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1. Scroll Inc., a wholly-owned subsidiary of Pirn, Inc. began operations on January 1, 2019. The following information is from the condensed 2019 income statements

1. Scroll Inc., a wholly-owned subsidiary of Pirn, Inc. began operations on January 1, 2019. The following

information is from the condensed 2019 income statements of Pirn and Scroll:

Pirn Scroll

Sales P 500,000 P 300,000

Cost of goods sold (350,000) (270,000)

Gross profit P 150,000 P 30,000

Depreciation ( 40,000) ( 10,000)

Other expenses ( 60,000) ( 15,000)

Income from operations P 50,000 P 5,000

Gain on sale of equipment to Scroll __12,000 _________

Income before taxes P 62,000 P 5,000

Equipment purchased by Scroll from Pirn for P36,000 on January 1, 2019, is depreciated using the

straight-line method over four years. What amount should be reported as depreciation expense in Pirn's

consolidated income statements?

2. Upper Company holds 60 percent of Lower Company's voting shares. During the preparation of

consolidated financial statements for 2019, the following eliminating entry was made:

Retained earnings, January 1....................................... 10,000

Land............................................................................................. 10,000

Which of the following statements is correct?

a. Upper Company purchased land from Lower Company during 2019.

b. Upper Company purchased land from Lower Company before January 1, 2019.

c. Lower Company purchased land from Upper Company during 2019.

d. Lower Company purchased land from Upper Company Before January 1, 2019.

3. Middle Company holds 60 percent of Bottom Corporation's voting shares. Bottom has developed a new

type of production equipment that appears to be quite marketable. It spent P40,000 in developing the

equipment; however, Middle agreed to purchase the production rights for the machine for P100,000. If

the intercompany sale occurred on January 1, 2019, and the production rights are expected to have

value for five years, at what amount should the rights be reported in the consolidated balance sheet

for December 31, 2019?

Questions 4 through 7 are based on the following information:

On January 1, 2019, Gold Company purchased a computer with an expected economic life of five years.

On January 1, 2021, Gold sold the computer to TLK Corporation and recorded the following entry:

Cash............................................................................................. 39,000

Accumulated depreciation................................................................ 16,000

Computer equipment.................................................................... 40,000

Gain on sale of equipment................................................................ 15,000

TLK Corporation holds 60 percent of Gold's voting shares. Gold reported net income of P45,000, and TLK

reported income from its own operations of P85,000 for 2014. There is no change in the estimated life of the

equipment as a result of the inter-corporate transfer.

4. In the preparation of the 2021 consolidated income statement, depreciation expense will be:

a. Debited for P5,000 in eliminating entries

b. Credited for P5,000 in the eliminating entries

c. Debited for P13,000 in the eliminating entries

d. Credited for P13,000 in the eliminating entries

5. In the preparation of the 2021 consolidated balance sheet, the computer equipment will be:

a. Debited for P1,000 c. Credited for P24,000

b. Debited for P15,000 d. Debited for P40,000

6. The income assigned to the non-controlling interest in the 2021 consolidated income statement will be:

7. The consolidated net income for 2021 will be:

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