PROBLEM 3
The income statement of Pedro and Penduko are as follows:
Pedro Penduko
Year 1 Year 2 Year 1 Year 2
Net income, per books, earned evenly 432,000 504,000 420,000 456,000
Dividend declared, February 1 72,000 72,000 84,000 84,000
Retained earnings, beginning 1,800,000 ? 1,320,000 ?
Pedro has the controlling interest of 80%
In Year 1, the intercompany seller sold to the intercompany buyer land costing P500,000. In Year 2, the
intercompany buyer sold the land to an unrelated party with a gain on P30,000.