Exercise Answers - Consolidated FS - Intercompany Sale of PPE

On January 2, Year 2, PG Corporation sold equipment costing P100,000 with accumulated
depreciation of P25,000 to its wholly-owned subsidiary; SM Inc. the selling price was P90,000.
PG was depreciating the equipment on the straight-line method inventory over twenty years with
salvage value. SM continued this depreciation. What are the cost and accumulated
depreciation, respectively, of this equipment in the December 31, Year 2 consolidated statement
of financial position?
P100,000 and P30,000
On January 1, Year 1, Harny Company purchased an Equipment with an expected

useful life of 5 years and scrap value of P8,000. On January 1, Year 3, Harny
Company sold the truck to Jazel Company and recorded the following entry:
Debit Credit
Cash 50,000
Accumulated 18,000
depreciation
Truck 53,000
Gain on sale of 15,000
truck

Jazel holds 60% of Harny's voting shares and considered the equipment to have a
remaining useful life of 4 years. Harny reported net income of P55,000, and Jazel
reported separate net income of P98,000 for Year 3.
In preparing the consolidated financial statements for Year 3, depreciation expense
recorded by the Jazel will be:
Reduced by 1,500
On January 1, Year 1 SST Company purchased a computer with an expected life of 5

years. On January 1, Year 3 SST Company sold the computer to PMN corporation and
recorded the following entry:
P39,
Cash
000
Accumulated
16, 000
Depreciation
Computer Equipment 40, 000
Gain on sale of
15, 000
equipment

PMN Corporation holds 60% of the voting shares of SST Company. SST Company and
PMN Corporation reported income from its own operations of P45, 000 and P85, 000 for
Year 3 respectively. There is no change in the estimated life of the equipment as a
result of intercompany sale.
How much is the income attributable to the Non-Controlling Interest for Year 3?
14,000
Port, Inc. owns 100% of Salem, Inc. On January 1, 2018, Port sold Salem delivery equipment at
a gain. Port had owned the equipment for two years and used a five-year straight-line
depreciation rate with no residual value. Salem is using a three-year straight-line depreciation
rate with no residual value for the equipment. In the consolidated income statement, Salem’s
recorded depreciation expense on the equipment for 2018 will be decreased by
33 1/3% of the gain on sale.
Penny Company owns an 80% controlling interest in the Sandy’s Company. Sandy
regularly sells merchandise to Penny, which then sold to outside parties. The gross
profit on all such sales is 40%. On January 1, Year 2, Penny sold land and a building to
Sandy. The value of the parcel is 20% to land and 80% to structures. Pertinent data for
the companies is summarized in the next page.

Penny Sandy
520,00
Internally generated net income, Year 2
0 250,000
340,00
0 235,000
Intercompany merchandise sales, Year 2 100,000
Intercompany inventory, December 31,
Year 2 15,000
Year 3 20,000
Cost of real estate sold on January 1, Year 600,00
2 0
Sales price of real estate on January 1, 800,00
Year 2 0
Depreciable life of building 20 yrs
For Year 2, what is the consolidated comprehensive income attributable to controlling
interest?
523,200
AtC Industries manufactures heavy equipment used in construction and excavation.

On January 3, Year 1 AtC sold a piece of equipment from its inventory that cost
P180,00 to its 60% owned subsidiary, JlB Corporation, at AtC’s standard price is
twice its cost. Jlb is depreciating the equipment over six years using straight-line
depreciation and no salvage value.

How much depreciation must be eliminated in preparing the consolidated financial
statement?
30,000
BigBang Company owns an 80% controlling interest in Sheldon Company. Sheldon
regularly sells merchandise to BigBang, which then sells to outside parties. The
gross profit on all such sales is 40%. On January 1, Year 1, BigBang sold land and a
building to Sheldon. The value of the parcel is 20% to land and 80% to structures.
Pertinent data for the companies is summarized below.
BigBang Sheldon
Internally generated net income, Year
340, 000 235, 000
2
Internally generated net income, Year P520, P250,
1 000 000
Intercompany merchandise sales,
120, 000
Year 2
Intercompany merchandise sales,
100, 000
Year 1
20, 000
Year 2
15, 000
Year 1
Cost of real estate sold on January 1,
600, 000
Year 1
Sales price of real estate on January
800, 000
1, Year 1
Depreciable life of building 20 years.

For Year 2, what is the consolidated comprehensive income attributable to
controlling interest?
534, 400
On January 1, 2018, Poe Corp. sold a machine for 900,000 to Saxe Corp., its wholly
owned subsidiary. Poe paid 1,100,000 for this machine, which had accumulated
depreciation of 250,000. Poe estimated a 100,000 salvage value and depreciated
the machine on the straight-line method over twenty years, a policy which Saxe
continued. In Poe’s December 31, 2018 consolidated balance sheet, this machine
should be included in cost and accumulated depreciation as
1) Cost
2) Accumulated depreciation
1) 1,100,000 2) 300,000
Penny Company owns an 80% controlling interest in the Sandy’s Company. Sandy
regularly sells merchandise to Penny, which then sold to outside parties. The gross
profit on all such sales is 40%. On January 1, Year 2, Penny sold land and a building to
Sandy. The value of the parcel is 20% to land and 80% to structures. Pertinent data for
the companies is summarized in the next page.

Penny Sandy
520,00
0 250,000
340,00
0 235,000
Year 2 15,000
Year 3 20,000
Cost of real estate sold on January 1, Year 600,00
2 0
Sales price of real estate on January 1, 800,00
Year 2 0
Depreciable life of building 20 yrs
For Year 3, what is the consolidated comprehensive income attributable to controlling
interest?
534,400
On January 1, Year 1 SST Company purchased a computer with an expected life of 5

years. On January 1, Year 3 SST Company sold the computer to PMN corporation and
recorded the following entry:
P39,
Cash
000
Accumulated
16, 000
Depreciation
Computer Equipment 40, 000
Gain on sale of
15, 000
equipment

PMN Corporation holds 60% of the voting shares of SST Company. SST Company and
PMN Corporation reported income from its own operations of P45, 000 and P85, 000 for
Year 3 respectively. There is no change in the estimated life of the equipment as a
result of intercompany sale.
What is the consolidated total comprehensive income attributable to parent for Year 3?
P106, 000

Exercise Answers - Consolidated FS - Intercompany Sale of PPE

Uploaded by

Copyright:

Available Formats

Exercise Answers - Consolidated FS - Intercompany Sale of PPE

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Exercise Answers - Consolidated FS - Intercompany Sale of PPE

Uploaded by

Copyright:

Available Formats

On January 2, Year 2, PG Corporation sold equipment costing P100,000 with accumulated

On January 1, Year 1, Harny Company purchased an Equipment with an expected

On January 1, Year 1 SST Company purchased a computer with an expected life of 5

AtC Industries manufactures heavy equipment used in construction and excavation.

1) 1,100,000 2) 300,000

On January 1, Year 1 SST Company purchased a computer with an expected life of 5

You might also like