CHAPTER 4: CONSOLIDATION - INTERCOMPANY PROFIT PROBLEM 4-5 On January 1, 2022, Pet Company purchased 80% of the shares of Sam Company for P1,000,000. The shareholders' equity of Sam Company on that date showed: Ordinary Shares - P570,000 and Retained Earnings P490,000. Non-controlling interest is initially measured at proportionate share of subsidiary's net assets. On April 30, 2022, Pet acquired used machinery for P84,000 from Sam that was being carried in the latter's books at P105,000. The asset still has a remaining useful life of 5 years. On the other hand, on August 31, 2022, Sam purchased an equipment that was already 20% depreciated from Pet for P345,000. The original cost of this equipment was P375,000 and had a remaining life of 8 years. Net income of Pet Company and Sam Company for 2022 amounted to P360,000 and P155,000. Dividends paid totaled to P115,000 and P52,500 for Pet and Sam, respectively. Required On the consolidated financial statements in 2022, how much would be the 1. Net income attributable to parents' shareholders' equity. 2. Non-controlling interest in the net income of subsidiary (NCINIS). 3. Non-controlling interest in net asset of subsidiary (NCINAS) 4. The carrying value of Property and Equipment. CHAPTER 4: CONSOLIDATION - INTERCOMPANY PROFIT a. P70,000 b. P42,000 c. P28,000 d. P-0- 4. A Co. acquired 60% of the outstanding ordinary shares of B Co. on January 2, 2022. A Co. acquired it at book value which is the same as its fair value at the date of acquisition. Statements of Comprehensive Income of A Co. & B Co. for 2022 are as follows: Net Sales Cost of Sales Gross Profit 192 Operating Expenses Operating Income Dividend Revenue Net Income A Co. P218,750 131,250 P87,500 26,250 P61,250 14,000 P75,250 a. P74,039; P61,246 b. P77,539; P61,526 c. P77,539; P61,246 d. P74,039; P62,526 B Co. P87,500 52,500 B Co. made sales to A Co. of P28,000 in 2021 and P42,000 in 2022. A Co. reported inventory on December 31, 2021 amounting to P17,500 of which 20% comes from B Co. and inventory on December 31, 2022 amounting to P21,000 of which 30% comes B Co. A Co. uses 30% mark-up on cost and B Co. uses 25% mark-up on cost for their selling prices. A Co. & B Co. declared and paid dividends in 2022 amounting to P21,000 and P17,500, respectively. P35,000 13,125 P21,875 -0- P21,875 On January 1, 2022, B Co. has ordinary shares of P80,000; Share Premium of P30,000 and Retained Earnings of P40,000. 210 Compute for the consolidated net income attributable to parent shareholders' equity and amount of non-controlling interest in net assets of subsidiary. CHAPTER 4: CONSOLIDATION - INTERCOMPANY PROFIT MULTIPLE COICE (PROBLEM SOLVING) 1. Denzel Co. acquired inventories on May 1, 2021 from its 70% owned subsidiary, Martin Company. The inventories were sold for P188.000, including the 25% mark up on cost. Out of these inventories, 65% were sold to outsiders. During 2022, Denzel Co. reported net income of P430,000 and Martin Co. reported net income of P280,000. How much is the realized profit to be allocated to non-controlling interest in 2022? a. P7,332 b. P4.935 c. P13,160 d. P3,948 2. Selected information from the separate and consolidated income statements of PP Corporation and its subsidiary, ST Company for the year ended December 31, 2022 are as follows: Sales Cost of goods sold Gross profit a. P12,000. b. P9,000 C. P3,000 d. P6,000 PP Corp. P200,000 150,000 P 50,000 During 2022, PP Corporation sold goods to ST Company at the same markup on cost that P uses for all sales. At December 31, 2022, ST had not paid all of these goods and still held 37.5% of them in inventory. What is the original cost of goods in ST's inventory acquired from PP Corp.? ST Co. P140,000 110,000 P 30,000 209 CHAPTER 4: CONSOLIDATION - INTERCOMPANY PROFIT P1,215,000 a. b. P1,225,000 Consolidated P308,000 3. Par Corp. owns 60% of Sub Corp.'s outstanding ordinary shares. On May 3, 2022, Par advanced Sub P70,000 in cash, which was still outstanding at December 31, 2022. What portion of this advance should be eliminated in the preparation of the December 31, 2022 consolidated financial statements? c. P1,255,000 d. P1,185,000 231,000 P 77,000 5. The Justine Co. owns 75% of the Erin Co. The following figures are from their separate financial statements Justine Co. Trade receivables P1,040,000, including P30,000 due from Erin. Erin Co. Trade receivables P215,000, including P40,000 due from Justine. 211 What figure should appear for trade receivables in Justine's consolidated statement of financial position?