Gryffindor Company acquired 80% of Hufflepuff Company on January 2, 2019. The difference between the implied and book value of net assets of Hufflepuff on the date of acquisition was as follows:

Land: 50,000

Equipment (10 years life): 60,000

Inventory: 40,000

Hufflepuff reported retained earnings of 260,000 on January 1, 2022, and 320,000 on December 31, 2022.

Hufflepuff reported a net income of 90,000 and declared dividends of 30,000 in 2022. Also, Gryffindor reported net income using the cost method in 2022 and paid dividends of 25,000. The retained earnings of Gryffindor on December 31, 2022, are 2,700,000. The sales and cost of sales together with the intercompany sales made during 2022 are as follows:

Gryffindor Company:
Sales 3,000,000
Cost of sales 1,500,000
Net Income 550,000
Intercompany sales:
Gryffindor to Hufflepuff 400,000

Hufflepuff Company:
Sales 1,500,000
Cost of sales 900,000
Net Income 90,000
Intercompany sales:
Hufflepuff to Gryffindor 300,000

There were no intercompany sales prior to 2021.

In 2022 the following intercompany transfer of fixed assets occur.

On January 1, Hufflepuff sold machinery with the cost of 120,000, originally purchased last January 3, 2018, with 8 years of useful life. The selling price is 40,000.

On June 30, Gryffindor sold equipment with a book value of 60,000 for 100,000, Remaining useful life of the equipment is 5 years

Intercompany inventories held by the affiliated companies are shown below.

Gryffindor Hufflepuff Company Company

January 1, 2022
Gryffindor Company: 30,000
Hufflepuff Company: 60,000

December 31, 2022
Gryffindor Company: 70,000
Hufflepuff Company: 40,000

1. Compute for consolidated gross profit.
2. Compute net income attributable to the parent.

Answer rating: 100% (QA)

Q1 Consolidated gross profit is P1950000 Q2 Net income attributabl... View the full answer