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 a 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-companv transactions show: 12/31/x6 12/31/x7 240,000 160,000. 40,000 TOTAL POWER 100,000 On October 1, 20x6, TOTAL Company purchased a piece of land costine P1.000,000 from POWER Company for P1,500,000. On December 31, 20x7, TOTAL sold this land to an unrelated nartv for P1,500,000. On the other hand, on July 1, 2017, TOTAL Company sold a used machine with a carrying vaiue 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 ТОTAL COMPANY COMPANY Sales 25,000,000 14,040,000 Cost of sales 15,000,000 8,400,000 Gross profit Operating Expenses 10,000,000 5,640,000 6,000,000 4,000,000 3,800,000 1,840,000 (18,000) 1,822,000 Operating Profit Loss on sale of Machine 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 a 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-companv transactions show: 12/31/x6 12/31/x7 240,000 160,000. 40,000 TOTAL POWER 100,000 On October 1, 20x6, TOTAL Company purchased a piece of land costine P1.000,000 from POWER Company for P1,500,000. On December 31, 20x7, TOTAL sold this land to an unrelated nartv for P1,500,000. On the other hand, on July 1, 2017, TOTAL Company sold a used machine with a carrying vaiue 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 ТОTAL COMPANY COMPANY Sales 25,000,000 14,040,000 Cost of sales 15,000,000 8,400,000 Gross profit Operating Expenses 10,000,000 5,640,000 6,000,000 4,000,000 3,800,000 1,840,000 (18,000) 1,822,000 Operating Profit Loss on sale of Machine 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 a 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-companv transactions
show:
12/31/x6 12/31/x7
240,000 160,000.
TOTAL
POWER
100,000
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, 2017, TOTAL Company sold a used machine with a carryıng vaiue 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
ТОTAL
COMPANY COMPANY
Sales
25,000,000 14,040,000
Cost of sales
15,000,000
10,000,000
8,400,000
5,640,000
Gross profit
Operating Expenses
Operating Profit
6,000,000
3,800,000
1,840,000
(18,000)
4,000,000
Loss on sale of Machine
Net Income
4,000,000 1,822,000
Compute the following amounts for/as of December 31, 20x7
Consolidated operating expenses.
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