Problem 4: Pepper Company acquired 80% of the voting stock of Salt Company on January 1, 2016, when Salt Company's retained earnings amounted to P150,000. The difference between the implied and book value on the date of acquisition was allocated as follows: Land P50,000 Equipment (10-year) Goodwill 20,000 40,000 Salt Company reported retained earnings of P260,000 on January 1, 2019, and P320,000 on December 31, 2019. Salt Company reported net income of P90,000 and declared dividends of P30,000 in 2019. Also, pepper reported net income using cost method in 2019 in the amount of P724,000 with a dividends paid of P25,000 and retained earnings on December 31, 2019 of P3,500,000. The sales, cost of sales and intercompany sales made during 2019 are as follows: Pepper Co P2,500,000 Particulars Salt Co Sales P1,200,000 Cost of sales 1,250,000 875,000 Intercompany sales Pepper to Salt Salt to Pepper There were no intercompany sales prior to 2018 and unrealized profits on January 1 and on December 31, 2019, resulting from intercompany sales are as summarized below: 320,000 290,000 Unrealized Intercompany profit on 1/1/19 Particulars Resulting from Sales by Salt to Pepper Sales by Pepper to Salt 12/31/19 P10,000 P5,000 20,000 15,000
Problem 4: Pepper Company acquired 80% of the voting stock of Salt Company on January 1, 2016, when Salt Company's retained earnings amounted to P150,000. The difference between the implied and book value on the date of acquisition was allocated as follows: Land P50,000 Equipment (10-year) Goodwill 20,000 40,000 Salt Company reported retained earnings of P260,000 on January 1, 2019, and P320,000 on December 31, 2019. Salt Company reported net income of P90,000 and declared dividends of P30,000 in 2019. Also, pepper reported net income using cost method in 2019 in the amount of P724,000 with a dividends paid of P25,000 and retained earnings on December 31, 2019 of P3,500,000. The sales, cost of sales and intercompany sales made during 2019 are as follows: Pepper Co P2,500,000 Particulars Salt Co Sales P1,200,000 Cost of sales 1,250,000 875,000 Intercompany sales Pepper to Salt Salt to Pepper There were no intercompany sales prior to 2018 and unrealized profits on January 1 and on December 31, 2019, resulting from intercompany sales are as summarized below: 320,000 290,000 Unrealized Intercompany profit on 1/1/19 Particulars Resulting from Sales by Salt to Pepper Sales by Pepper to Salt 12/31/19 P10,000 P5,000 20,000 15,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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5. The consolidated sales for 2019 –
6. The consolidated cost of sales for 2019 –
Transcribed Image Text:Problem 4: Pepper Company acquired 80% of the voting stock of Salt Company on January 1, 2016, when Salt
Company's retained earnings amounted to P150,000. The difference between the implied and book value on the date of
acquisition was allocated as follows:
Land
P50,000
Equipment (10-year)
Goodwill
20,000
40,000
Salt Company reported retained earnings of P260,000 on January 1, 2019, and P320,000 on December 31, 2019.
Salt Company reported net income of P90,000 and declared dividends of P30,000 in 2019. Also, pepper reported net
income using cost method in 2019 in the amount of P724,000 with a dividends paid of P25,000 and retained earnings on
December 31, 2019 of P3,500,000.
The sales, cost of sales and intercompany sales made during 2019 are as follows:
Pepper Co
P2,500,000
Particulars
Salt Co
Sales
P1,200,000
Cost of sales
1,250,000
875,000
Intercompany sales
Pepper to Salt
Salt to Pepper
There were no intercompany sales prior to 2018 and unrealized profits on January 1 and on December 31, 2019,
resulting from intercompany sales are as summarized below:
320,000
290,000
Particulars
Unrealized Intercompany profit on
1/1/19
Resulting from
Sales by Salt to Pepper
Sales by Pepper to Salt
12/31/19
P10,000
15,000
P5,000
20,000
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