Question
P Company acquired 4,000 shares of the outstanding stock of S Company for P1,200,000 on January 1, 2022. P Company also paid P100,000 direct costs
P Company acquired 4,000 shares of the outstanding stock of S Company for P1,200,000 on January 1, 2022. P Company also paid P100,000 direct costs related to the combination. On this date, the stockholders equity of S Company consisted of: Ordinary Shares (P100 par), P500,000; and Retained Earnings, P600,000. The carrying values of S Company identifiable assets and liabilities are equal to their fair market values except for inventory with a fair value lower by P50,000 than book value and machinery that is undervalued by P150,000 with remaining life of 6 years. During the year, P Company sold merchandise costing P400,000 to S Company for a gross profit of P120,000. S Company sold 60% of the inventory to outsider during the year.
At the end of the year, P Company reported net income of P600,000 and paid dividends of P250,000 while S Company reported net income of P300,000 and paid dividends of P15 per share. The parent company measures its non-controlling interest using the proportionate method. Reported sales in the separate financial statements of P and S are P6,760,000 and P4,550,000, respectively. There is no other intercompany transaction during the year. P Company and S Company maintain the same profit rate on their sales to affiliate and outsider. (INPUT YOUR ANSWERS IN FIGURES. DO NOT PUT ANY COMMA, PESO SIGN, DECIMALS, AND EXTRA SPACES)
- The consolidated net income on December 31, 2022 is:
- The consolidated cost of sales is:
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