Q48 Business Combination

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) 1. The consolidated net income on December 31, 2022 is: 2. The consolidated cost of sales is