Problem 2. GV Company purchased 70% ownership of DL Company...

Problem 2. GV Company purchased 70% ownership of DL Company on January 1, 2019 at underlying book value. While each company had its own sales forces and independent product lines, there were substantial intercorporate sales of inventory each period. The following intercorporate sales occurred during 2020 and 2021: Year Seller Cost of Products Sold Buyer Sales Price Unsold at end of year Year sold to outsiders 2020 GV Co. 448,000 DL Co. 640,000 140,000 2021 2021 DL Co. 312,000 GV Co. 480,000 77,000 2022 2021 GV Co. 350,000 DL Co. 437,500 63,000 2022 The following data summarized the results of their financial operations for the year ended December 31, 2021: GV company DL Company Sales 3,850,000 1,680,000 Gross Profit 1,904,000 504,000 Operating Expenses 770,000 280,000 Ending Inventories 336,000 280,000 Dividend received from affiliate 126,000 - Dividend received from nonaffiliate - 70,000 1. What are the Consolidated sales and Consolidated cost of goods sold at the end of 2021? a. 4,612,500 and 2,457,550 b. 4,612,500 and 2,206,950 c. 4,612, 500 and 2,202,050 d. 5,530,000 and 2,202,050 2. What are the Consolidated net income attributable to parent and non-controlling interest in net income at the end of 2021? a. 1,301,335 and 59,115 b. 1,476,335 and 59,115 c. 1,476,335 and 80,115 d. 1,350,335 and 80,115

Transcript

00:01 And consolidated cost of goods sold at the end of 2021.

00:04 So let's look at the first one.

00:06 You want to calculate the consolidated sales.

00:21 This can be calculated by, hold on, this is 2021, is gv sales plus dl sales and minus the intercompany sale at 3.

00:54 2021.

00:56 So from the table that we get, in 2021, the gv sale has been found out to be 3850 ,000.

01:12 So 3 ,850 ,000.

01:15 And the dv sales is 1 ,680 ,000.

01:22 Now what is the $1 ,680 ,000? now, what is the company sales.

01:28 Now for intercompany sales you can look at the first chart.

01:32 You can see that.

01:35 So at 2021 the sale price is 480 ,000 and 437 ,550.

01:50 That's the fourth column from a fifth column, i'm sorry, from the top table.

01:57 You can see that that's sales there's a column called sales price so you can see that the intercompany sale is 480 ,000 plus 437 ,500 and you end up having 4 ,612 ,500 so basically this is the consolidated sales amount.

02:33 The next step, you want to calculate the consolidated cost of goods sold.

02:50 So this can be calculated by the consolidate sale minus the gross profit.

03:12 So basically, the cost of good will be the sale minus the profit.

03:15 So the rest of it will be the cost.

03:17 So we have already calculated sale, which is this amount.

03:21 We want to calculate a gross profit.

03:24 The gross profit equals net income, consolidated net income, plus operating cost or expense, and minus other income.

04:01 Now, the next we want to calculate the net income.

04:05 So for each company, you have to separate net income.

04:11 So gv equals the gross profit minus the operating expense and then plus other income.

04:42 So you can see that the gross profit is 1 ,904 ,000 minus operating 7704 ,000 minus operating 770 ,000.

04:59 0 and other dividend fraud affiliate is 126 ,000 so then you end up having a gv net income of 1 ,260 ,000 you use the same formula we calculate the dl1 dl has a gross profit of 504 ,000 minus the operating cost of 2a0000 0 plus other 70 ,000 and you end up having 294 ,000.

05:45 All right.

05:46 And so you add them up together to calculate the sum net income.

06:02 This equals these two add up together, 1 ,540 ,000.

06:10 So to calculate the consolidate.

06:13 Net income, you're going to have to eliminate the intra -group dividend and eliminate current and realize profit and add the realized prior year and realized profit.

06:28 So this is just the net income for each one of them, and you have a sum.

06:34 But consolidated net income is going to be the sum minus intra -group division.

06:53 Also minus the current unrealized profit and then plus prior year unrealized profit.

07:46 So from there you can see we also need to calculate the current unrealized profit and realized prior year unrealized profit.

07:56 So let's do the first one first.

07:59 How do we calculate the current unrealized profit? so for this one here so first of all we know that the current year and realized profit must be eliminated at december 231 of 2021 so for d l to a gb the profit margin equals 480 ,000 minus 312 ,000 then divided by 4800 ,000.

08:57 So you get a margin of 0 .35.

09:06 All right.

09:06 So the unrealized profit will be the 770 unsolved at the end of the year multiplied by the the profit margin.

09:18 So unrealized profit is the unsold the end of the year, multiply by 0 .35.

09:38 So this is 7700 ,000 multiplied by 0 .35...

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