The following transactions occurred for the period ended regarding LL and its two subsidiaries L1 and L2: On January 1, 2020, LL acquired 60% of the outstanding common stocks of L1. On April 1, 2020, LL acquired 70% of the outstanding common stocks of L2. It is the policy of LL to account all its investment in subsidiary using cost method in its separate financial statements On May 1, 2020, LL sold inventory to L2 at a price of P100,000. On June 1, 2020, L2 resold the inventory coming from LL at a price of P150,000 as follows: 80% to unrelated parties and 20% to L1. On July 1, 2020, L1 sold a new set of inventory to L2 at a price of P200,000. On august 1, 2020, L2 resold the inventory coming from L1 at a price of P300,000 as follows: 40% to unrelated parties and 60% to LL. For the period ended December31, 2020, the affiliates reported the following sales revenue in their separate income statement: o LL – Sales Revenue P3,000,000 o L1 – Sales Revenue 2,000,000 o L2 – Sales Revenue 1,000,000 What is the consolidated sales revenue to be reported by LL in its consolidated income statement for the year ended December 31, 2020? A. P5,490,000 B. P5,700,000 C. P5,620,000 D. P5,870,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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The following transactions occurred for the period ended regarding LL and its two subsidiaries L1 and L2:

On January 1, 2020, LL acquired 60% of the outstanding common stocks of L1. On April 1, 2020, LL acquired 70% of the outstanding common stocks of L2. It is the policy of LL to account all its investment in subsidiary using cost method in its separate financial statements

On May 1, 2020, LL sold inventory to L2 at a price of P100,000. On June 1, 2020, L2 resold the inventory coming from LL at a price of P150,000 as follows: 80% to unrelated parties and 20% to L1.

On July 1, 2020, L1 sold a new set of inventory to L2 at a price of P200,000. On august 1, 2020, L2 resold the inventory coming from L1 at a price of P300,000 as follows: 40% to unrelated parties and 60% to LL.

For the period ended December31, 2020, the affiliates reported the following sales revenue in their separate income statement:

o LL – Sales Revenue P3,000,000

o L1 – Sales Revenue 2,000,000

o L2 – Sales Revenue 1,000,000

What is the consolidated sales revenue to be reported by LL in its consolidated income statement for the year ended December 31, 2020?

A. P5,490,000

B. P5,700,000

C. P5,620,000

D. P5,870,000

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