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: ТOTAL 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 (18,000) 1,822,000 Sales |Cost of sales 25,000,000 15,000,000 10,000,000 Gross profit Operating Expenses |Operating Profit Loss on sale of Machine 6,000,000 4,000,000 Net Income 4,000,000 Compute the following amounts for/as of December 31, 20x7 Consolidated 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: ТOTAL 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 (18,000) 1,822,000 Sales |Cost of sales 25,000,000 15,000,000 10,000,000 Gross profit Operating Expenses |Operating Profit Loss on sale of Machine 6,000,000 4,000,000 Net Income 4,000,000 Compute the following amounts for/as of December 31, 20x7 Consolidated Operating Expenses.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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:
12/31/x6
240,000
100,000
12/31/x7
160,000
40,000
ТОTAL
POWER
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
25,000,000
15,000,000
10,000,000
Sales
14,040,000
8,400,000
5,640,000
3,800,000
1,840,000
(18,000)
1,822,000
Cost of sales
Gross profit
Operating Expenses
Operating Profit
Loss on sale of Machine
6,000,000
4,000,000
Net Income
4,000,000
Compute the following amounts for/as of December 31, 20x7
Consolidated Operating Expenses.
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