Compute for the consolidated operating expense as of December 31, 20x7 On January 2, 20x6, TOTAL Company acquired 90% of the outstanding shares of POWER Company at bookvalue. 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-company transactionsshow:12/31/x6 12/31/x7TOTAL240,000 160,000POWER100,00040,000On October 1, 20x6, TOTAL Company purchased a piece of land costing P1,000,000 from POWER Company forP1,500,000. On December 31, 20x7, TOTAL sold this land to an unrelated party for P1,500,000. On the otherhand, on July 1, 2017, TOTAL Company sold a used machine with a carrying value of P60,000 and remaininglife of 3 years to POWER Company for P42,000.Separate Statement of Comprehensive Income for the two companies for 20x7 follow:POWERТOTALCOMPANY COMPANYSales25,000,000 14,040,000Cost of sales15,000,00010,000,0008,400,0005,640,000Gross profitOperating ExpensesOperating Profit6,000,0003,800,0001,840,000(18,000)4,000,000DEDLoss on sale of MachineNet Income4,000,000 1,822,000Compute the following amounts for/as of December 31, 20x7Consolidated operating expenses.

Given: To calculate the consolidate operating expense as of Dec 31, 20x7 as,

Answered: y sales amounted to P2, 25% mark-up…

Business

Accounting

y sales amounted to P2, 25% mark-up based on sa buying affiliate, which all 12/31/x6

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Compute for the consolidated operating expense as of December 31, 20x7

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-company transactions
show:
12/31/x6 12/31/x7
TOTAL
240,000 160,000
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 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
ТOTAL
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
DED
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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