Question

On January 2, 20x6, TOTAL Company acquired 90% of the outstanding shares of POWER Company at book value. During 20x6 and 20x7, intercompany sales amounted to P2,000,000 and P4,000,000, respectively. POWER Company consistently recognized 25% mark-up based on sales while TOTAL Company had a 25% gross profit on cost. The inventories of the buying affiliate, which all came from Inter-company transactions show: | | 12/31/x6 | 12/31/x7 | |---|---|---| | TOTAL | 240,000 | 160,000 | | POWER | 100,000 | 40,000 | On October 1, 20x6, TOTAL Company purchased a piece of land costing P1,000,000 from POWER Company for P1,500,000. On December 31, 20x7, TOTAL sold this land to an unrelated party for P1,500,000. On the other hand, on July 1, 20x7, TOTAL Company sold a used machine with a carrying value of P60,000 and remaining life of 3 years to POWER Company for P42,000. Separate Statement of Comprehensive Income for the two companies for 20x7 follow: | | POWER COMPANY | TOTAL COMPANY | |---|---|---| | Sales | 25,000,000 | 14,040,000 | | Cost of sales | 15,000,000 | 8,400,000 | | Gross profit | 10,000,000 | 5,640,000 | | Operating Expenses | 6,000,000 | 3,800,000 | | Operating Profit | 4,000,000 | 1,840,000 | | Loss on sale of Machine | | (18,000) | | Net Income | 4,000,000 | 1,822,000 | Compute the following amounts for/as of December 31, 20x7 Consolidated gross profit.

          On January 2, 20x6, TOTAL Company acquired 90% of the outstanding shares of POWER Company at book value. During 20x6 and 20x7, intercompany sales amounted to P2,000,000 and P4,000,000, respectively. POWER Company consistently recognized 25% mark-up based on sales while TOTAL Company had a 25% gross profit on cost. The inventories of the buying affiliate, which all came from Inter-company transactions show:

| | 12/31/x6 | 12/31/x7 |
|---|---|---|
| TOTAL | 240,000 | 160,000 |
| POWER | 100,000 | 40,000 |

On October 1, 20x6, TOTAL Company purchased a piece of land costing P1,000,000 from POWER Company for P1,500,000. On December 31, 20x7, TOTAL sold this land to an unrelated party for P1,500,000. On the other hand, on July 1, 20x7, TOTAL Company sold a used machine with a carrying value of P60,000 and remaining life of 3 years to POWER Company for P42,000.

Separate Statement of Comprehensive Income for the two companies for 20x7 follow:

| | POWER COMPANY | TOTAL COMPANY |
|---|---|---|
| Sales | 25,000,000 | 14,040,000 |
| Cost of sales | 15,000,000 | 8,400,000 |
| Gross profit | 10,000,000 | 5,640,000 |
| Operating Expenses | 6,000,000 | 3,800,000 |
| Operating Profit | 4,000,000 | 1,840,000 |
| Loss on sale of Machine | | (18,000) |
| Net Income | 4,000,000 | 1,822,000 |

Compute the following amounts for/as of December 31, 20x7
Consolidated gross profit.

On January 2, 20x6, TOTAL Company acquired 90% of the outstanding shares of POWER Company at book value. During 20x6 and 20x7, intercompany sales amounted to P2,000,000 and P4,000,000, respectively. POWER Company consistently recognized 25% mark-up based on sales while TOTAL Company had a 25% gross profit on cost. The inventories of the buying affiliate, which all came from Inter-company transactions show:

| | 12/31/x6 | 12/31/x7 |
|—|—|—|
| TOTAL | 240,000 | 160,000 |
| POWER | 100,000 | 40,000 |

On October 1, 20x6, TOTAL Company purchased a piece of land costing P1,000,000 from POWER Company for P1,500,000. On December 31, 20x7, TOTAL sold this land to an unrelated party for P1,500,000. On the other hand, on July 1, 20x7, TOTAL Company sold a used machine with a carrying value of P60,000 and remaining life of 3 years to POWER Company for P42,000.

Separate Statement of Comprehensive Income for the two companies for 20x7 follow:

| | POWER COMPANY | TOTAL COMPANY |
|—|—|—|
| Sales | 25,000,000 | 14,040,000 |
| Cost of sales | 15,000,000 | 8,400,000 |
| Gross profit | 10,000,000 | 5,640,000 |
| Operating Expenses | 6,000,000 | 3,800,000 |
| Operating Profit | 4,000,000 | 1,840,000 |
| Loss on sale of Machine | | (18,000) |
| Net Income | 4,000,000 | 1,822,000 |

Compute the following amounts for/as of December 31, 20x7
Consolidated gross profit.

Added by Victoria G.

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