00c-4151-b445-52fe854a974b%2F09a600c9-8a77-426b-8fef-ee72cc98f79d%2Fhjbnh9o_processed.jpeg&w=3840&q=75)
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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